CVS Caremark Corporation (CVS)

ITEM 9:  STOCKHOLDER PROPOSAL REGARDING THE COMPANY’S POLICY ON STOCK OPTION GRANTS

We have received notice that Amalgamated Bank (proponent of Item 8, above) intends to introduce a proposal at the annual meeting urging that the Company adopt a policy concerning stock option backdating (the “Option Proposal”), and has indicated its intention to separately solicit proxies for the Option Proposal. While management and the Board of our Company agree in principle with the spirit of the Option Proposal, we believe that the Proposal as drafted is ill-advised. Instead, on March 7, 2007, the Board of Directors adopted a policy on stock option grants that it considers appropriate and in the best interests of the Company and its stockholders.

Under the policy adopted by the Board, all options to directors and executive officers will be granted at an exercise price equal to the closing price of the underlying stock on the date that the option is granted (the “grant date”), with grant dates in a given fiscal year to be established generally based on the Company’s customary and normal grant cycle. Where a grant to an existing employee is outside the annual grant cycle, the grant date will not be coordinated with the release of material non-public information that has been or will be disclosed within 30 days on either side of any such grant date. In hiring an executive after a fiscal year has begun, the grant date will be the later of the hire date and the date the Management Planning and Development Committee approves the award. If options are granted below the closing price on the grant date, the exercise price of unexercised options shall be increased to the closing price on the grant date; with respect to any exercised options, the affected executive or director shall compensate the Company for the value of any benefit that was received by using a date other than the actual grant date for determining the exercise price. The Management Planning and Development Committee (comprised entirely of independent directors) will be responsible for oversight of the Company’s policy on stock option grants.

The Company is committed to sound option grant practices, fully compliant with best practices and applicable law and accounting rules, all of which is reflected in and reinforced by our Board.

The proponent has asserted that the Company’s policy set forth above falls short because it does not contain some of the elements laid out in the proponent’s proposed policy. For example, the proponent’s policy would require: that the board conduct an independent investigation of any backdating allegations; that the Company seek the resignation of executives or directors found to have engaged in or to have approved backdating; and that the Company will make the results of any investigation available to stockholders.

The Company does not consider it prudent or in the best interests of its stockholders to have a policy that an independent investigation will occur each time there is a mere allegation of backdating. The Company has an independent Audit Committee and Management Planning and Development Committee, and the Company, its Board and Committees should be able to exercise good judgment on when an independent investigation is warranted. Furthermore, it is not common practice among major corporations, nor do we consider it prudent or in the best interests of our stockholders, to commit as a matter of policy that results of independent investigations will be publicly disclosed. Again, the Company, its Board and Committees should be able to exercise good judgment on when and what public disclosure is warranted, consistent with the Company’s disclosure obligations and the best interests of stockholders. Finally, to have a policy requirement on resignations again would take away the ability of the Company, its Board and Committees to exercise judgment based on the circumstances presented, which we do not believe to be in the best interest of our stockholders.

In light of the Board’s adoption of the above policy, and for the reasons set forth above, management and the Board believe that the Option Proposal is unnecessary and not in the best interests of the Company or its stockholders.

The Board of Directors recommends a vote AGAINST the Option Proposal (assuming it is properly introduced at the meeting).

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