2010 Management Incentive Plan



 Exhibit 10.38 

 

			
	



	  	2010 Management Incentive Plan

  

	I.	Objectives and Summary 

 CVS Caremark Corporation’s Management Incentive Plan (the “MIP”) is designed to reward incentive-eligible employees (“Eligible Participants”) of CVS Caremark Corporation and its
subsidiaries (together, “the Company”) for their role in driving performance and to encourage Eligible Participants’ continued employment with the Company. Funding of incentive awards will be based on actual results measured against
pre-established financial goals. Incentive awards will be based on the performance of the Company business unit in which each Eligible Participant works as well as the performance of individual Eligible Participants. 

The Management Planning and Development Committee (the “Committee”) of the Board of Directors (the “Board”) may
delegate to officers of CVS Caremark the authority to perform administrative functions under the MIP as the Committee may determine and may appoint officers and others to assist it in administering the MIP. 

 

	II.	Plan Year 

 The
MIP is a calendar year plan, which runs from January 1 to December 31, 2010 (“Plan Year”). All dates in this document occur during the Plan Year unless otherwise stated. 

 

	III.	Eligibility 


A. Eligibility for Participation 
 The Chief Executive Officer of CVS Caremark Corporation (“CEO”) will determine which employees are eligible for participation in the MIP, provided that the Committee shall determine the
eligibility of employees who are subject to Section 162(m) of the Internal Revenue Code (“Section 162(m)”) or who have been identified by the Committee as individuals who may be subject to Section 162(m) (collectively,
“162(m) Eligible Participants” and each of whom will also be included in the term “Eligible Participants” unless otherwise noted). In general, Eligible Participants include all exempt employees who are not covered under any other
incentive plans. 
 Eligibility for participation in the MIP is contingent upon the Eligible Participant being employed in an
incentive-eligible position on the last day of the Plan Year. The CEO (or, as to 162(m) Eligible Participants, the Committee) may, for any reason and in his or her sole discretion, at any time prior to the end of the Plan Year, determine an
employee’s eligibility for participation in the Plan. Eligible Participants are subject to the terms and conditions relating to incentive awards set forth in this MIP. 
 B. 162(m) Eligible Participants 
 162(m) Eligible Participants shall
be subject to the limitations required to comply with the provisions of Section 162(m). Subject to the requirements of Section 162(m), the Committee shall retain sole discretion to determine a 162(m) Eligible Participant’s eligibility
for an award, the target award, and the amount of the actual award. In no event shall a 162(m) Eligible Participant’s award exceed the amount permitted by Section 162(m). 







 C. Newly-Eligible Employees 

An employee will be eligible for a prorated incentive award if he or she becomes an Eligible Participant on or before November 1 of
the Plan Year; provided, however, that a 162(m) Eligible Participant shall be eligible for an award for the Plan Year in which he or she was hired or otherwise becomes a 162(m) participant only to the extent that such award does not violate the
requirements of Section 162(m). 
 D. Transfers  

Participants who become newly eligible during the Plan Year may be eligible for a prorated MIP award. If a change in assignments results
in an Eligible Participant being eligible for the MIP for part of the Plan Year and other incentives during other parts of the Plan Year, the participant may be eligible to receive a prorated award for the amount of time in each incentive eligible
position, subject to the terms of the other applicable incentive plans. Change in assignments from one MIP-eligible position to another during the Plan Year does not result in pro rata award but rather an award funded on the base salary of the
Eligible Participant on December 31 and the individual award opportunity as of that date. 
 E. Demotions

 If a previously Eligible Participant is demoted to a non-incentive eligible position due to his or her violation of CVS
Caremark policy or his/her performance, or if he or she voluntarily transfers to a non-incentive eligible position during the Plan Year, and is in the non-incentive eligible position on the last day of the Plan Year, he or she will not be eligible
to earn an incentive award for the Plan Year under this plan. 
 F. Terminations 

Unless otherwise stated in Section VII of the MIP, if an Eligible Participant’s employment terminates prior to the final
determination of incentive awards for the Plan Year, he or she will not be eligible to receive an incentive award under the MIP. 
 G. Rehires 
 Eligible Participants who are rehired on or before
November 1 of the Plan Year may be eligible for a prorated incentive award. For purposes of proration, credit will only be given for time worked during the Plan Year in incentive-eligible positions. 

 

	IV.	Administration  


A. Funding and Performance Measures 
 MIP funding is based on Consolidated Company Performance, calculated as 80% Operating Profit, 10% Pharmacy Services Customer Satisfaction, and 10% Retail Customer Service. 

1. Operating Profit 
 The incentive awards under the MIP will be funded based on consolidated CVS Caremark operating profit as adjusted based on permitted financial adjustments approved by the Committee (the “Operating
Profit”). Operating Profit will be used to calculate the available pool for incentive awards (the “Total Pool”). If Operating Profit falls below the minimum threshhold as set forth in Exhibit A, no formulaic funding will be made
available for awards and there is no requirement that incentive awards be paid under the MIP. 

  

					
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 2. Pharmacy Services Customer Satisfaction 

Achievement of the Customer Satisfaction segment of the incentive will be determined by the aggregate actual performance against target
of the weighted composite of the following surveys: 
  

	 	•	 	 Client Relationship and Loyalty Survey (weight = 50%) 



	 	•	 	 Customer Care Survey (weight = 20%) 



	 	•	 	 Mail Service Pharmacy Survey (weight = 20%) 



	 	•	 	 Specialty Survey (weight = 10%) 


 Pharmacy Services Customer Satisfaction funding is subject to adjustment based on the Operating Profit. 
 3. Retail Customer Service 
 The Retail Customer Service segment of the
incentive will be measured using the Total Triple ‘S’ actual performance against the target. The Triple ‘S’ Score Card consists of performance in three elements of customer satisfaction: Stock, Shop and Service. 

Retail Customer Service funding is subject to adjustment based on the Operating Profit. 

 

									
	Measurement	 	Percent
Weight	 	
Measurement

Tool
	 	Achievement Measured
Against	 	Modifier
	Consolidated Operating Profit	 	80%	 	Earnings Before Interest & Taxes	 	2010 EBIT Goal	 	 CEO &
Committee
 Discretion
 Approved Permitted
 Financial Adjustments

	 Pharmacy Services
 Customer Satisfaction
	 	10%	 	 Client Relationship and
Loyalty, Customer Care, Mail Service and
 Specialty Surveys
	 	2010 PBM Customer Satisfaction Target	 	Operating Profit funding
	Retail Customer Service	 	10%	 	Triple “S” Scorecard	 	 2010 Triple
“S”
 Target
	 	Operating Profit Funding


B. Fund Allocation 
 After the funding of the MIP has been established and the Total Pool has been created, the following criteria will be used in determining individual incentive awards for the Plan Year: 

1. Business Unit  
 The Business Unit Performance is based on Business Unit EBIT results compared to target and a discretionary assessment resulting from (a) input from the President/COO, Business Unit Presidents and
Finance regarding the performance of the Business Unit to assist the CEO and the Committee in their assessment of the overall performance; and (b) the CEO’s (or, in the case of 162(m) Eligible Participants’s, the Committee’s)
assessment of the achievement of Plan Year performance goals by the business unit. 
 2. Management discretion

 The Total Pool will be available for managers to award to Eligible Participants, taking into account all components of the
Plan. The amount, if any, of the calculated incentive award for an Eligible Participant shall be detemined in the sole discretion of CVS Caremark management. The amount, if any, of the calculated incentive award for a 162(m) Eligible Participant
shall be determined in the sole discretion of the Committee. 

  

					
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	V.	MIP Earnings and Payout 

 A. Timing 
 Incentive awards will be paid to Eligible Participants
as soon as administratively feasible following the date the Total Pool is funded and calculation of incentive payments may be ascertained, which will be in the year following the Plan Year, on or before March 15. Payments may be subject to
delay to comply with garnishments and other state or federal requirements. 
 B. Calculations 

Calculations for full and partial awards will be based on each Eligible Participant’s annual base salary and individual target
opportunity on the last day of the Plan Year. 
 For purposes of proration, the 15th of the month will be used to determine if the month is included or
excluded from the incentive calculation. 
 Examples: 

 

	 	1.	 An Eligible Participant is hired on September 14th. Because the Eligible Participant is actively employed prior to the 15th of September, the month of September will be included in his/her
prorated incentive award and the Eligible Participant will receive a prorated incentive award covering a total of four months. The award will be calculated using the participants individual award opportunity target and base salary as of
December 31st. 



 

	 	2.	 An Eligible Participant begins a personal leave of absence on June 3rd and returns to active status on July 22nd. Assuming the Eligible Participant was incentive eligible for the entire year, the months of June and July will be
excluded from the Eligible Participant’s incentive award and the Eligible Participant will receive a prorated incentive award covering a total of 10 months. The award will be calculated using the participants individual award opportunity target
and base salary as of December 31st.



 C. Award Opportunity 

Individual target awards will be determined by position and typically will vary based on the Eligible Participant’s level in the
organization. 
 D. Obligation to Pay Total Pool 

Eligible Participants, as a group, have a right to receive an amount at least equal to the Total Pool, but no individual Eligible
Participant shall be entitled to receive an award or any specific amount of the Total Pool. In no event will the aggregate of the total awards paid from the MIP be less than the amount of the Total Pool. 

 

	VI.	Corrections to Incentive Awards 

 Any corrections to incentive calculations must be submitted through the Human Resources Business Partner to Compensation by April 15 of the year following the Plan Year. 

  

					
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	VII.	Eligible Participant Status 

 A. Eligible Participant Performance 
 An Eligible Participant must
be employed in good standing (e.g., not on probation, written warning or any disciplinary/ performance action plan) throughout the Plan Year and at all times prior to the final determination of the Eligible Participant’s incentive award to be
eligible to earn an incentive award. 
 B. Leaves of Absence 

An Eligible Participant on a Company-approved leave of absence at any time during the Plan Year who remains employed
in an eligible position as of the last day of the Plan Year will earn a prorated incentive award based on the number of months worked during the Plan Year, provided he or she meets all other eligibility criteria for an incentive award. For purposes
of proration, the 15th of the month will be used to
determine if the month is included or excluded from the incentive calculation. 
 C. Reduction in Force, Retirement and
Death 
 1. Reduction in Force 

If an Eligible Participant is separated from employment on or before the last day of the Plan Year due to a reduction
in force, he or she will earn a prorated incentive award based on the number of months worked during the Plan Year, provided the Eligible Participant meets all other eligibility criteria for an incentive award. For purposes of proration, the
15th of the month will be used to determine if the month
is included or excluded from the incentive calculation. 
 2. Retirement  

If an Eligible Participant is at least age 55 and has a minimum of 10 years of service with CVS Caremark or a predecessor
company/subsidiary or is at least age 60 and has a minimum of 5 years of service with CVS Caremark or a predecessor company/subsidiary and the MIP Participant retires before the end of the Plan Year, he/she will earn a prorated
incentive based on the number of months worked during the Plan Year, provided he/she meets all other eligibility criteria for an incentive award. Earned incentives will be paid at the same time as other incentives are paid under this Plan. Eligible
Participants who do not meet the minimum retirement requirements at the time of retirement and who retire before the end of the Plan Year will not be eligible to earn an incentive award. 

3. Death 

In case of the death of an Eligible Participant, a pro rated incentive award shall be paid to the Eligible Participant’s spouse, if
living; otherwise, in equal shares to surviving children of the Eligible Participant. If there are no surviving children, the benefit shall be paid to the Eligible Participant’s parents in equal shares; and in the event none of the above-named
individuals survives the Eligible Participant, the death benefit shall be paid to the executor or administrator of the Eligible Participant’s estate. The incentive award will be prorated based on the number of months the Eligible Participant
worked during the Plan Year and shall be paid as soon as administratively practicable following the death of the Eligible Participant but no later than March 15 of the year following the Plan Year. If final performance numbers are not available
at the time of the employee’s death, the incentive award will be calculated using the incentive target and the number of months worked. 
  

	VIII.	Employment Rights 


The MIP does not create an express or implied contract of employment between CVS Caremark and an Eligible Participant. Both CVS Caremark
and the Eligible Participant retain the right to terminate the employment relationship at will, at any time and for any reason. 

  

					
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 A. Rights are Non-Assignable 

Neither the Eligible Participant, nor any beneficiary, nor any other person shall have any right to assign, in whole or in part, the
right to receive payments under the MIP. Payments are non-assignable and non-transferable, whether voluntarily or involuntarily. 
 B. Compliance with Applicable Regulations 
 An Eligible Participant
must comply with all applicable state and federal regulations and CVS Caremark policies to be eligible to receive an incentive award under the MIP. 
 C. Change in Control 
 In the event of a change in control of CVS
Caremark, as defined in the 1997 Incentive Compensation Plan, the MIP shall remain in full force and effect. Any amendments, modifications, termination or dissolution of the MIP by the acquiring entity may only occur prospectively and will not
affect incentive earnings or eligibility before the date of the change in control, or such date as it may be modified or dissolved by the acquiring entity. 
 Provisions regarding the payment of annual incentive awards that are set forth in Change in Control agreements shall supersede those appearing in the MIP. 

D. 2007 Incentive Plan 
 Capitalized terms not otherwise defined herein shall have the meaning assigned to such defined term(s) in the 2007 Incentive Plan. In the event of any conflict between the 2007 Incentive Plan and the MIP,
the terms of the 2007 Incentive Plan shall govern. 
 E. Withholding 

All required deductions will be withheld from the incentive awards prior to distribution. This includes all applicable federal, state, or
local taxes, as well as any eligible 401(k) deductions and deferred compensation contributions as defined by the applicable plans. Incentive awards that are deferred will be taxed according to applicable federal and state tax law. 

F. MIP Amendment/Modification/Termination 
 CVS Caremark retains the right to amend, modify, or terminate the MIP at any time on or before the last day of the Plan Year for any reason, with or without notice to Eligible Participants. 

G. MIP Interpretation 
 All requests for interpretation of any provision in the MIP must be submitted to the CVS Caremark Compensation Department. Failure to submit a request for resolution of a dispute or question within
30 days of distribution of the incentive award may result in a waiver of the Eligible Participant’s rights to dispute the MIP provision or amount of the incentive award. 

CVS Caremark will comply with all applicable laws concerning incentive awards; the MIP and its administration are not intended to
conflict with any applicable state or federal law. 

  

					
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 H. Recoupment of Incentive Awards Due to Fraud or Financial Misconduct

 If the Board determines that fraud or financial misconduct has occurred in a manner which subjects a recipient of a MIP award
to recoupment under the Company’s recoupment policy, as in effect from time to time, the MIP award recipient shall immediately repay to the Company the entire incentive award received by the MIP award recipient, or a portion thereof as
determined by the Board. If a MIP award recipient fails to repay his or her incentive award (or portion thereof) immediately upon request by the Board, the Company may seek reimbursement of such amount from the MIP award recipient by reducing salary
or any other payments that may be due to the MIP award recipient, to the extent legally permissible, and/or through initiating a legal action to recover such amount, which recovery shall include any reasonable attorneys fees incurred by the Company
in bringing such action. If a MIP award recipient has deferred payment of any portion of an incentive award that is subject to repayment hereunder, the amount of the MIP award recipient’s deferred compensation accrual shall be reduced by the
amount subject to repayment, plus all Company matching amounts and earnings on such amount. 
 I. Section 409A of the
Internal Revenue Code 
 The Company intends that this Plan not violate any applicable provision of, or result in any
additional tax or penalty under, Section 409A of the Internal Revenue Code of 1986 (the “Code”), as amended, and that to the extent any provisions of the 162(m) Plan do not comply with Code Section 409A the Company will make such
changes in order to comply with Code Section 409A. In all events, 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 Code, payment of any amounts subject
to Section 409A of the Code shall be delayed until the relevant date of payment that will result in compliance with the rules of Section 409A(a)(2)(B)(i) of the Code. 

  

					
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 Exhibit A 

 

															
	Operating Profit	 	 	 	 Customer Service
 Retail Triple ‘S’

(10%)
	 	 	 	 PBM Customer
Satisfaction
 (10%)

	Results	 	%
Payout	 	 	 	Results	 	%
Payout	 	 	 	Results	 	%
Payout
	106%	 	200%	 		 	100.0%	 	100%	 		 	100.0%	 	100%
	105%	 	180%	 		 	99.0%	 	95%	 		 	99.0%	 	95%
	104%	 	160%	 		 	98.0%	 	90%	 		 	98.0%	 	90%
	103%	 	140%	 		 	97.0%	 	85%	 		 	97.0%	 	85%
	102%	 	120%	 		 	96.0%	 	80%	 		 	96.0%	 	80%
	99% -101%          	 	100%	 		 	95.0%	 	75%	 		 	95.0%	 	75%
	98%	 	90%	 		 	94.0%	 	70%	 		 	94.0%	 	70%
	97%	 	83%	 		 	93.0%	 	65%	 		 	93.0%	 	65%
	96%	 	75%	 		 	92.0%	 	60%	 		 	92.0%	 	60%
	95%	 	68%	 		 	91.0%	 	55%	 		 	91.0%	 	55%
	94%	 	60%	 		 	90.0%	 	50%	 		 	90.0%	 	50%
	93%	 	53%	 		 	89.0%	 	25%	 		 	89.0%	 	25%
	92%	 	45%	 		 	<89.0%	 	0%	 		 	<89.0%	 	0%
	91%	 	38%	 		 		 		 		 		 	
	90%	 	30%	 		 		 		 		 		 	
	89%	 	25%	 		 		 		 		 		 	
	<89%	 	0%	 		 		 		 		 		 	


  

					
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