Exhibit 10.5

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CVS Health Corporation

Long-Term Incentive Plan

 

1.

Purpose

The purpose of the CVS Health Long-Term Incentive Plan (the “Plan”) is to
motivate select executives to focus on the long-term financial goals of CVS
Health Corporation (the “Company”) that enhance shareholder value, while
simultaneously promoting executive retention and maintaining competitive levels
of compensation.

 

2.

Administration

The Plan shall be administered by the Management Planning and Development
Committee (the “Committee”) of the Board of Directors (the “Board”) of the
Company under the provisions of the 2010 Incentive Compensation Plan or any
successor plan, as amended (the “ICP”), where applicable.  The Committee shall
have full and final authority, in each case subject to and consistent with the
provisions of the Plan, to determine Eligible Persons, grant awards under the
Plan (each, an “Award”), and determine the amount, terms and conditions and all
other matters relating to Awards.  In addition, the Committee shall have full
and final authority, in each case subject to and consistent with the provisions
of the Plan, to construe and interpret rules and regulations for the
administration of the Plan, correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee may deem necessary or advisable for the administration of the
Plan.

 

Capitalized terms not otherwise defined herein shall have the meaning assigned
to such term(s) in the ICP.

 

3.

Eligibility 

Executives employed by the Company or its subsidiaries who are selected by the
Committee or its designate shall be eligible to receive an Award under the Plan
(an “Eligible Person”).

 

The Committee may grant Awards under the Plan that are intended to qualify as
performance-based compensation within the meaning of the rules under Section
162(m) of the Internal Revenue Code (“the Section 162(m) Rules”) and Awards that
are not intended to qualify as performance-based compensation under the Section
162(m) Rules.  In each case, the terms of each Award shall be established
pursuant to such procedures and methods as may be approved by the Committee or
its designate.

 

If (a) the Award recipient is a member of the Company’s Business Planning
Committee at the time the Award is granted and (b) the Award recipient is
expected to be a “covered employee” within the meaning of the Section 162(m)
Rules for the calendar year in which the Award is settled, any Award granted
under the Plan to the Award recipient shall  qualify as performance-based
compensation under the Section 162(m) Rules, and the initial grant and the terms
of such Award, as established and approved by the Committee, shall comply with
the Section 162(m) Rules.

 

4.

Awards

 

(a)

The Committee shall determine the Eligible Persons to whom Awards shall be
granted and the terms and conditions relating to the Awards, including but not
limited to the target amount of each Eligible Person’s Award, the range of each
Eligible Person’s Award that may be earned based on the Company’s performance,
the performance period relating to such Awards, the performance criteria that
will be used to determine if and to what

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extent such Awards may be earned by Eligible Persons participating in the Plan
and any other provisions as the Committee deems appropriate; provided,  however,
that performance criteria with respect to Awards intended to qualify as Section
162(m) performance-based compensation shall be consistent with the ICP, and such
determination shall be made within the following time frames:

 

(i)

At the beginning of any performance period and, if the Awards are  intended to
qualify as Section 162(m) performance-based compensation, not later than the
earlier of 90 days after the start of the performance period and expiration of
25% of the performance period, or

(ii)

If the Awards are not intended to qualify as Section 162(m) performance-based
compensation, then with respect to any new employee, not later than the last day
of the calendar year in which the employee commences his or her employment.

(iii)

Subject to the requirements of Section 162(m), the Company has the right to
apply negative discretion, at both the aggregate and individual award level and
in determining the amount, if any, of an award to an Eligible Participant, and
the Participant’s individual performance throughout the Plan Year will be
considered by the Company in the final determination of the Eligible
Participant’s incentive award.

 

(b)

A “performance period” shall be defined by the Committee at the time the
performance cycle for the Award is established but shall generally begin on
January 1st of a calendar year and end on a December 31st of a succeeding
calendar year (the “Performance Period”).

 

(i)

The Committee may establish, in its sole discretion, one or more periodic
performance measurement periods within a Performance Period (an “Interim
Performance Period”).

(ii)

Any Interim Performance Period(s) commencement and end date(s), corresponding
performance criteria and other relevant factors will be established to allow the
Company to deduct to the full extent possible under Section 162(m) any
compensation paid as a performance award against such pre-determined goals.

 

(c)

An Award is considered “earned” when the Committee certifies the Company’s
financial performance for the relevant performance period (an “Earned Award”)
which, with respect to Awards intended to qualify as Section 162(m)
performance-based compensation, shall be consistent with the Section 162(m)
Rules.

 

(d)

Settlement of Earned Awards.  At the end of a Performance Period, the Committee
shall determine, in its sole discretion, the Earned Award that shall be
distributed to each Eligible Person in shares of CVS Health common stock (the
“Shares”) based on the level of achievement of the relevant performance
criteria.

Any Shares to be issued in connection with an Earned Award shall be issued
pursuant to the ICP. The number of Shares issued shall be determined by dividing
the Earned Award by the closing price of the Shares (the “Fair Market Value” or
“FMV”) on the date the Award is approved by the Committee, which shall be
rounded down to the nearest whole share.

Subject to an Eligible Person’s prior election to defer any or all of the Earned
Award pursuant to Paragraph 5, the Shares payable in respect of an Earned Award
will be paid to the Eligible Person as soon as practicable after the Earned
Award is approved by the Committee and in no event later than March 15 following
the completion of the relevant performance period.  The Shares associated with
the Earned Award will be settled through

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the issuance to each Eligible Person of a certificate for Shares or such other
method of transfer of Shares as may be made in accordance with prevailing
Company practice.

 

5.  Deferral Elections

In accordance with the rules promulgated by the Committee, an Eligible Person
may elect to defer any or all of such Earned Award.

 

6.Termination of Employment

 

(a)

In the event an Eligible Person ceases to be employed by the Company and any
subsidiary of the Company prior to the completion of a Performance Period due to
an Eligible Person’s voluntary termination of employment, or the termination of
an Eligible Person by the Company for Cause, any Award granted but not yet
earned for a Performance Period shall be forfeited.  For this purpose, “Cause”
shall be deemed to occur if the Eligible Person (A) willfully and materially
breaches any of his or her obligations to the Company with respect to
confidentiality, cooperation with regard to litigation, non-disparagement and
non-solicitation; (B) is convicted of a felony involving moral turpitude; or (C)
engages in conduct that constitutes willful gross neglect or willful gross
misconduct in carrying out Eligible Person’s duties to the Company, resulting,
in either case, in material harm to the financial condition or reputation of the
Company.

 

(b)

In the event an Eligible Person ceases to be employed by the Company and any
subsidiary of the Company prior to the completion of a Performance Period by
reason of death, any Award not yet earned in accordance with Paragraph 4 shall
be prorated pursuant to Paragraph 6(f) below.

 

(c)

In the event an Eligible Person ceases to be actively employed by the Company
and any subsidiary of the Company prior to the completion of a Performance
Period due to an Eligible Person becoming totally and permanently disabled (as
defined in the Company’s Long-Term Disability Plan, or, if not defined in such
plan, as defined by the Social Security Administration) while actively employed
by Company or a subsidiary of the Company, an Award granted but not yet earned
for a Performance Period shall be prorated pursuant to Paragraph 6(f) below.

 

(d)

In the event an Eligible Person ceases to be employed by the Company and any
subsidiary of the Company, due to a Termination by the Company without Cause (as
defined above in Paragraph 6(a)) or a “Constructive Termination without Cause”
(defined below), any Award granted but not yet earned for a Performance Period
shall be prorated pursuant to Paragraph 6(f) below.  “Constructive Termination
without Cause” shall mean a termination of the Eligible Person’s employment at
his or her initiative as provided under the definition of either “Constructive
Termination without Cause” or “Termination by Executive for Good Reason” set
forth in the most recent Employment Agreement, as amended, Change in Control
Agreement, or other comparable agreement, between the Company and the Eligible
Person.  If there is no such Agreement between the Company and the Eligible
Person, then Constructive Termination without Cause shall have the same meaning
for the Eligible Person as is defined for a similarly-situated Eligible Person
in his or her Employment or Change in Control Agreement.

 

(e)

In the event an Eligible Person’s employment with the Company and any subsidiary
of the Company terminates by reason of a “Qualified Retirement,” an Award
granted but not yet earned for a Performance Period shall be prorated pursuant
to Paragraph 6(f) below. A “Qualified Retirement” shall mean termination of
employment after attainment of age fifty-five (55) with at least ten (10) years
of continuous service, or attainment of age sixty (60) with at least five (5)
years of continuous service, provided that:  (i) if Participant elects to

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terminate his or her employment voluntarily, Participant has provided the
Company with at least twelve (12) months advance notice of his or her retirement
date or such other term of advance notice as is determined by the Chief Human
Resources Officer of the Company; or (ii) if the Company elects to terminate
Participant’s employment, then such termination is without cause.
Notwithstanding the forgoing, in the event an Eligible Person is a party to an
Employment Agreement with the Company, a Qualified Retirement shall be deemed to
occur under this Paragraph if the Eligible Person’s termination of employment
qualifies as a Normal Retirement or an Approved Early Retirement under such
Employment Agreement.

 

(f)

Pro Rating

 

(i)

Subject to Paragraph 6(f)(ii), in the case of Paragraphs 6(b) and 6(c), the
Award payable will be determined based on the Eligible Person’s target award
and, in the case of Paragraphs 6(d) and 6(e), the Award payable will be
determined based on the Company’s actual performance during the applicable
Performance Period.  The amount of the Award will be calculated by multiplying
the Award amount (based on target or actual performance, as the case may be) by
the following fraction: (A) the numerator shall be the number of months elapsed
since the beginning of the Performance Period (including any partial month in
which the Eligible Person worked as a whole month) and (B) the denominator shall
be the total number of months in the Performance Period.  Any payment to an
Eligible Person under Paragraphs 6(b) and 6(c) shall be made within two and a
half months of such death or disability, as the case may be, and any payment
made under Paragraphs 6(d) and 6(e) will be made following completion of the
performance period at the same time payment is made to other Eligible Persons in
accordance with Paragraph 4(d).

(ii)

Notwithstanding the foregoing and subject to compliance with Section 409A of the
Internal Revenue Code, the Committee may provide, in its sole discretion, that
the amount payable following terminations described in Paragraphs 6(b) and 6(c)
with respect to Awards subject to the Section 162(m) Rules will be determined
based on the Company’s actual performance during the applicable Performance
Period and payable on the earlier of (i) the time payment is made to other
Eligible Persons in accordance with Paragraph 4(d) and (ii) the Company’s first
taxable year when payment would not reasonably be anticipated to result in a
loss of a tax deduction under the Section 162(m)  Rules.

 

7.Tax Withholding

The Company will withhold from an Eligible Person’s Earned Award, subject to an
Eligible Person’s election to defer all or a portion of the Earned Award, all
required federal, state and local payroll taxes, including Medicare taxes.  If
an Eligible Person’s Social Security wages have not reached the Social Security
maximum taxable wage base at the time the Earned Award is paid or Shares are
delivered, Social Security taxes will also be withheld from the Award.

If an Eligible Person elects to defer an Earned Award, the Company may require
the Eligible Person to remit to the Company in advance of the actual deferral of
such Earned Award, the required FICA withholding taxes, including Social
Security and Medicare taxes, in order to ensure compliance with the
Sarbanes-Oxley Act of 2002.

 

8.    Change in Control of the Company

Upon the occurrence of a change in control of the Company, as defined in Section
10(c) of the ICP (a “Change in Control”), the performance criteria for any
outstanding Performance Period shall be deemed to have been fully satisfied at
target and all outstanding Awards under the Plan shall be come immediately
non-forfeitable Earned Awards.  Each Eligible Person shall

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receive the Target Award for each outstanding Performance Period to be paid as
soon as administratively possible within two and a half months  of the Change in
Control, subject all applicable Plan provisions and federal regulations
governing payment of such Award(s), including but not limited to the Eligible
Person’s deferral elections, and Sections 162(m), 4999 and 409A of the Internal
Revenue Code.

 

9.  Recoupment of Awards

Except as may be specifically provided in the Award, each Award under the Plan
shall be subject to the terms of the Company’s Recoupment Policy as it exists
from time to time, which may require the Eligible Person to immediately repay to
the Company the value of any pre-tax economic benefit that he or she may derive
from the Plan.

 

10.  Miscellaneous

 

(a)

Not a Contract of Employment.  The adoption and maintenance of the Plan shall
not be deemed to be a contract of between the Company and an Eligible Person and
shall not be consideration for the employment of an Eligible Person.  Nothing
contained herein shall be deemed to give an Eligible Person the right to be
retained in the employ of the Company or to restrict the right of the Company to
discharge an Eligible Person at any time nor shall the Plan be deemed to give
the Company the right to require an Eligible Person to remain in the employ of
the Company or to restrict an Eligible Person’s right to terminate their
employment at any time.

 

(b)

Non-Assignability of Benefits.  No Eligible Person, Beneficiary or distributees
of benefits under the Plan shall have any power or right to transfer, assign,
anticipate, hypothecate or otherwise encumber any part or all of the amounts
payable hereunder, which are expressly declared to be unassignable and
nontransferable.  Any such attempted assignment or transfer shall be void.  No
amount payable hereunder shall, prior to actual payment hereof, be subject to
seizure by any creditor or any such Eligible Person, Beneficiary or other
distributees for the payment of any debt judgment or other obligation, by a
proceeding at law or in equity, nor transferable by operation of law in the
event of the bankruptcy, insolvency or death of such Eligible Person,
Beneficiary or other distributes hereunder.

 

(c)

Amendment and Termination.  The Board may amend, alter, suspend, discontinue or
terminate the Plan or the Committee’s authority to grant Awards under the Plan
without the consent of Eligible Persons, except that without the consent of an
affected Eligible Person, no such Board action may materially and adversely
affect the rights of such Eligible Person under any previously granted and
outstanding Awards. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award(s) previously granted,
except as otherwise provided in the Plan, provided that, without the consent of
an affected Eligible Person, no such Committee action may materially and
adversely affect the rights of such Eligible Person under such Award(s).

 

(d)

Compliance with Legal and Other Requirements.  Notwithstanding any Plan
provision to the contrary, the Committee may at any time impose such
restrictions on the Plan and participation therein as the Committee may deem
advisable from time to time in order to comply with or preserve compliance with
any applicable laws, including any applicable federal and state securities laws
and exemptions from registrations thereunder.

 

Further, to the extent it would not violate an applicable provision of Section
409A of the Internal Revenue Code the Company may, to the extent deemed
necessary or advisable by the Committee, postpone the issuance or delivery of
CVS Health stock or payment of other benefits under any Earned Award until
completion of such registration or qualification of such stock or other required
action under any federal or state law, rule or regulation,

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listing or other required action with respect to any stock exchange or automated
quotation system upon which such stock are listed or quoted, or compliance with
any other obligation of the Company, as the Committee may consider appropriate,
and may require any Eligible Person to make such representations, furnish such
information and comply with or be subject to such other conditions as it may
consider appropriate in connection with the issuance or delivery of stock or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.

 

(e)

Section 409A.  The Company intends that the Plan not violate any applicable
provision of, or result in any additional tax or penalty under, Section 409A of
the Internal Revenue Code, as amended, and the regulations and guidance
thereunder (collectively, “Section 409A”), and that to the extent any provisions
of the Plan do not comply with Section 409A the Company will make such changes
as it deems reasonable in order to comply with Section 409A.  In all events, the
provisions of CVS Health Corporation’s Universal 409A Definitions Document are
hereby incorporated by reference, and notwithstanding the any other provision of
the Plan or any Award to the contrary, to the extent required to avoid a
violation of the applicable rules under Section 409A by reason of Section
409A(a)(2)(B)(i) of the Internal Revenue Code (requiring certain delays for
“specified employees”), payment of any amounts subject to Section 409A shall be
delayed until the first business day of the seventh (7th) month following the
date of termination of employment.  For purposes of any provision of the Plan
providing for the payment of any amounts or benefits in connection with a
termination of employment, references to an Eligible Person’s “termination of
employment” (and corollary terms) shall be construed to refer to the Eligible
Person’s “separation from service” with the Company as determined under Section
409A.

 

(f)

Adjustments.  In the event that any dividend or other distribution (whether in
the form of cash, stock, or other property), re-capitalization, 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 appropriate
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust the number and kind of Shares of stock subject to or
deliverable in respect of outstanding Awards.

 

(g)

Limitation on Rights Conferred by Awards Granted under Plan.  Neither the Plan
nor any action taken under the Plan shall be construed as conferring on an
Eligible Person any of the rights of a shareholder of CVS Health until the
Eligible Person is duly issued or transferred Shares in accordance with the
terms of an Earned Award.

 

(h)

Unfunded Status of Awards; Creation of Trusts.  The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to an Eligible Person or obligation to
deliver stock pursuant to an Award, nothing contained in any Award shall give
any such Eligible Person any rights that are greater than those of a general
creditor of CVS Health, provided that the Committee may authorize the creation
of trusts and deposit therein cash, stock, other awards or other property, or
make other arrangements to meet CVS Health’s obligations under the Plan. Such
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 Eligible Person.

 

11.  Governing Law

The validity, construction and effect of the Plan, and any rules and regulations
under the Plan shall be determined in accordance with Delaware law, without
giving effect to principles of conflicts of laws and applicable federal law.

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