UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. C.A. No JLT

Transcription

1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS IN RE CVS CORPORATION SECURITIES LITIGATION X : : : X C.A. No JLT NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION, MOTION FOR ATTORNEYS FEES AND SETTLEMENT FAIRNESS HEARING TO: ALL PERSONS OR ENTITIES WHO PURCHASED THE COMMON STOCK OF CVS CORPORATION ( CVS ) BETWEEN FEBRUARY 6, 2001 AND OCTOBER 30, 2001, INCLUSIVE (THE CLASS PERIOD ), AND WHO WERE ALLEGEDLY DAMAGED THEREBY (THE CLASS ). PLEASE READ THIS NOTICE CAREFULLY. IT RELATES TO THE PROPOSED SETTLEMENT OF THIS CLASS ACTION LAWSUIT. IF YOU ARE A MEMBER OF THE CLASS, THIS NOTICE INCLUDES IMPORTANT INFORMATION ABOUT YOUR LEGAL RIGHTS. A MEMBER OF THE CLASS WHO HAS NOT PREVIOUSLY SUBMITTED A TIMELY REQUEST TO BE EXCLUDED FROM THE SETTLEMENT WILL BE BOUND BY THE SETTLEMENT WHETHER OR NOT HE OR SHE SUBMITS A CLAIM FOR RECOVERY. CLAIM DEADLINE: IN ORDER TO SHARE IN THE SETTLEMENT, MEMBERS OF THE CLASS MUST SUBMIT A PROOF OF CLAIM ON THE FORM ACCOMPANYING THIS NOTICE NO LATER THAN OCTOBER 8, BANKS, BROKERAGE FIRMS AND NOMINEES: IF YOU HELD CVS COMMON STOCK ON BEHALF OF BENEFICIAL OWNERS, YOU ARE REQUESTED TO FORWARD COPIES OF THIS NOTICE AND THE PROOF OF CLAIM TO SUCH BENEFICIAL OWNERS OR PROVIDE THE CLAIMS ADMINISTRATOR WITH MAILING INFORMATION, AS DESCRIBED ON PAGE 10 BELOW. A federal court authorized this notice. This is not a solicitation from a lawyer. The settlement will provide a $110 million cash settlement fund for the benefit of investors who purchased the common stock of CVS between February 6, 2001 and October 30, 2001, inclusive, and who were allegedly damaged thereby. The settlement resolves a lawsuit on behalf of the Class over whether the Defendants misled investors during the Class Period about CVS s financial condition and business prospects. Your legal rights are affected whether you act or do not act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT: SUBMIT A CLAIM FORM OBJECT GO TO A HEARING DO NOTHING The only way to get a payment. Write to the Court about why you do not like the settlement. Ask to speak in Court about the settlement. Get no payment. Give up rights. These rights and options - and the deadlines to exercise them - are explained in this notice. The Court in charge of this case still has to decide whether to approve the settlement. Payments will be made if the Court approves the settlement and after appeals are resolved. Please be patient.

2 SUMMARY NOTICE Statement of Plaintiff Recovery Pursuant to the settlement described herein, a Settlement Fund consisting of $110,000,000 in cash, plus interest, will be established. Plaintiff estimates that there were approximately million shares of CVS common stock traded during the Class Period which may have been damaged. Plaintiff estimates that the average recovery per damaged share of CVS common stock under the settlement is approximately 64.4 per damaged share 1 before deduction of Court-awarded attorneys fees and expenses. A Class Member s actual recovery will be a proportion of the Net Settlement Fund determined by his, her or its Recognized Claim as compared to the total Recognized Claims of all Class Members who submit acceptable Proofs of Claim. Depending on the number of claims submitted, when during the Class Period a Class Member purchased CVS common stock, and whether those securities were held at the end of the Class Period or sold during the Class Period, and if sold, when they were sold, an individual Class Member may receive more or less than this average amount. See the Plan of Allocation beginning on page 9 for more information on your Recognized Claim. Statement of Potential Outcome of Case The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if Plaintiff were to have prevailed on each claim alleged. CVS and the other Defendants deny that they misled investors or that they are liable in any respect to the Plaintiff and the Class and deny that Plaintiff or the Class have suffered any damages. Statement of Attorneys Fees and Costs Sought Plaintiffs Counsel are moving the Court to award attorneys fees in an amount of up to twenty-five percent (25%) of the Settlement Fund, and for reimbursement of expenses incurred in connection with the prosecution of this Securities Action in the approximate amount of $2,700,000. The requested fees and expenses would amount to an average of 17.7 per damaged share in total for fees and expenses. Plaintiffs Counsel have expended considerable time and effort in the prosecution of this litigation on a contingent fee basis, and have advanced the expenses of the litigation, in the expectation that if they were successful in obtaining a recovery for the Class they would be paid from such recovery. In this type of litigation, it is customary for counsel to be awarded a percentage of the common fund recovery as their attorneys fees. Further Information Further information regarding the Securities Action and this Notice may be obtained by contacting either of Lead Plaintiff s Co-Lead Counsel: Deborah Clark-Weintraub, Esq. Milberg Weiss Bershad & Schulman LLP One Pennsylvania Plaza New York, New York (212) Michael K. Yarnoff, Esq. Schiffrin & Barroway, LLP 280 King of Prussia Road Radnor, Pennsylvania (610) DO NOT CONTACT THE COURT TO ANSWER QUESTIONS YOU MIGHT HAVE. Reasons for the Settlement Plaintiff believes that the principal reason for the settlement is the significant benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future. Defendants deny that they misled investors during the Class Period and have entered into the settlement solely in order to eliminate the burden and expense of further litigation and in recognition of the risk of an adverse outcome that is inherent in any complex litigation. [END OF COVER PAGE] 1 An allegedly damaged share might have been traded more than once during the Class Period, and the indicated average recovery would be the total for all purchasers of that share. 2

3 WHAT THIS NOTICE CONTAINS Table of Contents Page SUMMARY NOTICE... 2 Statement of Plaintiff Recovery... 2 Statement of Potential Outcome of Case... 2 Statement of Attorneys Fees and Costs Sought... 2 Further Information... 2 Reasons for the Settlement... 2 BASIC INFORMATION Why did I get this notice package? What is this lawsuit about? Why is this a class action? Why is there a settlement?... 5 WHO IS IN THE SETTLEMENT How do I know if I am part of the settlement? Are there exceptions to being included? What if I am still not sure if I am included?... 5 THE SETTLEMENT BENEFITS WHAT YOU GET What does the settlement provide? How much will my payment be?... 6 HOW YOU GET A PAYMENT SUBMITTING A PROOF OF CLAIM FORM How can I get a payment? When would I get my payment? What am I giving up to get a payment?... 6 NO FURTHER EXCLUSION FROM THE CLASS Can I exclude myself from the Class now? If I previously excluded myself, can I get money from the proposed settlement?... 7 THE LAWYERS REPRESENTING YOU Do I have a lawyer in this case? How will the lawyers be paid?... 7 OBJECTING TO THE SETTLEMENT How do I tell the Court that I do not like the proposed settlement?... 7 THE COURT S SETTLEMENT HEARING When and where will the Court decide whether to approve the proposed settlement? Do I have to come to the hearing? May I speak at the hearing?... 9 IF YOU DO NOTHING What happens if I do nothing at all?... 9 GETTING MORE INFORMATION Are there more details about the proposed settlement? How do I get more information?... 9 PLAN OF ALLOCATION OF SETTLEMENT PROCEEDS AMONG CLASS MEMBERS... 9 SPECIAL NOTICE TO BANKS, BROKERAGE FIRMS AND OTHER NOMINEES

4 BASIC INFORMATION 1. WHY DID I GET THIS NOTICE PACKAGE? You or someone in your family may have purchased the common stock of CVS between February 6, 2001 and October 30, 2001, inclusive, and suffered damages thereby. The Court directed that this Notice be sent to Class Members because they have a right to know about a proposed settlement of a class action lawsuit, and about all of their options, before the Court decides whether to approve the settlement. If the Court approves the settlement, and after any objections and appeals are resolved, an administrator appointed by the Court will make the payments that the settlement allows. This package explains the lawsuit, the settlement, Class Members legal rights, what benefits are available, who is eligible for them, and how to get them. 2. WHAT IS THIS LAWSUIT ABOUT? This consolidated case began on August 22, 2001, when the first of nine class action complaints alleging violations of federal securities laws were filed in the Court. Those cases later were consolidated under the caption at the beginning of this Notice, and they are referred to in this Notice collectively as the Securities Action. On April 8, 2002, the Consolidated and Amended Class Action Complaint (the Complaint ) was filed in the Securities Action. The Court in charge of the case is the United States District Court for the District of Massachusetts, and the case is known as In re CVS Corporation Securities Litigation, Civil Action No. 02 Civ (JLT). This case was assigned to United States District Judge Joseph L. Tauro. The people who sued are called plaintiffs. By Order dated February 6, 2002, the Court appointed the Plumbers & Pipefitters National Pension Fund as the Lead Plaintiff in the Securities Action. The company and the persons that have been sued in this case, CVS and Thomas M. Ryan (Chief Executive Officer, President, and Chairman of the Board of CVS during the Class Period) and David B. Rickard (Executive Vice President and Chief Financial Officer of CVS during the Class Period), are called the Defendants. CVS is one of the largest retail drugstore chains in the United States. The lawsuit alleges that during the Class Period beginning on February 6, 2001 and ending on October 30, 2001, CVS or the other Defendants made materially false and misleading statements and omissions in public documents they disseminated during the Class Period to the investing public, including press releases and CVS s financial reports, that materially misrepresented CVS s financial condition and business prospects, thereby allegedly artificially inflating the price of CVS s common stock, and that the Defendants knew (or recklessly disregarded) that such statements were materially misleading when made. In particular, the Complaint alleges that, during the Class Period, the Defendants concealed material adverse information regarding CVS s financial condition and business prospects and issued a series of falsely positive statements in which they: (i) affirmatively misled the investing public into believing that CVS was able to attract and retain an adequate number of pharmacists to staff its stores and that the industry pharmacist shortage was not having any adverse impact on the Company; (ii) failed to disclose the fact that CVS intended to close approximately 200 underperforming stores; and (iii) inflated CVS s gross margins and operating profits by failing to properly account for marked down and unsaleable merchandise in violation of Generally Accepted Accounting Principles ( GAAP ). Plaintiff alleges that these material misrepresentations and omissions caused CVS s public statements issued during the Class Period to be materially false and misleading, in violation of the federal securities laws. Plaintiff claimed that as a result of these allegedly false and misleading public statements the market price of CVS common stock was artificially inflated. In the litigation, CVS and the other Defendants have vigorously disputed Plaintiff s allegations that CVS or the individual defendants made any public statements that materially misrepresented CVS s financial condition and business prospects or failed to adequately disclose material facts regarding CVS s financial condition and business prospects. Defendants also contend that CVS and the individual defendants adequately warned investors of the potential risks in investing in CVS common stock. In addition, Defendants assert that all of their public statements were made in good faith and deny that any such statements were made with knowing or reckless disregard for the truth (as is required to establish liability under Section 10(b) of the Securities Exchange Act of 1934), and deny that any member of the Class has been harmed by them or their actions in any way. Defendants have advised Plaintiff that they have entered into the settlement in this Securities Action solely in order to eliminate the burden and expense of further litigation and in recognition of the risk of an adverse outcome that is inherent in any complex litigation, especially securities class actions claiming losses of the size claimed by Plaintiff here. 3. WHY IS THIS A CLASS ACTION? In a class action, one or more people called class representatives (in this case the Plumbers & Pipefitters National Pension Fund) sue on behalf of people who have similar claims. All these people are a Class or Class Members. Bringing a case, such as this one, as a class action allows adjudication of many similar claims of persons and entities that might be economically too small to bring in individual actions. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. On March 28, 2003, Plaintiff filed a motion to certify the Securities Action as a class action. In an order dated October 16, 2003, after discovery and briefing on that motion, the Court certified Lead Plaintiff, the Plumbers & Pipefitters National Pension Fund, as the representative of the Class. It authorized the class representative to proceed in the Securities Action on behalf of the Class. 4

5 The Class was defined to consist of all persons or entities who purchased the common stock of CVS Corporation between February 6, 2001 and October 30, 2001, inclusive, and who were allegedly damaged thereby. On behalf of the Class, the Complaint asserts claims against the Defendants for securities fraud under Section 10(b) of the Securities Exchange Act of 1934 (the Exchange Act ) and Rule 10b-5 promulgated thereunder and against Thomas M. Ryan and David B. Rickard for control person liability under Section 20(a) of the Exchange Act. Excluded from the Class are the Defendants, all of the officers, directors and partners thereof, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which any of the foregoing have or had a controlling interest. 4. WHY IS THERE A SETTLEMENT? On June 7, 2002, Defendants moved to dismiss the Complaint. After full briefing by Lead Plaintiff and Defendants and a hearing on the motion to dismiss, the Court, by Order dated December 18, 2002, denied Defendants motion to dismiss. Defendants filed an answer to the Complaint on January 24, 2003, denying liability. Since the Court s December 18, 2002 decision denying Defendants motion to dismiss the Complaint, the parties have been engaged in intensive pre-trial proceedings and discovery relating to the claims asserted in the Complaint against the Defendants. Lead Plaintiff s Co-Lead Counsel have conducted an extensive investigation relating to the claims and defenses concerning the underlying events and transactions alleged in the Complaint. Lead Plaintiff s Co-Lead Counsel have analyzed the evidence adduced during pretrial discovery and have researched the applicable law with respect to the claims of Lead Plaintiff and the Class against the Defendants and the potential defenses thereto. Defendants Counsel have done the same. Merits and expert discovery occurred in the Securities Action from March 2003 through December Lead Plaintiff s Co-Lead Counsel and Defendants Counsel have reviewed hundreds of thousands of pages of documents produced by Defendants and various third parties. Lead Plaintiff s Co-Lead Counsel and Defendants Counsel have also taken the depositions of 18 persons in connection with this matter, including present or former directors, officers or employees of CVS and the parties respective experts, and exchanged expert reports. Following the close of expert discovery, on January 14, 2005, Defendants filed a motion for summary judgment. After full briefing by Lead Plaintiff and Defendants, the Court denied Defendants motion for summary judgment, by Order dated March 8, Thereafter, the parties filed their respective motions in limine, exchanged exhibit and witness lists and proposed jury instructions. The Settlement was not reached until April 20, 2005, less than three weeks before trial was scheduled to begin, after the Court s decision on summary judgment, and only after repeated mediations involving multiple sessions with a retired federal judge. Lead Plaintiff s Co-Lead Counsel and counsel for the Defendants agreed in principle to the settlement discussed in this Notice, subject to Court approval. The Court did not decide in favor of the Lead Plaintiff or the Defendants. Instead, both sides agreed to a settlement. That way, they avoid the risks and cost of a trial, and the Class Members who suffered losses on their transactions in CVS common stock during the Class Period will get compensation. Lead Plaintiff and its attorneys think the settlement is best for all Class Members. WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to determine if you are a Class Member. 5. HOW DO I KNOW IF I AM PART OF THE SETTLEMENT? The Court decided that everyone who fits the following description is a Class Member: all persons or entities who purchased the common stock of CVS Corporation ( CVS ) between February 6, 2001 and October 30, 2001, inclusive, and who were allegedly damaged thereby. 6. ARE THERE EXCEPTIONS TO BEING INCLUDED? Excluded from the Class are the Defendants, all of the officers, directors and partners thereof, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which any of the foregoing have or had a controlling interest. A prior notice of pendency of this Securities Action as a class action was mailed to Class Members beginning on December 9, 2003 and a summary notice was published in the national edition of The Wall Street Journal on December 23, If you submitted a request for exclusion in response to the prior notice of pendency, then you are excluded from the Class and may not submit a Proof of Claim form to participate in the settlement. If one of your mutual funds purchased CVS common stock during the Class Period, that fact alone does not make you a Class Member. You are a Class Member only if you directly purchased CVS common stock during the Class Period. Contact your broker to see if you purchased CVS common stock during the Class Period. If you sold CVS common stock during the Class Period, that fact alone does not make you a Class Member. You are a Class Member only if you purchased your CVS common stock during the Class Period. 7. WHAT IF I AM STILL NOT SURE IF I AM INCLUDED? If you are still not sure whether you are included, you can ask for free help. You can call or visit for more information. Or you can fill out and return the Proof of Claim form described on page 6, in response to question 10, to see if you qualify. 5

6 8. WHAT DOES THE SETTLEMENT PROVIDE? THE SETTLEMENT BENEFITS WHAT YOU GET In exchange for the Settlement and dismissal of the Securities Action, Defendants have agreed to contribute $110,000,000 in cash (the Securities Settlement Amount ) to a settlement fund that will be divided, after deducting fees and expenses of notice and administration and any Court-awarded attorneys fees and expenses, among all Class Members who send in a valid Proof of Claim form. 9. HOW MUCH WILL MY PAYMENT BE? Your share of the fund will depend on the total Recognized Claims represented by the valid Proof of Claim forms that Class Members send in, how many shares of CVS common stock you bought, how much you paid for them, and when you bought and whether or when you sold them, and if so for how much you sold them. By following the instructions beginning on page 9 of this Notice, you can calculate what is called your Recognized Claim. It is unlikely that you will get a payment for all of your Recognized Claim. After all Class Members have sent in their Proof of Claim forms, the payment you get will be a fraction of the Net Settlement Fund equal to your Recognized Claim divided by the total of everyone s Recognized Claims. See the Plan of Allocation beginning on page 9 for more information on your Recognized Claim. 10. HOW CAN I GET A PAYMENT? HOW YOU GET A PAYMENT SUBMITTING A PROOF OF CLAIM FORM To qualify for a payment, you must send in a Proof of Claim form. A Proof of Claim form is being circulated with this Notice. You may also get a Proof of Claim form on the Internet at Read the instructions carefully, fill out the Proof of Claim form, include all the documents the form asks for, sign it, and mail it postmarked no later than October 8, WHEN WOULD I GET MY PAYMENT? The Court will hold a hearing on September 7, 2005, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It is always uncertain whether or when any such appeals, if any, might be resolved, and resolving them can take time, perhaps more than a year. It also takes time for all the Proofs of Claim to be processed. Please be patient. 12. WHAT AM I GIVING UP TO GET A PAYMENT? Upon the Effective Date, you and all other Class Members will release all Settled Claims, including Unknown Claims against the Released Parties (all as defined below). In addition, the Order and Final Judgment shall provide that Lead Plaintiff and members of the Class shall, upon the Effective Date, be deemed to have covenanted not to sue any of the Released Parties in any individual, class or other representative capacity with respect to any Settled Claim. Settled Claims means all claims, whether known or unknown (including Unknown Claims), and whether arising under federal, state, or any other law, against any of the Released Parties, which have been, or could have been, asserted in the Securities Action or in any court or forum, relating to or arising from the acts, facts, transactions and circumstances that were alleged in the Complaint and which relate to or arise from the purchase of CVS common stock during the Class Period. Settled Claims do not include any claims against the Released Parties arising under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001, et seq. ( ERISA ) that are the subject of another class action pending in the United States District Court, District of Massachusetts, Fescina v. CVS Corp., et al., Civil Action No JLT, other than claims that the price of CVS common stock purchased on the open market during the Class Period was artificially inflated as alleged in the Complaint. Unknown Claims means any and all Settled Claims which any Plaintiff or Class Member does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, and any Settled Defendants Claims which any Defendant does not know or suspect to exist in his, her or its favor, which (in either case) if known by him, her or it might have affected his, her or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants Claims, the parties stipulate and agree that upon the Effective Date, Lead Plaintiff and the Defendants shall expressly waive, and each Class Member shall be deemed to have waived, and by operation of the Order and Final Judgment in the Securities Action shall have expressly waived, any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Lead Plaintiff and the Defendants acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of Unknown Claims in the definition of Settled Claims and Settled Defendants Claims was separately bargained for and was a key element of the Settlement. 6

7 Released Parties means the Defendants, and any of the families, heirs, executors, trustees, personal representatives, estates or administrators, attorneys, counselors, insurers, financial or investment advisors of any such Defendant who is a natural person, and the affiliates, partners, subsidiaries, predecessors, successors or assigns, past or present officers, directors, associates, controlling persons, representatives, employees, attorneys, counselors, insurers, financial or investment advisors, dealer managers, consultants, accountants, investment bankers, commercial bankers, engineers, advisors or agents of CVS, all in their capacities as such. The Effective Date will occur when an Order entered by the Court approving the Settlement becomes final and not subject to any further appeal. NO FURTHER EXCLUSION FROM THE CLASS The Court previously certified this litigation to proceed as a class action on behalf of all persons or entities who purchased CVS common stock between February 6, 2001 and October 30, 2001, inclusive, and who were allegedly damaged thereby. As described in the prior Notice of Pendency and the prior summary notice, Class Members were previously provided the opportunity, until February 20, 2004, to elect either to exclude themselves from the Class for all purposes or to remain as members of the Class and be bound by these proceedings. The settlement does not provide for any new right to be excluded from the Class with respect to the settlement with the Defendants. If the settlement is approved, it will be binding on all Class Members. The persons and entities who previously requested exclusion from the Class are excluded from the Class for purposes of this settlement. Class Members who did not request exclusion in response to the Notice of Pendency may not now request exclusion from the Class. If you previously submitted a request for exclusion from the Class in accordance with the prior Notice of Pendency, then you may not submit a Proof of Claim form to participate in the settlement herein. 13. CAN I EXCLUDE MYSELF FROM THE CLASS NOW? No. Pursuant to the prior Notice of Pendency, Class Members were allowed to request exclusion until February 20, The settlement does not provide another opportunity to request exclusion. As described in question 17 below, Class Members may object to the settlement. 14. IF I PREVIOUSLY EXCLUDED MYSELF, CAN I GET MONEY FROM THE PROPOSED SETTLEMENT? No. If you previously excluded yourself, you cannot get money from the proposed settlement. Do not send in a claim form to ask for any money. 15. DO I HAVE A LAWYER IN THIS CASE? THE LAWYERS REPRESENTING YOU The Court ordered that Milberg Weiss Bershad & Schulman LLP, a law firm based in New York, New York, and Schiffrin & Barroway, LLP, a law firm based in Radnor, Pennsylvania, will represent you and the other Class Members. These lawyers are called Lead Plaintiff s Co-Lead Counsel. You will not be separately charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. 16. HOW WILL THE LAWYERS BE PAID? Lead Plaintiff s Co-Lead Counsel are moving the Court to award attorneys fees from the Settlement Fund in an amount of up to twenty-five percent (25%) of the Settlement Fund and for reimbursement of their expenses in the approximate amount of $2,700,000, plus interest on such expenses at the same rate as earned by the Settlement Fund. The award of attorneys fees shall be allocated among Plaintiffs Counsel in a fashion which, in the opinion of Lead Plaintiff s Co-Lead Counsel, fairly compensates Plaintiffs Counsel for their respective contributions in the prosecution of the Securities Action. Lead Plaintiff s Co-Lead Counsel, without further notice to the Class, may subsequently apply to the Court for fees and expenses incurred in connection with administering and distributing the settlement proceeds to the members of the Class and any proceedings subsequent to the Settlement Hearing. There is a derivative lawsuit filed by a CVS shareholder on behalf of CVS also pending in the United States District Court for the District of Massachusetts, Krantz v. Ryan, et al., Civil Action (REK) (the Derivative Action ). A settlement has also been reached in the Derivative Action. Attorneys fees and expenses awarded by the Court in the Derivative Action to derivative plaintiff s counsel in the amount of up to $750,000 shall be payable from the award to Lead Plaintiff s Co-Lead Counsel in the Securities Action. OBJECTING TO THE SETTLEMENT You can tell the Court that you do not agree with the settlement or some part of it. 17. HOW DO I TELL THE COURT THAT I DO NOT LIKE THE PROPOSED SETTLEMENT? If you are a Class Member you can object to the settlement or any of its terms, the proposed Plan of Allocation and/or the application by Lead Plaintiff s Co-Lead Counsel for an award of fees and expenses. You may write to the Court setting out your objection. You may give reasons why you think the Court should not approve any or all of the settlement terms or arrangements. The Court will consider your views if you file a proper objection within the deadline identified, and according to the following procedures. 7

8 To object, you must send a signed letter stating that you object to the proposed settlement in the In re CVS Corporation Securities Litigation, Civil Action No (JLT). Be sure to include your name, address, telephone number, and your signature, identify the date(s), price(s), and number(s) of shares of all purchases and sales of CVS common stock you made during the Class Period, and state the reasons why you object to the Settlement. Mail the objection to all of the following addresses postmarked no later than August 23, 2005: COURT Clerk of the Court United States District Court for the District of Massachusetts John Joseph Moakley United States Courthouse 1 Courthouse Way Boston, Massachusetts LEAD PLAINTIFF S CO-LEAD COUNSEL Deborah Clark-Weintraub, Esq. MILBERG WEISS BERSHAD & SCHULMAN LLP One Pennsylvania Plaza New York, New York Michael K. Yarnoff, Esq. SCHIFFRIN & BARROWAY, LLP 280 King of Prussia Road Radnor, Pennsylvania DEFENDANTS' COUNSEL Dennis E. Glazer, Esq. DAVIS POLK & WARDWELL 450 Lexington Avenue New York, New York You do not need to go to the Settlement Hearing to have your written objection considered by the Court. At the Settlement Hearing, any Class Member who has not previously submitted a request for exclusion from the Class and who has complied with the procedures set out in this section and in the response to question 20 below for filing with the Court and providing to Lead Plaintiff s Co-Lead Counsel and Defendants Counsel a statement of an intention to appear at the Settlement Hearing may also appear and be heard, to the extent allowed by the Court, to state any objection to the Settlement, the Plan of Allocation or Lead Plaintiff s Co-Lead Counsel s motion for an award of attorneys fees and reimbursement of expenses. Any such objector may appear in person or arrange, at that objector s expense, for a lawyer to represent the objector at the Hearing. THE COURT S SETTLEMENT HEARING The Court will hold a hearing to decide whether to approve the proposed settlement. You may attend and you may ask to speak, but you do not have to. 18. WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE THE PROPOSED SETTLEMENT? The Court will hold a Settlement Hearing at 11:30 a.m., on September 7, 2005, at the United States District Court for the District of Massachusetts, John Joseph Moakley United States Courthouse, 1 Courthouse Way, Boston, Massachusetts At this hearing the Court will consider whether the settlement is fair, reasonable and adequate. The Court also will consider the proposed Plan of Allocation for the proceeds of the settlement and the application of Lead Plaintiff s Co-Lead Counsel for attorneys fees and reimbursement of expenses. The Court will take into consideration any written objections filed in accordance with the instructions shown in response to question 17. The Court will consider any objections that are submitted within the deadline identified, and according to the procedures described, in this Notice. The Court also may listen to people who have properly indicated within the deadline identified above an intention to speak at the hearing; but decisions regarding the conduct of the hearing will be made by the Court. The Court may also decide how much to pay to Plaintiffs Counsel. At or after the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. You should be aware that the Court may change the date and time of the Settlement Hearing. Thus, if you want to come to the hearing, you should check with Lead Plaintiff s Co-Lead Counsel before coming to be sure that the date and/or time have not changed. 19. DO I HAVE TO COME TO THE HEARING? No. Lead Plaintiff s Co-Lead Counsel will answer questions the Court may have. But, you are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you filed your written objection in time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. Class Members do not need to appear at the hearing or take any other action to indicate their approval. 8

9 20. MAY I SPEAK AT THE HEARING? If you object to the settlement, you may ask the Court for permission to speak at the Settlement Hearing. To do so, you must include with your objection (see response to question 17 above) a statement stating that it is your Notice of Intention to Appear in the In re CVS Corporation Securities Litigation, Civil Action No (JLT). Persons who intend to object to the settlement, the Plan of Allocation, and/or Lead Plaintiff s Co-Lead Counsels application for an award of attorneys fees and expenses and desire to present evidence at the Settlement Hearing must include in their written objections the identity of any witnesses they may call to testify and exhibits they intend to introduce into evidence at the Settlement Hearing. You cannot speak at the hearing if you excluded yourself from the Class or if you have not provided written notice of your intention to speak at the Settlement Hearing by the deadline identified, and in accordance with the procedures described, in the responses to questions 17 and 18, above. 21. WHAT HAPPENS IF I DO NOTHING AT ALL? IF YOU DO NOTHING If you do nothing, you will get no money from this settlement. You must submit a Proof of Claim form in order to share in the Net Settlement Fund. The Order and Final Judgment approving the Settlement will dismiss the Securities Action and settle all Class Members Settled Claims as against all Released Parties. Whether or not they submit a Proof of Claim form, all Class Members will be barred and enjoined from starting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit against CVS and the other Released Parties about the Settled Claims in this case, ever again. GETTING MORE INFORMATION 22. ARE THERE MORE DETAILS ABOUT THE PROPOSED SETTLEMENT? This notice summarizes the proposed settlement. More details are in a Stipulation and Agreement of Compromise, Settlement and Release of Securities Action dated June 6, 2005 (the Securities Stipulation ). You can get a copy of the Securities Stipulation by writing to Deborah Clark-Weintraub, Esq., Milberg Weiss Bershad & Schulman LLP, One Pennsylvania Plaza, New York, New York or Michael K. Yarnoff, Esq., Schiffrin & Barroway, LLP, 280 King of Prussia Road, Radnor, Pennsylvania You also can call the Claims Administrator at toll free; write to In re CVS Corporation Securities Litigation Settlement, c/o The Garden City Group, Inc., Claims Administrator, P.O. Box 9000 #6172, Merrick, NY ; or visit the website at where you will find answers to common questions about the settlement, a Proof of Claim form, plus other information to help you determine whether you are a Class Member and whether you are eligible for a payment. 23. HOW DO I GET MORE INFORMATION? For even more detailed information concerning the matters involved in this Securities Action, reference is made to the pleadings, to the Securities Stipulation, to the Orders entered by the Court and to the other papers filed in the Securities Action, which may be inspected at the Office of the Clerk of the United States District Court for the District of Massachusetts, John Joseph Moakley United States Courthouse, 1 Courthouse Way, Boston, Massachusetts 02210, during regular business hours. PLAN OF ALLOCATION OF SETTLEMENT PROCEEDS AMONG CLASS MEMBERS The $110,000,000 Settlement Amount, together with any interest thereon, shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the Net Settlement Fund ) shall be distributed to members of the Class who submit acceptable Proofs of Claim ( Authorized Claimants ). The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund based upon each Authorized Claimant s Recognized Claim. The Recognized Claim formula is not intended to be an estimate of the amount of what a Class Member might have been able to recover after a trial; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the settlement. The Recognized Claim formula is the basis upon which the Net Settlement Fund will be proportionately allocated to the Authorized Claimants. The proposed Plan of Allocation reflects Plaintiff s allegations that the price of CVS common stock was inflated because of Defendants allegedly misleading statements and omissions. The amount of the alleged artificial inflation changed as different disclosures were made until Defendants October 30, 2001 announcements, which fully revealed the true facts and eliminated the alleged inflation. An Authorized Claimant s Recognized Claim shall mean the amount determined as follows: (1) For each share of CVS common stock purchased on the open market during the Class Period which an Authorized Claimant continued to hold as of the close of trading on October 30, 2001 (the end of the Class Period), the Recognized Claim shall be equal to the lesser of (x) Plaintiff s Contention Of The Estimated Artificial Inflation Per Share on the date of purchase of the CVS common stock (as shown on Appendix A set forth below), or (y) the difference, if a positive number (a loss), between the Purchase Price Paid for such shares, including commissions and other charges (the PPP ), minus $27.06 per share (the average closing value of CVS common stock for the 90 day period following the end of the Class Period). NOTE: If the difference found in (y) above is a negative number (a gain), the shares were purchased for less than they were worth at the end of the Class Period and the claimant shall have no Recognized Claim on such shares. 9

10 (2) For each share of CVS common stock purchased on the open market during the Class Period which an Authorized Claimant sold prior to the close of trading on October 30, 2001, the Recognized Claim shall be equal to the lesser of (x) the difference, if positive, between the Plaintiff s Contention Of The Estimated Artificial Inflation Per Share on the date of purchase of the CVS common stock during the Class Period, minus the Plaintiff s Contention Of The Estimated Artificial Inflation Per Share on the date of sale of the CVS common stock, or (y) the difference, if positive, between the PPP and the proceeds received on sale (net of commissions etc.) (the SPR ). NOTE: If the difference found in either (x) or (y) above is a negative number (a gain) the claimant shall have no Recognized Claim on such shares. Annexed hereto as Appendix A is a table setting forth Plaintiff s Contention Of The Estimated Artificial Inflation Per Share on a daily basis during the time period, February 6, 2001 through and including October 30, In the event a Class Member has more than one purchase or sale of CVS common stock, all purchases and sales shall be matched on a First In First Out ( FIFO ) basis, Class Period sales will be matched first against any CVS shares held at the beginning of the Class Period and then against purchases in chronological order. A purchase or sale of CVS common stock shall be deemed to have occurred on the contract or trade date as opposed to the settlement or payment date. The receipt or grant by gift, devise or operation of law of CVS common stock during the Class Period shall not be deemed a purchase or sale of CVS common stock for the calculation of an Authorized Claimant s Recognized Claim nor shall it be deemed an assignment of any claim relating to the purchase of such shares unless specifically provided in the instrument of gift or assignment. The receipt of CVS common stock during the Class Period in exchange for securities of any other corporation or entity shall not be deemed a purchase or sale of CVS common stock. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund based on his, her or its Recognized Claim compared to the Total Recognized Claims of all accepted claimants. Each Authorized Claimant shall be paid an amount determined by multiplying his, her or its Recognized Claim by a fraction the numerator of which shall be the Net Settlement Fund and the denominator of which shall be the Total Recognized Claims of all Authorized Claimants. A Class Member who does not file an acceptable Proof of Claim will not share in the settlement proceeds. A Class Member who does not file an acceptable Proof of Claim will nevertheless be bound by the judgment and the Settlement. To the extent a Claimant had a gain from his, her or its overall transactions in CVS common stock during the Class Period, the value of the Recognized Claim will be zero. To the extent that a Claimant suffered an overall loss on his, her or its overall transactions in CVS common stock during the Class Period, but that loss was less than the Recognized Claim calculated above, then the Recognized Claim shall be limited to the amount of the actual loss. For purposes of determining whether a Claimant had a gain from his, her or its overall transactions in CVS common stock during the Class Period or suffered a loss, the Claims Administrator shall: (i) total the amount paid for all CVS common stock purchased during the Class Period by the claimant (the Total Purchase Amount ); (ii) match any sales of CVS common stock during the Class Period first against the Claimant s opening position in the stock (the proceeds of those sales will not be considered for purposes of calculating gains or losses); (iii) total the amount received for sales of the remaining shares of CVS common stock sold during the Class Period (the Sales Proceeds ); (iv) ascribe a $27.06 per share holding value for the number of shares of CVS common stock purchased during the Class Period and still held at the end of the Class Period ( Holding Value ). The difference between (x) the Total Purchase Amount (item i above) and (y) the sum of the Sales Proceeds (item iii above) and Holding Value (item iv above), will be deemed a Claimant s gain or loss on his, her or its overall transactions in CVS common stock during the Class Period. Distributions will be made to Authorized Claimants after all claims have been processed and after the Court has finally approved the settlement. If any funds remain in the Net Settlement Fund by reason of un-cashed checks or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distributions, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed to Class Members who have cashed their initial distributions and who would receive at least $10.00 from such re-distribution, after payment of any unpaid costs or fees incurred in administering the Net Settlement Fund for such re-distribution. If after six months after such re-distribution any funds shall remain in the Net Settlement Fund, then such balance shall be contributed to non-sectarian, not-for-profit, 501(c)(3) organization(s) designated by Plaintiff s Co-Lead Counsel. SPECIAL NOTICE TO BANKS, BROKERAGE FIRMS AND OTHER NOMINEES If you purchased the common stock of CVS between February 6, 2001 and October 30, 2001, inclusive, for the beneficial interest of a person or organization other than yourself, the Court has directed that, WITHIN SEVEN (7) DAYS OF YOUR RECEIPT OF THIS NOTICE, you either (a) provide to the Claims Administrator the name and last known address of each person or organization for whom or which you purchased CVS common stock during such time period or (b) request additional copies of this Notice and the Proof of Claim form, which will be provided to you free of charge, and within seven (7) days mail the Notice and Proof of Claim form directly to the beneficial owners of those shares of CVS common stock. If you choose to follow alternative procedure (b), the Court has directed that, upon such mailing, you send a statement to the Claims Administrator confirming that the mailing was made as directed. You are entitled to reimbursement from the Settlement Fund of your reasonable expenses actually incurred in connection with the foregoing, including reimbursement of postage expense and the cost of ascertaining the names and addresses of beneficial owners. Those expenses will be paid upon request and submission of appropriate supporting documentation. All communications concerning the foregoing should be addressed to the Claims Administrator: In re CVS Corporation Securities Litigation Settlement c/o The Garden City Group, Inc. Claims Administrator P.O. Box 9000 #6172 Merrick, NY (866) By Order of the Court CLERK OF THE COURT

11 APPENDIX A Plaintiff s Contention Of The Estimated Artificial Inflation Per Share during the Class Period: Date Alleged Inflation Date Alleged Inflation Date Alleged Inflation 02/06/2001 $ /22/2001 $ /07/2001 $ /07/2001 $ /23/2001 $ /08/2001 $ /08/2001 $ /26/2001 $ /09/2001 $ /09/2001 $ /27/2001 $ /10/2001 $ /12/2001 $ /28/2001 $ /11/2001 $ /13/2001 $ /29/2001 $ /14/2001 $ /14/2001 $ /30/2001 $ /15/2001 $ /15/2001 $ /02/2001 $ /16/2001 $ /16/2001 $ /03/2001 $ /17/2001 $ /20/2001 $ /04/2001 $ /18/2001 $ /21/2001 $ /05/2001 $ /21/2001 $ /22/2001 $ /06/2001 $ /22/2001 $ /23/2001 $ /09/2001 $ /23/2001 $ /26/2001 $ /10/2001 $ /24/2001 $ /27/2001 $ /11/2001 $ /25/2001 $ /28/2001 $ /12/2001 $ /29/2001 $ /01/2001 $ /16/2001 $ /30/2001 $ /02/2001 $ /17/2001 $ /31/2001 $ /05/2001 $ /18/2001 $ /01/2001 $ /06/2001 $ /19/2001 $ /04/2001 $ /07/2001 $ /20/2001 $ /05/2001 $ /08/2001 $ /23/2001 $ /06/2001 $ /09/2001 $ /24/2001 $ /07/2001 $ /12/2001 $ /25/2001 $ /08/2001 $ /13/2001 $ /26/2001 $ /11/2001 $ /14/2001 $ /27/2001 $ /12/2001 $ /15/2001 $ /30/2001 $ /13/2001 $ /16/2001 $ /01/2001 $ /14/2001 $ /19/2001 $ /02/2001 $ /15/2001 $ /20/2001 $ /03/2001 $ /18/2001 $ /21/2001 $ /04/2001 $ /19/2001 $

12 Date Alleged Inflation Date Alleged Inflation Date Alleged Inflation 06/20/2001 $ /02/2001 $ /20/2001 $ /21/2001 $ /03/2001 $ /21/2001 $ /22/2001 $ /06/2001 $ /24/2001 $ /25/2001 $ /07/2001 $ /25/2001 $ /26/2001 $ /08/2001 $ /26/2001 $ /27/2001 $ /09/2001 $ /27/2001 $ /28/2001 $ /10/2001 $ /28/2001 $ /29/2001 $ /13/2001 $ /01/2001 $ /02/2001 $ /14/2001 $ /02/2001 $ /03/2001 $ /15/2001 $ /03/2001 $ /05/2001 $ /16/2001 $ /04/2001 $ /06/2001 $ /17/2001 $ /05/2001 $ /09/2001 $ /20/2001 $ /08/2001 $ /10/2001 $ /21/2001 $ /09/2001 $ /11/2001 $ /22/2001 $ /10/2001 $ /12/2001 $ /23/2001 $ /11/2001 $ /13/2001 $ /24/2001 $ /12/2001 $ /16/2001 $ /27/2001 $ /15/2001 $ /17/2001 $ /28/2001 $ /16/2001 $ /18/2001 $ /29/2001 $ /17/2001 $ /19/2001 $ /30/2001 $ /18/2001 $ /20/2001 $ /31/2001 $ /19/2001 $ /23/2001 $ /04/2001 $ /22/2001 $ /24/2001 $ /05/2001 $ /23/2001 $ /25/2001 $ /06/2001 $ /24/2001 $ /26/2001 $ /07/2001 $ /25/2001 $ /27/2001 $ /10/2001 $ /26/2001 $ /30/2001 $ /17/2001 $ /29/2001 $ /31/2001 $ /18/2001 $ /30/2001 $ /01/2001 $ /19/2001 $