Document:

2002 Executive Incentive Plan

 
EXHIBIT A

 
EXHIBIT 10.17 
 
UNIVERSAL HEALTH SERVICES, INC. 
EXECUTIVE INCENTIVE PLAN 
 
1. Purpose. The purpose of the Plan is to foster the ability of the Company and its Affiliates to attract, retain and motivate highly qualified
senior management and other executive officers of the Company and its Affiliates through the payment of performance-based incentive compensation. 
 
2. Definitions. Wherever used herein, the masculine includes the feminine, the singular includes the plural, and the following terms have the
following meanings unless a different meaning is clearly required by the context. 
 
(a) “Affiliate” means any entity (whether or not incorporated) which is required to be aggregated with the Company under Section 414(b) or 414(c) of the Internal Revenue Code of 1986, as
amended (the “Code”). 
 
(b)
“Board” means the Board of Directors of the Company. 
 
(c) “Committee” means the administrative committee appointed by the Board in accordance with the provisions hereof. 
 
(d) “Company” means Universal Health Services, Inc. 
 
(e) “Compensation” means the base salary of a Participant for a calendar year, determined as of the
beginning of the calendar year and without regard to increases, if any, made during the calendar year. 
 
(f) “Net Income” means the net income of the Company or of an Affiliate, division, hospital or other unit, as determined by the
Committee. 
 

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(g)
“Participant” means, with respect to any calendar year, an individual who is designated by the Committee as eligible to receive an incentive award for the year upon achievement of the applicable performance conditions. 
 
(h) “Plan” means the incentive compensation plan as
set forth herein and any amendments thereto. 
 
(i)
“Return on Capital” means Net Income divided by the quarterly average net capital of the Company or of an Affiliate, division, hospital or other unit, as determined by the Committee. 
 
3. Administration. The Plan will be administered by a committee
consisting of at least two directors appointed by and serving at the pleasure of the Board. Each member of the Committee will be a “non-employee director” within the meaning and for the purposes of Rule 16b-3 issued by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, and an “outside director” within the meaning of Section 162(m) of the Code. Subject to the provisions of the Plan, the Committee, acting in its sole and absolute discretion,
will have full power and authority to interpret, construe and apply the provisions of the Plan and to take such action as may be necessary or desirable in order to carry out the provisions of the Plan. A majority of the members of the Committee will
constitute a quorum. The Committee may act by the vote of a majority of its members present at a meeting at which there is a quorum or by unanimous written consent. The Committee will keep a record of its proceedings and acts and will keep or cause
to be kept such books and records as may be necessary in connection with the proper administration of the Plan. The Company shall indemnify and hold harmless each member of the Committee and any employee or director of the Company or an Affiliate to
whom 
 

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any duty or power relating to
the administration or interpretation of the Plan is delegated from and against any loss, cost, liability (including any sum paid in settlement of a claim with the approval of the Board), damage and expense (including legal and other expenses
incident thereto) arising out of or incurred in connection with the Plan, unless and except to the extent attributable to such person’s fraud or wilful misconduct. 
 
4. Eligibility. Annual incentive compensation may be awarded under the Plan to any person who is a member of the
senior management of the Company and to other executive officers of the Company or an Affiliate. Subject to the provisions hereof, the Committee will select the persons to whom incentive compensation may be awarded for any calendar year and will fix
the terms and conditions of each such award. 
 
5. Annual
Performance Bonus. The amount of a Participant’s incentive award for a year will be equal to the Participant’s base bonus amount (described in (a) below) multiplied by the applicable performance factor (described in (b) below).

 
(a) Base Bonus Amount. For each calendar
year, the Committee will establish the amount of bonus (“base bonus amount”) which will be payable to a Participant if the performance goals for the year are met. A Participants’ base bonus amount will be expressed as a percentage of
the Participant’s Compensation, which percentage may vary from year to year and may be different for each Participant or class of Participants, all as determined by the Committee. 
 
(b) Applicable Performance Factor. For each calendar year, the Committee will establish performance
targets based upon the following business criteria: increase in Net Income from the preceding calendar year, and Return on Capital. As to any Participant or class 
 

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of Participants, the
performance targets may be based upon either or both of such criteria and on company-wide figures, local or divisional figures, or a combination thereof. If a Participant’s performance targets for a calendar year are achieved, then the
Participant will be entitled to receive an incentive payment equal to 100% of the Participant’s base bonus amount for the year. No incentive compensation will be payable for a year if neither performance target is achieved, and a performance
bonus (which may be greater than 100% of a Participant’s base bonus amount) may be payable if either or both performance targets are exceeded for a calendar year, all in accordance with the Company performance matrix established by the
Committee. 
 
(c) Performance Conditions to be
Pre-Established. Performance targets, as well as percentage factors used to determine base bonus amounts and performance percentages with respect to any calendar year will be established in writing by the Committee before the beginning of that
calendar year; provided, however, that the Committee may establish any one or more of said factors during the calendar year if and to the extent permitted by the Treasury Department pursuant to Section 162(m) of the Code. 
 
(d) Limitation on Amount of Incentive Awards.
Notwithstanding anything to the contrary contained herein, the maximum incentive award which any Participant may earn hereunder for any calendar year shall not exceed $5 million. 
 
6. Calculation and Payment of Performance Bonus. As soon as practicable after the end of each calendar year, the
Committee, based upon the Company’s financial statements for the year, will determine the amount, if any, of the incentive compensation payable to each Participant for that calendar year. A Participant’s incentive award for a calendar year
will be paid to the Participant at such time as the Committee determines; provided, however, that the 
 

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Committee certifies in writing
prior to payment that the performance goals were in fact satisified, and provided further that the Committee may establish a procedure pursuant to which payment of all or a portion of a Participant’s incentive award for a calendar year will be
deferred. Unless the Committee determines otherwise, no incentive award will be payable to a Participant with respect to a calendar year if the Participant’s employment with the Company and its Affiliates terminates at any time prior to the
payment thereof. 
 
7. Amendment or Termination. The Board
may amend or terminate the Plan at any time. The Plan supersedes the executive incentive plan heretofore maintained by the Company. 
 
8. Term of the Plan. The Plan will become effective as of January 1, 2002, subject to approval by the stockholders of the Company. Unless sooner
terminated by the Board, the Plan will continue through the date of the first meeting of stockholders of the Company (or any adjournment thereof) in 2007. 
 
9. Governing Law. The Plan and each award made under the Plan shall be governed by the laws of the State of Delaware, without regard to its
principles of conflicts of law, it being understood, however, that annual incentive compensation awarded and paid under the Plan are intended to constitute “performance-based compensation” within the meaning of Section 162(m) of the Code,
and the provisions of the Plan and any award made hereunder will be interpreted and construed accordingly. 
 
10. No Rights Conferred. Nothing contained herein will be deemed to give any person any right to receive an incentive compensation award under the Plan or to be retained in the employ or service
of the Company or any Affiliate or interfere with the right of the Company or any Affiliate to terminate the employment or other service of any person for any reason. 
 

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11. Decisions of
Board or Committee to be Final. Any decision or determination made by the Board pursuant to the provisions hereof and, except to the extent rights or powers under the Plan are reserved specifically to the discretion of the Board, all decisions
and determinations of the Committee hereunder, shall be final and binding. 
 

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                                                                   EXHIBIT 10.22

                         UNIVERSAL HEALTH SERVICES, INC.

                           ACTION BY UNANIMOUS CONSENT
                         IN WRITING IN LIEU OF A MEETING
                            OF THE BOARD OF DIRECTORS

                                July 1, 1997

Re:  Adoption of Nonqualified Deferred Compensation Plan for
     UHS Non-Employee Directors
     -------------------------------------------------------

     The undersigned, being all of the directors of Universal Health Services,
Inc., a Delaware corporation (the "Company"), do hereby unanimously consent in
writing, pursuant to Section 141(f) of the Delaware General Corporation Law and
the Bylaws of the Company, to the following resolutions by unanimous written
consent without a meeting and with the same force and effect as if they were
duly adopted at a regularly convened meeting:

     WHEREAS, certain non-employee directors have rendered, and will undoubtedly
     continue to render, valuable service and contribute to the success of the
     Company's business;

     WHEREAS, the Company desires to establish a nonqualified deferred
     compensation plan for the benefit of such directors to enable them to defer
     payment on all or a portion of their annual retainer from the Company;

     WHEREAS, the Company desires to provide such directors with incentives to
     continue their valuable service to the Company, in part, by allowing such
     directors the opportunity to select Company stock performance as a measure
     of investment performance for the period while payment of amounts are
     deferred; and

     WHEREAS, the Company has prepared and finalized the Universal Health
     Services, Inc. Deferred Compensation Plan for UHS Board of Directors (the
     "Plan"), a specimen copy of which is attached hereto and incorporated
     herein by reference.

     NOW THEREFORE, BE IT RESOLVED that the Universal Health Services, Inc.
     Deferred Compensation Plan for UHS Board of Directors, a specimen copy of
     which is attached hereto and incorporated herein by reference, shall be,
     and it hereby is, adopted and approved by the Company effective July 1,
     1997 in accordance with its terms and conditions;

     BE IT FURTHER RESOLVED that the proper officers of the Company shall be,
     and they hereby are, authorized and

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     directed to sign and execute the Plan on behalf of the Company;

     BE IT FURTHER RESOLVED that the fixed interest rate to be used for 1997
     under the Plan shall be, and it hereby is, set at six percent (6%);

     BE IT FURTHER RESOLVED that the Company's Chief Financial Officer and/or
     its Vice President/Controller shall be, and they hereby are, authorized and
     directed for each year hereafter to set the fixed interest rate to be used
     in accordance with the Plan; and

     BE IT FURTHER RESOLVED that all appropriate Company personnel shall be, and
     they hereby are, authorized and instructed to take all other necessary and
     appropriate actions to properly administer the Plan and otherwise fulfill
     the purpose and objectives of these Resolutions.

IN WITNESS WHEREOF, the undersigned have executed this Unanimous Consent Action
indicating their consent to the action taken in the above resolutions as of the
date first set forth above.

                                    DIRECTORS
                                    ---------

        /s/ Alan B. Miller                  /s/ Martin Meyerson
        --------------------------          --------------------------
        Alan B. Miller                      Martin Meyerson

        /s/ Sidney Miller                   /s/ John H. Herrell
        --------------------------          --------------------------
        Sidney Miller                       John H. Herrell

        /s/ Anthony Pantaleoni
        --------------------------          --------------------------
        Anthony Pantaleoni                  Paul R. Verkuil

        /s/ Robert H. Hotz
        --------------------------
        Robert H. Hotz

<PAGE>

                         UNIVERSAL HEALTH SERVICES, INC.

                           DEFERRED COMPENSATION PLAN
                           FOR UHS BOARD OF DIRECTORS

                                    Article 1
                                     Purpose

     This Deferred Compensation Plan for UHS Board of Directors (the "Plan") is
established and maintained in order to enable Universal Health Services, Inc.
(the "Company") to attract and retain qualified persons to serve as Directors,
to provide Directors with an opportunity to defer some or all of their Retainer
as a means of saving for retirement or other purposes, and to align the
interests of the Directors with those of the Company's shareholders by providing
such Directors with an opportunity to have the investment performance of all or
some portion of their Retainer deferred under the Plan measured by the Company's
stock performance and financial progress.

                                    Article 2
                                 Effective Date

     The Plan is subject to the approval of the Company's Board at its next
regular meeting or, to the extent permitted by law, by unanimous consent action
without a meeting. Subject to the receipt of such approval, the Plan shall be
effective as of July 1, 1997.

                                    Article 3
                                   Definitions

     Whenever used in the Plan, the following terms shall have the respective
meanings set forth below:

3.1  "Account" means, with respect to each Participant, the Participant's
     separate individual account established and maintained for the exclusive
     purpose of accounting for the Participant's deferred Retainer and the
     investment performance thereon determined in accordance with Article 5. A
     Participant's Account will be comprised of Stock Units, dollar credits or a
     combination of both.

3.2  "Beneficiary" means, with respect to each Participant, the recipient or
     recipients designated by the Participant in writing in accordance with
     Article 7.

3.3  "Board" means the Board of Directors of the Company.

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3.4  "Common Stock" means the Class B common stock of the Company listed and
     traded on the New York Stock Exchange.

3.5  "Company" means Universal Health Services, Inc., a Delaware corporation,
     and any successor thereto. Any provisions of this Plan which authorize the
     Company to make a determination or to take other steps shall require action
     by the appropriate members of the Board or, if the Board specifically so
     delegates, by officers, employees or other Company personnel.

3.6  "Director" means an individual who is a member of the Board, but excluding
     those who are employees of the Company or any Subsidiary.

3.7  "Market Value" means the closing price of the Common Stock, as published in
     The Wall Street Journal report of the New York Stock Exchange - Composite
     Transactions on the date in question or, if the Common Stock shall not have
     been traded on such date or if the New York Stock Exchange is closed on
     such date, then the first day prior thereto on which the Common Stock was
     so traded. If the Common Stock ceases to be traded on the New York Stock
     Exchange, Market Value shall be determined by the Company on the basis of
     quotes of other publicly traded ask prices or, if none, such other
     reasonable method as the Company may determine.

3.8  "Participant" means any Director who has made an election to defer payment
     of all or a portion of such person's Retainer.

3.9  "Retainer" means the designated annual cash retainer, currently paid
     coincident with the date of each Board meeting for Directors as established
     from time to time as annual compensation for services rendered, but
     exclusive of reimbursements for expenses incurred in performance of
     services as a Director.

3.10 "Stock Unit" means a unit of investment measure, derived by reference to
     the Market Value of a share of Common Stock and credited to a Participant's
     Account under this Plan. No certificates shall be issued with respect to
     such Stock Units, but the Company shall maintain only a bookkeeping Account
     in the name of the Participant with respect to the Stock Units.

3.11 "Subsidiary" means any corporation in which the Company owns directly or
     indirectly through its Subsidiaries, at least 50 percent of the total
     combined voting power of all classes of stock, or any other entity
     (including, but not limited to, partnerships and joint ventures) in which
     the Company owns at least 50 percent of the combined equity thereof.

3.12 "Termination" means retirement from the Board or termination of service as
     a Director for disability, resignation or any reason (other than death).

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                                    Article 4
                           Election to Defer Retainer

4.1  Election to Defer

          For calendar years after 1997, a Director may elect to defer receipt
     of all or a specified portion of the Director's Retainer for a year by
     filing with the Company, on or before December 31st of the preceding year,
     a written election to defer. Subject to the terms and conditions of the
     Plan, the written election to defer shall specify: (i) the amount or
     percentage of the Retainer to be deferred, (ii) the future date or time
     when deferred amounts should be paid, (iii) the method of distribution to
     be used when deferred amounts are paid, (iv) the investment measure to be
     used for crediting earnings on deferred amounts during the period while
     held pursuant to the Plan, and (v) such other information as the Company
     may consider necessary or appropriate. If a Director elects to defer less
     than all of his or her Retainer for the year, the deferred portion will be
     pro-rated against each periodic payment of the Retainer made during the
     year.

          Notwithstanding the foregoing:

          (a) a Director may choose to participate in the Plan beginning with
     the Retainer payable on or after July 1, 1997, by filing an election to
     defer on or before July 15, 1997; and

          (b) a Director (i) who fills a vacancy on the Company's Board in
     mid-year and who was not a Director on the preceding December 31st, or (ii)
     whose term of office otherwise does not begin until mid-year, may choose to
     participate in the Plan beginning with the Retainer payable for such year
     and after the date he or she assumes the position of Director by filing an
     election to defer within 30 days after the date he or she first assumes the
     position of Director.

4.2  Period of Deferral

          A Participant shall specify a period of deferral at the time of his or
     her election to defer under Section 4.1. A period of deferral represents
     the time upon which deferred amounts will first begin to be paid and shall
     be the earlier of: (i) the Participant's Termination or (ii) a fixed and
     determinable date specified by the Participant, which shall be no later
     than the date the Participant attains age 70 and which shall be no sooner
     than two years from the date of the election to defer. A Participant's
     choice of a period of deferral for deferred amounts for one year may be
     different than the period of deferral specified for deferred amounts in
     earlier years, but once a period of deferral has been specified by a
     Participant for a deferred amount, the Participant may not change or modify
     the period of deferral for such deferred amount.

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4.3  Revocation of Election

          An election to defer pursuant to Section 4.1 may not be revoked or
     modified (except as otherwise stated herein) with respect to the Retainer
     payable for a calendar year or portion of a calendar year for which such
     election is effective. An election to defer filed with the Company shall
     remain in effect for the Retainer payable in all subsequent calendar years
     until such election is timely terminated or modified by a Participant.

          An effective election to defer may be terminated or modified for any
     subsequent calendar year by the filing of another written election to defer
     (or a written revocation of elections), on or before December 31st of the
     calendar year preceding the calendar year for which such modification or
     termination is to be effective. Any termination or modification of an
     election to defer with respect to the Retainer payable in subsequent
     calendar years shall not alter or change the election for deferred amounts
     under the Plan made prior to the effective date of such termination or
     modification.

                                    Article 5
                     Investment Measures on Deferred Amounts

5.1  Choice of Investment Measures

          When a Participant elects to defer under Section 4.1 for a calendar
     year, the Participant shall specify the investment measure to be used for
     purposes of crediting investment performance on deferred amounts during the
     entire period of deferral. Participants may choose between only two methods
     of investment measure consisting of: (i) a fixed rate of return credited on
     an annual basis in accordance with Section 5.2; or (ii) the investment
     performance of Company Common Stock in accordance with Section 5.3.

          A Participant may not divide or split the deferred amount for a year
     between the two available methods of investment measure. A Participant's
     choice of a method of investment measure for deferred amounts for one year
     may be different than the method of investment measure specified for
     deferred amounts in earlier years, but once a Participant has selected a
     method of investment measure for the deferred amounts for a year, the
     method of investment measure used for such amounts will remain in effect
     for the entire period of deferral and may not be changed by the Participant
     for such deferred amounts.

5.2  Fixed Rate of Return

          If a Participant specifies a fixed rate of return as the measure of
     investment performance for deferred amounts, compound interest shall be
     credited on an annual

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     basis as of December 31st of each year or, as applicable, on a pro-rated
     basis as of the last day preceding the date of payment of deferred amounts.
     For the first year when deferred amounts are made, interest shall be
     credited only from the date the Retainer would have been paid, but for the
     election to defer, through the end of the year.

          The interest rate shall be redetermined and set annually by the
     Company's Chief Financial Officer and/or the Company's Vice
     President/Controller, in their sole discretion. The determination of the
     annual interest rate to be used for the next calendar year shall be made no
     later than 45 days before the first day of such calendar year and shall be
     communicated in writing to the Board by such date. Once an annual interest
     rate has been set for a year, it shall remain in effect for the entire year
     and may not be changed or modified until the following year. The interest
     rate applicable for the period from July 1, 1997 through December 31, 1997
     shall be six percent (6%).

5.3  Common Stock Performance

          (a) If a Participant specifies investment performance of Company
     Common Stock as the measure of investment performance for deferred amounts,
     the Participant's Account shall be credited with a number of Stock Units
     for this purpose. The number of Stock Units to be credited, on each date
     the deferred amount of the Retainer would otherwise have been payable to
     the Participant but for the election to defer, shall be equal to the whole
     and fractional Stock Units, computed to three decimal places, obtained by
     dividing (i) the dollar value of the deferred amount of the Retainer which
     otherwise would have been payable to the Participant but for his or her
     election to defer by (ii) the Market Value of the Common Stock on the first
     day of the month in which the payment of the deferred amount of the
     Retainer would have occurred but for the election to defer.

          (b) On each dividend payment date, if any, with respect to the Common
     Stock, the Account of a Participant, with Stock Units held pursuant to this
     Section, shall be credited with an additional number of whole and
     fractional Stock Units, computed to three decimal places, equal to (i) the
     product of the dividend per share of Common Stock then payable, multiplied
     by the number of Stock Units then credited to such Account; divided by (ii)
     the Market Value of the Common Stock on the first day of the month which
     includes the dividend payment date.

          (c) The number of Stock Units credited to a Participant's Account
     pursuant to this Section shall be appropriately adjusted for any change in
     the Common Stock by reason of any merger, reclassification, consolidation,
     recapitalization, stock dividend, stock split or any other similar change
     affecting the Common Stock.

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                                    Article 6
                           Payment of Deferred Amounts

6.1  Manner of Payment Upon Termination or Fixed Date

          (a) In accordance with the Participant's written election to defer as
     provided in Section 4.1, the relevant portion of the accumulated value of a
     Participant's Account shall be paid to the Participant in the manner
     elected by the Participant either as (i) a lump sum distribution within 30
     days after, as applicable, the Participant's Termination or the specified
     date for the period of deferral, or (ii) in up to 10 annual installments
     commencing within 30 days after, as applicable, the Participant's
     Termination or the specified date for the period of deferral. Once chosen,
     a Participant may not change or modify his or her election of the manner of
     payment. Payment shall be made only in cash. Stock Units shall be converted
     to cash on the basis of the Market Value of the Common Stock on the first
     day of the month in which the payment is made.

          (b) If all or some portion of a Participant's Account is paid in two
     or more annual installments:

               (i) installments ordinarily will be paid on or about the same
          date each year, but shall be paid on a date no more than a period of
          30 days following the anniversary date of the initial installment;

               (ii) any such payment in installments which has begun at any time
          before a Participant's Termination shall continue to be made without
          change or alteration, unless the Company, in its sole discretion,
          determines that the Participant's Termination was involuntary and
          chooses to accelerate the payment of any remaining installments by
          paying them in a single cash lump sum payment;

               (iii) investment performance shall continue to be credited on the
          unpaid portion of the Account in accordance with Article 5;

               (iv) that portion of any installment representing Stock Units
          will not be converted in accordance with subsection (a) above to a
          cash equivalent until such time when the value of the Stock Units will
          actually be paid to the Participant; and

               (v) the amount to be distributed in any one installment shall be
          equal to the total value of the Account on the first day of the month
          that includes the payment date of the installment divided by the
          number of installments remaining (including such installment).

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6.2  Manner of Payment Upon Death

          Notwithstanding the Participant's election, if a Participant dies
     while an Account is held for the Participant, such Account will be paid to
     the Beneficiary in a lump sum in cash within 90 days from the date of the
     Participant's death. Upon written application by the Beneficiary
     (including, if applicable, the legal representative for the Participant's
     estate) filed within 45 days of the Participant's death, the lump sum
     payment may be deferred for a reasonable period of time beyond 90 days for
     good cause, if the Company consents in writing to such deferral.

6.3  Determination

          Any cash payments of Stock Units shall be calculated on the basis of
     the Market Value of the Common Stock on the first day of the month which
     includes the relevant date for payment or other calculation, irrespective
     of installment payment dates or the date of the Participant's death, as the
     case may be.

6.4  Small Payment Amounts

          Notwithstanding any elections made by a Participant or anything else
     in this Plan to the contrary, the Company shall pay to a Participant (or,
     if appropriate, his or her Beneficiary) in a single cash lump sum that
     portion of an Account which first becomes payable at the end of a period of
     deferral if, at that time, the amount of such portion is $10,000 or less.

6.5  Financial Hardship

          Notwithstanding any elections made by a Participant or anything else
     in this Plan to the contrary, the Company shall pay all or some portion of
     a Participant's Account if the Participant establishes to the satisfaction
     of the Company that the Participant has developed an immediate and heavy
     financial need. The amount of a distribution under this Section on account
     of an immediate and heavy financial need shall not exceed the amount
     required to relieve the financial need. No distribution under this Section
     shall be made to the extent the immediate and heavy financial need can be
     satisfied from other financial resources of the Participant (including
     liquidation of assets, cessation of contributions to tax-favored plans or
     distributions or non-taxable loans from retirement plans) or through
     reimbursement or compensation by insurance or otherwise.

          For purposes of this Section, an "immediate and heavy financial need"
     shall exist only if the Company determines the need to arise from payments
     related to medical expenses for the Participant or his or her dependents;
     needed to prevent eviction from the Participant's principal residence; or
     needed to prevent foreclosure on the mortgage of the Participant's
     principal residence.

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<PAGE>

          The Company may require the Participant to provide such written
     statements, documentation and other evidence as the Company in its
     discretion deems necessary or appropriate to establish immediate and heavy
     financial need. Distributions on account of immediate and heavy financial
     need shall be made first from that portion of the Account, if any, where
     the investment measure is a fixed rate of return, and then from the
     remaining portion, if any, where the investment measure is Company Common
     Stock performance. Stock Units shall be converted to cash on the basis of
     the Market Value of the Common Stock on the first day of the month in which
     a distribution is made. No Stock Unit may be converted to cash if held for
     less than six months. A Participant who receives a distribution on account
     of an immediate and heavy financial need shall cease to have deferred
     amounts made under the Plan for the year in which the distribution is made
     and may not make an election to defer for the following year.

                                    Article 7
                             Beneficiary Designation

          Each Participant shall be entitled to designate a Beneficiary or
     Beneficiaries (which may be an entity other than a natural person) who,
     following the Participant's death, will be entitled to receive any payments
     to be made under Section 6.2. At any time, and from time to time, any
     designation may be changed or canceled by the Participant without the
     consent of any Beneficiary. Any designation, change, or cancellation must
     be by written notice filed with the Company before the Participant's date
     of death and shall not be effective until received by the Company.

          Payment shall be made in accordance with the last unrevoked written
     designation of Beneficiary that has been signed by the Participant and
     delivered by the Participant to the Company prior to the Participant's
     death. If the Participant designates more than one Beneficiary, any
     payments under Section 6.2 to the Beneficiaries shall be made in equal
     shares unless the Participant has expressly designated otherwise, in which
     case the payments shall be made in the proportions designated by the
     Participant. If no Beneficiary has been named by the Participant or if all
     Beneficiaries predecease the Participant, payment shall be made to the
     Participant's estate.

                                    Article 8
                          Transferability Restrictions

          The Plan shall not in any manner be liable for, or subject to, the
     debts and liabilities of any Participant or Beneficiary. No payee may
     assign any payment due such party under the Plan. No benefits at any time
     payable under the Plan, or interests in the Plan, shall be subject in any
     manner to anticipation, alienation, sale, transfer, assignment, pledge,
     attachment, garnishment, levy, execution, or other legal or equitable
     process, or encumbrance of any kind, including without limitation by reason
     of any qualified or other domestic relations order.

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<PAGE>
                                    Article 9
                                 Funding Policy

          The Company's obligations under the Plan shall be totally unfunded so
     that the Company or any Subsidiary is under merely a contractual duty to
     make payments when due under the Plan. The promise to pay shall not be
     represented by notes and shall not be secured in any way. The Company, in
     its sole discretion, may take action to establish a separate trust or
     trusts for purposes of holding assets set aside in connection with the
     Plan, but the Plan and obligations thereunder shall at all times remain
     unfunded.

                                   Article 10
                                Change of Control

          Notwithstanding any provision of this Plan to the contrary, if a
     "Change of Control" (as defined below) of the Company occurs, the
     accumulated value of a Participant's Account on the day immediately
     preceding the Change of Control will be paid in a cash lump sum to the
     Participant not later than 15 days after the date of the Change of Control.
     For this purpose, the cash equivalent of Stock Units in the Account shall
     be determined by the higher of (a) the average of the Market Value of the
     Common Stock for the last 20 trading days immediately prior to such Change
     of Control or (b) if the Change of Control of the Company occurs as a
     result of a tender or exchange offer or consummation of a corporate
     transaction, then the highest price paid per share of Common Stock pursuant
     thereto. Any consideration (other than cash) forming a part or all of the
     consideration for the Common Stock to be paid pursuant to the applicable
     transaction shall be valued at the valuation price thereon reasonably
     determined by the Board (other than those who are Participants) serving on
     the day immediately before the Change of Control.

          In addition, if a Change of Control of the Company occurs, the Company
     shall reimburse a Participant for the legal fees and expenses incurred if
     the Participant is required to seek to obtain or enforce any right to
     distribution or any other right under this Plan. In the event that it is
     determined that such Participant is properly entitled to a cash
     distribution hereunder, such Participant shall also be entitled to interest
     thereon at the prime rate of interest as published in The Wall Street
     Journal plus two percent from the date such distribution should have been
     made to and including the date it is made. Notwithstanding any provisions
     of this Plan to the contrary, the provisions of this Plan may not be
     amended by an amendment effected at any time within three years following a
     Change of Control.

          For purposes of this Plan, Change of Control shall mean: the purchase
     or other acquisition by any person, entity or group of persons, within the
     meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934
     ("Act"), or any comparable successor provisions, of beneficial ownership
     (within the meaning of Rule 13d-3

                                      A-9

<PAGE>

     promulgated under the Act) of 30 percent or more of either the outstanding
     shares of common stock or the combined voting power of the Company's then
     outstanding voting securities entitled to vote generally, or the approval
     by the stockholders of the Company of a reorganization, merger, or
     consolidation, in each case, with respect to which persons who were
     stockholders of the Company immediately prior to such reorganization,
     merger or consolidation do not, immediately thereafter, own more than 50
     percent of the combined voting power entitled to vote generally in the
     election of directors of the reorganized, merged or consolidated Company's
     then outstanding securities, or a liquidation or dissolution of the Company
     or of the sale of all or substantially all of the Company's assets. The
     Board (other than those who are Participants) shall have the duty to make a
     determination as to those events which give rise to a Change of Control and
     shall do so prior to the occurrence of a Change of Control.

                                   Article 11
                                 Administration

          The Plan shall be administered by the Company. The Company shall have
     authority to interpret and construe the Plan, and to prescribe, amend and
     rescind rules and regulations relating to the administration of the Plan,
     and all such interpretations, rules and regulations shall be conclusive and
     binding on all Directors and Participants. The Company may employ agents,
     attorneys, accountants, or other persons (who also may be employees of a
     Subsidiary) and allocate or delegate to them powers, rights, and duties,
     all as the Company in its discretion may consider necessary or advisable to
     properly carry out the administration of the Plan.

          Upon the request of a Participant, and not more frequent than once
     each calendar year, the Company shall provide the Participant with a
     written statement showing the total value of the Participant's Account as
     of a date selected by the Company, the portion of the total Account
     allocated to each of the investment measures, the date on which payment of
     deferred amounts are expected to be made, the manner in which payments will
     be made and such other information as the Company in its sole discretion
     deems necessary or appropriate.

                                   Article 12
                            Amendment and Termination

          The Company, by resolution duly adopted by the Board, shall have the
     right, authority and power to alter, amend, modify, revoke, or terminate
     the Plan; except as provided in Article 10; and provided further, that no
     amendment or termination of the Plan shall adversely affect the rights of
     any Participant with respect to any Stock Units or other amounts credited
     such Participant's Account, unless the Participant shall consent thereto in
     writing.

                                      A-10

<PAGE>

                                   Article 13
                                  Miscellaneous

13.1 No Right to Continue as a Director

          Nothing in this Plan shall be construed as conferring upon a
     Participant any right to continue as a member of the Board.

13.2 No Interest as a Shareholder

          Stock Units do not give a Participant any voting, dividend or other
     rights whatsoever with respect to shares of Common Stock.

13.3 No Right to Corporate Assets

          Nothing in this Plan shall be construed as giving the Participant, the
     Participant's designated Beneficiaries or any other person any equity or
     interest of any kind in the assets of the Company or any Subsidiary or
     creating a trust of any kind or a fiduciary relationship of any kind
     between the Company or any Subsidiary and any person. As to any claim for
     payments due under the provisions of the Plan, a Participant, Beneficiary
     and any other persons having a claim for payments shall be mere unsecured
     creditors of the Company or any Subsidiary.

13.4 Tax Withholding; Other Tax Consequences

          A Director shall be solely responsible for determining and providing
     for the timely payment of federal, state and local income and other taxes
     incident to deferred amounts of the Retainer pursuant to the Plan. The
     Company is authorized to make such arrangements and establish such
     procedures as they determine may be necessary or appropriate for any
     reporting or withholding obligations they may have under the tax laws.

13.5 Payment to Legal Representative for Participant

          In the event the Company shall find that a Participant is unable to
     care for his or her affairs because of illness or accident, the Company may
     direct that any payment due the Participant be paid to the Participant's
     duly appointed legal representative, and any such payment so made shall be
     a complete discharge of the liabilities of the Plan.

13.6 No Limit on Further Corporate Action

          Nothing contained in the Plan shall be construed so as to prevent the
     Company or any Subsidiary from taking any corporate action which is deemed
     by the Company or any Subsidiary to be appropriate or in its best interest.

                                      A-11

<PAGE>

13.7 Governing Law

          The Plan shall be construed and administered according to the laws of
     the Commonwealth of Pennsylvania to the extent that those laws are not
     preempted by the laws of the United States of America.

13.8 Headings

          The headings of articles, sections, subsections, paragraphs or other
     parts of the Plan are for convenience of reference only and do not define,
     limit, construe, or otherwise affect its contents.

     IN WITNESS WHEREOF, the undersigned has signed and dated this Plan on the
17th day of September, 1997.

                                       UNIVERSAL HEALTH SERVICES, INC.

                                       By: /s/ Alan Miller
                                           -------------------------------------

                                       Date: 9/17/97
                                             -----------------------------------

                                      A-12

<PAGE>

                                 FIRST AMENDMENT

                                     TO THE

                         UNIVERSAL HEALTH SERVICES, INC.
                           DEFERRED COMPENSATION PLAN
                           FOR UHS BOARD OF DIRECTORS

Pursuant to the authority granted in Article 12 of the Universal Health
Services, Inc. Deferred Compensation Plan for UHS Board of Directors ("Plan"),
Universal Health Services, Inc. ("Company") hereby amends the Plan as follows:

Effective July 1, 2000

1.   Section 5.1 is revised in its entirety to read as follows:

     "5.1 Choice of Investment Measures

          (a) When a Participant elects to defer under Section 4.1 for a
     calendar year the Participant shall specify the investment measure to be
     used for purposes of crediting investment performance on such deferred
     amounts. Participants may choose between only two methods of investment
     measure consisting of: (i) a fixed rate of return credited on an annual
     basis in accordance with Section 5.2; or (ii) the investment performance of
     Company Common Stock in accordance with Section 5.3.

          (b) A Participant may not divide or split the deferred amount for a
     year between the two available methods of investment measure. A
     Participant's choice of a method of investment measure for deferred amounts
     for one year may be different than the method of investment measure
     specified for deferred amounts in earlier years.

          (c) Within a reasonable time prior to each December 31 and June 30, a
     Participant may redesignate the investment measure to be used (such
     redesignation to be effective the next following January 1 and July 1,
     respectively) with respect to all amounts deferred in calendar years prior
     to the calendar year which contains the effective date, and subject to the
     requirement that upon any such redesignation, one hundred percent of such
     previously deferred amounts shall be subject to the same single investment
     measure."

2.   Section 5.2 is amended by adding a new sentence at the end thereof to read
     as follows:

     "Notwithstanding the foregoing, if a Participant makes a redesignation of
     investment measures under Section 5.1(c) such that deferred amounts are
     subject to the investment measure under this Section for less than a full
     year, compound interest shall be credited on a prorated basis as of the
     last day prior to the effective date of the redesignation."

<PAGE>

3.   The first sentence of Section 5.3(a) is revised to read as follows:

     "If a Participant specifies investment performance of Company Common Stock
     as the measure of investment performance in connection with his or her
     election to defer under Section 4.1 for a calendar year, the Participant's
     Account shall be credited with a number of Stock Units for this purpose."

4.   Sections 5.3(b) and 5.3(c) are renumbered as Sections 5.3(c) and 5.3(d),
     respectively, and a new section 5.3(b) shall be added to the Plan, to read
     as follows:

     "(b) If a Participant redesignates the measure of investment performance of
     amounts previously deferred (pursuant to Section 5.1(c) above) into Company
     Common Stock, the portion of a Participant's Account which does not at that
     time specify Company Common Stock as the investment measure and which is
     attributable to amounts previously deferred shall be credited with a number
     of Stock Units for this purpose. As of the effective date of any such
     redesignation, the total number of Stock Units with respect to that portion
     of the Participant's Account that does not at that time specify Company
     Common Stock as the investment measure shall be equal to the whole and
     fractional Stock Units, computed to three decimal places, obtained by
     dividing (i) the accumulated value (as of the effective date of such
     redesignation) of such portion of the Participant's Account attributable to
     amounts previously deferred by (ii) the Market Value of the Common Stock as
     of the effective date of such redesignation."

5.   All other provisions of the Plan not mentioned herein shall remain
     unchanged.

IN WITNESS WHEREOF, the Company has executed this First Amendment on this 19th
day of September, 2000.

                                       UNIVERSAL HEALTH SERVICES, INC.

                                       By: /s/ Alan B. Miller
                                           -------------------------------------
                                       Title: President, CEO
                                              ----------------------------------

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