AETNA INC. 2002 STOCK INCENTIVE PLAN



 



Exhibit 10.1


AETNA INC.

2002 STOCK INCENTIVE PLAN



SECTION 1. PURPOSE.



         The purposes of this Plan are to promote the interests of the Company and its
shareholders, and further align the interests of shareholders and Participants by:



	 	(i)	 	motivating Participants through Awards tied to total return to
shareholders (i.e., stock price appreciation and dividends);
	 
	 	(ii)	 	attracting and retaining outstanding individuals as Participants;
	 
	 	(iii)	 	enabling Participants to acquire additional equity interests in the
Company; and
	 
	 	(iv)	 	providing compensation opportunities dependent upon the Company’s
performance relative to its competitors and changes in its own
performance over time.



SECTION 2. DEFINITIONS.



         “AFFILIATE” shall mean any corporation or other entity (other than the Company or one
of its Subsidiaries) in which the Company directly or indirectly owns at least twenty percent
(20%) of the combined voting power of all classes of stock of such entity or at least twenty
percent (20%) of the ownership interests in such entity.



         “AWARD” shall mean any grant or award under the Plan, as evidenced in a written
document delivered to a Participant as provided in Section 12(b).


         “BOARD” shall mean the Board of Directors of the Company.


         “CAUSE” shall mean (i) the willful failure by the Participant to perform substantially
the Participants duties as an employee of the Company (other than due to physical or mental
illness) after reasonable notice to the Participant, (ii) the Participants engaging in serious
misconduct that is injurious to the Company, any Subsidiary or any Affiliate, (iii) the
Participants having been convicted of, or entered a plea of nolo contendere to, a crime that
constitutes a felony, (iv) the breach by the Participant of any written covenant or agreement
not to compete with the Company, any Subsidiary or any Affiliate or (v) the breach by the
Participant of his or her duty of loyalty to the Company which shall include, without
limitation, (A) the disclosure by the Participant of any confidential information pertaining to
the Company, any Subsidiary or any Affiliate, (B) the harmful interference by the Participant
in the business or operations of the Company, any Subsidiary or any Affiliate, (C) any attempt
by the Participant directly or indirectly to induce any employee, insurance agent, insurance
broker or broker-dealer of the Company, any Subsidiary or any Affiliate to be employed or
perform services elsewhere, (D) any attempt by the Participant directly or indirectly to
solicit the trade of any customer or supplier, or prospective customer or supplier, of the
Company or (E) any breach or violation of the Companys Code of Conduct.


         “CODE” shall mean the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.


 







 


         “COMMITTEE” shall mean a committee of the Board as may be designated by the Board to
administer the Plan.


         “COMMON STOCK” shall mean the common stock, $.01 par value, of the Company.


         “COMPANY” shall mean Aetna Inc., a Pennsylvania corporation.


         “ELIGIBLE EMPLOYEE” shall mean each employee of the Company, its Subsidiaries or its
Affiliates, but shall not include directors who are not employees of such entities and
Executive Officers of the Company. Any individual the Company designates as, or otherwise
determines to be, an independent contractor shall not be considered an Eligible Employee, and
such designation or determination shall govern regardless of whether such individual is
ultimately determined to be an employee pursuant to the Code or any other applicable law.


         “EMPLOYMENT” shall mean, for purposes of determining whether a termination of
employment has occurred under the Plan, continuous and regular salaried employment with the
Company, a Subsidiary or an Affiliate, which shall include (unless the Committee shall
otherwise determine) any period of vacation, any approved leave of absence or any salary
continuation or severance pay period and, at the discretion of the Committee, may include
service with any former Subsidiary or Affiliate of the Company. For this purpose, regular
salaried employment means scheduled employment of at least 20 hours per week.


         “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as amended from time to
time.


         “EXECUTIVE OFFICER” shall mean those persons who are officers of the Company within
the meaning of Rule 16a-l(f) of the Exchange Act.


         “FAIR MARKET VALUE” shall mean 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.


         “FUNDAMENTAL CORPORATE EVENT” shall mean any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, offering to purchase Common Stock at a price substantially
below fair market value, or other similar event.


         “INCENTIVE STOCK” shall mean an Award of Common Stock granted under Section 7 which
may become vested and nonforfeitable upon the passage of time and/or the attainment, in whole
or in part, of performance objectives determined by the Committee.


         “INCENTIVE STOCK OPTION” shall mean an option which is intended to meet the
requirements of Section 422 of the Code.


         “INCENTIVE UNIT” shall mean an Award of a contractual right granted under Section 7 to
receive Common Stock (or, at the discretion of the Committee, cash based on the Fair Market
Value of the Common Stock) which may become vested and nonforfeitable upon either the passage
of time and/or the attainment, in whole or in part, of performance objectives determined by the
Committee.


         “NONSTATUTORY STOCK OPTION” shall mean an Option which is not intended to be an
Incentive Stock Option.


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         “OPTION” shall mean the right granted under Section 5 to purchase the number of shares
of Common Stock specified by the Committee, at a price and for the term fixed by the Committee
in accordance with the Plan and subject to any other limitations and restrictions as this Plan
and the Committee shall impose, and shall include both Incentive Stock Options and Nonstatutory
Stock Options.


         “OTHER STOCK-BASED AWARD” shall mean any right granted under Section 8.


         “PARTICIPANT” shall mean an Eligible Employee who is selected by the Committee to
receive an Award under the Plan and Substitute Award as contemplated under Section 4(c).


         “PLAN” shall mean the Aetna Inc. 2002 Stock Incentive Plan, described herein, and as
may be amended from time to time.


         “RESTRICTED PERIOD” shall mean the period during which a grant of Incentive Stock or
Incentive Units is subject to forfeiture.


         “STOCK APPRECIATION RIGHT” shall mean a right granted under Section 6.


         “SUBSIDIARY” shall mean 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.


         “SUBSTITUTE AWARDS” shall mean Awards granted in assumption of, or in substitution
for, outstanding awards previously granted by a company acquired by the Company or with which
the Company combines.


SECTION 3. ADMINISTRATION.



         The Plan shall be administered by the Committee. The Committee shall have the
responsibility of construing and interpreting the Plan and of establishing and amending such
rules and regulations as it deems necessary or desirable for the proper administration of the
Plan. Any 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 maximum extent permitted by applicable law, be within
its absolute discretion (except as otherwise specifically provided herein) and shall be
conclusive and binding upon all Participants and any person claiming under or through any
Participant.


         Subject to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the Committee shall have full
power and authority to: (i) designate Participants; (ii) determine the type or types of Awards,
if any, to be granted to an Eligible Employee: (iii) determine the number of shares of Common
Stock to be covered by, or with respect to which payments, rights, or other matters are to be
calculated in connection with, Awards: (iv) determine the terms and conditions of any Award:
(v) determine whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Stock, other securities, other Awards or other property, or canceled,
forfeited, or suspended and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what
circumstances, cash, Common Stock, other securities, other Awards, other property, and other
amounts payable with respect to an Award shall be deferred either automatically or at the
election of the holder thereof or of the Committee: (vii) interpret and administer the Plan and
any instrument or agreement relating to, or Award made under, the Plan; (viii) establish,
amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan: and (ix) make any other determination
and take any other action that


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the Committee deems necessary or desirable for the
administration of the Plan (including authorizing another Committee of the Company to designate
Participants or make Awards under the Plan within limits prescribed by the Committee).


SECTION 4. SHARES AVAILABLE FOR AWARDS.



         (a) 
Shares Available for Issuance. The maximum number of shares of Common Stock in
respect of which Awards may be made under the Plan shall be a total of 7,500,000 shares of
Common Stock. Shares of Common Stock may be made available from the authorized but unissued
shares of the Company or from shares held in the Companys treasury and not reserved for some
other purpose. In the event that any Award is paid solely in cash, no shares shall be deducted
from the number of shares available for issuance by reason of such Award. Shares of Common
Stock subject to Awards that are forfeited, terminated, canceled or settled without the
delivery of Common Stock under the Plan will again be available for Awards under the Plan, as
will (A) shares of Common Stock tendered (either actually or by attestation) to the Company in
satisfaction or partial satisfaction of the exercise price of any Award under either the Plan
and (B) shares of Common Stock repurchased on the open market with remittances from the
exercise of options granted under the Plan.


         (b) 
Adjustment for Corporate Transactions. In the event that the Committee shall
determine that any Fundamental Corporate Event affects the Common Stock such that an adjustment
is required to preserve, or to prevent enlargement of, the benefits or potential benefits made
available under this Plan, then the Committee may, in such manner as the Committee may deem
equitable, adjust any or all of (i) the number and kind of shares which thereafter may be
awarded or optioned and sold or made the subject of Awards under the Plan, (ii) the number and
kinds of shares subject to outstanding Awards and (iii) the grant, exercise or conversion price
with respect to any of the foregoing. Additionally, the Committee may make provisions for a
cash payment to a Participant or a person who has an outstanding Award. However, the number of
shares subject to any Award shall always be a whole number.


         (c) 
Substitute Awards. Any shares of Common Stock underlying Substitute Awards shall
not be counted against the Shares available for Awards under the Plan.


SECTION 5. STOCK OPTIONS.



         (a) 
Grant. Subject to the provisions of the Plan, the Committee shall have the
authority to grant Options to an Eligible Employee and to determine (i) the number of shares to
be covered by each Option, (ii) subject to Section 5(b), the exercise price of the Option and
(iii) the conditions and limitations applicable to the exercise of the Option. Notwithstanding
the foregoing, in no event shall the Committee grant any Participant Options (i) for more than
800,000 shares of Common Stock in respect of any year in which the Plan is in effect, as such
number may be adjusted pursuant to Section 4(b). In the case of Incentive Stock Options, the
terms and conditions of such grants shall be subject to and comply with Section 422 of the Code
and the regulations thereunder.


         (b) 
Exercise Price. Except in the case of, Substitute Awards or Options granted in
lieu of payment for compensation earned by an Eligible Employee of the Company, the exercise
price of an Option shall not be less than 100% of the Fair Market Value on the date of grant.


         (c) 
Exercise. Each Option shall be exercised at such times and subject to such-terms
and conditions as the Committee may specify at the time of the applicable Award or thereafter.
No shares shall be delivered pursuant to any exercise of an Option unless arrangements
satisfactory to the Committee have been made to assure full payment of the exercise price
therefor. Without


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limiting the generality of the foregoing, payment of the exercise price may
be made in cash or its equivalent or, if and to the extent permitted by the Committee, by
exchanging shares of Common Stock owned by the optionee (which are not the subject of any
pledge or other security interest or which, in the case of Incentive Stock, are fully vested)
either actually or by attestation, or by a combination of the foregoing, provided that the
combined value of all cash and cash equivalents and the Fair Market Value of any such Common
Stock so tendered to the Company, valued as of the date of such tender, is at least equal to
such exercise price.


         (d) 
Incentive Stock Option Annual Limit. The aggregate Fair Market Value (determined
as of the date the Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an Eligible Employee during any
calendar year (counting Incentive Stock Options under this Plan and under any other stock option
plan of the Company or a subsidiary) shall not exceed $100,000. If an Option intended to be an
Incentive Stock Option is granted to an Eligible Employee and the Option may not be treated in
whole or in part as an Incentive Stock Option pursuant to the $100,000 limitation, the Option
shall be treated as an Incentive Stock Option to the extent it may be so treated under the
limitation and as a Nonstatutory Stock Option as to the remainder. For purposes of determining
whether an Incentive Stock Option would cause the limitation to be exceeded, Incentive Stock
Options shall be taken into account in the order granted. The annual limit set forth above shall
not apply to Nonstatutory Stock Options.


SECTION 6. STOCK APPRECIATION RIGHTS.



         (a)  Grant of Stock Appreciation Rights. The Committee shall have the authority to
grant Stock Appreciation Rights in tandem with an Option, in addition to an Option, or
freestanding and unrelated to an Option. Notwithstanding the foregoing, in no event shall the
Committee grant any Participant Stock Appreciation Rights (i) for more than 500,000 shares of
Common Stock in respect of any year in which the Plan is in effect, as such number may be
adjusted pursuant to Section 4(b) and (ii) with a term exceeding 10 years (or the term of the
underlying Incentive Stock Option in the case of a Stock Appreciation Right granted in tandem
with an Incentive Stock Option). Stock Appreciation Rights granted in tandem with an option
may be granted either at the same time as the Option or at a later time.


         (b)  Exercise Price. The exercise price of an SAR shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date the SAR was granted; provided that if
an SAR is granted retroactively in tandem with or in substitution for an Option, the exercise
price may be the exercise price of the Option to which it is related.


         (c)  Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall entitle
the Participant to receive from the Company an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right over
the base price thereof. The Committee shall determine the time or times at which or the event
or events (including, without limitation, a change of control) upon which a Stock Appreciation
Right may be exercised in whole or in part, the method of exercise and whether such Stock
Appreciation Right shall be settled in cash, shares of Common Stock or a combination of cash
and shares of Common Stock; provided, however, that unless otherwise specified by the Committee
at or after grant, a Stock Appreciation Right granted in tandem with an Option shall be
exercisable at the same time or times as the related option is exercisable.


SECTION 7. INCENTIVE AWARDS.


         (a)  Incentive Stock and Incentive Units. Subject to the provisions of the Plan, the
Committee shall have the authority to grant time vesting and/or performance vesting Incentive


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Stock or Incentive Units to any Eligible Employee and to determine (i) the number of shares of
Incentive Stock and the number of Incentive Units to be granted to each Participant and (ii)
the other terms and conditions of such Awards; provided that, to the extent necessary to comply
with applicable law, Incentive Stock shall only be awarded to an Eligible Employee who has been
employed for such minimum period of time as shall be determined by the Committee. The
Restricted Period related to Incentive Stock or Incentive Units shall lapse upon the passage of
time and/or the determination by the Committee that the performance objectives established by
the Committee have been attained, in whole or in part.



         (b) 
Certificates. Any certificates issued in respect of Incentive Stock shall be
registered in the name of the Participant and deposited by such Participant, together with a
stock power endorsed in blank, with the Company. At the expiration of the Restricted Period
with respect to any award of Incentive Stock, unless otherwise forfeited, the Company shall
deliver such certificates to the Participant or to the Participants legal representative.
Payment for Incentive Stock Units shall be made by the Company in shares of Common Stock, cash
or in any combination thereof, as determined by the Committee.



SECTION 8. OTHER STOCK-BASED AWARDS.



         The Committee shall have authority to grant to eligible Employees an “Other
Stock-Based Award”, which shall consist of any right which is (i) not an Award described in
Sections 5 through 7 above and (ii) an Award of Common Stock or an Award denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or related to, Common
Stock (including, without limitation, securities convertible into Common Stock), as deemed by
the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan
and any applicable award agreement, the Committee shall determine the terms and conditions of
any such Other Stock-Based Award.


SECTION 9. DIVIDENDS AND DIVIDEND EQUIVALENTS.



         The Committee may provide that any Award shall include dividends or dividend
equivalents, payable in cash, Common Stock, securities or other property on a current or
deferred basis, including payment contingencies.


SECTION 10. STOCK IN LIEU OF CASH.



         The Committee may grant Awards in lieu of all or a portion of compensation or an Award
otherwise payable in cash to an Executive officer pursuant to any bonus or incentive
compensation plan of the Company.


         If shares are issued in lieu of cash, the number of shares of Common Stock to be
issued shall be the greatest number of whole shares which has an aggregate Fair Market Value on
the date the cash would otherwise have been payable pursuant to the terms of such other plan
equal to or less than the amount of such cash.


SECTION 11. DEFERRAL.



         The Committee shall have the discretion to determine whether, to what extent, and
under what circumstances cash, shares of Common Stock, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee.


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SECTION 12. GENERAL PROVISIONS.



         (a)  Withholding. The Company shall have the right to deduct from all amounts paid to
a Participant in cash (whether under this Plan or otherwise) any taxes required by law to be
withheld in respect of Awards under this Plan. In the case of any Award satisfied in the form
of Common Stock, no shares shall be issued unless and until arrangements satisfactory to the
Company shall have been made to satisfy any withholding tax obligations applicable with respect
to such Award. Without limiting the generality of the foregoing and subject to such terms and
conditions as the Committee may impose, the Company shall have the right to retain, or the
Committee may, subject to such terms and conditions as it may establish from time to time,
permit Participants to elect to use shares of Common Stock (including Common Stock issuable in
respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.


         (b)  Award Agreement. Each Award hereunder shall be evidenced in writing. The written
agreement shall be delivered to the Participant and shall incorporate the terms of the Plan by
reference and specify the terms and conditions thereof and any rules applicable thereto.


         (c)  Nontransferability. Unless the Committee shall permit (on such terms and
conditions as it shall establish) an Award to be transferred to a member of the Participants
immediate family or to a trust or similar vehicle for the benefit of such immediate family
members (collectively, the “Permitted Transferees”), no Award shall be assignable or
transferable except by will or the laws of descent and distribution, and except to the extent
required by law, no right or interest of any Participant shall be subject to any lien,
obligation or liability of the Participant. All rights with respect to Awards granted to a
Participant under the Plan shall be exercisable during the Participants lifetime only by such
Participant or, if applicable, the Permitted Transferees or the Participants legal
representative.


         (d)  No Right to Employment. No person shall have any claim or right to be granted an
Award, and the grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company, any Subsidiary or any Affiliate. Further, the Company
and each Subsidiary and Affiliate expressly reserves the right at any time to dismiss a
Participant free from any liability, or any claim under the Plan, except as provided herein or
in any agreement entered into with respect to an Award.


         (e)  No Rights to Awards, No Shareholder Rights. No Participant or Eligible Employee
shall have any claim to be granted any Award under the Plan, and there is no obligation of
uniformity of treatment of Participants and Eligible Employees. Subject to the provisions of
the Plan and the applicable Award, no person shall have any rights as a shareholder with
respect to any shares of Common Stock to be issued under the Plan prior to the issuance thereof.


         (f)  Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and rights relating to
the Plan, shall be determined solely in accordance with the laws of the State of Connecticut.


         (g)  Effective Date. January 25, 2002.


         (h)  Amendment or Termination of Plan. The Board or the Committee may terminate or
suspend the Plan at any time, but the termination or suspension will not adversely affect any
vested Awards then outstanding under the Plan. No Award may be granted under the Plan after
January 25, 2012 or such earlier date as the Plan is terminated by action of the Board or the
Committee, The Plan may be amended or terminated at any time by the Board, except that no
amendment may be made without shareholder approval if the Committee determines that such
approval is necessary to comply with any tax or regulatory requirement, including any approval
requirement which is a prerequisite for exemptive relief from Section 16 of the Exchange Act,
for


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which or with which the Committee determines that it is desirable to qualify or comply.
The Committee may amend the term of any Award or Option granted, retroactively or
prospectively, but no amendment may adversely affect any vested Award or Option without the
holders consent.


         (i) 
Compliance with Legal and Exchange Requirements. The Plan, the granting and
exercising of Awards thereunder, and the other obligations of the Company under the Plan, shall
be subject to all applicable federal and state laws, rules, and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the granting and exercising of Awards, the issuance or delivery of
Common Stock under any Award or any other action permitted under the Plan to permit the
Company, with reasonable diligence, to complete such stock exchange listing or registration or
qualification of such Common Stock or other required action under any federal or state law,
rule, or regulation and may require any Participant to make such representations and furnish
such information as it may consider appropriate in connection with the issuance or delivery of
Common Stock in compliance with applicable laws, rules, and regulations. The Company shall not
be obligated by virtue of any provision of the Plan to recognize the exercise of any Award or
to otherwise sell or issue Common Stock in violation of any such laws, rules, or regulations;
and any postponement of the exercise or settlement of any Award under this provision shall not
extend the term of such Awards, and neither the Company nor its directors or officers shall
have any obligations or liability to the Participant with respect to any Award (or stock
issuable thereunder) that shall lapse because of such postponement.


         (j) 
Severability of Provisions. If any provision of this Plan shall be held invalid
or unenforceable, such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provision had not been
included.


         (k) 
Incapacity. Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid when paid to such
persons guardian or to the party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge any liability or obligation of the
Committee, the Board, the Company and all other parties with respect thereto.


         (1) 
Headings and Captions. The headings and captions herein are
provided for
reference and convenience only, shall not be considered part of this Plan, and shall not be
employed in the construction of this Plan.


Approved

Aetna Board of Directors

January 25, 2002


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