EMPLOYMENT AGREEMENT



 Exhibit 10.1 
  
 CVS CORPORATION 
  


 
 Employment Agreement for Thomas Ryan 
  










 CVS Corporation 
  

  
 Employment Agreement for Thomas Ryan 
  

  

			
	 	  	Page


	 1.      Definitions
	  	1
		
	 2.      Term of Employment
	  	2
		
	 3.      Position, Duties and Responsibilities
	  	3
		
	 4.      Base Salary
	  	4
		
	 5.      Annual Incentive Awards
	  	4
		
	 6.      Long-Term Stock Incentive Awards
	  	4
		
	 7.      Employee Benefit Programs
	  	4
		
	 8.      Disability
	  	6
		
	 9.      Reimbursement of Business and Other Expenses
	  	7
		
	 10.    Termination of Employment
	  	7
		
	 11.    Confidentiality; Cooperation with Regard to Litigation; Non-disparagement
	  	19
		
	 12.    Non-competition
	  	21
		
	 13.    Non-solicitation
	  	22
		
	 14.    Remedies
	  	23
		
	 15.    Resolution of Disputes
	  	23
		
	 16.    Indemnification
	  	23
		
	 17.    Excise Tax Gross-Up
	  	25
		
	 18.    Effect of Agreement on Other Benefits
	  	27
		
	 19.    Assignability; Binding Nature
	  	27
		
	 20.    Representation
	  	28
		
	 21.    Entire Agreement
	  	28
		
	 22.    Amendment or Waiver
	  	28
		
	 23.    Severability
	  	28
		
	 24.    Survivorship
	  	29
		
	 25.    Beneficiaries/References
	  	29
		
	 26.    Governing Law/Jurisdiction
	  	29
		
	 27.    Notices
	  	29
		
	 28.    Headings
	  	30
		
	 29.    Counterparts
	  	30










 EMPLOYMENT AGREEMENT 
  
 AGREEMENT, made and entered into as of the 4th day of December, 1996 by and between CVS Corporation, a Delaware corporation
(together with its successors and assigns, the “Company”), and Thomas Ryan (the “Executive”). 
  
 WITNESSETH: 
  
 WHEREAS, the Company desires to employ the Executive pursuant to an agreement embodying the terms of such employment (this “Agreement”) and the Executive desires to enter into this Agreement and to accept such employment, subject
to the terms and provisions of this Agreement; 
  
 NOW, THEREFORE,
in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a “Party” and together the
“Parties”) agree as follows: 
  
 1. Definitions.

  
 (a) “Approved Early Retirement”
shall have the meaning set forth in Section 10(f) below. 
  
 (b) “Base Salary” shall have the meaning set forth in Section 4 below. 
  
 (c) “Board” shall have the meaning set forth in Section 3(a) below. 
  
 (d) “Cause” shall have the meaning set forth in
Section 10(b) below. 
  
 (e) “Change in
Control” shall have the meaning set forth in Section 10(c) below. 
  
 (f) “Committee” shall have the meaning set forth in Section 4 below. 
  
 (g) “Confidential Information” shall have the meaning set forth in Section 11(c) below. 
  
 (h) “Constructive Termination Without Cause” shall
have the meaning set forth in Section 10(c) below. 
  
 (i) “Effective Date” shall have the meaning set forth in Section 2(a) below. 









 (j) “Normal Retirement” shall have the meaning set forth in Section 10(f)
below. 
  
 (k) “Original Term of
Employment” shall have the meaning set forth in Section 2(a) below. 
  
 (l) “Renewal Term” shall have the meaning set forth in Section 2(a) below. 
  
 (m) “Restriction Period” shall have the meaning set forth in Section 12(b) below. 
  
 (n) “Severance Period” shall have the meaning set
forth in Section 10(c)(ii) below, except as provided otherwise in Section 10(e) below. 
  
 (o) “Subsidiary” shall have the meaning set forth in Section 11(d) below. 
  
 (p) “Term of Employment” shall have the meaning
set forth in Section 2(a) below. 
  
 (q)
“Termination Without Cause” shall have the meaning set forth in Section 10(c) below. 
  
 2. Term of Employment. 
  
 (a) The term of the Executive’s employment under this Agreement shall commence on the date of this Agreement (the “Effective
Date”) and end on the third anniversary of such date (the “Original Term of Employment”), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms
(the “Renewal Terms”) unless at least 180 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the
expiration of the then current Term of Employment. “Term of Employment” shall mean the Original Term of Employment and all Renewal Terms. If a Change in Control shall have occurred during the Term of Employment, notwithstanding any other
provision of this Section 2(a), the Term of Employment shall not expire earlier than two years after such Change in Control. 
  
 (b) In the event that this Agreement is not renewed because the Company has given the 180-day notice prescribed in the preceding paragraph
on or before the expiration of the Original Term of Employment or any Renewal Term and, in either case, should such notice result in the expiration of the Term of Employment prior to the Executive’s 60th 

  

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birthday, such non-renewal shall be treated as a “Constructive Termination Without Cause” pursuant to Section 10(c). 
  
 (c) Notwithstanding anything in this Agreement to the
contrary, at least one year prior to the expiration of the Original Term of Employment, upon the written request of the Company or the Executive, the Parties shall meet to discuss this Agreement and may agree in writing to modify any of the terms of
this Agreement. 
  
 3. Position, Duties and
Responsibilities. 
  
 (a) Generally.
Executive shall serve as Vice Chairman and Chief Operating Officer of the Company, as a member of the Board of Directors of the Company, and as President and Chief Executive Officer of CVS Pharmacy, Inc. For so long as he is serving on the Board of
Directors of the Company (the “Board”), Executive agrees to serve as a member of any committee of the Board if the Board shall elect Executive to such positions. In any and all such capacities, Executive shall report only to the Board.
Executive shall have and perform such duties, responsibilities, and authorities as are customary for the vice chairman and chief operating officer of corporations of similar size and businesses as the Company, and as are customary for the president
and chief executive officer of corporations of similar size and businesses as CVS Pharmacy, Inc., as they each may exist from time to time and as are consistent with such positions and status. Executive shall devote substantially all of his business
time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the positions of Vice Chairman and Chief Operating Officer and for the businesses of the Company and to the
positions of President and Chief Executive Officer of CVS Pharmacy, Inc. and for the businesses of CVS Pharmacy, Inc. 
  
 (b) Other Activities. Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude the Executive from
(i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs,
and (iii) managing his personal investments and affairs, provided that such activities do not materially interfere with the proper performance of his duties and responsibilities under this Agreement. 
  
 (c) Place of Employment. Executive’s principal
place of employment shall be the corporate offices of the Company. 
  

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 (d) Rank of Executive Within Company. As Vice Chairman and Chief Operating Officer
of CVS Corporation, Executive shall be the second highest-ranking executive of CVS Corporation; and as President and Chief Executive Officer of CVS Pharmacy, Inc., Executive shall be the highest ranking executive of CVS Pharmacy Inc. 
  
 4. Base Salary. 
  
 The Executive shall be paid an annualized salary (“Base Salary”),
payable in accordance with the regular payroll practices of the Company, of not less than $600,000, subject to review for increase at the discretion of the Compensation Committee (the “Committee”) of the Company’s Board of Directors
(the “Board”). 
  
 5. Annual Incentive Awards.

  
 The Executive shall participate in the Company’s annual
incentive compensation plan with a target annual incentive award opportunity of no less than 65% of Base Salary. Payment of annual incentive awards shall be made at the same time that other senior-level executives receive their incentive awards.

  
 6. Long-Term Incentive Programs. 
  
 The Executive shall be eligible to participate in the Company’s
long-term incentive compensation programs (including stock options and stock grants). 
  
 7. Employee Benefit Programs. 
  
 (a) General Benefits. During the Term of Employment, the Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of the Company as are made available to the
Company’s senior-level executives or to its employees generally, as such plans or programs may be in effect from time to time, including, without limitation, health, medical, dental, long-term disability, travel accident and life insurance
plans. 
  
 (b) Deferral of Compensation.
The Company shall implement deferral arrangements, reasonably acceptable to Executive and the Company, permitting Executive to elect to defer receipt, pursuant to written deferral election terms and forms (the “Deferral Election Forms”),
of all or a specified portion of (i) his annual Base Salary and annual incentive compensation under Sections 4 and 5, (ii) long term incentive compensation under Section 6 and (iii) shares acquired upon exercise of options to
purchase Company common stock that are acquired in an exercise in which Executive pays the exercise price by the surrender of 

  

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previously acquired shares, to the extent of the net additional shares otherwise issuable to Executive in such exercise; provided, however,
that such deferrals shall not reduce Executive’s total cash compensation in any calendar year below the sum of (i) the FICA maximum taxable wage base plus (ii) the amount needed, on an after-tax basis, to enable Executive to pay the
1.45% medicare tax imposed on his wages in excess of such FICA maximum taxable wage base. 
  
 In accordance with such duly executed Deferral Election Forms, the Company shall credit to a bookkeeping account (the “Deferred Compensation Account”) maintained for Executive on the respective payment date
or dates, amounts equal to the compensation subject to deferral, such credits to be denominated in cash if the compensation would have been paid in cash but for the deferral or in shares if the compensation would have been paid in shares but for the
deferral. An amount of cash equal in value to all cash-denominated amounts credited to Executive’s account and a number of shares of Company common stock equal to the number of shares credited to Executive’s account pursuant to this
Section 7(b) shall be transferred as soon as practicable following such crediting by the Company to, and shall be held and invested by, an independent trustee selected by the Company and reasonably acceptable to Executive (a
“Trustee”) pursuant to a “rabbi trust” established by the Company in connection with such deferral arrangement and as to which the Trustee shall make investments based on Executive’s investment objectives (including possible
investment in publicly traded stocks and bonds, mutual funds, and insurance vehicles). Thereafter, Executive’s deferral accounts will be valued by reference to the value of the assets of the “rabbi trust”. The Company shall pay all
costs of administration or maintenance of the deferral arrangement, without deduction or reimbursement from the assets of the “rabbi trust.” 
  
 Except as otherwise provided under Section 10, in the event of Executive’s termination of employment with the Company or as otherwise determined
by the Committee in the event of hardship on the part of Executive, upon such date(s) or event(s) set forth in the Deferral Election Forms (including forms filed after deferral but before settlement in which Executive may elect to further defer
settlement), the Company shall promptly pay to Executive cash equal to the value of the assets then credited to Executive’s deferral accounts, less applicable withholding taxes, and such distribution shall be deemed to fully settle such
accounts; provided, however, that the Company may instead settle such accounts by directing the Trustee to distribute Company common stock and/or other assets of the “rabbi trust.” The Company and Executive agree that
compensation deferred pursuant to this Section 7(b) shall be fully vested and nonforfeitable; however, Executive acknowledges that his rights to the deferred compensation provided for in this Section 7(b) shall be no greater than
those of a general unsecured creditor of the Company, and that such rights may not be pledged, collateralized, encumbered, hypothecated, or liable for or subject to any lien, obligation, or liability of Executive, or be assignable or transferable by


  

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Executive, otherwise than by will or the laws of descent and distribution, provided that Executive may designate one or more beneficiaries to receive any
payment of such amounts in the event of his death. 
  
 8.
Disability. 
  
 (a) During the Term of
Employment, as well as during the Severance Period, the Executive shall be entitled to disability coverage as described in this Section 8(a). In the event the Executive becomes disabled, as that term is defined under the Company’s
Long-Term Disability Plan, the Executive shall be entitled to receive pursuant to the Company’s Long-Term Disability Plan or otherwise, and in place of his Base Salary, an amount equal to 60% of his Base Salary, at the annual rate in effect on
the commencement date of his eligibility for the Company’s long-term disability benefits (“Commencement Date”) for a period beginning on the Commencement Date and ending with the earlier to occur of (A) the Executive’s
attainment of age 65 or (B) the Executive’s commencement of retirement benefits from the Company in accordance with Section 10(f) below. If (i) the Executive ceases to be disabled during the Term of Employment (as determined in
accordance with the terms of the Long-Term Disability Plan), (ii) his position or another senior executive position is then vacant and (iii) the Company requests in writing that he resume such position, he may elect to resume such position
by written notice to the Company within 15 days after the Company delivers its request. If he resumes such position, he shall thereafter be entitled to his Base Salary at the annual rate in effect on the Commencement Date and, for the year he
resumes his position, a pro rata annual incentive award. If he ceases to be disabled during the Term of Employment and does not resume his position in accordance with the preceding sentence, he shall be treated as if he voluntarily terminated his
employment pursuant to Section 10(d) as of the date the Executive ceases to be disabled. If the Executive is not offered his position or another senior executive position after he ceases to be disabled during the Term of Employment, he shall be
treated as if his employment was terminated Without Cause pursuant to Section 10(c) as of the date the Executive ceases to be disabled; provided, however, that if a Change in Control shall have occurred during the period of the
Executive’s disability, he shall be treated as if his employment was terminated Without Cause following a Change in Control pursuant to Section 10(e) as of the date the Executive ceases to be disabled. 
  
 (b) The Executive shall be entitled to a pro rata annual
incentive award for the year in which the Commencement Date occurs based on 65% of Base Salary paid to him during such year prior to the Commencement Date, payable in a lump sum not later than 15 days after the Commencement Date. The Executive shall
not be entitled to any annual incentive award with respect to the period following the Commencement Date. If the Executive recommences his position in 

  

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accordance with Section 8(a), he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be
entitled to annual incentive awards in accordance with Section 5 hereof. 
  
 (c) During the period the Executive is receiving disability benefits pursuant to Section 8(a) above, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which
he was participating on the Commencement Date, including without limitation, the benefits and entitlements referred to in Sections 6 and 7 above, except that the Executive shall not be entitled to receive any annual salary increases or any new
long-term incentive plan grants following the Commencement Date. 
  
 9. Reimbursement of Business and Other Expenses. 
  
 The Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all business expenses incurred in connection therewith, subject
to documentation in accordance with the Company’s policy. During the Term of Employment, the Company shall reimburse the Executive, upon demand, for out-of-pocket expenses incurred in connection with personal financial and tax planning up to a
maximum of $15,000 per annum. The Company shall pay or reimburse the Executive for the expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by him in conjunction with preparation and negotiation of this
Agreement and any related documents up to a maximum of $10,000. 
  
 10. Termination of Employment. 
  
 (a) Termination Due to Death. In the event the Executive’s employment with the Company is terminated due to his death, his estate or his beneficiaries, as the case may be, shall be entitled to and their sole remedies under this
Agreement shall be: 
  
 (i) Base Salary through
the date of death, which shall be paid in a cash lump sum not later than 15 days following the Executive’s death; 
  
 (ii) pro rata annual incentive award for the year in which the Executive’s death occurs assuming that the Executive would have
received an award equal to 65% of Base Salary for such year, which shall be payable in a cash lump sum promptly (but in no event later than 15 days) after his death; 
  

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 (iii) elimination of all restrictions on any restricted or deferred stock awards
outstanding at the time of his death (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  
 (iv) immediate vesting of all outstanding stock options and the right to exercise such stock options for a
period of one year following death or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  
 (v) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following the Executive’s death; 
  
 (vi) settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation plan or election
form; and 
  
 (vii) other or additional benefits
then due or earned in accordance with applicable plans and programs of the Company. 
  
 (b) Termination by the Company for Cause. 
  

(i) “Cause” shall mean: 
  
 (A) the Executive’s willful and material breach of Sections 11, 12 or 13 of this Agreement; 
  
 (B) the Executive is convicted of a felony involving moral
turpitude; or 
  
 (C) the Executive engages in
conduct that constitutes willful gross neglect or willful gross misconduct in carrying out his duties under this Agreement, resulting, in either case, in material harm to the financial condition or reputation of the Company. 
  
 For purposes of this Agreement, an act or failure to act on Executive’s part shall be
considered “willful” if it was done or omitted to be done by him not in good faith, and shall not include any act or failure to act resulting from any incapacity of Executive. 
  

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 (ii) A termination for Cause shall not take effect unless the provisions of this
paragraph (ii) are complied with. The Executive shall be given written notice by the Company of its intention to terminate him for Cause, such notice (A) to state in detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is based and (B) to be given within 90 days of the Company’s learning of such act or acts or failure or failures to act. The Executive shall have 20 days after the date
that such written notice has been given to him in which to cure such conduct, to the extent such cure is possible. If he fails to cure such conduct, the Executive shall then be entitled to a hearing before the Committee of the Board at which the
Executive is entitled to appear. Such hearing shall be held within 25 days of such notice to the Executive, provided he requests such hearing within 10 days of the written notice from the Company of the intention to terminate him for Cause. If,
within five days following such hearing, the Executive is furnished written notice by the Board confirming that, in its judgment, grounds for Cause on the basis of the original notice exist, he shall thereupon be terminated for Cause. 
  
 (iii) In the event the Company terminates the
Executive’s employment for Cause, he shall be entitled to and his sole remedies under this Agreement shall be: 
  
 (A) Base Salary through the date of the termination of his employment for Cause, which shall be paid in a cash lump sum not later than 15
days following the Executive’s termination of employment; 
  
 (B) any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following the Executive’s termination of employment;

  
 (C) settlement of all deferred compensation
arrangements in accordance with any then applicable deferred compensation plan or election form; and 
  
 (D) other or additional benefits then due or earned in accordance with applicable plans or programs of the Company. 
  
 (c) Termination Without Cause or Constructive Termination
Without Cause Prior to Change in Control. In the event the Executive’s 

  

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employment with the Company is terminated without Cause (which termination shall be effective as of the date specified by the Company in a written notice to
the Executive), other than due to death, or in the event there is a Constructive Termination Without Cause (as defined below), in either case prior to a Change in Control (as defined below) the Executive shall be entitled to and his sole remedies
under this Agreement shall be: 
  
 (i) Base
Salary through the date of termination of the Executive’s employment, which shall be paid in a cash lump sum not later than 15 days following the Executive’s termination of employment; 
  
 (ii) Base Salary, at the annualized rate in effect on the
date of termination of the Executive’s employment (or in the event a reduction in Base Salary is a basis for a Constructive Termination Without Cause, then the Base Salary in effect immediately prior to such reduction), for a period of 36
months (the “Severance Period”); 
  
 (iii) pro rata annual incentive award for the year in which termination occurs equal to 65% of Base Salary (determined in accordance with Section 10(c)(ii) above) for such year, payable in a cash lump sum promptly (but in no event
later than 15 days) following termination; 
  
 (iv) an amount equal to 65% of Base Salary (determined in accordance with Section 10(c)(ii) above) multiplied by three, payable in equal monthly payments over the Severance Period; 
  
 (v) elimination of all restrictions on any restricted or
deferred stock awards outstanding at the time of termination of employment (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  
 (vi) any outstanding stock options which are unvested shall
vest and the Executive shall have the right to exercise any vested stock options during the Severance Period or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be
governed by the terms of such awards); 
  
 (vii)
the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following the Executive’s termination of employment; 
  

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 (viii) immediate vesting of the Executive’s accrued benefits under any supplemental
retirement benefit plan (“SERP”) maintained by the Company, with payment of such benefits to be made in accordance with the terms and conditions of the SERP; 
  
 (ix) settlement of all deferred compensation arrangements in accordance with any then applicable deferred
compensation plan or election form; 
  
 (x)
continued participation in all medical, health and life insurance plans at the same benefit level at which he was participating on the date of the termination of his employment until the earlier of: 
  
 (A) the end of the Severance Period; or 
  
 (B) the date, or dates, he receives equivalent coverage and
benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis); provided that (1) if the Executive is precluded from continuing his
participation in any employee benefit plan or program as provided in this clause (x) of this Section 10(c), he shall receive cash payments equal on an after-tax basis to the cost to him of obtaining the benefits provided under the plan or
program in which he is unable to participate for the period specified in this clause (x) of this Section 10(c), (2) such cost shall be deemed to be the lowest reasonable cost that would be incurred by the Executive in obtaining such
benefit himself on an individual basis, and (3) payment of such amounts shall be made quarterly in advance; and 
  
 (xi) other or additional benefits then due or earned in accordance with applicable plans and programs of the Company. 
  
 “Termination Without Cause” shall mean the Executive’s
employment is terminated by the Company for any reason other than Cause (as defined in Section 10(b)) or due to death. 
  

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 “Constructive Termination Without Cause” shall mean a termination of the Executive’s
employment at his initiative as provided in this Section 10(c) following the occurrence, without the Executive’s written consent, of one or more of the following events (except as a result of a prior termination): 
  
 (A) a material diminution or change, adverse to Executive,
in Executive’s positions, titles, or offices as set forth in Section 3(a), status, rank, nature of responsibilities, or authority within the Company, or a removal of Executive from or any failure to elect or re-elect or, as the case may
be, nominate Executive to any such positions or offices, including as a member of the Board; 
  
 (B) an assignment of any duties to Executive which are inconsistent with his status as Vice Chairman and Chief Operating Officer of the
Company and other positions held under Section 3(a); 
  
 (C) a decrease in Executive’s annual Base Salary or target annual incentive award opportunity below 65% of Base Salary; 
  
 (D) any other failure by the Company to perform any material obligation under, or breach by the Company of any material provision of,
this Agreement that is not cured within 30 days; 
  
 (E) a relocation of the corporate offices of the Company outside a 35-mile radius of Woonsocket, Rhode Island; or 
  
 (F) any failure to secure the agreement of any successor corporation or other entity to the Company to fully assume the Company’s
obligations under this Agreement. 
  
 A “Change in
Control” shall be deemed to have occurred if: 
  
 (i) any Person (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company immediately prior to
the occurrence with respect to which the evaluation is being made in substantially the same proportions as their ownership of 

  

 12 








 
the common stock of the Company) becomes the Beneficial Owner (except that a Person shall be deemed to be the Beneficial Owner of all shares that any such
Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants or options or otherwise, without regard to the sixty day period referred to in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company or any Significant Subsidiary (as defined below), representing 25% or more of the combined voting power of the Company’s or such subsidiary’s then outstanding securities; 
  
 (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of
this paragraph) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so approved but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or
Person other than the Board, cease for any reason to constitute at least a majority of the Board; 
  
 (iii) the consummation of a merger or consolidation of the Company or any subsidiary owning directly or indirectly all or substantially
all of the consolidated assets of the Company (a “Significant Subsidiary”) with any other entity, other than a merger or consolidation which would result in the voting securities of the Company or a Significant Subsidiary outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or resulting entity) more than 50% of the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation; 
  
 (iv) the stockholders of the Company approve a plan or agreement for the sale or disposition of all or substantially all of the consolidated assets of the Company (other than such a sale or disposition immediately
after which such assets will be owned directly or indirectly by the stockholders of the Company in 

  

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substantially the same proportions as their ownership of the common stock of the Company immediately prior to such sale or disposition) in which case the
Board shall determine the effective date of the Change in Control resulting therefrom; or 
  
 (v) any other event occurs which the Board determines, in its discretion, would materially alter the structure of the Company or its
ownership. 
  
 For purposes of this definition: 
  
 (A) The term “Beneficial Owner” shall have the
meaning ascribed to such term in Rule 13d-3 under the Exchange Act (including any successor to such Rule). 
  
 (B) The term “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act
thereto. 
  
 (C) The term “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including “group” as defined in Section 13(d) thereof. 
  
 (d) Voluntary Termination. In the event of a
termination of employment by the Executive on his own initiative after delivery of 10 business days advance written notice, other than a termination due to death, a Constructive Termination Without Cause, or Approved Early Retirement or Normal
Retirement pursuant to Section 10(f) below, the Executive shall have the same entitlements as provided in Section 10(b)(iii) above for a termination for Cause, provided that at the Company’s election, furnished in writing to the
Executive within 15 days following such notice of termination, the Company shall in addition pay the Executive 50% of his Base Salary for a period of 18 months following such termination in exchange for the Executive not engaging in competition with
the Company or any Subsidiary as set forth in Section 12(a) below. Notwithstanding any implication to the contrary, the Executive shall not have the right to terminate his employment with the Company during the Term of Employment except in the
event of a Constructive Termination Without Cause, Approved Early Retirement, or Normal Retirement, and any voluntary termination of employment during the Term of Employment in violation of this Agreement shall be considered a material breach.

  

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 (e) Termination Without Cause; Constructive Termination Without Cause or Voluntary
Termination Following Change in Control. In the event the Executive’s employment with the Company is terminated by the Company without Cause (which termination shall be effective as of the date specified by the Company in a written
notice to the Executive), other than due to death, or in the event there is a Constructive Termination Without Cause (as defined above), in either case within two years following a Change in Control (as defined above), the Executive shall be
entitled to and his sole remedies under this Agreement shall be: 
  
 (i) Base Salary through the date of termination of the Executive’s employment, which shall be paid in a cash lump sum not later than 15 days following the Executive’s termination of employment; 

 
 (ii) an amount equal to three times the Executive’s
Base Salary, at the annualized rate in effect on the date of termination of the Executive’s employment (or in the event a reduction in Base Salary is a basis for a Constructive Termination Without Cause, then the Base Salary in effect
immediately prior to such reduction), payable in a cash lump sum promptly (but in no event later than 15 days) following the Executive’s termination of employment; 
  
 (iii) pro rata annual incentive award for the year in which termination occurs assuming that the Executive
would have received an award equal to 65% of Base Salary (determined in accordance with Section 10(e)(ii) above) for such year, payable in a cash lump sum promptly (but in no event later than 15 days) following the Executive’s termination
of employment; 
  
 (iv) an amount equal to three
times the higher of (A) 65% of such Base Salary (determined in accordance with Section 10(e)(ii) above) or (B) the average cash bonus payable to the Executive for the three years preceding the Change in Control, payable in a cash lump
sum promptly (but in no event later than 15 days) following the Executive’s termination of employment; 
  
 (v) elimination of all restrictions on any restricted or deferred stock awards outstanding at the time of termination of employment (other
than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  

 15 








 (vi) immediate vesting of all outstanding stock options and the right to exercise such
stock options during the Severance Period or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  
 (vii) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which shall be paid in a single lump sum not later than 15 days following the Executive’s termination of employment; 
  
 (viii) immediate vesting of the Executive’s accrued benefits under any supplemental retirement benefit
plan (“SERP”) maintained by the Company, with payment of such benefits to be made in accordance with the terms and conditions of the SERP; 
  
 (ix) settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation plan or election
form; 
  
 (x) continued participation in all
medical, health and life insurance plans at the same benefit level at which he was participating on the date of termination of his employment until the earlier of: 
  
 (A) the end of the Severance Period; or 
  
 (B) the date, or dates, he receives equivalent coverage and benefits under the plans and programs of a
subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis); provided that (1) if the Executive is precluded from continuing his participation in any employee benefit plan or program
as provided in this clause (x) of this Section 10(e), he shall receive cash payments equal on an after-tax basis to the cost to him of obtaining the benefits provided under the plan or program in which he is unable to participate for the
period specified in this clause (x) of this Section 10(e), (2) such cost shall be deemed to be the lowest reasonable cost that would be incurred by the Executive in obtaining such benefit himself on an individual basis, and
(3) payment of such amounts shall be made quarterly in advance; and 
  

 16 








 (xi) other or additional benefits then due or earned in accordance with applicable plans
and programs of the Company. 
  
 For purposes of any termination pursuant to this
Section 10(e), the term “Severance Period” shall mean the period of 36 months following the termination of the Executive’s employment. 
  
 (f) Approved Early Retirement or Normal Retirement. Upon the Executive’s Approved Early Retirement or Normal Retirement (each
as defined below), the Executive shall be entitled to and his sole remedies under this Agreement shall be: 
  
 (i) Base Salary through the date of termination of the Executive’s employment, which shall be paid in a cash lump sum not later than
15 days following the Executive’s termination of employment; 
  
 (ii) pro rata cash portion of annual incentive award for the year in which termination occurs, based on performance valuation at the end of such year and payable in a cash lump sum promptly (but in no event later than
15 days) thereafter; 
  
 (iii) elimination of all
restrictions on any restricted stock awards outstanding at the time of the Executive’s termination of employment; 
  
 (iv) continued vesting (as if the Executive remained employed by the Company) of any deferred stock awards outstanding at the time of his
termination of employment (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards); 
  
 (v) continued vesting of all outstanding stock options and the right to exercise such stock options for a period of one year following the
later of the date the options are fully vested or the Executive’s termination of employment or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be governed by
the terms of such awards); provided, however, that options granted pursuant to the Company’s 1987 Stock Option Plan shall in no event be exercisable after three years following termination of employment; 
  
 (vi) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which shall be 

  

 17 








 
paid in a single lump sum not later than 15 days following the Executive’s termination of employment; 
  
 (vii) settlement of all deferred compensation arrangements
in accordance with any then applicable deferred compensation plan or election form; 
  
 (viii) continued participation in all medical, health and life insurance plans at the same benefit level at which he was participating on
the date of the termination of his employment until the earlier of: 
  
 (A) the Executive’s attainment of age 60; or 
  
 (B) the date, or dates, he receives substantially equivalent coverage and benefits under the plans and programs of a subsequent employer
(such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis); provided that (1) if the Executive is precluded from continuing his participation in any employee benefit plan or program as provided
in this clause (viii) of this Section 10(f), he shall receive cash payments equal on an after-tax basis to the cost to him of obtaining the benefits provided under the plan or program in which he is unable to participate for the period
specified in this clause (viii) of this Section 10(f), (2) such cost shall be deemed to be the lowest cost that would be incurred by the Executive in obtaining such benefit himself on an individual basis, and (3) payment of such
amounts shall be made quarterly in advance; and 
  
 (ix) other or additional benefits then due or earned in accordance with applicable plans and programs of the Company. 
  
 “Approved Early Retirement” shall mean the Executive’s voluntary termination of employment with the Company at or after attaining age 55
but prior to attaining age 60, if such termination is approved in advance by the Committee. 
  
 “Normal Retirement” shall mean the Executive’s voluntary termination of employment with the Company at or after attaining age 60. 
  
 (g) No Mitigation; No Offset. In the event of any termination of employment, the Executive shall be
under no obligation to seek other employment; amounts due the Executive under this Agreement shall not be offset by any remuneration attributable to any subsequent employment that he may obtain. 
  

 18 








 (h) Nature of Payments. Any amounts due under this Section 10 are in the
nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty. 
  
 (i) Exclusivity of Severance Payments. Upon termination of the Executive’s employment during the Term of Employment, he shall
not be entitled to any severance payments or severance benefits from the Company or any payments by the Company on account of any claim by him of wrongful termination, including claims under any federal, state or local human and civil rights or
labor laws, other than the payments and benefits provided in this Section 10. 
  
 (j) Release of Employment Claims. The Executive agrees, as a condition to receipt of the termination payments and benefits provided
for in this Section 10, that he will execute a release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of the Executive’s employment (other than enforcement of this Agreement, the
Executive’s rights under any of the Company’s incentive compensation and employee benefit plans and programs to which he is entitled under this Agreement, and any claim for any tort for personal injury not arising out of or related to his
termination of employment). 
  
 11. Confidentiality;
Cooperation with Regard to Litigation; Non-disparagement. 
  
 (a) During the Term of Employment and thereafter, the Executive shall not, without the prior written consent of the Company, disclose to anyone (except in good faith in the ordinary course of business to a person who
will be advised by the Executive to keep such information confidential) or make use of any Confidential Information except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having
supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that the Executive is so
ordered, he shall give prompt written notice to the Company in order to allow the Company the opportunity to object to or otherwise resist such order. 
  
 (b) During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement beyond what is
disclosed in the proxy statement or documents filed with the government unless and to the extent such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection
with enforcement of his rights under this Agreement. In the event that disclosure is so required, the Executive shall give prompt written notice to the Company in order to 

  

 19 








 
allow the Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of
his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information. 
  
 (c) “Confidential Information” shall mean all
information concerning the business of the Company or any Subsidiary relating to any of their products, product development, trade secrets, customers, suppliers, finances, and business plans and strategies. Excluded from the definition of
Confidential Information is information (i) that is or becomes part of the public domain, other than through the breach of this Agreement by the Executive or (ii) regarding the Company’s business or industry properly acquired by the
Executive in the course of his career as an executive in the Company’s industry and independent of the Executive’s employment by the Company. For this purpose, information known or available generally within the trade or industry of the
Company or any Subsidiary shall be deemed to be known or available to the public. 
  
 (d) “Subsidiary” shall mean any corporation controlled directly or indirectly by the Company. 
  
 (e) The Executive agrees to cooperate with the Company,
during the Term of Employment and thereafter (including following the Executive’s termination of employment for any reason), by making himself reasonably available to testify on behalf of the Company or any Subsidiary in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives
or counsel, or representatives or counsel to the Company, or any Subsidiary as reasonably requested; provided, however, that the same does not materially interfere with his then current professional activities. The Company agrees to
reimburse the Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or assistance. 
  

 20 








 (f) The Executive agrees that, during the Term of Employment and thereafter (including
following the Executive’s termination of employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or
indirectly, disparage the Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. The Company agrees that, during the Term of Employment and thereafter (including following the
Executive’s termination of employment for any reason), the Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or
indirectly, disparage the Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either the Executive or the Company from making truthful statements or disclosures that are required by
applicable law, regulation or legal process. 
  
 12.
Non-competition. 
  
 (a) During the
Restriction Period (as defined in Section 12(b) below), the Executive shall not engage in Competition with the Company or any Subsidiary. “Competition” shall mean engaging in any activity, except as provided below, for a Competitor of
the Company or any Subsidiary, whether as an employee, consultant, principal, agent, officer, director, partner, shareholder (except as a less than one percent shareholder of a publicly traded company) or otherwise. A “Competitor” shall
mean any corporation or other entity engaged in the retail drug pharmacy chain store business, any corporation or other entity whose principal business is mail order pharmacy benefits management, or any corporation or other entity in a joint venture
relationship (directly or indirectly) with the Company, including without limitation Eckerd Corporation, Revco D.S. Inc., Rite Aid Corporation and Walgreen Company or their successors. If the Executive commences employment or becomes a consultant,
principal, agent, officer, director, partner, or shareholder of any entity that is not a Competitor at the time the Executive initially becomes employed or becomes a consultant, principal, agent, officer, director, partner, or shareholder of the
entity, future activities of such entity shall not result in a violation of this provision unless (x) such activities were contemplated by the Executive at the time the Executive initially became employed or becomes a consultant, principal,
agent, officer, director, partner, or shareholder of the entity or (y) the Executive commences directly or indirectly overseeing or managing the activities of an entity which becomes a Competitor during the Restriction Period, which activities
are competitive with the activities of the Company or Subsidiary. The Executive shall not be deemed indirectly overseeing or 

  

 21 








 
managing the activities of such Competitor which are competitive with the activities of the Company or Subsidiary so long as he does not regularly
participate in discussions with regard to the conduct of the competing business. 
  
 (b) For the purposes of this Section 12, “Restriction Period” shall mean the period beginning with the Effective Date and
ending with: 
  
 (i) in the case of a termination
of the Executive’s employment without Cause or a Constructive Termination Without Cause, in either case prior to a Change in Control, the earlier of (1) 24 months after such termination and (2) the occurrence of a Change in Control;

  
 (ii) in the case of a termination of the
Executive’s employment for Cause, the earlier of (1) 24 months after such termination and (2) the occurrence of a Change in Control; 
  
 (iii) in the case of a voluntary termination of the Executive’s employment pursuant to Section 10(d) above followed by the
Company’s election to pay the Executive (and subject to the payment of) 50% of his Base Salary, as provided in Section 10(d) above, the earlier of (1) 18 months after such termination and (2) the occurrence of a Change in
Control; 
  
 (iv) in the case of a voluntary
termination of the Executive’s employment pursuant to Section 10(d) above which is not followed by the Company’s election to pay the Executive such 50% of Base Salary, the date of such termination; 
  
 (v) in the case of Approved Early Retirement or Normal
Retirement pursuant to Section 10(f) above, the remainder of the Term of Employment; or 
  
 (vi) in the case of a termination of the Executive’s employment without Cause or a Constructive Termination Without Cause, in either
case following a Change in Control, immediately upon such termination of employment. 
  
 13. Non-solicitation. 
  
 During the period beginning with the Effective Date and ending 18 months following the termination of the Executive’s employment, the Executive shall not induce employees of the Company or any Subsidiary to terminate their employment,
nor shall the Executive solicit or encourage any of the Company’s or any Subsidiary’s non-retail customers, or any corporation or other entity in a joint venture relationship (directly or indirectly) with the Company or any 

  

 22 








 
Subsidiary, to terminate or diminish their relationship with the Company or any Subsidiary or to violate any agreement with any of them. During such period,
the Executive shall not hire, either directly or through any employee, agent or representative, any employee of the Company or any Subsidiary or any person who was employed by the Company or any Subsidiary within 180 days of such hiring. 

 
 14. Remedies. 
  
 If the Executive breaches any of the provisions contained in Sections 11, 12
or 13 above, the Company (a) subject to Section 15, shall have the right to immediately terminate all payments and benefits due under this Agreement and (b) shall have the right to seek injunctive relief. The Executive acknowledges
that such a breach of Sections 11, 12 or 13 would cause irreparable injury and that money damages would not provide an adequate remedy for the Company; provided, however, the foregoing shall not prevent the Executive from contesting the issuance of
any such injunction on the ground that no violation or threatened violation of Section 11, 12 or 13 has occurred. 
  
 15. Resolution of Disputes. 
  
 Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding
effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Section 14, shall be resolved by binding arbitration, to be held at an office closest to the Company’s principal offices in
accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts and benefits due the Executive under this Agreement. All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the
respective party incurring such costs and expenses, but the Company shall reimburse the Executive for such reasonable costs and expenses in the event he substantially prevails in such arbitration or court proceeding. Notwithstanding the foregoing,
following a Change in Control all reasonable costs and expenses (including fees and disbursements of counsel) incurred by the Executive pursuant to this Section 15 shall be paid on behalf of or reimbursed to the Executive promptly by the
Company; provided, however, that no reimbursement shall be made of such expenses if and to the extent the arbitrator(s) determine(s) that any of the Executive’s litigation assertions or defenses were in bad faith or frivolous.

  
 16. Indemnification. 
  

 23 








 (a) Company Indemnity. The Company agrees that if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of the Company or
any Subsidiary or is or was serving at the request of the Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether or not the basis of such Proceeding is the Executive’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless
by the Company to the fullest extent legally permitted or authorized by the Company’s certificate of incorporation or bylaws or resolutions of the Company’s Board or, if greater, by the laws of the State of Delaware against all cost,
expense, liability and loss (including, without limitation, attorney’s fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, officer, employee or agent of the Company or other entity and shall inure to the benefit of the Executive’s heirs, executors
and administrators. The Company shall advance to the Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within 20 days after receipt by the Company of a written request for such advance. Such request
shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. The provisions of this Section 16(a) shall not be
deemed exclusive of any other rights of indemnification to which the Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

  
 (b) No Presumption Regarding Standard of
Conduct. Neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by the Executive under
Section 16(a) above that indemnification of the Executive is proper because he has met the applicable standard of conduct, nor a determination by the Company (including its Board, independent legal counsel or stockholders) that the Executive
has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct. 
  

 24 








 (c) Liability Insurance. The Company agrees to continue and maintain a directors
and officers’ liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers. 
  
 17. Excise Tax Gross-Up. 
  
 If the Executive becomes entitled to one or more payments (with a “payment” including, without limitation, the vesting of an option or other
non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (the “Total Payments”), which are or become subject to the tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (or any similar tax that may hereafter be imposed) (the “Excise Tax”), the Company shall pay to the Executive at the time specified below an
additional amount (the “Gross-up Payment”) (which shall include, without limitation, reimbursement for any penalties and interest that may accrue in respect of such Excise Tax) such that the net amount retained by the Executive, after
reduction for any Excise Tax (including any penalties or interest thereon) on the Total Payments and any federal, state and local income or employment tax and Excise Tax on the Gross-up Payment provided for by this Section 17, but before
reduction for any federal, state, or local income or employment tax on the Total Payments, shall be equal to the sum of (a) the Total Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or
local income tax purposes because of the inclusion of the Gross-up Payment in the Executive’s adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar
year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax: 
  
 (i) The Total Payments shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the written opinion
of independent compensation consultants, counsel or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to the Executive, the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; 
  

 25 








 (ii) The amount of the Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the total amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above); and

  
 (iii) The value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 
  
 For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed (A) to pay federal income
taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions
based upon the amount of the Executive’s adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up
Payment in the Executive’s adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to the Executive or otherwise realized as a
benefit by the Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied in initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such
excess is finally determined. 
  
 The Gross-up Payment provided
for above shall be paid on the 30th day (or such earlier date as the Excise Tax becomes due and payable to the taxing authorities) after it has been determined that the Total Payments (or any portion thereof) are subject to the Excise Tax;
provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined by the Independent
Advisors, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at 

  

 26 








 
the rate provided in Section 1274(b)(2)(B) of the Code), as soon as the amount thereof can be determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth day after demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code). If more than one Gross-up Payment is made, the amount of each Gross-up Payment shall be computed so as not to duplicate any prior Gross-up Payment. The Company shall have the right to control all proceedings
with the Internal Revenue Service that may arise in connection with the determination and assessment of any Excise Tax and, at its sole option, the Company may pursue or forego any and all administrative appeals, proceedings, hearings, and
conferences with any taxing authority in respect of such Excise Tax (including any interest or penalties thereon); provided, however, that the Company’s control over any such proceedings shall be limited to issues with respect to
which a Gross-up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest any other issue raised by the Internal Revenue Service or any other taxing authority. The Executive shall cooperate with the Company in any
proceedings relating to the determination and assessment of any Excise Tax and shall not take any position or action that would materially increase the amount of any Gross-Up Payment hereunder. 
  
 18. Effect of Agreement on Other Benefits. 
  
 Except as specifically provided in this Agreement, the existence of this
Agreement shall not be interpreted to preclude, prohibit or restrict the Executive’s participation in any other employee benefit or other plans or programs in which he currently participates. 
  
 19. Assignability; Binding Nature. 
  
 This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors, heirs (in the case of the Executive) and permitted assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be
assigned or transferred in connection with the sale or transfer of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale or transfer of assets as
described in the preceding sentence, it shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Section 25 below. 
  

 27 








 20. Representation. 
  
 The Company represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm or organization. 
  
 21. Entire Agreement. 
  
 This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and, as of the Effective Date,
supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto, including, without limitation the Income Continuation Policy for Select Senior Executives
of CVS Corporation. 
  
 22. Amendment or Waiver.

  
 No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and an authorized officer of the Company. Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power
or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall
be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized officer of the Company, as the case may be. 
  
 23. Severability. 
  
 In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 
  

 28 








 24. Survivorship. 
  
 The respective rights and obligations of the Parties hereunder shall survive any termination of the Executive’s
employment to the extent necessary to the intended preservation of such rights and obligations. 
  
 25. Beneficiaries/References. 
  
 The Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following the Executive’s death by giving the Company written notice thereof. In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. 
  
 26. Governing Law/Jurisdiction. 
  
 This Agreement shall be governed by and construed and interpreted in accordance with the laws of Rhode Island without reference to principles of conflict
of laws. Subject to Section 15, the Company and the Executive hereby consent to the jurisdiction of any or all of the following courts for purposes of resolving any dispute under this Agreement: (i) the United States District Court for
Rhode Island or (ii) any of the courts of the State of Rhode Island. The Company and the Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient
forum. 
  
 27. Notices. 
  
 Any notice given to a Party shall be in writing and shall be deemed to have
been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently
give such notice of: 
  

			
	If to the Company:	 	 CVS Corporation
 One CVS Drive
 Woonsocket, Rhode Island 02895
 Attention: Secretary


  

 29 









			
	If to the Executive:	 	Mr. Thomas Ryan

  
 28. Headings.

  
 The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 
  
 29. Counterparts. 
  
 This Agreement may be executed in two or more counterparts. 
  
 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. 
  

			
	 CVS CORPORATION

		
	By:	 	/S/    STANLEY P.
GOLDSTEIN        
	 Name:
	 	Stanley P. Goldstein
	 Title:
	 	Chairman of the Board and C.E.O.
	
	/s/    THOMAS
RYAN        
	THOMAS RYAN


  

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