<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material under Rule 14a-12.
PHYCOR, INC.
--------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials. Check box if any part of
the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------
(3) Filing Party:
-------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[LOGO]
30 BURTON HILLS BOULEVARD
SUITE 400
NASHVILLE, TENNESSEE 37215
May 1, 2000
To Our Shareholders:
You are cordially invited to attend the annual meeting of shareholders,
which is to be held on Wednesday, May 31, 2000, at 10:00 a.m. at the First
American Center Auditorium, Fifth Floor, 300 Union Street, Nashville, Tennessee.
The following pages contain the formal notice of the annual meeting and our
proxy statement, which describe the specific business to be considered and voted
upon at the annual meeting.
It is important that your shares be represented at the meeting. Whether or
not you expect to attend in person, we would greatly appreciate your efforts to
return the enclosed proxy as soon as possible. If you decide to attend the
annual meeting, you may withdraw your proxy should you wish to vote in person.
We look forward to seeing you at the annual meeting.
Sincerely yours,
/s/ JOSEPH C. HUTTS
-------------------------
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY.
Enclosures:
1. Proxy Card and Business Reply Envelope
2. Annual Report to Stakeholders
<PAGE> 3
PHYCOR, INC.
30 BURTON HILLS BOULEVARD
SUITE 400
NASHVILLE, TENNESSEE 37215
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
WEDNESDAY, MAY 31, 2000
--------------------
Notice is hereby given that the annual meeting of shareholders (the "Annual
Meeting") of PhyCor, Inc. (the "Company") will be held on Wednesday, May 31,
2000, at 10:00 a.m. at the First American Center Auditorium, Fifth Floor, 300
Union Street, Nashville, Tennessee, for the following purposes:
(1) To approve an amendment to the Company's 1999 Incentive Stock Plan
increasing the number of shares of common stock of the Company authorized
thereunder from 4,500,000 to 7,700,000;
(2) To approve an amendment to the Company's Amended 1992
Non-Qualified Stock Option Plan for Non-Employee Directors increasing the
number of shares of common stock of the Company authorized thereunder from
337,500 to 637,500;
(3) To elect four nominees as Class III directors of the Company; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on April 20, 2000 will
be entitled to vote at the Annual Meeting.
The enclosed Proxy Statement contains more information pertaining to
matters to be voted on at the Annual Meeting. Please read the Proxy Statement
carefully. Each shareholder who does not plan to attend the Annual Meeting is
requested to date, sign and return the accompanying proxy in the enclosed,
postage-paid envelope.
By Order of the Board of Directors,
/s/ N. CAROLYN FOREHAND
-----------------------
Secretary
Nashville, Tennessee
May 1, 2000
<PAGE> 4
PHYCOR, INC.
30 BURTON HILLS BOULEVARD
SUITE 400
NASHVILLE, TENNESSEE 37215
--------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2000
--------------------
This Proxy Statement is furnished to the holders of common stock, no par
value per share ("Common Stock"), of PhyCor, Inc. (the "Company") in connection
with the solicitation of proxies by the board of directors of the Company (the
"Board of Directors") to be voted at the annual meeting of shareholders of the
Company (the "Annual Meeting") to be held on Wednesday, May 31, 2000, at 10:00
a.m. at the First American Center Auditorium, Fifth Floor, 300 Union Street,
Nashville, Tennessee, and at any adjournments or postponements thereof.
Only the holders of Common Stock of record at the close of business on
April 20, 2000 will be entitled to vote at the Annual Meeting. On such date,
73,768,467 shares of Common Stock were issued and outstanding. Each shareholder
is entitled to one vote per share held of record on the record date. This Proxy
Statement and the accompanying proxy are first being mailed on or about May 1,
2000.
A majority of the shares of Common Stock entitled to vote, represented in
person or by proxy, is required to constitute a quorum. If a quorum is not
present at the time of the Annual Meeting, or if for any reason the Company
believes that additional time should be allowed for the solicitation of proxies,
the Company may adjourn or postpone the Annual Meeting with or without a vote of
the shareholders.
If you properly execute, return and do not revoke the enclosed proxy, the
proxy will be voted in accordance with your instructions, if any, and if you do
not provide instructions, your proxy will be voted (a) FOR approval of an
amendment to the Company's 1999 Incentive Stock Plan to increase the number of
shares of Common Stock authorized thereunder, (b) FOR approval of an amendment
to the Company's Amended 1992 Non-Qualified Stock Option Plan for Non-Employee
Directors to increase the number of shares of Common Stock authorized
thereunder, (c) FOR the election as directors of the nominees listed thereon and
described in this proxy statement, and (d) in accordance with the recommendation
of the Board of Directors on any other proposal that may properly come before
the Annual Meeting.
Directors must be elected by a plurality of votes cast, in person or by
proxy, by the holders of Common Stock entitled to vote at the Annual Meeting if
a quorum is present. In voting by proxy for the election of four nominees as
Class III directors to serve three year terms, shareholders may vote in favor of
all nominees, withhold their votes as to all nominees or withhold their votes as
to a specific nominee. Abstentions and broker non-votes will be counted for
purposes of constituting a quorum, but will not have the effect of voting in
opposition to a director.
All matters to be voted on at the Annual Meeting other than the election of
the directors require approval by a majority of the votes cast, in person or by
proxy, at the Annual Meeting at which a quorum is present. Abstentions and
broker non-votes will be counted for purposes of constituting a quorum, but will
not have the effect of a vote against such proposals.
All expenses of the Annual Meeting, including the cost of soliciting
proxies, will be paid by the Company. The Company may reimburse persons holding
shares in their names for others, or holding
<PAGE> 5
shares for others who have the right to give voting instructions, such as
brokers, banks, fiduciaries and nominees, for such persons' reasonable expenses
in forwarding the proxy materials to their principals.
Any shareholder giving a proxy may revoke it by delivering a written notice
of such revocation to the Secretary of the Company at 30 Burton Hills Boulevard,
Suite 400, Nashville, Tennessee 37215 prior to the Annual Meeting, by submitting
to the Company a more recently dated proxy or by attending the Annual Meeting
and voting at any time before it is exercised.
2
<PAGE> 6
PROPOSAL 1: APPROVAL OF THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S
1999 INCENTIVE STOCK PLAN
The Board of Directors has adopted, subject to approval by the Shareholders
of the Company, an amendment to the Company's 1999 Incentive Stock Plan (the
"1999 Plan") increasing the number of shares of Common Stock authorized under
the 1999 Plan from 4,500,000 to 7,700,000.
DESCRIPTION OF THE PROPOSED AMENDMENT
Prior to the amendment of the 1999 Plan (the "1999 Plan Amendment"),
4,500,000 shares of Common Stock had been reserved thereunder, 3,672,400 of
which have been used in connection with the granting of non-qualified options
("NSOs"), which are options that are not incentive stock options ("ISOs") as
described in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") to directors and employees of the Company (collectively, ISOs and NSOs
are referred to as "Options"). The 1999 Plan was designed to qualify for the
exemption from the short-swing profit restrictions on directors and executive
officers provided by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The only change effected by the 1999 Plan Amendment is to increase the
number of shares authorized by the 1999 Plan as follows:
Increase in Shares. Under the 1999 Plan Amendment, an additional 3,200,000
shares are available for grant under the 1999 Plan, none of which have been
granted to date. The 1999 Plan is an essential part of the Company's
compensation and reward program for its employees and directors because the 1999
Plan enables the Company to compensate its employees and directors for their
efforts in the challenging environment in which the Company operates and
provides meaningful incentive to motivate the employees to continue their
efforts to accomplish the Company's short-term and long-term goals. Accordingly,
the Board of Directors believes it is in the interest of the Company and its
shareholders to authorize additional shares under the 1999 Plan.
DESCRIPTION OF THE 1999 PLAN
The compensation committee of the Board of Directors (the "Compensation
Committee") is authorized to determine which individuals are to receive options
under the 1999 Plan, the type of option to be granted (ISOs or NSOs) and the
exercise prices and vesting dates of each Option. The exercise price of ISOs may
not be less than 100% of the fair market value of the Common Stock on the date
of grant (110% for individuals who own more than 10% of the total outstanding
Common Stock). These and other terms are set forth in a written agreement
between the Company and the individual receiving the award. The aggregate fair
market value of Common Stock (determined at the time the option was granted)
with regard to which ISOs are exercisable by an individual for the first time
during any calendar year may not exceed $100,000. No Option shall be exercisable
after the expiration of ten years from the date it is granted (five years for
ISOs granted to individuals who own more than 10% of the total outstanding
shares of Common Stock).
Once an Option has become exercisable, the individual may purchase shares
of Common Stock from the Company by paying the exercise price in cash, shares of
Common Stock or in other consideration acceptable to the Compensation Committee.
The Compensation Committee has the discretion to determine the vesting schedules
of the options granted pursuant to the 1999 Plan. Options become fully vested
upon the occurrence of a merger or certain other corporate events in which the
control of the Company is changed.
3
<PAGE> 7
1999 PLAN BENEFITS
The number of the Options granted under the 1999 Plan is subject to the
discretion, within the terms of the 1999 Plan, of the Compensation Committee
and, therefore, cannot be determined in advance. Similarly, the dollar value of
the Options cannot be determined prior to their grant. The table below provides
information for 1999 regarding the number of shares underlying Options granted
under the Incentive Plan:
1999 INCENTIVE STOCK PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING 1999
NAME AND POSITION STOCK OPTIONS(1)
----------------- ----------------
<S> <C>
Joseph C. Hutts....................................... 300,000
Chairman of the Board and Chief Executive Officer
Thompson S. Dent...................................... 250,000
President and Chief Operating Officer
Derril W. Reeves...................................... 200,000
Vice Chairman, Executive Vice President and Chief
Development Officer
John K. Crawford(2)................................... --
Executive Group....................................... 750,000
Non-Executive Director Group.......................... --
Non-Executive Officer Employee Group.................. 2,881,550
</TABLE>
- ---------------
(1) The closing sales price of the Common Stock of $1.875 as reported on the
Nasdaq National Market on December 31, 1999 was less than the weighted
average of the exercise prices of the options granted.
(2) Mr. Crawford resigned his positions with the Company effective October 31,
1999. All options held by Mr. Crawford were terminated and warrants for
544,083 shares were issued in connection with his resignation.
4
<PAGE> 8
FEDERAL INCOME TAX CONSEQUENCES
Tax consequences to the Company and to individuals receiving Options will
vary with the type of Option. Generally, a participant will not recognize
income, and the Company is not entitled to take a deduction, upon the grant of
an ISO or a NSO, under the 1999 Plan. An individual who exercises an ISO will
not recognize income on its exercise if he or she does not sell the shares of
Common Stock acquired thereby for at least two years after the date of grant and
one year after exercising the ISO. Any gain or loss on the sale of the Common
Stock after these statutory holding periods will be subject to capital gains
treatment. The exercise price of the ISO is the basis for purposes of
determining capital gains. For Options exercised after December 31, 2000,
reduced capital gains rates apply if the Common Stock is held for at least five
years.
An individual who disposes of the Common Stock before the statutory holding
periods are satisfied will have engaged in a "disqualifying disposition" and
will recognize ordinary income on the difference between the exercise price of
the ISO and the fair market value of the Common Stock at the time the ISO was
exercised. The individual's basis in the Common Stock after a disqualifying
disposition is its fair market value at the time of exercise. The individual
will also be subject to tax on the capital gain, if any, upon the sale of the
Common Stock on the amount realized in excess of the basis.
Generally, the Company is not entitled to a tax deduction upon the grant of
an Option or the exercise of an ISO under the 1999 Plan. However, if the
individual engages in a disqualifying disposition, the Company may take a tax
deduction for the amount of ordinary income recognized by the individual.
Upon exercise of a NSO, the individual recognizes ordinary income on the
difference between the fair market value of the Common Stock and the exercise
price paid under the NSO. The Company is generally entitled to deduct the amount
recognized by the individual for tax purposes. The individual is also subject to
capital gains treatment on the subsequent sale of the Common Stock. For this
purpose, the individual's basis in the Common Stock is its fair market value at
the time the NSO is exercised.
REGISTRATION UNDER THE SECURITIES ACT OF 1933
The Company intends to register the additional shares of Common Stock
authorized for issuance under the 1999 Plan on a Registration Statement on Form
S-8 as soon as practicable after adoption of the 1999 Plan Amendment by the
shareholders of the Company.
REQUIRED VOTE
Approval of the 1999 Plan Amendment requires the affirmative vote of a
majority of the votes cast, in person or by proxy, by the holders of the Common
Stock entitled to vote at the Annual Meeting at which a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE COMPANY'S 1999 INCENTIVE STOCK PLAN.
5
<PAGE> 9
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE AMENDED 1992 NON-QUALIFIED STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted, subject to approval by the shareholders
of the Company, an amendment to the Company's Amended 1992 Non-Qualified Stock
Option Plan for Non-Employee Directors (the "Director Plan") increasing the
number of shares of Common Stock authorized under the Director Plan from 337,500
to 637,500.
DESCRIPTION OF PROPOSED AMENDMENT
Prior to the amendment of the Director Plan (the "Director Plan
Amendment"), 337,500 shares of Common Stock had been reserved thereunder, all of
which have been used in connection with the granting of (i) restricted stock
awards and (ii) NSOs to directors who are not employees of the Company
("Non-Employee Directors"). Non-Employee Directors are the only eligible
participants in the Director Plan. As of the date hereof, there are nine
Non-Employee directors.
The only change effected by the Director Plan Amendment is to increase the
number of shares authorized by the Director Plan as follows:
Increase in Shares. Under the Director Plan Amendment, an additional
300,000 shares are available for grant under the Director Plan, none of which
has been granted to date, subject to shareholder approval of this amendment. To
enable the Company to successfully meet the challenges of the difficult
environment in which the Company operates, it needs experienced Non-Employee
Directors. The Director Plan is an essential part of the Company's ability to
attract, motivate and retain Non-Employee Directors of experience and ability.
Accordingly, the Board of Directors believes that it is in the best interests of
the Company to authorize additional shares under the Director Plan.
DESCRIPTION OF THE DIRECTOR PLAN
As amended, the Director Plan authorizes the issuance of up to 637,500
shares of Common Stock (i) pursuant to options having an exercise price equal to
the fair market value of the Common Stock on the date the options are granted
and (ii) pursuant to restricted stock awards, with a per share value equal to
the fair market value of the Common Stock on the date of grant. On January 1 of
each year, the Non-Employee Directors serving as of such date receive an
automatic grant of options to purchase 6,750 shares of Common Stock at an
exercise price per share equal to the closing sales price of the Common Stock on
the date of grant. The Director Plan is administered by the Board of Directors,
but the Board of Directors has no authority, discretion or power to select the
participants who will receive options or restricted stock awards pursuant to the
Director Plan, to set the number of shares to be covered by each option or the
total value of each restricted stock award, to set the exercise price or the
period within which the options may be exercised, to set the period of the
restrictions applicable to the restricted stock awards or to alter any other
terms or condition specified therein.
The Board of Directors may revoke the automatic grant of options on or
prior to January 1st of a given year if no options have been granted to
employees since the preceding January 1st under the Company's 1988 Plan or any
other employee stock option plan the Company might adopt from time to time. Each
option expires ten years from the date of grant, unless cancelled sooner due to
termination of service or death, or unless the option is fully exercised prior
to the expiration of the option.
The Director Plan also provides for the automatic award to each
Non-Employee Director of restricted stock having a value equal to $7,000 for
each year which the Non-Employee Director is elected by the shareholders to
serve. The Non-Employee Director receives one-third of the shares after each
year of service is completed during their term. The restricted stock awarded to
the Non-Employee Directors is held by the Company on behalf of the Non-Employee
Directors until distributed to the Non-Employee Directors.
6
<PAGE> 10
Failure by a Non-Employee Director to complete his or her service to the Company
results in the forfeiture of the restricted stock not yet delivered to the
Non-Employee Director. The restricted stock granted pursuant to the Director
Plan is valued at the fair market value of the Company's Common Stock as of the
date of the annual meeting of shareholders at which the Non-Employee Director is
elected to serve the Company.
In consideration for the issuance of options for the purchase of Common
Stock and restricted stock awards pursuant to the Director Plan, the Company
receives the benefit of the service provided by each Non-Employee Director to
the Company. At April 19, 2000, the fair market value of the 317,249 shares of
Common Stock underlying the outstanding options issued to date to the
Non-Employee Directors who are serving on the Board of Directors and the value
of the 40,953 shares of restricted stock awarded to such Non-Employee Directors
was $198,280 and $25,596, respectively.
Each of Messrs. Ackerman, Ashworth, Brooks and Moorhead, Ms. Givens and Ms.
James, and Drs. Dunn, Hill and Moncrief received options for the purchase of
3,243 shares of Common Stock on January 1, 2000 pursuant to the Director Plan.
Because there were not a sufficient number of shares authorized under the
Director Plan, the Company has granted options for the purchase of the remaining
3,507 shares under the 1999 Plan. Messrs. Ashworth and Moorhead are nominees for
election at the Annual Meeting and, if elected, each will receive a stock award
equal to a value of $21,000 at that time, subject to forfeiture as described
above. Below is a table setting forth the value and the number of shares of
Common Stock underlying the annual 1999 option grants and restricted stock
awards:
DIRECTOR PLAN BENEFITS
AMENDED 1992 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLAR VALUE OF 1999 NUMBER OF SHARES OF
UNDERLYING 1999 RESTRICTED STOCK 1999 RESTRICTED STOCK
GROUP STOCK OPTIONS(1) AWARDS(2) AWARDS
--------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
Joel Ackerman (3) -- $ -- --
Ronald B. Ashworth 6,750 -- --
Sam A. Brooks, Jr. 6,750 6,238 3,327
Dr. Winfield Dunn 6,750 -- --
C. Sage Givens 6,750 -- --
Dr. Joseph Hill 6,750 -- --
Kay Coles James 6,750 6,238 3,327
Dr. James A. Moncrief 6,750 6,238 3,327
Rodman W. Moorhead, III (3) -- -- --
------ ------- -----
Non-Employee Director Group 47,250 $18,714 9,981
</TABLE>
--------------------------
(1) The closing sales price of the Company's Common Stock of $1.875 per
share as reported on the Nasdaq National Market on December 31, 1999
was less than the weighted average of the exercise prices of the
options granted.
(2) Based upon the closing sales price of the Company's Common Stock of
$1.875 per share as reported on the Nasdaq National Market on
December 31, 1999.
(3) Appointed to the Board of Directors on September 3, 1999.
7
<PAGE> 11
FEDERAL INCOME TAX CONSEQUENCES
Options
A Non-Employee Director will not recognize any income and the Company will
not be entitled to a deduction upon the grant of options under the Director
Plan. Upon the exercise of an option, the Non-Employee Director will recognize
ordinary income in an amount equal to the excess, if any, of the fair market
value, on the date of exercise, of the stock acquired over the exercise price of
the option. The Company will be entitled to a tax deduction in an amount equal
to the ordinary income recognized by the Non-Employee Director. Any additional
gain or loss realized by the Non-Employee Director on disposition of the shares
of Common Stock will generally be a capital gain or loss to the Non-Employee
Director and will not result in an additional tax deduction to the Company.
Restricted Stock
Under Section 83(b) of the Code, a Non-Employee Director may elect within
30 days after the date of the issuance of the shares of restricted stock to
recognize ordinary income on the date the shares are issued in an amount equal
to the fair market value of the shares on that date less the amount paid
therefor. If no election is made, the Non-Employee Director will be taxed on the
fair market value of the shares, less the amount paid therefor, when the shares
are no longer forfeitable. The Company will be entitled to a deduction on the
date the Non-Employee Director recognizes income in an amount equal to the fair
market value of the shares on that date. A Non-Employee Director will have a tax
basis in the shares equal to the amount of the ordinary income recognized.
REQUIRED VOTE
Approval of the Director Plan Amendment requires the affirmative vote of a
majority of the votes cast, in person or by proxy, by holders of the Common
Stock entitled to vote at the Annual Meeting at which a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S AMENDED 1992
NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
8
<PAGE> 12
PROPOSAL 3: ELECTION OF DIRECTORS
The Company's Restated Charter provides that the Board of Directors shall
be divided into three classes of as nearly equal size as possible. Approximately
one-third of the directors are elected each year. The Board of Directors has
nominated the four individuals named below under the caption "Class III
Nominees" for election as directors to serve until the annual meeting of
shareholders in 2003 and until their successors have been elected and qualified.
All of the Class III nominees are currently serving on the Board of Directors of
the Company with terms expiring at this Annual Meeting.
The Company's Amended Bylaws provide that the Board of Directors shall
consist of not less than three nor more than 15 directors as established by the
Board of Directors. The size of the Board of Directors has been established at
13 directors, and currently consists of 12 directors. Mr. John K. Crawford
resigned his positions as a director, and as Executive Vice President and Chief
Financial Officer of the Company effective October 31, 1999. The vacancy created
by Mr. Crawford's resignation has not yet been filled. The Company intends to
fill this vacancy with a Non-Employee Director in the near future. Mr. Joel
Ackerman was appointed to the Board of Directors on September 3, 1999 as a Class
I Director and will stand for re-election to the Board of Directors with the
other Class I Directors in 2001. Mr. Rodman W. Moorhead, III was appointed to
the Board of Directors on September 3, 1999 as a Class III Director and is a
current nominee to the Board of Directors.
CLASS III NOMINEES:
RONALD B. ASHWORTH
Age - 55
Director since 1992
Since 1991, Mr. Ashworth has served as President and Chief Executive
Officer of the Sisters of Mercy Health System, St. Louis, Missouri ("SMHS"), a
system consisting of hospitals and affiliated health care entities serving a
seven-state area in the central and southwestern United States. Mr. Ashworth has
been a director of SMHS since its inception in 1986. From 1986 to 1990, Mr.
Ashworth served as Vice Chairman of Specialized Industries and Marketing for
KPMG LLP, the Company's independent public accountants. From 1978 to 1985, Mr.
Ashworth served as the National Director of the health care practice of KPMG
LLP. Mr. Ashworth has been a director of the Benedictine Health System in
Duluth, Minnesota since 1995.
JOSEPH C. HUTTS
Age - 58
Director since 1988
Mr. Hutts has served as Chairman of the Board and Chief Executive Officer
of the Company since the Company's inception. Mr. Hutts also served as President
from such time until the appointment of Mr. Dent as President in October 1998.
From 1977 to 1986, Mr. Hutts served in various positions with Hospital
Corporation of America ("HCA"), including Vice President, Operations, Senior
Vice President, Western Operations and President of HCA Health Plans, a managed
care subsidiary of HCA. Mr. Hutts served as Vice Chairman and Chief Operating
Officer of EQUICOR - Equitable HCA Corporation ("EQUICOR") from 1986 to 1987.
Mr. Hutts serves on the boards of directors of Renal Care Group, Inc., a
provider of nephrology services ("Renal Care") and Quorum Health Group, Inc.
("Quorum"), an owner and operator of hospitals.
9
<PAGE> 13
RODMAN W. MOORHEAD, III
Age - 56
Director since 1999
Mr. Moorhead is a Senior Managing Director of and has been with Warburg,
Pincus & Co., LLC ("Warburg, Pincus") since 1973. Prior to joining Warburg,
Pincus, he was with Rosenthal & Co., a member of the New York Stock Exchange.
Mr. Moorhead is a Director of Cambridge Academies, Coventry Health Care, Inc.,
ElderTrust, Scientific Learning Corporation, and Transkaryotic Therapies, Inc.
He is a Trustee of The Taft School, a member of the Overseer's Committee on
University Resources, Harvard College and a Director of The Stroud Water
Research Center, Inc.
DERRIL W. REEVES
Age - 56
Director since 1988
Mr. Reeves has served as Vice Chairman of the Company since October 1998.
In addition, since the Company's inception, Mr. Reeves has served as Executive
Vice President and Chief Development Officer of the Company. Prior to becoming
an officer of the Company, Mr. Reeves served as Vice President of Sales and
Marketing with HCA Management Company from 1977 to 1986, at which time he took
the position of Senior Vice President, National Sales, with EQUICOR, a position
he held until 1987. Mr. Reeves is a director of American Dental Partners, Inc.
CONTINUING DIRECTORS:
The persons named below will continue to serve as directors until the
annual meeting of shareholders in the year indicated and until their successors
are elected and take office. Shareholders are not voting at this Annual Meeting
on the election of Class I and Class II directors. The following table shows the
names, ages and principal occupations of each continuing director and the year
in which each was first elected to the Board of Directors.
CLASS I DIRECTORS SERVING UNTIL 2001:
JOEL ACKERMAN
Age - 34
Director since 1999
Mr. Ackerman is a Managing Director of and has been with Warburg, Pincus
since 1993. Prior to joining Warburg, Pincus, he was with Mercer Management
Consulting. He is a Director of Coventry Health Care, Inc., Deerfield Healthcare
Corporation, MediSphere Health Partners, Inc., Meridian Occupational Healthcare
Associates, Inc., and Sonus Corp.
DR. WINFIELD DUNN
Age - 72
Director since 1988
Dr. Dunn is a former Governor of the State of Tennessee. Dr. Dunn has
served as Vice Chairman of the Board of Directors of Total eMed, Inc., a
provider of web-based electronic medical transcription services, since June
1998. From 1993 to 1998, Dr. Dunn served as Chairman of the Board of MedShares
Management Group, Incorporated, an owner and manager of home health care
agencies. From 1987 to 1991, Dr. Dunn served as Chairman of the Board of First
Cumberland Bank. From 1979 to 1985, Dr. Dunn served as Senior Vice President,
Government Affairs, for HCA. Dr. Dunn is a director of Province Healthcare
Company.
10
<PAGE> 14
C. SAGE GIVENS
Age - 43
Director since 1989
Since 1995, Ms. Givens has served as the managing partner of Acacia Venture
Partners, L.P., a private venture fund specializing in health care services.
From 1987 to 1995, Ms. Givens served as a general partner of First Century
Management Company. Ms. Givens joined First Century in 1983. Ms. Givens is a
director of HEALTHSOUTH Corporation, a leading provider of rehabilitation and
outpatient surgery services ("HEALTHSOUTH").
DR. JOSEPH A. HILL
Age - 59
Director since 1989
Dr. Hill is a physician specializing in family practice at Gold, Vann &
White, P.A. (the "Doctors' Clinic") in Vero Beach, Florida, a clinic managed by
the Company. Dr. Hill joined the Doctors' Clinic in 1973 and served as its
President from 1988 to 1991.
CLASS II DIRECTORS SERVING UNTIL 2002:
SAM A. BROOKS, JR.
Age - 61
Director since 1988
Mr. Brooks is Chairman, President, Chief Executive Officer and a director
of Renal Care. He is also President of MedCare Investments Corp., a health care
investment company. From 1992 to 1997, Mr. Brooks served as Chairman of National
Imaging Affiliates, Inc., an owner of outpatient diagnostic imaging centers.
From 1986 to 1989, Mr. Brooks was President of Nationwide Health Properties, a
health care real estate investment trust. From 1969 to 1986, Mr. Brooks served
as the Chief Financial Officer of HCA. Mr. Brooks is a director of Quorum.
THOMPSON S. DENT
Age - 50
Director since 1992
Mr. Dent has served as the President of the Company since October 1998 and
as Chief Operating Officer of the Company since October, 1997. From October 1997
to October 1998, Mr. Dent also served as Executive Vice President. Mr. Dent
served as Executive Vice President, Corporate Services, from the inception of
the Company until October 1997 and served as Secretary of the Company from 1991
to October 1998. Mr. Dent also served as Vice President of Development at
EQUICOR from 1986 until 1988. Prior to 1986, Mr. Dent served as Director of
Mergers and Acquisitions for HCA. Mr. Dent is a director of Healthcare Realty
Trust Incorporated ("HRT"), a real estate investment trust and HealthStream,
Inc., a web-based company providing continuing medical education on-line.
KAY COLES JAMES
Age - 50
Director since 1997
Ms. James is a Senior Fellow at The Heritage Foundation in Washington, D.C.
From 1996 to 1999, Ms. James served as a dean of Regent University, Robertson
School of Government in Virginia Beach, Virginia. From 1997 to 1999, Ms. James
also served as Chairperson of the National Gambling Impact Study Commission.
From January 1994 to 1997, Ms. James served as Secretary of Health and Human
Resources for the Commonwealth of Virginia.
11
<PAGE> 15
DR. JAMES A. MONCRIEF
Age - 64
Director since 1988
Dr. Moncrief is a physician specializing in pediatrics and pediatric
neurology at The Green Clinic L.L.C. (the "Green Clinic") in Ruston, Louisiana,
a clinic managed by the Company. Dr. Moncrief joined the Green Clinic in 1966
and serves as its President.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held twelve meetings, including regular and special
meetings, and took action by written consent four times during 1999. Each
director, except for Messrs. Ackerman and Ashworth and Ms. Givens, attended at
least 75% of the meetings of the Board of Directors and committees thereof on
which the director serves.
The Committees of the Board of Directors consist of an Audit Committee, on
which Messrs. Ackerman and Brooks and Ms. Givens and Ms. James serve, and a
Compensation Committee, on which Messrs. Ashworth and Moorhead and Drs. Dunn,
Hill and Moncrief serve. During 1999, the Audit Committee and the Compensation
Committee each met three times. The Audit Committee is responsible for
recommending the independent public accountants to the Board of Directors,
reviewing audit fees and supervising matters relating to audit functions and
other financial controls. The Compensation Committee is responsible for
approving compensation arrangements for executive officers of the Company,
reviewing compensation plans, granting stock options, restricted stock and bonus
stock awards and reviewing employee compensation policies. The Board of
Directors has no standing nominating committee.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors. Non-Employee Directors are
entitled to receive (i) a retainer equal to $7,000 times the number of years for
which the Non-Employee Director is elected, payable in restricted shares of the
Common Stock, at a price per share equal to the closing sales price of the
Common Stock as of the date of the annual meeting of shareholders at which the
director is elected to serve, and (ii) options for the purchase of 6,750 shares
of Common Stock, pursuant to the Director Plan, automatically issued as of
January 1 of each year during which the Non-Employee Director serves the Company
at a per share price equal to the closing sales price of the Common Stock on the
date of grant. Such newly granted options are immediately exercisable for all
shares subject to such options. The shares of restricted stock are held by the
Company on behalf of the Non-Employee Director, and each Non-Employee Director
receives one-third of the shares upon the completion of each year of his or her
term. In addition, Non-Employee Directors receive $2,500 in cash per regular and
special meeting of the Board of Directors and $1,000 per committee meeting.
Board members are reimbursed for their expenses incurred in attending such
meetings.
REQUIRED VOTE
Directors must be elected by a plurality of the votes cast, in person or by
proxy, by the holders of Common Stock entitled to vote at the Annual Meeting at
which a quorum is present. The Company's Restated Charter does not provide for
cumulative voting, and, accordingly, the holders of the Company's Common Stock
do not have cumulative voting rights with respect to the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF ALL OF THE PROPOSED CLASS III NOMINEES
TO THE BOARD OF DIRECTORS.
12
<PAGE> 16
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding beneficial
ownership as of March 31, 2000 (unless otherwise indicated) by (i) all
directors, nominees for directors and executive officers, (ii) each person known
by the Company to be the beneficial owner of more than 5% of the Common Stock of
the Company, and (iii) all directors and officers as a group. Except as
otherwise indicated, the beneficial owners listed below have sole voting and
investment power with respect to all shares owned by them, except to the extent
such power is shared by a spouse under applicable law.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) SHARES
--------------------------------------- -------- ------
<S> <C> <C>
Joseph C. Hutts(3)............................................... 2,228,839 2.9%
Thompson S. Dent(4).............................................. 1,936,210 2.6
Derril W. Reeves(5).............................................. 1,835,084 2.4
Joel Ackerman (6)(7)............................................. 22,592,651 25.5
Rodman W. Moorhead, III(6)(7).................................... 22,592,651 25.5
John K. Crawford(8).............................................. 602,770 *
Ronald B. Ashworth(9)............................................ 81,080 *
Sam A. Brooks, Jr.(10)........................................... 98,269 *
Dr. Winfield Dunn(11)............................................ 103,097 *
C. Sage Givens(12)............................................... 92,219 *
Dr. Joseph A. Hill(13)........................................... 111,533 *
Kay Coles James (14)............................................. 55,578 *
Dr. James A. Moncrief (15)....................................... 113,455 *
Tarpley B. Jones (16)............................................ -- *
Warburg, Pincus Equity Partners, L.P.(7)(17)..................... 22,589,408 25.5
Legg Mason, Inc. (18) ........................................... 7,764,350 10.5
The Prudential Insurance Company of America(19).................. 4,040,308 5.5
All directors and officers as a group (13 persons)(20)........... 29,251,258 36.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as otherwise indicated, the addresses for each director, nominee
for director, executive officer and beneficial owner is: care of
PhyCor, Inc., 30 Burton Hills, Suite 400, Nashville, Tennessee 37215.
(2) Includes shares of Common Stock subject to options which may be
exercised within 60 days of March 31, 2000. Such shares are deemed to
be outstanding for the purposes of computing the percentage ownership
of the individual holding such shares, but are not deemed outstanding
for purposes of computing the percentage of any other person shown in
the table.
(3) Includes options to purchase 2,107,488 shares of Common Stock.
(4) Includes options to purchase 1,770,303 shares of Common Stock. Of Mr.
Dent's 165,907 shares, 147,986 shares are held in four trusts by Mr.
Dent for the benefit of members of his immediate family.
(5) Includes options to purchase 1,665,303 shares of Common Stock.
(6) All shares indicated as owned by Messrs. Moorhead and Ackerman are
included because of their affiliation with Warburg, Pincus Equity
Partners, L.P. and its affiliates (the "Warburg, Pincus entities"),
except 3,243 options granted to each of Mr. Moorhead and Mr. Ackerman
on January 1, 2000 pursuant to the Director Plan. The address of both
Messrs. Moorhead and Ackerman is 466 Lexington Avenue, New York, NY
10017. Messrs. Moorhead and Ackerman disclaim beneficial ownership of
all shares owned by the Warburg, Pincus entities.
(7) Includes 14,992,408 shares of Common Stock that may be acquired upon
the conversion of Series A Zero Coupon Convertible Subordinated Notes
due 2014.
(8) Mr. Crawford resigned as an officer and director on October 31, 1999.
Ownership information presented here is as of October 31, 1999. All
unexercised options held by Mr. Crawford were terminated and warrants
for 544,083 shares were issued in connection with Mr. Crawford's
resignation.
(9) Includes options to purchase 78,743 shares of Common Stock and 254
shares of restricted Common Stock.
13
<PAGE> 17
(10) Includes options to purchase 75,368 shares of Common Stock and 3,327
shares of restricted Common Stock.
(11) Includes options to purchase 88,869 shares of Common Stock and 872
shares of restricted Common Stock.
(12) Includes options to purchase 80,431 shares of Common Stock and 872
shares of restricted Common Stock.
(13) Includes options to purchase 80,431 shares of Common Stock and 872
shares of restricted Common Stock.
(14) Includes options to purchase 51,743 shares of Common Stock and 3,327
shares of restricted Common Stock.
(15) Includes options to purchase 80,431 shares of Common Stock and 3,327
shares of restricted Common Stock.
(16) Mr. Jones was appointed Executive Vice President and Chief Financial
Officer effective February 1, 2000.
(17) Warburg, Pincus Equity Partners, L.P., including three related limited
partnerships ("WPEP"), is an investment company. Warburg, Pincus is
the sole general partner of WPEP. WPEP is managed by E.M. Warburg,
Pincus & Co., LLC ("EMW LLC"). Lionel I. Pincus is the managing
partner of Warburg, Pincus and the managing member of EMW LLC, and may
be deemed to control both entities. The address of the Warburg, Pincus
entities is 466 Lexington Avenue, New York, NY 10017. Messrs. Moorhead
and Ackerman are managing directors and members of EMW LLC and general
partners of Warburg, Pincus. Messrs. Moorhead and Ackerman may be
deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Exchange Act) in an indeterminate portion of the
shares beneficially owned by WPEP.
(18) Legg Mason, Inc. is an investment company. The address of Legg Mason is
100 Light Street, Baltimore, Maryland 21202. Legg Mason Fund Adviser,
Inc. holds 7,500,000 shares. Information is as of December 31, 1999
and is derived from Commission filings.
(19) The Prudential Insurance Company is a mutual insurance company has
shared voting power over 4,012,323 shares. The address of Prudential
Insurance is 751 Broad Street, Newark, New Jersey 07102. Information is
as of December 31, 1999 and is derived from Commission filings.
(20) Does not reflect Mr. Crawford's ownership. Includes options to purchase
6,085,596 shares of Common Stock and 12,851 shares of restricted
Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who own more than 10% of a registered class of the
Company's securities to file reports of ownership and changes in ownership with
the Commission.
Based solely on a review of copies of reports filed with the Commission and
written representations from certain of the Company's directors and executive
officers, all reports required to be filed with the Commission by Section 16(a)
of the Exchange Act during the most recent fiscal year or prior fiscal years
have been filed, and no other reports were required.
14
<PAGE> 18
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
paid or accrued by or on behalf of the Company's Chief Executive Officer and the
three other most highly compensated executive officers of the Company whose
total annual salary and bonus exceeded $100,000 (hereinafter, collectively
referred to as the "Named Executive Officers") for services rendered in all
capacities to the Company for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------------------------------- -------------------------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation(1) Options(#) Compensation($)
------------------ ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Hutts............... 1999 $600,000 -- -- 600,000 $117,275(2)
Chairman of the Board 1998 646,000(3) $60,000(4) -- 402,199 201,910(5)
and Chief Executive Officer 1997 586,000 -- (6) -- 275,259(7) 32,788(8)
Thompson S. Dent.............. 1999 $500,000 -- -- 525,000 $ 71,046(2)
President and 1998 471,000(3) $55,000(4) -- 364,619 101,739(5)
Chief Operating Officer 1997 416,000 -- (6) -- 204,576(7) 32,158(8)
Derril W. Reeves.............. 1999 $425,000 -- -- 450,000 $104,122(2)
Vice Chairman, Executive 1998 471,000(3) $55,000(4) -- 334,619 165,573(5)
Vice President and Chief 1997 416,000 -- (6) -- 204,576(7) 41,321(8)
Development Officer
John K. Crawford.............. 1999 $315,996(9) -- 289,730(10) 250,000 $ 8,000(2)
1998 366,000(3) $50,000(4) -- 306,117 9,832(5)
1997 316,000 -- (6) -- 150,914(7) 8,952(8)
</TABLE>
- ---------------
(1) Except as otherwise noted, for 1997, 1998 and 1999 the perquisites and
personal benefits paid to each of the Named Executive Officers was less
than $50,000 or 10% of the total salary and bonus reported for the
Named Executive Officers, and, therefore, the amount of such other
annual compensation is not reported.
(2) Includes the 1999 contributions of $8,000 by the Company to a defined
contribution plan for each of the Named Executive Officers. Includes
$109,275, $61,813 and $96,122 for each of Messrs. Hutts, Dent and
Reeves, respectively, which equals the amount accrued in 1999 pursuant
to the supplemental retirement plan described herein. Also includes
$1,233 for Mr. Dent, which constitutes the reportable economic benefit
in 1999 to Mr. Dent of his split dollar insurance policy.
(3) Includes cash compensation of $586,000, $416,000, $416,000 and $316,000
and options to purchase 9,023, 8,271, 8,271 and 7,519 shares of Common
Stock for Messrs. Hutts, Dent, Reeves and Crawford, respectively. The
options are exercisable at a price of $19.00 per share and expire
January 14, 2008.
(4) In lieu of any cash bonus for 1998, Messrs. Hutts, Dent, Reeves and
Crawford were granted options to purchase 40,060, 29,534, 29,534 and
22,015 shares of Common Stock, respectively, at an exercise price of
$19.00 per share. These options expire April 14, 2001.
(5) Includes the 1998 contributions of $8,000 by the Company to a defined
contribution plan for the four Named Executive Officers and includes
excess premiums paid by the Company in 1998 in term life insurance
policies of $1,832 paid on behalf of Mr. Crawford. Also includes
$193,910, $93,739 and $157,573 for each of Messrs. Hutts, Dent and
Reeves, respectively, which equals the amount accrued in 1998 pursuant
to the supplemental retirement plan described herein.
(6) Options to purchase shares were forfeited by the recipient as a result
of the recipient's election to forego any bonus for 1997.
(7) Of these options, Messrs. Hutts, Reeves, Dent and Crawford subsequently
elected to forfeit options to purchase 38,000, 26,667, 26,667 and
17,500 shares of Common Stock, respectively.
(8) Includes the 1997 contributions by the Company to a defined
contribution plan of $8,000 for each Named Executive Officer and
includes excess premiums paid by the Company in 1997 on term life
insurance policies of $952 paid on behalf of Mr. Crawford. Also
includes $24,788, $24,158 and $33,321 for each of Messrs.
15
<PAGE> 19
Hutts, Dent and Reeves, respectively, which equals the amount accrued
in 1997 pursuant to the supplemental retirement plan described herein.
(9) Represents compensation through Mr. Crawford's resignation effective
October 1, 1999.
(10) Represents payments related to Mr. Crawford's termination, including
$182,893 in cash surrender value of the life insurance policy held by
the Company on Mr. Crawford's life, $70,833 as additional severance
compensation and $36,501 for accrued vacation.
The following table sets forth information concerning the stock options
granted to the Named Executive Officers in 1999:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation for
Underlying Granted to Exercise or Option Term(2)
Options Employees in Base Price Expiration ----------------------------
Name Granted(#) Fiscal Year ($/Sh) (1) Date 5% ($) 10% ($)
---- ---------- ----------- ---------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Hutts........... 300,000(3) 5.0% $5.00 3/5/09 943,342 2,390,614
300,000(4) 5.0 $1.90 11/19/09 358,470 908,433
Thompson S. Dent.......... 275,000(3) 4.6 $5.00 3/5/09 864,730 2,191,396
250,000(4) 4.2 $1.90 11/19/09 298,725 757,028
Derril W. Reeves.......... 250,000(3) 4.2 $5.00 3/5/09 786,118 1,992,178
200,000(4) 3.3 $1.90 11/19/09 238,980 605,622
John K. Crawford (5)...... 250,000(3)(6) 4.2 $5.00 3/5/09 -- --
74,083(7) -- $7.91 7/31/00 -- --
470,000(7) -- $5.00 7/31/00 -- --
</TABLE>
- ---------------
(1) Represents the fair market value per share of the Common Stock on the date
of the grant of the option.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term and based
upon assumed rates of appreciation in the market price of the Common Stock
of 5% and 10% compounded annually from the date of grant to the expiration
date. Actual gains, if any, upon the exercise of stock options will depend
on the future performance of the Common Stock and the date on which the
options are exercised.
(3) All options granted to the Named Executive Officers, including the options
described above, are immediately exercisable. These options were granted
under the Company's 1988 Incentive Stock Plan.
(4) All options granted to the Named Executive Officers, including the options
described above, are immediately exercisable. Options were granted under
the Company's 1999 Incentive Stock Plan.
(5) Mr. Crawford resigned his position as an executive officer and director of
the Company effective October 31, 1999.
(6) These options and all other options held by Mr. Crawford were canceled in
connection with his resignation.
(7) Warrants to purchase shares of the Company's Common Stock were granted to
Mr. Crawford in connection with his resignation.
16
<PAGE> 20
The Named Executive Officers did not exercise any options during the last
fiscal year. The following table sets forth information with respect to
unexercised options held as of the end of the fiscal year by the Named Executive
Officers:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Exercisable Options at In-the-Money Exercisable
Name Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
---- ---------------------------------- --------------------------------
<S> <C> <C>
Joseph C. Hutts............. 2,107,488 --
Thompson S. Dent............ 1,770,303 --
Derril W. Reeves............ 1,835,084 --
John K. Crawford(2)......... -- --
</TABLE>
- ---------------
(1) Based upon the closing sales price of a share of Common Stock as
reported on the Nasdaq Stock Market on the date of exercise less the
exercise price for the options no op outstanding shares are currently
in the money.
(2) Mr. Crawford resigned his position as an executive officer and director
on October 31, 1999. All outstanding options held by Mr. Crawford were
canceled in connection with his termination and warrants for 544,083
shares were issued.
The Company has not awarded stock appreciation rights to any employee
of the Company and has no long-term incentive plans, as such term is defined in
Commission regulations.
RETIREMENT PLAN
Effective as of January 1, 1997, the Company established a
supplemental, non-qualified retirement plan (the "Retirement Plan") for certain
of the Company's executive officers. The Retirement Plan was amended as of
December 31, 1999. As of December 31, 1999, under the terms of the Retirement
Plan, Messrs. Hutts, Reeves and Dent (the "Eligible Officers") were eligible to
participate. The Company may amend or terminate the Retirement Plan at any time.
Retirement Plan benefits are equal to the amounts that are credited to
an Eligible Officer's account. In addition, the accounts are credited with an
annual earnings rate through the date of retirement. At retirement, these
accruals will be paid in lump sums that are projected to result in a 15 year
certain benefit of approximately $301,022 for Mr. Hutts, $216,274 for Mr.
Reeves, and $252,736 for Mr. Dent. After the occurrence of a change of corporate
control, however, the benefit payable is a straight life annuity (with a
ten-year certain period) with annual payments equal to 55% (or, if greater, 2.5%
for each year of service) of the Eligible Officer's compensation at the time of
the change in control. In addition, the Retirement Plan provides for additional
payments by the Company to offset the effects of excise taxes for which the
Eligible Officer may become liable under Section 4999 of the Code upon a change
of corporate control. Benefits under the Retirement Plan are not subject to
offset for Social Security benefits.
The following table illustrates the total combined estimated annual
pension benefits payable to an Eligible Officer at normal retirement age (age 65
under the Retirement Plan) after a change of control based on compensation that
is covered under the plans and years of service with the Company and its
subsidiaries:
17
<PAGE> 21
RETIREMENT PLAN
<TABLE>
<CAPTION>
Average Annual Remuneration Plus
Company Contributions to the Years of Service at Retirement
Company's Qualified -----------------------------------------------------------------------
Retirement Plan (401(k)) 15 20 25 30 35
------------------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 200,000 $110,000 $110,000 $125,000 $150,000 $ 175,000
300,000 165,000 165,000 187,500 235,000 262,500
400,000 220,000 220,000 250,000 300,000 350,000
500,000 275,000 275,000 312,500 375,000 437,500
600,000 330,000 330,000 375,000 450,000 525,000
700,000 385,000 385,000 437,500 525,000 612,500
800,000 440,000 440,000 500,000 600,000 700,000
900,000 495,000 495,000 562,500 675,000 787,500
1,000,000 550,000 550,000 625,000 750,000 875,000
1,100,000 605,000 605,000 687,000 825,000 962,500
1,200,000 660,000 660,000 750,000 900,000 1,050,000
</TABLE>
As of December 31, 1999, the average three-year compensation, as
defined in the Retirement Plan, of the Eligible Officers was: (i) Mr. Hutts,
$640,000; (ii) Mr. Reeves, $458,000 and (iii) Mr. Dent, $483,000. As of December
31, 1999, each of the Eligible Officers had 11 years of service with the
Company.
SPLIT DOLLAR LIFE INSURANCE
The Company had previously acquired life insurance policies on the
lives of Messrs. Hutts, Dent and Reeves. In 1999, the Company transferred to Mr.
Dent the policy on his life subject to a collateral assignment of the policy
securing the return of the premiums the Company has paid or will pay. It is
anticipated that the Company will similarly transfer the existing policies on
the lives of Messrs. Hutts and Reeves to each of them. The Company intends to
fund new life insurance policies for each of Messrs. Hutts, Dent and Reeves
utilizing a split dollar arrangement. The aggregate face amounts of such
policies are anticipated to be approximately $9.25 million, $5.75 million and
$4.30 million, respectively for each of Messrs. Hutts, Reeves and Dent. The
aggregate insurance premiums expected to be paid by the Company in installments
beginning in 2000 through 2004 are approximately $3.250 million, $1.625 million
and $1.025 million related to each of Messrs. Hutts, Reeves and Dent,
respectively. Although the policies will be owned by the Named Executive
Officers, the Company, through a split dollar collateral assignment, will be
entitled to reimbursement of the premiums paid relating to this insurance at the
earlier of termination of the policies or February 1 of the year after the
individual turns 65. Additionally, the policies may be terminated prior to death
in certain circumstances. In the event the policies are terminated prior to
death, the Named Executive Officer will be entitled to retain the amount accrued
by the policy less the premiums paid by the Company. The Company will be
reimbursed for premiums paid and will retain a collateral assignment of the
policies to ensure the repayment of such premiums. The Company set aside
approximately $5.3 million in rabbi trusts established in December 1999 to
provide for partial funding of the insurance premiums for these policies. The
Company is prohibited from borrowing against such policies without the consent
of the insured.
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE-OF-CONTROL ARRANGEMENTS
Messrs. Hutts, Reeves and Dent entered into Amended and Restated
Employment Agreements with the Company which were effective August 1, 1997, and
Mr. Crawford entered into an Amended and Restated Employment Agreement with the
Company which was effective April 1, 1999 (collectively, the "Amended
Agreements"). The Amended Agreements supersede the employment agreements entered
into by each of Messrs. Hutts, Reeves and Dent as of March 25, 1994 and the
employment agreement of Mr. Crawford entered into as of August 13, 1997, and
extend the employment of the executive officers for an initial period of five
years from the date of the execution of the Amended Agreements, unless earlier
terminated.
18
<PAGE> 22
Mr. Crawford terminated his Amended Agreement effective October 31, 1999. The
Company will soon begin to negotiate in good faith for the renewal of the
Amended Agreements with each remaining Named Executive Officer. Failure by the
Company and the Named Executive Officer to reach agreement as to the renewal of
the Amended Agreement by 24 months prior to the expiration of the term, to
extend the negotiation period of such Amended Agreement, or to reach agreement
as to renewal by the end of the extended negotiation period will result in the
Amended Agreement being terminated without cause.
Each of the Amended Agreements provides that the Named Executive
Officer may terminate his agreement upon giving 90 days prior written notice of
termination to the Company. The Amended Agreements also provide that the Company
may terminate the Named Executive Officer at any time for cause, which includes
a violation by the Named Executive Officer of any material term of the Amended
Agreement or if the Named Executive Officer is convicted of a felony or commits
an act of dishonesty, fraud or embezzlement against the Company or its
affiliates.
In the event the Company terminates a Named Executive Officer without
cause, the Company is obligated to pay to such Named Executive Officer all
bonuses and unreimbursed expenses owed that have accrued. The Company will also
(i) continue to pay the Named Executive Officer's salary for the longer of the
remaining term of the Amended Agreement or 24 months, (ii) continue to provide
insurance and other benefits for the period the salary is paid, (iii) provide
that all grants of outstanding options, Restricted Stock, Bonus Stock and any
other incentive stock awards become fully vested and (iv) cause all deferred
compensation, supplemental retirement programs and similar programs to become
fully funded.
In the event of a merger or consolidation of the Company where the
Company does not survive, or survives only as a subsidiary of another company or
in the event any person becomes the holder of 50% or more of the Company's
outstanding voting securities or has the power, directly or indirectly, to
designate a majority of the members of the Board of Directors ("Change of
Control") and any of Messrs. Hutts, Dent or Reeves terminates his Amended
Agreement within two years of such event, he will be entitled to the benefits
described immediately above. In the event Messrs. Hutts, Dent or Reeves becomes
subject to an excise tax under Section 4999 of the Code as a result of such
payments, the Company will provide additional payments to such executive officer
to avoid any adverse economic impact from such excise tax. Additionally upon a
Change of Control, payments will be made to the Named Executive Officers under
the Retirement Plan, as described under the heading "Retirement Plans."
In the event any of Messrs. Hutts, Dent or Reeves becomes disabled and
his disability continues for a period of 60 consecutive days, the Company will
pay the disabled executive officer's insurance, bonus and other benefits for a
period of six months from the date of the beginning of the disability. The Named
Executive Officer's salary would be reduced by any disability income paid
pursuant to any disability insurance policy maintained under the terms of his
Amended Agreement. Messrs. Hutts, Reeves and Dent have individual disability
insurance policies, the premiums for which are paid by the Company. All other
officers and employees of the Company have disability insurance through a group
policy, the premiums for which are also paid by the Company.
Each of the Named Executive Officer's compensation shall consist of an
annual salary determined by the Compensation Committee, vacation, bonuses and
reimbursement for all reasonable expenses incurred in the performance of his
duties. For 2000, Mr. Hutts' base salary is $600,000, the base salary for Mr.
Dent is $500,000, and the base salary for Mr. Reeves is $425,000. The base
salary of the Named Executive Officers may be adjusted each year by the
Compensation Committee.
Under the Amended Agreements, each Named Executive Officer agrees that
during the term of the applicable agreement and for a period of 24 months
following the expiration or termination of the applicable agreement, the Named
Executive Officer will not (i) operate, develop or own any interest in, other
than the ownership of less than 5% of the equity securities of a publicly-traded
company, any business which has
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<PAGE> 23
significant (viewed in relation to the business of the Company) activities or
has announced an intention to focus significant resources, relating to the
ownership, management or operation of multi-specialty medical clinics, physician
group practices, independent practice associations, or other similar entities (a
"Business"), (ii) compete with the Company or any of its subsidiaries and
affiliates in the operation or development of any Business within the United
States, (iii) be employed by any business which owns, manages or operates a
Business, (iv) interfere with, solicit, disrupt or attempt to disrupt any past,
present or prospective relationship, contractual or otherwise, between the
Company, its subsidiaries or affiliates and any customer, client, supplier or
employee of the Company, its subsidiaries or affiliates, or (v) solicit any
employee of the Company, its subsidiaries or affiliates to leave their
employment with the Company, its subsidiaries or affiliates, or hire any such
employee to work for a Business. In the event the Named Executive Officer is
terminated without cause, the above provisions are applicable only for so long
as the Company is obligated to pay the Named Executive Officer's compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the Compensation Committee of the Board of Directors consisted
of Mr. Ashworth and Drs. Dunn, Hill and Moncrief. In addition, Mr. Moorhead was
added to the Compensation Committee in October 1999. None of the members of the
Compensation Committee has at any time been an officer or employee of the
Company or any of its subsidiaries, nor have any of the members had any
relationship with the Company requiring disclosure by the Company, except for
Mr. Moorhead and Drs. Hill and Moncrief, whose relationships are described
hereinafter under the caption "Certain Relationships and Related Transactions."
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<PAGE> 24
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph C. Hutts........... 58 Chairman of the Board and Chief Executive Officer
Thompson S. Dent.......... 50 President and Chief Operating Officer
Derril W. Reeves.......... 56 Vice Chairman, Executive Vice President and Chief
Development Officer
Tarpley B. Jones.......... 42 Executive Vice President and Chief Financial Officer
</TABLE>
Tarpley B. Jones has served as Executive Vice President and Chief Financial
Officer of the Company since February 1, 2000. From February 1997 until January
2000 Mr. Jones served as President, Chief Executive Officer and a Director of
Cardiology Partners of America, Inc., a physician practice management company
that operated and managed cardiology physician practices and clinics. Mr. Jones
was President of the Surgery Center Division of HEALTHSOUTH from January 1996
until January 1997. He was Senior Vice President and Chief Financial Officer of
Surgical Care Affiliates, Inc. ("SCA") from January 1, 1992 until its merger
with HEALTHSOUTH in January 1996. Prior to joining SCA, he was Executive Vice
President and Chief Financial Officer of Comdata Holdings Corporation and
Comdata Network.
See "Proposal 3: Election of Directors" for information regarding the
backgrounds of Messrs. Hutts, Dent and Reeves.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Compensation Committee of the Company at
the direction of the Board of Directors pursuant to rules established by the
Commission. This report provides certain data and information regarding the
compensation and benefits provided to Mr. Hutts, the Company's Chief Executive
Officer, as well as to Messrs. Reeves, Dent and Crawford.
The Compensation Committee is responsible for establishing and
administering the Company's executive compensation policies and programs within
the guidelines of the Company's compensation philosophy. Recommendations
relating to the compensation of the Named Executive Officers are made by the
Compensation Committee to the Board of Directors, which makes the final
decisions as to compensation. Employees serving on the Board of Directors do not
participate in the determination of their own compensation.
COMPENSATION PHILOSOPHY
The Compensation Committee's philosophy is to provide significant ownership
opportunity to the Named Executive Officers so that they will be motivated to
enhance shareholder return and increase shareholder value. The compensation
policies and programs utilized by the Compensation Committee and endorsed by the
Board of Directors generally consist of the following:
- Recommend the Named Executive Officers' total compensation in relation
to Company performance;
- Provide long-term incentive compensation in the form of stock options
to attract, retain, motivate and reward individuals with the
experience and skills necessary to promote the Company's success.
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<PAGE> 25
The compensation program of the Company generally consists of (i) base
salary and annual incentive compensation in the form of cash bonuses and/or
stock option awards and (ii) long-term incentive compensation in the form of
stock options.
COMPENSATION
The 1999 compensation package for each Named Executive Officer was
determined based on their individual and unique contributions to the Company.
The 1999 compensation package for the Named Executive Officers continued to
include annual compensation in the form of base salary which in 1999 was solely
payable in cash and long-term compensation in the form of stock options. The
Named Executive Officers were not awarded bonuses in 1999.
The following briefly describes the sources of compensation:
BASE COMPENSATION
The Company's annual salary levels are intended to reflect the contribution
to the Company and level of responsibility of the particular executive officer
given the Company's challenging business environment. Individual base salary
levels are established based on these guidelines.
ANNUAL INCENTIVES
Traditionally, bonus opportunities are established in recognition of the
bonuses paid in the health care industry and in consideration of the level of
each of the Named Executive Officers' position in the Company and resulting
influence on business success. The bonus is stated as a percentage of annual
salary of the Named Executive Officers. In establishing the level of bonuses
actually paid, the Compensation Committee utilizes a formula based upon a
comparison of actual earnings per share and return on capital achieved during
the year as compared to budgeted amounts for such results. Each of these factors
is weighted equally in application of the bonus formula. As stated above, in
recognition of the difficult environment in which the Company operates and its
performance in 1999, the Compensation Committee did not award bonuses to the
Named Executive Officers for 1999.
LONG-TERM COMPENSATION
The Company's long-term compensation strategy includes the grant of stock
options. The Company grants stock options to provide a total compensation
package that rewards contributions by the executive officers to the Company's
long-term stock performance. These grants are intended not only to motivate and
retain the Named Executive Officers in the service of the Company, but also to
more closely align the Named Executive Officers' interests with those of the
Company's shareholders.
In making its decisions to approve stock option awards to the Named
Executive Officers, the Compensation Committee evaluated the Company's
performance for the year, the Company's transition plans, the desirability of
long-term service from the Named Executive Officers, the number of options held
by other executives in the Company with similar responsibilities as the
executive being considered, and the amount and terms of options already held by
the Named Executive Officers. The amount of long-term compensation granted to
the Named Executive Officers in 1999 was based upon a consideration of the need
to ensure that the options granted would provide a meaningful incentive to
motivate and retain the Named Executive Officers. In connection with the ongoing
compensation plans, the Compensation Committee intends to continue to promote
long-term compensation structures which, in the Compensation Committee's
opinion, provide features which properly align the Company's executive
compensation with corporate performance and the interest of its shareholders and
which offer competitive compensation relevant to comparable opportunities in the
marketplace.
22
<PAGE> 26
COMPENSATION PAID IN 1999 TO THE CHIEF EXECUTIVE OFFICER
BASE SALARY
In order to determine Mr. Hutts' base salary for 1999, the Compensation
Committee evaluated the Company's 1999 position and performance and the
challenging environment in which the Company was operating. After weighing these
factors the Compensation Committee decided to decrease Mr. Hutts' base salary by
approximately 7% to $600,000.
ANNUAL INCENTIVE FOR 1999
As discussed above, given the Company's 1999 operating results, the
Compensation Committee did not award Mr. Hutts a bonus for 1999.
LONG-TERM INCENTIVES
The Compensation Committee determined to issue to Mr. Hutts options for the
purchase of an aggregate of 600,000 shares of Common Stock. The grant was
intended to recognize Mr. Hutts' efforts in 1999 in a difficult and demanding
environment and to provide Mr. Hutts continued motivation to deal with the
Company's existing and future challenges. The Compensation Committee believed
these option awards would continue to align Mr. Hutts' compensation with the
Company's performance and the interest of shareholders.
COMPENSATION PAID IN 1999 TO OTHER NAMED EXECUTIVE OFFICERS
BASE SALARIES
In order to determine the base salary of Messrs. Reeves, Dent and Crawford,
the Compensation Committee evaluated the Company's 1999 position and performance
and the challenging environment in which the Company was operating and each
individual's responsibility to the Company. After weighing these factors, the
Compensation Committee decided that the base salaries of Messrs. Dent and
Crawford should be increased and that of Mr. Reeves decreased. In recognition of
Mr. Dent's increased responsibility as President of the Company, the
Compensation Committee determined to increase his salary by approximately 6%, to
$500,000. In determining Mr. Reeves compensation, the Compensation Committee
considered the Company's declining development activity and decided to decrease
Mr. Reeves base salary by approximately 10%, to $425,000. The Compensation
Committee increased Mr. Crawford's 1999 base salary by approximately 16%, to
$425,000, in recognition of the increased demands placed on Mr. Crawford. Mr.
Crawford tendered his resignation as an officer and director of the Company
effective October 31, 1999.
ANNUAL INCENTIVES FOR 1999
As discussed above, given the Company's 1999 operating results, the
Compensation Committee did not award the other Named Executive Officers any
bonuses for 1999.
LONG-TERM INCENTIVES
The Compensation Committee determined to issue Messrs. Dent, Reeves and
Crawford options in 1999 to purchase 525,000, 450,000 and 250,000 shares,
respectively, of the Company's Common Stock. The grants were intended to
recognize the efforts of these Named Executive Officers in 1999 in a difficult
and demanding environment and to provide continued motivation to deal with the
Company's existing and future challenges. Mr. Crawford's options to purchase
960,254 shares of the Company Stock were canceled in connection with his
resignation. As part of his severance compensation, Mr. Crawford was granted
warrants,
23
<PAGE> 27
immediately exercisable and expiring July 31, 2000, to purchase 74,083 shares of
the Company's Common Stock at $7.91 per share and 470,000 shares of the
Company's Common Stock at $5.00 per share.
The Compensation Committee, with such independent assistance as it believes
necessary, will continue to monitor the financial performance of the Company and
its executive officers and reassess executive compensation, accordingly.
COMPENSATION COMMITTEE
Dr. Winfield Dunn, Chairman
Ronald B. Ashworth
Dr. Joseph A. Hill
Dr. James A. Moncrief
Rodman W. Moorhead, III
24
<PAGE> 28
COMPARATIVE PERFORMANCE GRAPH
The following is a comparative performance graph which compares the
percentage change of cumulative total shareholder return on the Common Stock
with (a) the performance of a broad equity market indicator, the CRSP Index for
Nasdaq Stock Market (US Companies) (the "Broad Index"), and (b) the performance
of a published industry index, the CRSP Index for Nasdaq Health Services Stocks
(the "Industry Index"). The graph begins on December 30, 1994, and assumes the
investment on such date of $100 in the Common Stock, the Broad Index and the
Industry Index and assumes that all dividends, if any, were reinvested at the
time they were paid.
Comparison of Five-Year Cumulative Total Returns
Performance Graph for
PHYCOR, INC.
Legend
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
- ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PHYCOR, INC. 100.0 283.5 238.7 227.1 57.3 15.8
Nasdaq Stock Market (US Companies) 100.0 141.3 173.9 213.1 300.2 545.7
Nasdaq Health Services Stocks 100.0 126.8 126.6 129.0 109.3 88.6
SIC 8000-8099 US & Foreign
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/30/1994.
25
<PAGE> 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. James A. Moncrief, a director of the Company, is President and a member
of the Green Clinic. The Company manages the Green Clinic pursuant to a 30-year
service agreement. Under the service agreement, the Company receives a
management fee equal to clinic expenses incurred by the Company plus a
percentage of operating income of the clinic.
Dr. Joseph A. Hill, a director of the Company, is a shareholder of the
Doctors' Clinic. The Company manages the Doctors' Clinic pursuant to a 40-year
service agreement. Under the service agreement, the Company receives a
management fee equal to clinic expenses incurred by the Company plus a
percentage of operating income of the clinic.
Mr. Dent, an executive officer and director of the Company, is a director
and shareholder of HRT. The Company's Vero Beach property is leased from HRT by
PhyCor of Vero Beach, Inc., a wholly-owned subsidiary of the Company, at a base
rental of approximately $1.1 million per year for a term of 15 years. First
Physician Care of South Florida, Inc., a wholly-owned subsidiary of the Company
made payments in 1999 to HRT totaling $400,000 pursuant to a lease which
terminates in 2009. The Company has guaranteed the lease obligations of its
affiliated Roanoke, Virginia physician group to HRT. The Roanoke physician group
leases properties under a 15-year agreement with HRT which includes rent and
certain operating expenses. Such payments totaled approximately $6.4 million in
1999. PhyCor of Richmond, Inc., a wholly-owned subsidiary of the Company, made
payments totaling $1.1 million to HRT pursuant to a sublease with Virginia
Physicians, Inc. ("VPI"). The Company's obligations under the sublease were
terminated in conjunction with the termination of its service agreement with VPI
effective December 31, 1999.
Mr. Dent is also a director and shareholder of HealthStream. The Company
has an agreement with HealthStream pursuant to which the Company receives 10.0%
of the total cost of each transaction completed by the Company's affiliated
physicians with HealthStream. To date the Company has not paid anything to
HealthStream or received any payments pursuant to this agreement.
Mr. Hutts, President, Chief Executive Officer and Chairman of the Board of
the Company, and Mr. Brooks, a director of the Company, are directors of Quorum.
The Company has entered into an agreement with Quorum to obtain access to volume
purchasing agreements, materials management support and other services. Total
payments by the Company to Quorum for such services during 1999 were
approximately $385,000.
Messrs. Ackerman and Moorhead, each directors of the Company, are managing
directors and members and general partners of Warburg, Pincus. During the second
quarter of 1999, the Company announced a definitive agreement allowing for a
strategic investment in the Company of up to $200.0 million by funds managed by
EMW LLC. The agreement allows for the issuance of two separate series of zero
coupon convertible subordinated notes, each resulting in gross proceeds to the
Company of $100 million. The first of these series ("Series A Notes") was issued
on September 3, 1999. Both series of notes are non-voting, have a 6.75% yield,
and are convertible at an initial conversion price of $6.67 at the option of the
holder into approximately 15.0 million shares of the Company's Common Stock.
Each series of notes will accrete to a maturity value of approximately $266.4
million at the 15-year maturity date and includes an investor option to put the
notes to PhyCor at the end of ten years. The Company used the net proceeds of
$92.5 million from the Series A Notes to repay indebtedness outstanding under
the Company's credit facility. Issuance of the second series of notes ("Series B
Notes") under the current terms is dependent upon market conditions and
shareholder approval. There is no assurance the Series B Notes will be issued or
any other investment in the Company by Warburg, Pincus will be made.
26
<PAGE> 30
SHAREHOLDER PROPOSALS
2001 ANNUAL MEETING
If a shareholder wishes to have a proposal considered for inclusion in the
Company's proxy materials for the 2001 annual meeting of shareholders, the
proposal must comply with the Commission's proxy rules, be stated in writing and
be submitted on or before January 3, 2001.
DISCRETIONARY AUTHORITY
The deadline for delivering a notice of shareholder proposal, other than a
proposal to be included in the proxy materials for the 2001 annual meeting of
shareholders will be March 17, 2001. The persons named as proxies in the Proxy
Statement may exercise discretionary voting authority with respect to any matter
that is not submitted to the Company by such date. Additionally, even if proper
notice is received on or prior to March 31, 2001, the individuals named as
proxies on the proxy card for that meeting may nevertheless exercise their
discretionary authority in voting such proxies with respect to such proposal by
advising the shareholders of the proposal and how they intend to exercise their
discretion to vote on such proposal, unless the shareholder making the proposal
solicits proxies with respect to the proposal to the extent required by Rule
14a-4(c)(2) under the Exchange Act. Any proposals should be mailed to the
Company at 30 Burton Hills Boulevard, Suite 400, Nashville, Tennessee 37215,
Attention: N. Carolyn Forehand, Secretary.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has not selected an independent public accounting firm to audit
the Company's consolidated financial statements for the year ending December 31,
2000. The Company is still considering several independent public accounting
firms, including KPMG LLP, its auditors for the 1999 fiscal year, to perform the
audit. It is anticipated that representatives of KPMG LLP will attend the Annual
Meeting and will have the opportunity to make a statement, if they determine to
do so, and will be available to respond to questions at that time.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be brought
before the Annual Meeting. If any other matters, however, are properly brought
before the Annual Meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY HOLDER OF THE COMMON STOCK ENTITLED TO VOTE
AT THE ANNUAL MEETING, THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS
FILED WITH THE COMMISSION. REQUESTS SHOULD BE DIRECTED TO TARPLEY B. JONES,
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, PHYCOR, INC., 30 BURTON
HILLS BOULEVARD, SUITE 400, NASHVILLE, TENNESSEE 37215.
By Order of the Board of Directors,
/s/ N. Carolyn Forehand
-----------------------
Secretary
<PAGE> 31
PHYCOR, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2000
The undersigned hereby appoints Thompson S. Dent and Tarpley B. Jones, or
either of them, with power of substitution, as proxies to vote all shares of
PhyCor, Inc. (the "Company") owned by the undersigned at the Annual Meeting of
Shareholders to be held at the First American Center Auditorium, Fifth Floor,
300 Union Street, Nashville, Tennessee, at 10:00 a.m. on May 31, 2000, on the
following matters as indicated below and such other business as may properly
come before the meeting.
1. Proposal to amend the Company's 1999 Incentive Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to amend the Company's Amended 1992 Non-Qualified Stock Option Plan
for Non-Employee Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. [ ] FOR the election as Class III directors of all nominees listed: Ronald B.
Ashworth, Joseph C. Hutts, Rodman W. Moorhead, III and Derril W. Reeves
(except as marked to the contrary hereafter).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed: Ronald B. Ashworth,
Joseph C. Hutts, Rodman W. Moorhead, III and Derril W. Reeves.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL NOMINEES, WRITE THEIR
NAMES IN THE SPACE PROVIDED BELOW:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
IN THEIR DISCRETION, THE PROXIES NAMED ABOVE MAY VOTE UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
<PAGE> 32
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
ALL MATTERS TO BE VOTED ON ARE PROPOSED BY THE COMPANY.
The shares represented by this Proxy, when properly executed, will be voted
in the manner directed herein by the undersigned shareholder. A vote against any
of the proposals will not count as a vote for adjournment of the Annual Meeting.
If no direction is made, this Proxy will be voted (i) FOR the amendment to the
Company's 1999 Incentive Stock Plan; (ii) FOR the amendment to the Company's
Amended 1992 Non-Qualified Stock Option Plan for Non-Employee Directors; and
(iii) FOR the four nominees as Class III directors of the Company.
Please sign exactly as your name
appears on this Proxy Card. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership or
limited liability entity, please
sign in full name of such entity
by authorized person.
Dated: , 2000
--------------------------
---------------------------------
Signature of Shareholder
---------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
