CVS Caremark Corporation (CVS)

Stock Options

In 2005, the Committee continued its general policy of making annual stock option grants to executives and key employees. Annual stock option grants in 2005 to Mr. Ryan and the other named executive officers are shown in the Summary Compensation Table on page 16 and the Option Grants Table on page 17. In 2005, the

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Committee also granted options to over 1,400 key employees below the executive officer level. Target awards for key employees are based on competitive market data with a minimum and maximum range of opportunity to reflect individual performance and contribution.

Regular annual stock option awards granted in 2005 to executive officers and key employees generally become exercisable one-third on the first, second and third anniversaries of the grant date. Options awarded in 2005 expire seven years from the date of grant.

Stock Options

In 2004, the Committee continued its general policy of making annual stock option grants to executives and key employees. However, the size of the 2004 option grant to named executive officers was reduced by approximately 35% to 55%, as the Committee decided to incorporate time-vested restricted stock unit awards into the executive equity compensation program in 2004 and going forward, as discussed below. Annual stock option grants in 2004 to Mr. Ryan and the other named executive officers are shown in the Summary Compensation Table on page 17 and the Option Grants Table on page 18. In 2004, the Committee also granted options to over 1,400 key employees below the executive officer level.

Regular annual stock option awards granted in 2004 to executive officers and key employees generally become exercisable one-third on the first, second and third anniversaries of the grant date. Options awarded in 2004 expire seven years from the date of grant, compared to ten years from the date of grant for options awarded in prior years.