Exhibit 10.4

 

 

CVS CAREMARK CORPORATION

 

 

DEFERRED STOCK COMPENSATION PLAN

 

 

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Exhibit 10.4

CVS CAREMARK CORPORATION

 

 

Deferred Stock Compensation Plan

 

 

 

          Page

1.

   Purposes    1

2.

   Definitions    1

3.

   Administration    2

4.

   Participation    3

5.

   Deferrals    3

6.

   Deferral Accounts    4

7.

   Settlement of Deferral Accounts    5

8.

   Provisions Relation to Section 16 of the Exchange Act    6

9.

   Statements    6

10.

   Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals    6

11.

   Amendment/Termination    6

12.

   General Provisions    6

13.

   Effective Date    9

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CVS CAREMARK CORPORATION

 

 

Deferred Stock Compensation Plan

 

 

1. Purposes. The purposes of this Deferred Stock Compensation Plan (the “Plan”)
are to provide certain highly compensated employees of CVS Caremark Corporation
(the “Company”) and its subsidiaries with the opportunity to elect to defer
receipt of shares of Stock under certain Stock-based compensation plans or
arrangements.

2. Definitions. In addition to the terms defined in Section 1 above, the
following terms used in the Plan shall have the meanings set forth below:

(a) “Administrator” shall mean the Deferred Stock Compensation Committee set
forth in Section 3(b) to whom the Committee has delegated the authority to take
action under the Plan, except as may be otherwise required under Section 8.

(b) “Beneficiary” shall mean any person (which may include trusts and is not
limited to one person) who has been designated by the Participant in his or her
most recent written beneficiary designation filed with the Company to receive
the benefits specified under the Plan in the event of the Participant’s death.
If no Beneficiary has been designated who survives the Participant’s death, then
Beneficiary means the Participant’s spouse, if any; otherwise, the Participant’s
Beneficiary shall be the person named as his beneficiary under the Company’s
life insurance program.

(c) “Change in Control” shall have the meaning given to such term in
Section 10(c) of the CVS Caremark Corporation 1997 Incentive Compensation Plan.

(d) “Code” shall mean the Internal Revenue Code of 1986, as amended. References
to any provision of the Code or regulation (including a proposed regulation)
thereunder shall include any successor provisions or regulations.

(e) “Committee” shall mean the Management Planning and Development Committee of
the Board of Directors of the Company or any other directors of the Company
designated as the Committee. Except as may be otherwise required under Section 8
or by applicable law, any function of the Committee may be delegated to the
Administrator.

(f) “Deferral Account” shall mean the account or subaccount established and
maintained by the Company for Stock deferrals by a Participant, as described in
Section 6. A Deferral Account will be maintained solely as a bookkeeping entry
by the Company to evidence unfunded obligation of the Company.

(g) “Deferred Stock” shall mean a right to receive Stock at the end of a
specified deferral period.

 

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(h) “Disability” shall have the meaning given to such term in the Company’s
Long-Term Disability Plan except that with respect to a Participant’s 409A
Amount, Disability shall have the meaning described in the applicable
regulations under Section 409A of the Code.

(i) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act or rule thereunder shall include
any successor provisions or rules.

(j) “409A Amount” shall mean the part of a Participant’s Deferral Account that
is subject to Section 409A of the Code.

(k) “Participant” shall mean any employee of the Company or any subsidiary who
is designated by the Committee as an eligible Participant in the Plan and who
participates or makes an election to participate in the Plan.

(l) “Retirement” shall mean (A) for a Participant’s 409A Amount, a termination
of employment on or after (i) age 55 and the completion of 10 or more years of
service or, if earlier, (ii) age 60 and the completion of five or more years of
service and (B) for the part of a Participant’s Deferral Account which is in
excess of such Participant’s 409A Amount, the Participant’s termination of
employment (i) at or after attaining age 60 or (ii) at or after attaining age
55, but prior to attaining age 60, if such termination is approved in advance by
the Committee.

(m) “Specified Employee” shall mean “Specified Employee” as such term is defined
in the Universal 409A Definition Document.

(n) “Stock” shall mean CVS Caremark Corporation Common Stock, or any other
equity securities of the Company designated by the Committee.

(o) “Termination of Employment” shall mean “termination of employment” as such
term is defined in the Universal 409A Definition Document.

(p) “Trust” shall mean any trust or trusts established or designated by the
Company to hold Stock or other assets in connection with the Plan; provided,
however, that the assets of such trusts shall remain subject to the claims of
the general creditors of the Company.

(q) “Trustee” shall mean the trustee of a Trust.

(r) “Trust Agreement” shall mean the agreement entered into between the Company
and the Trustee to carry out the purposes of the Plan, as amended or restated
from time to time.

3. Administration

(a) Authority. Both the Committee and the Administrator (subject to the ability
of the Committee to restrict the Administrator) shall administer the Plan in
accordance with its terms, and shall have all the powers necessary to accomplish
such purpose, including the power and authority to construe and interpret the
Plan, to define the terms used herein, to prescribe, amend and rescind rules and
regulations, agreements, forms, and notices relating to the administration of
the Plan, and to make all other determinations necessary or advisable for the

 

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administration of the Plan. Any actions of the Committee or the Administrator
with respect to the Plan shall be conclusive and binding upon all persons
interested in the Plan, except that any action of the Administrator will not be
binding on the Committee. The Committee and Administrator may each appoint
agents and delegate thereto powers and duties under the Plan, except as
otherwise limited by the Plan.

(b) Administrator. The Deferred Stock Compensation Committee shall consist of
such number of members as shall be determined by the Committee, each of whom
shall be appointed by, shall remain in office at the will of, and may be
removed, with or without cause, by the Committee. Any member of the Deferred
Stock Compensation Committee may resign at any time. No member of the Deferred
Stock Compensation Committee shall be entitled to act on or decide any matter
relating solely to himself or herself or any of his or her rights or benefits
under the Plan. The members of the Deferred Stock Compensation Committee shall
not receive any special compensation for serving in their capacities as members
of the Deferred Stock Compensation Committee but shall be reimbursed for any
reasonable expenses incurred in connection therewith. No bond or other security
need be required of the Deferred Stock Compensation Committee or any member
thereof in any jurisdiction.

(c) Limitation of Liability. Each member of the Committee and the Administrator
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee of the
Company or any subsidiary, the Company’s independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. To the maximum extent permitted by law, no member of the Committee or the
Administrator, nor any person to whom ministerial duties have been delegated,
shall be liable to any person for any action taken or omitted in connection with
interpretation and administration of the Plan.

4. Participation. The administrator will notify each person of his or her
participation or eligibility to participate in the Plan not later than 15 days
(or such lesser period as may be practicable in the circumstances) prior to any
deadline for filing an election form.

5. Deferrals. To the extent authorized by the Committee, a Participant may elect
to defer any award or other compensation which is in the form of units
denominated in Stock to be received from the Company or a subsidiary, including
shares issuable in connection with annual incentive awards or long term awards.
In addition to any terms and conditions of deferral set forth under plans,
programs or arrangements from which receipt of the Stock-denominated award or
other compensation is deferred, the Committee may impose limitations on the
amounts permitted to be deferred and other terms and conditions of deferrals
under the Plan. Any such limitations, and other terms and conditions of
deferral, shall be set forth in the rules relating to the Plan or election
forms, other forms, or instructions published by the Committee and/or the
Administrator.

(a) Elections. Once an election form, properly completed, is received by the
Company, the elections of the Participant shall be irrevocable: provided
however, that subject to the requirements of Section 409A of the Code, the
Committee and/or Administrator may, in its discretion, permit a Participant to
elect a further deferral of amounts credited to a Deferral Account by filing a
later election form.

 

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(b) Date of Election. An election to defer Stock-denominated awards or other
compensation hereunder must be received by the Administrator prior to the date
specified by the Administrator. Under no circumstances may a Participant defer
Stock-denominated awards or other compensation to which the Participant has
attained, at the time of deferral, a legally enforceable right to current
receipt of such Stock-denominated awards or other compensation.

(c) Taxes. The Corporation, and/or any of its subsidiaries, is authorized to
withhold any and all amounts necessary to satisfy Social Security, Medicare, and
all other payroll taxes (other than Federal, state or local income tax
withholding) imposed on the wages of such Participant from the Company and its
subsidiaries. The Company may make provisions as it deems appropriate to
withhold such payroll taxes, including withholding cash compensation, in
connection with a Participant’s deferral or take such other action which in the
opinion of the Company is necessary to satisfy all its obligations. The Company
may require the Participant to satisfy any relevant tax requirement before
authorizing the deferral of any award or other compensation in the form of Stock
or units denominated in Stock, as described in Section 5.

6. Deferral Accounts

(a) Establishment; Crediting of Amounts Deferred. One or more Deferral Accounts
will be established for each Participant, as determined by the Administrator.
The amount of Stock-denominated awards or other compensation deferred with
respect to each Deferral Account will be credited to such Account as of the date
on which such amounts would have been paid to the Participant but for the
Participant’s election to defer receipt hereunder. Unless otherwise determined
by the Administrator, shares will be credited to the Participant’s Deferral
Account as units of Deferred Stock (as opposed to cash amounts valued by
reference to the market price of Stock). With respect to any fractional shares
of Stock-denominated awards, the Administrator shall either pay such fractional
shares to the Participant in cash, credit the Deferral Account with cash in lieu
of depositing fractional shares into the Deferral Account, or credit the
Deferral Account with a fraction of a share calculated to at least three decimal
places, all as specified at the time of the original deferral.

(b) Deferred Stock As Sole Investment Vehicle. Amounts credited as Deferred
Stock to a Participant’s Deferral Account may not be reallocated or deemed
reinvested in any other investment vehicle, but shall remain as Deferred Stock
until such time as the Deferral Account is settled in accordance with Section 7.

(c) Dividend Equivalents. Except as provided in Section 6(d), dividend
equivalents will be credited on Deferred Stock credited to a Participant’s
Deferral Account as follows:

(i) Cash and Non-Stock Dividends. If the Company declares and pays a dividend on
Stock in the form of cash or property other than shares of Stock, then a number
of additional shares of Deferred Stock shall be credited to a Participant’s
Deferral Account as of the payment date for such dividend equal to (A) the
number of shares of Deferred Stock credited to the Deferral Account as of the
record date for such dividend, multiplied by (B) the amount of cash plus the
fair market value of any property other than shares actually paid as a dividend
on each share at such payment date, divided by (C) the fair market value of a
share of Stock at such payment date.

(ii) Stock Dividends and Splits. If the Company declares and pays a dividend on
Stock in the form of additional shares of Stock, or there occurs a forward split
of

 

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Stock, then a number of additional shares of Deferred Stock shall be credited to
the Participant’s Deferral Account as of the payment date for such dividend or
forward Stock split equal to (A) the number of shares of Deferred Stock credited
to the Deferral Account as of the record date for such dividend or split,
multiplied by (B) the number of additional shares actually paid as a dividend or
issued in such split in respect of each share of Stock.

(d) Trusts. The Committee may, in its discretion, establish one or more Trusts
(including sub-accounts under such Trusts), and deposit therein shares of Stock
equal in number to the number of shares of Deferred Stock then credited to a
Participant’s Deferral Account (or a specified subaccount). In such case, the
provisions of Section 6(c) notwithstanding, the dividend equivalents payable on
the Participant’s Deferred Stock shall be equal to the actual dividends paid on
the shares deposited in such Trust (which dividends shall be reinvested by the
Trustee in additional shares of Stock), and shares may be delivered in
settlement of the Participant’s Deferred Stock from the assets in such Trusts.
The Participant’s rights with respect to directing the voting of shares held in
such Trust or otherwise relating to such shares shall be determined by the
Administrator in its discretion.

7. Settlement of Deferral Accounts.

(a) Form of Payment. The Company shall settle a Participant’s Deferral Account,
and discharge all of its obligations to pay deferred compensation under the Plan
with respect to such Deferral Account, by delivery of shares of Stock, including
shares of Stock delivered out of the assets of the Trust.

(b) Forfeited Stock. To the extent that Stock (i) is deposited in a Trust
pursuant to Section 6 in connection with a deferral of a Stock-denominated award
under another plan, program, employment agreement or other arrangement and
(ii) is forfeited pursuant to the terms of such plan, program, agreement or
arrangement, the Participant shall not be entitled to the value of such Stock
and other property related thereto (including without limitation, dividends
thereon) or other award or amount, or proceeds thereof. Any Stock or
Stock-denominated awards (and proceeds thereof) forfeited shall be returned to
the Company.

(c) Timing of Payments. Payments in settlement of a Deferral Account shall be
made at the date or dates (including upon the occurrence of specified events),
and in such number of installments, as may be directed by the Participant in his
or her election relating to such Deferral Account, or earlier in the following
circumstances:

(i) In the event of termination of employment for reasons other than Retirement
or Disability, a single lump sum payment in settlement of any Deferral Account
(including a Deferral Account with respect to which one or more installment
payments have previously been made) shall be made in the month following such
termination; or

(ii) In the event of a Change in Control, payments in settlement of any Deferral
Account (including a Deferral Account with respect to which one or more
installment payments have previously been made) shall be made within fifteen
(15) business days following such Change in Control.

 

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(d) Financial Emergency and Other Payments. Other provisions of the Plan (except
Section 8) notwithstanding, if, upon the written application of a Participant,
the Committee determines that the Participant has a Unforeseeable Emergency, as
defined in the Universal 409A Definition Document, the Committee may direct the
payment to the Participant of all or a portion of the balance of a Deferral
Account, but only to the extent necessary to meet such emergency, including
federal, state and local taxes with respect to such payment.

8. Provisions Relating to Section 16 of the Exchange Act.

With respect to a Participant who is then subject to the reporting requirements
of Section 16(a) of the Exchange Act, the Committee and Administrator shall
implement transactions under the Plan and administer the Plan in a manner that
will ensure that each transaction by such a Participant is exempt from or
otherwise not subject to liability under Rule 16b-3, except that such a
Participant may be permitted to engage in a non-exempt transaction under the
Plan if written notice is given to the Participant regarding the non-exempt
nature of such transaction.

9. Statements. The Administrator will furnish statements to each Participant
reflecting the amount credited to a Participant’s Deferral Accounts and
transactions therein not less frequently than once each calendar year.

10. Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals. If
shares of Stock are deposited under the Plan in a Trust pursuant to Section 6 in
connection with a deferral of a Stock-denominated award under another plan,
program, employment agreement or other arrangement that provides for the
issuance of shares, the shares so deposited shall be deemed to have originated,
and shall be counted against the number of shares reserved, under such other
plan, program or arrangement. Shares of Stock actually delivered in settlement
of Deferral Accounts shall be originally issued shares or treasury shares, in
the discretion of the Committee.

11. Amendment/Termination. The Committee may, with prospective or retroactive
effect, amend, alter, suspend, discontinue the Plan at any time without the
consent of Participants, stockholders, or any other person; provided, however,
that, without the consent of a Participant, no such action shall materially and
adversely affect the rights of such Participant with respect to any rights to
payment of amounts credited to such Participant’s Deferral Account.
Notwithstanding the foregoing, to the extent consistent with the rules relating
to plan terminations and liquidations in Treas. Reg. Section 1.409A-3(j)(4)(ix)
or otherwise consistent with Code Section 409A, the Committee may terminate the
Plan at any time and in that event the Committee may provide that, without the
prior written consent of Participants, the Participants’ Deferral Account shall
be distributed in a single payment in shares upon termination of the Plan.

12. General Provisions.

(a) Limits on Transfer of Awards. Other than by will or the laws of descent and
distribution, no right, title, or interest of any kind in the Plan shall be
transferable or assignable by a Participant or his or her Beneficiary or be
subject to alienation, anticipation, encumbrance, garnishment, attachment, levy,
execution or other legal or equitable process, nor subject to the debts,
contracts, liabilities or engagements, or torts of any Participant or his or her
Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge, garnish,
attach or take any action subject to legal or equitable process or encumber or
dispose of any interest in the Plan shall be void.

 

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(b) Receipt and Release. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the awards or other
compensation deferred and relating to the Deferral Account to which the payments
relate against the Company or any subsidiary thereof, the Committee, or the
Administrator. In the case of any payment under the Plan of less than all
amounts then credited to an account in the form of Stock, the amounts paid shall
be deemed to relate to the Stock credited to the account at the earliest time.

(c) Unfunded Status of Awards: Creation of Trusts. The Plan is intended to
constitute an “unfunded” plan for deferred compensation and Participants shall
rely solely on the unsecured promise of the Company for payment hereunder. With
respect to any payment not yet made to a Participant under the Plan, nothing
contained in the Plan shall give a Participant any rights that are greater than
those of a general unsecured creditor of the Company; provided, however, that
the Committee may authorize the creation of Trusts, including but not limited to
the Trusts referred to in Section 6 hereof, or make other arrangements to meet
the Company’s obligations under the Plan, which Trusts or other arrangements
shall be consistent with the “unfunded’ status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.

(d) Compliance.

(i) The Company shall impose such restrictions on Stock delivered to a
Participant hereunder and any other interest constituting a security as it may
deem advisable in order to comply with the Securities Act of 1933, as amended,
the requirements of the New York Stock Exchange or any other stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
applicable state securities laws, any provision of the Company’s Certificate of
Incorporation or Bylaws, or any other law, regulation, or binding contract to
which the Company is a party.

(ii) With respect to 409A Amounts, the Plan is intended to comply with the
requirements of Code Section 409A and the provisions hereof shall be interpreted
in a manner that satisfies the requirements of Code Section 409A and the
regulations thereunder, and the Plan shall be operated accordingly. If any
provision of the Plan would otherwise frustrate or conflict with this intent,
the provision will be interpreted and deemed amended so as to avoid this
conflict. With respect to a Participant who is a Specified Employee as of the
date of his Termination of Employment for reasons other than death, payment of
any portion of his 409A Amount on account of his Termination of Employment will
be delayed until the first day of the seventh month following the date such
Termination of Employment occurs.

(e) Other Participant Rights. No Participant shall have any of the rights or
privileges of a stockholder of the Company under the Plan, including as a result
of the crediting of Stock-denominated units or other amounts to a Deferral
Account, or the creation of any Trust and deposit of such Stock therein, except
at such time as Stock may be actually delivered in settlement of a Deferral
Account. No provision of the Plan or transaction hereunder shall confer upon any
Participant any right to be employed by the Company or a subsidiary thereof, or
to interfere in any way with the right of the Company or a subsidiary to
increase or decrease the

 

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amount of compensation payable to such Participant. Subject to the limitations
set forth in Section 12(a) hereof, the Plan shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and assigns.

(f) Tax Withholding. The Company and any subsidiary shall have the right to
deduct from amounts otherwise payable in settlement of a Deferral Account any
sums that federal, state, local or foreign tax law requires to be withheld with
respect to such payment. Shares may be withheld to satisfy such obligations in
any case where taxation would be imposed upon the delivery of shares, except
that shares issued or delivered under any plan, program, employment agreement or
other arrangement may be withheld only in accordance with the terms of such
plan, program, employment agreement or other arrangement and any applicable
rules, regulations, or resolutions thereunder.

(g) Governing Law. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Rhode Island, without giving effect to principles
of conflicts of laws, and applicable provisions of federal law.

(h) Limitation. A Participant and his or her Beneficiary shall assume all risk
in connection with any decrease in value of the Deferral Account and neither the
Company, the Committee nor the Administrator shall be liable or responsible
therefor.

(i) Adjustments. In the event that any dividend or other distribution (whether
in the form of cash, Stock, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution or other similar corporate
transaction or event affects the Stock such that an adjustment is determined by
the Administrator or the Committee to be appropriate in order to prevent
dilution or enlargement of a Participant’s rights under the Plan, then the
Administrator or the Committee shall, in such manner as it may deem equitable,
adjust any or all of the number and kind of shares of Stock to be issued upon
settlement of Deferred Stock then credited to a Deferral Account under the Plan.

(j) Construction. The captions and numbers preceding the sections of the Plan
are included solely as a matter of convenience of reference and are not to be
taken as limiting or extending the meaning of any of the terms and provisions of
the Plan. Whenever appropriate, words used in the singular shall include the
plural or the plural may be read as the singular.

(k) Acceleration of or Delay in Payments. The Administrator, in its sole and
absolute discretion, may elect to accelerate the time or form of payment of a
benefit owed to the Participant hereunder, provided such acceleration is
permitted under Treas. Reg. Section 1.409A-3(j)(4) and any subsequent guidance.
The Administrator may also, in its sole and absolute discretion, delay the time
for payment of a benefit owed to the Participant hereunder, to the extent
permitted under Treas. Reg. Section 1.409A-2(b)(7) and any subsequent guidance.

(l) Severability. In the event that any provision of the Plan shall be declared
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions of the Plan but shall be fully severable, and
the Plan shall be construed and enforced as if said illegal or invalid provision
had never been inserted herein.

 

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(m) Status. The establishment and maintenance of, or allocations and credits to,
the Deferral Account of any Participant shall not vest in any Participant any
right, title, or interest in and to any Plan or Company assets or benefits
except at the time or times and upon the terms and conditions and to the extent
expressly set forth in the Plan and in accordance with the terms of the Trust.

13. Effective Date. The Plan shall be effective as of September 10, 1997.

 

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