Medco Health Solutions, Inc. 2006 Executive Severance Plan

Exhibit 10.1


MEDCO HEALTH SOLUTIONS, INC.


2006 EXECUTIVE SEVERANCE PLAN

SECTION 1

PURPOSE

The purpose of the Plan is to alleviate concerns that top-level executives of the Company may have that their employment may be terminated without Cause so that these executives will be able to focus fully on the success of the business of the Company.


SECTION 2

DEFINITIONS


For purposes of the Plan, the following terms shall have the following meanings:


2.1 " Affiliate" shall mean, with respect to any person or entity, any entity directly or indirectly controlled by, controlling or under common control with such person or entity.


2.2 " Annual Cash Bonus" shall mean, the annual cash bonus paid or deferred in respect of the Fiscal Year Preceding Termination, or if bonuses for such fiscal year have not been paid generally to employees as of an Eligible Individual' s Termination Date, Annual Cash Bonus shall mean an amount equal to the Eligible Individual' s Earned But Unpaid Bonus Amount.


2.3 " Annual Salary Amount" shall mean an Eligible Individual' s annual base salary as in effect immediately prior to his or her Termination Date.

2.4 " Board" shall mean the Board of Directors of Medco Health Solutions, Inc.


2.5 " Cause" shall mean conduct of an Eligible Individual evidencing any of the following, as determined by the Plan Administrator: (i) dishonesty related to the Eligible Individual' s employment; (ii) improper disclosure by the Eligible Individual of any information of the Company or any of its Affiliates considered by the Company to be confidential or in the nature of a trade secret; (iii) any material violation of law by the Eligible Individual related to the Eligible Individual' s employment; (iv) commission of any crime or disorderly persons offense by the Eligible Individual that materially injures the business or reputation of the Company or any of its Affiliates; (v) gross or willful insubordination by the Eligible Individual; or (vi) dereliction in the performance of the Eligible Individual' s employment duties that continues after the Eligible Individual has been notified of such dereliction and has been given a reasonable opportunity to correct such dereliction.

2.6 " Company" shall mean Medco Health Solutions, Inc., a Delaware corporation, and any successor thereto.


2.7 " Company' s Bonus Plan" shall mean the Company' s annual cash bonus plan.

2.8 " Earned But Unpaid Bonus Amount" shall mean, as to any Eligible Individual whose Termination Date occurs prior to the date on which annual cash bonuses are paid under the Company' s Bonus Plan in respect of the Fiscal Year Preceding Termination, an amount equal to the bonus awarded to the Eligible Individual under the Company' s Bonus Plan in respect of the Fiscal Year Preceding Termination (which may be zero); provided, however, if bonuses have not yet been awarded by the Termination Date, the Earned But Unpaid Bonus Amount shall be equal to the annual cash bonus, if any, paid to or deferred by such Eligible Individual in respect of the fiscal year ended immediately prior to the Fiscal Year Preceding Termination. The Earned But Unpaid Bonus Amount shall not duplicate any bonus paid or deferred in respect of the Fiscal Year Preceding Termination. By way of example, if an Eligible Individual' s Termination Date is February 1, 2006 (and assuming bonuses have not yet been awarded under the Company' s Bonus Plan in respect of fiscal year 2005 by such date), the Earned But Unpaid Bonus Amount for such Eligible Individual shall be equal to the Eligible Individual' s annual bonus in respect of 2004, if any.


2.9 " Effective Date" shall mean February 1, 2006.

2.10 " Eligible Individual" shall mean Executive Officers and Senior Officer Participants. For purposes of this Plan, the terms " employ," " employee" and " employment" shall be construed to refer to the provision of services by the Eligible Individual to the Company, irrespective of whether the Eligible Individual is classified as an employee of the Company under the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.


2.11 " ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.


2.12 " Executive Officer" shall mean as of a particular day, the executive officers of the Company as most recently designated by the Board. The Board may, in its discretion, provide by resolution that an Executive Officer shall not participate in the Plan.

2.13 " Fiscal Year Preceding Termination" shall mean the most recent fiscal year of the Company ended prior to an Eligible Individual' s Termination Date.


2.14 " Plan" shall mean the Medco Health Solutions, Inc. 2006 Executive Severance Plan.

2.15 " Plan Administrator" shall mean the Chief Executive Officer of the Company or his or her designee.

2.16 " Plan Year" shall mean the calendar year.

2.17 " Pro Rata Bonus Amount" shall mean, as to any Eligible Individual, an amount equal to his or her Annual Cash Bonus multiplied by a fraction, the numerator of which is the number of full calendar months that have elapsed since the end of the Fiscal Year Preceding Termination through the Termination Date and the denominator of which is 12. The Pro Rata Bonus shall not duplicate any bonus paid or deferred in respect of the fiscal year in which the Termination Date occurs.


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2.18 " Qualifying Termination" shall mean a termination of employment of an Eligible Individual that entitles him or her to Severance Benefits, as provided in Section 3.1.


2.19 " Release of Claims" shall mean the agreement that an Eligible Individual must execute in order to receive Severance Benefits under the Plan, which shall be prepared by the Plan Administrator and shall contain, among such other terms and conditions determined by the Plan Administrator, a general release of all claims that the Eligible Individual may have against Merck & Co., Inc., the Company and any of their Affiliates relating to the employment and termination of employment of the Eligible Individual and specifically including any claims for bonus payments pursuant to the Company' s Bonus Plan or otherwise.


2.20 " Senior Officer Participants" shall mean non-executive officers selected for participation after the Effective Date. The Plan Administrator, in his or her discretion, may add or remove Senior Officer Participants from the Plan from time to time.

2.21 " Severance Benefits" shall mean the Severance Pay and the benefits provided pursuant to Section 4.3.

2.22 " Severance Pay" shall mean the cash benefit payable under the Plan pursuant to Section 4.1.


2.23 " Termination Date" shall mean the date designated by the Company as an Eligible Individual' s date of termination of employment.

SECTION 3

ELIGIBILITY FOR SEVERANCE BENEFITS


3.1 Eligibility for Severance Benefits


(a) Except as provided in Sections 3.1(b) and 3.4, an Eligible Individual will become entitled to Severance Benefits under the Plan if his or her employment is involuntarily terminated by the Company other than for Cause prior to the Expiration Date (any such termination of employment is herein referred to as a " Qualifying Termination" ).


(b) An Eligible Individual shall not be entitled to Severance Benefits if his or her employment is terminated by the Company in connection with a sale, divestiture or other disposition of the stock or assets of the Company or a ...