As filed with the Securities and Exchange Commission on March 9, 1994
Exhibit Index on Page No. II-8 Registration No. 33-_______
________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
HUMANA INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0647538
(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No.)
500 West Main Street
Louisville, Kentucky 40202
(Address of principal executive offices)
_____________________
THE HUMANA INC. STOCK BONUS PLAN FOR EMPLOYED PHYSICIANS
(Full title of the plan)
_____________________
Walter E. Neely Copy to:
Vice President, General Counsel and
Secretary
Humana Inc. William G. Strench, Esq.
500 West Main Street Hirn Reed & Harper
Louisville, Kentucky 40202 2000 Meidinger Tower
(502) 580-1000 Louisville, Kentucky 40202
(Name, address and telephone number, (502) 585-2450
including area code, of agent for service)
_______________________
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
<C> <C> <C> <C> <C>
Proposed Proposed Amount
Title of Amount to maximum maximum of
securities be offering price aggregate registration
to be registered registered per share offering fee
price
Common stock, par
value $.16-2/3 per 1,000,000 $19.3125 $19,312,500 $6659.53
share shares (1)
(1) Plus an indeterminable number of additional shares as may become
issuable as a result of any antidilution provisions of the Plan.
(2) Estimated solely for the purpose of determining the registration
fee. Calculated in accordance with Rule 457(c) under the Securities
Act of 1933 and based on the average of the high and low prices of
the Common Stock as reported in the New York Stock Exchange
Composite Tape on March 4, 1994.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
The following documents filed by Humana Inc. (the "Registrant" or
"Company") with the Securities and Exchange Commission (the "Commission")
(File No. 1-5975) are incorporated herein by reference and made a part
hereof:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1992 (In light of the spinoff by Registrant of its
hospital business and as a result of the accounting treatment of the
spinoff, the financial statements included in such 10-K are expressly not
incorporated by reference herein. See Item 3(f) for Registrant's
financial statements.);
(b) The Registrant's Quarterly Report on Form 10-Q for the
quarters ended November 30, 1992 (In light of the spinoff by Registrant of
its hospital business and as a result of the accounting treatment of the
spinoff, the financial statements included in such 10-Q are expressly not
incorporated by reference herein.), March 31, 1993, June 30, 1993,
September 30, 1993, and the Transition Report on Form 10-Q for the period
September 1, 1992 to December 31, 1992;
(c) The Registrant's Current Reports on Form 8-K dated October 20,
1992, November 13, 1992, December 7, 1992, February 18, 1993 and September
1, 1993;
(d) The description of the Registrant's Common Stock, par value
$.16-2/3 per share (the "Common Stock"), contained in the Registrant's
Registration Statement on Form 8-A, as such description may be amended or
updated;
(e) The Registrant's Proxy Statement dated January 22, 1993
("Proxy Statement") filed with the Securities and Exchange Commission on
January 25, 1993, pursuant to Rule 14a-6(c) promulgated under the
Securities Exchange Act of 1934, as amended, and incorporated by reference
as Exhibit 28(a) into the Registrant's Current Report on Form 8-K dated
February 18, 1993; and
(f) The audited consolidated financial statements as of August 31,
1992 and August 31, 1991 and for the three years ended August 31, 1992
(including the notes thereto) of the Registrant (captioned in the Proxy
Statement as the financial statements of Humana Health Plans) set forth in
Exhibit 99 to Post-Effective Amendment No. 1, filed February 2, 1994, to
the Registration Statement on Form S-8 (Reg. No. 33-49305) filed on
January 22, 1993.
All documents subsequently filed by the Registrant pursuant to
Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934, prior to
the filing of a post-effective amendment to this registration statement
which indicates that all of the securities offered have been sold or which
deregisters all of such shares then remaining unsold, shall be deemed to
be incorporated by reference in this registration statement and to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
of this registration statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
registration statement.
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Item 5. Interests of Named Experts and Counsel.
Certain legal matters in connection with the Common Stock offered in
connection with The Humana Inc. Stock Bonus Plan for Employed Physicians
are being passed upon by Hirn Reed & Harper. Certain members of the firm
own Common Stock of the Registrant, however, in the aggregate, it is less
than 1% of the Common Stock outstanding.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "GCL")
permits a Delaware corporation to indemnify any person who was or is, or
is threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided that such person acted in good
faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, such person had no reasonable cause to
believe the conduct was unlawful. A Delaware corporation may indemnify
such persons in actions brought by or in the right of the corporation to
procure a judgment in its favor under the same conditions, except that no
indemnification is permitted in respect of any claim, issue or matter as
to which such person has been adjudged to be liable to the corporation
unless and to the extent the Court of Chancery of the State of Delaware,
or the court in which such action or suit is brought, determines upon
application that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as
the Court of Chancery or other such court deems proper. To the extent
such person has been successful on the merits or otherwise in defense of
any action referred to above, or in defense of any claim, issue or matter
therein, the corporation must indemnify such person against expenses
(including attorneys' fees) actually and reasonably incurred by such
person in connection therewith. Corporations, under certain
circumstances, may pay expenses incurred by an officer or director in
advance of the final disposition of an action for which indemnification
may be permitted or required. The indemnification and advancement of
expenses provided for or granted pursuant to Section 145 of the GCL are
not exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise. Section 145
further provides that a corporation may maintain insurance against
liabilities for which indemnification is not expressly provided by
statute.
Article X of the Company's By-Laws essentially provides for
indemnification of directors, officers, employees and agents of the
Company to the fullest authorized under Delaware law.
The Tenth Article of the Company's Restated Certificate of
Incorporation provides that a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware GCL or (iv) for any transaction from which the
director derived an improper personal benefit.
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The Company has in effect officers and directors liability insurance
policies with various insurance companies. The policies provide indemnity
to the directors and officers of the Company for loss arising from claims
concerning a covered wrongful act where there is no corporate
indemnification. The insurance will also reimburse the Company for
indemnification it may be required by statute or the Company's By-laws to
make to any of its directors and officers in connection with a claim by
reason of a wrongful act. The policy covers negligent acts, errors,
omissions, or breach of duty by a director or officer. The principal
exclusions from coverage include the following: (i) claims involving
violations of Section 16(b) of the Securities Exchange Act of 1934; (ii)
dishonest acts; and (iii) libel, slander or non-monetary damages. The
policy provides for a $500,000 deductible self-insurance retention by the
Company. The limit of liability under the policies is $70,000,000 in the
aggregate annually for coverage in excess of deductibles and
participations.
The Company has entered into Indemnity Agreements (the "Agreements")
with its directors and officers ("Indemnitees"), whereby the Company will
indemnify such parties and advance expenses to the fullest extent
permitted by Delaware law.
An Indemnitee will not be entitled to indemnification or advancement
of expenses under the Agreements with respect to any proceeding or claim
brought or made by the Indemnitee against the Company. If the Indemnitee
is not entitled to indemnification of all expenses, he or she may still be
indemnified for a portion of the expenses. The determination of
entitlement to indemnification under the Agreements will be made by a
majority of a quorum of disinterested directors, independent counsel or by
the stockholders of the Company. In the event of a change in control of
the Company (as defined in the Agreements), the determination of
entitlement will be made, if the Indemnitee so elects, by an independent
counsel selected by the Indemnitee, and the Company will have the burden
of proof to overcome a presumption that the Indemnitee is entitled to
indemnification.
The Agreements further provide that to the extent the Company
maintains a liability insurance policy for directors, officers, employees,
agents or fiduciaries, the Indemnitee will be covered by such policy in
accordance with its terms to the maximum extent of the coverage available
for any such officer, director, employee, agent or fiduciary under the
policy. The Agreements will terminate upon the later of: (a) 10 years
after the date the Indemnitee ceases to serve; or (b) the final
termination of all pending proceedings covered thereunder.
Item 8. Exhibits.
The Exhibit Index immediately preceding the exhibits is incorporated
herein by reference.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this
registration statement (or the most recent post-
effective amendment hereof) which, individually
or in the aggregate, represent a fundamental
change in the information set forth in this
registration statement;
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(iii)To include any material information with respect
to the plan of distribution not previously
disclosed in this registration statement or any
material change to such information in this
registration statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) shall not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the GCL, the Amended and
Restated Certificate of Incorporation, the By-Laws of the Registrant and
the Agreements or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Louisville, Commonwealth of
Kentucky, on the 9th day of March, 1994.
HUMANA INC.
By: _______________________________
Walter E. Neely
Vice President, General
Counsel and Secretary
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POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints Walter E. Neely, James E. Murray
and Martha E. Clark, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and re-substitution, for
him and in his name, place and stead, in any and all capacities, to sign
any and all Amendments (including Post-Effective Amendments) to this
Registration Statement on Form S-8 (Stock Bonus Plan for Employed
Physicians), and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
BY: ___________________________________________
David A. Jones
Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer) and Director
DATE: March 9, 1994
BY: ____________________________________________
Wayne T. Smith
President, Chief Operating Officer
and Director
DATE: March 9, 1994
BY: ____________________________________________
W. Roger Drury
Chief Financial Officer
(Principal Financial Officer)
DATE: March 9, 1994
BY: ____________________________________________
James E. Murray
Vice President and Controller
(Principal Accounting Officer)
DATE: March 9, 1994
BY: ____________________________________________
K. Frank Austen, M.D.
Director
DATE: March 9, 1994
BY: ___________________________________________
Michael E. Gellert
Director
DATE: March 9, 1994
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BY: ____________________________________________
David A. Jones, Jr.
Director
DATE: March 9, 1994
BY: ___________________________________________
W. Ann Reynolds, Ph.D.
Director
DATE: March 9, 1994
BY: ___________________________________________
John R. Hall
Director
DATE: March 9, 1994
BY: ___________________________________________
Irwin Lerner
Director
DATE: March 9, 1994
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Exhibit Index.
4(a) - Restated Certificate of Incorporation filed with the Secretary
of State of Delaware on November 9, 1989 as restated pursuant
to Item 102(c) of regulation S-T. Exhibit 4.(i) to the
Company's Post-Effective Amendment No. 1 filed February 2, 1994
to the Company's Registration Statement on Form S-8 (Reg. No.
33-49305) filed January 22, 1993 is incorporated by reference
herein.
4(b) - By-Laws as amended. Exhibit 3(b)(2) to the Company's Current
Report on Form 8-K (File No. 1-5975) filed March 5, 1993 is
incorporated by reference herein.
4(c) - Form of The Humana Inc. Stock Bonus Plan for Employed
Physicians.
4(e) - Form of Rights Agreement, dated March 5, 1987, between Humana
Inc. and Mid-America Bank of Louisville and Trust Company.
Exhibit 1 to the Form SE for the Registration Statement (File
No. 1-5975) on Form 8-A dated March 9, 1987 is incorporated by
reference herein.
4(f) - Amendment No. 1, dated December 7, 1992, to the Rights
Agreement. Exhibit 1.1 to the Company's Form 8 (File No. 1-
5975) filed December 16, 1992 is incorporated herein by
reference.
4(g) - Amendment No. 2, dated March 2, 1993, to the Rights Agreement.
Exhibit 1.2 to the Company's Form 8 (File No. 1-5975) filed
March 2, 1993 is incorporated herein by reference.
5 - Opinion of Hirn Reed & Harper, counsel to the Registrant, as to
the validity of the securities registered herein.
23(a) - Consent of Hirn Reed & Harper, counsel to the Registrant,
included in 5 above.
23(b) - Consent of Coopers & Lybrand, independent accountant for the
Registrant.
24 - Powers of Attorney (included on the signature page of this
Registration Statement).
99 - Audited consolidated financial statements of Humana Health
Plans. Exhibit 99 to the Company's Post-Effective Amendment
No. 1 filed February 2, 1994 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-49305) filed January 22,
1993, is incorporated by reference herein.
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</TABLE>
Exhibit 4(c)
Humana Inc.
Stock Bonus Plan for Employed Physicians
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment of the Plan. Humana Inc., a Delaware
corporation (the "Company"), hereby establishes a short-term incentive
compensation plan to be known as "The Humana Inc. Stock Bonus Plan for
Employed Physicians" (the "Plan"), as set forth in this document. The
Plan permits the awarding of annual stock bonuses to Eligible Employees of
the Company, based on the achievement of preestablished performance goals.
Upon approval by the Board of Directors of the Company, this Plan
will become effective as of March 1, 1993 (the "Effective Date") and shall
remain in effect until terminated by the Board or the Committee.
1.2 Purpose. The purpose of the Plan is to provide Participants
with a meaningful annual incentive opportunity geared toward the
achievement of specific quality and productivity goals, as well as any
other goals deemed appropriate by the Committee.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the defined meaning is intended, the
term is capitalized:
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(a) "Award Date" means the date on which Final Awards are
ascertained and the number of Shares to be awarded to a
Participant is determined.
(b) "Award Opportunity" means the maximum incentive award which a
Participant may earn under the Plan, as established by the
Committee pursuant to Sections 5.1 and 5.2 herein.
(c) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(d) "Cause" shall mean the occurrence of any one or more of the
following:
(i) The willful and continued failure by a
Participant to substantially perform his or her
duties (other than any such failure resulting
from the Participant's Disability), after a
written demand for substantial performance is
delivered to the Participant that specifically
identifies the manner in which the Company
believes that the Participant has not
substantially performed his or her duties, and
the Participant has failed to remedy the
situation within ten (10) business days after
receiving such notice; or
(ii) The Participant's conviction for committing a
felony; or
(iii)The willful engaging by the Participant in gross
misconduct materially and demonstrably injurious
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to the Company or a patient. However, no act, or
failure to act, on the participant's part shall
be considered "willful" unless done, or omitted
to be done, by the Participant not in good faith
and without reasonable belief that his or her
action or omission was in the best interest of
the Company.
(e) "Change in Control" shall be deemed to have occurred upon the
acquisition by any single entity or group of affiliated
entities of at least 50% of the outstanding Shares of the
Company; or the execution of a definitive agreement providing
for the reorganization, merger, or consolidation of the
Company in which the Company is not the surviving corporation,
or providing for a sale of all or substantially all the assets
of the Company to another entity.
(f) "Committee" means the Compensation Committee of the Board of
Directors or any other committee approved by the Board to
administer the Plan.
(g) "Company" means Humana Inc., a Delaware corporation (including
any and all subsidiaries), and any successor thereto.
(h) "Disability" means total disability as determined by the
Committee in accordance with standards and procedures similar
to those under the Company's long-term disability plan
covering most of its employed physicians.
(i) "Effective Date" means the date the Plan becomes effective, as
set forth in Section 1.1 herein.
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(j) "Eligible Employee" means a full-time or part-time salaried
staff physician of the Company. "Part-time" is defined as a
physician who works a minimum of .5 FTE's providing clinical
services.
(k) "Fair Market Value" shall mean the average of the highest and
lowest price of the Shares in the reported consolidated
trading of the New York Stock Exchange-listed securities on
the Award Date. If there are no Shares transactions reported
for such date, the determination shall be made as of the last
immediately preceding date on which Shares transactions were
reported. If there shall be any material alteration in the
present system of reporting sale prices of the Shares, or if
the Shares shall no longer be listed on the New York Stock
Exchange, or if the Internal Revenue Service shall otherwise
define "fair market value," the fair market value of the
Shares as of a particular date shall be determined in such a
method as shall be determined by the Committee.
(l) "Final Award" means the actual award earned during a Plan Year
by a Participant, as determined by the Committee.
(m) "Participant" means an Eligible Employee who has been chosen
to and is actively participating in the Plan.
(n) "Plan" means The Humana Inc. Stock Bonus Plan for Employed
Physicians.
(o) "Plan Year" means the Company's fiscal year.
(p) "Retirement" shall mean retirement from active employment with
the Company and its subsidiaries on or after the normal
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retirement date specified in the Humana Retirement and Savings
Plan or such earlier retirement date as approved by the
Committee for the purposes of this Plan.
(q) "Shares" shall mean shares of Humana Inc. common stock.
(r) "Vesting" means conferring a nonforfeitable right to a payout
from the Plan.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the
Compensation Committee of the Board of Directors or any other committee
approved by the Board to administer the Plan in accordance with rules that
it may establish from time to time, that are not inconsistent with the
provisions of the Plan. The Committee may delegate its authority to
administer the Plan to the Chief Executive Officer (CEO) of the Company.
The CEO may, in turn, delegate certain duties to others in the Company.
3.2 Decisions Binding. All determinations and decisions of the
Committee as to any disputed question arising under the Plan, including
questions of construction and interpretation, shall be final, binding, and
conclusive upon all parties.
3.3 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party, or in which he or she may be involved
by reason of any action taken or failure to act under the Plan, and
against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in
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satisfaction of any judgement in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. All Eligible Employees who are actively employed
by the Company during a Plan Year shall be eligible to participate in the
Plan for such Plan Year. However, in no event will any officer or
director of Humana Inc. be eligible to participate in the Plan.
4.2 Participation. Participation in the Plan shall be determined
annually from the pool of Eligible Employees. Eligible Employees who are
chosen to be Participants in the Plan shall be so notified in writing, and
shall be apprised of the performance goals and related Award Opportunity
for the relevant Plan Year, as soon as is practicable.
4.3 Partial Plan Year Participation. In the event that an
Eligible Employee is chosen as a Participant in the Plan subsequent to the
commencement of a Plan Year, such Eligible Employee's Award Opportunity
and Final Award may be prorated based upon the number of full weeks of
employment with the Company during such Plan Year. The Committee shall
have full discretion to determine the proper calculation for such
proration, if any. Moreover, a Participant may be removed from
participation in the Plan any time during a Plan Year for any reason or no
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reason, and upon such removal the Participant will automatically forfeit
his/her Award Opportunity and Final Award for that year.
4.4 No Right to Participate. No Participant or other Eligible
Employee shall at any time have a right to be selected for participation
in the Plan for any Plan Year, despite having previously participated in
the Plan and despite being an Eligible Employee.
ARTICLE 5. AWARD DETERMINATION
5.1 Performance Goals. Prior to the beginning of each Plan Year,
or as soon as practicable thereafter, the Committee shall establish
performance goals for that Plan Year. The goals may be based on any
combination of performance measures deemed relevant by the Committee. The
Committee may establish one or more market or facility performance goals
which must be achieved for any Participant to receive an award for that
Plan Year.
The Committee shall have the authority to exercise subjective
discretion in the determination of performance goals achieved, as well as
the authority to delegate the ability to exercise subjective discretion to
determine performance goals achieved.
The goals for the 1993 Plan Year are attached as Exhibit A.
5.2 Award Opportunities. Prior to the beginning of each Plan
Year, or as soon as practicable thereafter, the Committee shall establish
an Award Opportunity for each Participant. The established Award
Opportunity may vary by Participant.
5.3 Adjustment of Performance Goals. The Committee shall have the
right to adjust the performance goals and the Award Opportunities (either
up or down) during a Plan Year if it determines that external changes or
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other unanticipated business conditions have materially affected the
fairness of the goals and have unduly influenced the Company's ability to
meet them. Further, in the event of a Plan Year of less than twelve (12)
months, the Committee shall have the right to adjust the performance goals
and the Award Opportunities accordingly, at its discretion.
5.4 Final Award Determinations. At the end of each Plan Year,
Final Awards shall be computed for each Participant as determined by
multiplying the Participant's Award Opportunity by the cumulative
percentage of Participant's performance goals achieved, subject always to
any Award Cap, all as determined by the Committee.
5.5 Award Cap. The Committee may establish guidelines governing
the maximum Final Awards that may be earned by Participants (either in the
aggregate, by employee class, or among individual Participants) in each
Plan Year. The guidelines may be expressed as a percentage of Company-
wide goals or financial measures, or such other measures as the Committee
shall from time to time determine.
ARTICLE 6. PAYMENT OF FINAL AWARDS
6.1 Form and Timing of Payment. Final Awards may be awarded in
cash or in Shares as determined by the Committee. In the event that the
Final Award is to be awarded in Shares, the number of Shares will be
determined by dividing the cash amount of the Final Award by the Fair
Market Value of the Shares on the Award Date, as determined by the
Committee in advance. However, no fractional Shares will be awarded and
the number of Shares awarded will be rounded to the nearest whole number
of Shares. The Final Award will both vest and be paid in installments.
The initial installment of the Final Award will be made within a
reasonable amount of time after each Plan Year. The participant is vested
in the initial installment when it is paid. The vesting of the remaining
installment will be on September 1 of each succeeding year.
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6.2 Vesting of Final Awards. Whether or not the Final Award is
granted in cash or Shares, the whole award will not be paid immediately
but rather will vest and be paid in accordance with such vesting schedule
or other restrictions that the Committee deems appropriate. Unless and
until modified by the Committee, the vesting and distribution for cash or
Share awards will be 20% immediate upon payout, and 20% on each September
1 of the four following years.
6.3 Dividends. The Committee may determine, in its sole
discretion, whether dividends, if any, will be paid currently on unvested
Shares under the Plan and accrued, subject to vesting restrictions, or not
paid at all. Such determination must be made and communicated when the
Shares are awarded. A right to dividends so conferred cannot thereafter
be reduced or abridged. If on an Award Date the Company is not paying
dividends on its issued and outstanding common stock, then such
determination will be made by the Committee after dividends have been
declared.
6.4 Adjustment and Changes in Common Stock. In the event of any
change in Humana Inc. common stock through stock dividends, split-ups,
recapitalizations, reclassifications, or otherwise, or in the event that
other shares shall be substituted for the present Humana Shares as the
result of any merger, consolidation, or reorganization, then the Committee
may make appropriate adjustment or substitution in the number and kinds of
unvested outstanding Shares which have been granted to Participants but
remain unvested and undistributed.
ARTICLE 7. TERMINATION OF EMPLOYMENT
7.1 Termination of Employment Due to Death, Disability, or
Retirement. In the event a Participant's employment is terminated by
reason of death, Disability, or Retirement, the Final Award determined in
accordance with Section 5.4 herein shall be pro rated to reflect
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<PAGE>
participation prior to termination only. Any such Final Award will be
paid in cash within a reasonable amount of time following the end of the
Plan Year in which employment termination occurred. In addition, any
unvested cash or Shares held by a Participant will vest upon the
Participant's death, Disability, or Retirement.
In the case of a Participant's Disability, the employment
termination shall be deemed to have occurred on the date that the
Committee determines the definition of Disability to have been satisfied.
7.2 Termination of Employment for Other Reasons. In the event a
Participant's employment is terminated for any reason other than death,
Disability, or Retirement (of which the Committee shall be the sole
judge), all of the Participant's rights to a Final Award for the Plan Year
then in progress shall be forfeited and all of Participant's rights to any
unvested cash or Shares previously awarded will be forever forfeited.
However, except in the event of an employment termination for Cause, the
Committee, in its sole discretion, may pay a prorated award for the
portion of that Plan Year that the Participant was employed by the
Company, computed as determined by the Committee, and, the Committee may
accelerate vesting of unvested cash or Shares, in its sole discretion.
ARTICLE 8. RIGHTS OF PARTICIPANTS
8.1 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company.
8.2 Nontransferability. No right or interest of any Participant
in the Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law, or otherwise, including, but not limited to
execution, levy, garnishment, attachment, pledge, and bankruptcy.
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8.3 Unsecured Interest. No Participant or any other party
claiming an interest in amounts earned under the Plan shall have any
interest whatsoever in any specific assets of the Company. To the extent
that any party acquires a right to receive payments under the Plan, such
right shall be equivalent to that of an unsecured general creditor of the
Company.
ARTICLE 9. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of
his or her death before he or she receives any or all of such benefit.
Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Participant in writing with the Committee
during his or her lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's estate.
ARTICLE 10. CHANGE IN CONTROL
In the event of a Change in Control, each Participant shall be
entitled to payment of an amount equal to the amount of his or her Award
Opportunity for the Plan Year during which such Change in Control occurs.
Such amount shall be paid in cash or in Shares to each Participant
promptly following the occurrence of the Change in Control. Further, upon
the occurrence of the Change in Control all unvested Final Awards will
immediately fully vest and become payable.
ARTICLE ll. AMENDMENTS
The Committee, in its sole discretion, without notice, at any time
and from time to time, may modify or amend, in whole or in part, any or
all of the provisions of the Plan, or suspend or terminate it entirely;
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<PAGE>
provided, however, that no such modification, amendment, suspension, or
termination may, without the consent of a Participant (or his or her
beneficiary in the case of the death of the Participant), reduce the right
of a Participant (or his or her beneficiary as the case may be) to a
payment or distribution hereunder to which he or she is entitled.
ARTICLE 12. MISCELLANEOUS
12.1 Shares to be Awarded. A maximum of 1,000,000 Shares may be
awarded under this Plan. Any unvested Shares awarded under the Plan which
are forfeited will be available for future awards.
12.2 Termination of Plan. Should the Plan be terminated by the
Board or the Committee, cash or Shares awarded under the Plan prior to
termination will continue to vest and be distributed in accordance with
the terms and conditions of the Plan for the applicable vesting schedule
period after termination.
12.3 Governing Law. The Plan, and all agreements hereunder, shall
be governed by and construed in accordance with the laws of the state of
Delaware.
12.4 Withholding Taxes. As a condition to its obligation to vest
and distribute Shares, the Company shall collect from the Participant
federal, state, or local taxes required by law to be withheld prior to the
issuance of the Shares. For vested and distributed cash, the Company
shall withhold all required amounts prior to distribution.
12.5 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine;
the plural shall include the singular, and the singular shall include the
plural.
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12.6 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
12.7 Costs of the Plan. All costs of implementing and
administering the Plan shall be borne by the Company.
12.8 Successors. All obligations of the Company under the Plan
shall be binding upon and inure to the benefit of any successor to the
Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
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Exhibit A
THE HUMANA INC. STOCK BONUS PLAN FOR EMPLOYED PHYSICIANS
October 1993
<PAGE>
STOCK BONUS PLAN FOR EMPLOYED PHYSICIANS
Plan Purpose
The purposes of the Humana Inc. Stock Bonus Plan for Employed Physicians
are to:
Reward superior performance each year,
Provide physicians with an incentive to achieve and maintain
superior performance levels from year to year,
Result in Humana Inc. stock ownership, such that physicians
participate in the success of the Company in the future, and
Attract and retain excellent staff model physicians.
Eligibility
You are eligible to participate in the plan if you are a full-time or
permanent part-time staff model physician at Humana Inc. Part-time is
defined as .5 FTEs or more providing clinical services.
Actual participation will be determined by the Chief Executive Officer of
the Company, however, the Company reserves the right to exclude physicians
from the plan from year to year, or remove them from the plan during the
year.
Eligible physicians for the 1993 plan will be located in one of eight
areas:
Chicago Lexington
Kansas City Tampa
South Florida Daytona
Louisville Orlando
Plan Structure
You earn a stock bonus based on annual performance, that is paid out in
shares of Humana Inc. stock. The stock vests (becomes nonforfeitable) over
time. The bonus is earned when it is paid. You must be employed at the
time the bonus is paid in order to receive it.
Once the amount of bonus is determined, it is awarded no later than June
1 of each year. The award date becomes the date on which the price of the
stock is fixed. Of the total shares earned, 20% vest immediately. The
remaining shares vest 20% on each September 1 following the year of
payout. If you leave the company prior to retirement, death or disability,
you forfeit all unvested shares.
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Example
You earn a bonus of $4,000 in 1993. Humana Inc. stock is trading at $20
per share on May 15 when the bonus is calculated. That means you earn 200
shares of stock. The stock is nonforfeitable (and saleable) by you as
follows:
May 15, 1994 40 shares
Sept. 1, 1995 40 shares
Sept. 1, 1996 40 shares
Sept. 1, 1997 40 shares
Sept. 1, 1998 40 shares
If you leave prior to September 1, 1996, for example, you forfeit 120
shares of stock.
Tax withholding may reduce the number of shares delivered. Dividends will
not be paid or accrued on unvested shares.
Amount of Bonus
If you are a Primary Care Physician, the maximum bonus you can earn each
year is equal to 5% of your paid salary during the year. If you are a
Specialist, the maximum bonus you can earn is 3% of paid salary up to
$100,000, plus 1% of salary above $100,000.
Example
You are a Primary Care Physician, with W-2 salary earnings of $104,598.
The maximum bonus you can earn for the year is $5,230.
You are a Specialist, with W-2 salary earnings of $124,339. The maximum
bonus you can earn for the year is $3,000 + $243 = $3,243.
PERFORMANCE CATEGORIES
There are two main categories of performance in the plan for 1993:
Quality, and
Productivity
The two categories are weighted equally.
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Within the Quality category, there are two performance measures: Quality
of Care and Member Satisfaction. The Productivity goal is measured solely
by Medical Loss Ratio.
Knockout Factor
You must earn some bonus under the Quality of Care measure to receive any
bonus under the other two measures.
Example
You have a maximum bonus of $4,000. In 1994, you tentatively earn $0
under Quality of Care, $850 under Member Satisfaction, and $1,500 under
Productivity. Because you earned $0 under Quality of Care, however, the
total bonus for 1994 is also $0.
Performance Measures
Each performance measure is explained in detail below. For 1993 only, the
Quality of Care and Member Satisfaction goals will be measured from
October 1 through December 31. In addition, the Productivity goal will be
measured from March 1 through December 31, 1993.
Bonuses for 1993 will be measured on salary earned from March 1 through
December 31, 1993.
Example
You have a salary of $120,000. The amount of salary earned between March
1 and December 31, 1993 is $100,000. The $100,000 figure forms the basis
for your 1993 bonus. In 1994 and later years, your full salary earned
during the calendar year will form the basis of your bonus.
Quality of Care Measure (25% Weighting)
The plan measures Quality of Care by the number of confirmed quality
problems that are counted from any source. The Company collects this data
on a physician-specific basis. We categorize problems based on the
following levels of severity:
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Level 1: Mismanagement without potential adverse effect(s) on the
patient
Level 2: Mismanagement with potential for bad outcomes
a: Insignificant
b: Significant
Level 3: Mismanagement with adverse effect(s) on the patient
a: Reversible Morbidity
b: Nonreversible Morbidity
c: Death
The table below shows the portion of the Quality of Care bonus earned
given the quality problems counted. See pages 7 and 8 for categories of
deficiencies.
Percent of Maximum
Level of Severity Number of Bonus Earned
(from above table) Quality Problems (Quality of Care Portion)
1 4 or fewer 100%
1 Greater than 4 0%
2a 2 or fewer 80%
2a 3 or more 0%
2b 1 or fewer 60%
2b 2 or more 0%
3a,b,c 1 or more 0%
Note: Combinations of quality problems result in multiplication of
the results for each item.
Example
Your maximum bonus is $4,000, with a maximum $1,000 earned from Quality of
Care (25% weighting). You end the year with three Level 1 quality
problems and two Level 2a problems. Your bonus earned for the Quality of
Care portion is $1,000 x 80%, or $800.
Member Satisfaction (25% weighting)
The plan will measure Member Satisfaction via mail surveys on a
statistically significant sample of enrollees. Only responses from
Commercial members will be tabulated.
For Primary Care Physicians, the Company calculates the Member
Satisfaction score at the physician or center level, however they
are panelized.
For Specialists who service more than one center, we calculate
Member Satisfaction based on the combined score for all centers
within the market.
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The following table shows the relationship of bonus earned (for this
portion) to the Member Satisfaction score obtained:
Primary Care Physician Specialist
Percent Percent of Maximum Percent Percent of Maximum
Satisfaction Bonus Earned Satisfaction Bonus Earned
Less than 90% 0% Less than 92% 0%
90% 70% 92% 70%
93% 85% 95% 85%
96% or more 100% 98% or more 100%
Performance between points is interpolated on a straight-line basis.
Example
You are a Primary Care Physician with a maximum bonus of $5,000, panelized
at the center level. The maximum bonus you can earn based on member
satisfaction is $1,250.
The responses from your center's member satisfaction survey (Commercial
members only) are 92% "satisfactory." You earn a bonus of 80% x $1,250,
or $1,000.
Productivity (50% Weighting)
Productivity is measured by Medical Loss Ratio vs. a goal.
For Primary Care Physicians, the goal is set at the center level.
For Specialists who migrate among centers, the goal is a combined
goal for all centers within the market.
Goals will be set that are specific to the entity measured and its
historical performance. They will, in most cases, represent improved
performance over prior years. In rare cases where plans are already at
end-stage profitability, the goal may represent maintenance of this high
performance state.
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The following table shows the performance/payout schedule for this portion
of the plan:
Percent of Goal Achieved Percent of Bonus Earned
Less than 90% 0%
90% 25%
95% 50%
100% 80%
105% or above 100%
__________________________________________________________________________
Performance between points will be interpolated on a straight-line basis.
Example
You are a Specialist who migrates among centers, with a maximum bonus of
$4,000. The maximum bonus you can earn based on productivity is $2,000.
The combined centers in your market have a Medical Loss Ratio goal of 80%.
Last year's Ratio was 85%, so the goal represents improvement of 5% over
the prior year. The following table shows the level of Medical Loss Ratio
that corresponds to each level of goal achievement.
Medical Bonus
Goal Loss Ratio Earned
Below 90% $ 0
9O% 80.50 $ 500
95% 80.25 $1,000
100% 80.00 $1,600
105% 79.75 $2,000
Your specific Medical Loss Ratio goal can be found in Attachment A to this
document.
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Categories of Deficiencies for
Confirmed Quality Issues
1. Delays In Care
a. "Inappropriate" response to abnormal diagnostic study
b. "Inappropriate" response to recommended or indicated care
c. Failure to order diagnostics
d. Failure to treat or follow-up
e. Failure to refer "appropriately"
f. Lack of access to physician/provider
g. Referral/precept administrative problem
2. Premature Discharge
a. Not voiding after catheter removed
b. Elevated temperature
c. Abnormal labs not followed up
d. Abnormal x-rays not followed up
e. IVs discontinued on day of discharge
f. IM medications within 24 hours of discharge
3. Documentation Problems
a. Lack of documentation
b. Partial documentation
c. Legibility
d. Pre-dated additions
e. Falsification
f. Ambulatory record format deficiency
g. Missing chart
h. Unprofessional editorial notes
i. Advanced directives information not included in the medical
record
4. Discharge Planning
a. Lack of documentation by department/physician/facility
b. Incomplete documentation
c. Implementation problems
d. Inappropriate level of care on discharge
5. Inappropriate Care
a. Drugs
b. "Mis" and "missed" diagnosis
c. Mistreatment--therapeutically
d. Chief complaint not addressed
e. Preventative screening/care missed
f. Inappropriate setting of care
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6. Ethics and Misconduct
a. Inappropriate sexual contact/comments
b. Substance abuse, mental/physical impairment
c. Falsification or formal deficiency of ambulatory record
d. Deficient patient releases
e. Credentialing falsification
f. Verbal harassment/abuse of patients/providers
g. Inappropriate/forced transfer/disenrollment
h. New felony status
i. Refusal to treat patients
7. Administrative Problems
a. Referrals not processed
b. Drug refills delayed
c. Chart organization
d. Scheduling problems
e. Physician turnover
f. Staffing issues
g. Equipment and physical plant status
h. No follow-up of "no shows" at the ambulatory level
i. Missing report/reports not in the medical record
j. Test(s) or referral(s) ordered by PCP but not processed by
center staff
8
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Attachment A (Example)
Your center's Medical Loss Ratio goal for 1993 is 90%. This represents a
4% increase over last year's goal of 94%. The table below shows the
performance/payout relationship at each level of Medical Loss Ratio
achievement.
Percent of Medical Loss Ratio Percent of
Goal Achieved For Your Plan Bonus Earned
Less than 90% O%
90% 90.40 25%
95% 90.20 50%
100% 90.00 80%
105% or above 89.80 100%
Performance between points will be interpolated on a straight-line basis.
9
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Exhibit 5
March 7, 1994
Humana Inc.
500 West Main
Louisville, KY 40202
Ladies and Gentlemen:
We have acted as legal counsel in connection with the preparation of
a Form S-8 Registration Statement under the Securities Act of 1933, as
amended ("Registration Statement"), covering an aggregate of 1,000,000
shares of Common Stock, par value $.16-2/3 per share (the "Shares"), of
Humana Inc., a Delaware corporation (the "Company").
We have examined and are familiar with the Restated Certificate of
Incorporation and By-Laws of the Company and the various corporate records
and proceedings relating to the proposed issuance of the Shares pursuant
to The Humana Inc. Stock Bonus Plan for Employed Physicians (the "Plan").
We have also examined such other documents and proceedings as we have
considered necessary for the purpose of this opinion.
Based on the foregoing, it is our opinion that the Shares have been
duly authorized and, when issued in accordance with the terms of the Plan,
will be validly issued, fully paid and nonassessable.
To the extent that laws other than the corporate laws of the State
of Delaware are applicable to any of the transactions, agreements or
instruments referred to herein, we express no opinion on such laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
HIRN REED & HARPER
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of Humana Inc. on Form S-8 of our report dated October 20, 1992,
except as to the information presented in Note 13, for which the date is
November 13, 1992, on our audits of the consolidated financial statements
and financial statement schedules of the health plan operations of Humana
Inc. as of August 31, 1992 and 1991, and for each of the three years in
the period ended August 31, 1992, which report is included on page 110 of
Humana's Proxy Statement dated January 22, 1993 and on page 2 in Exhibit
99 of Post-Effective Amendment No. 1 of the Form S-8 for the Humana
Retirement and Savings Plan (Registration No. 33-49305).
COOPERS & LYBRAND
Louisville, Kentucky
March 7, 1994
