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0000930661-00-000784.txt : 20000331
0000930661-00-000784.hdr.sgml : 20000331
ACCESSION NUMBER: 0000930661-00-000784
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20000518
FILED AS OF DATE: 20000330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HUMANA INC
CENTRAL INDEX KEY: 0000049071
STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324]
IRS NUMBER: 610647538
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT:
SEC FILE NUMBER: 001-05975
FILM NUMBER: 584866
BUSINESS ADDRESS:
STREET 1: 500 W MAIN ST
CITY: LOUISVILLE
STATE: KY
ZIP: 40202
BUSINESS PHONE: 5025801000
FORMER COMPANY:
FORMER CONFORMED NAME: EXTENDICARE INC
DATE OF NAME CHANGE: 19740404
FORMER COMPANY:
FORMER CONFORMED NAME: HERITAGE HOUSE OF AMERICA INC
DATE OF NAME CHANGE: 19671129
DEF 14A
1
DEFINITIVE PROXY STATEMENT
DEFINITIVE PROXY STATEMENT
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.
)
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Filed by the Registrant /x/ |
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Filed by a Party other than the Registrant / / |
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Check the appropriate box: |
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/ / Preliminary proxy statement |
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/x/ Definitive proxy statement |
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/ / Definitive additional materials |
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/ / Soliciting material pursuant to Section
240.14a-11(c) |
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or Section 240.14a-12 |
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/ / Confidential, for Use of the Commissioner Only (as
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permitted by Rule 14a-6(e)(2)) |
HUMANA INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
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/x/ No Filing Fee Required |
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/ / $500 per each party to the controversy pursuant
to |
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Exchange Act Rule 14a-6(i)(3). |
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/ / Fee computed on table below per Exchange Act
Rules |
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14a-6(i)(4) and 0-11. |
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(1) Title of each class of securities to which transaction
applies: |
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____________________________________________________________
_____ |
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(2) Aggregate number of securities to which transaction
applies: |
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____________________________________________________________
_____ |
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(3) Per unit price or other underlying value of transaction
computed pursuant to |
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Exchange Act Rule 0-11: (Set forth the amount on which
the filing fee is calculated |
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and state how it was determined.) |
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____________________________________________________________
_____ |
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(4) Proposed maximum aggregate value of transaction:
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____________________________________________________________
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(5) Total fee paid: |
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____________________________________________________________
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/ / Fee paid previously with preliminary
materials. |
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/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule |
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0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. |
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Identify the previous filing by registration statement
number, or the form or schedule |
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and the date of its filing. |
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(1) Amount previously paid: |
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____________________________________________________________
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(2) Form, schedule or registration statement no.: |
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____________________________________________________________
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(3) Filing party: |
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____________________________________________________________
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(4) Date filed: |
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____________________________________________________________
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[LOGO OF
HUMANAR(R)]
March 30, 2000
Dear Fellow
Stockholders:
We would like to invite you to attend our 2000 Annual
Meeting of Stockholders of Humana Inc. to be held on Thursday, May 18, 2000,
at 10:00 a.m., EDT at the Companys headquarters, 500 West Main Street,
25th Floor Auditorium, Louisville, Kentucky. We have enclosed a copy of our
1999 Annual Report to Stockholders for your review.
We hope you can attend the meeting. If you are unable to
join us, however, we urge you to exercise your right as a stockholder and
vote. The vote of every stockholder is important. Please mark, sign, date
and either return the enclosed proxy card in the envelope provided, vote by
telephone or vote via the Internet (see instructions on proxy card).
Your cooperation is appreciated.
The Proxy Statement is first being mailed to the Company
s stockholders on or about March 30, 2000.
David A. Jones
Chairman of the Board and
Stockholder
|
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|
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/s/ Michael B.
McCallister
Michael B.
McCallister
Director,
President,
Chief Executive Officer and
Stockholder
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Humana
Inc.
March 30, 2000
Notice of Annual Meeting
of Stockholders
Thursday, May 18,
2000
10:00 a.m.,
EDT
Humana
Building
25th Floor
Auditorium
500 West Main
Street
Louisville, Kentucky
40202
AGENDA
1. Elect
directors;
2. Act on one stockholder
proposal; and
3. Transact any other
business properly brought before the meeting.
Stockholders of record at the close of business on March
20, 2000 will be entitled to vote.
Your vote is important so that as many shares as possible
will be represented. Please MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR THE INTERNET
(see instructions on proxy card).
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By Order of the Board of
Directors,
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/s/ Joan O.
Lenahan |
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Joan O. Lenahan
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TABLE OF
CONTENTS
Q: When is the proxy
statement first being sent to stockholders?
A:
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This proxy statement is
first being mailed to stockholders on or about March 30, 2000. It will
also be available at the Companys web site: www.humana.com on that
date.
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Q: What am I voting
on?
A:
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You are being asked to
elect the members of the Board of Directors of the Company. You are being
presented with one stockholder proposal. The Board of Directors is not
aware of any other matters to be presented for action at the Annual
Meeting. However, if other matters are presented for a vote, the proxies
will be voted for these matters in accordance with the judgment of the
persons acting under the proxies.
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Q: How does the Board
recommend I vote on the proposals?
A:
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The Board recommends a vote
FOR each of the nominees for director. The Board recommends a vote AGAINST
the stockholder proposal. All Shares of Company Common Stock that are
represented at the Annual Meeting by properly executed proxies received
before or at the Annual Meeting and not revoked will be voted at the
Annual Meeting in accordance with the instructions indicated in the
proxies. If no instructions are indicated, the executed proxies will be
voted FOR approval of the election of the Board of Directors eight
nominees as directors of the Company and AGAINST the stockholder
proposal.
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Q: Who is entitled to
vote?
A:
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Stockholders as of the
close of business on March 20, 2000 (the Record Date) are entitled to vote
at the Annual Meeting or any adjournment or postponement of the
meeting.
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Q: How many votes are
required to elect the directors?
A.
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The affirmative vote of a
plurality of the Shares of Company Common Stock represented in person or
by properly executed proxy is required to approve the election of each of
the Companys nominees for election as a director.
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Since only a plurality is
required for the election of directors, abstentions or broker non-votes
will have no effect on the election of directors (except for purposes of
determining whether a quorum is present at the Annual
Meeting).
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Q: How many votes are
required to adopt the stockholder proposal?
A.
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The affirmative vote of a
majority of the Shares of Company Common Stock represented in person or by
properly executed proxy is required to adopt the stockholder
proposal.
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Since a majority is
required for the adoption of the stockholder proposal, abstentions are
counted as no votes in tabulations of the votes cast on
proposals presented to stockholders. Broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
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Q: How many shares can
vote?
A.
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As of the Record Date,
March 20, 2000, 167,746,710 Shares of Company Common Stock were issued and
outstanding. Every stockholder is entitled to one vote for each share
held.
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Q: How do I
vote?
A:
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There are three methods.
This year on-line voting is available via the Internet. If you have access
to the Internet, we encourage you to vote at the following web address:
www.ProxyVote.com. You may also vote by telephone 1-800-690-6903 or by
completing and mailing your proxy card. If you return your signed proxy
card, but do not mark the boxes showing how you wish to vote, your shares
will be voted FOR the election of directors and AGAINST the
stockholder proposal.
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Q: How do I revoke my
proxy?
A:
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You have the right to
revoke your proxy at any time before the meeting. To do so, you must give
written notice of revocation to the Automatic Data Processing, Investor
Communication Services, 51 Mercedes Way, Edgewood, NY 11717 or by fax at
(515) 254-7733, submit another properly signed proxy with a more recent
date, or vote in person at the meeting. For written and fax notices, you
must include the control number that is printed on the upper portion of
the proxy card.
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Q: What is a quorum
?
A:
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A quorum is a
majority of the outstanding shares. They may be present at the meeting or
represented by proxy. There must be a quorum for the meeting to be held.
Any stockholder of record present at the Annual Meeting, but who abstains
from voting shall be counted for purposes of determining whether a quorum
is present at the Annual Meeting.
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Q: Who will count the
votes?
A:
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Automatic Data Processing,
Investor Communication Services and D. F. King & Co., Inc., will
tabulate the votes cast by proxy. In addition, the Companys
Inspectors of Election will tabulate the votes cast at the Annual Meeting
together with the votes cast by proxy.
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Q: When are the
stockholder proposals for the 2001 Annual Meeting due?
A:
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Stockholder proposals for
inclusion in the proxy materials relating to the Annual Meeting of
Stockholders to be held in May 2001 must be submitted in writing no later
than November 30, 2000.
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Q: How much did this proxy
solicitation cost?
A:
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D. F. King & Co., Inc.
was hired to assist in the distribution of proxy materials and
solicitation of votes for $10,000 plus expenses. The Company will
reimburse stockbrokers and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and
solicitation material to the Stockholders.
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The Board of Directors
Recommends a Vote FOR All Nominees
The Board of Directors of Humana Inc. (the Company
), in accordance with the provisions of the Companys Articles of
Incorporation and Bylaws, has determined that the number of directors of the
Company shall be eight. The directors are elected to hold office until the
Annual Meeting of Stockholders in 2001 and until a successor is elected and
qualified.
If any nominee becomes unable to serve for any reason
(which is not anticipated), the Shares of Common Stock represented by the
enclosed proxy may be voted for the substituted nominee as may be designated
by the Board of Directors.
The following table shows certain information concerning
the nominees at March 1, 2000.
Name
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Age
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Position
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First elected
director
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David A.
Jones(1) |
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68 |
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Chairman of the
Board |
|
09/64 |
David A. Jones,
Jr. |
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42 |
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Vice Chairman of the
Board |
|
05/93 |
K. Frank Austen,
M.D. |
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72 |
|
Director |
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01/90 |
Michael E.
Gellert |
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68 |
|
Director |
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02/68 |
John R. Hall |
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67 |
|
Director |
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05/92 |
Irwin Lerner |
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69 |
|
Director |
|
11/93 |
Michael B.
McCallister |
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47 |
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Director, President &
Chief Executive Officer |
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02/00 |
W. Ann Reynolds,
Ph.D. |
|
62 |
|
Director |
|
01/91 |
(1)
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A director of a predecessor
corporation since 1961.
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David A. Jones has been Chairman of the Board of the
Company since its inception and served as Chief Executive Officer of the
Company from August 1969 to December 1997, when he retired. Due to the
resignation of the Companys President and Chief Executive Officer in
August 1999, he served as Interim Chief Executive Officer from that time
until February 2000. He is also a director of Abbott
Laboratories.
David A. Jones, Jr. was elected Vice Chairman of the Board
of the Company in September 1996. Mr. Jones, Jr. is Chairman and Managing
Member of Chrysalis Ventures, LLC, a venture capital firm in Louisville,
Kentucky, and is the son of David A. Jones, Chairman of the Board. From
October 1992 to December 1993, Mr. Jones, Jr. was an attorney with a law
firm in Louisville, Kentucky. He is Chairman of the Board of High Speed
Access Corp., a director of Tritel, Inc., and Mid-America
Bancorp.
K. Frank Austen, M.D. is the Theodore B. Bayles Professor
of Medicine at the Harvard Medical School in the Division of Rheumatology,
Immunology and Allergy at Brigham and Womens Hospital in Boston,
Massachusetts. Dr. Austen is a member of the Board of Trustees of Amherst
College and a member of the National Academy of Sciences.
Michael E. Gellert is a general partner of Windcrest
Partners, a private investment partnership in New York, New York, having
held that position since April 1967. From January 1958 until his retirement
in October 1989, Mr. Gellert served in executive capacities with Drexel
Burnham Lambert and its predecessors in New York, New York. Mr. Gellert is
also a director of Devon Energy Corporation; High Speed Access Corp.;
Premier Parks Inc.; Seacor Smit Inc.; Smith Barney Worldwide Funds; and a
Member of the Putnam Trust Advisory Board to The Bank of New
York.
John R. Hall is the retired Chairman of the Board
and Chief Executive Officer of Ashland Inc., positions he held from 1981
until his retirement. He is also a member of the American Petroleum
Institute Executive Committee, a member of the Transylvania University Board
of Trustees and past President of Vanderbilt University Board of Trustees
and remains a trustee. Mr. Hall retired as a director of Arch Coal, Inc. in
April 1999. He was named non-executive chairman of Bank One Corporation in
December 1999. He is also a director of Bank One Corporation; Canada Life
Assurance Company; CSX Corporation; Reynolds Metals Company; UCAR
International Inc.; and United States Enrichment Corporation.
Irwin Lerner is the retired Chairman of the Board and
Chairman of the Executive Committee of Hoffmann-La Roche Inc. From April
1980 to December 1992, Mr. Lerner was President and Chief Executive Officer
of Hoffmann-La Roche Inc. He serves on the U.S. Advisory Board of the Zurich
Insurance Company, and was Chairman of the Board of the New Jersey Governor
s Council for a Drug Free Workplace. He is a Distinguished
Executive-in-Residence at the Rutgers University Graduate School of
Management. He is also a director of Axys Pharmaceuticals, Inc.; Covance
Inc.; Medarex Inc.; Inhale Therapeutic Systems Inc.; Public Service
Enterprise Group and its wholly owned subsidiary, Public Service Electric
and Gas Company; and V. I. Technologies, Inc.
Michael B. McCallister was elected President and Chief
Executive Officer of the Company in February 2000. Before that, Mr.
McCallister served as Senior Vice PresidentHealth System Management
from January 1998 to February 2000. Mr. McCallister served as Division I
President from July 1996 to January 1998. He joined the Company in June
1974.
W. Ann Reynolds, Ph.D. is President of the University of
Alabama at Birmingham, a position she has held since September 1997. Before
that, she served as Chancellor of the City University of New York, in New
York, New York for seven years and Chancellor of the California State
University system for eight years. She is also a director of Abbott
Laboratories; iPhysician Net; Maytag Corporation; and Owens-Corning
Fiberglass Corporation.
The information given in this Proxy Statement concerning
the nominees is based upon statements made or confirmed to the Company by or
on behalf of the nominees.
During 1999, the Board of Directors met 7 times (6 regular
meetings and 1 special meeting). All Directors attended at least 75% of the
scheduled Board of Directors meetings and meetings held by Committees
of which they were members.
The following table shows compensation for Directors who
are not employees:
Compensation
Annual Board
Retainer |
|
$10,000 |
(Except for
Chairman) |
|
1,000 shares of
Humana Stock at Fair Market Value
Cash Payment of 30% of the Fair Market
Value of Stock award |
|
Annual Stock Option
Grant* |
|
5,000 stock
options |
|
|
Annual Fee for Committee
Chairperson
(except Executive Committee) |
|
$3,000 |
|
Annual FeeExecutive
Committee Members |
|
$5,000 |
|
|
Board Attendance Fee (per
meeting) |
|
$2,000 |
|
|
Committee Attendance Fee
(per meeting) |
|
$1,000 |
|
*
|
Options granted on January
4, 1999 had an exercise price of $18.7813, the fair market value on that
date.
|
In addition, the Company paid certain local taxes which
averaged approximately $580 per outside director.
In 1999, as the Companys Chairman of the Board of
Directors, Mr. Jones received a $200,000 annual cash retainer in lieu of
attendance fees and the annual board retainer fee outlined above. Mr. Jones
receives the annual stock option grant described above and receives fees as
an Executive Committee member. Mr. Jones served as Interim Chief Executive
Officer from August 3, 1999 to February 3, 2000. In addition to Board of
Directors responsibilities, Mr. Jones compensation reflects his
continuing consultation on major initiatives of the Company and on corporate
strategy and policy, and his external activities, including preserving and
enhancing the image of the Company within the health care industry. Mr.
Jones was provided office space, with an annual value of approximately
$43,500 and administrative and secretarial support, with an annual cost of
approximately $179,138. In addition, during 1999, the Company provided to
Mr. Jones life and accidental death insurance, parking, use of the Company
airplane, occupational tax, and membership to the fitness club at a cost of
$58,272. Upon his retirement in December 1997, Mr. Jones elected to receive
a lifetime annuity payment under the Officers Target Retirement Plan (
OTRP). Under the OTRP, Mr. Jones receives approximately $60,000
monthly. The Company will continue to provide the benefits and arrangements
described above to Mr. Jones for at least as long as he serves as Chairman
of the Board. In December 1999, the Board believed it was in the
best interest of the Company to set out the terms and conditions as described
above in a written agreement. This agreement formalizes the terms of Mr.
Jones compensation as described herein until he no longer serves as
Chairman of the Board or until December 31, 2004, whichever is
longer.
In 1999, in connection with his position as Vice Chairman
of the Board, David A. Jones, Jr. received $30,000 as reimbursement for
office expenses. Mr. Jones, Jr. also was granted options for 40,000 Shares
of Company Common Stock at the fair market value on the date of
grant.
The following table shows benefits for Directors who are
not employees:
Benefits
Charitable
Contributions |
|
Company matches up to
$20,000 |
|
|
Group Life and Accidental
Death Insurance |
|
$100,000 |
|
|
Business Travel Accident
Insurance |
|
$150,000 |
|
Directors may elect to participate in the medical and
dental benefit programs offered to all employees of the Company at the same
rate that all employees pay. Only one director has elected this
option.
The Company also maintains the 1989 Stock Option Plan for
Non-employee Directors pursuant to which options to purchase 15,000 Shares
of the Common Stock are granted at 100% of fair market value to each
Non-employee Director upon his or her initial election to the Board of
Directors. In addition, options to purchase 5,000 Shares of the Common Stock
are granted on the first business day of each January at 100% of fair market
value to each Non-employee Director who has been a director continuously for
at least the full calendar year prior thereto.
No new non-employee director will receive any retirement
benefits. The current directors have been grandfathered under the Company
s Retirement Policy (the Policy). The Policy provides that
a director who is not an employee must retire at the annual meeting
following his or her seventy-third birthday. The retiring director is
entitled to elect to receive either (1) an annual retirement benefit for the
life of the director in the amount of $38,000, the annual retainer fee in
effect for 1997, or (2) in lieu thereof, an actuarially equivalent joint and
survivor annuity payment. In addition, each retiring director also receives
an annual matching charitable contribution benefit of 50% of the annual
retirement benefit. Benefits are prorated for any retiring director who has
not served at least ten years on the Board of Directors. Currently, the
Company is paying benefits under the Policy to two former directors and has
a separate letter agreement with one other former director that was executed
before the adoption of the Policy. The benefits under the letter agreement
are comparable to those under the Policy.
The Company has Audit, Executive, Investment, Medical
Affairs, Nominating & Corporate Governance, and Organization &
Compensation Committees of its Board of Directors. During 1999, an ad hoc
Search Committee was established to select the President and Chief Executive
Officer. Its members were Michael E. Gellert, David A. Jones, Jr. and Irwin
Lerner. In 1999, the
Company adopted written charters for each of the Board Committees. The members
of the Audit and Organization & Compensation Committees are independent
outside directors as defined by the Securities and Exchange Commission and
the New York Stock Exchange. Membership as of the Record Date was as
follows:
Audit
|
|
Executive
|
|
Investment
|
Michael E. Gellert,
Chairman |
|
David A. Jones,
Chairman |
|
W. Ann Reynolds, Ph.D.,
Chairwoman |
K. Frank Austen,
M.D. |
|
Michael E.
Gellert |
|
K. Frank Austen,
M.D. |
John R. Hall |
|
David A. Jones,
Jr. |
|
Michael E.
Gellert |
Irwin Lerner |
|
Michael B.
McCallister |
|
David A. Jones,
Jr. |
|
Medical
Affairs
|
|
Nominating &
Corporate Governance
|
|
Organization &
Compensation
|
K. Frank Austen, M.D.,
Chairman |
|
John R. Hall,
Chairman |
|
Irwin Lerner,
Chairman |
Irwin Lerner |
|
David A. Jones,
Jr. |
|
K. Frank Austen,
M.D. |
W. Ann Reynolds,
Ph.D. |
|
W. Ann Reynolds,
Ph.D. |
|
Michael E.
Gellert |
|
|
|
|
John R. Hall |
The primary functions and the number of meetings held in
1999 of each Board Committee follows:
Audit Committee
6 meetings in 1999
|
Recommends to the Board the
appointment of the Companys independent accountants;
|
|
Meets with the independent
accountants and financial management of the Company to review the scope of
the proposed audit for the current year and the audit procedures to be
utilized and, at the conclusion, reviews such audit;
|
|
Reviews with the
independent accountants, the Companys internal auditor, and
financial and accounting personnel, the effectiveness of the accounting
and financial controls of the Company and makes recommendations for the
improvement of such internal control procedures;
|
|
Reviews the internal audit
function of the Company including the independence and authority of its
reporting obligations, the proposed audit plans for the coming year, and
the coordination of such plans with the independent
accountants;
|
|
Receives prior to each
meeting, a summary of findings from completed internal audits and progress
reports on the proposed internal audit plan;
|
|
Reviews the financial
statements contained in the annual report and other reports to
stockholders with management and the independent accountants to determine
that the external auditors are satisfied with the disclosure and content
of the financial statements to be presented to the stockholders and
reviews any changes in accounting principles;
|
|
Confers independently with
the internal auditors and the independent accountants; and
|
|
Determines the
appropriateness of fees for audit and non-audit services performed by the
independent accountants.
|
Executive Committee
5 meetings
in 1999
|
Exercises all the powers of
the Board of Directors except as otherwise provided by Delaware law and
the Companys Bylaws during intervals between meetings of the
Board;
|
|
Establishes or discontinues
bank depositories for the Companys funds in accordance with existing
credit agreements; and
|
|
Approves guarantees
required of the Company to support operations of subsidiaries which are at
least 80% owned by the Company.
|
Investment Committee
2 meetings in
1999
|
Establishes investment
objectives and policies for the various investment portfolios of the
Company and investment options available under various employee benefit
plans; and
|
|
Analyzes and ratifies the
investment decisions.
|
Medical Affairs Committee
2 meetings in 1999
|
Identifies members
needs in the facilitation of health services and oversees their
implementation;
|
|
Reviews the effectiveness
of the functions which form managed care partnerships with physicians and
which develop medical management processes designed to improve the quality
of care delivered to the Companys members; and
|
|
Reviews processes which
allow the Company to maintain accreditation and meet quality-based
regulatory requirements.
|
Nominating & Corporate
Governance Committee
1 meeting in 1999
|
Recommends to the full
Board criteria for the selection and qualification of the members of the
Board;
|
|
Evaluates and recommends
for nomination by the Board candidates to be proposed for election by the
stockholders at each annual meeting;
|
|
Seeks out possible
candidates and aids in attracting highly qualified candidates to serve on
the Board;
|
|
Recommends for Board
approval, candidates to fill vacancies on the Board which occur between
annual meetings;
|
|
Studies and reviews with
management the overall effectiveness of the organization of the Board and
the conduct of its business, and makes appropriate recommendations to the
Board; and
|
|
Considers the overall
relationship of the Board and management.
|
Organization &
Compensation Committee
4 meetings in
1999
|
Reviews and approves salary
levels, salary increases and bonuses for executive officers of the Company
and other executive officers;
|
|
Administers the Company
s equity compensation plans;
|
|
Reports to the Board
regarding performance appraisals and remuneration information concerning
the Chief Executive Officer and other executive officers;
|
|
Reviews and recommends to
the Board additional executive compensation and employee benefit programs,
including incentive-based compensation programs, non-cash compensation
programs, retirement and savings plans, severance programs, and any
material changes to existing programs; and
|
|
Reviews and approves
changes required by law to be made to existing employee benefit
programs.
|
The Boards corporate governance guidelines
incorporate principles by which the Board has been operating for many years.
The guidelines are intended to serve as a flexible network within which the
Board may conduct its business, not as a set of legally binding obligations.
They should be interpreted in the context of all applicable laws and the
Companys articles of incorporation, bylaws and other governing legal
documents. The guidelines are as follows:
|
|
Established the Nominating
& Corporate Governance Committee of the Board.
|
|
|
A majority of the Directors
should come from outside the Company and independence is important in the
selection of new candidates. The Board selects candidates and extends
invitations to join the Board.
|
|
|
The Board of Directors
meets on a bi-monthly basis. Special sessions are scheduled as required.
The Chairman and the President set the agenda, and directors may suggest
items for inclusion. Information is made available to the Board of
Directors a reasonable period of time before each meeting.
|
|
|
Only outside directors
serve on the Companys Audit and Organization & Compensation
Committees.
|
|
|
All directors stand for
election every year.
|
|
|
Outside directors meet in
executive session as required.
|
|
|
Every year the Board of
Directors reviews and approves a one-year operating plan for the
Company.
|
Organization &
Compensation Committee Interlocks and Insider Participation
All members of the Organization & Compensation
Committee are Non-employee Directors and no member has any direct or
indirect material interest in, or a relationship with, the Company, other
than stock holdings as discussed herein and as related to his or her
position as director. During 1999, no member of the Organization &
Compensation Committee had a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
STOCK OWNERSHIP INFORMATION
BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (
Exchange Act) requires the Companys directors and
executive officers, and persons who beneficially own more than ten percent
of a registered class of the Companys equity securities to file with
the Securities and Exchange Commission and the New York Stock Exchange
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Executive officers, directors and
greater than ten percent stockholders are required to furnish the Company
with copies of all the forms they file.
During the year ended December 31, 1999, based upon the
Companys knowledge of stock transfers, review of copies of these
reports and written representations by the persons furnished to the Company,
all executive officers, directors and greater than ten percent beneficial
owners of the Companys Common Stock complied with Section 16(a) filing
requirements applicable to the Company except that one report for each of
Michael B. McCallister and Bruce D. Perkins was inadvertently filed late in
connection with a stock option exercise. Both Mr. McCallister and Mr.
Perkins still own such shares. Also, Gregory K. Rotherham filed one late
report in connection with a stock purchase. Mr. Rotherham still owns such
shares.
The Company has a program to oversee the compliance of its
officers and directors in their reporting obligations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF COMPANY COMMON
STOCK
Principal Stockholders of
the Company
The following table shows certain data with respect to
those persons known by the Company to be the beneficial owners of 5% or more
of the outstanding Common Stock of the Company as of the Record
Date.
Dreman Value Management,
L.L.C.
10 Exchange Place
Jersey City, NJ 07203 |
|
16,704,948
shares |
|
9.9%(1)(2) |
|
|
Scudder Kemper Investments,
Inc.
Scudder, Stevens & Clark Inc.
Two International Place
Boston, MA 02110 |
|
13,852,769
shares |
|
8.3%(1)(3) |
|
|
Wellington Management
Company, LLP
75 State Street
Boston, MA 02109 |
|
12,699,800
shares |
|
7.6%(1)(4) |
|
|
Franklin Resources, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Boulevard
San Mateo, CA 94404
-and-
Templeton Global Advisors Limited
Lyford Cay, P.O. Box N-7759
Nassau, Bahamas |
|
12,356,486
shares |
|
7.4%(1)(5) |
|
|
J. & W. Seligman &
Co. Incorporated
William C. Morris
100 Park Avenue
New York, NY 10017 |
|
11,576,000
shares |
|
6.9%(1)(6) |
|
|
Vanguard Specialized Funds
Vanguard Health Care Fund
P.O. Box 2600
V37
Valley Forge, PA 19482 |
|
11,445,000
shares |
|
6.8%(1)(7) |
|
|
David A. Jones
Chairman of the Board |
|
9,050,113 shares |
|
5.4%(1)(8) |
(1)
|
The percentage is based on
167,746,710 shares outstanding on the Record Date.
|
(2)
|
Based upon a Form 13G/A
filed with the Commission for the year ended December 31, 1999, Dreman
Value Management, L.L.C. has sole power to vote 15,702,651 shares; has no
shared power to vote any shares; has sole power to dispose of 16,704,948
shares; and has no shared power to dispose of shares.
|
(3)
|
Based upon a Form 13G filed
with the Commission for the year ended December 31, 1999, Scudder Kemper
Investments, Inc. has sole power to vote 13,849,670 shares; has sole power
to dispose of 13,852,769 shares; and has no shared power to vote or
dispose of any shares.
|
(4)
|
Based upon a Form 13G filed
with the Commission for the year ended December 31, 1999, Wellington
Management Company, LLP has shared power to vote 1,161,000 shares; has
shared dispositive power to vote 12,699,800; and no sole power to vote or
dispose of any shares.
|
(5)
|
Based on a Form 13G/A filed
with the Commission for the year ended December 31, 1999, the following
companies and/or principal shareholders vote shares as
follows:
|
Sole power to vote or
direct the vote and sole power to dispose or to direct the
disposition of shares:
|
|
|
Franklin Resources, Inc.
(Parent Holding Co.) |
|
0 |
Charles B. Johnson
(Principal Shareholder of Parent Holding Company) |
|
0 |
Rupert H. Johnson, Jr.
(Principal Shareholder of Parent Holding Company) |
|
0 |
Templeton Global Advisors
Limited (Investment Advisor) |
|
12,062,468 |
Templeton Management
Limited (Advisory Subsidiary) |
|
226,400 |
Templeton/Franklin
Investment Services, Inc. (Advisory Subsidiary) |
|
64,118 |
Templeton Investment
Management Limited (Advisory Subsidiary) |
|
3,500 |
|
No shared power to vote,
direct to vote, dispose of or direct the disposition of any
shares.
|
(6)
|
Based upon a Form 13G filed
with the Commission for the year ended December 31, 1999, J. & W.
Seligman & Co. Incorporated (JWS) and William C. Morris, majority
owner of outstanding voting securities of JWS, has shared power to vote
8,139,937 shares; has shared dispositive power to vote 11,576,000; and has
no sole power to vote or dispose of any shares.
|
(7)
|
Based upon a Form 13G filed
with the Commission for the year ended December 31, 1999, Vanguard
Specialized Funds-Vanguard Health Care Fund has sole power to vote
11,445,000 shares; has shared dispositive power to vote 11,445,000 shares;
and has no shared voting or sole dispositive power to vote any
shares.
|
(8)
|
Based upon a Form 4 filed
with the Commission for the month of January 2000. Includes 10,000 shares
which may be acquired through the exercise of currently exercisable
options.
|
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows stock ownership by each Named
Executive Officer, (except Dr. Reeves and Mr. Wolf who resigned prior to
March 1, 2000), and by the Companys directors and executive officers
as a group as of March 1, 2000, unless otherwise indicated.
|
|
Company
Common Stock
Beneficially
Owned as of
March 1, 2000(1)(2)
|
|
Percent
of Class(3)
|
David A.
Jones(4) |
|
9,050,113 |
|
5.40 |
K. Frank Austen,
M.D. |
|
35,500 |
|
|
Michael E.
Gellert |
|
153,700 |
|
|
John R. Hall |
|
58,588 |
|
|
David A. Jones,
Jr. |
|
425,642 |
|
|
Irwin Lerner |
|
55,000 |
|
|
Michael B.
McCallister |
|
420,080 |
|
|
W. Ann Reynolds,
Ph.D. |
|
52,600 |
|
|
Kenneth J.
Fasola |
|
248,015 |
|
|
James E. Murray |
|
298,645 |
|
|
All directors and executive
officers as a group (19 in number,
including those named above (Group)) |
|
11,814,456 |
|
7.04 |
(1)
|
Beneficial ownership of
Shares of Company Common Stock, for purposes of this Proxy Statement,
includes Shares of Company Common Stock as to which a person has or shares
voting and/or investment power. These footnotes describe whenever an
individual shares voting and/or investment power over the Shares of
Company Common Stock beneficially owned by them.
|
|
As described in the
footnotes, the number of Shares of Company Common Stock listed
excludes:
|
|
(a)
|
the interest of certain
persons in Shares of Company Common Stock held by family members in their
own right; and
|
|
(b)
|
certain Shares of Company
Common Stock held for the benefit of such individuals by the Humana
Retirement and Savings Plan (the HRSP) on February 1, 2000,
(the latest date for which the information is available), over which the
employee participant has no voting or investment power. They are as
follows: M. B. McCallister-9,790; K. J. Fasola-1,017; J. E. Murray-2,359;
and Group-31,363.
|
|
The number of Shares of
Company Common Stock listed, however, includes:
|
|
(a)
|
certain Shares of Company
Common Stock held for the benefit of the individuals in the HRSP as of
February 1, 2000, over which the employee participant has no voting power
but does have investment power. In certain circumstances, such as a merger
or reorganization, voting rights on all Shares of Company Common Stock
pass to the individual HRSP participant in which case all HRSP Shares of
Company Common Stock could be deemed to be beneficially owned. They are as
follows: M. B. McCallister-27,832; K. J. Fasola-18,187; J. E.
Murray-7,565; and Group-105,364.
|
|
(b)
|
Shares of Company Common
Stock which may be acquired by these individuals through the exercise of
options, which are exercisable currently or within 60 days after March 1,
2000 under the Companys 1989 Stock Option Plan for Employees, the
1989 Stock Option Plan for Non-employee Directors and the 1996 Stock
Incentive Plan for Employees (collectively the Stock Option Plans
). They are as follows: D. A. Jones-10,000; K. F. Austen,
M.D.-30,000; M. E. Gellert-30,000; J. R. Hall-45,000; D. A. Jones,
Jr.-205,001; I. Lerner-40,000; M. B. McCallister-357,400; W. A. Reynolds,
Ph.D.-45,000; K. J. Fasola-202,298; J. E. Murray-264,705; and
Group-2,047,271.
|
(2)
|
Excludes shares of Company
Common Stock held by directors spouses over which they have no
voting or investment power. They are as follows: D. A. Jones-1,385, D. A.
Jones, Jr.-72; I. Lerner-1,000; and W. A. Reynolds, Ph.D.-87.
|
(3)
|
Unless indicated, less than
1% of the class.
|
(4)
|
Excludes Shares of Company
Common Stock owned by children of Mr. Jones who are past the age of
majority over which Mr. Jones has no voting or investment
power.
|
EXECUTIVE COMPENSATION OF THE COMPANY
The following Summary Compensation Table shows the
compensation earned for the time period served as an executive officer
during the past three years by (1) the Chairman who served as the Interim
Chief Executive Officer (2) a former President and Chief Executive Officer
and (3) each of the four other highest compensated executive officers of the
Company serving at December 31, 1999, (collectively, the Named
Executive Officers).
Summary Compensation
Table
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
Name and
Principal Position
|
|
Year
|
|
Salary
$
|
|
Bonus(2)
$
|
|
Other Annual
Compensation(3)
$
|
|
Restricted
Stock
Awards(4)
#
|
|
Value of
Unvested
Restricted Stock
at Year End(4)
$
|
|
Number of
Securities
Underlying
Options
#
|
|
All Other
Compensation(3)
$
|
David A. Jones
(1) |
|
1999 |
|
205,000 |
|
|
|
56,891 |
|
|
|
|
|
5,000 |
|
720,070 |
Chairman (Former |
|
1998 |
|
205,000 |
|
|
|
52,780 |
|
|
|
|
|
5,000 |
|
840,081 |
Interim Chief |
|
1997 |
|
1,012,440 |
|
2,500,000 |
|
85,460 |
|
|
|
|
|
170,000 |
|
897,898 |
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/1999-2/2000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael B.
McCallister |
|
1999 |
|
350,000 |
|
250,000 |
|
75,247 |
|
|
|
94,375 |
|
130,000 |
|
97,573 |
President & Chief |
|
1998 |
|
350,000 |
|
228,900 |
|
282,680 |
|
12,000 |
|
|
|
152,860 |
|
62,279 |
Executive Officer |
|
1997 |
|
280,384 |
|
100,000 |
|
151,665 |
|
|
|
|
|
60,000 |
|
47,845 |
(Elected 2/2000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth J.
Fasola |
|
1999 |
|
432,578 |
|
235,000 |
|
27,884 |
|
|
|
117,970 |
|
130,000 |
|
73,991 |
Chief Operating |
|
1998 |
|
284,792 |
|
186,194 |
|
19,470 |
|
15,000 |
|
|
|
249,440 |
|
48,579 |
OfficerSmall Group |
|
1997 |
|
260,000 |
|
145,000 |
|
13,769 |
|
|
|
|
|
80,000 |
|
52,496 |
Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Murray |
|
1999 |
|
320,000 |
|
175,000 |
|
18,996 |
|
|
|
117,970 |
|
130,000 |
|
78,579 |
Chief Operating |
|
1998 |
|
277,260 |
|
181,238 |
|
9,961 |
|
15,000 |
|
|
|
168,805 |
|
43,839 |
OfficerHealth Plan |
|
1997 |
|
225,000 |
|
100,000 |
|
8,611 |
|
|
|
|
|
65,000 |
|
27,643 |
Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory H. Wolf |
|
1999 |
|
500,685 |
|
500,685 |
|
9,750 |
|
|
|
|
|
200,000 |
|
2,681,229 |
Former President |
|
1998 |
|
800,000 |
|
697,600 |
|
56,921 |
|
|
|
|
|
434,664 |
|
122,713 |
& Chief Executive |
|
1997 |
|
571,233 |
|
200,000 |
|
35,771 |
|
100,000 |
|
|
|
384,000 |
|
114,095 |
Officer (Resigned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/1999) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Reeves,
M.D. |
|
1999 |
|
320,000 |
|
45,600 |
|
18,559 |
|
|
|
78,646 |
|
50,000 |
|
52,731 |
Former Sr. Vice |
|
1998 |
|
320,000 |
|
209,280 |
|
11,698 |
|
10,000 |
|
|
|
166,200 |
|
11,256 |
President and Chief |
|
1997 |
|
265,627 |
|
180,000 |
|
95,298 |
|
6,000 |
|
|
|
100,000 |
|
|
Medical Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Resigned 2/2000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mr. Jones resigned as Chief
Executive Officer on December 1, 1997. Since that time, he has been and
continues to be non-employee Chairman of the Board. In August 1999, Mr.
Jones assumed the position of Interim Chief Executive Officer, a position
he held until the appointment of Mr. McCallister in February 2000. See
Director Compensation for further information regarding amounts Mr. Jones
received as an outside director. The amounts in the Salary column and the
Options columns represent Mr. Jones Board fees for 1998 and
1999.
|
(2)
|
The amounts include
retention bonuses for Messrs. Wolf and Fasola in 1997 in connection with
the merger of EMPHESYS Financial Group, Inc. (EFG) in the
amounts $200,000 and $75,000, respectively. Dr. Reeves 1997 award
reflects a bonus of $100,000 received when he joined the Company. The 1997
award of $2,500,000 for Mr. Jones was in connection with his leadership in
guiding the Company through a period of strategic and management change
and his retirement as Chief Executive Officer.
|
(3)
|
Other Annual Compensation
includes Company provided transportation, executive insurance and
relocation expenses which are listed in the table below. All Other
Compensation represents amounts contributed or accrued to the HRSP and
contributions and earnings related to the Supplemental Executive
Retirement Plan and Thrift Excess Plan (Long Term Benefit Plans
). The breakdown is listed in the table below. Mr. Jones 1999 and
1998 Other amounts represent annuity payments he received from
the Companys OTRP as a result of his retirement. Mr. Wolfs
1999 Other consists of the payout of his benefit under the
OTRP of $965,530 and severance amounts paid pursuant to his Employment
Agreement upon his resignation in an amount of $1,700,000.
|
(4)
|
The value of unvested
restricted stock is based on the average price of the Company Common Stock
as of December 31, 1999 of $8.0313 less amounts paid by the recipient.
After deducting the consideration paid, the shares held by Messrs.
McCallister, Fasola, Murray and Dr. Reeves had a pretax value based on a
fair market value of $14.375 as of the date of grant of $170,500,
$213,125, $213,125 and $142,083, respectively. The Company has not paid
any dividends, but holders of restricted stock are entitled to dividends,
if paid. Mr. Wolf was awarded 100,000 Shares of restricted stock at the
time of his promotion to Chief Executive Officer in 1997. One third of
this award vested in 1998 with the remaining award accelerating upon his
resignation. Dr. Reeves was awarded 6,000 Shares of restricted stock upon
his date of hire, which vested one year from date of grant (1/27/98). Dr.
Reeves 1998 awards were forfeited upon his leaving the Company in
February 2000. The 1998 restricted stock awards for Messrs. McCallister,
Fasola, and Murray had the potential to vest in equal one-third
installments beginning on January 1, 2000, provided the Company achieved
earnings per share (EPS) equal to the minimum management
incentive plan goal for the previous year. As the 1999 goal was not met,
and the awards are cumulative, two-thirds of the award may vest January 1,
2001, provided the Company achieves EPS equal to the minimum management
incentive plan goal established for 2000.
|
|
|
Other Annual
Compensation
|
|
All Other
Compensation
|
|
|
Year
|
|
Transportation
$
|
|
Exec. Ins.
$
|
|
Relocation/Misc
$
|
|
Contribution
$
|
|
Earnings/(Losses)
$
|
|
Other
$
|
David A. Jones |
|
1999 |
|
49,875 |
|
4,044 |
|
2,972 |
|
|
|
|
|
|
720,070 |
|
|
1998 |
|
44,768 |
|
5,040 |
|
2,972 |
|
|
|
|
|
|
840,081 |
|
|
1997 |
|
81,682 |
|
3,778 |
|
|
|
387,113 |
|
510,785 |
|
|
|
|
Michael B.
McCallister |
|
1999 |
|
14,196 |
|
1,176 |
|
59,875 |
|
89,430 |
|
8,143 |
|
|
|
|
|
1998 |
|
10,892 |
|
1,310 |
|
270,478 |
|
47,750 |
|
14,529 |
|
|
|
|
|
1997 |
|
16,226 |
|
1,032 |
|
134,407 |
|
33,511 |
|
14,334 |
|
|
|
|
Kenneth J.
Fasola |
|
1999 |
|
26,437 |
|
1,447 |
|
|
|
91,633 |
|
(17,642 |
) |
|
|
|
|
1998 |
|
18,412 |
|
1,058 |
|
|
|
45,180 |
|
3,399 |
|
|
|
|
|
1997 |
|
13,301 |
|
468 |
|
|
|
45,229 |
|
7,267 |
|
|
|
|
James E. Murray |
|
1999 |
|
17,921 |
|
1,075 |
|
|
|
72,637 |
|
5,942 |
|
|
|
|
|
1998 |
|
8,935 |
|
1,026 |
|
|
|
39,261 |
|
4,578 |
|
|
|
|
|
1997 |
|
7,379 |
|
832 |
|
400 |
|
23,954 |
|
3,689 |
|
|
|
|
Gregory H. Wolf |
|
1999 |
|
7,846 |
|
1,904 |
|
|
|
4,800 |
|
10,899 |
|
|
2,665,530 |
|
|
1998 |
|
53,925 |
|
2,996 |
|
|
|
108,584 |
|
14,129 |
|
|
|
|
|
1997 |
|
33,665 |
|
2,106 |
|
|
|
106,706 |
|
7,389 |
|
|
|
|
Jerry D. Reeves,
M.D. |
|
1999 |
|
10,500 |
|
1,075 |
|
6,984 |
|
52,336 |
|
395 |
|
|
|
|
|
1998 |
|
10,500 |
|
1,198 |
|
|
|
11,256 |
|
|
|
|
|
|
|
1997 |
|
9,490 |
|
982 |
|
84,826 |
|
|
|
|
|
|
|
The following table provides information on stock options
granted to the Named Executive Officers during the year ended December 31,
1999.
|
|
Date of
Award
(1)
|
|
Number of
Securities
Underlying
Granted
(1)
#
|
|
% of Total
Options
Granted
To
Employees
in 1999
%
|
|
Exercise
Price
Per
Share
(2)
$
|
|
Expiration
Date
|
|
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation For
Option Term (3) |
|
|
|
|
|
|
5%
$
|
|
10%
$
|
David A. Jones |
|
01/04/99 |
|
5,000 |
(4) |
|
.13 |
|
18.7813 |
|
01/04/09 |
|
59,057 |
|
149,663 |
|
Michael B.
McCallister |
|
01/15/99 |
|
30,000 |
|
|
.77 |
|
19.2500 |
|
01/15/09 |
|
363,187 |
|
920,386 |
|
|
11/18/99 |
|
100,000 |
|
|
2.57 |
|
7.4688 |
|
11/18/09 |
|
469,709 |
|
1,190,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
3.34 |
|
|
|
|
|
832,896 |
|
2,110,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth J.
Fasola |
|
01/15/99 |
|
30,000 |
|
|
.77 |
|
19.2500 |
|
01/15/09 |
|
363,187 |
|
920,386 |
|
|
11/18/99 |
|
100,000 |
|
|
2.57 |
|
7.4688 |
|
11/18/09 |
|
469,709 |
|
1,190,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
3.34 |
|
|
|
|
|
832,896 |
|
2,110,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Murray |
|
01/15/99 |
|
30,000 |
|
|
.77 |
|
19.2500 |
|
01/15/09 |
|
363,187 |
|
920,386 |
|
|
11/18/99 |
|
100,000 |
|
|
2.57 |
|
7.4688 |
|
11/18/09 |
|
469,709 |
|
1,190,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
3.34 |
|
|
|
|
|
832,896 |
|
2,110,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory H. Wolf |
|
01/15/99 |
|
200,000 |
|
|
5.14 |
|
19.2500 |
|
08/03/01 |
|
509,633 |
|
1,058,254 |
|
Jerry D. Reeves,
M.D. |
|
01/15/99 |
|
30,000 |
|
|
.77 |
|
19.2500 |
|
01/15/09 |
|
363,187 |
|
920,386 |
|
|
09/09/99 |
|
20,000 |
|
|
.51 |
|
9.5938 |
|
09/09/09 |
|
120,670 |
|
305,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
1.28 |
|
|
|
|
|
483,857 |
|
1,226,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Messrs. McCallister,
Fasola, Murray and Dr. Reeves each received 5,194 incentive stock options
on 1/15/99, with the balance being non-qualified options. The 1/15/99
options become exercisable in equal annual one third installments. The
09/09/99 and 11/18/99 stock option grants were all non-qualified options
exercisable in equal one third installments. In the event of a Change in
Control of the Company, all outstanding stock options become fully vested
and immediately exercisable in their entirety. In addition, during the
60-day period following the Change in Control, any stock option (or
portion thereof) may generally be surrendered for cancellation for a
payment of the difference between the market and option price as more
fully described in the 1996 Plan.
|
(2)
|
The exercise price per
share for all options was equal to the fair market value of the Common
Stock on the date of grant. The exercise price may be paid in cash or, at
the discretion of the Organization & Compensation Committee, in Shares
of Company Common Stock valued at fair market value on the date
immediately preceding the date of exercise, or any combination
thereof.
|
(3)
|
The dollar amounts in this
table represent the potential realizable value of the stock options
granted, assuming that the market price of the Shares of Company Common
Stock appreciate in value from the date of grant to the end of the option
term at annualized rates of 5% and 10%. Therefore, these amounts are not
the actual value of the options granted and are not intended to forecast
possible future appreciation, if any, of Company Common Stock prices. No
assurances can be given that the stock price will appreciate at these
rates or experience any appreciation at all. The average trading price of
the Companys Common Stock was $8.0313 on December 31,
1999.
|
(4)
|
Mr. Jones received his
shares pursuant to the Directors Plan as approved by the
stockholders.
|
1999 OPTION EXERCISES AND YEAR-END VALUES
The following table provides information on the value of
stock options exercised during the year ended December 31, 1999 and the
year-end values of unexercised options for the Named Executive
Officers.
|
|
Shares Acquired
On Exercise
$
|
|
Value
Realized
$
|
|
Number of Securities
Underlying Unexercised
Options at Year End
|
|
Value of Unexercised
In-the-Money Options
at Year End(1)
|
|
|
|
Exercisable
#
|
|
Unexercisable
#
|
|
Exercisable
$
|
|
Unexercisable
$
|
David A.
Jones(2) |
|
|
|
|
|
|
5,000 |
|
5,000 |
|
|
|
|
|
Michael B.
McCallister |
|
5,000 |
|
|
54,090 |
|
329,748 |
|
182,112 |
|
183,600 |
|
56,250 |
|
Kenneth J.
Fasola |
|
|
|
|
|
|
156,490 |
|
182,950 |
|
|
|
56,250 |
|
James E. Murray |
|
(3 |
) |
|
|
|
223,436 |
|
172,869 |
|
183,600 |
|
56,250 |
|
Gregory H. Wolf |
|
|
|
|
|
|
984,664 |
|
|
|
|
|
|
|
Jerry D. Reeves,
M.D. |
|
|
|
|
|
|
72,534 |
|
103,666 |
|
|
|
|
(1)
|
The Value of Unexercised
In-the-Money Options is based on the difference between the
December 31, 1999 (the last trading day of 1999) average trading price of
the Companys Common Stock of $8.0313 as reported on the New York
Stock Exchange Composite Tape, and the exercise price of the options. If
the December 31, 1999 average trading price of $8.0313 is less than the
per share exercise price, no amounts are shown.
|
(2)
|
Mr. Jones, receiving no
value in return, forfeited 470,000 exercisable stock options with prices
ranging from $18.8125$19.3125 in order to increase the pool of
options available to other employees.
|
(3)
|
In October 1999, Mr. Murray
had 5,250 options with an exercise price of $8.6498 expire unexercised as
the exercise price was greater than the current trading price.
|
OFFICERS TARGET RETIREMENT PLAN
The Company also has in effect the OTRP, which is a
non-qualified, unfunded plan providing supplemental retirement benefits to
each elected Company officer, including the Named Executive Officers, and
other designated key employees.
The following table illustrates the estimated maximum
annual benefit which would be payable at age 65 to a participant, at various
average compensation levels for specified years of credited service, under
the OTRP:
Estimated OTRP Maximum
Annual Benefit at Age 65
For Years of Credited
Service Shown (1)(2)
Average Rate
of
Compensation
|
|
10 Years
|
|
15 Years
|
|
20 Years
|
|
25 Years
|
|
30 Years
|
$
100,000 |
|
$
16,700 |
|
$
25,050 |
|
$
33,400 |
|
$
41,750 |
|
$
50,000 |
200,000 |
|
33,400 |
|
50,100 |
|
66,800 |
|
83,500 |
|
100,000 |
300,000 |
|
50,100 |
|
75,150 |
|
100,200 |
|
125,250 |
|
150,000 |
400,000 |
|
66,800 |
|
100,200 |
|
133,600 |
|
167,000 |
|
200,000 |
500,000 |
|
83,500 |
|
125,250 |
|
167,000 |
|
208,750 |
|
250,000 |
600,000 |
|
100,200 |
|
150,300 |
|
200,400 |
|
250,500 |
|
300,000 |
700,000 |
|
116,900 |
|
175,350 |
|
233,800 |
|
292,250 |
|
350,000 |
1,000,000 |
|
167,000 |
|
250,500 |
|
334,000 |
|
417,500 |
|
500,000 |
1,500,000 |
|
250,500 |
|
375,750 |
|
501,000 |
|
626,250 |
|
750,000 |
2,000,000 |
|
334,000 |
|
501,000 |
|
668,000 |
|
835,000 |
|
1,000,000 |
(1)
|
These estimates are based
on the assumption that (a) the OTRP will be continued under its present
terms; (b) the participant will continue with the Company until, and
retire at, age 65; and (c) the participant elected to receive an annual
distribution instead of a lump sum payment.
|
(2)
|
The amounts shown are the
total targeted retirement benefit and are reduced with respect to benefits
received under the Retirement Account in the HRSP, the Supplemental
Executive Retirement Plan and Social Security benefits.
|
The benefits will be based on salary and incentive
compensation under the OTRP. The maximum years of service credited under the
OTRP are 30 years, unless otherwise changed by the Board of Directors. The
years of service for each of the other Named Executive Officers are as
follows: Michael B. McCallister26; Kenneth J. Fasola10; James E.
Murray10. Upon termination, Gregory H. Wolf was credited with 10 years
of service and Jerry D. Reeves, M.D. was credited with 3 years of service.
Messrs. Wolf and Fasola were credited for their years of service with
EFG.
In March 1999, the Company entered into an agreement with
Mr. Fasola pursuant to which he 1) serves as a senior officer of the Company
at an annual base salary in an amount not less than $470,000, 2)
participates in an incentive plan providing for a target incentive
compensation amount of not less than 75% of his base salary but was
guaranteed a minimum of 50% of base salary as bonus for the 1999 Performance
Year, and 3) is eligible for participation in all benefit plans and programs
made available by the Company for its executive employees. In the event of
termination of employment without Good Cause (as defined in the agreement),
or with Good Cause under certain circumstances as set out in the Agreement,
or pursuant to disability or death, the Company will pay to him or his
estate a prorated bonus calculated on the basis of 100% of base salary, plus
a severance amount equal to one years base salary. He is also entitled
to continue coverage under the Companys life, health and disability
plans for a 12-month period upon the same terms and costs for other
employees of the Company. Additionally, all restricted shares shall become
vested and all stock options shall become fully vested and shall be
exercisable for a two-year period following his termination. In the event of
termination of employment with Good Cause, Mr. Fasola would receive an
amount equal to his then current base salary earned but not yet paid and
shall have a period of 90 days to exercise any vested options. Mr. Fasola
would forfeit any unvested options or restricted shares.
In the event of termination of employment because Mr.
Fasola gives notice of termination of the agreement, or because Mr. Fasola
voluntarily terminates his employment during the Employment Period, then the
Company shall pay to him an amount equal to his base salary. Any bonus
payable shall be prorated. He is also entitled to continue coverage for a
12-month period under the Companys life, health and disability plans
upon the same terms and costs for other similarly situated employees of the
Company.
In the event of termination of employment following a
Change in Control, as defined in the agreement, then Mr. Fasola shall
receive 1) his full base salary earned but not yet paid through the
termination date at the greater of the rate in effect at the time of the
Change in Control or the Termination Date (Higher Annual Base Salary), plus
any incentive compensation which has been earned, 2) an amount equal to one
and one-half times the amount equal to the sum of the Higher Annual Base
Salary plus the maximum target incentive compensation which could have been
earned, and 3) continued coverage for a two-year period, at the Company
s expense, under all life, health, dental, accidental death and
dismemberment and disability insurance.
Mr. Wolf had a similar agreement with the Company and upon
his resignation was paid benefits thereunder. See Summary Compensation
Table.
In December 1999, the Company entered into an agreement
with Mr. Jones (Jones Agreement) formalizing the payments he is
receiving as Chairman of the Board. See Director Compensation
for a description of the terms of the Jones Agreement.
All officers elected by the Board of Directors, including
the Named Executive Officers, generally receive health benefits upon
termination for themselves and their eligible dependents at a predetermined
rate until the earlier of attainment of age 65 or obtaining other
coverage.
The Company has entered into agreements with all other
officers, including Messrs. McCallister and Murray, and key management
employees, which for a two-year period
following a Change in Control provide certain benefits upon termination. Such
termination shall be involuntary or shall be due to a resignation as a
result of a change in responsibilities or compensation. Under these
agreements, these individuals would be entitled to receive severance pay
which generally is determined by multiplying the sum of each individual
s annual base salary, and the maximum incentive compensation payable
to him or her, by a multiple ranging from one to one and
one-half.
In addition, in the event of a Change in Control of the
Company, benefits are payable under the Companys Stock Option Plans,
and health, life and disability insurance coverage are
available.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
In 1994, the Company entered into an agreement with JAPC,
Inc. (JAPC), which is owned by David A. Jones. The Company
provides hangar space, pilot services and maintenance for an airplane owned
by JAPC, and the Company may also use the JAPC pilots to fly Company
aircraft. The rate paid for the hangar space is at least as favorable to the
Company as market rates for comparable space. The Company is fully
reimbursed for the cost of airplane maintenance. Either party upon 30 days
written notice generally may terminate the agreement. For the year
ended December 31, 1999, the Company was reimbursed by JAPC
$54,829.
Effective January 1998, the Company entered into an
Aircraft Interchange Agreement with JAPC. Under the terms of the Agreement,
the Company leases its aircraft to JAPC and JAPC leases its aircraft to the
Company. The lessee exchanges with the lessor equal time on the lessee
s aircraft. The Company and JAPC each bill the other for any flights
that occurred in the preceding month. Any difference in number of hours is
carried over to succeeding months and is offset against flight hours on
aircraft of the other party. Either party upon 60 days written notice
generally may terminate the agreement. For the year ended December 31, 1999
the Company used JAPCs aircraft 39.6 hours and JAPC used the Company
s aircraft 38.9 hours.
In 1995, the Company completed a commitment to invest $1
million in the African-American Venture Capital Fund, LLC., a Kentucky
Limited Liability Company (Fund). This investment makes the
Company a greater than 10% stockholder of the Fund. David A. Jones made a
similar investment in the Fund and is also a greater than 10% stockholder of
the Fund. David A. Jones, Jr. is a director of the Fund. The Fund was
established to provide capital and management resources to enhance the
growth and development of businesses owned by African-Americans living in
the metropolitan Louisville, Kentucky area.
ORGANIZATION & COMPENSATION COMMITTEE REPORT
Executive Officer
Compensation Policy
The Organization & Compensation Committee (the
Committee) administers the Companys executive officer
compensation program, the key components of which are base salary, incentive
compensation, stock option and restricted stock awards. Each member of the
Committee is an independent non-employee director who has never been an
employee of the Company.
The executive officer compensation program rewards
executive officers for short and long-term performance. In addition to base
salary, executive officers are compensated on a performance-oriented basis
through the use of incentive compensation linking both short and long-term
results. One component, the annual incentive bonus, permits team and
individual performance to be recognized on an annual basis and is based, in
part, on an evaluation of the contribution made by the officer to Company
performance. Stock options are included in the compensation program to
reward executive officers for longer-term strategic actions that increase
Company value. This use of stock options directly relates a significant
portion of each executive officers long-term remuneration to the
Companys stock price, and thus aligns the executives
compensation with the interests of the Companys other stockholders.
The granting of stock options, as well as the limited use of restricted
stock is used to: (1) recognize promotions of executives into positions of
significant responsibilities, (2) recognize significant accomplishments of
executives, particularly as the accomplishments impact growth, profits
and/or competitive positioning, and (3) as an additional incentive to
attract and retain high level executive talent. The Committee uses outside
consultants to assist it in evaluating the various components of executive
officer compensation.
The executive officer compensation program is designed to
allow the Company to be competitive in the marketplace in attracting,
motivating and retaining key executive officers. The marketplace is defined
as both (1) publicly traded companies approximating the Companys
revenue and employee size, and (2) specific companies in the managed care
industry. The Committee believes this definition of the marketplace provides
a good benchmark for analyzing competitiveness of the Companys
executive compensation program. The Committee considers the overall
compensation package when setting any one component of compensation.
Although data from specific competitors in the managed care industry is used
in the compensation analysis, because of mergers in the managed care
industry, the Company uses a health care index in its Stock Performance
graph instead of a specific peer group.
Several circumstances arose during 1999 which affected the
Committees decisions regarding its executive officer compensation. The
Company entered into an Employment Agreement with Mr. Fasola dated March 29,
1999, which governs the compensation and bonus arrangements for Mr. Fasola.
On August 3, 1999, Mr. Wolf resigned as President and Chief Executive
Officer, and Mr. Jones, Chairman of the Board agreed to act as Interim Chief
Executive Officer. An Office of the Chairman was established to assist Mr.
Jones. The members of the Office of the Chairman were Kenneth J. Fasola,
Michael B. McCallister and James E. Murray. To recognize the additional
responsibilities assumed by members of the Office of the Chairman and to
have some compensation equity among its members, the Committee made certain
decisions which are described under Incentive Compensation
herein. Subsequently, on February 2, 2000, the Board elected Mr. McCallister
as President and Chief Executive Officer.
Base
Compensation
Base compensation for executive officers is determined by
an assessment of overall company performance, executive officer performance,
changes in executive officer responsibilities and relevant marketplace data.
While many aspects of performance can be measured in financial terms, the
Committee also evaluates senior management in areas of performance that are
more subjective. These areas include the development and execution of
strategic plans, the exercise of leadership in the development of management
and associates, innovation and improvement in the Companys products
and processes, as well as the executives involvement in industry
groups and in the communities that the Company serves. The Companys
policy is to collectively set executive base salaries between the median and
the 75th percentile of the Companys peer group. Individual salaries
are established in alignment with this target to ensure the attraction,
development and retention of superior talent and in relation to individual
executive performance.
Incentive
Compensation
The Companys incentive compensation plans are
designed to reward officers and designated key associates for the attainment
of financial goals and other performance objectives approved annually by the
Committee. Incentive compensation objectives are constructed to encourage
profitability and growth while taking into account non-routine factors such
as acquisitions that may be integral to the growth strategy of the Company.
As an outside Director, Mr. Jones did not participate in any incentive
compensation program during 1999. During 1999, the Company had two incentive
compensation plans that covered its executive officers. Until his
resignation in August 1999, Mr. Wolf participated in the Humana Inc.
Executive Management Incentive Compensation PlanGroup A, providing for
an award based solely on the attainment of pre-established Company
consolidated net income objectives, with maximum potential payments of 100%
of base pay. Pursuant to Mr. Wolfs Employment Agreement with the
Company, he received a prorated amount of incentive compensation upon his
resignation. Mr. Fasolas Employment Agreement provided for an
incentive compensation payment of not less than 50% of his base salary for
1999. All other executive officers, including Messrs. McCallister and Murray
and Dr. Reeves, were covered by the Companys 1999 Management Incentive
Plan, which based 70-80% of awards on the attainment of certain earnings and
growth goals for 1999 and 30-20% of the award being discretionary, with a
maximum potential payment of 75% of base pay. The non-discretionary
components of this plan were not met. For 1999, approximately 20% of the
target award was awarded based on the discretionary component. Dr. Reeves
discretionary payment for 1999 was $45,600. In determining the
appropriate incentive compensation for Messrs. Fasola, McCallister and
Murray, the Committee considered their additional duties as members of the
Office of the Chairman and Mr. Fasolas Employment Agreement. In lieu
of any other 1999 incentive compensation, the Committee awarded Mr. Fasola a
bonus of $235,000, Mr. McCallister a bonus of $250,000, and Mr. Murray a
bonus of $175,000.
Equity
Compensation
The Company uses stock options and restricted stock awards
to reward officers and key associates for long-term performance and as a
method to attract, motivate, and retain these key employees. The use of
equity based compensation provides a vital, long-term link between the
results achieved for the Companys stockholders and the rewards
provided to executive officers and other associates.
All stock options are granted at the fair market
value of the Companys stock on the date of grant. The Committee
determines the aggregate amounts, terms and timing of stock option and
restricted stock awards with the assistance of outside consultants. The
number of shares covered by each award reflects the executives level
of responsibility along with past and anticipated future contributions to
the Company.
In 1998, the Company awarded performance-based, restricted
stock to approximately 86 employees, including the Named Executive Officers
other than Mr. Jones and Mr. Wolf, which could vest in equal one-third
installments beginning January 1, 2000, provided the Company achieved
earnings per share objectives equal to the minimum management incentive
compensation goal in the previous fiscal year. The objective was not met in
1999, and none of the restricted shares vested. The vesting is cumulative so
that up to two-thirds of the award have the potential to vest in 2001 based
on the performance goals for the year 2000. The Committee limits the use of
restricted stock awards. Other than two grants to newly hired executive
officers, no restricted stock awards were granted in 1999, and the Committee
does not anticipate granting any in the foreseeable future.
In 1999, the Committee granted options and restricted
stock totaling approximately 2.4% of the Companys outstanding Common
Stock. In connection with their appointment to the Office of the Chairman,
the Committee awarded an option for 100,000 shares each in addition to the
annual option grant in January 1999 of 30,000 shares each. Mr. Wolf received
an option for 200,000 Shares and Dr. Reeves received options for 50,000
Shares. See also Summary Compensation Table, and 1999
Stock Option Grants for a description of stock options granted in
1999.
Chief Executive Officer
Compensation
Mr. Wolf resigned as Chief Executive Officer in August
1999. See the Summary Compensation Table for a description of
his compensation and severance payments. During 1999, Mr. Jones did not
receive any additional compensation for serving as Interim Chief Executive
Officer.
Executive Compensation Tax
Deductibility
The Omnibus Budget Reconciliation Act of 1993 amended the
Code to generally provide that compensation paid by publicly-held
corporations to the chief executive officer and the four most highly paid
senior executive officers in excess of $1 million per year per executive
will be deductible by the Company, only if paid pursuant to qualifying
performance-based compensation plans approved by stockholders of the
Company. Compensation as defined by the Code includes, among other things,
base salary, incentive compensation and gains on stock options and
restricted stock. It is the Committees policy to maximize the
effectiveness of the Companys executive compensation plans. In that
regard, the Committee intends to maintain flexibility to take actions which
it deems to be in the best interest of the Company and its stockholders.
Such actions may not always qualify for tax deductibility under the Code.
The Company believes it has taken the necessary steps to qualify the Company
s performance-based compensation plans for tax deductibility. The
Company also believes that all compensation paid for 1999 is deductible for
federal income tax purposes.
All members of the Organization & Compensation
Committee of the Company whose members are as follows submit the foregoing
report:
ORGANIZATION &
COMPENSATION COMMITTEE
Irwin Lerner,
Chairman
K. Frank Austen,
M.D.
Michael E.
Gellert
John R. Hall
The foregoing report of the Organization &
Compensation Committee shall not be deemed incorporated by reference by any
general statement incorporating by reference the Proxy Statement into any
filing under the Securities Act of 1933 or the Exchange Act, and shall not
otherwise be deemed filed under such Acts except to the extent that the
Company specifically incorporates this information by reference.
COMPANY STOCK PERFORMANCE
The following performance graph compares the performance
of the Companys Common Stock to the Standard & Poors
Composite 500 Stock Index (S&P 500) and the Morgan Stanley
Healthcare Payor Index (Peer Group) for the 60 months ended
December 31, 1999. The graph assumes an investment of $100 in each of the
Companys Common Stock, the Standard & Poors Composite 500
Stock Index, and the Morgan Stanley Healthcare Payor Index on December 31,
1994, and also assumes reinvestment of all dividends.
Humana, Inc. Stock
Performance Graph December 31, 1999
|
|
12/31/94
|
|
12/31/95
|
|
12/31/96
|
|
12/31/97
|
|
12/31/98
|
|
12/31/99
|
Humana Inc. |
|
$100 |
|
$121 |
|
$ 84 |
|
$ 92 |
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$ 79 |
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$ 36 |
S&P 500 |
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$100 |
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$134 |
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$161 |
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$211 |
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$268 |
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$320 |
Morgan Stanley
Healthcare Payor
Index |
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$100 |
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$126 |
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$109 |
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$113 |
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$121 |
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$108 |
Amalgamated Bank of New York LongView Collective
Investment Fund, 11-15 Union Square, New York, New York, which owns 51,875
shares of the Companys Common Stock, has submitted the resolution set
forth below for inclusion in this Proxy Statement for the Companys
2000 Annual Meeting of Stockholders. The Board recommends a vote AGAINST
this proposal.
SHAREHOLDER
PROPOSAL
RESOLVED: That the shareholders of Humana, Inc. (
Humana or the Company) request the Board of
Directors to redeem the shareholder rights previously issued unless such
issuance is approved by the affirmative vote of shareholders, to be held as
soon as may be practicable.
SUPPORTING
STATEMENT
In 1987 the Board of Directors issued certain shareholder
rights pursuant to a Rights Agreement of the type commonly known
as a poison pill. In 1996 the Board extended the
expiration of the rights created under this Agreement until February 2006,
raised the exercise price of rights from $25 to $145 and reduced the
threshold at which rights will be triggered from 20-30% to 15% of the
outstanding shares.
In both instances the Board acted unilaterally and without
seeking or obtaining prior approval from Humana shareholders.
We view this Rights Agreement as a type of anti-takeover
device, which injures shareholders by reducing management accountability and
adversely affecting shareholder value. We believe that these rights are
designed to discourage or thwart an unwanted takeover of the Company, and
they operate in that manner. Although management and the Board of Directors
should have appropriate tools to ensure that all shareholders benefit from
any proposal to acquire the Company, we do not believe that the future
possibility of a takeover justifies the unilateral imposition of such a
poison pill. At a minimum, we believe that the shareholders should have the
right to vote on the necessity of such a powerful tool, which can operate to
entrench existing management.
The negative effects of poison pill rights plans on the
trading value of companies stock have been the subject of extensive
research. Indeed, a 1992 study by Professor John Pound of Harvards
Corporate Research Project and Lilli A. Gordon of the Gordon Group found a
correlation between high corporate performance and the absence of poison
pills.
We also believe that a shareholder role is important in
light of Humanas poor performance in recent years. Humana stock has
lost approximately two-thirds of its value over the past five years. Indeed,
Humana was recently added to the Council of Institutional Investors
Focus List of companies that have underperformed both the S
&P 500 index and their S&P industry peer group during the one-,
three- and five-year periods ending June 30, 1999.
In recent years, various companies have been willing to
redeem outstanding rights. We believe that Humana should follow suit or at
least put to a vote of the shareholders the question of whether the current
Rights Agreement should remain in force.
WE URGE YOU TO VOTE
FOR THIS RESOLUTION!
The Board of Directors recommends a vote AGAINST the
adoption of the foregoing stockholder proposal.
STATEMENT IN OPPOSITION TO
THE PROPOSAL
The Board of Directors believes that the proposal of the
Amalgamated Bank of New York, Longview Collective Investment Fund is not in
the best interest of the Companys stockholders and recommends that
stockholders vote AGAINST it.
The Companys Board of Directors originally adopted
the Companys Shareholders Rights Plan (the Rights Plan) in
1987 and extended it in 1996 to expire in February 2006. The Rights Plan was
adopted to protect Humanas stockholders against abusive takeover
tactics and to ensure that each Humana stockholder would be treated fairly
in the event of an unsolicited offer to acquire Humana and to obtain fair
value for the Company in the event of a sale. The Rights Plan can be amended
by a majority vote of the then current Board of Directors and is not limited
to the vote of only continuing directors. The Board believes
that the continuation of the Rights Plan is in the best interests of Humana
and its stockholders.
The Rights Plan is not designed or intended to, nor
would it, prevent an unsolicited offer to acquire Humana at a fair price.
Rather, the Rights Plan is designed and intended to enhance the Board of
Directors ability to discharge its fiduciary duty by protecting both a
stockholders right to retain an equity investment in Humana and also
the full value of that investment, without preventing an offer to acquire
Humana at a fair price and upon terms that treat all stockholders fairly.
The Board of Directors ability to achieve this objective by
negotiating with a potential acquirer on behalf of all stockholders is
significantly greater than the ability of stockholders individually. The
Rights Plan does not affect any takeover proposal which the Board of
Directors believes is in the best interests of the Companys
stockholders. The overriding objective of the Board of Directors in adopting
the Rights Plan was, and continues to be, the preservation and maximization
of the Companys value for all stockholders.
The Board of Directors followed its fiduciary
responsibilities under Delaware law when it adopted and amended the Rights
Plan. It is important to note that the Companys Board of Directors is
an independent board, consisting of a majority of outside directors,
providing further assurance that the Rights Plan will not be used for
entrenchment purposes. The Board of Directors believes the Rights Plan
provides a valuable and necessary means for protecting the interests of all
of the stockholders and maximizing the value of their investments in the
Company.
Shareholder rights plans have become very common for
public companies. The Rights Plan does not in any way weaken the financial
strength of the Company and does not change the way in which the Common
Stock of the Company presently can be traded.
The Board of Directors believes that such plans better
position the Board of Directors to negotiate the most attractive and fair
price for all stockholders. Many companies with rights plans have received
unsolicited offers and have redeemed their rights after their directors were
satisfied that the offer, as negotiated by the target companys board
of directors, adequately reflected the underlying value of the company and
was fair and equitable to all stockholders. The Board of Directors believes
experience indicates that rights plans neither prevent unsolicited offers
from occurring, nor prevent companies from being acquired at prices that are
fair and adequate to stockholders.
The Board of Directors believes that the only proper time
to consider redemption of the Rights Plan is when a specific offer is made
to acquire the Companys stock. Redemption of the Rights Plan prior to
that time would be premature and would remove any incentive for a potential
acquirer to negotiate with the Board of Directors so that stockholders would
be treated fairly.
For the reasons set forth above, the Board of Directors
urges Humanas stockholders to reject this proposal.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE AGAINST THIS PROPOSAL
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, in accordance with the
recommendation of its Audit Committee, the members of which are not
employees of the Company, has appointed PricewaterhouseCoopers LLP as
independent accountants to audit the consolidated financial statements of
the Company for the year ending December 31, 2000. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will be
afforded the opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
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By Order of the Board of
Directors
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Joan O. Lenahan,
Secretary
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APPENDIX
HUMANA INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 18, 2000
10:00 A.M., EDT
HUMANA BUILDING
25TH FLOOR AUDITORIUM
500 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202
YOUR VOTE IS IMPORTANT
VOTE BY TELEPHONE OR INTERNET OR MAIL
Humana Inc. encourages you to take advantage of two new cost-effective and
convenient ways to vote your shares.
You may now vote your proxy 24 hours a day, 7 days a week, using either a
touch- tone telephone or through the Internet. Your TELEPHONE OR INTERNET
VOTE MUST BE RECEIVED BY 11:00 p.m. NEW YORK TIME ON MAY 17, 2000.
Your telephone or Internet vote authorizes the proxies named on the proxy
card to vote your shares in the same manner as if you marked, signed, and
returned your proxy card.
VOTE BY TELEPHONE: |
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ON A TOUCH-TONE TELEPHONE DIAL 1-800
690-6903 FROM THE U.S.AND CANADA |
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You will be asked to enter the CONTROL NUMBER located below.
Then follow the instructions. |
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VOTE BY INTERNET: |
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ACCESS THE INTERNET VOTING SITE AT
WWW.PROXYVOTE.COM |
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Click the "PROXY VOTING" icon -- You will be asked to enter
the CONTROL NUMBER located below. Then follow the instructions. |
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VOTE BY MAIL: |
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Mark, sign and date your proxy card and
return it in the postage-paid envelope. PLEASE DO NOT MAIL YOUR PROXY CARD
IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET |
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The Board of Directors recommends a vote FOR the following proposal:
Vote On Directors
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The election of (01) K. Frank Austen, M.D., (02) Michael E.
Gellert, (03) John R. Hall, (04) David A. Jones, (05) David A. Jones, Jr.,
(06) Irwin Lerner, (07) Michael B. McCallister, (08) W. Ann Reynolds,
Ph.D. as Directors except as indicated below. |
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For All [ ]
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Withhold All [ ] |
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For All Except [ ] |
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To withhold authority to vote, mark "For All
Except" and write the nominee's number on the line below. |
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The Board of Directors recommends a vote AGAINST the
following proposal: |
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Vote on Stockholder proposal |
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For [ ] |
Against [ ] |
Abstain [ ] |
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At their discretion, the Proxies are authorized
to vote upon any other matters as may come before the Annual Meeting. |
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE
ACCOMPANYING ENVELOPE.
Signatures of stockholders should correspond exactly with the
names shown on this proxy card. Attorneys, trustees, executors,
administrators, guardians and others signing in a representative capacity
should designate their full titles. When Shares of Company Common Stock are
held in joint tenants, both should sign. If a corporation, please sign in
full corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
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Signature |
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Signature |
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(PLEASE SIGN WITHIN BOX) |
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Date
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(Joint Owners) |
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Date
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[REVERSE SIDE OF CARD]
HUMANA INC.
500 WEST MAIN STREET, LOUISVILLE, KENTUCKY 40202
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints David A. Jones and Michael B. McCallister,
and each of them, their attorneys and agents, with full power of
substitution to vote as Proxy for the undersigned, as herein stated, at the
Annual Meeting of Stockholders of Humana Inc. (the Annual Meeting) to be
held in the Auditorium on the 25th Floor of the Humana Building, 500 West
Main Street, Louisville, Kentucky on Thursday, the 18th day of May, 2000 at
10:00 a.m., EDT and at any postponements or adjournments thereof, according
to the number of votes the undersigned would be entitled to vote on the
proposals set forth below if personally present.
THE SHARES OF COMMON STOCK COVERED BY THIS PROXY WILL BE
VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED
IN FAVOR OF THE ELECTION OF DIRECTORS AND AGAINST
THE STOCKHOLDER PROPOSAL.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Annual Meeting.
(SEE REVERSE SIDE TO VOTE)
HUMANA INC.
500 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints David A. Jones and Michael B. McCallister,
and each of them, their attorneys and agents, with full power of
substitution to vote as Proxy for the undersigned, as herein stated, at the
Annual Meeting of Stockholders of Humana Inc. (the Annual Meeting) to be
held in the Auditorium on the 25th Floor of the Humana Building, 500 West
Main Street, Louisville, Kentucky on Thursday, the 18th day of May, 2000 at
10:00 a.m., EDT and at any postponements or adjournments thereof, according
to the number of votes the undersigned would be entitled to vote on the
proposals set forth below if personally present.
The Board of Directors recommends a vote FOR the following proposal:
1 . |
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The election of (1) K. Frank Austen, M.D., (2) Michael E.
Gellert, (3) John R. Hall, (4) David A. Jones, (5) David A. Jones, Jr.,
(6) Irwin Lerner, (7) Michael B. McCallister, (8) W. Ann Reynolds,
Ph.D. |
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FOR ALL [ ]
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WITHHOLD AUTHORITY [
]
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FOR ALL EXCEPT [
]
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To withhold authority to vote, mark "For All Except" and
write the nominee's number on the line below. |
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The Board of Directors recommends a vote AGAINST the
following proposal: |
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2. |
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Stockholder Proposal-Shareholder Rights Plan |
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For [ ]
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Against [ ]
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Abstain [ ] |
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At their discretion, the Proxies are authorized
to vote upon any other matters as may come before the Annual Meeting. |
THE SHARES OF COMPANY COMMON STOCK COVERED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF
THE ELECTION OF DIRECTORS AND AGAINST THE STOCKHOLDER PROPOSAL.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Annual Meeting.
(SEE REVERSE SIDE TO VOTE)
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE
ACCOMPANYING ENVELOPE. |
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Date: |
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, 2000
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Signature |
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Signature (Joint Owners) |
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Signatures of stockholders should correspond exactly with
the names shown on this proxy card. Attorneys, trustees, executors,
administrators, guardians and others signing in a representative capacity
should designate their full titles. When Shares of Company Common Stock
are held by joint tenants, both should sign. If a corporation, please sign
in full corporate name by authorized officer. If a partnership, please
sign in partnership name by authorized person. |
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