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EXHIBIT 10.1
PHYCOR, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000
RECITALS:
WHEREAS, PhyCor, Inc. ("PhyCor") established the Plan effective January
1, 1997, pursuant to approval of the PhyCor board of directors, and has amended
the Plan from time to time to designate individuals who are eligible to
participate hereunder;
WHEREAS, on December 16, 1999, the board of directors of PhyCor took
action to authorize the payment of certain deferred compensation amounts to
eligible participants; and
WHEREAS, PhyCor now desires to modify the Plan to provide for the
accrual of specified deferred compensation amounts through individual accounts
maintained on behalf of each eligible participant, and to otherwise reflect the
intent of the actions taken by the board;
NOW, THEREFORE, the Plan is hereby amended and restated to reflect the
foregoing, effective January 1, 2000.
I. NAME AND PURPOSE
PhyCor has determined that it is reasonable, desirable and necessary to
provide for retirement benefits to certain executive employees of PhyCor that
supplement the retirement benefits provided under the PhyCor, Inc. Savings and
Profit Sharing Plan. Accordingly, PhyCor has established this PhyCor, Inc.
Supplemental Executive Retirement Plan (the "Plan") in order to enable PhyCor to
attract into and retain persons of outstanding competence. This Plan is to be an
unfunded plan of deferred compensation covering a select group of management or
highly compensated employees, within the meaning of sections 201(2), 301(a)(3),
and 401(a)(1) of ERISA, and is intended to be exempt from Parts 2, 3, and 4 of
Title I of ERISA. The Plan shall continue indefinitely until it is terminated by
an amendment permissible under Section 7.3.
II. DEFINITIONS
When used in this Plan, the following terms will have the meanings set
forth below:
2.1 "Account" means the individual bookkeeping account maintained for
each Participant which is credited with such amounts as are determined pursuant
to Article III. The individual account shall be established for record keeping
purposes only and shall not require an actual segregation or allocation of
assets.
2.2 "Change in Control" means (i) a consolidation or merger of PhyCor
with or into any other person in which PhyCor will not survive, or will survive
only as a subsidiary of another corporation, (ii) the sale, lease or other
disposition of all or substantially all of the assets
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of PhyCor to any other person, (iii) complete liquidation or dissolution of
PhyCor, or (iv) the acquisition by any person, including a "group" as
contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, of beneficial ownership or control of securities of PhyCor representing
50% or more of the combined voting power of PhyCor's then outstanding
securities; provided, however, a Change in Control shall not be deemed to have
occurred solely as a result of any transaction between PhyCor and one or more of
its affiliates (whether or not in existence on the date hereof).
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Commencement Date" means January 1 coinciding with or following
the date a Participant attains age 65 and has terminated employment for reasons
other than death. In the event of a Participant's death, the Commencement Date
shall be the date that is as soon as administratively feasible following the
date of death.
2.5 "Committee" means the compensation committee of the board of
directors of PhyCor; provided, however, that after the occurrence of a Change in
Control, or after the termination of employment of a Participant without "cause"
(as defined in the Participant's employment agreement with PhyCor) the members
of the Committee shall instead be the individuals who are Participants
immediately prior to the Change in Control or termination event.
2.6 "Compensation" means the average of a Participant's annual
compensation that is paid over the three consecutive fiscal years that will
produce the highest average, adjusted as follows:
(a) Amounts that are recognized upon the exercise of Company stock
options or under restricted stock awards shall be excluded.
(b) Amounts that are excluded from income under section 402(g) of
the Code or section 125 of the Code shall be included.
(c) If termination of employment occurs after a Change in Control,
Compensation shall be increased each year by adding an adjustment on
January 1st of each year following the date of termination equal to the
rate on one-year Treasury Bills that is in effect on such dates,
through the Commencement Date.
2.7 "Disability" shall have the same meaning as under PhyCor's long
term disability plan.
2.8 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
2.9 "Normal Retirement Date" means the earliest of (i) the date of a
Change in Control, (ii) the date of a Participant's death, or (iii) the date a
Participant attains age 65.
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2.10 "Normal Retirement Benefit" means the benefit described in Section
5.2.
2.11 "Participant" means an individual who is: (i) a member of a select
group of management or highly compensated employees of PhyCor, within the
meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, (ii) designated
by the Committee to participate in this Plan, and (iii) identified on Exhibit A.
The identification of an individual on Exhibit A shall be deemed to be
irrebuttable evidence that PhyCor has deemed such individual for all purposes to
be a member of a select group of management and highly compensated employees.
The chief executive officer of the Company shall have the authority to
prospectively modify Exhibit A to add or remove individuals identified thereon.
2.12 "Trust" means the grantor trust which is described in Section 4.2
and has been established to hold, administer, and invest the assets accrued and
reserved to pay benefits under the Plan and for the purposes otherwise stated in
the Trust instrument.
2.13 "Years of Service" means the number of months in any described
period that a Participant, prior to a Change in Control, has been employed by
PhyCor plus the number of months between a Change in Control and the
Commencement Date, divided by 12.
III. ELIGIBILITY AND BENEFIT ACCRUALS
3.1 Effective Date of Participation. An executive employee of PhyCor
shall become a Participant in this Plan as of the date designated by the
Committee or on the date evidenced in an exhibit to this Plan. All deferred
compensation amounts that are accrued under this Plan shall be deemed to have
been accrued as of the last day of the fiscal year of the Plan which includes
the last day of PhyCor's fiscal year for which the accrual is calculated.
3.2 Calculation of Accounts. Effective January 1, 2000, each
Participant shall receive an allocation to his Account on each January 1st of
the amount indicated on Exhibit A to this Plan, through January 1st, 2004,
provided that the Participant continues to be employed by PhyCor or one of its
affiliates on the date of the allocation, or ceased to be employed due to a
Disability. In addition, on each December 31st, each Participant's Account shall
be credited with compounded interest at the rate of 8.5%. In the event that a
Participant dies before the Commencement Date that occurs after he attains age
65, an immediate allocation shall be made to his Account that is equal to the
amounts that would have been allocated if he had survived until such
Commencement Date.
IV. ADMINISTRATION
4.1 Administration Committee. This Plan shall be administered by the
Committee. The Committee shall have full discretionary power and authority to
interpret, construe and administer this Plan and the Committee's interpretations
and constructions thereof, and actions thereunder, including the amount or
recipient of the payment to be made from this Plan, shall be binding and
conclusive on all persons for all purposes.
4.2 Funding. All benefits payable hereunder shall be unfunded for
purposes of section 83 of the Code and Title I of ERISA.
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(a) Except as described in this Section, PhyCor shall establish the
Trust as a reserve for the benefits payable hereunder and for the
purposes stated in the Trust instrument. PhyCor shall be the grantor of
the Trust and the Trust shall be established for the benefit of the
Participants herein and, in the case of the insolvency or bankruptcy of
PhyCor, for the benefit of the general creditors of PhyCor. To the
extent that the Participants' benefits are not paid from the Trust,
such benefits shall be paid from the general assets of PhyCor. Except
as provided in the Trust, the Participants shall have no funded,
secured, or preferential right to payment hereunder, but rather shall
at all times have the status of a general unsecured creditor.
(b) The Committee, in its sole discretion, may at any time prior to
the time that a Change in Control is being considered by the officers,
shareholders or directors of PhyCor, cease funding the Trust.
4.3 Claims Procedure. Prior to or upon becoming entitled to receive a
benefit hereunder, a Participant or his beneficiary ("Claimant") shall request
payment of such benefits at the time and in the manner prescribed by the
Committee. The Committee may direct payment of benefits without requiring the
filing of a claim therefor, if the Committee has knowledge of such Claimant's
whereabouts. The Committee shall provide adequate notice in writing as
prescribed pursuant to paragraph (b) below to any Claimant whose claim for
benefits under the Plan has been denied.
(a) Such notice must be sent within 90 days of the date the claim
is received by the Committee unless special circumstances require an
extension of time for processing the claim. Such extension shall not
exceed 90 days and no extension shall be allowed unless, within the
initial 90 day period, the claimant is sent an extension notice
indicating the special circumstances requiring the extension and
specifying a date by which the Committee expects to render its
decision.
(b) The Committee's notice of denial to the Claimant shall set
forth the following:
(1) the specific reason or reasons for the denial;
(2) specific references to pertinent Plan provisions on which
the Committee based its denial;
(3) a description of any additional material and information
needed for the Claimant to perfect his or her claim and an
explanation of why the material or information is needed;
(4) a statement that the Claimant may request a review upon
written application to the Committee, review pertinent Plan
documents, and submit issues and comments in writing;
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(5) a statement that any appeal of the Committee's adverse
determination must be made in writing to the Committee within 60
days after receipt of the Committee's notice of denial of benefits,
and that failure to appeal the action to the Committee in writing
within the 60-day period will render the Committee's determination
final, binding, and conclusive; and
(6) the address of the Committee to which the Claimant may
forward his or her appeal.
(c) If the Claimant should appeal to the Committee, the Claimant or
a duly authorized representative, may submit, in writing, whatever
issues and comments the Claimant deems pertinent. The Committee shall
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under
the circumstances. The Committee shall advise the Claimant in writing
of its decision on the appeal, the specific reasons for the decision,
and the specific Plan provisions on which the decision is based. The
notice of the decision shall be given within 60 days of the Claimant's
written request for review, unless special circumstances (such as a
hearing) would make the rendering of a decision within the 60 day
period infeasible, but in no event shall the Committee render a
decision regarding the denial of a claim for benefits later than 120
days after its receipt of a request for review. If an extension of time
for review is required because of special circumstances, written notice
of the extension shall be furnished to the claimant prior to the date
the extension period commences.
4.4 Designation of Beneficiaries. Each Participant shall designate in a
writing prescribed by the Committee a Beneficiary(ies) and contingent
Beneficiary(ies) to whom benefits due hereunder shall be paid. If any
Participant fails to designate a Beneficiary or if the designated Beneficiary
predeceases the Participant, benefits due hereunder at that Participant's death
shall be paid to his or her contingent Beneficiary or, if none, to the deceased
Participant's surviving spouse, if any, and if none, to the deceased
Participant's estate. Beneficiaries may be changed at any time by filing a new
Participation Agreement without the consent of any prior Beneficiaries.
Provided, however, that the Participant must designate his spouse as his
beneficiary or must obtain his spouse's written consent to the designation of
another beneficiary. Such spousal consent must be witnessed by the Committee or
a notary public. Any attempted designation of a beneficiary without the written
consent of the Participant's spouse shall be void. A Participant may change a
Beneficiary designation in writing in accordance with the above procedures at
any time prior to his death.
V. BENEFITS
5.1 Death Benefit. Upon death prior to Normal Retirement Date, a
Participant will be eligible for the Normal Retirement Benefit as a death
benefit. The death benefit will be paid to the Beneficiaries of a Participant.
5.2 Normal Retirement Benefit. A Participant whose employment
terminates on or after the Normal Retirement Date shall begin receiving the
Normal Retirement Benefit on the Commencement Date. The Normal Retirement
Benefit shall be calculated as follows:
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(a) Prior to the occurrence of a Change in Control, the Normal
Retirement Benefit shall be the sum of amounts that have been credited
to a Participant's Account.
(b) After the occurrence of a Change in Control, the Normal
Retirement Benefit shall be the greater of: (1) A payment that is
equivalent to an annuity for life with a ten year term certain, with
annual payments equal to the greater of (i) 55%, multiplied by the
Participant's Compensation, and (ii) 2.5% multiplied by the
Participant's Years of Service, multiplied by the Participant's
Compensation. The amount of the payment shall be actuarially calculated
to be equivalent to the annuity payment form by utilizing the interest
rate and mortality assumptions that are specified in section 417(e) of
the Code, but without regard to pre-retirement mortality calculations
and, provided further, that the interest rate utilized shall be the
lowest rate available during the period for which the calculations are
being made. (2) The amounts that have been credited to a Participant's
Account, plus all amounts that would be credited if the Participant
continued to be employed by PhyCor or one of its affiliates until the
Commencement Date following the date he attained age 65.
5.3 Disability. A Participant whose employment terminates as a result
of a Disability shall continue to accrue benefits and receive allocations to his
Account that are specified herein and shall be eligible to retire at Normal
Retirement Age and shall receive the Normal Retirement Benefit.
5.4 Other Termination of Employment. A Participant whose employment
terminates prior to the Normal Retirement Date and prior to a Change in Control
shall receive as a benefit the amounts that have been credited to his Account.
5.5 Timing of Distributions. A Participant's benefits hereunder will be
paid as follows to the Participant or his Beneficiary.
(a) Generally, a payment of a Participant's benefit will be made in
a lump sum on the Commencement Date.
(b) The Committee may, in its absolute discretion, give its consent
to any alternate payment election made by the Participant, provided
that such consent is given on account of a change in PhyCor's business
and/or financial considerations that the Committee deems appropriate.
The decision of the Committee to consent or deny consent to a
Participant's election described in this Section shall for all purposes
be deemed to have been made pursuant to valid business or financial
considerations. Following Change in Control, the decision of the
Committee must be approved by PhyCor (or its successor).
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5.6 Additional Change in Control Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by or
on behalf of PhyCor to or for the benefit of the Participant as a
result of a change in control, as defined in Section 280G of the Code,
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 5.6 (a
"Payment")) would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the
Participant with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Participant shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Participant of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Participant retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5.6(c), all determinations
required to be made under this Section 5.6, including whether and when
a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized accounting firm or law firm
selected by the Participant, subject to the consent of PhyCor, which
consent shall not be unreasonably withheld (the "Tax Firm"); provided,
however, that the Tax Firm shall not determine that no Excise Tax is
payable by the Participant unless it delivers to the Participant a
written opinion (the "Tax Opinion") that failure to pay the Excise Tax
and to report the Excise Tax and the payments potentially subject
thereto on or with the Participant's applicable federal income tax
return will not result in the imposition of an accuracy-related or
other penalty on the Participant. All fees and expenses of the Tax Firm
shall be borne solely by PhyCor. Within 15 business days of the receipt
of notice from the Participant that there has been a Payment, or such
earlier time as is requested by PhyCor, the Tax Firm shall make all
determinations required under this Section 5.6, shall provide to PhyCor
and the Participant a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm
determines that no Excise Tax is payable, shall deliver the Tax Opinion
to the Participant. Any Gross-Up Payment, as determined pursuant to
this Section 5.6, shall be paid by PhyCor to the Participant within
fifteen days of the receipt of the Tax Firm's determination. Subject to
the remainder of this Section 5.6, any determination by the Tax Firm
shall be binding upon PhyCor and the Participant; provided, however,
that the Participant shall only be bound to the extent that the
determinations of the Tax Firm hereunder, including the determinations
made in the Tax Opinion, are reasonable and reasonably supported by
applicable law. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by
the Tax Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by PhyCor should have been made
("Underpayment"), consistent with the calculations
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required to be made hereunder. In the event that it is ultimately
determined in accordance with the procedures set forth in Section
5.6(c) that the Participant is required to make a payment of any Excise
Tax, the Tax Firm shall reasonably determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by PhyCor to or for the benefit of the Participant. In
determining the reasonableness of Tax Firm's determinations hereunder,
and the effect thereof, the Participant shall be provided a reasonable
opportunity to review such determinations with Tax Firm and the
Participant's tax counsel. Tax Firm's determinations hereunder, and the
Tax Opinion, shall not be deemed reasonable until the Participant's
reasonable objections and comments thereto have been satisfactorily
accommodated by Tax Firm.
(c) The Participant shall notify PhyCor in writing of any claims by
the Internal Revenue Service that, if successful, would require the
payment by PhyCor of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 30 calendar days after
the Participant actually receives notice in writing of such claim and
shall apprise PhyCor of the nature of such claim and the date on which
such claim is requested to be paid; provided, however, that the failure
of the Participant to notify PhyCor of such claim (or to provide any
required information with respect thereto) shall not affect any rights
granted to the Participant under this Section 5.6 except to the extent
that PhyCor is materially prejudiced in the defense of such claim as a
direct result of such failure. The Participant shall not pay such claim
prior to the expiration of the 30-day period following the date on
which he gives such notice to PhyCor (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).
If PhyCor notifies the Participant in writing prior to the expiration
of such period that it desires to contest such claim, the Participant
shall:
(1) give PhyCor any information reasonably requested by PhyCor
relating to such claim;
(2) take such action in connection with contesting such claim
as PhyCor shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by PhyCor and
reasonably acceptable to the Participant;
(3) cooperate with PhyCor in good faith in order effectively to
contest such claim; and
(4) if PhyCor elects not to assume and control the defense of
such claim, permit PhyCor to participate in any proceedings
relating to such claim;
provided, however, that PhyCor shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Participant harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this Section
5.6(c), PhyCor shall have the right, at its sole option,
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to assume the defense of and control all proceedings in connection with
such contest, in which case it may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may either direct the
Participant to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Participant agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as PhyCor shall determine; provided, however, that if
PhyCor directs the Participant to pay such claim and sue for a refund,
PhyCor shall advance the amount of such payment to the Participant, on
an interest-free basis and shall indemnify and hold the Participant
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Participant with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, PhyCor's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Participant shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Participant of an amount advanced
by PhyCor pursuant to Section 5.6 the Participant becomes entitled to
receive any refund with respect to such claim, the Participant shall
(subject to PhyCor's complying with the requirements of Section 5.6(c))
promptly pay to PhyCor the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Participant of an amount advanced by PhyCor
pursuant to Section 5.6(c), a determination is made that the
Participant is not entitled to a refund with respect to such claim and
PhyCor does not notify the Participant in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall, to the extent of such
denial, be forgiven and shall not be required to be repaid and the
amount of forgiven advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
VI. FORFEITURE OF BENEFITS
6.1 Noncompete Violation. A Participant who violates the
non-competition provision contained in his Employment Agreement shall forfeit
his right to any and all benefits under this Plan.
6.2 For Cause Termination. A Participant who is terminated "for cause,"
as defined in his employment agreement with PhyCor, prior to January 1, 2004,
shall forfeit his right to any and all benefits under this Plan.
6.3 Determinations After Change in Control or Termination Without
Cause by the Company. All determinations under the Plan, including a
determination under this Article VI., shall be made by
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the Committee as it is configured following a Change in Control or the
termination by the Company of a Participant without cause.
6.4 Termination Without Cause By Participant Unrelated to a Change in
Control. A voluntary termination of employment by a Participant, (other than a
resignation under duress or due to a Disability) on a before January 1, 2004
will cause a forfeiture of all benefits allocated to such Participant's Account
pursuant to Section 3.2.
VII. MISCELLANEOUS
7.1 Non-assignment of Interest. No right or interest to or in any
payment or benefit to a Participant shall be assignable by such Participant
except by will or the laws of descent and distribution. No right, benefit or
interest of a Participant hereunder shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation or
set-off in respect of any claim, debt or obligation, or to execution,
attachment, levy or similar process, or assignment by operation of law. Any
attempt, voluntarily or involuntarily, to effect any action specified in the
immediately preceding sentence shall, to the full extent permitted by law, be
null, void and of no effect; provided, however, that this provision shall not
preclude a Participant from designating one or more Beneficiaries to receive any
amount that may be payable to such Participant under the Plan after his death
and shall not preclude the legal representatives of the Participant's estate
from assigning any right hereunder to the person or persons entitled thereto
under his will, or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate.
7.2 Successors. This Plan shall be binding upon and inure to the
benefit of PhyCor, its successors and assigns and the Participants and their
heirs, executors, administrators, and duly appointed legal representatives.
7.3 Amendment and Termination. PhyCor may at any time modify or
terminate this Plan by an amendment pursuant to an action that is approved or
ratified by PhyCor's board of directors. Modifications to Exhibit A to the Plan
may be executed by the chief executive officer of the Company. Provided,
however, that amendments that would reduce benefits or rights of an individual
who is a Participant at the time of the amendment shall not be binding with
respect to such Participant without the Participant's prior written consent.
7.4 Taxes. All payments made hereunder shall be subject to all taxes
required to be withheld under applicable laws and regulations of any
governmental authorities in effect at the time of such payments.
7.5 Controlling Law. Except to the extent superseded by federal law,
the internal laws of the State of Tennessee shall be controlling in all
materials relating to the Plan, including construction and performance hereof.
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IN WITNESS WHEREOF, PhyCor, Inc. has caused this instrument to be
executed by its duly authorized officer effective as of the date first written
above.
PHYCOR, INC.
By: /s/ Joseph C. Hutts
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Its: Chairman and Chief Executive Officer
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