Document:

Medco Health Solutions, Inc. Executive Annual Incentive Plan

 Exhibit 10.1 
  
 MEDCO HEALTH SOLUTIONS, INC. 
 EXECUTIVE INCENTIVE COMPENSATION PLAN 
 Adopted February 2, 2005 
  
 1. PURPOSE. 
  
 The principal purposes of the Medco Health Solutions, Inc. Executive Incentive Compensation
Plan (the “Plan”) are to provide annual incentives and rewards to executive officers of Medco Health Solutions, Inc. (“Medco”) for contributing to the success and growth of Medco and to assist Medco in attracting, motivating and
retaining these key employees on a competitive basis. 
  
 2. ADMINISTRATION OF THE PLAN. 
  
 The Plan shall be administered
by the Compensation Committee of the Board of Directors of Medco (the “Committee”). The Committee shall consist of two or more members of the Board who qualify as outside directors for purposes of section 162(m) of the Internal Revenue
Code and the regulations promulgated thereunder (“Section 162(m)”). 
  
 The Committee shall have all powers vested in it by the terms of this Plan, such powers to include authority (within the limitations described herein) to select the persons to be granted awards under the Plan, to determine the time when
awards will be granted, to determine whether performance objectives and conditions for earning awards have been met, to determine whether awards will be paid following the end of the award period or deferred, and to determine whether an award or
payment of an award should be reduced or eliminated. 
  
 For each Medco fiscal
year, the Committee shall establish in writing (on or before the latest date permitted under Section 162(m)) one or more performance goals to be attained, which performance goals may be stated as alternative performance goals. Performance goals may
be based on any one or more of the following business criteria as the Committee, in its sole discretion, may select: earnings per share; net new sales; client satisfaction; member satisfaction; revenue growth; corporate earnings; return on assets;
return on equity; return on investment capital; profits; cash flow; market value added; economic value added; or earnings before interest, taxes, depreciation and amortization. 
  
 The Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. The Committee’s interpretations of the Plan, and all actions taken and determinations made by the
Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding on all parties concerned, including Medco, its shareholders and any person receiving an award under the Plan. 
  
 3. ELIGIBILITY. 
  
 Executive officers of Medco are eligible to be granted awards under the Plan. 
  

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 4. AWARDS. 
  
 (a) Setting Awards. For each Medco fiscal year, the Committee shall establish maximum incentive awards for particular
levels of performance by Medco’s executive officers. Subject to these maximums, target incentive awards may also be established. The pre-established maximum awards shall apply to all individuals who either are executive officers at the
beginning of the fiscal year or become executive officers during the fiscal year. 
  
 (b) Payment of Awards. Awards will be payable for a fiscal year upon certification by the Committee that Medco achieved the performance target(s) that the Committee had previously established for the year. No
payment will be made if the minimum performance target(s) is not met. The Committee may, in its discretion, permit executives to defer the payment of awards in accordance with Section 409A of the Internal Revenue Code of 1986, as amended.

  
 (c) Negative Discretion. Notwithstanding the attainment
by Medco of one or more specified performance targets, the Committee has the discretion, by participant, to pay less than the maximum incentive award that relates to that level of performance. 
  
 (d) Maximum Possible Award. No participant may receive an incentive
award for a Medco fiscal year that is more than $3,500,000. 
  
 5. MISCELLANEOUS PROVISIONS. 
  
 (a) Guidelines. The Committee may adopt from time to time written policies for its implementation of the Plan. 
  
 (b) Withholding Taxes. Medco shall have the right to deduct from all Plan awards any federal, state, local or foreign taxes required by law to be
withheld with respect to such awards. 
  
 (c) No Implied
Rights. Except as set forth herein, no employee or other person shall have any claim or right to be granted an award under the Plan. No employee shall be entitled to payment of an award under this Plan unless they are employed by Medco on the
payment date. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of Medco or any of its subsidiaries, divisions or affiliates. 
  
 (d) Costs and Expenses. The cost and expenses of administering the
Plan shall be borne by Medco and not charged to any award or to any employee receiving an award. 
  
 (e) Funding of Plan. Medco shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the
payment of any award under the Plan. 
  
 6.
EFFECTIVE DATE, AMENDMENTS AND TERMINATION. 
  
 (a)
Effective Date. The Plan shall become effective upon its approval by Medco’s shareholders. 
  

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 (b) Amendments. The Committee may at any time terminate or from time to time amend the Plan in
whole or in part, but no such action shall adversely affect any rights or obligations with respect to any awards theretofore made under the Plan. 
  
 In addition, unless the shareholders of Medco shall have first approved, no amendment of the Plan shall be effective which would: (i) modify the
eligibility requirements for participation in the Plan, (ii) increase the maximum possible award that may be paid to a participant under the Plan, or (iii) change the business criteria that may be used for performance goals. 
  
 (c) Termination. No awards shall be made under the Plan after March
31, 2010. Determination of the actual amount to be paid and payment may occur later. 
  

 3Form of terms and conditions for director stock option

 Exhibit 10.2 
  
 MEDCO HEALTH SOLUTIONS, INC. 2002 STOCK INCENTIVE PLAN 
 RESTRICTED STOCK UNIT 
 SUMMARY OF 2004 DIRECTOR GRANT TERMS 
  
 This is a summary of the terms applicable to the grant specified on this document.
Different terms may apply to any other grant under the Medco Health Solutions, Inc. 2002 Stock Incentive Plan. 
  
 I. GENERAL INFORMATION 
  
 This grant becomes fully vested and nonforfeitable on the Vesting Date indicated in the accompanying box. If your service with Medco Health Solutions, Inc. (Company) ends for any reason prior to the Vesting Date, your
right to this grant will be determined according to the terms in Section II. 
  

			
	Grant Amount:	  	 
	Grant Type:	  	 Restricted Stock Unit (RES)

	Grant Code:	  	 BOD

	Grant Date:	  	 
		
	Vesting Date	  	Portion that Vests
	 	  	 100%

  
 II. TERMINATION OF SERVICE

  
 A. General Rule. If your service as a member of the Board of
Directors terminates for any reason other than voluntary resignation or removal, this grant, if unvested, will vest on the date your service ends. 
  
 B. Removal. If you are removed from the Board pursuant to Article Seventh of the Company’s Amended and Restated Certificate of Incorporation, this grant, if
unvested, will be forfeited immediately upon such removal. 
  
 C. Voluntary
Resignation. If your service terminates as a result of your voluntary resignation, a prorated portion of the grant shall vest based on the number of full and partial months since the Grant Date. 
  
 III. CONVERSION OF UNITS 
  
 Restricted Stock Units that have vested may only be converted to shares of Common Stock
following the end of your service as a member of the Board of Directors. Restricted Stock Units may not be converted while you are a member of the Board. 
  
 IV. ADJUSTMENTS 
  
 In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, spin off, split off, split up or other event identified by the Board of
Directors, the Board shall make such adjustments, if any, as it may deem appropriate to the number and kind of shares subject to this award (provided that fractions of a share will be rounded down to the nearest whole share). Any such determination
shall be final, binding and conclusive on all parties. 
  
 This grant is
subject to the provisions of the 2002 Stock Incentive Plan and the Rules and Regulations thereunder established by the Board of Directors of Medco Health Solutions, Inc. or its Compensation Committee as in effect on the Grant Date. 

 

 1 

 MEDCO HEALTH SOLUTIONS, INC. 2002 STOCK INCENTIVE PLAN 
 NON-QUALIFIED STOCK OPTION (NQSO) 
 SUMMARY OF 2004 DIRECTOR GRANT TERMS 
  
 This is a summary of
the terms applicable to the stock option specified on this document. Different terms may apply to any other stock option under the Medco Health Solutions, Inc. 2002 Stock Incentive. 
  
 I. GENERAL INFORMATION 
  
 This stock option becomes exercisable on the Vesting Date indicated in the accompanying box. This stock option expires on its Expiration Date, which is the day before the
tenth anniversary of the Grant Date. If your service with Medco Health Solutions, Inc. (Company) ends for any reason prior to the Vesting Date, your right to exercise this stock option will be determined according to the terms in Section II.

  

			
	Grant Amount:	  	8,000 options
	Grant Type:	  	Nonqualified Stock Option (NQ)
	Grant Code:	  	BOD
	Option Price:	  	$
	Grant Date:	  	 
	Expiration Date:	  	 
		
	Vesting Date	  	Portion that Vests
	 	  	 100%

  
 II. TERMINATION OF SERVICE

  
 A. General Rule. If your service as a member of the Board of
Directors terminates for any reason other than voluntary resignation or removal, this grant, if unvested, will vest on the date your service ends. 
  
 B. Removal. If you are removed from the Board pursuant to Article Seventh of the Company’s Amended and Restated Certificate of Incorporation, this grant, if
unvested, will be forfeited immediately upon such removal. 
  
 C. Voluntary
Resignation. If your service terminates as a result of your voluntary resignation, a prorated portion of the grant shall vest based on the number of full and partial months served from the Grant Date. 
  
 III. MISCELLANEOUS 
  
 A. Transferability. Except as specifically permitted by the Compensation Committee, this option may not be assigned or otherwise
transferred. The Committee may permit this stock option to be transferred to family members or certain family partnerships or trusts in accordance with rules and regulations adopted by the Committee. 
  
 B. Reorganization. In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights offering, spin off, split off, split up or other event identified by the Board of Directors, the Board shall make such adjustments, if any, as it may deem appropriate to the number
and kind of shares subject to this option and/or the option price (provided that fractions of a share will be rounded down to the nearest whole share). Any such determination shall be final, binding and conclusive on all parties. 

 
 This stock option is subject to the provisions of the 2002 Stock Incentive Plan and the
Rules and Regulations thereunder established by the Board of Directors of Medco Health Solutions, Inc. or its Compensation Committee as in effect on the Grant Date.

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