Document:

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                                                                    EXHIBIT 10.4

                              AMENDED AND RESTATED

                  CAREMARK RX, INC. INCENTIVE COMPENSATION PLAN

                  The Amended and Restated Caremark Rx, Inc. Incentive
Compensation Plan (the "Incentive Compensation Plan") is the result of the
assumption and adoption by Caremark Rx, Inc., a Delaware corporation, of the
Caremark International Inc. 1992 Incentive Compensation Plan (the "Caremark
Plan"), pursuant to the provisions of that certain Plan and Agreement of Merger,
dated as of May 13, 1996, by and among Caremark Rx, Inc., PPM Merger Corporation
and Caremark International Inc.

1.       PURPOSE

                  The purpose of this Incentive Compensation Plan is to increase
stockholder value and to advance the interests of Caremark Rx, Inc. and its
subsidiaries (collectively, "Caremark Rx" or the "Company") by awarding equity
and performance based incentives designed to attract, retain and motivate
employees. As used in this Incentive Compensation Plan, the term "subsidiary"
means any business, whether or not incorporated, in which Caremark Rx has an
ownership interest.

2.       ADMINISTRATION

                  2.1      Administration by the Committee.

                  The Incentive Compensation Plan shall be administered by the
Compensation Committee of the Board of Directors of Caremark Rx or by any other
committee appointed by the Board of Directors of Caremark Rx (the "Committee"),
which Committee shall consist solely of two or more Non- Employee Directors
("Non-Employee Directors") as such are defined in Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision.

                  2.2      Authority.

                  Subject to the provisions of this Incentive Compensation Plan,
the Committee shall have the authority to:

                  (a)      manage and control the operation of this Incentive
         Compensation Plan;

                  (b)      interpret and construe any provision of this
         Incentive Compensation Plan and any Award Agreement granted under it;

                  (c)      prescribe, amend and rescind rules and regulations
         relating to this Incentive Compensation Plan;
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                  (d)      make awards under this Incentive Compensation Plan,
         in such forms and amounts and subject to such restrictions, limitations
         and conditions as it deems appropriate, including, without limitation,
         awards which are made in combination with or in tandem with other
         awards (whether or not contemporaneously granted) or compensation in
         lieu of current or deferred compensation;

                  (e)      modify the terms of, cancel and reissue, or
         repurchase outstanding awards;

                  (f)      prescribe the form of agreement, certificate, or
         other instrument evidencing any award under this Incentive Compensation
         Plan (an "Award Agreement"), provided that any such Award Agreement
         shall incorporate by reference all of the terms and provisions of this
         Incentive Compensation Plan as in effect at the time of grant and shall
         include such other terms and provisions not contrary to the Incentive
         Compensation Plan as shall be approved and adopted by the Committee;

                  (g)      correct any defect or omission and reconcile any
         inconsistency in this Incentive Compensation Plan or in any award
         hereunder; and

                  (h)      make all other determinations and take all other
         actions as it deems necessary or desirable for the implementation and
         administration of this Incentive Compensation Plan.

                  The determination of the Committee on matters within its
authority shall be conclusive and binding on Caremark Rx and all other persons.

3.       PARTICIPATION

                  Subject to the terms and conditions of this Incentive
Compensation Plan, the Committee shall determine and designate from time to time
the employees, directors and consultants of Caremark Rx who shall receive awards
under this Incentive Compensation Plan ("Participants").

4.       SHARES SUBJECT TO THE INCENTIVE COMPENSATION PLAN

                  4.1      Number of Shares Reserved.

                  Shares of common stock, $.001 par value per share, of Caremark
Rx ("Common Stock") shall be available for awards under this Incentive
Compensation Plan. To the extent provided by resolution of the Committee, such
shares may be uncertificated. Subject to adjustment in accordance with Sections
4.2 and 4.3, the aggregate number of shares of Common Stock available for awards
under this Incentive Compensation Plan shall be 13,771,964 shares.

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                  4.2      Reusage of Shares.

                  (a)      In the event of the exercise or termination (by
         reason of forfeiture, expiration, cancellation, surrender or otherwise)
         of any award under this Incentive Compensation Plan, that number of
         shares of Common Stock that was subject to the award but not delivered
         to the Participant shall again be available for awards under this
         Incentive Compensation Plan.

                  (b)      In the event that shares of Common Stock are
         delivered under this Incentive Compensation Plan as Restricted Stock,
         as described in Section 6 hereof, or pursuant to a stock award and are
         thereafter forfeited or reacquired by the Company pursuant to rights
         reserved upon the award thereof, such forfeited or reacquired shares
         shall again be available for awards under this Incentive Compensation
         Plan.

                  (c)      Notwithstanding the provisions of paragraphs (a) or
         (b) of this Section 4.2, the following shares shall not be available
         for reissuance under this Incentive Compensation Plan: (i) shares with
         respect to which the Participant has received the benefits of ownership
         (other than voting rights), either in the form of dividends or
         otherwise; (ii) shares which are withheld from any award or payment
         under this Incentive Compensation Plan to satisfy tax withholding
         obligations (as described in Section 7.5(e)); (iii) shares which are
         surrendered to fulfill tax obligations (as described in Section
         7.5(e)); and (iv) shares which are surrendered in payment of the Option
         Price (as defined in Section 5.2) upon the exercise of a Stock Option,
         as described in Section 5 hereof.

                  4.3      Adjustments to Shares Reserved.

                  In the event of any merger, consolidation, reorganization,
recapitalization, spin-off, stock dividend, stock split, reverse stock split,
exchange or other distribution with respect to shares of Common Stock or other
change in the corporate structure or capitalization affecting the Common Stock,
the type and number of shares of stock which are or may be subject to awards
under this Incentive Compensation Plan and the terms of any outstanding awards
(including the price at which shares of stock may be issued pursuant to an
outstanding award) shall be equitably adjusted by the Committee, in its sole
discretion, to preserve the value of benefits awarded or to be awarded to
Participants under this Incentive Compensation Plan.

5.       STOCK OPTIONS

                  5.1      Awards.

                  Subject to the terms and conditions of this Incentive
Compensation Plan, the Committee shall designate the employees to whom options
to purchase shares of Common Stock ("Stock Options") are to be awarded under
this Incentive Compensation Plan and shall determine the number, type and terms
of the Stock Options to be awarded to each of them; provided, however, that each
Stock Option designated as an "Incentive

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Stock Option" (as defined below) shall expire on the earlier of the date
provided by the option terms or the date which is ten years after the date of
grant. In addition, each Stock Option awarded to any person who owns, directly
or indirectly (or is treated as owning by reason of attribution rules, currently
set forth in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code")), stock of the Company constituting more than 10% of the total combined
voting power of the Company's outstanding stock, or the stock of any of its
corporate subsidiaries, shall expire on the earlier of the date provided by the
option terms or the date which is five years after the date of the grant. Each
Stock Option awarded under this Incentive Compensation Plan shall be a
"nonqualified stock option" for tax purposes, unless the Stock Option satisfies
all of the requirements of Section 422 of the Code and the Committee designates
such Stock Option as an "Incentive Stock Option".

                  5.2      Manner of Exercise.

                  A Stock Option may be exercised, in whole or in part, by
giving proper notification to the Corporate Secretary of Caremark Rx prior to
the date on which the Stock Option expires; provided, however, that a Stock
Option may only be exercised with respect to whole shares of Common Stock. Such
notice shall specify the number of shares of Common Stock to be purchased and
shall be accompanied by payment of the Option Price for such shares (the "Option
Price"). The Option Price of a Stock Option shall be determined in accordance
with the applicable provisions of the Code and shall in no event be less than
the Fair Market Value (as defined in Section 7.12) of the stock covered by the
Stock Option at the date of the grant; provided, however, that the Option Price
of a Stock Option granted to any person who owns, directly or indirectly (or is
treated as owning by reason of attribution rules, currently set forth in Section
424 of the Code), stock of the Company constituting more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or of
any affiliate of the Company, shall in no event be less than 110% of such Fair
Market Value.

                  5.3      Payment of Option Price.

                  No shares of Common Stock shall be issued on the exercise of
an Option unless paid for in full at the time of exercise. Payment shall be made
in cash, which may be paid by check or other instrument acceptable to the
Company. In addition, subject to compliance with applicable laws and regulations
and such conditions as the Committee may impose, the Committee may elect to
accept payment in shares of Common Stock of the Company which are already owned
by the optionee, valued at the Fair Market Value thereof on the date of
exercise. The Committee may also allow an optionee to exercise an Option by use
of proceeds to be received from the sale of Common Stock issuable pursuant to
the Option being exercised.

                  5.4      Vesting of Stock Options.

                  Except as provided by the Committee in the applicable Award
Agreement, Stock Options shall vest and become exercisable as follows:

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                  (a)      34% of the Stock Options granted shall vest on the
         Stock Option grant date;

                  (b)      33% of the Stock Options granted shall vest on each
         of the first anniversary and second anniversary of the Stock Option
         grant date; provided, however, that if during the first year after the
         Stock Option grant date, the stock price of the Common Stock closes at
         or above $12.00 (or such other price as determined by the Committee and
         set forth in the applicable Award Agreement) for any twenty (20) out of
         thirty (30) consecutive trading days, the 33% of the Stock Options due
         to vest on the first anniversary of the Stock Option grant date shall
         vest immediately at the end of such 20th day, and provided, however,
         that if during the second year after the Stock Option grant date, the
         stock price of the Common Stock closes at or above $18.00 (or such
         other price as determined by the Committee and set forth in the
         applicable Award Agreement) for any twenty (20) out of thirty (30)
         consecutive trading days, the 33% of the Stock Options due to vest on
         the second anniversary of the Stock Option grant date shall vest
         immediately at the end of such 20th day.

6.       RESTRICTED STOCK

                  6.1      Awards.

                  Subject to the terms and conditions of this Incentive
Compensation Plan, the Committee shall designate the Participants to whom shares
of "Restricted Stock" shall be awarded under this Incentive Compensation Plan
and determine the number of shares and the terms and conditions of each such
award; provided, however, that newly issued shares shall be issued as Restricted
Stock only to the extent that the Committee determines that past services of the
Participant constitute adequate consideration for at least the par value
thereof. Each Restricted Stock award shall entitle the Participant to receive
shares of Common Stock upon the terms and conditions specified by the Committee
and subject to the following provisions of this Section 6.

                  6.2      Restrictions.

                  All shares of Restricted Stock transferred or sold hereunder
shall be subject to such restrictions as the Committee may determine, including,
without limitation, any or all of the following:

                  (a)      a required period of employment with the Company, as
         determined by the Committee, prior to the vesting of the shares of
         Restricted Stock;

                  (b)      a prohibition against the sale, assignment, transfer,
         pledge, hypothecation or other encumbrance of the shares of Restricted
         Stock for a specified period as determined by the Committee;

                  (c)      a requirement that the holder of shares of Restricted
         Stock forfeit (or in the case of shares sold to a Participant, resell
         back to the Company at his cost) all

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         or a part of such shares in the event of termination of his employment
         during any period in which such shares are subject to restrictions; and

                  (d)      a prohibition against employment of the holder of
         such Restricted Stock by any competitor of the Company or against such
         holder's dissemination of any secret or confidential information
         belonging to the Company.

                  All restrictions on shares of Restricted Stock awarded
pursuant to this Incentive Compensation Plan shall expire at such time or times
as the Committee shall specify.

                  6.3      Registration of Shares.

                  Shares of Restricted Stock awarded pursuant to this Incentive
Compensation Plan shall be registered in the name of the Participant and, if
such shares are certificated, at the discretion of the Committee, may be
deposited in a bank designated by the Committee or with Caremark Rx. The
Committee may require a stock power endorsed in blank with respect to shares of
Restricted Stock whether or not certificated.

                  6.4      Stockholder Rights.

                  Subject to the terms and conditions of this Incentive
Compensation Plan, during any period in which shares of Restricted Stock are
subject to forfeiture or restrictions on transfer, each Participant who has been
awarded shares of Restricted Stock shall have such rights of a stockholder with
respect to such shares as the Committee may designate at the time of the award,
including the right to vote such shares and the right to receive all dividends
paid on such shares. Unless otherwise provided by the Committee, stock dividends
or dividends in kind and, except as otherwise provided by Section 7.10, any
other securities distributed with respect to Restricted Stock shall be
restricted to the same extent and subject to the same terms and conditions as
the Restricted Stock to which they are attributable.

                  6.5      Lapse of Restrictions.

                  Subject to the terms and conditions of this Incentive
Compensation Plan, at the end of any time period during which the shares of
Restricted Stock are subject to forfeiture or restrictions on transfer, such
shares will be delivered free of all restrictions to the Participant (or to the
Participant's legal representative, beneficiary or heir).

                  6.6      Substitution of Cash.

                  The Committee may, in its sole discretion, substitute cash
equal to the Fair Market Value (as described in Section 7.11) (determined as of
the date of the distribution) of shares of Common Stock otherwise required to be
distributed to a Participant in accordance with this Section 6.

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7.       GENERAL

                  7.1      Effective Date.

                  This Incentive Compensation Plan became effective the date
that the Caremark Plan was adopted by the Board of Directors of the former
parent corporation of Caremark International Inc.

                  7.2      Duration.

                  This Incentive Compensation Plan shall remain in force and
effect until all awards made under this Incentive Compensation Plan have either
been satisfied by the issuance of shares of Common Stock or the payment of cash
or been terminated in accordance with the terms of this Incentive Compensation
Plan or the award and until all restrictions imposed on shares of Common Stock
issued under this Incentive Compensation Plan have lapsed. No Incentive Stock
Option award may be made under this Incentive Compensation Plan after the tenth
anniversary of the date that the Caremark Plan was adopted by the Board of
Directors of the former parent corporation of Caremark International Inc.

                  7.3      Non-Transferability of Incentives.

                  (a)      No share of Restricted Stock under this Incentive
         Compensation Plan may be transferred, pledged or assigned by the holder
         thereof (except, in the event of the holder's death, by will or the
         laws of descent and distribution), and the Company shall not be
         required to recognize any attempted assignment of such rights by any
         Participant. During a Participant's lifetime, awards may be exercised
         only by him or by his guardian or legal representative.

                  (b)      (1) Incentive Stock Options. No incentive stock
         option granted under the Incentive Compensation Plan may be sold,
         transferred, pledged, assigned, or otherwise alienated or hypothecated,
         other than by will or by the laws of descent and distribution. Further,
         all incentive stock options granted to a Participant under the
         Incentive Compensation Plan shall be exercisable during his or her
         lifetime only by such Participant.

                  (2)      Nonqualified Stock Options. No nonqualified stock
option granted under the Incentive Compensation Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Notwithstanding the foregoing, to the
extent not prohibited by any statute, rule or regulation applicable to the
Incentive Compensation Plan, the nonqualified stock options or the registration
with the Securities and Exchange Commission of the Common Stock to be issued
upon exercise of the nonqualified stock options, the Committee may, in its
discretion, authorize all or a portion of nonqualified stock options granted to
a Participant to be on terms which permit transfer by such Participant to (i)
the spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, provided that (x) there

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may be no consideration for any such transfer, (y) the Award Agreement pursuant
to which such nonqualified stock options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this Section, and (z) subsequent transfers of transferred nonqualified
stock options shall be prohibited except those by will or the laws of descent
and distribution. Following transfer, any such nonqualified stock options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of this Incentive
Compensation Plan, the term "Participant" shall be deemed to refer to the
transferee. The events of termination of employment shall continue to be applied
with respect to the original Participant, following which the nonqualified stock
options shall be exercisable by the transferee only to the extent, and for the
periods specified in Section 7.4. Notwithstanding the foregoing, should the
Committee provide that nonqualified stock options granted be transferable, the
Company by such action incurs no obligation to notify or otherwise provide
notice to a transferee of early termination of the nonqualified stock option. In
the event of a transfer, as set forth above, the original Participant is and
will remain subject to and responsible for any applicable withholding taxes upon
the exercise of such nonqualified stock options.

                  7.4      Effect of Termination of Employment or Death.

                  (a)      Except as otherwise provided in an Award Agreement or
         as provided in paragraphs (b) and (c) below, each Stock Option, to the
         extent it has not been previously exercised, shall terminate upon the
         earliest to occur of: (a) the expiration of the period set forth in the
         Award Agreement; (b) the expiration of 12 months following the
         Participant's death or permanent disability; (c) immediately upon the
         date the Participant ceases to be an employee, officer, consultant or
         director or otherwise affiliated with the Company for cause; or (d) the
         expiration of 90 days following the date the Participant ceases to be
         an employee, officer, consultant or director or otherwise affiliated
         with the Company for any reason other than cause, death or permanent
         disability.

                  (b)      Except as otherwise provided in an Award Agreement,
         any Stock Option granted after September 21, 1998 (a "Secondary
         Option"), to the extent it has not been previously exercised, shall
         terminate upon the earliest to occur of: (a) the expiration of the
         Secondary Option period set forth in the Award Agreement; (b) the
         expiration of 12 months following the Participant's death or permanent
         disability; (c) immediately upon termination for Cause (as defined
         below); or (d) the expiration of 90 days following the Participant's
         termination of employment for any reason other than Cause (as defined
         below), Change in Control (as defined in Section 7.10), death or
         permanent disability.

                           For purposes of the preceding sentence only, Cause
         means the Company, subsidiary or an affiliate having cause to terminate
         a Participant's status as an employee, officer, consultant or director
         or other affiliation with the Company under any existing employment
         agreement between the Participant and the Company, a subsidiary or an
         affiliate or, in the absence of such an employment agreement, upon (i)
         the determination by the Committee that the

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         Participant has ceased to perform his duties to the Company, a
         subsidiary or an affiliate (other than as a result of his incapacity
         due to physical or mental illness or injury), which failure amounts to
         an intentional and extended neglect of his duties to such party, (ii)
         the Committee's determination that the Participant has engaged or is
         about to engage in conduct materially injurious to the Company, a
         subsidiary or an affiliate, or (iii) the Participant having been
         convicted of a felony.

                  (c)      Notwithstanding the foregoing, any Secondary Option,
         to the extent it has not been previously exercised prior to a Change in
         Control (as defined in Section 7.10) shall remain exercisable for its
         full original term upon and following such Change in Control.

                  7.5      Compliance with Applicable Law and Withholding.

                  (a)      Notwithstanding any other provision of this Incentive
         Compensation Plan, Caremark Rx shall have no obligation to issue any
         shares of Common Stock under this Incentive Compensation Plan if such
         issuance would violate any applicable law or any applicable regulation
         or requirement of any securities exchange or similar entity.

                  (b)      Prior to the issuance of any shares of Common Stock
         under this Incentive Compensation Plan, Caremark Rx or the Company may
         require a written statement that the recipient is acquiring the shares
         for investment and not for the purpose or with the intention of
         distributing the shares and will not dispose of them in violation of
         the registration requirements of the Securities Act of 1933.

                  (c)      With respect to any person who is subject to Section
         16(a) of the Exchange Act, the Committee may, at any time, add such
         conditions and limitations to any award under this Incentive
         Compensation Plan that it deems necessary or desirable to comply with
         the requirements of Rule 16b-3.

                  (d)      If, at any time, Caremark Rx, in its sole discretion,
         determines that the listing, registration or qualification (or any
         updating of any such document) of any type of award, or the shares of
         Common Stock issuable pursuant thereto, is necessary on any securities
         exchange or under any federal or state securities or blue sky law, or
         that the consent or approval of any governmental regulatory body is
         necessary or desirable as a condition of, or in connection with, any
         award, the issuance of shares of Common Stock pursuant to any award, or
         the removal of any restrictions imposed on shares subject to an award,
         such award shall not be made and the shares of Common Stock shall not
         be issued or such restrictions shall not be removed, as the case may
         be, in whole or in part, unless such listing, registration,
         qualification, consent or approval shall have been effected or obtained
         free of any conditions not acceptable to Caremark Rx.

                  (e)      All awards and payments under this Incentive
         Compensation Plan are subject to withholding of all applicable taxes
         and the Company shall have the right to withhold from any award under
         this Incentive Compensation Plan or to

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         collect as a condition of any payment under this Incentive Compensation
         Plan, as applicable, any taxes required by law to be withheld. To the
         extent provided by the Committee, a Participant may elect to have any
         distribution otherwise required to be made under this Incentive
         Compensation Plan to be withheld or to surrender to the Company shares
         of Common Stock already owned by the Participant to fulfill any tax
         withholding obligation.

                  7.6      No Continued Employment.

                  The Incentive Compensation Plan does not constitute a contract
of employment or continued service, and participation in this Incentive
Compensation Plan will not give any employee or Participant the right to be
retained in the employ of the Company or the right to continue as a director of
the Company or any right or claim to any benefit under this Incentive
Compensation Plan unless such right or claim has specifically accrued under the
terms of this Incentive Compensation Plan or the terms of any award under this
Incentive Compensation Plan.

                  7.7      Treatment as a Stockholder.

                  Any award to a Participant under this Incentive Compensation
Plan shall not create any rights in such Participant as a stockholder of
Caremark Rx until shares of Common Stock are registered in the name of the
Participant.

                  7.8      Deferral Permitted.

                  Payment of cash to a Participant or distribution of any shares
of Common Stock to which a Participant is entitled under any award shall be made
as provided in the terms of the award. Payment may be deferred at the option of
the Participant to the extent provided in the award.

                  7.9      Amendment of the Incentive Compensation Plan.

                  The Committee may, at any time and in any manner, amend,
suspend, or terminate this Incentive Compensation Plan or any award outstanding
under this Incentive Compensation Plan; provided, however, that no such
amendment or discontinuance shall:

                  (a)      be made without stockholder approval: (1) to the
         extent such approval is required by law, agreement or the rules of any
         exchange or automated quotation system upon which the Common Stock is
         listed or quoted or (2) to the extent that any outstanding Stock Option
         is canceled and regranted or repriced;

                  (b)      adversely alter or impair the rights of Participants
         with respect to awards previously made under this Incentive
         Compensation Plan without the consent of the holder thereof; or

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                  (c)      make any change that would disqualify any provision
         of this Incentive Compensation Plan, intended to be so qualified, from
         the exemption provided by Rule 16b-3.

                  7.10     Immediate Acceleration of Incentives.

                  (a)      Notwithstanding any provision in this Incentive
Compensation Plan to the contrary or the normal terms of vesting under any
award, (i) the restrictions on all shares of Restricted Stock awarded shall
lapse immediately and (ii) all outstanding Stock Options will become exercisable
immediately, if a Change in Control (as defined below) occurs. For purposes of
this Incentive Compensation Plan, a "Change in Control" shall have occurred as
of the first day that any one or more of the following conditions shall have
been satisfied:

(1) The acquisition by any Person of Beneficial Ownership of 20% or more of
either (i) the then outstanding shares of Common Stock of the Company, or (ii)
the combined voting power of the outstanding voting securities of the Company
entitled to vote generally in the selection of Directors; provided, however,
that for purposes of this subsection, the following transactions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
through a public offering of shares of Common Stock of the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (D) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (3)
below;

(2) The cessation, for any reason, of the individuals who constitute the
Company's Board of Directors as of the date hereof ("Incumbent Board") to
constitute at least a majority of the Company's Board of Directors; provided,
however, that any individual becoming a Director following the date hereof whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the Directors then comprising the Incumbent
Board shall be considered as though such individual was a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs because of an actual or threatened election
contest with respect to the election or removal of Directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Company's Board of Directors;

(3) The consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
("Business Combination") unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the Beneficial
Owners, respectively, of the outstanding shares of Common Stock of the Company
and the outstanding voting securities of the Company immediately before such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of Directors, as the case may be, of the Company

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resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately before such Business Combination of the outstanding shares of Common
Stock and the outstanding voting securities of the Company, as the case may be;
(ii) no party (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
before the Business Combination; and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Company's Board of Directors at the time of the
execution of the initial agreement, or of the action of the Company's Board of
Directors, providing for such Business Combination; or

(4) The approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

(5) Any other condition or event (i) that the Committee determines to be a
"Change in Control" within the meaning of this Section 7.10 and (ii) that is set
forth as a supplement to this Section 7.10 in the Option Agreement.

                  The term "Beneficial Owner" or "Beneficial Ownership", as used
in this Section 7.10, has the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act. The term "Person", as used
in this Section 7.10, 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 a "group" as defined in Section 13(d) thereof.

                  (b)      Notwithstanding any other provision of this Incentive
Compensation Plan or any Award Agreement provision, the provisions of this
Section 7.10 may not be terminated, amended, or modified on or after the date of
a Change in Control to affect adversely any award theretofore granted under the
Incentive Compensation Plan without the prior written consent of the Participant
with respect to said Participant's outstanding awards.

                  7.11     Sale of Business Unit of Company.

                  The Committee, in connection with the sale of any subsidiary,
affiliate, division or other business unit of the Company, may within the
Committee's sole and absolute discretion (1) cause any or all Stock Options
granted hereunder to Participants whose Stock Options or rights under Stock
Options will be adversely affected by such transaction (a) to become immediately
exercisable, or (b) to remain exercisable after such transaction for such period
as the Committee deems appropriate under the circumstances, or both (a) and (b),
or (2) cause the restrictions on any or all shares of Restricted Stock

                                       12
<PAGE>   13

awarded hereunder to Participants whose Restricted Stock will be adversely
affected by such transaction to lapse immediately. The provision of this Section
7.11 and the actions of the Committee taken pursuant to this Section 7.11 shall
be effective upon action of the Committee alone without amendment to any Award
Agreement or the consent of any Participant.

                  7.12     Definition of Fair Market Value.

                  Except as otherwise determined by the Committee, the "Fair
Market Value" of a share of Common Stock as of any date shall be equal to the
closing sale price of a share of Common Stock as reported on The National
Association of Securities Dealers' New York Stock Exchange Composite Reporting
Tape (or if the Common Stock is not traded on The New York Stock Exchange, the
closing sale price on the exchange on which it is traded or as reported by an
applicable automated quotation system) (the "Composite Tape"), on the applicable
date or, if no sales of Common Stock are reported on such date, the closing sale
price of a share of Common Stock on the date the Common Stock was last reported
on the Composite Tape (or such other exchange or automated quotation system, if
applicable).

                                       13<PAGE>   1
                                                                    EXHIBIT 10.5

                              AMENDED AND RESTATED

                                CAREMARK RX, INC.

                             1993 STOCK OPTION PLAN

                  1.       PURPOSE OF THE PLAN

                  The purposes of this Amended and Restated Caremark Rx, Inc.
("Caremark Rx" or the "Company") 1993 Stock Option Plan (the "Plan") are to:

                  1.1.     furnish incentives to individuals or entities chosen
to receive options because they are considered capable of responding by
improving operations and increasing profits;

                  1.2.     encourage selected employees to accept or continue
employment with the Company or its Affiliates; and

                  1.3.     increase the interest of selected employees,
officers, directors and consultants in the Company's welfare through their
participation in the growth in value of the common stock, $.001 par value, of
the Company ("Common Stock").

                  To accomplish the foregoing objectives, this Plan provides a
means whereby individuals and entities may receive options to purchase Common
Stock. Options granted under this Plan ("Options") will be either nonqualified
options ("NQOs") or incentive stock options ("ISOs").

                  2.       ELIGIBLE PERSONS

                  2.1.     General. Every person who at the date on which an
Option granted to such person becomes effective (the "Grant Date") is a
full-time employee, officer, director or consultant of the Company or of any
Affiliate or any individual or entity subject to an acquisition or management
agreement with the Company is eligible to receive Options under this Plan.

                  2.2.     Definition of Affiliate. The term "Affiliate," as
used in this Plan, means a "parent corporation" or "subsidiary corporation," as
defined in Section 424 of the Internal Revenue Code of 1986 (as amended, the
"Code"). The term "employee" shall have the meaning ascribed for purposes of
Section 3401(c) of the Code and the Treasury Regulations promulgated thereunder
and shall include an officer or a director who is also an employee.

<PAGE>   2

                  3.       STOCK SUBJECT TO THIS PLAN

                  The total number of shares of stock reserved for issuance upon
the exercise of Options is 1,555,000 shares of Common Stock, divided into
500,000 shares of Common Stock reserved for issuance upon the exercise of
options that may be granted in connection with the acquisition of the assets of
or management of physician practices (hereinafter referred to as "Acquisition
Options") and 1,055,000 shares of Common Stock reserved for issuance upon the
exercise of options granted to employees, officers, consultants and members of
the Board of Directors of the Company (hereinafter referred to as "Management
Options"). The shares covered by the portion of any grant that expires
unexercised under this Plan shall become available again for grants under this
Plan; provided, however, that no Management Options may be granted as
Acquisition Options and vice versa. The number of shares reserved for issuance
under this Plan is subject to adjustment in accordance with the provisions for
adjustment in this Plan.

                  4.       ADMINISTRATION

                  4.1.     General. This Plan shall be administered by the
Compensation Committee of the Board of Directors or by any other committee
appointed by the Board of Directors (the "Committee"), which Committee shall
consist solely of two or more Non-Employee Directors ("Non-Employee Directors")
as such are defined in Rule 16b-3 promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision. The Committee shall have the authority to select the persons to
receive Options under this Plan, to fix the number of shares that each optionee
may purchase, to set the terms and conditions of each Option, and to determine
all other matters relating to this Plan. Any act approved in writing by a
majority of the members of the Committee shall be a valid act of the Committee.
All questions of interpretation, construction, implementation and application of
this Plan and any Option Agreement awarded under it shall be determined by the
Committee. Such determinations shall be final and binding on all persons. No
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under the Plan.

                  5.       GRANTING OF RIGHTS

                  5.1.     Ten Year Limitation on Grants of ISOs. No ISOs shall
be granted under this Plan after ten years from the date the Board of Directors
first adopts the Plan.

                  5.2.     Written Agreement; Effect. Each Option shall be
evidenced by a written agreement (the "Option Agreement"), in form satisfactory
to the Committee, executed by the Company and by the person to whom such Option
is granted. Each such Option Agreement shall incorporate by reference all of the
terms and conditions of the Plan as in effect at the time of its execution and
may contain such other terms and provisions not contrary to the Plan as shall be
approved and adopted by the Committee. The Option Agreement shall specify
whether each Option it evidences is a NQO or an ISO. Failure of the grantee to
execute an Option Agreement shall not void or invalidate

                                       2
<PAGE>   3

the grant of an Option; the Option may not be exercised, however, until the
Option Agreement is executed.

                  5.3.     Annual $100,000 Limitation on ISOs. To the extent
required by Section 422(d) of the Code, the aggregate fair market value of
shares of the Common Stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year shall
not exceed $100,000. For this purpose, fair market value shall be the fair
market value of the shares covered by the ISOs when the ISOs were granted. If by
their terms, such ISOs taken together would first become exercisable at a faster
rate, this $100,000 limitation shall be applied by deferring the exercisability
of those ISOs or portions of ISOs which have the highest per share exercise
prices. The ISOs or portions of ISOs, the exercisability of which are so
deferred, shall become exercisable on the first day of the first subsequent
calendar year during which they may be exercised, as determined by applying
these same principles of this Section and all other provisions of this Section
and all other provisions of this Plan, including those relating to the
expiration and termination of ISOs.

                  5.4.     Advance Approvals. The Committee may approve the
grant of Options to persons who are expected to become employees, consultants or
members of the Board of Directors, of the Company, but are not employees,
consultants or members of the Board of Directors at the date of approval. In
such cases, the Option shall be deemed granted, without further approval, on the
date the grantee becomes an employee, and must satisfy all requirements of this
Plan for Options granted on that date.

                  6.       TERMS AND CONDITIONS OF OPTIONS

                  Each Option shall be designated as an ISO or a NQO and shall
be subject to the terms and conditions set forth in Section 6.1. NQOs shall also
be subject to the terms and conditions set forth in Section 6.2, but not those
set forth in Section 6.3. ISOs shall also be subject to the terms and conditions
set forth in Section 6.3, but not those set forth in Section 6.2.

                  6.1.     Terms and Conditions to Which All Options Are
Subject. All Options shall be subject to the following terms and conditions:

                  (a)      Changes in Capital Structure. Subject to Section
         6.1(b), if the stock of the Company is changed by reason of a stock
         split, reverse stock split, stock dividend, or recapitalization, or
         converted into or exchanged for other securities as a result of a
         merger, consolidation, or reorganization, appropriate adjustments shall
         be made in (1) the number and class of shares of stock subject to this
         Plan and each outstanding Option, and (2) the exercise price of each
         outstanding Option; provided, however, that the Company shall not be
         required to issue fractional shares as a result of any such adjustment.
         Each such adjustment shall be determined by the Committee in its sole
         discretion, which determination shall be final and binding on all
         persons.

                                       3
<PAGE>   4

                  (b)      Corporate Transactions. New option rights may be
         substituted for Options granted, or the Company's obligations as to
         outstanding Options may be assumed, by an employer corporation other
         than the Company, or an Affiliate thereof, in connection with any
         merger, consolidation, acquisition, separation, reorganization,
         dissolution, liquidation, sale, or like occurrence in which the Company
         is involved and which the Committee determines, in its absolute
         discretion, would materially alter the structure. Substitution shall be
         done in such manner that the then outstanding Options which are ISOs
         will continue to be "incentive stock options" within the meaning of
         Section 422 of the Code to the full extent permitted thereby.
         Notwithstanding the foregoing or the provisions of Section 6.1(a), if
         such an event occurs and if such employer corporation, or an Affiliate
         thereof, does not substitute new option rights for, and substantially
         equivalent to, the outstanding Options granted hereunder, or assume the
         outstanding Options granted hereunder, or if there is no employer
         corporation, or if the Committee determines, in its sole discretion,
         that outstanding Options should not then continue to be outstanding,
         the Committee may upon ten days' prior written notice to optionees in
         its absolute discretion (1) shorten the period during which Options are
         exercisable (provided they remain exercisable, to the extent otherwise
         exercisable, for at least ten days after the date the notice is given),
         or (2) cancel Options upon payment to the optionee in cash, with
         respect to each Option to the extent then exercisable, of an amount
         which, in the absolute discretion of the Committee, is determined to be
         equivalent to any excess of the fair market value (at the effective
         time of the dissolution, liquidation, merger, consolidation,
         acquisition, separation, reorganization, sale or other event) of the
         consideration that the optionee would have received if the Option had
         been exercised before the effective time, over the exercise price of
         the Option; provided, however, if there is a successor corporation and
         replacement options are not granted by the successor corporation, all
         outstanding Options shall become exercisable prior to the consummation
         of the transaction such that the optionees shall have not less than ten
         days to exercise their Options and become stockholders of record
         entitled to receive the consideration paid to the other stockholders of
         the Company. If an optionee fails to exercise his Option within any
         exercise period described in this paragraph and the dissolution,
         liquidation, merger, consolidation, sale or other event is consummated,
         his Option shall no longer be exercisable. Any unexercised Option shall
         be canceled and terminated. Notwithstanding anything herein to the
         contrary, nothing shall extend an optionee's right to exercise an ISO
         after the expiration of ten years from the date it is granted. The
         actions described in this Section may be taken without regard to any
         resulting tax consequences to the optionee.

                  (c)      Option Grant Date. Each Option Agreement shall
         specify the date as of which it shall be effective, which date shall be
         the Grant Date (determined pursuant to Section 5.4 in the case of
         advance approvals).

                  (d)      Fair Market Value. Except as otherwise determined by
         the Committee, the "Fair Market Value" of a share of Common Stock as of
         any date shall be equal to the closing sale price of a share of Common
         Stock as reported on

                                       4
<PAGE>   5

         The National Association of Securities Dealers' New York Stock Exchange
         Composite Reporting Tape (or if the Common Stock is not traded on The
         New York Stock Exchange, the closing sale price on the exchange on
         which it is traded or as reported by an applicable automated quotation
         system) (the "Composite Tape"), on the applicable date or, if no sales
         of Common Stock are reported on such date, the closing sale price of a
         share of Common Stock on the date the Common Stock was last reported on
         the Composite Tape (or such other exchange or automated quotation
         system, if applicable).

                  (e)      Transfer of Option Rights.

                           (1)      Incentive Stock Options. No ISO granted
                  under the Plan may be sold, transferred, pledged, assigned, or
                  otherwise alienated or hypothecated, other than by will or by
                  the laws of descent and distribution. Further, all ISOs
                  granted to an optionee under the Plan shall be exercisable
                  during his or her lifetime only by such optionee.

                           (2)      Nonqualified Stock Options. No NQO granted
                  under the Plan may be sold, transferred, pledged, assigned, or
                  otherwise alienated or hypothecated, other than by will or by
                  the laws of descent and distribution. Notwithstanding the
                  foregoing, to the extent not prohibited by any statute, rule
                  or regulation applicable to the Plan, the Options or the
                  registration with the Securities and Exchange Commission of
                  the Common Stock to be issued upon exercise of the Options,
                  the Committee may, in its discretion, authorize all or a
                  portion of NQOs granted to an optionee to be on terms which
                  permit transfer by such optionee to (i) the spouse, children
                  or grandchildren of the optionee ("Immediate Family Members"),
                  (ii) a trust or trusts for the exclusive benefit of such
                  Immediate Family Members, or (iii) a partnership in which such
                  Immediate Family Members are the only partners, provided that
                  (x) there may be no consideration for any such transfer, (y)
                  the Option Agreement pursuant to which such NQOs are granted
                  must be approved by the Committee, and must expressly provide
                  for transferability in a manner consistent with this Section,
                  and (z) subsequent transfers of transferred NQOs shall be
                  prohibited except those by will or the laws of descent and
                  distribution. Following transfer, any such NQOs shall continue
                  to be subject to the same terms and conditions as were
                  applicable immediately prior to transfer, provided that for
                  purposes of this Plan, the term "optionee" shall be deemed to
                  refer to the transferee. The events of termination of
                  employment shall continue to be applied with respect to the
                  original optionee, following which the NQOs shall be
                  exercisable by the transferee only to the extent, and for the
                  periods specified in Section 6.1(g). Notwithstanding the
                  foregoing, should the Committee provide that NQOs granted be
                  transferable, the Company by such action incurs no obligation
                  to notify or otherwise provide notice to a transferee of early
                  termination of the NQO. In the event of a transfer, as set
                  forth above, the original optionee is and will remain subject
                  to and

                                       5
<PAGE>   6

                  responsible for any applicable withholding taxes upon the
                  exercise of such NQOs.

                  (f)      Payment. No shares of Common Stock shall be issued on
         the exercise of an Option unless paid for in full at the time of
         exercise. Payment shall be made in cash, which may be paid by check or
         other instrument acceptable to the Company. In addition, subject to
         compliance with applicable laws and regulations and such conditions as
         the Committee may impose, the Committee may elect to accept payment in
         shares of Common Stock of the Company which are already owned by the
         optionee, valued at the Fair Market Value thereof on the date of
         exercise. The Committee may also allow an optionee to exercise an
         option by use of proceeds to be received from the sale of Common Stock
         issuable pursuant to the Option being exercised.

                  (g)      Termination. Except as otherwise provided in an
         Option Agreement or as provided in paragraphs (h) and (i) below, each
         Option to the extent it has not been previously exercised, shall
         terminate upon the earliest to occur of: (a) the expiration of the term
         of the Option set forth in the Option Agreement; (b) immediately upon
         the date the optionee ceases to be an employee, officer, consultant or
         member of the Board of Directors or otherwise affiliated with the
         Company (a "Termination") on account of cause; (c) the expiration of 90
         days following the date of a Termination of the optionee for any reason
         other than cause, death or permanent disability or (d) the expiration
         of 12 months following a Termination of the optionee on account of
         death or permanent disability. A leave of absence duly authorized by
         the Company shall not be deemed a Termination or a break in continuous
         employment, service or affiliation with the Company.

                  (h)      Except as otherwise provided in an Option Agreement,
         any Option granted after September 21, 1998 (a "Secondary Option"), to
         the extent it has not been previously exercised, shall terminate upon
         the earliest to occur of: (a) the expiration of the Secondary Option
         period set forth in the Option Agreement; (b) the expiration of 12
         months following the optionee's death or permanent disability; (c)
         immediately upon Termination for Cause (as defined below); or (d) the
         expiration of 90 days following the optionee's Termination for any
         reason other than Cause (as defined below), Change in Control (as
         defined in Section 7 heretofore), death or permanent disability.

                           For purposes of the preceding sentence only, Cause
         means the Company or an Affiliate having cause to terminate an
         optionee's status as an employee, officer, consultant or director or
         other affiliation with the Company under any existing employment
         agreement between the optionee and the Company or an Affiliate or, in
         the absence of such an employment agreement, upon (i) the determination
         by the Committee that the optionee has ceased to perform his duties to
         the Company or an Affiliate (other than as a result of his incapacity
         due to physical or mental illness or injury), which failure amounts to
         an intentional and extended neglect of his duties to such party, (ii)
         the Committee's

                                       6
<PAGE>   7

         determination that the optionee has engaged or is about to engage in
         conduct materially injurious to the Company or an Affiliate, or (iii)
         the optionee having been convicted of a felony.

                  (i)      Notwithstanding the foregoing, any Secondary Option,
         to the extent it has not been previously exercised prior to a Change in
         Control (as defined in Article 7 heretofore) shall remain exercisable
         for its full original term upon and following such Change in Control.

                  (j)      Other Provisions. Each Option Agreement may contain
         such other terms, provisions, and conditions not inconsistent with this
         Plan, including rights of repurchase, as may be determined by the
         Committee, and each ISO granted under this Plan shall include such
         provisions and conditions as are necessary to qualify such option as an
         "incentive stock option" within the meaning of Section 422 of the Code.

                  (k)      Withholding and Employment Taxes. At the time of
         exercise of an Option, the optionee shall remit to the Company in cash
         all applicable federal and state withholding and employment taxes. If
         and to the extent authorized and approved by the Committee in its sole
         discretion, an optionee may elect, by means of a form of election to be
         prescribed by the Committee, to have shares which are acquired upon
         exercise of an Option withheld by the Company or tender other shares of
         Common Stock or other securities of the Company owned by the optionee
         to the Company at the time the amount of such taxes is determined in
         order to pay the amount of such tax obligations, subject to the
         following limitations:

                           (1)      such election shall be irrevocable; and

                           (2)      such election shall be subject to the
                  disapproval of the Committee at any time.

                  Any Common Stock or other securities so withheld or tendered
will be valued by the Company as of the date they are withheld or tendered.
Unless the Committee otherwise determines, the optionee shall pay to the Company
in cash, promptly when the amount of such obligations become determinable, all
applicable federal and state withholding taxes resulting from the lapse of
restrictions imposed on exercise of an Option, from a transfer or other
disposition of shares acquired upon exercise of an Option or otherwise related
to the Option or the shares acquired upon exercise of the Option.

                  6.2.     Terms and Conditions to Which Only NQOs Are Subject.
Options granted under this Plan which are designated as NQOs shall be subject to
the following terms and conditions:

                  (a)      Option Term. Unless a different expiration date is
         specified by the Committee at the Grant Date in the Option Agreement,
         each NQO shall expire ten years from its Grant Date.

                                       7
<PAGE>   8

                  6.3.     Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject to
the following terms and conditions:

                  (a)      Exercise Price. The exercise price of an ISO shall be
         determined in accordance with the applicable provisions of the Code and
         shall in no event be less than the fair market value of the stock
         covered by the ISO at the Grant Date; provided, however, that the
         exercise price of an ISO granted to any person who owns, directly or
         indirectly (or is treated as owning by reason of attribution rules,
         currently set forth in Section 424 of the Code), stock of the Company
         constituting more than 10% of the total combined voting power of all
         classes of outstanding stock of the Company or of any Affiliate of the
         Company, shall in no event be less than 110% of such fair market value.

                  (b)      Option Term. Unless an earlier expiration date is
         specified by the Committee at the Grant Date in the Option Agreement,
         each ISO shall expire ten years from its Grant Date; except that an ISO
         granted to any person who owns, directly or indirectly (or is treated
         as owning by reason of applicable attribution rules currently set forth
         in Section 424 of the Code) stock of the Company constituting more than
         10% of the total combined voting power of the Company's outstanding
         stock, or the stock of any Affiliate of the Company, shall expire five
         years from its Grant Date.

                  (c)      Disqualifying Dispositions. If stock acquired by
         exercise of an ISO is disposed of within two years from the Grant Date
         or within one year after the transfer of the stock to the optionee, the
         holder of the stock immediately prior to the disposition shall promptly
         notify the Company in writing of the date and terms of the disposition
         and shall provide such other information regarding the disposition as
         the Company may reasonably require. Such holder shall pay to the
         Company any withholding and employment taxes which the Company in its
         sole discretion deems applicable. The Company may instruct its stock
         transfer agent by appropriate means, including placement of legends on
         stock certificates, not to transfer stock acquired by exercise of an
         ISO unless it has been advised by the Company that the requirements of
         this Section have been satisfied.

                  6.4.     Vesting of Options. Except as set forth by the
Committee in the applicable Option Agreement, Options shall vest and become
exercisable as follows:

                  (a)      34% of the Options shall vest on the Grant Date;

                  (b)      33% of the Options granted shall vest on each of the
         first anniversary and second anniversary of the Grant Date; provided,
         however, that if during the first year after the Grant Date, the stock
         price of the Common Stock closes at or above $12.00 (or such other
         price determined by the Committee and set forth in the applicable
         Option Agreement) for any twenty (20) out of thirty (30) consecutive
         trading days, the 33% of the Options due to vest on the first
         anniversary of the Grant Date shall vest immediately at the end of such
         20th day,

                                       8
<PAGE>   9

         and provided, however, that if during the second year after the Grant
         Date, the stock price of the Common Stock closes at or above $18.00 (or
         such other price determined by the Committee and set forth in the
         applicable Option Agreement) for any twenty (20) out of thirty (30)
         consecutive trading days, the 33% of the Options due to vest on the
         second anniversary of the Grant Date shall vest immediately at the end
         of such 20th day.

                  7.       CHANGE IN CONTROL

                  (a)      Treatment of Outstanding Options. Unless otherwise
         specifically prohibited under applicable laws, or by the rules and
         regulations of any governing governmental agencies or national
         securities exchanges, upon the occurrence of a Change in Control, any
         and all Secondary Options granted hereunder shall become immediately
         exercisable.

                  (b)      Termination, Modification or Amendment of Change in
         Control Provisions. Notwithstanding any other provision of this Plan or
         any Option Agreement provision, the provisions of this Article 7 may
         not be terminated, amended, or modified on or after the date of a
         Change in Control to affect adversely any Option theretofore granted
         under the Plan without the prior written consent of the optionee with
         respect to said optionee's outstanding Options.

                  (c)      Definition of Change in Control. A Change in Control
         of the Company shall be deemed to have occurred as of the first day
         that any one or more of the following conditions shall have been
         satisfied:

                           (1)      The acquisition by any Person of Beneficial
                  Ownership of 20% or more of either (i) the then outstanding
                  shares of Common Stock of the Company, or (ii) the combined
                  voting power of the outstanding voting securities of the
                  Company entitled to vote generally in the selection of
                  Directors; provided, however, that for purposes of this
                  subsection, the following transactions shall not constitute a
                  Change of Control: (A) any acquisition directly from the
                  Company through a public offering of shares of Common Stock of
                  the Company, (B) any acquisition by the Company, (C) any
                  acquisition by any employee benefit plan (or related trust)
                  sponsored or maintained by the Company or any corporation
                  controlled by the Company, or (D) any acquisition by any
                  corporation pursuant to a transaction which complies with
                  clauses (i), (ii) and (iii) of subsection (3) below;

                           (2)      The cessation, for any reason, of the
                  individuals who constitute the Company's Board of Directors as
                  of the date hereof ("Incumbent Board") to constitute at least
                  a majority of the Company's Board of Directors; provided,
                  however, that any individual becoming a Director following the
                  date hereof whose election, or nomination for election by the
                  Company's stockholders, was approved by a vote of at least a
                  majority of the Directors then comprising the Incumbent Board
                  shall be

                                       9
<PAGE>   10

                  considered as though such individual was a member of the
                  Incumbent Board, but excluding, for this purpose, any such
                  individual whose initial assumption of office occurs because
                  of an actual or threatened election contest with respect to
                  the election or removal of Directors or other actual or
                  threatened solicitation of proxies or consents by or on behalf
                  of a Person other than the Company's Board of Directors;

                           (3)      The consummation of a reorganization, merger
                  or consolidation or sale or other disposition of all or
                  substantially all of the assets of the Company ("Business
                  Combination") unless, following such Business Combination, (i)
                  all or substantially all of the individuals and entities who
                  were the Beneficial Owners, respectively, of the outstanding
                  shares of Common Stock of the Company and the outstanding
                  voting securities of the Company immediately before such
                  Business Combination beneficially own, directly or indirectly,
                  more than 50% of, respectively, the then outstanding shares of
                  Common Stock and the combined voting power of the then
                  outstanding voting securities entitled to vote generally in
                  the election of Directors, as the case may be, of the Company
                  resulting from such Business Combination (including, without
                  limitation, a corporation which as a result of such
                  transaction owns the Company or all or substantially all of
                  the Company's assets either directly or through one or more
                  subsidiaries) in substantially the same proportions as their
                  ownership immediately before such Business Combination of the
                  outstanding shares of Common Stock and the outstanding voting
                  securities of the Company, as the case may be; (ii) no party
                  (excluding any corporation resulting from such Business
                  Combination or any employee benefit plan (or related trust) of
                  the Company or such corporation resulting from such Business
                  Combination) beneficially owns, directly or indirectly, 20% or
                  more of, respectively, the then outstanding shares of common
                  stock of the corporation resulting from such Business
                  Combination or the combined voting power of the then
                  outstanding voting securities of such corporation except to
                  the extent that such ownership existed before the Business
                  Combination; and (iii) at least a majority of the members of
                  the board of directors of the corporation resulting from such
                  Business Combination were members of the Company's Board of
                  Directors at the time of the execution of the initial
                  agreement, or of the action of the Company's Board of
                  Directors, providing for such Business Combination; or

                           (4)      The approval by the stockholders of the
                  Company of a complete liquidation or dissolution of the
                  Company.

                           (5)      Any other condition or event (i) that the
                  Committee determines to be a "Change in Control" within the
                  meaning of this Article 7 and (ii) that is set forth as a
                  supplement to this Article 7 in the Option Agreement.

                                       10
<PAGE>   11

                  The term "Beneficial Owner" or "Beneficial Ownership", as used
in this Article 7, has the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act. The term "Person", as used
in this Article 7, 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 a "group" as defined in Section 13(d) thereof.

                  8.       SALE OF BUSINESS UNIT OF COMPANY

                  The Committee, in connection with the sale of any subsidiary,
Affiliate, division or other business unit of the Company, may within the
Committee's sole and absolute discretion cause any or all Options granted
hereunder to optionees whose Options or rights under Options will be adversely
affected by such transaction (a) to become immediately exercisable, or (b) to
remain exercisable after such transaction for such period as the Committee deems
appropriate under the circumstances, or both (a) and (b). The provision of this
Article 8 and the actions of the Committee taken pursuant to this Article 8
shall be effective upon action of the Committee alone without amendment to any
option agreement or the consent of any optionee.

                  9.       MANNER OF EXERCISE

                  An optionee wishing to exercise an Option shall give proper
notification to the Company at its principal executive office, to the attention
of the Corporate Secretary, accompanied by a notice of exercise in form and
substance satisfactory to the Company, by payment of the exercise price for such
shares in a form and manner as the Committee may from time to time approve and
by such other documents as the Committee may request. The date the Company
receives proper notification of an exercise hereunder accompanied by payment of
the exercise price and all such other documents will be considered the date the
Option was exercised. Promptly after receipt of proper notification of exercise
of an Option, the Company shall, without stock issue or transfer taxes to the
optionee or any other person entitled to exercise the Option, deliver to the
optionee or such other person a certificate or certificates for the requisite
number of shares of stock. An optionee or transferee of an Option shall not have
any privileges as stockholder with respect to any stock covered by the Option
until the date of issuance of a stock certificate.

                  10.      RELATIONSHIP WITH THE COMPANY

                  Nothing in this Plan or any Option granted hereunder shall
interfere with or limit in any way the right of the Company to terminate any
optionee's employment, affiliation or other relationship with the Company at any
time, nor confer upon any optionee any right to continue in the employ of, as a
consultant to, as a director of, or otherwise affiliated in any way with, the
Company.

                                       11
<PAGE>   12

                  11.      AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN

                  The Committee may, at any time and in any manner, amend,
suspend, or termination this Plan or any award outstanding under this Plan;
provided, however, that no such amendment or discontinuance shall:

                  (a)      be made without stockholder approval: (1) to the
         extent such approval is required by law, agreement or the rules of any
         exchange or automated quotation system upon which the Common Stock is
         listed or quoted or (2) to the extent that any outstanding Option is
         canceled and regranted or repriced;

                  (b)      adversely alter or impair the rights of optionees
         with respect to awards previously made under this Plan without the
         consent of the holder thereof; or

                  (c)      make any change that would disqualify any provision
         of this Plan intended to be so qualified, from the exemption provided
         by Rule 16b-3.

                  12.      LIABILITY AND INDEMNIFICATION OF COMMITTEE

                  No member of the Committee shall be liable for any act or
omission on such member's own part, including, but not limited to, the exercise
of any power or discretion given to such member under this Plan, except for
those acts or omissions resulting from such member's own gross negligence or
willful misconduct. The Company shall indemnify each present and future member
of the Committee against, and each member of the Committee shall be entitled
without further act on his or her part to indemnity from the Company for, all
expenses (including attorneys' fees and the amount of judgments and the amount
of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by such person in connection with or arising out of any action, suit, or
proceeding to which the Committee or any member of the Committee may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted or not granted under the Plan to the full extent
permitted by law and by the Certificate of Incorporation and Bylaws of the
Company, as amended. The right of indemnity described in this Article 12 shall
be in addition to such other rights of indemnification as the members of the
Committee shall otherwise be entitled because of their serving on the Board of
Directors of the Company or as an employee of the Company.

                  13.      EFFECTIVE DATE OF THIS PLAN

                  This Plan first became effective upon adoption by the Board of
Directors on December 16, 1993 and was amended and restated on May 12, 1997.
This Amended and Restated Caremark Rx, Inc. 1993 Stock Option Plan is an
amendment and restatement of that Plan and was adopted by the Committee on
January __, 1999.

                                       12

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