ex10_12.htm


    
      

    

    Exhibit
10.12

     

    Amended
12/5/08


    AETNA
INC.

    2001
ANNUAL INCENTIVE PLAN

    (EFFECTIVE
AS OF JANUARY 1, 2001)

    


    SECTION
1.   PURPOSE.

     

    The
purpose of this Plan is to provide a general incentive for designated key
executive employees of the Companies in order to improve operating results of
the Companies and to reward such employees for the accomplishment of financial
and strategic objectives of the Companies.

     

    SECTION
2.   DEFINITIONS.

     

    Unless
the context requires otherwise, the following words as used in the Plan shall
have the meanings ascribed to each below, it being understood that masculine,
feminine and neuter pronouns are used interchangeably and that each comprehends
the others.

     

    
      	
                
      (a)

            	
              “Aetna”
      means Aetna Inc., a Pennsylvania
corporation.

            


    

     

    
      	
                
      (b)

            	
              “Board”
      means the Board of Directors of
Aetna.

            


    

     

    
      	
                
      (c)

            	
              “Change
      in Control” means the happening of any of the
  following:

            


    

     

    
      	
               
      

            	
              (i)

            	
              When
      any “person” as defined in Section 3(a)(9) of the Securities Exchange Act
      of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d) and
      14 (d) thereof, including a “group” as defined in Section 13 (d) of the
      Exchange Act but excluding Aetna and any subsidiary thereof and any
      employee benefit plan sponsored or maintained by Aetna or any subsidiary
      (including any trustee of such plan acting as trustee), directly or
      indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under
      the Exchange Act, as amended from time to time), of securities of Aetna
      representing 20 percent or more of the combined voting power of Aetna’s
      then outstanding securities;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              When,
      during any period of 24 consecutive months, the individuals who, at the
      beginning of such period, constitute the Board (the “Incumbent Directors”)
      cease for any reason other than death to constitute at least a majority
      thereof, provided that a director who was not a director at the beginning
      of such 24-month period shall be deemed to have satisfied such 24-month
      requirement (and be an Incumbent Director) if such director was elected
      by, or on the recommendation of or with the approval of, at
      least two-thirds of the directors who then qualified as Incumbent
      Directors either actually (because they were directors at the beginning
      of such 24-month period) or by prior operation of this paragraph
      (ii); or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              The
      occurrence of a transaction requiring stockholder approval for the
      acquisition of Aetna by an entity other than Aetna or a Subsidiary through
      purchase of assets, or by merger, or
otherwise.

            


    

     

    
      	
                
      (d)

            	
              “Committee”
      means the Committee on Compensation and Organization of the Board (or such
      other committee of the Board that the Board shall designate from time to
      time) or any subcommittee thereof consisting of two or more directors each
      of whom is an “outside director” within the meaning of Section 162 (m) and
      a “non-employee director” within the meaning of Rule 16b-3 under the
      Securities Exchange Act of 1934, as
amended.

            


    

     

    
      	
                 (e)

            	
              “Common
      Stock” means the common stock, $.01 par value, of
  Aetna.

            


    

     

    
      	
                 (f)

            	
              “Companies”
      means one or more of Aetna, any of Aetna’s affiliated companies, and any
      other entity as to which (i) Aetna or any of Aetna’s affiliated companies
      holds or is seeking to acquire an ownership interest, and (ii) has been
      included in the Plan by the
Committee.

            


    

     

    
      
        
           


        

        
          1

          
            

          

        

         

      

    

    


    
      	
                 (g)

            	
              “Covered
      Employee” shall have the meaning set forth in Section
    162(m).

            


    

     

    
      	
                 (h)

            	
              “Deferral
      Period” means the period of time during which payment of any amount
      otherwise payable under the Plan is deferred (i) at the direction of the
      Committee pursuant to Section 6(b) or (ii) at the election of a
      Participant pursuant to Section
6(c).

            


    

     

    
      	
                 (i)

            	
              “Disability”
      means the occurrence of an event that would entitle a Participant to the
      payment of disability income under a specific long-term disability income
      plan approved by the Companies and under which the Participant is
      enrolled, as such plan may be amended from time to time, or if such
      Participant is not enrolled in a specific plan, as defined in a plan
      covering similarly situated executive officers of
  Aetna.

            


    

     

    
      	
                 (j)

            	
              “Fair
      Market Value” means on any date, with respect to a share of Common Stock,
      the closing price of a share of Common Stock as reported by the
      Consolidated Tape of New York Stock Exchange Listed Shares on such date,
      or, if no shares were traded on such Exchange on such date, on the next
      date on which the Common Stock is
traded.

            


    

     

    
      	
                 (k)

            	
              “Participant”
      means (i) each Covered Employee and (ii) each other executive officer of
      Aetna as defined in Rule 3b-7 of the Securities Exchange Act of 1934 whom
      Aetna designates as a participant under the
  Plan.

            


    

     

    
      	
                 (1)

            	
              “Performance
      Period” means the calendar year or such other period as may be designated
      by the Committee.

            


    

     

    
      	
                 (m)

            	
              “Plan”
      means the Aetna Inc. 2001 Annual Incentive Plan, as set forth herein and
      as may be amended from time to
time.

            


    

     

    
      	
                 (n)

            	
              “Retirement”
      means the retirement of a Participant from active service with the
      Companies at or after the age at which full pension benefits are provided
      under a specific retirement plan maintained or contributed to by any of
      the Companies and under which the Participant has an accrued benefit, as
      such plan may be amended from time to time, or if such Participant does
      not have an accrued benefit under any such plan, the age at which full
      pension benefits are provided under a retirement plan covering similarly
      situated executive officers of
Aetna.

            


    

     

    
      	
                 (o)

            	
              “Section
      162(m)” means Section 162 (m) of the Internal Revenue Code of 1986, as
      amended, and any regulations promulgated
  thereunder.

            


    

     

    
      	
                 (p)

            	
              “Section
      409A” means Section 409A of the Internal Revenue Code of 1986, as amended,
      and any regulations promulgated
thereunder.

            


    

     

    
      	
                 (q)

            	
              “Share”
      means a share of Common Stock.

            


    

     

       (r)   “Stock
Unit” means a unit representing the contractual right to receive the value of
one Share.

     

    
      	
                 (s)

            	
              “Stock
      Unit Account” means, with respect to any Participant who has elected to
      have deferred amounts deemed invested in Stock Units, a bookkeeping
      account established to record such Participant’s interest under the Plan
      related to such Stock Units.

            


    

     

    
      	
                 (t)

            	
              “Subsidiary”
      means any entity of which the Company possesses directly or indirectly
      fifty percent (50%) or more of the total combined voting power of all
      classes of stock of such entity.

            


    

     

    SECTION
3.   ADMINISTRATION.

     

    The Plan
shall be administered by the Committee.  The Committee shall have the
responsibility of construing and interpreting the Plan, provided that, in no
event shall the Plan be interpreted in a manner which would cause any award to a
Covered Employee to fail to qualify as performance-based compensation under
Section 162(m). The Committee shall establish the performance objectives for any
Performance Period in accordance with Section 5 and certify whether such
performance objectives have been obtained. Any determination made or decision or
action taken or to be taken by the Committee, arising out of or in connection
with the construction, administration, interpretation and effect of the Plan and
of its rules and regulations, shall, to the fullest extent permitted by law (but
subject to the limitations on the discretion of the Committee applicable to
awards intended to be qualified as

     

    
      
        
           


        

        
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    performance-based
compensation under Section 162(m)), be within the Committee’s absolute
discretion and shall be conclusive and binding on any and all Participants, any
person claiming under or through a Participant and each of the Companies. The
Committee may employ such legal counsel, consultants and agents (including
counsel or agents who are employees of any Company) as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from any
such counsel or consultant or agent and any computation received from such
consultant or agent. All expenses incurred in the administration of the Plan,
including, without limitation, for the engagement of any counsel, consultant or
agent, shall be paid by the Companies. No member or former member of the Board
or the Committee shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Plan other than as a
result of such individual’s willful misconduct.

     

    SECTION
4.   DETERMINATION OF PARTICIPANTS.

     

    In
addition to the Covered Employees, the Committee may designate as a Participant
in the Plan any executive officer of Aetna as defined in Rule 3b-7 of the
Securities Exchange Act of 1934. Members of the Board who are not employees of
any of the Companies shall not be eligible to participate in the
Plan.

     

    SECTION
5.   BONUSES.

     

    (a)
 Performance
Criteria.  On or before the end of the first 90 days of each
Performance Period (or such other date as may be required or permitted under
Section 162(m)), the Committee shall establish the performance objective or
objectives that must be satisfied in order for a Participant to receive a bonus
for such Performance Period. Any such performance objectives will be based upon
the relative or comparative achievement of one or more of the following
criteria, as determined by the Committee: (i) net income, (ii) earnings before
income taxes, (iii) earnings per share, (iv) return on shareholders equity, (v)
expense management, (vi) profitability of an identifiable business unit or
product, (vii) ratio of claims to revenues, (viii) revenue growth, (ix) earnings
growth, (x) total shareholder return, (xi) cash flow, (xii) return on assets,
(xiii) pretax operating income, (xiv) net economic profit (operating earnings
minus a charge for capital), (xv) customer satisfaction, (xvi) provider
satisfaction, (xvii) employee satisfaction, (xviii) quality of networks, (xix)
strategic innovation or (xx) any combination of the foregoing.

     

    (b)  Maximum Amount
Payable.  If the Committee certifies in writing that any one of
the performance objectives established for the relevant Performance Period under
Section 5(a) has been satisfied, each Participant who is employed by the
Companies on the last day of the Performance Period for which the bonus is
payable shall be entitled to receive a bonus in an amount not to exceed
$3,000,000.

     

    (c)  Negative
Discretion.  Notwithstanding anything else contained in Section
5(b) to the contrary, the Committee shall have the right, in its discretion, (i)
to reduce or eliminate the amount otherwise payable to any Participant under
Section 5(b) and (ii) to establish rules or procedures that have the effect of
limiting the amount payable to each Participant to an amount that is less than
the maximum amount otherwise authorized under Section 5(b).

     

    (d)  Affirmative
Discretion.  Notwithstanding any other provision in the Plan to
the contrary, (i) the Committee shall have the right, in its discretion, to pay
to any Participant who is not a Covered Employee a bonus for a Performance
Period in an amount up to the maximum bonus payable under Section 5(b), based on
individual performance or any other criteria that the Committee, in its
discretion, deems to warrant the payment of such a bonus, and (ii) in connection
with the hiring of any person who is or becomes a Covered Employee, the
Committee may provide for a minimum bonus amount for such Covered Employee with
respect to the Performance Period in which such Covered Employee is hired and/or
for the next following Performance Period, which would be payable to such
Covered Employee regardless of whether the relevant performance objectives are
attained with respect to the relevant Performance Period.

     

    (e)  Methodology for
Determinations.  In making any determination under Section 5(c)
or 5(d), the Committee shall give consideration to such factors as it deems
appropriate, including, without limitation, the degree to which the established
performance objectives have been obtained and whether the Participant has
materially contributed to the overall results of the Companies. To assist it in
making its determination under such Sections, the Chairman of Aetna will furnish
the Committee with specific recommendations (except with respect to the
Chairman’s own award) and the Committee may request such other advice and
recommendations as it deems appropriate.

    


    
      
        
           


        

        
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    SECTION
6.   PAYMENT OF AWARDS.

     

    (a)  General
Rule.   Except as otherwise expressly provided hereunder,
payment of any bonus amount determined under Section 5 shall be made to each
Participant as soon as practicable after the Committee certifies that one or
more of the applicable performance objectives have been attained (or, in the
case of any bonus payable under the provisions of Section 5(d), after the
Committee determines the amount of any such bonus), provided, however, that
payment shall be made during the first 21⁄2 months of the calendar year following
the end of the Performance period.  Any such payments shall be made in
cash or, at the discretion of the Committee in awards under the Aetna Inc. 2001
Stock Incentive Plan.

     

    (b)  Mandatory
Deferral.  Notwithstanding Section 6(a), the Committee may
specify that a percentage of the bonus payable with respect to any Participant,
all Participants or any class of Participants for any Performance Period be
mandatorily deferred for a Deferral Period specified by the Committee. The
percentage to be so deferred shall be determined by the Committee in its
discretion. Unless otherwise determined by the Committee at or after the date of
such deferral, any amount payable in respect of an amount mandatorily deferred
pursuant to this Section 6(b) shall be forfeited by the Participant
if

     

    
      	
               
      

            	
              (i)

            	
              the
      Participant’s employment with each of the Companies is terminated for
      cause (as determined in the discretion of the Committee under the
      generally applicable practices and policies of whichever of the Companies
      employs the Participant);

            


    

     

    
      	
               
      

            	
              (ii)

            	
              the
      Participant voluntarily terminates employment, other than by reason of
      death, Disability or Retirement, prior to the end of the Deferral Period
      specified by the Committee with respect to such mandatorily deferred
      amount; or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              the
      Participant engages in any activity or conduct which, in the reasonable
      opinion of the Committee, is inimical to the best interest of the
      Companies.

            


    

     

    (c)  Voluntary
Deferral.  Notwithstanding Section 6(a), the Committee may
permit a Participant to defer payment of any portion of an award that is not
mandatorily deferred pursuant to Section 6(b) or to defer payment of an amount
mandatorily deferred to a date or event later than that specified by the
Committee. Any such election shall be made in the calendar year prior to the
start of the Performance period during which it will be earned or, if permitted
under Section 409A, at least six months prior to the end of such Performance
Period.

     

    (d)  Accounting for Deferrals. Any
amount deferred under this Section 6 shall be credited to one or more
bookkeeping accounts for the benefit of such Participant on the books and
records of whichever of the Companies employs the Participant. Unless a
Participant otherwise elects to have such amounts deemed invested in Stock Units
in accordance with Section 6(e), such amounts shall be deemed held in cash and
shall be credited with such rate of interest or such deemed rate of earnings as
the Committee shall specify from time to time; provided that, unless the
Committee otherwise determines, no interest or earnings shall be credited during
the Deferral Period specified by the Committee in respect of amounts mandatorily
deferred.

     

    (e)  Stock Units.  The
Committee may permit any Participant, all Participants or any class of
Participants to elect that any or all amounts deferred under the Plan (including
amounts mandatorily deferred pursuant to Section 6(b)) be deemed invested, in
whole or in part, in a number of whole or fractional Stock Units. Any such Stock
Units shall be credited to a Stock Unit Account for the benefit of such
Participant. The number of whole and fractional Stock Units credited to a Stock
Unit Account in respect of any amount deferred under this Section 6 shall be
equal to the quotient of (i) the amount deferred divided by (ii) the Fair Market
Value of a Share on the date such amount would have been paid under the Plan but
for such deferral. Whenever a dividend other than a dividend payable in the form
of Shares is declared with respect to the Shares, the number of Stock Units in
the Participant’s Stock Unit Account shall be increased by the number of Stock
Units determined by dividing (i) the product of (A) the number of Stock Units in
the Participant’s Stock Unit Account on the related dividend record date and (B)
the amount of any cash dividend declared by the Company on a Share (or, in the
case of any dividend distributable in property other than Shares, the per share
value of such dividend, as determined by the Company for purposes of income tax
reporting) by (ii) the Fair Market Value of a Share on the related dividend
payment date. In the case of any dividend declared on Shares which is payable in
Shares, each Participant’s Stock Unit Account shall be increased by the number
of Stock Units equal to the product of (i) the number of Units credited to the
Participant’s Stock Unit Account on the related dividend record date and (ii)
the number of Shares (including any fraction thereof)

     

    
      
        
           


        

        
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     distributable
as a dividend on a Share. In the event of any stock split, recapitalization,
reorganization or other corporate transaction affecting the capital structure of
Aetna, the Committee shall make such adjustments to the number of Stock Units
credited to each Participant’s Stock Unit Account as the Committee shall deem
necessary or appropriate to prevent the dilution or enlargement of such
Participant’s rights.

     

    (f)   Payment of Deferred Amounts.  Payment
of any amounts deferred under Section 6(b) or 6(c) shall be made in a lump sum
on the date the Participant experiences a “separation from service” within the
meaning of Section 409A unless another time and form of payment is elected or
otherwise established at the time of the mandatory or elective deferral,
consistent with the requirements of Section 409A.  The Participant may
elect payment in a lump sum or in five, ten or such other number of annual
installments as shall be permitted by the Committee.  The Committee
may, in its discretion, accelerate the payment of all or any portion of any
Participant’s deferred amounts (regardless of whether the applicable Deferral
Period or period have terminated) in the event of an “unforeseeable emergency”
within the meaning of Section 409A.

     

    Any
payment to be made in respect of deferred amounts shall be made in cash. For
purposes of any cash distribution in respect of a Participant’s Stock Units, the
cash payable shall equal the product of (i) the number of whole and fractional
Stock Units being distributed and (ii) the Fair Market Value of a Share on the
date as of which the distribution is to be made.

     

    (g)  Change in
Control.  Upon the occurrence of a Change in Control, all
performance objectives for the then current Performance Period shall be deemed
to have been achieved at target levels of performance and the Committee shall
cause each Participant to be paid an amount in cash based on such assumed
performance for the entire Performance Period as soon as practicable but in no
event later than 10 business days following the occurrence of such Change in
Control.

     

    SECTION
7.  AMENDMENT AND TERMINATION.

     

    Notwithstanding
Section 8(a), the Board or the Committee may at any time amend, suspend,
discontinue or terminate the Plan; provided, however, that no such action shall
be effective without approval by the shareholders of Aetna to the extent
necessary to continue to qualify the amounts payable to Covered Employees as
performance-based compensation under Section 162(m). Notwithstanding the
foregoing, no amendment, suspension, discontinuance or termination of the Plan
shall adversely affect the rights of any Participant or beneficiary in respect
of any award that the Committee has determined to be payable to a Participant in
accordance with the terms hereof or as to any amounts awarded, but payment of
which has been deferred, in accordance with Section 6.

     

    SECTION
8. GENERAL PROVISIONS.

     

    (a)  Effectiveness of the
P1an.  Subject to the approval of Aetna’s shareholders and the
shareholders of Aetna Inc., a Connecticut corporation, the Plan shall be
effective with respect to calendar years beginning on or after January 1, 2001
and ending on or before December 31, 2010, unless the term hereof is extended by
action of the Board or the Committee.

     

    (b)  Designation of
Beneficiary.  Each Participant may designate a beneficiary or
beneficiaries (which beneficiary may be an entity other than a natural person)
to receive any payments which may be made following the Participant’s death.
Such designation may be changed or canceled at any time without the consent of
any such beneficiary. Any such designation, change or cancellation must be made
in a form approved by the Committee and shall not be effective until received by
the Committee. If no beneficiary has been named, or the designated beneficiary
or beneficiaries shall have predeceased the Participant, the beneficiary shall
be the Participant’s spouse or, if no spouse survives the Participant, the
Participant’s estate. If a Participant designates more than one beneficiary, the
rights of such beneficiaries shall be payable in equal shares, unless the
Participant has designated otherwise.

     

    
      (c)  No Right of Continued
Employment.  Nothing contained in this Plan shall create any
rights of employment in any Participant or in any way affect the right and power
of any of the Companies to discharge any Participant or otherwise terminate the
Participant’s employment at any time with or without cause or to change the
terms of employment in any way.

       

      (d)  No Limitation on Corporate
Actions.  Nothing contained in the Plan shall be construed to
prevent any of the Companies from taking any corporate action (including,
without limitation, making provision for the payment of 

    

    


    
      
        
           


        

        
          5

          
            

          

        

        
           


        

      

    

     

    other incentive
compensation, whether payable in cash or otherwise, or whether pursuant to a
plan or otherwise) which is deemed by it to be appropriate or in its best
interest, whether or not such action would have an adverse effect on any awards
made under the Plan.  No employee, beneficiary or other person shall
have any claim against any of the Companies as a result of any such
action.

     

    (e)  No Right to Specific
Assets.  Nothing contained in the Plan (including, without
limitation, the provisions of Section 6 hereof) shall be construed to create in
any Participant or beneficiary any claim against, right to or lien on any
particular assets of any of the Companies or to require any of the Companies to
segregate or otherwise set aside any assets or create any fund to meet any of
its obligations hereunder.

     

    (f)   No Contractual Right to
Bonus.  Nothing in this Plan shall be construed to give any
Participant any right, whether contractual or otherwise, to receive any bonus
with respect to any Performance Period unless and until the Committee shall have
expressly determined that such a Participant is entitled to receive such an
award pursuant to the terms of the Plan.

     

    (g)  Nonalienation of
Benefits.  Except as expressly provided herein, no Participant
or beneficiary shall have the power or right to transfer, anticipate, or
otherwise encumber the Participant’s interest under the Plan.

     

    (h)  Withholding.  Any
amount payable to a Participant or a beneficiary under this Plan shall be
subject to any applicable Federal, state and local income and employment taxes
and any other amounts that any of the Companies is required at law to deduct and
withhold from such payment.

     

    (i)   Severability.  If
any provision of this Plan is held unenforceable, the remainder of the Plan
shall continue in full force and effect without regard to such unenforceable
provision and shall be applied as though the unenforceable provision were not
contained in the Plan.

     

    (j)   Governing Law.  The
Plan shall be construed in accordance with and governed by the laws of the State
of Connecticut, without reference to the principles of conflict of
laws.

     

    (k)  Headings.  Headings
are inserted in this Plan for convenience of reference only and are to be
ignored in a construction of the provisions of the Plan.

     

    (l)   Compliance with Section
409A.  The payment of bonuses under this Plan is intended to be
exempt from the requirements of Section 409A as short-term
deferrals.  To the extent not exempt (i.e., in the case of deferrals
permitted under Section 6(b) and (c)), payment is intended to satisfy the
requirements of Section 409A.  The provisions of this Plan shall be
construed in a manner consistent with such intent.  The Company will
not pay or accelerate the payment of any deferred compensation in violation of
Section 409A.  To the extent an amount that constitutes “deferred
compensation” within the meaning of Section 409A would otherwise vest and become
payable upon a Change in Control, such amount shall vest as so provided but
payment shall not be accelerated unless the Change in Control also satisfies the
broadest definition of change in control permitted under Section
409A.

     

    Any
amount that constitutes “deferred compensation” within the meaning of Section
409A and is payable under this Plan solely by reason of a Participant’s
termination of employment or separation from service shall be payable as soon
as, and no later than, the Participant experiences a “separation from service”
within the meaning of Section 409A, provided that if the Participant is a
“specified employee” within the meaning of Section 409A at the time of such
separation from service, as determined by the Company in accordance with Section
409A, no payments shall be made before the six-month anniversary of the
Participant’s separation from service, at which time all payments that would
otherwise have been made during such six-month period shall be paid to the
Participant in a lump sum.

     

    6