UNITED STATES DISTRICT COURT DISTRICT OF RHODE ISLAND

Transcription

1 MARK WUOTILA, Derivatively on Behalf of CVS CAREMARK CORPORATION, v. Plaintiff, THOMAS M. RYAN, HOWARD A. MCLURE, DAVID B. RICKARD, JONATHAN C. ROBERTS, KRISTEN E. GIBNEY WILLIAMS, EDWIN M. BANKS, MARIAN L. HEARD, WILLIAM H. JOYCE, RICHARD J. SWIFT, TERRENCE MURRAY, SHELl Z. ROSENBERG, DAVID W. DORMAN, C. DAVID BROWN II, JEAN-PIERRE MILLON, and C.A. LANCE PICCOLO, and UNITED STATES DISTRICT COURT DISTRICT OF RHODE ISLAND Defendants, CVS CAREMARK CORPORATION, a Delaware corporation, Nominal Defendant Case No. 1 :09-cv ML-PAS STIPULATION OF SETTLEMENT

2 This Stipulation of Settlement ("Stipulation", dated March 21, 2016 is entered into, by and through their respective undersigned counsel, among and between: (i Plaintiff Mark Wuotila ("Plaintiff', individually and derivatively on behalf of CVS Health Corporation (previously known as CVS Caremark Corporation ("CVS" or the "Company"; (ii nominal defendant CVS; and (iii Defendants Thomas M. Ryan, Howard A. McLure, David B. Rickard, Jonathan C. Roberts, Kristen E. Gibney Williams, Edwin M. Banks, Marian L. Heard, William H. Joyce, Richard J. Swift, Terrence Murray, Sheli Z. Rosenberg, David W. Dorman, C. David Brown II, Jean-Pierre Millon, and C.A. Lance Piccolo (the "Individual Defendants," together with CVS, "Defendants" (collectively, the "Patties". This Stipulation is intended by the Parties to fully, finally, and forever compromise, resolve, discharge, and settle the Released Claims against the Released Persons and dismiss the Action with prejudice, upon the terms and subject to the conditions set forth herein. 1 I. RELEVANT BACKGROUND OF THE ACTION AND SETTLEMENT NEGOTIATIONS A. The Initiation of the Derivative Action Prior to filing this Action, Plaintiffs Counsel devoted significant efforts to investigating and assessing the derivative claims, including, but not limited to: (1 inspecting, analyzing, and reviewing public information pertaining to the alleged wrongdoing, including CVS's public filings with the U.S. Securities and Exchange Commission, press releases, announcements, transcripts of investor conference calls, securities analysts' reports, advisories, media reports, and news articles; (2 researching the applicable law with respect to the derivative claims to be asserted in the Action and the potential defenses thereto; (3 conducting an analyses of the 1 All capitalized terms are defined in Section IV. I below, unless otherwise noted

3 potential and actual damages resulting from the alleged wrongdoing; and ( 4 drafting and filing the complaint. On December 23, 2009, Plaintiff filed the Verified Shareholder Derivative Complaint for Violations of the Securities Exchange Act of 1934, Breach of Fiduciary Duty, Waste of Corporate Assets, and Unjust Enrichment (the "Complaint" on behalf of CVS in the U.S. District Court for the District of Rhode Island. The Complaint alleges, among other things, that the Individual Defendants breached their fiduciary duties by mismanaging the Company's operations and causing the Company to issue improper statements concerning the Company's financial projections, results, and business operations, therefore causing CVS to become a defendant in a securities fraud class action, filed in the Court and captioned Medoff v. CVS Caremark Corporation, Case No. 1:09-CV JNL-PAS (the "Securities Class Action". The Complaint further alleges that the Individual Defendants authorized and failed to halt a stock repurchase ofthe Company's stock at artificially inflated prices while certain of the Company's insiders were selling their personally held shares. B. Plaintiff's Efficient Litigation of the Derivative Action During the Pendency of CVS's Defense of the Securities Class Action At the time of the filing of this Action, the factually-related Securities Class Action was also pending in this Court. In exchange for certain protections of the Company's derivative claims, the Parties agreed to stay this Action pending the anticipated motion to dismiss the Securities Class Action and ultimately, pending the resolution of the Securities Class Action (hereinafter, the "Derivative Case Agreement". On December 31, 2013, the Court entered an order in the Securities Class Action denying defendants' motion to dismiss. During the stay of this Action, and while the parties in the Securities Class Action were engaged in discovery, Plaintiff has diligently followed the progress - 2 -

4 of the Securities Class Action, including reviewing and analyzing the relevant pleadings and the Company's public filings, in order to preserve the Company's derivative claims. Plaintiff has also filed regular status reports updating the Court on the progress of the Securities Class Action and any impact it may have on the derivative claims. On August 24, 2015, the parties in the Securities Class Action participated in mediation with mediator Layn Phillips. As part of the Derivative Case Agreement, Defendants provided Plaintiff with notice of the mediation in the Securities Class Action. Plaintiff communicated with Defendants regarding the settlement of the Securities Class Action as settlement discussions in the Securities Class Action progressed. Plaintiff simultaneously attempted to resolve the derivative claims. The settlement negotiations in this Action were hard~fought, and, at times, contentious. On September 14, 2015, the parties in the Securities Class Action filed a stipulation of settlement and motion for preliminary approval of the proposed settlement, which the Court granted on November 9, On December 15, 2015, the parties in the Securities Class Action filed a motion for final approval of settlement. The Parties in this Action, with the assistance of an experienced mediator, reached a tentative settlement agreement on January 11, The Securities Class Action received final approval from the court on February 29, The Securities Class Action settled for $48 million, with $14.4 million allocated for attorneys' fees. 2 C. The Settlement of the Derivative Action On April 24, 2013, Plaintiff sent a settlement demand to Defendants to explore whether Defendants were interested in attempting to settle this difficult and complex shareholder 2 Attorneys for the plaintiff in the Securities Class Action also received court approval of $857, in litigation expenses. - 3 ~

5 derivative matter efficiently and in the best interests of the Company. No agreement was reached at that time. On August 25, 2015, Plaintiff sent Defendants a follow-up settlement demand. This time, extensive settlement negotiations aimed at reaching a resolution of the derivative claims in the best interests of the Company, soon followed. In support of these settlement discussions, Plaintiff spent significant efforts reviewing CVS's corporate governance structures and policies, researching corporate governance issues and best practices, and formulating proposed corporate governance reforms. On December 15, 2015, after engaging in months of telephonic and written settlement negotiations, the Parties agreed to seek the aid of experienced mediator Jill Sperber ("Mediator" to help the Parties reach a fair, adequate, and mutually agreeable resolution of the Action in the best interests of CVS and its shareholders. In the weeks following, with the aid of the Mediator, the Parties continued their settlement negotiations and were able to make substantial progress toward a proposed resolution. Ultimately, on January 11, 2016, the Parties reached an agreement-in-principle to resolve the Action, pending certain confirmatory discovery to follow shortly thereafter. On January 12, 2016, Plaintiffs Counsel led a telephonic confirmatory discussion call with the Company's Senior Vice President, Corporate Secretary and Assistant General Counsel - Corporate Services, to further discuss the Company's internal controls to ensure the Settlement is in the best interests of CVS and its shareholders. The confirmatory discussion call confirmed the Parties' agreement that the Settlement confers substantial benefits upon, and is in the best interests of, CVS and its shareholders. Thereafter, the Parties memorialized the basic Settlement terms and worked on finalizing all matters in support of the Settlement. The Parties are in agreement that a settlement at this junction on the terms and on the conditions set forth in this Stipulation is fair, adequate, and reasonable. The Parties agree that -4-

6 the Settlement confers substantial benefits to CVS and its shareholders and that this Action precipitated and was a material factor in the substantial benefits achieved. II. PLAINTIFF'S CLAIMS AND BENEFITS OF SETTLEMENT, Plaintiff believes that the claims asserted in the Action have merit. However, Plaintiff recognizes and acknowledges the expense and length of continued proceedings necessary to prosecute the Action against the Individual Defendants through trial and through appeals. Plaintiff has also taken into account the uncertain outcome and the risk of any litigation, especially in complex actions such as the Action, as well as the difficulties and delays inherent in such litigation. Plaintiff is also mindful of the inherent problems of proof and possible defenses to the claims asserted in the Action. The Settlement set forth in this Stipulation confers substantial benefits upon CVS and its shareholders, and is in the best interests of CVS and its shareholders. III. DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY Defendants have denied and continue to deny each and all of the claims and contentions alleged by the Plaintiff in the Action. Nonetheless, Defendants have concluded that it is desirable that the Action be fully and finally settled in the manner and upon the terms and conditions set forth in this Settlement. Defendants acknowledge and agree that the Action filed by Plaintiff precipitated and was a material factor in the Corporate Governance Reforms agreed to as part of this Settlement. Defendants further acknowledge and agree that the Corporate Governance Reforms that are part of this Settlement confer a substantial benefit to CVS. IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among Plaintiff (on behalf of himself and derivatively on behalf of CVS the Individual Defendants, and CVS, each by and through their respective counsel, as follows: - 5 -

7 1. Definitions As used in this Stipulation, the following terms have the meanings specified below: 1.1. "Action" means Wuotila v. Ryan, Case No. 1 :09-cv ML-PAS, filed on December 23, 2009 in this Court "Board" means the Board ofdirectors ofcvs "Corporate Governance Reforms" means the corporate governance reforms specified in Section IV, paragraphs 2.4 through 2.18, infra "Court" means the U.S. District Court for the District of Rhode Island "Current CVS Shareholders" means any Persons who owned CVS common stock as ofthe Execution Date of this Stipulation and who continue to hold their CVS common stock as of the date of the Settlement Hearing, excluding the Individual Defendants, the current officers and directors of CVS, members of their immediate families, and their legal representatives, heirs, successors, or assigns, and any entity in which Individual Defendants have or had a controlling interest "CVS" or the "Company" means CVS Health Corporation (previously known as CVS Caremark Corporation, a Delaware Corporation, and its predecessors, successors, subsidiaries, affiliates, divisions, and assigns "Defendants" means collectively nominal defendant CVS and the Individual Defendants. "Defendant" means, individually, any of the Defendants "Effective Date" means the first date by which all of the events and conditions specified in paragraph 6.1 herein have been met and have occurred "Execution Date" means the date this Stipulation has been signed by all the signatories through their respective counsel

8 1.10. "Fee and Expense Amount" means the agreed upon sum to be paid for Plaintiffs attorneys' fees and expenses, subject to Court approval, in recognition of the substantial and material benefits conferred upon CVS by the filing, prosecution, and Settlement of the Action "Final" means the expiration of all time to seek appeal or other review of the Judgment, or if any appeal or other review of such Judgment is filed and not dismissed, after such Judgment is upheld on appeal in all material respects and is no longer subject to appeal, reargument, or review by writ of certiorari or otherwise "Incentive Amount" means an award in the amount of$2,000 for which Plaintiffs Counsel may apply to the Court for Plaintiff, only to be paid upon Court approval, in recognition of Plaintiffs selfless commitment and dedication to the Company's derivative claims in the prosecution and settlement of the Action. Any Incentive Amount shall be paid to Plaintiff from the Fee and Expense Amount "Individual Defendants" Thomas M. Ryan, Howard A. McLure, David B. Rickard, Jonathan C. Roberts, Kristen E. Gibney Williams, Edwin M. Banks, Marian L. Heard, William H. Joyce, Richard J. Swift, Terrence Murray, Sheli Z. Rosenberg, David W. Dorman, C. David Brown II, Jean-Pierre Millon, and C.A. Lance Piccolo "Judgment" means the [Proposed] Final Judgment and Order of Dismissal to be rendered by the Court, substantially in the form of Exhibit D attached hereto "Parties" means collectively, the Plaintiff, nominal defendant CVS, and the Individual Defendants. "Party" means individually, any of the Parties "Person" means an individual, corporation, limited liability corporation, professional corporation, partnership, limited partnership, limited liability partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, - 7 -

9 government or any political subdivision or agency thereof, and any business or legal entity and their spouses, heirs, predecessors, successors, representatives, or assignees "Plaintiff'' means Mark Wuotila, individually and derivatively on behalf ofcvs "Plaintiff's Counsel" means any counsel who has appeared on behalf of Plaintiff in this Action, including specifically Robbins Arroyo LLP and Moore, Virgadamo & Lynch, Ltd "Preliminary Approval Order" means the proposed order preliminarily approving the Settlement, providing for Notice, and setting a date for the Settlement Hearing to be rendered by the Court, substantially in the form attached hereto as Exhibit A "Released Claims" shall collectively mean any and all claims, rights, and causes of action, whether based on federal, state, local, statutory, or common law or any other law, rule, or regulation, including Unknown Claims, arising out of, based upon, or relating in any way to the claims asserted by Plaintiff or any other shareholder of CVS derivatively on behalf of CVS against the Released Persons in the Complaint filed in the Action "Released Persons" means collectively, each of the Defendants and each of the Defendants' past or present agents, officers, directors, attorneys, accountants, auditors, advisors, insurers, co-insurers, reinsurers, spouses, immediate family members, heirs, executors, personal representatives, estates, administrators, trusts, predecessors, successors, and assigns or other individual or entity in which any Individual Defendant or CVS has a direct or indirect controlling interest, and each and all of their respective past and present officers, directors, employees, agents, affiliates, parents, subsidiaries, divisions, attorneys, accountants, auditors, advisors, msurers, co-insurers, re-msurers, heirs, executors, personal representatives, estates, administrators, trusts, predecessors, successors, and assigns

10 1.22. "Securities Class Action" means the securities class action captioned Medoff v. CVS Caremark Corporation, Case No. 1:09-CV JNL-PAS, filed in the Court "Releasing Parties" means Plaintiff (both individually and derivatively on behalf of CVS, any other CVS shareholder on behalf of CVS, and Plaintiffs Counsel "Settlement" means mean the Settlement documented in this Stipulation "Settlement Hearing" means the hearing set by the Court to consider fmal approval of the Settlement "Stipulation" means this Stipulation of Settlement "Unknown Claims" means any Released Claims which Plaintiff or Defendants do not know of or suspect to exist in his, her, or its favor at the time of the release of the Released Persons. With respect to any and all Released Claims, the Parties agree that upon the Effective Date, the Parties expressly waive the provisions, rights, and benefits conferred by or under California Civil Code section 1542, or any other law of the United States or any state or tenitory of the United States, or principle of common law, which is similar, comparable, or equivalent to 1542, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. The Parties acknowledge that they may hereafter discover facts in addition to or different from those now known or believed to be true by them, with respect to the subject matter of the Released Claims, but it is the intention of the Parties to completely, fully, finally, and forever compromise, settle, release, discharge, and extinguish any and all Released Claims, known or unknown, suspect or unsuspected, contingent or absolute, accrued or unaccrued, apparent or unapparent, which do now exist, or heretofore existed, or may hereafter exist, and without regard - 9 -

11 to the subsequent discovery of additional or different facts. The Parties acknowledge that the foregoing waiver was separately bargained for and is a key element of this Stipulation of which this release is a part. 2. Corporate Governance Reforms 2.1. In connection with the Settlement of the Action, CVS has either already adopted or agreed to adopt the Corporate Governance Reforms set forth below, which CVS shall implement and maintain for a period of not less than four (4 years. The Parties agree that the Action filed by Plaintiff precipitated and was a material factor in the Corporate Governance Reforms described below. The Parties further agree that the Corporate Governance Reforms confer a substantial benefit to CVS as part of the Settlement of the Action Within thirty (30 calendar days of the issuance of a Judgment approving the Settlement of the Action, or at the next meeting of the CVS Board, whichever is later, the CVS Board shall adopt resolutions and amend committee charters to ensure adherence to the below Corporate Governance Reforms. Additionally, CVS shall provide Plaintiffs Counsel with copies ofthe Corporate Governance Reforms within thirty (30 calendar days of adoption The Corporate Governance Reforms, as detailed further below, provide, among other things: heightened guidelines regarding disclosure obligations (see paragraph 2.4 ; improvements in support of compliance (see paragraphs 2.5 through 2.8; a more engaged Board (see paragraphs 2.9 through 2.11 ; strengthened controls and processes (see paragraphs 2.12 through 2.16; and greater shareholder voice (see paragraphs 2.17 through

12 Heightened Guidelines Regarding Disclosure Obligations 2.4. Audit Committee Oversight over Disclosures: The Audit Committee shall review and approve the Company's disclosure controls and procedures annually. Such procedures shall require that certain key financial disclosure documents, such as annual and quarterly reports, earnings releases on Form 8-K, proxy statements and registration statements, as well as certain other public statements, correspondence, and other materials broadly disseminated to shareholders, including press releases containing financial information or information about material transactions or events, investor presentations, earnings scripts, and financial projections, be reviewed by the Company's disclosure committee, or by a subset of that committee, as may be set forth in said disclosure controls and procedures. Such procedures shall also require that, if an error in the Company's disclosures were discovered, the correction of the error would be addressed through the same disclosure process involving the disclosure committee or a subset of that committee. Improvements in Support of Compliance 2.5. Board Updates: The Nominating and Corporate Governance Committee Charter shall be amended to provide that the Board shall receive regular (and no less than annual updates with respect to material developments regarding the laws, rules, and regulations that apply to the various aspects of the business of the Company, as well as health care industry trends, as well as the responsibilities of Board members and public company corporate governance Information Firewall: An information frrewall shall exist between CVS/pharmacy providers and the CVS/Caremark Pharmacy Benefit Manager business to separate certain competitively sensitive information that each business possesses, as implemented during the pendency of this Action

13 2.7. Audit Committee Communications with Compliance Officers: The Audit Committee shall meet with the Chief Compliance Officer and the head of the internal audit function quarterly, as implemented during the pendency of this Action Audit Committee Oversight over Compliance Program: The Audit Committee shall oversee the Company's compliance program, including reviewing federal health care program requirements, as implemented during the pendency of this Action. A More Engaged Board 2.9. Board/Committee Meetings: The Board, Audit Committee, Nominating and Corporate Governance Committee, and Management Planning and Development Committee shall meet at least four times per year Board Independence: As implemented during the pendency of this Action, the positions of Chairman and Chief Executive Officer shall be separate, with the Chairman being independent; or, in the alternative, CVS shall appoint an Independent Lead Director. Either the Independent Chairman or the Independent Lead Director shall convene periodic meetings of the Independent Directors to review issues New Director Positions/Independence: Two new independent director positions were added in 2015; a substantial majority of directors are now independent and will continue to be independent. Strengthened Controls and Processes Stock Repurchases: CVS's outstanding stock repurchase programs shall be reviewed by the Audit Committee on a quarterly basis and evaluated to determine whether it would recommend that the Board consider any modifications thereto

14 2.13. Compensation Recoupment Policy: CVS's compensation recoupment policy, which covers annual and long-term incentive awards granted to executive officers, shall include a three-year look-back period, as revised during the pendency of this Action Compensation Recoupment for Consent Decree: CVS's compensation recoupment policy shall have an expanded definition of "misconduct," which includes actions precipitating a consent decree if the Company was required to restate its financial statements as a result of the conduct that precipitated the Company entering into the consent decree Insider Trading: CVS shall maintain its Statement of Company Policy on Securities Trades by Company Personnel, as revised during the pendency of this Action, which among other things, shortened the trading windows for the Company's senior executive officers, increased the use of 10b5-1 plans, refined the list of insiders, and expanded the anti-hedging policy Stock Option Grants: CVS's policy on stock option grants, as revised during the pendency of this Action, shall: (i specifically prohibit option repricing, and (ii establish predetermined grant dates for new hire equity awards. Greater Share/wider Voice Shareholder Meetings: Shareholders shall have the right to call special meetings of shareholders on terms no less restrictive than those currently in the Company's by-laws, as revised during the pendency of this Action Written Consent: Shareholders shall have the right to act by written consent that is less than unanimous on tetms no less restrictive than those currently in the Company's bylaws, as revised during the pendency of this Action

15 3. Procedures for Implementing the Settlement 3.1. Promptly after execution of this Stipulation, Plaintiff shall submit this Stipulation and its exhibits to the Court and shall apply for an order substantially in the form of Exhibit A hereto, requesting the preliminary approval of the Settlement set forth in this Stipulation (the "Preliminary Approval Order", and approval for the dissemination of the Notice of Pendency and Proposed Settlement of Shareholder Derivative Action ("Notice" substantially in the form of Exhibit B hereto and the Summary Notice of Pendency and Proposed Settlement of Shareholder Derivative Action ("Summary Notice" substantially in the form of Exhibit C hereto, which shall include the general terms of the Settlement set forth in this Stipulation, including the general terms of the Fee and Expense Amount requested to be paid to Plaintiffs Counsel and the date of the Settlement Hearing. Within five (5 business days of the issuance of the Preliminary Approval Order, CVS shall publish the Summary Notice once in Investor's Business Daily, and shall post this Stipulation and Notice on CVS's website such that visitors to the "Investors" section of the website will readily find a hyperlink to this Stipulation and Notice. All costs in providing the Notice and Summary Notice will be paid by CVS. The Parties believe the content and manner of the Notice and Summary Notice constitutes adequate and reasonable notice to CVS shareholders pursuant to applicable law and due process Plaintiff will request that after the notice is given, the Court hold a hearing (the "Settlement Hearing" and approve the settlement of the Action as set forth herein, including payment of Plaintiffs Counsel's Fee and Expense Amount and Plaintiffs Incentive Amount, as negotiated by Plaintiffs Counsel and CVS, with the assistance of Mediator Sperber, following negotiation of the Corporate Governance Reforms, and enter the Judgment

16 4. Mutual Releases 4.1. Upon the Effective Date, the Releasing Parties shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice the Released Claims (including Unknown Claims against the Released Persons and any and all claims arising out of, relating to, or in connection with the defense, settlement, or resolution of the Action against the Released Persons; provided, however, that such release shall not affect any claims to enforce the terms of this Stipulation or the Settlement Upon the Effective Date, each of the Defendants shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice Plaintiff and Plaintiffs Counsel from all claims (including Unknown Claims arising out of, relating to, or in connection with the institution, prosecution, assertion, settlement, or resolution of the Action or the Released Claims, provided, however, that such release shall not affect any claims to enforce the terms of this Stipulation or the Settlement Defendants warrant that they are satisfied that the foregoing constitutes reasonably equivalent value for the release of the Released Claims and is a fair, adequate, and reasonable resolution of the Released Claims on CVS's behalf and is in the best interests of CVS and Current CVS Shareholders Pending the Court's determination as to final approval ofthe Settlement, Plaintiff and Current CVS Shareholders are barred and enjoined from commencing, prosecuting, investigating, or in any way participating in the commencement or prosecution of any action asserting any Released Claim against any of the Released Persons

17 4.5. Nothing in this Stipulation constitutes or reflects a waiver or release of any rights or claims of Defendants and/or CVS against their insurers, or their insurers' subsidiaries, predecessors, successors, assigns, affiliates, or representatives, including, but not limited to, any rights or claims by the Defendants and/or CVS under any directors' and officers' liability insurance or other applicable insurance coverage maintained by the Company. Nothing in this Stipulation constitutes or reflects a waiver or release of any rights or claims of the Defendants relating in any way to indemnification or advancement of attorneys' fees relating to the Action or the Released Claims, whether under any written indemnification or advancement agreement, or under the Company's charter, by-laws or operating agreement, or under applicable law 5. Attorneys' Fees and Expenses and Incentive Award to Plaintiff 5.1. After negotiating the Corporate Governance Reforms, Plaintiffs Counsel and CVS, with the assistance of Mediator Sperber, separately negotiated the Fee and Expense Amount that would be paid to Plaintiffs Counsel. As a result of these negotiations, and in light of the substantial benefits conferred upon CVS by Plaintiffs Counsel's efforts, Defendants and its insurers have agreed to pay the Fee and Expense Amount of$270,000 for Plaintiffs Counsel's fees and expenses, subject to Court approval Within ten (1 0 business days of issuance of Judgment by the Court finally approving the Settlement, notwithstanding the existence of any timely filed objections to the Settlement, or potential for appeal therefrom, CVS's Board shall cause CVS's and the Individual Defendants' insurers to pay the Fee and Expense Amount to Robbins Arroyo LLP as receiving agent for Plaintiffs Counsel, subject to Plaintiffs Counsel's several obligation to make appropriate refunds or repayment of the principal amount received and any accrued interest thereon less taxes within ten (1 0 business days if, as a result of any further Order of the Court, appeal, further proceedings or remand, or successful collateral attack, the Settlement is not - 16-

18 approved or is overturned on appeal. The Fee and Expense Amount shall constitute full, complete, and exclusive compensation for Plaintiffs Counsel's efforts, fees, services, and expenses The Parties further stipulate that Plaintiffs Counsel may apply to the Court for an Incentive Amount of $2,000 for Plaintiff, only to be paid upon Court approval, in recognition of Plaintiffs participation and efforts in the prosecution and Settlement of the Action. The failure of the Court to approve any requested Incentive Amount, in whole or in part, shall have no effect on the Settlement set forth in this Stipulation. The Incentive Amount, if approved by the Court, shall be paid to Plaintiff from the Fee and Expense Amount. The Released Persons and each of them shall not be liable for any portion of any Incentive Amount. 6. Conditions of Settlement, Effect of Disapproval, Cancellation, or Termination 6.1. The Effective Date is conditioned on the occurrence of all of the following events, and is the first date by which all of the following events and conditions have been met and have occurred: (a approval of the recommended Corporate Governance Reforms specified in Section IV, paragraphs 2.4 through 2.18, by the CVS Board; (b Court approval of the method and form of providing the Notice and Summary Notice, attached hereto as Exhibits B and C, respectively, to CVS shareholders and entry by the Court of the Preliminary Approval Order, substantially in the form attached hereto as Exhibit A; (c final approval of the Settlement by the Court following notice to CVS shareholders; - 17-

19 (d entry by the Court of the Judgment, attached hereto as Exhibit D and the dismissal with prejudice of the Action; and (e the passing of the date upon which the Judgment becomes Final If any of the conditions specified in paragraph 6.1 are not met, then this Stipulation shall be canceled and terminated subject to paragraph 6.3, unless the Parties mutually agree in writing to proceed with this Stipulation If for any reason the Effective Date of this Stipulation does not occur, or if this Stipulation is in any way canceled, terminated, or fails to become final in accordance with its terms: (a all Parties and Released Persons shall be restored to their respective positions in the Action as of March 21, 2016; (b all releases delivered in connection with this Stipulation shall be null and void, except as provided for in this Stipulation; (c the Fee and Expense Amount paid to Plaintiffs Counsel and any and all interest accrued thereon since payment, shall be returned to CVS or its insurers within ten (1 0 business days of said event; and (d all negotiations, proceedings, documents prepared, and statements made in connection herewith shall be without prejudice to the Parties, shall not be deemed or construed to be an admission by a Party of any act, matter, or proposition, and shall not be used in any manner for any purpose in any subsequent proceeding in any other action or proceeding. In such event, the tenns and provisions of this Stipulation shall have no further force and effect with respect to the Parties and shall not be used in the Action or in any other proceeding for any purpose. 7. Additional Provisions 7.1. The Parties (i acknowledge that it is their intent to consummate this Stipulation and Settlement; and (ii agree to cooperate to the extent reasonably necessary to effectuate and implement all terms and conditions of this Stipulation and the Settlement and to exercise their

20 best efforts to accomplish the foregoing terms and conditions of this Stipulation and the Settlement The Parties intend this Settlement to be a final and complete resolution of all disputes between Plaintiff, Defendants, and CVS with respect to the Action. The Settlement compromises claims that are contested and shall not be deemed an admission by any Party as to the merits of any claim, allegation, or defense. The Parties further agree that the claims are being settled voluntarily after consultation with competent legal counsel and Mediator Sperber The Parties agree that if any disputes arise related to the implementation and enforcement of the terms of the Stipulation, said disputes are to be resolved by Mediator Sperber by way of mediation Neither this Stipulation (including any exhibits attached hereto nor the Settlement, nor any act performed or document executed pursuant to or in furtherance of this Stipulation or the Settlement: (a is or may be deemed to be, or may be offered, attempted to be offered, or used in any way by the Parties as a presumption, a concession, or an admission of, or evidence of, any fault, wrongdoing, or liability of the Parties or of the validity of any Released Claims; or (b is intended by the Parties to be offered or received as evidence or used by any other person in any other actions or proceedings, whether civil, criminal, or administrative. The Released Persons may file this Stipulation and/or the Judgment in any action that may be brought against them in order to support a defense or counterclaim based on principles of res judicata, collateral estoppel, full faith and credit, release, standing, good faith settlement, judgment bar or reduction, or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim, and any of the Parties may file this Stipulation and documents executed pursuant and in furtherance thereto in any action to enforce the Settlement

21 7.5. The Exhibits to this Stipulation are material and integral parts hereof and are fully incorporated herein by this reference This Stipulation may be amended or modified only by a written instrument signed by or on behalf of all Parties or their respective successors-in-interest This Stipulation and the Exhibits attached hereto constitute the entire agreement among the Parties and no representations, warranties, or inducements have been made to any Party concerning this Stipulation or any of its Exhibits other than the representations, warranties, and covenants contained and memorialized in such documents. Except as specifically provided herein, each Party shall bear its own costs Each counsel or other Person executing this Stipulation and/or the Exhibits attached hereto on behalf of any Party hereby warrants that such Person has the full authority to do so This Stipulation may be executed in one or more counterparts. A faxed signature or electronically scanned (in.pdf format signature shall be deemed an original signature for the purposes of this Stipulation. All executed counterparts and each of them shall be deemed to be one and the same instrument. A complete set of counterparts, either originally executed or copies thereof, shall be filed with the Court This Stipulation and the Settlement shall be binding upon, and inure to the benefit of, the successors and assigns of the Parties and the Released Persons The Com1 shall retain jurisdiction with respect to implementation and enforcement of the terms of this Stipulation and the Settlement, and the Parties submit to the jurisdiction of the Court for purposes of implementing and enforcing this Stipulation and the Settlement. -20-

22 7.12. This Stipulation and the Settlement contemplated by it shall be governed by, and construed in accordance with, the laws of the State of Rhode Island, without regard to Rhode Island's conflict of law rules The Parties hereby represent and warrant that they have not assigned any rights, claims, or causes of action that were asserted or could have been asserted in connection with, under, or arising out of the Released Claims All agreements made and orders entered during the course of the Action relating to the confidentiality of information shall survive this Stipulation Without further order ofthe Court, the Parties may agree to reasonable extensions of time to carry out any of the provisions of this Stipulation. IN WITNESS WHEREOF, the Parties hereto have caused this Stipulation to be executed, by their duly authorized attorneys, dated this 21st day ofmarch, DATED: March 21,2016 ROBBINS ARROYO LLP BRIAN J. ROBBINS KEVIN A. SEELY (pro hac vice GREGORY E. DEL GAIZO (pro hac vice ASHLEY R. RIFKIN (pro hac vice c ~ ASBL R. RIFKIN (pro hac vice 600 B Street, Suite 1900 San Diego, CA Telephone: ( Facsimile: ( brobbins@robbinsarroyo.com kseely@robbinsarroyo.com gdelgaizo@robbinsarroyo.com arifkin@robbinsarroyo.com MOORE, VIRGADAMO & LYNCH, LTD JEREMIAH C. LYNCH, III # John Clarke Road Middletown, RI

23 Telephone: ( Facsimile: ( Counsel for Plaintiff Mark Wuotila DATED: March 21, 2016 WILLIAMS & CONNOLLY LLP STEVEN M. FARINA (pro hac vice MARGARET A. KEELEY (pro hac vice KATHERINE M. TURNER (pro hac vice 72512th Str et NW Washington, DC Telephone: ( Facsimile: ( HINCKLEY, ALLEN & SNYDER LLP WILLIAM R. GRIMM # Kennedy Plaza, Suite 1500 Providence, RI Telephone: ( Facsimile: ( wgrimm@hinckleyallen.com Counsel for Defendants