Amended and Restated Employment Agreement for David B. Rickard

Exhibit 10.37

CVS CAREMARK CORPORATION

 

Amended and Restated Employment Agreement for David B. Rickard

 

CVS CAREMARK CORPORATION

 

Amended and Restated Employment Agreement for David B. Rickard

 

 

 

i

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made and entered into as of the 22 ^nd day of December, 2008 by and between CVS Caremark Corporation, a Delaware corporation (together with its successors and assigns, the “Company”), and David B. Rickard (the “Executive”).

WITNESSETH:

WHEREAS, CVS Corporation and Executive entered into an agreement in or about August 1999 embodying the terms of Executive’s employment by the Company (the “Original Agreement”), which Original Agreement was amended as of December 19, 2006;

WHEREAS, Executive and the Company desire to further amend the Original Agreement in certain respects and to restate the Original Agreement in its entirety to reflect all applicable amendments by entering into this Amended and Restated Employment Agreement for David B. Rickard (the “Agreement”);

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive (individually a “Party” and together the “Parties”) agree as follows:

1 . Definitions .

(a) “Approved Early Retirement” shall have the meaning set forth in Section 10(f) below.

(b) “Base Salary” shall have the meaning set forth in Section 4 below.

(c) “Board” shall mean the Board of Directors of the Company.

(d) “Cause” shall have the meaning set forth in Section 10(b) below.

(e) “Change in Control” shall have the meaning set forth in Section 10(c) below.

(f) “Committee” shall mean the Management Planning and Development Committee of the Board.

(g) “Confidential Information” shall have the meaning set forth in Section 11(c) below.

(h) “Constructive Termination Without Cause” shall have the meaning set forth in Section 10(c) below.

(i) “Effective Date” shall have the meaning set forth in Section 2 below.

(j) “Normal Retirement” shall have the meaning set forth in Section 10(f) below.

(k) “Original Term of Employment” shall have the meaning set forth in Section 2 below.

(l) “Renewal Term” shall have the meaning set forth in Section 2 below.

(m) “Restriction Period” shall have the meaning set forth in Section 12(b) below.

(n) “Severance Period” shall have the meaning set forth in Section 10(c)(ii) below, except as provided otherwise in Section 10(e) below.

(o) “Subsidiary” shall have the meaning set forth in Section 11(d) below.

(p) “Term of Employment” shall have the meaning set forth in Section 2 below.

(q) “termination of employment”, “employment is terminated” and other similar words shall mean

(i) for any plan or arrangement that is subject to the rules of Section 409A of the Internal Revenue Code (the “Code”) a “Separation from Service” as such term is defined in the Income Tax Regulations under Section 409A (the “409A Regulations”) of the Code as modified by the rules described below:

 

(A)

except in the case where Executive is on a bona fide leave of absence pursuant to the Company’s policies as provided below, Executive is deemed to have incurred a Separation from Service on a date if the Company and Executive reasonably anticipate that the level of services to be performed by Executive after such date would be permanently reduced to 20% or less of the average services rendered by Executive during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding periods during which Executive was on a bona fide leave of absence;

 

(B)

if Executive is absent from work due to military leave, sick leave, or other bona fide leave of absence pursuant to the Company’s policies Executive shall incur a Separation from Service on the first date that the rules of (A), above, are satisfied following the later of (i) the six-month anniversary of the commencement of the leave or (ii) the expiration of Executive’s right, if any, to reemployment under statute, contract or Company policy;

 

(C)

Executive shall be considered to continue employment and to not have a Separation from Service while on a bona fide leave of absence if the leave does not exceed 6 consecutive months (twelve months for a leave of absence due to Executive’s disability) or, if longer, so long as Executive retains a right to reemployment with the Corporation or an Affiliate under an applicable statute, contract or Company policy. For this purpose, a “disability leave of absence” is an absence due to any medically determinable physical or mental impairment or Executive that can be expected to result in death or can be expected to last for a continuous period of not less than 6 months, where such impairment causes the Participant to be unable to perform the

 

2

duties of his job or a substantially similar job;

 

(D)

for purposes of determining whether another organization is an Affiliate of the Company, common ownership of at least 50% shall be determinative;

 

(E)

the Company specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Separation from Service with respect to Executive providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction. Such determination shall be made in accordance with the requirements of Code Section 409A; or

(ii) for any plan or arrangement that is not subject to the rules of Section 409A of the Code, the complete cessation of providing service to the Company or any Affiliate as an employee

(r) “Termination Without Cause” shall have the meaning set forth in Section 10(c) below.

2. Term of Employment .

The term of Executive’s employment under this Agreement shall commence on the date of the Original Agreement (the “Effective Date”) and end on the third anniversary of such date (the “Original Term of Employment”), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the “Renewal Terms”) unless at least 180 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. “Term of Employment” shall mean the Original Term of Employment and all Renewal Terms. If a Change in Control shall have occurred during the Term of Employment, notwithstanding any other provision of this Section 2, the Term of Employment shall not expire earlier than two years after such Change in Control.

3. Position, Duties and Responsibilities .

(a) Generally . Executive shall serve as a senior officer of the Company. Executive shall have and perform such duties, responsibilities, and authorities as shall be specified by the Company from time to time and as are customary for a senior officer of a publicly held corporation of the size, type, and nature of the Company as they may exist from time to time and as are consistent with such position and status. Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to his position and the businesses of the Company.

(b) Other Activities . Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that such activities do not materially interfere with the proper performance of his duties and responsibilities under this Agreement.

 

3

(c) Place of Employment . Executive’s principal place of employment shall be the corporate offices of the Company.

4. Base Salary .

Executive shall be paid an annualized salary (“Base Salary”), payable in accordance with the regular payroll practices of the Company, of not less than $575,000 subject to review for increase at the discretion of the Committee.

5. Annual Incentive Awards .

Executive shall participate in the Company’s annual cash incentive compensation plan with a target annual incentive award opportunity of no less than 90% of Base Salary. Payment of annual incentive awards shall be made at the same time that other senior-level executives receive their incentive awards.

6. Long-Term Incentive Programs .

Executive shall be eligible to participate in the Company’s long-term incentive compensation programs (including stock options and stock grants).

7. Employee Benefit Programs .

(a) General Benefits . During the Term of Employment, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of the Company as are made available to the Company’s senior-level executives or to its employees generally, as such plans or programs may be in effect from time to time, including, without limitation, health, medical, dental, long-term disability, travel accident, life insurance and deferred compensation plans.

(b) Additional Payment Upon Attainment of Normal Retirement Age . If Executive continues to be employed by the Company until the date on which he attains age 64, or in the event Executive’s employment terminates either due to an Approved Early Retirement, death, Termination Without Cause, or Constructive Termination Without Cause, the amount of $350,000 shall be credited, without any election or additional action by the Executive, to an unfunded bookkeeping account subject to rules (including notional investment and related account adjustment provisions) similar to those applicable to the CVS Caremark Corporation Deferred Compensation Plan or any successor or replacement plan but payable (unless further deferred in accordance with the terms of such Plan) in accordance with this Section 7(b). The adjusted balance of such account, determined under the terms thereof and reduced by applicable withholdings, shall be paid to Executive within 15 days (or by such later date as is required to comply with Section 22(b)) following Executive’s Normal Retirement, Approved Early Retirement, death, Termination Without Cause or Constructive Termination Without Cause.

8. Disability .

(a) During the Term of Employment, as well as during the Severance Period, Executive shall be entitled to disability coverage as described in this Section 8(a). In the event Executive becomes disabled, as that term is defined under the Company’s Long-Term Disability Plan, Executive shall be entitled to receive pursuant to the Company’s Long-Term Disability Plan or otherwise, and in place of his Base Salary, an amount equal to 60% of his Base Salary, at the annual rate in effect on the commencement date of his eligibility for the Company’s long-term disability benefits (“Commencement Date”) for a period beginning on the Commencement Date and ending with the earlier to occur of (A) Executive’s attainment of age 65 or (B) Executive’s

 

4

commencement of retirement benefits from the Company in accordance with Section 10(f) below. If (i) Executive ceases to be disabled during the Term of Employment (as determined in accordance with the terms of the Long-Term Disability Plan), (ii) his position or another senior executive position is then vacant and (iii) the Company requests in writing that he resume such position, he may elect to resume such position by written notice to the Company within 15 days after the Company delivers its request. If he resumes such position, he shall thereafter be entitled to his Base Salary at the annual rate in effect on the Commencement Date and, for the year he resumes his position, a pro rata annual incentive award. If he ceases to be disabled during the Term of Employment and does not resume his position in accordance with the preceding sentence, he shall be treated as if he voluntarily terminated his employment pursuant to Section 10(d) as of the date Executive ceases to be disabled. If Executive is not offered his position or another senior executive position after he ceases to be disabled during the Term of Employment, he shall be treated as if his employment was terminated Without Cause pursuant to Section 10(c) as of the date Executive ceases to be disabled; provided , however , that if a Change in Control shall have occurred during the period of Executive’s disability, he shall be treated as if his employment was terminated Without Cause following a Change in Control pursuant to Section 10(e) as of the date Executive ceases to be disabled.

(b) Executive shall be entitled to a pro rata annual cash incentive award for the year in which the Commencement Date occurs based on the most recently established market target annual cash incentive amount, payable in a cash lump sum not later than 15 days after the Commencement Date. Executive shall not be entitled to any annual incentive award with respect to the period following the Commencement Date. If Executive recommences his position in accordance with Section 8(a), he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with Section 5 hereof.

(c) During the period the Executive is receiving disability benefits pursuant to Section 8(a) above, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was participating on the Commencement Date, including without limitation, the benefits and entitlements referred to in Sections 6 and 7 above, except that the Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants following the Commencement Date. Notwithstanding the foregoing, with respect to any benefit plan or program providing benefits covered by Section 409A of the Code, the definition of “termination of employment” set forth in Section 1(g) above shall apply.

(d) In the event that Executive ceases before his 64th birthday to be employed by the Company by reason of disability, as that term is defined under the Company’s Long-Term Disability Plan, Executive shall be entitled to full acceleration and immediate vesting of any unvested equity awards, including stock options outstanding at the time of his termination of employment.

(e) The provisions of this Agreement in Section 8(a)-(d), above, shall apply in the event Executive shall become disabled, as that term is defined in the Company’s Long-Term Disability Plan and, except as provided in Section 8(a), the provisions of Section 10 shall not apply if the Executive has a termination of employment due to such disability.

9. Reimbursement of Business and Other Expenses .

Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all business expenses incurred in connection therewith, subject to documentation in accordance with the Company’s policy. During the Term of Employment, the Company shall pay or reimburse Executive, upon demand, for out-of-pocket expenses incurred in connection with

 

5

personal financial and tax planning up to a maximum of $15,000 per annum. The Company shall pay or reimburse the Executive for the expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by him in conjunction with preparation and negotiation of this Agreement and any related documents up to a maximum of $10,000.

10. Termination of Employment .

(a) Termination Due to Death . In the event Executive’s employment with the Company is terminated due to his death, his estate or his beneficiaries, as the case may be, shall be entitled to and their sole remedies under this Agreement shall be:

 

(i)

Base Salary through the date of death, which shall be paid in a cash lump sum not later than 15 days following Executive’s death;

 

(ii)

pro rata annual incentive award for the year in which Executive’s death occurs based on the most recently established market target annual cash incentive amount for Executive, which shall be payable in a cash lump sum promptly (but in no event later than 15 days);

 

(iii)

elimination of all restrictions on any restricted or deferred stock awards outstanding at the time of his death (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards);

 

(iv)

immediate vesting of all outstanding stock options and the right to exercise such stock options for a period of one year following death or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards);

 

(v)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following the Executive’s death;

 

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation plan or election form; and

 

(vii)

other or additional benefits then due or earned in accordance with applicable plans and programs of the Company.

(b) Termination by the Company for Cause .

 

(i)

“Cause” shall mean:

 

(A)

Executive’s willful and material breach of Sections 11, 12 or 13 of this Agreement;

 

(B)

Executive is convicted of a felony involving moral turpitude; or

 

(C)

Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out his duties

 

6

under this Agreement, resulting, in either case, in material harm to the financial condition or reputation of the Company.

For purposes of this Agreement, an act or failure to act on Executive’s part shall be considered “willful” if it was done or omitted to be done by him not in good faith, and shall not include any act or failure to act resulting from any incapacity of Executive.

 

(ii)

A termination for Cause shall not take effect unless the provisions of this paragraph (ii) are complied with. Executive shall be given written notice by the Company of its intention to terminate him for Cause, such notice (A) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based and (B) to be given within 90 days of the Company’s learning of such act or acts or failure or failures to act. Executive shall have 20 days after the date that such written notice has been given to him in which to cure such conduct, to the extent such cure is possible. If he fails to cure such conduct, Executive shall then be entitled to a hearing before the Committee of the Board at which Executive is entitled to appear. Such hearing shall be held within 25 days of such notice to Executive, provided he requests such hearing within 10 days of the written notice from the Company of the intention to terminate him for Cause. If, within five days following such hearing, Executive is furnished written notice by the Board confirming that, in its judgment, grounds for Cause on the basis of the original notice exist, he shall thereupon be terminated for Cause.

 

(iii)

In the event the Company terminates Executive’s employment for Cause, he shall be entitled to and his sole remedies under this Agreement shall be:

 

(A)

Base Salary through the date of the termination of his employment for Cause, which shall be paid in a cash lump sum not later than 15 days following Executive’s termination of employment;

 

(B)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following Executive’s termination of employment;

 

(C)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation plan or election form; and

 

(D)

other or additional benefits then due or earned in accordance with applicable plans or programs of the Company.

(c) Termination Without Cause or Constructive Termination Without Cause Prior to Change in Control . In the event Executive’s employment with the Company is terminated without Cause (which termination shall be effective as of the date specified by the Company in a written notice to Executive), other than due to death, or in the event there is a

 

7

Constructive Termination Without Cause (as defined below), in either case prior to a Change in Control (as defined below) the Executive shall be entitled to and his sole remedies under this Agreement shall be:

 

(i)

Base Salary through the date of termination of Executive’s employment, which shall be paid in a cash lump sum not later than 15 days following the Executive’s termination of employment;

 

(ii)

Base Salary, at the annualized rate in effect on the date of termination of Executive’s employment (or in the event a reduction in Base Salary is a basis for a Constructive Termination Without Cause, then the Base Salary in effect immediately prior to such reduction), for a period of 24 months (the “Severance Period”);

 

(iii)

a pro rata annual incentive award for the year in which Executive’s termination occurs based on the most recently established Management Incentive Plan market target amount, as adjusted in (A) below, for Executive (“MIP Award”). The MIP Award will be payable at the conclusion of the annual performance cycle, based on actual performance of the Company as determined in accordance with the Company’s 2007 Incentive Plan (the “Plan”) or other plan for an executive of the Company as may be in effect from time to time, as certified by the applicable Committee of the Board of Directors of the Company, and paid at the same time the annual incentive award is paid to other similarly-situated executives of the Company, unless otherwise previously elected to be deferred by Executive.

 

(A)

The MIP Award is determined by multiplying the Market Payout Percentage as approved by the Committee for Executive’s position, by Executive’s base salary in effect on the date of termination, based on the Company’s performance for the applicable annual performance cycle.

 

(B)

The amount of the pro rata award will be determined by multiplying the full amount of the MIP Award, as determined above, by a fraction, the numerator of which is the number of months that have elapsed since January 1 through the date of termination of Executive’s Employment and the denominator of which is twelve (12);

 

(iv)

an amount equal to the most recently established market target MIP Award (without taking into account the Company’s performance) for Executive multiplied by two, payable in equal monthly payments over the Severance Period;

 

(v)

elimination of all restrictions on any restricted or deferred stock awards outstanding at the time of termination of employment (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards);

 

(vi)

any outstanding stock options which are unvested shall vest and Executive shall have the right to exercise any vested stock options

 

8

during the Severance Period or for the remainder of the exercise period, if less (other than awards under the Company’s Partnership Equity Program, which shall be governed by the terms of such awards);

 

(vii)

the balance of any incentive awards, except for awards under the Company’s Long-Term Incentive Plan or other such plans which are intended to qualify for deductibility under Section 162(m) of the Code, earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than 15 days following Executive’s termination of employment;

 

(viii)

a pro rata long-term incentive award, as determined below, for the year in which Executive’s termination occurs based on the targets for Executive for performance periods not yet closed under the Company’s Long-Term Incentive Plan (the “LTIP”) with the target for each such performance period being adjusted based on actual performance of the Company as determined in accordance with the LTIP or other plan for an executive of the Company as may be in effect from time to time, as certified by the applicable Committee of the Board of Directors of the Company, and as further adjusted under (A), below, and being payable at the same time such Awards are paid to other similarly-situated executives of the Company, unless otherwise previously elected to be deferred by Executive;

 

(A)

The amount of the pro rata award will be determined by multiplying the full amount of each award, as determined above, by a fraction, the numerator of which is the number of months (treating a part of a month as a full month) that have elapsed since the first day of the applicable performance cycle through the date of termination of Executive’s Employment and the denominator of which is the number of months in such performance cycle;

 

(ix)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation plan or election form;

 

(x)

continued participation in all medical, health and life insurance plans at the same benefit level at which he was participating on the date of the termination of his employment until the earlier of:

 

(A)

the end of the Severance Period; or

 

(B)

the date, or dates, he receives equivalent coverage and benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis);

provided that (1) if Executive is precluded from continuing his participation in any employee benefit plan or program as provided in this clause (ix) of this Section 10(c), he shall receive cash payments equal on an after-tax basis to the cost to him of

 

9

obtaining the benefits provided under the plan or program in which he is unable to participate for the period specified in this clause (ix) of this Section 10(c), (2) such cost shall be deemed to be the lowest reasonable cost that would be incurred by Executive in