Inside Information and Trading of Company Stock
I. SCOPE: Universal Health Services, Inc. and Subsidiaries
The Company endorses the ownership of Company stock by the Board of Directors (“Directors”), Executive Officers, non-executive officers and other employees in order for them to have a meaningful investment in what they manage. However, it must be recognized that stock ownership brings with it responsibilities for complying with the requirements of the Securities Laws.
II. Inside Information and Insider Designations
Under the Federal Securities Law, a person is prohibited from exercising stock options and/or purchasing or selling securities on the basis of “material (inside) information”, which includes any information that would influence a reasonable investor to buy or sell stock of the Company. Non-public information is material if it is reasonably certain to have a substantial effect on the market price of the security, if publicly disclosed. The news of such activity must be widely disseminated in the press before stock options can be exercised and/or purchases or sales of stock can be made. Communications on behalf of the Company with the media, security analysts and investors must be made only by specifically designated representatives of the Company.
Examples of material (inside) information include, but are not limited to, earnings, mergers, acquisitions, divestitures, joint ventures, acquisition or loss of a significant contract, stock or cash dividends, stock splits, significant financing developments, major personnel changes, and major litigation developments. No individual, regardless of position within the Company, should exercise stock options and/or purchase or sell the Company’s stock while in the possession of material (inside) information which is not yet publicly disseminated. At such times, such individuals (referred to as “Insiders”) may not exercise stock options and/or purchase or sell Company stock.
The Company has designated its Directors and Executive Officers as Insiders for both Securities and Exchange Commission (“SEC”) and internal purposes and as such, they are required to comply at all times with the requirements and restrictions outlined in III and IV below. In addition, the Company has designated certain non-executive officers and other employees as Insiders for internal purposes and as such, they are required to comply at all times with the requirements and restrictions outlined in III below.
In addition, the remaining non-executive officers and other employees, not specifically designated as Insiders, may from time to time be in possession of material (inside) information. The fact that the Insider may have relied upon other factors in exercising stock options and/or purchasing or selling stock, while in the possession of material (inside) information, will not absolve the Insider from liability and therefore, the Insider must refrain from exercising stock options and/or purchasing or selling the Company’s stock. In some cases, an individual may not be aware of certain material (inside) information, although the SEC might assume they were. Therefore, the Company makes available advice of counsel, which can be obtained prior to exercising stock options and/or purchasing or selling Company stock.
Persons who have traded on material (inside) information, as well as persons who have “tipped” others, and the “tippees” of such information, have been subjected to both civil and criminal proceedings.
Each individual who has access to material (inside) information must exercise the utmost caution in preserving the confidentiality of that information. If anyone becomes aware of the leak of material (inside) information, this should be reported immediately to the Company’s General Counsel and/or Chief Financial Officer.
If any Director, Executive Officer, non-executive officer or employee of the Company becomes aware of material (inside) information, that person may not disclose the information, except as required in the performance of their regular duties for the Company. If any Director, Executive Officer, non-executive officer or employee of the Company becomes aware of material (inside) information related to another company as a result of discussions in connection with the acquisition, merger or execution of significant contract agreements, that individual may not disclose the information, except as required in the performance of their regular duties for the Company, or trade in the stock of the other company until the information is publicly disclosed.
I. Stock Option Exercise and Trading Restrictions/Requirements for Individuals Designated as Insiders
In order to avoid any appearance of trading on inside information, all of the Company’s Directors, Executive Officers, and non-executive officers have been designated as Insiders as have certain other employees. All Insider designated individuals have been formally notified and have signed acknowledgements outlining the trading restrictions and requirements.
All designated Insiders must fully comply with the following trading guidelines:
(i) All Insiders must refrain from exercising stock options and trading in the Company’s stock during financial “quiet periods” which begin on the 15th of the last month of the calendar quarter and end two (2) business days after the Company’s public release of quarterly or annual earnings. The approximate dates for each period are as follows:
- 1st Quarter: March 15th through April 30th.
- 2nd Quarter: June 15th through July 31st.
- 3rd Quarter: September 15th through October 31st.
- 4th Quarter/full year: December 15th through March 3rd.
(ii) Since there may be other “quiet periods” when trading should be suspended including, but not limited to, the pending release of material (inside) information to the public or recent stock repurchases by the Company pursuant to its repurchase program, all designated Insiders must notify the Company’s Senior Vice President and Chief Financial Officer (Steve Filton), or the Vice President and Controller (Chick Boyle), before executing purchases or sales of Company stock, at any time. The Company’s Senior Vice President and Chief Financial Officer shall notify the President and Chief Executive Officer before executing purchases or sales of Company stock, at any time. Notification for the exercise of stock options should be made to the Corporate Accounting Department to the Controller and/or the Director of Corporate Accounting. If any development of major importance is expected to be announced in the near future, Insiders should also refrain from trading. Whenever doubt exists, the presumption should be made against exercising stock options or trading in the Company’s stock until advice has been sought in advance.
II. Directors and Executive Officers — Filing Responsibilities and Short-Swing Profits
Directors and Executive Officers are required to report the exercise of stock options and purchases and sales of the Company’s stock to the SEC under Section 16(a) of the Securities Exchange Act of 1934, as amended. It is the responsibility of the individual to make the required filings timely and correctly. The Company does not assume the responsibility in this regard.
When an individual initially becomes a Director or Executive Officer of the Company, he/she must report all Company stock owned by him/her at that time by filing a statement on Form 3 with the SEC within ten days of assuming the position.
If the individual subsequently exercises stock options or acquires or disposes of any Company stock, he/she must file a statement on Form 4 with the SEC by the second business day following the transaction. In addition, the Company will file a Form 4 with the SEC, by the end of the second business day, in the event of the issuance of a stock grant or issuance of a stock option grant.
In general, transactions involving Company stock listed in the name of a spouse, children, relatives sharing the same household, as well as other entities such as trusts, corporations and partnerships in which the person has an interest are subject to the filing of a Form 4. In addition to purchases and sales, reportable transactions also include gifts and inheritances.
New rules under Section 16(a) impose additional reporting requirements on Directors and Executive Officers. These rules require companies to report in their annual proxy statement and Form 10-K the names of any Directors or Executive Officers who, during the Company’s preceding fiscal year, failed to file or filed late, a Form 4 or Form 3. Further, companies are required to describe in their proxy statement and 10-K their compliance procedures (or lack thereof) for assisting Directors and Executive Officers in meeting the Section 16(a) filing requirements. The SEC also requires a year-end filing, Form 5, for all Directors and Executive Officers, as a means to ensure that Directors and Executive Officers are, in fact, complying with their filing obligations. Form 5 contains a statement that all required reports have been filed during the year and contains a list of the reporting person’s holdings in the Company as of the end of the year.
The office of Corporate Secretary will prepare and file the necessary forms electronically with the SEC upon notification from any Director or Executive Officer of a transaction. One manually signed copy of the Form must be kept in the individual’s file, located in the Corporate Accounting Department. In the event the Director or Executive Officer is unable to manually sign their Form 3, 4 or 5, such Form will be signed by a previously designated Attorney-in-Fact.
Supplementing the reporting requirements of Section 16(a) is the short-swing trading provision contained in Section 16(b), which provides for the recovery by the Company of “short-swing profits” generated by directly or indirectly trading by Directors and Executive Officers in the Company’s stock. Under this Section, all purchases and sales, and sales and purchases, of the stock of the Company within a six-month period are matched and any profits inure to the benefit to the Company.
The definitions of “purchase”, “sale” and “profit” under this Section are very broad. It does not matter whether the purchase or sale occurs first. Nor is it necessary for the same shares to be involved in each of the matched transactions. Losses cannot be offset against gains. Transactions are paired so as to match the lowest purchase price and the highest sale price within a six-month period, thus finding the maximum spread. The liability applies without regard to intent. Good faith is no defense. It makes no difference how long the stock being sold has been held or that the person was a Director or Executive Officer for only one of the two matching transactions. Therefore, any transaction in the Company’s stock should be structured very carefully so that Section 16(b) is not violated.
The Company makes available advice of counsel, which can be obtained prior to purchasing or selling Company stock by Directors and Executive Officers.
Originator: /s/ Steve Filton
Senior Vice President and Chief Financial Officer
Authorized: /s/ Alan B. Miller
Alan B. Miller President and Chief Executive Officer