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8-K - FORM 8-K - MEDCO HEALTH SOLUTIONS INC | c18002e8vk.htm |
EX-3.1 - EXHIBIT 3.1 - MEDCO HEALTH SOLUTIONS INC | c18002exv3w1.htm |
EX-3.2 - EXHIBIT 3.2 - MEDCO HEALTH SOLUTIONS INC | c18002exv3w2.htm |
EX-10.1 - EXHIBIT 10.1 - MEDCO HEALTH SOLUTIONS INC | c18002exv10w1.htm |
Exhibit 10.2
Medco Health Solutions, Inc.
2002 STOCK INCENTIVE PLAN
As amended and restated
May 15, 2003 and March 14, 2011
and approved by shareholders
on May 31, 2005 and May 24, 2011
May 15, 2003 and March 14, 2011
and approved by shareholders
on May 31, 2005 and May 24, 2011
2002 STOCK INCENTIVE PLAN
(As amended and restated May 15, 2003 and March 14, 2011 and approved by shareholders on
May 31, 2005 and May 24, 2011)
(As amended and restated May 15, 2003 and March 14, 2011 and approved by shareholders on
May 31, 2005 and May 24, 2011)
1. Purpose
The 2002 Stock Incentive Plan (the Plan), effective June 17, 2002 is established to
encourage employees of Medco Health Solutions, Inc. (the Company), its parent, if any, its
subsidiaries, its affiliates and its joint ventures to acquire Common Stock in the Company
(Common Stock). It is believed that the Plan will serve the interests of the Company and
its stockholders because it allows employees to have a greater personal financial interest in
the Company through ownership of, or the right to acquire its Common Stock, which in turn will
stimulate employees efforts on the Companys behalf, and maintain and strengthen their desire
to remain with the Company or one of its related entities. It is believed that the Plan will
also assist in the recruitment of employees.
2. Administration
The Plan shall be administered by the Compensation Committee of the Board of Directors of
the Company (the Committee). A Director of the Company may serve on the Committee only if he
or she (i) is a Non-Employee Director for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the Exchange Act), and (ii) satisfies the requirements of an outside
director for purposes of Section 162(m) of the Internal Revenue Code (the Code). The
Committee shall be responsible for the administration of the Plan including, without limitation,
determining which Eligible Persons receive Incentives, the types of Incentives they receive
under the Plan, the number of shares covered by Incentives granted under the Plan, and the other
terms and conditions of such Incentives. Determinations by the Committee under the Plan
including, without limitation, determinations of the Eligible Persons, the form, amount and
timing of Incentives, the terms and provisions of Incentives and the writings evidencing
Incentives, need not be uniform and may be made selectively among Eligible Persons who receive,
or are eligible to receive, Incentives hereunder, whether or not such Eligible Persons are
similarly situated.
The Committee shall have the responsibility of construing and interpreting the Plan,
including the right to construe disputed or doubtful Plan provisions, and of establishing,
amending and construing such rules and regulations as it may deem necessary or desirable for the
proper administration of the Plan including adopting sub-plans and special rules to facilitate
compliance or achieve desirable tax results or other Company objectives for grants made to
employees outside the U.S. and to determine the consequences of termination of employment or
other relationships for grants made to non-employee directors, independent contractors, leased
employees or consultants when the grants are made. In addition, as to any Performance Share
Award not intended to constitute performance-based compensation under Section 162(m) of the
Code, at any time prior to the end of an Award Period (as defined in Section 9), the Committee
may revise the Performance Goals and the computation of payment if unforeseen events occur which
have a substantial effect on the performance of the Company, its parent, subsidiary, division,
affiliate or joint venture of the Company and which, in the judgment of the Committee, make the
application of the Performance Goals (as defined in Section 9) unfair (as determined in the sole
discretion of the Committee) unless a revision is made. 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 final, binding and conclusive upon the Company, all
Eligible Persons and any person claiming under or through any Eligible Person.
The Committee may delegate any or all of its power and authority hereunder to the Chief
Executive Officer or President and such other officers as the Committee deems appropriate;
provided, however, that the Committee may not delegate its authority with regard to (i) any
matter or action affecting an officer subject to
Section 16 of the Exchange Act; (ii) any matter related to Incentives intended to be qualified
under Section 162(m) of the Code; or (iii) any matter or action related to grants of Incentives
to Non-Employee Directors.
For the purpose of this section and all subsequent sections, the Plan shall be deemed to
include this Plan and any sub-plans which, in the aggregate, shall constitute one Plan governed
by the terms set forth herein.
3. Eligibility
(a) Employees. Any person employed by the Company, its parent, if any, or its
subsidiaries, its affiliates and its joint ventures, including officers, whether or not
directors of the Company, and employees of a joint venture partner or affiliate of the Company
who provide services to the joint venture with such partner or affiliate (each such person, an
Employee), shall be eligible to participate in the Plan if designated by the Committee
(Eligible Persons).
(b) Non-employees. The term Employee shall not include a non-employee director or a
person hired as an independent contractor, leased employee or consultant, provided, however,
that the Committee may determine that any such person is eligible to receive Incentives under
the Plan (and, if such a determination is made as to any such person, such person shall be an
Eligible Person under the Plan). Such person shall not participate in this Plan except to the
extent that the Committee so determines, even if such person is subsequently determined to be an
employee by any governmental or judicial authority.
(c) No Right To Continued Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company, its parent, its subsidiaries, its affiliates or its joint
ventures to terminate the employment of any participant at any time, nor confer upon any
participant the right to continue in the employ of the Company, its parent, its subsidiaries,
its affiliates or its joint ventures. No Eligible Person shall have a right to receive an
Incentive or any other benefit under this Plan or having been granted an Incentive or other
benefit, to receive any additional Incentive or other benefit. Neither the award of an
Incentive nor any benefits arising under such Incentives shall constitute an employment contract
with the Company, its parent, its subsidiaries, its affiliates or its joint ventures, and
accordingly, this Plan and the benefits hereunder may be terminated at any time in the sole and
exclusive discretion of the Company without giving rise to liability on the part of the Company,
its parent, its subsidiaries, its affiliates or its joint ventures for severance (except as
otherwise required under applicable local law). Except as may be otherwise specifically stated
in any other employee benefit plan, policy or program, or as required under applicable local
law, neither any Incentive under this Plan nor any amount realized from any such Incentive shall
be treated as compensation for any purposes of calculating an employees benefit under any such
plan, policy or program.
4. Term of the Plan
This Plan was effective on June 17, 2002 and originally approved by shareholders on July
21, 2003. The Plan is being extended pursuant to the amendments and restatements made on March
14, 2011 such that no Incentive shall be granted under the Plan after May 24, 2021, but the term
and exercise of Incentives granted theretofore may extend beyond that date.
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5. Incentives
(a) Types of Incentives. Incentives under the Plan may be granted in any one or a
combination of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock
Appreciation Rights; (iv) Restricted Stock Grants, (v) Performance Shares, (vi) Share Awards and
(vii) Phantom Stock Awards (Incentive Stock Options and Nonqualified Stock Options shall be
referred to collectively as Stock Options and together with Restricted Stock Grants,
Performance Shares, Share Awards and Phantom Stock Awards shall be
referred to collectively as Incentives) Incentives other than Stock Options and Stock
Appreciation Rights are Full Value Awards. All Incentives shall be subject to the terms and
conditions set forth herein and to such other terms and conditions as may be established by the
Committee.
(b) No Repricing. Except in connection with a corporate transaction involving the company
(including, without limitation, any stock dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or
exchange of shares), the terms of outstanding awards may not be amended to reduce the option
price of outstanding Stock Options or Stock Appreciation Rights or cancel outstanding Stock
Options or in exchange for cash, other awards or Stock Options or with an option price that is
less than the option price of the original Stock Options or Stock Appreciation Rights without
stockholder approval.
6. Shares Available for Incentives
(a) Shares Available. Subject to the provisions of Section 6(c), the maximum number of
shares of Common Stock of the Company that may be issued under the Plan as of December 31, 2010
is twenty-nine million, four hundred sixty-five thousand, three hundred eighteen (29,465,318)
which includes twelve million, sixty-five thousand, three hundred eighteen (12,065,318) shares
remaining from the original fifty-four million (54,000,000) shares that were approved by
shareholders on May 31, 2005 and an additional seventeen million, four hundred thousand
(17,400,000) shares added in connection with the amendment and restatement of the Plan on March
14, 2011.
For all grants made after December 31, 2010, the share reserve shall be reduced by (1) one
common share for each common share issued with respect to a Stock Option or Stock Appreciation
Right; and (b) 2.16 common shares for each common share issue with respect to Full Value Awards.
Upon the exercise of a stock-settled Stock Appreciation Right, the number of shares subject to
the Award that are then being exercised shall be counted against the maximum aggregate number of
shares that may be issued under the Plan, on the basis of one share for every share subject
thereto, regardless of the actual number of shares used to settle the Stock Appreciation Right
upon exercise.
In addition to the foregoing, the following shares of Common Stock related to Incentives
under this Plan may again be used for the grant of Incentives under the Plan: (i) shares related
to Incentives paid in cash; (ii) shares related to Incentives that expire, are forfeited or
cancelled or terminate for any other reason without issuance of shares of Common Stock; and
(iii) any shares of Common Stock related to Incentives that are assumed, converted or
substituted as a result of the acquisition of another company by the Company or a combination of
the Company with another company. Regardless of when Incentives are granted, effective January
1, 2011, shares tendered in payment of the option price or grant price for Stock Options and
Stock Appreciation Rights or shares withheld from Incentives (including Full Value Awards) for
tax payments or withholding for taxes shall not be added back into the Plan.
Shares under this Plan may be delivered by the Company from its authorized but unissued
shares of Common Stock or from issued and reacquired Common Stock held as treasury stock, or
both. In no event shall fractional shares of Common Stock be issued under the Plan.
(b) Limit on an Individuals Incentives. In any calendar year, no Eligible Person may
receive (i) Incentives (including Stock Options and Stock Appreciation Rights) covering more than
two million (2,000,000) shares of the Companys Common Stock (such number of shares shall be
adjusted in accordance with Section 6(c)), or (ii) any Incentive if such person owns more than ten
percent of the stock of the Company within the meaning of Section 422 of the Code, or (iii) any
Incentive Stock Option, as defined in Section 422 of the Code, which would result in such person
receiving a grant of Incentive Stock Options for stock that would have an
aggregate fair market value in excess of $100,000, determined as of the time that the Incentive
Stock Option is granted, that would be exercisable for the first time by such person during any
calendar year.
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(c) Adjustment of Shares. 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 Committee, the Committee shall make such adjustments, if
any, as it may deem appropriate in (i) the number and kind of shares authorized for issuance under
the Plan, (ii) the number and kind of shares subject to outstanding Incentives and (iii) the option
price/grant price of Stock Options and Stock Appreciation Rights. For the purposes of (i) and (ii)
above, fractions of a share will be rounded down to the nearest whole share (other than for
Incentive Stock Options). Any such determination shall be final, binding and conclusive on all
parties.
(d) Minimum Vesting for Full Value Awards. With respect to at least 95% of Full Value Awards
(other than Performance Share Awards) granted after December 31, 2010, vesting of such Incentives
will occur over a minimum of three years from the grant date. For Performance Share Awards, at
least 95% of these Incentives granted after December 31, 2010 will vest over a minimum of one year
from the grant date.
7. Stock Options
The Committee may grant options qualifying as Incentive Stock Options as defined in Section
422 of the Code to employees of the Company or a parent or subsidiary corporation within the
meaning of Section 424 of the Code, and options other than Incentive Stock Options
(Nonqualified Options) (collectively Stock Options). Such Stock Options shall be subject
to the following terms and conditions and such other terms and conditions as the Committee may
prescribe:
(a) Stock Option Price. The option price per share with respect to each Stock Option shall
be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the
Common Stock (as defined below) on the date the Stock Option is granted, as determined by the
Committee. Unless the Committee determines otherwise, Fair Market Value shall mean the closing
stock price of a share of Common Stock, as reported on the New York Stock Exchange (or any other
reporting system selected by the Committee, in its sole discretion) on the date as of which the
determination is being made or, if no sale of shares of Common Stock is reported on this date, on
the next preceding day on which there were sales of shares of Common Stock reported.
(b) Period of Stock Option. The period of each Stock Option shall be fixed by the Committee,
provided that the period for all Stock Options shall not exceed ten (10) years from the grant. The
Committee may, subsequent to the granting of any Stock Option, extend the term thereof, but in no
event shall the extended term exceed ten years from the original grant date.
(c) Exercise of Stock Option and Payment Therefore. No shares shall be issued until full
payment of the option price has been made. The option price may be paid in cash or, if the
Committee determines, in shares of Common Stock or a combination of cash and shares of Common
Stock. If the Committee approves the use of shares of Common Stock as a payment method, the
Committee shall establish such conditions as it deems appropriate for the use of Common Stock to
exercise a Stock Option. Stock Options awarded under the Plan shall be exercised through such
procedure or program as the Committee may establish or define from time to time, which may include
a designated broker that must be used in exercising such Stock Options.
(d) First Exercisable Date. The Committee shall determine how and when shares covered by a
Stock Option may be purchased. The Committee may establish waiting periods, the dates on which
Stock Options become exercisable or ''vested and, subject to paragraph (b) of this section,
exercise periods. The Committee may accelerate the exercisability of any Stock Option or portion
thereof.
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(e) Termination of Employment. Unless determined otherwise by the Committee, upon the
termination of a Stock Option grantees employment (for any reason other than gross misconduct),
outstanding Stock Options which were not exercisable at the date of such termination shall be
immediately forfeited upon termination. The Committee, however, in its discretion, may provide
that any Stock Options outstanding but not yet exercisable upon the termination of a Stock Option
grantees employment may become exercisable in accordance with a schedule determined by the
Committee. Such Stock Options shall expire unless exercised within such period of time after the
date of termination of employment as may be established by the Committee, but in no event later
than the expiration date of the Stock Option.
(f) Termination Due to Misconduct. If a Stock Option grantees employment is terminated for
gross misconduct, as determined by the Company, all outstanding Stock Options (regardless of
whether vested or not upon termination) shall expire upon the date of such termination.
(g) Limits on Incentive Stock Options. Except as may otherwise be permitted by the Code, an
Eligible Person may not receive a grant of Incentive Stock Options for stock that would have an
aggregate fair market value in excess of $100,000 (or such other amount as the Internal Revenue
Service may decide from time to time), determined as of the time that the Incentive Stock Option is
granted, that would be exercisable for the first time by such person during any calendar year. All
shares that have been authorized to be issued under the Plan may be used for the grant of Incentive
Stock Options.
8. Stock Appreciation Rights
The Committee may, in its discretion, grant a right to receive the appreciation in the fair
market value of shares of Common Stock (Stock Appreciation Right) either singly or in
combination with an underlying Stock Option granted hereunder. Such Stock Appreciation Right
shall be subject to the following terms and conditions and such other terms and conditions as
the Committee may prescribe:
(a) Time and Period of Grant. If a Stock Appreciation Right is granted with respect to an
underlying Stock Option, it may be granted at the time of the Stock Option grant or at any time
thereafter but prior to the expiration of the Stock Option grant. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, at the time the Stock Appreciation Right is
granted the Committee may limit the exercise period for such Stock Appreciation Right, before and
after which period no Stock Appreciation Right shall attach to the underlying Stock Option. In no
event shall the exercise period for a Stock Appreciation Right granted with respect to an
underlying Stock Option exceed the exercise period for such Stock Option. If a Stock Appreciation
Right is granted without an underlying Stock Option, the term of the Stock Appreciation Right shall
be set by the Committee, but in no event shall exceed ten (10) years from the grant.
(b) Value of Stock Appreciation Right. If a Stock Appreciation Right is granted with respect
to an underlying Stock Option, the grantee will be entitled to surrender the Stock Option which is
then exercisable and receive in exchange an amount equal to the excess of the fair market value of
the Common Stock on the date the election to surrender is received by the Company in accordance
with exercise procedures established by the Company over the Stock Option price multiplied by the
number of shares covered by the Stock Option which is surrendered. If a Stock Appreciation Right
is granted without an underlying Stock Option, the grantee will receive upon exercise of the Stock
Appreciation Right an amount equal to the excess of the fair market value of the Common Stock on
the date the election to surrender such Stock Appreciation Right is received by the Company in
accordance with exercise procedures established by the Company over the fair market value of the
Common Stock on the date of grant multiplied by the number of shares covered by the grant of the
Stock Appreciation Right. All Stock Appreciation Rights shall have a grant price that is not less
than 100% of the Fair Market Value of the Common Stock on the date the Stock Appreciation Right is
granted.
(c) Payment of Stock Appreciation Right. Payment of a Stock Appreciation Right shall be in
the form of shares of Common Stock, cash or any combination of shares and cash. The form of payment
upon exercise of such a right shall be determined by the Committee either at the time of grant of
the Stock Appreciation Right or at the time of exercise of the Stock Appreciation Right.
- 5 -
9. Performance Share Awards
The Committee may grant awards under which payment may be made in shares of Common Stock,
cash or any combination of shares and cash if the performance of the Company or its parent, if
any, or any subsidiary, affiliate or joint venture of the Company or based on an individual
grantees performance, team, division or group performance or any other defined group that the
Committee determines during the Award Period meets certain goals established by the Committee
(Performance Share Awards). Such Performance Share Awards shall be subject to the following
terms and conditions and such other terms and conditions as the Committee may prescribe:
(a) Award Period and Performance Goals. The Committee shall determine and include in a
Performance Share Award grant the period of time for which a Performance Share Award is made
(Award Period). The Committee shall also establish performance objectives (Performance
Goals) to be met by the Company, its parent, if any, subsidiary, affiliate or joint venture of
the Company or individual grantee or team, division or group determined by the Committee during the
Award Period as a condition to payment of the Performance Share Award. The Performance Goals may
include any one or more of the following Company measures, as interpreted by the Committee, which
(to the extent applicable) will be determined in accordance with GAAP: earnings per share; net-new
sales; new named sales; client retention; client satisfaction; employee satisfaction; member
satisfaction; revenue performance; corporate earnings performance; return on assets; return on
equity; return on invested capital; cash flow; cash balances; market value added; economic value
added; earnings before interest, taxes, depreciation and amortization; mail and total prescription
volumes; mail penetration rate; cost and expense controls; drug trend management; clinical program
effectiveness; generic dispensing rates; specialty segment performance; covered lives; productivity
and growth in new markets, products and/or services. Performance Measures may be measured before
or after taking taxes into consideration, in the discretion of the Committee. The Performance
Goals may include minimum and optimum objectives or a single set of objectives. In determining
attainment of Performance Goals, the Committee will exclude unusual or infrequently occurring
items, charges for restructurings (employee severance liabilities, asset impairment costs, and exit
costs), discontinued operations, extraordinary items and the cumulative effect of changes in
accounting treatment, and may determine no later than ninety (90) days after the commencement of
any applicable Award Period to exclude other items, each determined in accordance with GAAP (to the
extent applicable) and as identified in the financial statements, notes to the financial statements
or discussion and analysis of management. If the Committee desires that compensation payable
pursuant to any Performance Share Award be qualified performance-based compensation within the
meaning of Section 162(m) of the Code for covered employees, the Performance Goals (i) shall be
established by the Committee no later than the end of the first quarter of the Award Period (or
such other time designated by the United States Internal Revenue Service) and (ii) shall satisfy
all other applicable requirements imposed under United States Treasury Regulations promulgated
under Section 162(m) of the Code, including the requirement that such Performance Goals be stated
in terms of an objective formula or standard.
(b) Payment of Performance Share Awards. The Committee shall establish the method of
calculating the amount of payment to be made under a Performance Share Award if the Performance
Goals are met, including the fixing of a maximum payment. The Performance Share Award shall be
expressed in terms of shares of Common Stock and referred to as Performance Shares. After the
completion of an Award Period, the performance of the Company, its parent, if any, subsidiary,
affiliate or joint venture of the Company or
individual grantee or team, division or group (whichever is relevant under the terms of the
Performance Share Award) shall be measured against the Performance Goals, and the Committee shall
determine, in accordance with the terms of such Performance Share Award, whether all, none or any
portion of a Performance Share Award shall be paid. The Committee, in its discretion, may elect to
make payment in shares of Common Stock, cash or a combination of shares and cash. Any cash payment
shall be based on the Fair Market Value of Performance Shares at the end of the Award Period.
- 6 -
(c) Requirement of Employment. A grantee of a Performance Share Award must remain in the
employ of the Company, its parent, if any, subsidiary, affiliate or joint venture until the
completion of the Award Period in order to be entitled to payment under the Performance Share
Award; provided that the Committee may, in its discretion, provide for a full or partial payment
where such an exception is deemed equitable. However, to the extent that the Performance Share
Award is intended to constitute performance-based compensation, the Committee shall only make
exceptions in the event that the covered employees employment terminates due to death, disability
or upon a change of control provided payments are not made until after the completion of the Award
Period and certification that the Performance Goals have been attained as required pursuant to
Section 162(m).
(d) Dividend Equivalents. Dividend equivalents shall not be paid during the Award Period and
may only be paid on vested Performance Shares to the extent determined by the Committee.
10. Restricted Stock Grants
The Committee may award shares of Common Stock to an Eligible Person, which shares shall be
subject to the following terms and conditions and such other terms and conditions as the
Committee may prescribe (Restricted Stock Grant):
(a) Requirement of Employment. A grantee of a Restricted Stock Grant must remain in the
employment of the Company or its parent, if any, its subsidiaries, its affiliates and its joint
ventures during a period designated by the Committee (Restriction Period) in order to retain
the shares under the Restricted Stock Grant. If the grantees employment with the Company or its
parent, if any, its subsidiaries, its affiliates and its joint ventures terminates prior to the end
of the Restriction Period, the Restricted Stock Grant shall terminate and the shares of Common
Stock shall be returned immediately to the Company provided that the Committee may, at the time of
the grant, provide for the employment restriction to lapse with respect to a portion or portions of
the Restricted Stock Grant at different times during the Restriction Period. The Committee may, in
its discretion, also provide for such complete or partial exceptions to the employment restriction
as it deems equitable.
(b) Restrictions on Transfer and Legend on Stock Certificates. During the Restriction
Period, the grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of
Common Stock. Each certificate for shares of Common Stock issued hereunder shall contain a legend
giving appropriate notice of the restrictions in the grant.
(c) Escrow Agreement. The Committee may require the grantee to enter into an escrow
agreement providing that the certificates representing the Restricted Stock Grant will remain in
the physical custody of an escrow holder until all restrictions are removed or expire.
(d) Lapse of Restrictions. All restrictions imposed under the Restricted Stock Grant shall
lapse upon the expiration of the Restriction Period if the conditions as to employment set forth
above have been met. The grantee shall then be entitled to have the legend removed from the
certificates and/or request shares to be transferred to him or her from the escrow holder, if any.
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(e) Dividends. The Committee shall, in its discretion, at the time of the Restricted Stock
Grant, provide that any dividends declared on the Common Stock during the Restriction Period shall
either be (i) paid to the grantee as soon as practicable after the dividend is declared, or (ii)
accumulated for the benefit of the grantee and paid to the grantee only after the expiration of the
Restriction Period.
(f) Performance Goals. The Committee may designate whether any Restricted Stock Grant is
intended to be performance-based compensation as that term is used in Section 162(m) of the Code.
Any such Restricted Stock Grant designated to be performance-based compensation shall be
conditioned on the achievement of one or more Performance Goals (as defined in Section 9(a)), to
the extent required by Section 162(m).
11. Other Share-Based Awards
(a) Share Awards. The Committee may grant an award of shares of common stock (a Share
Award) to any Eligible Person on such terms and conditions as the Committee may determine in
its sole discretion.
(b) Phantom Stock Awards. The Committee may, in its discretion, grant a right representing
a number of hypothetical shares, including restricted stock units (a Phantom Stock Award), to
any Eligible Person on such terms and conditions, including whether payment of such Phantom
Stock Award will be in cash or shares, as the Committee may determine in its sole discretion.
12. Transferability
Each Incentive, other than Nonqualified Options, granted under the Plan shall not be
transferable or assignable other than by will or the laws of descent and distribution and shall
be exercisable during the grantees lifetime only by the grantee. Nonqualified Options shall
not be transferable or assignable by the recipient, and may not be made subject to execution,
attachment or similar procedures, other than by will or the laws of descent and distribution or
pursuant to a domestic relations order within the meaning of Rule 16a-12 under the Exchange Act.
Notwithstanding the foregoing, the Committee, in its discretion, may adopt rules permitting the
transfer, solely as gifts during the grantees lifetime, of Stock Options (other than Incentive
Stock Options) to trusts or family partnerships for the benefit of immediate family members, but
in no event will awards be transferable for value or consideration. For this purpose, immediate
family member means the grantees spouse, parent, child, stepchild, grandchild and the spouses
of such family members. The terms of a Stock Option shall be final, binding and conclusive upon
the beneficiaries, executors, administrators, heirs and successors of the grantee.
13. Discontinuance or Amendment of the Plan
The Board of Directors may discontinue the Plan at any time and may from time to time amend
or revise the terms of the Plan as permitted by applicable statutes, except that it may not,
without the consent of the grantees affected, revoke or alter, in a manner unfavorable to the
grantees of any Incentives hereunder, any Incentives then outstanding, nor may the Board amend
the Plan without stockholder approval where the absence of such approval would cause the Plan to
fail to comply with Rule 16b-3 under the Exchange Act, or any other requirement of applicable
law or regulation.
14. No Constraint on Corporate Action
Nothing in the Plan shall be construed (i) to limit, impair or otherwise affect the
Companys right or power to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or
transfer all or any part of its business or assets, or (ii)
except as provided in Section 13, to limit the right or power of the Company, its parent, or any
subsidiary, affiliate or joint venture to take any action which such entity deems to be
necessary or appropriate.
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15. Withholding Taxes
The Company and its parent, if any, its subsidiaries, its affiliates and its joint ventures
shall be entitled to collect income taxes, social insurance contributions, payment on account
amounts, any local taxes and any other taxes related to the grant, vesting or exercise of
Incentives or acquisition or sale of shares acquired under the Plan legally due by grantee and
required to be withheld by the Company (or one of its affiliates) or grantees employer (Tax
Withholding Amounts) by any of the following methods: (i) withholding from shares of Common Stock
or cash issuable or due under the Incentive; (ii) withholding from compensation, salary, bonuses or
any other amounts due to grantee; or (iii) forcing shares of Common Stock to be sold that are
issued pursuant to Incentives and using the proceeds to cover the Tax Withholding Amounts. In
addition and in accordance with any applicable administrative guidelines it establishes, the
Committee may allow a grantee to pay the Tax Withholding Amounts by withholding from any payment of
Common Stock due as a result of such Incentive, or by permitting the grantee to deliver to the
Company, shares of Common Stock having a fair market value, as determined by the Committee, equal
to the amount of the Tax Withholding Amounts. Regardless of when Incentives are granted, effective
January 1, 2011, shares tendered in payment of the option price or grant price for Stock Options
and Stock Appreciation Rights or withheld from Incentives (including Full Value Awards) for tax
payments or withholding for taxes shall not be added back into the Plan.
16. Compliance with Section 16
With respect to Eligible Persons subject to Section 16 of the Exchange Act (Section 16
Officers), transactions under the Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successor under the Exchange Act. To the extent that compliance with any Plan
provision applicable solely to the Section 16 Officers is not required in order to bring a
transaction by such Section 16 Officer into compliance with Rule 16b-3, it shall be deemed null
and void as to such transaction, to the extent permitted by law and deemed advisable by the
Committee and its delegees. To the extent any provision of the Plan or action by the Plan
administrators involving such Section 16 Officers is deemed not to comply with an applicable
condition of Rule 16b-3, it shall be deemed null and void as to such Section 16 Officers, to the
extent permitted by law and deemed advisable by the Plan administrators.
17. Use of Proceeds
The proceeds received by the Company from the sale of stock under the Plan shall be added
to the general funds of the Company and shall be used for such corporate purposes as the Board
of Directors shall direct.
18. Change in Control
Unless otherwise provided in an award agreement, or for Incentives that do not constitute
deferred compensation under Section 409A of the Code, unless determined by the Committee in its
discretion, in the event of a Change in Control (as defined below), each Incentive outstanding as
of the Change in Control shall be assumed, continued, or substituted with a new Incentive that has:
(i) an intrinsic value equivalent to that of the original Incentive; and (ii) terms at least as
beneficial to the grantee as those contained in the original award agreement. If within two years
following a Change in Control, a grantee is terminated for any reason (or constructively terminated
as determined by the Committee in its sole discretion) except for Cause (as defined below) all of
the grantees outstanding Incentives which have not vested shall immediately vest and become
exercisable (if applicable) and all restrictions on such awards or shares shall immediately lapse.
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For purposes of this Section 18, the term Cause shall mean that a grantee: (i) has been
convicted of, or entered a plea of nolo contendere to, a crime that constitutes a felony under
U.S. Federal or state law or equivalent under any applicable foreign law; (ii) has engaged in
willful gross misconduct in the performance of the grantees duties to the Company or a parent,
subsidiary or affiliate; or (iii) has committed a material breach of any written agreement with
the Company or any parent, subsidiary or affiliate with respect to confidentiality,
noncompetition, nonsolicitation or similar restrictive covenant. The Committee shall have the
discretion of determining whether a grantee has been terminated for Cause for the purposes of
this Section 18.
A Change in Control shall mean the occurrence during the term of the Plan of any one of the
following events:
(a) An acquisition (other than directly from the Company) of any shares of Common Stock or
other voting securities of the Company by any Person (for purposes of this Section only, as
the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act),
immediately after which such Person has Beneficial Ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of forty percent (40%) or more of either (i) the then
outstanding shares of Common Stock or (ii) the combined voting power of the Companys then
outstanding voting securities entitled to vote for the election of directors (the Voting
Securities); provided, however, in determining whether a Change in Control has occurred, shares
of Common Stock or Voting Securities which are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition which would cause a Change in Control.
A Non-Control Acquisition shall mean an acquisition by (i) an employee benefit plan (or a
trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Company (for purposes of this definition, a
Related Entity), (ii) the Company or any Related Entity, or (iii) any Person in connection
with a Non-Control Transaction (as hereinafter defined); or
(b) The individuals who, immediately after the acquisition or transaction, are members of
the Board of Directors of the Company (the Incumbent Board), (i) cease for any reason to
constitute at least a majority of the members of the Board of Directors of the Company, or (ii)
following a Merger (as hereinafter defined), do not constitute at least a majority of the board
of directors of (x) the Surviving Corporation (as hereinafter defined), if fifty percent (50%)
or more of the combined voting power of the then outstanding voting securities of the Surviving
Corporation is not Beneficially Owned, directly or indirectly by a Parent Corporation, or (y) if
there is one or more Parent Corporations, the ultimate Parent Corporation (as hereinafter
defined); provided, however, that if the election, or nomination for election by the Companys
common stockholders, of any new director was approved by a vote of at least a majority of the
Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member
of the Incumbent Board; provided, further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as a result of an
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company (a Proxy Contest), including by reason of any agreement
intended to avoid or settle any Proxy Contest; or
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(c) The consummation of:
(i) A merger, consolidation or reorganization with or into the Company or a direct
or indirect subsidiary of the Company or in which securities of the Company are issued (a
Merger), unless the Merger is a Non-Control Transaction. A Non-Control Transaction
shall mean:
(A) the stockholders of the Company immediately before such Merger own directly or
indirectly immediately following the Merger at least fifty percent (50%) of the
outstanding
common stock and the combined voting power of the outstanding voting securities of (x)
the corporation resulting from such Merger (the Surviving Corporation), if fifty
percent (50%) or more of the combined voting power of the then outstanding voting
securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly
by another corporation (a Parent Corporation), or (y) if there is one or more Parent
Corporations, the ultimate Parent Corporation;
(B) the individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for the Merger, constitute at least a majority of
the members of the board of directors of, (x) the Surviving Corporation, if fifty percent
(50%) or more of the combined voting power of the then outstanding voting securities of
the Surviving Corporation is not Beneficially Owned, directly or indirectly by a Parent
Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent
Corporation; and
(C) no Person other than (1) the Company or another corporation that is a party to
the agreement of Merger, (2) any Related Entity, or (3) any employee benefit plan (or any
trust forming a part thereof) that, immediately prior to the Merger, was maintained by
the Company or any Related Entity, or (4) any Person who, immediately prior to the Merger
had Beneficial Ownership of forty percent (40%) or more of the then outstanding shares of
Common Stock or Voting Securities, has Beneficial Ownership, directly or indirectly, of
forty percent (40%) or more of the combined voting power of the outstanding voting
securities or common stock of (x) the Surviving Corporation, if fifty percent (50%) or
more of the combined voting power of the then outstanding voting securities of the
Surviving Corporation is not Beneficially Owned, directly or indirectly by a Parent
Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent
Corporation.
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of the assets of the Company
and its subsidiaries taken as a whole to any Person (other than a transfer to a Related Entity or
under conditions that would constitute a Non-Control Transaction with the disposition of assets
being regarded as a Merger for this purpose or the distribution to the Companys stockholders of
the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any
Person (the Subject Person) acquired Beneficial Ownership of more than the permitted amount of
the then outstanding shares of Common Stock or Voting Securities as a result of the acquisition of
shares of Common Stock or Voting Securities by the Company which, by reducing the number of shares
of Common Stock or Voting Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons; provided, that if a Change in Control would occur (but
for the operation of this sentence) as a result of the acquisition of shares of Common Stock or
Voting Securities by the Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increases the percentage of the then outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
Also, notwithstanding the foregoing, to the extent that any Incentive constitutes a deferral of
compensation subject to Code Section 409A, and if that Incentive provides for a change in the time
or form of payment upon a Change in Control, then no Change in Control shall be deemed to have
occurred upon an event described in this Section 18 unless the event would also constitute a change
in ownership or effective control of, or a change in the ownership of a substantial portion of the
assets of, the Company under Code Section 409A.
19. Governing Law
The Plan, and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware without giving effect to the principles of conflicts of
laws.
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ADDENDUM
TO THE
MEDCO HEALTH SOLUTIONS, INC.
2002 STOCK INCENTIVE PLAN
TO THE
MEDCO HEALTH SOLUTIONS, INC.
2002 STOCK INCENTIVE PLAN
This addendum is intended to cause the Medco Health Solutions, Inc. 2002 Stock Incentive Plan (the
Plan) to meet the requirements of a written plan as described in Q&A 21 of Internal Revenue
Service Notice 2005-1 with respect to restricted stock units, performance shares or other share
based awards subject to deferral (Stock Units) granted under the Plan. Capitalized terms used
herein but not defined shall have the meaning ascribed to them in the Plan.
1. Deferrals of Stock Units Permitted
(a) Receipt of stock or other payment pursuant to the conversion of a Stock Unit granted under the
Plan may be deferred at the election of a grantee beyond the taxable year in which the Stock Unit
vests and becomes non-forfeitable provided permitted by the Committee.
(b) This deferral program is intended to meet the requirements of an unfunded top-hat plan
maintained primarily for the purpose of providing deferred compensation for a select group of
management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. No grantee shall be permitted to make a deferral election if such grantees
participation in the deferral program would cause the Plan to fail to be treated as a top-hat plan.
(c) Stock Units granted to members of the Board of Directors are not affected by this Addendum.
2. Deferral Period
(a) The deferral may be until any of the following:
(i) six months after the date of a grantees separation from service,
(ii) the date the participant becomes disabled (within the meaning of Section 409A(a)(2)(C)
of Code),
(iii) death,
(iv) a specified date (or pursuant to a fixed schedule),
(v) to the extent provided in regulations, a change in the ownership or effective control
of the Company, or in the ownership of a substantial portion of the assets of the Company,
or
(vi) the occurrence of an unforeseeable emergency (as defined in Section 409A of the Code
or the regulations promulgated thereunder).
3. No Acceleration
Acceleration of the deferral period elected by the grantee shall not be permitted, except as
provided in regulations promulgated under Section 409A of the Code.
4. Deferral Elections
Deferral elections shall be made in compliance with Section 409A of the Code. In accordance with
IRS Notice 2005-1, deferral elections with respect to Stock Units outstanding but unvested as of
March 15, 2005 may be made on or before March 15, 2005. Changes in the time and form of payments
with respect to Stock Units for which an initial deferral is in effect shall be permitted in
accordance with Section 409A(a)(4)(C) of the Code, the terms of which shall be incorporated into
this Addendum.
5. Compliance with Section 409A
Awards granted under the Plans are intended to comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended. In order to comply with Section 409A, Stock Units
granted under the Plans to employees who are not participants in the 2006 Executive Severance Plan
at the time of grant shall be administered such that a separation from service of the grantee does
not result in deferred compensation as defined in Section 409A unless the recipient has made a
voluntary deferral election. As a result, Stock Units shall be converted and paid as soon as
practicable following the date on which the Stock Units vest and become non-forfeitable. Stock
Units granted under the Plans to employees who are participants in the 2006 Executive Severance
Plan shall be administered such that a separation from service of the grantee does not result in
the acceleration of payment of a Stock Unit. As a result, Stock Units shall not be converted and
paid prior to the Vesting Date specified on the Term Sheet issued in respect of the award. The
purpose of the prior sentence is to document that, except in the case of death or termination
Within Two Years following a Change in Control, Stock Units granted to a participant in the 2006
Executive Severance Plan are paid on a date certain unless the recipient has made a specific
deferral election in writing.
6. Transition Relief
Notwithstanding the foregoing, Stock Units that have become vested on or before October 22, 2008
and have not been paid as of such date, shall, if held by an employee who is not a participant in
the Executive Severance Plan, be paid on or about February 24, 2009. This provision has been added
as of October 22, 2008 and is intended to comply with the 409A transition guidance.
7. Change in Control Provisions
In order to comply with Section 409A in connection with the payment of any Stock Units following or
in connection with a Change in Control, the following applies:
a. The definition of Change in Control in Section 18 of the Plan shall apply for purposes of
determining the extent to which an Incentive has vested.
b. Any payment provisions applicable to a Stock Unit that are conditioned upon the occurrence
of a Change in Control shall only apply if the Change in Control is also a change in the ownership
or effective control, or a change in the ownership of a substantial portion of the assets of the
Company as defined in Treasury Regulation Section 1.409A-3(i)(5).
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