Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended August 1, 2015

Commission File Number 1-6049

TARGET CORPORATION

(Exact name of registrant as specified in its charter)



Minnesota		41-0215170
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1000 Nicollet Mall, Minneapolis, Minnesota		55403
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 612/304-6073

Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller Reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at August 20, 2015 were 628,430,247.

TARGET CORPORATION

TABLE OF CONTENTS



PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Financial Position	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Investment	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

Signature		28
Exhibit Index		29

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements



Consolidated Statements of Operations
	Three Months Ended						Six Months Ended
(millions, except per share data) (unaudited)	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Sales	$	17,427		$	16,957		$	34,546		$	33,614
Cost of sales	12,051			11,798			23,962			23,546
Selling, general and administrative expenses	3,495			3,599			7,009			6,974
Depreciation and amortization	551			537			1,090			1,049
Earnings from continuing operations before interest expense and income taxes	1,330			1,023			2,485			2,045
Net interest expense	148			433			305			585
Earnings from continuing operations before income taxes	1,182			590			2,180			1,460
Provision for income taxes	409			199			756			498
Net earnings from continuing operations	773			391			1,424			962
Discontinued operations, net of tax	(20		)	(157		)	(36		)	(309		)
Net earnings	$	753		$	234		$	1,388		$	653
Basic earnings per share
Continuing operations	$	1.21		$	0.62		$	2.23		$	1.52
Discontinued operations	(0.03		)	(0.25		)	(0.06		)	(0.49		)
Net earnings per share	$	1.18		$	0.37		$	2.17		$	1.03
Diluted earnings per share
Continuing operations	$	1.21		$	0.61		$	2.21		$	1.51
Discontinued operations	(0.03		)	(0.25		)	(0.06		)	(0.49		)
Net earnings per share	$	1.18		$	0.37		$	2.16		$	1.02
Weighted average common shares outstanding
Basic	635.8			633.5			638.3			633.4
Dilutive impact of share-based awards	5.2			4.9			5.4			4.9
Diluted	641.0			638.4			643.7			638.3
Antidilutive shares	—			5.1			—			5.2

See accompanying Notes to Consolidated Financial Statements.



Consolidated Statements of Comprehensive Income
	Three Months Ended				Six Months Ended
(millions) (unaudited)	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Net earnings	$	753	$	234	$	1,388	$	653
Other comprehensive income, net of tax
Pension and other benefit liabilities, net of taxes of $5, $4, $76 and $8	8		7		117		14
Currency translation adjustment and cash flow hedges, net of taxes of $1, $1, $1 and $1	—		23		1		85
Other comprehensive income	8		30		118		99
Comprehensive income	$	761	$	264	$	1,506	$	752

See accompanying Notes to Consolidated Financial Statements.



Consolidated Statements of Financial Position
(millions)	August 1, 2015			January 31, 2015			August 2, 2014
Assets	(unaudited)						(unaudited)
Cash and cash equivalents, including short term investments of $1,985, $1,520 and $3	$	2,742		$	2,210		$	766
Inventory	8,269			8,290			7,929
Assets of discontinued operations	97			1,333			693
Other current assets	2,250			2,254			2,166
Total current assets	13,358			14,087			11,554
Property and equipment
Land	6,120			6,127			6,109
Buildings and improvements	26,726			26,613			26,231
Fixtures and equipment	5,145			5,329			5,042
Computer hardware and software	2,550			2,552			2,280
Construction-in-progress	494			424			652
Accumulated depreciation	(15,452		)	(15,093		)	(14,182		)
Property and equipment, net	25,583			25,952			26,132
Noncurrent assets of discontinued operations	456			442			5,705
Other noncurrent assets	989			923			1,064
Total assets	$	40,386		$	41,404		$	44,455
Liabilities and shareholders’ investment
Accounts payable	$	6,944		$	7,759		$	6,986
Accrued and other current liabilities	3,768			3,783			3,644
Current portion of long-term debt and other borrowings	841			91			294
Liabilities of discontinued operations	60			103			412
Total current liabilities	11,613			11,736			11,336
Long-term debt and other borrowings	11,883			12,705			12,625
Deferred income taxes	1,319			1,321			1,233
Noncurrent liabilities of discontinued operations	276			193			1,333
Other noncurrent liabilities	1,353			1,452			1,495
Total noncurrent liabilities	14,831			15,671			16,686
Shareholders’ investment
Common stock	53			53			53
Additional paid-in capital	5,271			4,899			4,561
Retained earnings	9,099			9,644			12,611
Accumulated other comprehensive loss
Pension and other benefit liabilities	(444		)	(561		)	(408		)
Currency translation adjustment and cash flow hedges	(37		)	(38		)	(384		)
Total shareholders’ investment	13,942			13,997			16,433
Total liabilities and shareholders’ investment	$	40,386		$	41,404		$	44,455

Common Stock Authorized 6,000,000,000 shares, $.0833 par value; 630,446,029, 640,213,987 and 633,644,605 shares issued and outstanding at August 1, 2015, January 31, 2015 and August 2, 2014, respectively.

Preferred Stock Authorized 5,000,000 shares, $.01 par value; no shares were issued or outstanding at August 1, 2015, January 31, 2015 or August 2, 2014.

See accompanying Notes to Consolidated Financial Statements.



Consolidated Statements of Cash Flows
	Six Months Ended
(millions) (unaudited)	August 1, 2015			August 2, 2014
Operating activities
Net earnings	$	1,388		$	653
Losses from discontinued operations, net of tax	(36		)	(309		)
Net earnings from continuing operations	1,424			962
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation and amortization	1,090			1,049
Share-based compensation expense	54			40
Deferred income taxes	(45		)	(158		)
Loss on debt extinguishment	—			285
Noncash (gains)/losses and other, net	(34		)	26
Changes in operating accounts:
Inventory	18			(130		)
Other assets	156			179
Accounts payable and accrued liabilities	(697		)	(318		)
Cash provided by operating activities—continuing operations	1,966			1,935
Cash provided by/ (required for) operating activities—discontinued operations	823			(421		)
Cash provided by operations	2,789			1,514
Investing activities
Expenditures for property and equipment	(710		)	(881		)
Proceeds from disposal of property and equipment	13			44
Proceeds from sale of business	8			—
Cash paid for acquisitions, net of cash assumed	—			(20		)
Other investments	38			46
Cash required for investing activities—continuing operations	(651		)	(811		)
Cash provided by/ (required for) investing activities—discontinued operations	19			(171		)
Cash required for investing activities	(632		)	(982		)
Financing activities
Change in commercial paper, net	—			109
Additions to long-term debt	—			1,993
Reductions of long-term debt	(54		)	(2,039		)
Dividends paid	(665		)	(545		)
Repurchase of stock	(1,237		)	—
Stock option exercises and related tax benefit	331			55
Cash required for financing activities	(1,625		)	(427		)
Effect of exchange rate changes on cash and cash equivalents	—			3
Net increase in cash and cash equivalents	532			108
Cash and cash equivalents at beginning of period	2,210			695			^(a)
Cash and cash equivalents at end of period	$	2,742		$	803		^(b)

^(a) Includes cash of our discontinued operations of $25 million at February 1, 2014.

^(b) Includes cash of our discontinued operations of $37 million at August 2, 2014.

See accompanying Notes to Consolidated Financial Statements.



Consolidated Statements of Shareholders’ Investment
	Common		Stock			Additional					Accumulated Other
	Stock		Par			Paid-in		Retained			Comprehensive
(millions, except per share data)	Shares		Value			Capital		Earnings			Income/(Loss)			Total
February 1, 2014	632.9		$	53		$	4,470	$	12,599		$	(891	)	$	16,231
Net earnings	—		—			—		(1,636		)	—			(1,636		)
Other comprehensive income	—		—			—		—			292			292
Dividends declared	—		—			—		(1,273		)	—			(1,273		)
Repurchase of stock	(0.8	)	—			—		(46		)	—			(46		)
Stock options and awards	8.1		—			429		—			—			429
January 31, 2015	640.2		$	53		$	4,899	$	9,644		$	(599	)	$	13,997
(unaudited)
Net earnings	—		—			—		1,388			—			1,388
Other comprehensive income	—		—			—		—			118			118
Dividends declared	—		—			—		(691		)	—			(691		)
Repurchase of stock	(15.2	)	(1		)	—		(1,242		)	—			(1,243		)
Stock options and awards	5.4		1			372		—			—			373
August 1, 2015	630.4		$	53		$	5,271	$	9,099		$	(481	)	$	13,942

We declared $1.08 and $0.95 per share dividends for the six months ended August 1, 2015 and August 2, 2014, respectively, and $1.99 for the fiscal year ended January 31, 2015.

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These financial statements should be read in conjunction with the financial statement disclosures in our 2014 Form 10-K. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Certain prior-year amounts have been reclassified to conform to the current year presentation. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings and cash flows are not necessarily indicative of the results that may be expected for the full year.

2. Pharmacies and Clinics Transaction

On June 12, 2015, we entered into an asset purchase agreement with CVS Pharmacy, Inc. (CVS) to sell our pharmacy and clinic businesses for cash consideration of approximately $1.9 billion. The closing of the transaction is subject to regulatory approval and other customary conditions. Either party will be permitted to terminate the agreement if the closing has not occurred on or before March 15, 2016 (or September 15, 2016 solely in the event that, as of March 15, 2016, all conditions other than regulatory approval have been satisfied or waived). Following the closing, CVS will operate the pharmacy and clinic businesses in our stores on a long term basis.

The agreement includes the sale of inventory and other assets. These currently held for sale assets have been classified as follows.



(millions)	August 1, 2015		January 31, 2015		August 2, 2014
Inventory included in other current assets	$	464	$	500	$	479
Other current assets	13		—		—
Other noncurrent assets	—		13		12
Total	$	477	$	513	$	491

3. Canada Exit

Background

On January 15, 2015, Target Canada Co. and certain other wholly owned subsidiaries of Target (collectively Canada Subsidiaries), comprising substantially all of our Canadian operations and our historical Canadian Segment, filed for protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto (the Court) and were deconsolidated. The Canada Subsidiaries are executing a liquidation process. As of May 2, 2015, all stores were closed.



Loss on Discontinued Operations	Three Months Ended						Six Months Ended
(millions)	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Sales	$	—		$	449		$	—		$	842
Cost of sales	—			367			—			686
SG&A expenses	—			216			—			434
Depreciation and amortization	—			70			—			137
Interest expense	—			19			—			38
Pretax loss from operations	—			(223		)	—			(453		)
Pretax exit costs ^(a)	(80		)	—			(113		)	—
Income taxes	60			66			77			144
Loss on discontinued operations	$	(20	)	$	(157	)	$	(36	)	$	(309	)

^(a) For the three and six months ended August 1, 2015, the pretax exit costs related to our ongoing support of the liquidation process, other professional fees, and an increase to our accrual for the estimated probable losses related to claims that may be asserted against us, primarily under guarantees of certain leases.

Recorded Assets and Liabilities



Assets and Liabilities of Discontinued Operations
(millions)	August 1, 2015		January 31, 2015			August 2, 2014
Income tax benefit	$	234	$	1,430	Inventory	$	510
Receivables from Canada Subsidiaries	319		326		Property and equipment, net	5,056
Receivables under the debtor-in-possession credit facility	—		19		Other	832
Total assets	$	553	$	1,775	Total assets	$	6,398
					Capital lease obligations	$	1,240
Accrued liabilities	$	336	$	296	Accounts payable and other liabilities	505
Total liabilities	$	336	$	296	Total liabilities	$	1,745

Accrued liabilities include estimated probable losses related to claims that may be asserted against us, primarily under guarantees of certain leases. The beneficiaries of those guarantees may seek damages or other related relief as a result of our exit from Canada. Our probable loss estimate is based on the expectation that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable we would be found liable were these claims to be litigated. Our estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims and estimated payments by the Canada Subsidiaries. We are not able to reasonably estimate a range of possible losses in excess of the accrual because there are significant factual and legal issues to be resolved. We believe that it is reasonably possible that future changes to our estimates of loss and the ultimate amount paid on these claims could be material to our results of operations in future periods. Any such losses would be reported in discontinued operations.

Receivables from the Canada Subsidiaries primarily relate to loans made to fund the operations of the Canada Subsidiaries and receivables generated in the ordinary course of business prior to deconsolidation. To assess recoverability, we estimated the fair value of the underlying net assets of the Canada Subsidiaries available for distribution to their creditors in relation to the estimated creditor claims and the priority of these claims. Our estimates involve significant judgment and are based on currently available

information, an assessment of the validity of certain claims and estimated payments by the Canada Subsidiaries. Our ultimate recovery is subject to the final liquidation value of the Canada Subsidiaries.

Income Taxes

During the second quarter of 2015, we recognized a net tax benefit of $60 million in discontinued operations, which primarily relates to our second quarter pretax exit costs and adjustments to the tax benefit from our investment loss in Canada. During the fourth quarter of 2014, we recognized a tax benefit of $1,627 million in discontinued operations. The majority of the tax benefit was received in the first quarter of 2015, and we expect to use substantially all of the remainder to reduce our 2015 estimated tax payments.

4. Restructuring Initiatives

During the six months ended August 1, 2015, we initiated a series of headquarters workforce reductions intended to increase organizational effectiveness and provide cost savings that can be reinvested in our growth initiatives. As a result, we recorded $11 million and $114 million of severance and other benefits-related charges within selling, general and administrative expenses (SG&A) during the three and six months ended August 1, 2015, respectively. The vast majority of these expenses will require cash expenditures. These costs were not included in our segment results.



Restructuring Costs	August 1, 2015
(millions)	Three Months Ended		Six Months Ended
Severance	$	9	$	108
Pension and other	2		6
Total	$	11	$	114

Accruals for restructuring costs are included in other current liabilities.



Restructuring-Related Liabilities (millions)	Severance			Pension and Other			Total
Restructuring liability as of January 31, 2015	$	—		$	—		$	—
Charges during period	108			6			114
Paid or otherwise settled	(94		)	(6		)	(100		)
Restructuring liability as of August 1, 2015	$	14		$	—		$	14

5. Fair Value Measurements

Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).



Fair Value Measurements - Recurring Basis		Fair Value at
(millions)	Pricing Category	August 1, 2015		January 31, 2015		August 2, 2014
Assets
Cash and cash equivalents
Short-term investments	Level 1	$	1,985	$	1,520	$	3
Other current assets
Interest rate swaps^(a)	Level 2	25		—		—
Prepaid forward contracts	Level 1	36		38		40
Beneficial interest asset	Level 3	29		43		56
Other noncurrent assets
Interest rate swaps^(a)	Level 2	16		65		51
Company-owned life insurance investments^(b)	Level 2	331		322		314
Beneficial interest asset	Level 3	19		31		41
Liabilities
Other current liabilities
Interest rate swaps^(a)	Level 2	16		—		—
Other noncurrent liabilities
Interest rate swaps^(a)	Level 2	—		24		31

^(a) See Note 9 for additional information on interest rate swaps.

^(b) Company-owned life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of nonrecourse loans that are secured by some of these policies. These loan amounts totaled $783 million at August 1, 2015, $773 million at January 31, 2015 and $806 million at August 2, 2014.



Significant Financial Instruments not Measured at Fair Value ^(a) (millions)	August 1, 2015				January 31, 2015				August 2, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Debt ^(b)	$	11,921	$	13,365	$	11,946	$	14,089	$	12,135	$	13,553

^(a) The carrying amounts of certain other current assets, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.

^(b)The carrying amount and estimated fair value of debt exclude unamortized swap valuation adjustments and capital lease obligations.

6. Notes Payable and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program, a form of notes payable.



Commercial Paper	Three Months Ended						Six Months Ended
(dollars in millions)	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Maximum daily amount outstanding during the period	$	—		$	500		$	—		$	590
Average daily amount outstanding during the period	—			148			—			214
Amount outstanding at period-end	—			189			—			189
Weighted average interest rate	—		%	0.11		%	—		%	0.10		%

7. Property and Equipment

We review long-lived assets for impairment when events or changes in circumstances, such as a decision to relocate or close a store, make significant software changes or discontinue projects, indicate that the asset’s carrying value may not be recoverable. We recognized impairment losses during each of the periods presented, primarily resulting from discontinued projects, store closures, and completed or planned land sales.



Impairments ^(a)	Three Months Ended				Six Months Ended
(millions)	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Total segment impairments	$	33	$	46	$	40	$	59
Unallocated impairments ^(b)	—		16		—		16
Total impairments	$	33	$	62	$	40	$	75

^(a) Substantially all of the impairments are recorded in selling, general and administrative expense on the Consolidated Statements of Operations.

^(b) Represents impairments of undeveloped land.

8. Data Breach

In the fourth quarter of 2013, we experienced a data breach in which an intruder stole certain payment card and other guest information from our network (the Data Breach). Based on our investigation, we believe that the intruder installed malware on our point-of-sale system in our U.S. stores and stole payment card data from up to approximately 40 million credit and debit card accounts of guests who shopped at our U.S. stores between November 27 and December 17, 2013. In addition, the intruder stole certain guest information, including names, mailing addresses, phone numbers or email addresses, for up to 70 million individuals.

Data Breach Related Accruals

Each of the four major payment card networks has made a written claim against us regarding the Data Breach, either directly or through our acquiring banks. In August 2015, we entered into a settlement agreement with Visa under which we will pay up to $67 million to eligible Visa card issuers worldwide that issued cards that Visa claimed to have been affected by the Data Breach. Our previously recorded accrual for estimated probable losses related to Visa is consistent with the settlement. We expect to dispute the remaining unsettled claims regarding the Data Breach that have been or may be made against us by the payment card networks. With respect to the three major payment card networks other than Visa, we think it is probable that our disputes would lead to settlement negotiations. We believe such negotiations would effect a combined settlement of the payment card networks' counterfeit fraud loss allegations and their non-ordinary course operating expense allegations.

In addition, more than 100 actions were filed in courts in many states on behalf of guests, payment card issuing banks, and shareholders, seeking damages or other related relief allegedly arising out of the Data Breach. The federal court actions (the MDL Actions) have been consolidated in the U.S. District Court for the District of Minnesota (MDL Court) pursuant to the rules governing multidistrict litigation and one remaining state court action has been stayed. In March 2015, Target entered into a Settlement Agreement that, upon approval of the MDL Court, will resolve and dismiss the claims asserted in the MDL Actions on behalf of a class of guests whose information was compromised in the Data Breach. Pursuant to the Settlement Agreement, Target has agreed to pay $10 million to class member guests, certain administrative costs associated with the settlement, and attorneys’ fees and expenses to class counsel as the Court may award. The claims asserted by payment card issuing banks and shareholders in the MDL Actions remain pending. One action was filed in Canada relating to the Data Breach. That action was dismissed, but is being appealed. State and federal agencies, including State Attorneys General, and the Federal Trade Commission are investigating events related to the Data Breach, including how it occurred, its consequences and our responses. The SEC's Enforcement Division concluded its investigation during the second quarter of 2015 and does not intend to recommend an enforcement action against us.

Our accrual for estimated probable losses for what we believe to be the vast majority of actual and potential Data Breach related claims is based on the expectation of reaching negotiated settlements, and not on any determination that it is probable we would be found liable for the losses we have accrued were these claims to be litigated. Given the varying stages of claims and related proceedings, and the inherent uncertainty surrounding them, our estimates involve significant judgment and are based on currently available information, historical precedents and an assessment of the validity of certain claims. Our estimates may change as new information becomes available, and although we do not believe it is probable, it is reasonably possible that we may incur a material loss in excess of the amount accrued. We are not able to estimate the amount of such reasonably possible excess loss exposure at

this time because many of the matters are in the early stages, alleged damages have not been specified, and there are significant factual and legal issues to be resolved.

Expenses Incurred and Amounts Accrued



Data Breach Balance Sheet Rollforward (millions)	Liabilities			Insurance Receivable
Balance at February 1, 2014	$	61		$	44
Expenses incurred/insurance receivable recorded ^(a)	175			46
Payments made/received	(54		)	(20		)
Balance at August 2, 2014	$	182		$	70



Balance at January 31, 2015	$	171		$	60
Expenses incurred/insurance receivable recorded ^(a)	12			—
Payments made/received	(15		)	(5		)
Balance at August 1, 2015	$	168		$	55

^(a)Includes expenditures and accruals for Data Breach-related costs and expected insurance recoveries as discussed below.

We recorded $9 million and $12 million of pretax Data Breach-related expenses during the three and six months ended August 1, 2015, respectively, primarily for legal and other professional services. We recorded $148 million and $175 million of pretax Data Breach-related expenses during the three and six months ended August 2, 2014, respectively, partially offset by expected insurance recoveries of $38 million and $46 million, respectively. Along with legal and other professional services, these expenses included an increase to the accrual for estimated probable losses for what we believe to be the vast majority of actual and potential breach-related claims, including claims by the payment card networks. These expenses were included in our Consolidated Statements of Operations as SG&A, but were not part of our segment results.

Since the Data Breach, we have incurred $264 million of cumulative expenses, partially offset by expected insurance recoveries of $90 million, for net cumulative expenses of $174 million.

Insurance Coverage

To limit our exposure to losses relating to Data Breach and other claims, we maintained $100 million of network-security insurance coverage during the period that the Data Breach occurred, above a $10 million deductible and with a $50 million sublimit for settlements with the payment card networks. This coverage, and certain other customary business-insurance coverage, has reduced our exposure related to the Data Breach. We will pursue recoveries to the maximum extent available under the policies. Since the Data Breach, we have received $35 million from our network-security insurance carriers of the $90 million accrued.

9. Derivative Financial Instruments

Our derivative instruments primarily consist of interest rate swaps, which are used to mitigate interest rate risk. As a result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis. See Note 5 for a description of the fair value measurement of our derivative instruments and their classification on the Consolidated Statements of Financial Position.

As of August 1, 2015 and August 2, 2014, three interest rate swaps with notional amounts totaling $1,250 million were designated as fair value hedges. No ineffectiveness was recognized during the three and six months ended August 1, 2015 or August 2, 2014.

Periodic payments, valuation adjustments and amortization of gains or losses on our derivative contracts had the following effect on our Consolidated Statements of Operations:



Derivative Contracts - Effect on Results of Operations (millions)		Three Months Ended						Six Months Ended
Type of Contract	Classification of (Income)/Expense	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Interest rate swaps	Net interest expense	$	(9	)	$	(9	)	$	(18	)	$	(13	)

The amount remaining on unamortized hedged debt valuation gains from terminated or de-designated interest rate swaps that will be amortized into earnings over the remaining lives of the underlying debt totaled $25 million, $34 million and $43 million, at August 1, 2015, January 31, 2015 and August 2, 2014, respectively.

10. Share Repurchase

In June 2015, our Board of Directors authorized a $5 billion expansion of our existing share repurchase program to $10 billion. Under this program, through August 1, 2015, we have repurchased 65.1 million cumulative shares of common stock at an average price of $67.19, for a total investment of $4.4 billion.

In June 2015, we entered into an accelerated share repurchase agreement (ASR) to repurchase $250 to $350 million of our common stock under the existing share repurchase program. In July 2015, the contract was settled and we repurchased a total of 3.8 million shares under the ASR for a total cash investment of $314 million ($82.67 per share).

In April 2015, we entered into an ASR to repurchase $200 to $300 million of our common stock under the existing share repurchase program. In May 2015, the contract was settled and we repurchased a total of 3.3 million shares under the ASR for a total cash investment of $265 million ($80.74 per share).

Neither ASR was accounted for as a derivative instrument.



Share Repurchases	Six Months Ended
(millions, except per share data)	August 1, 2015 ^(a)		August 2, 2014 ^(b)
Total number of shares purchased	15.2		0.6
Average price paid per share	$	81.41	$	55.36
Total investment	$	1,240	$	34

^(a) Includes 0.1 million shares delivered upon the noncash settlement of prepaid contracts which had an original cash investment of $3 million and an aggregate market value at their settlement dates of $7 million. These contracts are among the investment vehicles used to reduce our economic exposure related to our nonqualified deferred compensation plans. Note 11 provides the details of our positions in prepaid forward contracts.

^(b) All of the shares reacquired were delivered upon the noncash settlement of prepaid forward contracts which had an original cash investment of $34 million and an aggregate market value at their settlement dates of $35 million.

11. Pension, Postretirement Health Care and Other Benefits

Pension and Postretirement Health Care Benefits

We provide qualified defined benefit pension plans, unfunded nonqualified pension plans and certain postretirement health care benefits to eligible team members.



Net Pension and Postretirement Health Care Benefits Expense	Pension Benefits												Postretirement Health Care Benefits
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
(millions)	Aug 1, 2015			Aug 2, 2014			Aug 1, 2015			Aug 2, 2014			Aug 1, 2015			Aug 2, 2014			Aug 1, 2015			Aug 2, 2014
Service cost	$	27		$	28		$	55		$	56		$	1		$	1		$	2		$	2
Interest cost	39			37			77			75			1			—			1			1
Expected return on assets	(65		)	(59		)	(130		)	(117		)	—			—			—			—
Amortization of losses	19			17			42			33			1			2			2			3
Amortization of prior service cost	(3		)	(3		)	(6		)	(6		)	(5		)	(4		)	(9		)	(8		)
Settlement charges	—			—			2			—			—			—			—			—
Total	$	17		$	20		$	40		$	41		$	(2	)	$	(1	)	$	(4	)	$	(2	)

As a result of the restructuring initiatives discussed in Note 4, we remeasured the assets and liabilities of our largest pension plan as of March 9, 2015. The remeasurement resulted in a $208 million reduction to the projected benefit obligation, primarily resulting from a 41 basis point increase in the discount rate used, and a $47 million reduction of plan assets. Subsequent to the remeasurement, the pension plan was overfunded, with plan assets of $3,725 million exceeding the projected benefit obligation of $3,604 million. We expect this remeasurement will reduce 2015 pension expense by $26 million, $8 million and $11 million of which was recognized during the three and six months ended August 1, 2015, respectively.

Other Benefits

We offer unfunded nonqualified deferred compensation plans to certain team members. We mitigate some of our risk of these plans through investing in vehicles, including company-owned life insurance and prepaid forward contracts in our own common stock, that offset a substantial portion of our economic exposure to the returns of these plans. These investment vehicles are general corporate assets and are marked to market with the related gains and losses recognized in the Consolidated Statements of Operations in the period they occur.

The total change in fair value for contracts indexed to our own common stock recognized in earnings was pretax income of $1 million and $4 million for the three and six months ended August 1, 2015, respectively, and pretax losses of $5 million and pretax income of $2 million for the three and six months ended August 2, 2014, respectively. During the six months ended August 1, 2015 and August 2, 2014, we made no investments in prepaid forward contracts in our own common stock. Adjusting our position in these investment vehicles may involve repurchasing shares of Target common stock when settling the forward contracts as described in Note 10. The settlement dates of these instruments are regularly renegotiated with the counterparty.



Prepaid Forward Contracts on Target Common Stock (millions, except per share data)	Number of Shares	Contractual Price Paid per Share		Contractual Fair Value		Total Cash Investment
August 1, 2015	0.4	$	41.13	$	36	$	18
January 31, 2015	0.5	$	41.11	$	38	$	21
August 2, 2014	0.7	$	42.88	$	40	$	29

12. Accumulated Other Comprehensive Income



(millions)	Cash Flow Hedges				Currency Translation Adjustment			Pension and Other Benefits				Total
January 31, 2015	$	(22	)		$	(16	)	$	(561	)		$	(599	)
Other comprehensive income before reclassifications	—				(1		)	99				98
Amounts reclassified from AOCI	2			^(a)	—			18			^(b)	20
August 1, 2015	$	(20	)		$	(17	)	$	(444	)		$	(481	)

^(a) Represents gains and losses on cash flow hedges, net of $1 million of taxes.

^(b) Represents amortization of pension and other benefit liabilities, net of $12 million of taxes.

13. Segment Reporting

Our segment measure of profit is used by management to evaluate performance and make operating decisions. We operate as a single segment that includes all of our continuing operations, which are designed to enable guests to purchase products seamlessly in stores, online or through mobile devices.



Business Segment Results	Three Months Ended						Six Months Ended
(millions)	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Sales	$	17,427		$	16,957		$	34,546		$	33,614
Cost of sales	12,051			11,798			23,962			23,546
Gross margin	5,376			5,159			10,584			10,068
Selling, general and administrative expenses ^(a)(e)	3,475			3,473			6,883			6,817
Depreciation and amortization	551			537			1,090			1,049
Segment profit	$	1,350		$	1,149		$	2,611		$	2,202
Restructuring costs ^(b)(e)	(11		)	—			(114		)	—
Data Breach related costs^(c)(e)	(9		)	(111		)	(12		)	(129		)
Impairments ^(e)	—			(16		)	—			(16		)
Card brand conversion costs ^(d)(e)	—			—			—			(13		)
Earnings from continuing operations before interest expense and income taxes	1,330			1,023			2,485			2,045
Net interest expense	148			433			305			585
Earnings from continuing operations before income taxes	$	1,182		$	590		$	2,180		$	1,460

Note: Amounts may not foot due to rounding.

^(a) Beginning with the first quarter of 2015, segment EBIT includes the impact of the reduction of the the beneficial interest asset. For comparison purposes, prior year segment EBIT has been revised.

^(b) Refer to Note 4 for more information on restructuring costs.

^(c) Refer to Note 8 for more information on Data Breach related costs.

^(d) Expense related to converting co-branded card program to MasterCard.

^(e) The sum of segment SG&A expenses, restructuring costs, Data Breach related costs, impairments and card brand conversion costs equal consolidated SG&A expenses.



Reconciliation of Segment Assets to Total Assets (millions)	August 1, 2015		January 31, 2015		August 2, 2014
Segment assets	$	39,778	$	39,569	$	37,987
Assets of discontinued operations	553		1,775		6,398
Unallocated assets ^(a)	55		60		70
Total assets	$	40,386	$	41,404	$	44,455

^(a) Represents the insurance receivable related to the Data Breach.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Second quarter 2015 includes the following notable items:


•	GAAP earnings per share were $1.18, including dilution of $(0.03) related to discontinued operations.


•	Adjusted earnings per share from continuing operations were $1.22.


•	Second quarter comparable sales grew 2.4 percent, driven primarily by growth in comparable transactions.


•	Digital channel sales increased by 30 percent, contributing 0.6 percentage points to comparable sales growth.


•	We returned $1.0 billion to shareholders in the second quarter through dividends and share repurchase.

Sales were $17,427 million for the three months ended August 1, 2015, an increase of $470 million or 2.8 percent from the same period in the prior year. Operating cash flow provided by continuing operations was $1,966 million and $1,935 million for the six months ended August 1, 2015 and August 2, 2014, respectively.



Earnings Per Share from Continuing Operations	Three Months Ended						Six Months Ended
Earnings Per Share from Continuing Operations	August 1, 2015		August 2, 2014		Change		August 1, 2015		August 2, 2014		Change
GAAP diluted earnings per share	$	1.21	$	0.61	96.8	%	$	2.21	$	1.51	46.7	%
Adjustments	0.01		0.40				0.11		0.43
Adjusted diluted earnings per share	$	1.22	$	1.01	20.6	%	$	2.32	$	1.93	20.1	%

Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share from continuing operations (Adjusted EPS), a non-GAAP metric, excludes the impact of certain matters not related to our routine retail operations and the impact of our discontinued Canadian operations. Management believes that Adjusted EPS is meaningful to provide period-to-period comparisons of our operating results. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 21.

We are reporting after-tax return on invested capital (ROIC) for continuing operations as we believe ROIC provides a meaningful measure of the effectiveness of our capital allocation over time. For the trailing twelve months ended August 1, 2015, ROIC was 13.3 percent, compared with 11.3 percent for the trailing twelve months ended August 2, 2014. A reconciliation of ROIC is provided on page 22.

Pharmacies and Clinics Transaction

On June 12, 2015 we entered into an asset purchase agreement with CVS Pharmacy, Inc. (CVS) to sell our pharmacy and clinic businesses for cash consideration of approximately $1.9 billion. The closing of the transaction is subject to regulatory approval and other customary conditions. Either party will be permitted to terminate the agreement if the closing has not occurred on or before March 15, 2016 (or September 15, 2016 solely in the event that, as of March 15, 2016, all conditions other than regulatory approval have been satisfied or waived). Following the closing, CVS will operate the pharmacy and clinic businesses in our stores under a long term operating agreement. No profit-sharing arrangement exists, but CVS will make an ongoing annual, inflation-adjusted occupancy-related payment to us, starting at approximately $20 million to $25 million in the first year of the agreement. We also entered a development agreement with CVS through which we may jointly develop small-format stores.

Based on current estimates, we expect to record a pretax gain of approximately $550 million at closing, which will be recorded outside of segment results and excluded from Adjusted EPS. Also, at closing, we expect to record deferred income of approximately $800 million, which we will record in income evenly over 23 years following closing.

We expect to use the $1.4 billion of after-tax proceeds to settle the approximately $200 million of retained pharmacy and clinic net liabilities (primarily accounts payable, net of accounts receivable) and return capital to shareholders.

Had this transaction closed prior to this year, our reported sales, cost of goods sold, and SG&A expense for the six months ended August 1, 2015 would have been lower by approximately $2.1 billion, $1.7 billion and $0.4 billion, respectively, with no notable affect on EBITDA and EBIT.

This transaction is expected to be accretive to EPS in every period following the Closing, and should add 50 basis points or more to ROIC over time. In addition, due to the lower sales base, we expect the transaction to have a favorable impact on our EBITDA and EBIT margin rates.

Refer to Note 2 of the Financial Statements for additional information about the transaction.

Analysis of Results of Operations

Segment Results



	Three Months Ended						Six Months Ended
(dollars in millions)	August 1, 2015		August 2, 2014		Percent Change		August 1, 2015		August 2, 2014		Percent Change
Sales	$	17,427	$	16,957	2.8	%	$	34,546	$	33,614	2.8	%
Cost of sales	12,051		11,798		2.1		23,962		23,546		1.8
Gross margin	5,376		5,159		4.2		10,584		10,068		5.1
SG&A expenses ^(a)	3,475		3,473		0.1		6,883		6,817		1.0
EBITDA	1,901		1,686		12.7		3,701		3,251		13.8
Depreciation and amortization	551		537		2.5		1,090		1,049		4.0
EBIT	$	1,350	$	1,149	17.5	%	$	2,611	$	2,202	18.5	%

Note: We operate as a single segment which includes all of our continuing operations, excluding net interest expense, Data Breach related costs and certain other expenses that are discretely managed. Our segment operations are designed to enable guests to purchase products seamlessly in stores, online or through mobile devices. Beginning with the first quarter of 2015, segment EBIT includes the impact of the reduction of the beneficial interest asset. For comparison purposes, prior year segment EBIT has been revised. See Note 13 of our Financial Statements for a reconciliation of our segment results to earnings before income taxes.

^(a) SG&A includes $159 million and $311 million of net profit-sharing income under our credit card program agreement for the three and six months ended August 1, 2015, respectively, and $156 million and $305 million for the three and six months ended August 2, 2014, respectively.



Rate Analysis	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Gross margin rate	30.9	%	30.4	%	30.6	%	30.0	%
SG&A expense rate	19.9		20.5		19.9		20.3
EBITDA margin rate	10.9		9.9		10.7		9.7
Depreciation and amortization expense rate	3.2		3.2		3.2		3.1
EBIT margin rate	7.7		6.8		7.6		6.6

Note: Rate analysis metrics are computed by dividing the applicable amount by sales.

Sales

Sales include merchandise sales, net of expected returns, from our stores and digital channels, and gift card breakage. Digital channel sales include all sales initiated through mobile applications and our conventional websites, including those of acquired entities from the date of acquisition. Digital channel sales may be fulfilled through our distribution centers or our stores.



Sales by Channel	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Stores	97.3	%	97.8	%	97.2	%	97.9	%
Digital	2.7		2.2		2.8		2.1
Total	100	%	100	%	100	%	100	%



Sales by Product Category	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Household essentials	28	%	28	%	28	%	28	%
Hardlines	14		15		14		15
Apparel and accessories	21		20		20		20
Food and pet supplies	20		20		21		21
Home furnishings and décor	17		17		17		16
Total	100	%	100	%	100	%	100	%

Comparable sales is a measure that highlights the performance of our existing stores and digital channel sales by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies.



Comparable Sales	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Comparable sales change	2.4	%	—	%	2.4	%	(0.2	)%
Drivers of change in comparable sales
Number of transactions	1.6		(1.3	)	1.3		(1.8	)
Average transaction amount	0.8		1.3		1.1		1.7
Selling price per unit	3.8		3.0		4.5		2.4
Units per transaction	(2.9	)	(1.7	)	(3.2	)	(0.7	)

Note: Amounts may not foot due to rounding.



Contribution to Comparable Sales Change	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Stores channel comparable sales change	1.8	%	(0.6	)%	1.7	%	(0.7	)%
Digital channel contribution to comparable sales change	0.6		0.6		0.7		0.5
Total comparable sales change	2.4	%	—	%	2.4	%	(0.2	)%

Note: Amounts may not foot due to rounding.

The collective interaction of a broad array of macroeconomic, competitive and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.

We monitor the percentage of sales that are paid for using REDcards (REDcard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on REDcards are also incremental sales for Target, with the remainder representing a shift in tender type. Guests receive a 5 percent discount on virtually all purchases when they use a REDcard at Target.



REDcard Penetration	Three Months Ended				Six Months Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Target Debit Card	12.0	%	11.1	%	12.0	%	11.2	%
Target Credit Cards	10.1		9.7		9.8		9.4
Total REDcard Penetration	22.1	%	20.8	%	21.8	%	20.6	%

Note: Amounts may not foot due to rounding.

Gross Margin Rate

For the three and six months ended August 1, 2015, our gross margin rate was 30.9 percent and 30.6 percent compared with 30.4 percent and 30.0 percent in the comparable period last year. The increase was primarily due to lower promotional activity relative to the highly promotional period in 2014 following the Data Breach and favorable category sales mix, partially offset by the impact of increased digital channel sales mix.

Selling, General and Administrative Expense Rate

For the three and six months ended August 1, 2015, our SG&A expense rate was 19.9 percent, decreasing from 20.5 percent and 20.3 percent in the comparable period last year. The decrease primarily resulted from cost saving initiatives and marketing expense timing, partially offset by increased incentive compensation.

Store Data



Change in Number of Stores	Three Months Ended		Six Months Ended
	August 1, 2015	August 2, 2014	August 1, 2015	August 2, 2014
Beginning store count	1,795	1,789	1,790	1,793
Opened	4	6	9	10
Closed	—	—	—	(8	)
Ending store count	1,799	1,795	1,799	1,795
Number of stores remodeled during the period	1	13	1	26



Number of Stores and Retail Square Feet	Number of Stores			Retail Square Feet^(a)
Number of Stores and Retail Square Feet	August 1, 2015	January 31, 2015	August 2, 2014	August 1, 2015	January 31, 2015	August 2, 2014
Expanded food assortment stores	1,297	1,292	1,278	167,659	167,026	165,198
SuperTarget stores	249	249	249	44,151	44,151	44,152
General merchandise stores	239	240	259	27,847	27,945	30,121
CityTarget stores	9	8	8	987	820	820
TargetExpress stores	5	1	1	92	21	21
Total	1,799	1,790	1,795	240,736	239,963	240,312

^(a) In thousands; reflects total square feet, less office, distribution center and vacant space.

Other Performance Factors

Consolidated Selling, General and Administrative Expenses

In addition to segment selling, general and administrative expenses, we recorded certain other expenses. For the three and six months ended August 1, 2015, these expenses included $11 million and $114 million, respectively, of restructuring costs and $9 million and $12 million, respectively, of Data Breach-related costs. For the three and six months ended August 2, 2014, these expenses included $111 million and $129 million, respectively, of Data Breach-related costs (net of expected insurance proceeds), $16 million of impairments, and $13 million of costs related to plans to convert existing co-branded REDcards to MasterCard co-

branded chip-and-PIN cards in 2015 to support the accelerated transition to chip-and-PIN-enabled REDcards. Additional information about these items is provided within the Reconciliation of Non-GAAP Financial Measures to GAAP Measures on page 21.

Net Interest Expense

Net interest expense from continuing operations was $148 million and $305 million for the three and six months ended August 1, 2015, respectively, compared to $433 million and $585 million for the three and six months ended August 2, 2014, respectively. Net interest expense for the three and six months ended August 2, 2014 included a loss on early retirement of debt of $285 million.

Provision for Income Taxes

Our effective income tax rate from continuing operations for the three and six months ended August 1, 2015 was 34.6 percent and 34.7 percent, respectively, compared with 33.7 percent and 34.1 percent for the three and six months ended August 2, 2014. The increase was primarily due to higher pretax earnings net of the favorable resolution of various tax matters. The higher pretax earnings increased our effective income tax rate by diluting the rate impact of recurring tax deductions. The resolution of income tax matters reduced tax expense by $5 million and $8 million for the three and six months ended August 1, 2015, respectively, compared with $0 million and $1 million for the same periods in the prior year.

Discontinued Operations

Loss from discontinued operations, net of tax, was $20 million and $36 million for the three and six months ended August 1, 2015. In addition to costs related to our ongoing support of the liquidation process and other professional fees, we increased our accrual for the estimated probable losses related to claims that may be asserted against us, primarily under guarantees of certain leases, and made adjustments to the tax benefit from our investment loss in Canada. See Note 3 of the Financial Statements for information regarding our Canada exit.

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes restructuring costs, net expenses related to the 2013 data breach and other matters presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the measure for comparisons with other companies. Prior year amounts have been revised to present Adjusted EPS on a continuing operations basis.



Adjusted EPS	Three Months Ended
	August 1, 2015								August 2, 2014
(millions, except per share data)	Pretax		Net of Tax			Per Share Amounts			Pretax		Net of Tax		Per Share Amounts
GAAP diluted earnings per share from continuing operations						$	1.21						$	0.61
Adjustments
Restructuring costs ^(a)	$	11	$	8		$	0.01		$	—	$	—	$	—
Data Breach-related costs ^(b)	9		5			0.01			111		71		0.11
Loss on early retirement of debt	—		—			—			285		174		0.27
Impairments ^(c)	—		—			—			16		9		0.01
Resolution of income tax matters	—		(5		)	(0.01		)	—		—		—
Adjusted diluted earnings per share from continuing operations						$	1.22						$	1.01



	Six Months Ended
	August 1, 2015								August 2, 2014
(millions, except per share data)	Pretax		Net of Tax			Per Share Amounts			Pretax		Net of Tax			Per Share Amounts
GAAP diluted earnings per share from continuing operations						$	2.21							$	1.51
Adjustments
Restructuring costs ^(a)	$	114	$	72		$	0.11		$	—	$	—		$	—
Data Breach-related costs ^(b)	12		7			0.01			129		83			0.13
Loss on early retirement of debt	—		—			—			285		174			0.27
Impairments ^(c)	—		—			—			16		9			0.01
Card brand conversion costs ^(d)	—		—			—			13		8			0.01
Resolution of income tax matters	—		(8		)	(0.01		)	—		(1		)	—
Adjusted diluted earnings per share from continuing operations						$	2.32							$	1.93

Note: Amounts may not foot due to rounding. Beginning with the first quarter 2015, we no longer exclude the reduction of the beneficial interest asset from Adjusted EPS because it is no longer meaningful. For comparison purposes, prior year Adjusted EPS has been revised.

^(a) Refer to Note 4 in the Financial Statements for more information on restructuring costs.

^(b) Refer to Note 8 in the Financial Statements for more information on Data Breach-related costs.

^(c) Refer to Note 7 in the Financial Statements for more information on impairments.

^(d) Expense related to converting the co-branded card program to MasterCard.

We have also disclosed after-tax return on invested capital for continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between us and our competitors. We believe this metric provides a meaningful measure of the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently than we do, limiting the usefulness of the measure for comparisons with other companies.



After-Tax Return on Invested Capital

Numerator	Trailing Twelve Months
(dollars in millions)	August 1, 2015		August 2, 2014
Earnings from continuing operations before interest expense and income taxes	$	4,974	$	4,301
+ Operating lease interest ^(a)(b)	90		94
Adjusted earnings from continuing operations before interest expense and income taxes	5,064		4,395
- Income taxes ^(c)	1,694		1,492
Net operating profit after taxes	$	3,370	$	2,903



Denominator (dollars in millions)	August 1, 2015		August 2, 2014		August 2, 2013
Current portion of long-term debt and other borrowings	$	841	$	294	$	1,828
+ Noncurrent portion of long-term debt	11,883		12,625		11,386
+ Shareholders' equity	13,942		16,433		16,020
+ Capitalized operating lease obligations ^(b)(d)	1,497		1,573		1,631
- Cash and cash equivalents	2,742		766		810
- Net assets of discontinued operations	217		4,653		4,165
Invested capital	$	25,204	$	25,506	$	25,890
Average invested capital ^(e)	$	25,356	$	25,698



After-tax return on invested capital	13.3	%	11.3	%

^(a) Represents the add-back to operating income driven by the hypothetical capitalization of our operating leases, using eight times our trailing twelve months rent expense and an estimated interest rate of six percent.

^(b) See the following Reconciliation of Capitalized Operating Leases table for the adjustments to our GAAP total rent expense to obtain the hypothetical capitalization of operating leases and related operating lease interest.

^(c) Calculated using the effective tax rate for continuing operations, which was 33.4% and 33.9% for the trailing twelve months ended August 1, 2015 and August 2, 2014.

^(d) Calculated as eight times our trailing twelve months rent expense.

^(e) Average based on the invested capital at the end of the current period and the invested capital at the end of the prior period.

Capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is total rent expense. Capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP.



Reconciliation of Capitalized Operating Leases	Trailing Twelve Months
(dollars in millions)	August 1, 2015		August 2, 2014		August 3, 2013
Total rent expense	$	187	$	197	$	204
Capitalized operating lease obligations (Total rent expense x 8)	1,497		1,573		1,631
Operating lease interest (Capitalized operating lease obligations x 6%)	90		94		n/a

Analysis of Financial Condition

Liquidity and Capital Resources

Our cash and cash equivalents balance was $2,742 million at August 1, 2015 compared with $766 million for the same period in 2014. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place certain dollar limits on our investments in individual funds or instruments.

Cash Flows

Operations during the first six months of 2015 were funded by internally generated funds. Operating cash flow provided by continuing operations was $1,966 million for the six months ended August 1, 2015 compared with $1,935 million for the same period in 2014. These cash flows, combined with our prior year-end cash position, allowed us to invest in the business, pay dividends and repurchase shares under our share repurchase program.

Share Repurchases

During the three months ended August 1, 2015, we repurchased 8.2 million shares of our common stock for a total investment of $675 million ($81.94 per share), excluding the ASR initiated and prepaid in first quarter 2015 that settled in May (described in Note 10). During the six months ended August 1, 2015, we repurchased 15.2 million shares of our common stock for a total investment of $1,240 million ($81.41 per share). We did not repurchase any shares on the open market during the six months ended August 2, 2014. However, we reacquired 0.6 million shares during the three and six months ended August 2, 2014 upon the noncash settlement of prepaid forward contracts related to nonqualified deferred compensation plans that had an original cash investment of $34 million and an aggregate market value at their settlement dates of $34.7 million.

Dividends

We paid dividends totaling $331 million ($0.52 per share) and $665 million ($1.04 per share) for the three and six months ended August 1, 2015, respectively, and $272 million ($0.43 per share) and $545 million ($0.86 per share) for the three and six months ended August 2, 2014, respectively, a per share increase of 20.9 percent. We declared dividends totaling $356 million ($0.56 per share) in second quarter 2015, a per share increase of 7.7 percent over the $329 million ($0.52 per share) of declared dividends during the second quarter of 2014. We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.

Short-term and Long-term Financing

Our financing strategy is to ensure liquidity and access to capital markets, to manage our net exposure to floating interest rate volatility and to maintain a balanced spectrum of debt maturities. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors including the condition of debt capital markets, our operating performance and maintaining strong credit ratings. As of August 1, 2015 our credit ratings were as follows:



Credit Ratings	Moody’s	Standard and Poor’s	Fitch
Long-term debt	A2	A	A-
Commercial paper	P-1	A-1	F2

If our credit ratings were lowered, our ability to access the debt markets and our cost of funds and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above.

As a measure of our financial condition, we monitor our ratio of pretax earnings from continuing operations before fixed charges to fixed charges. Fixed charges include interest expense and the interest portion of rent expense. For the first six months of 2015

our ratio of earnings from continuing operations to fixed charges was 7.02x compared with 4.93x for the first six months of 2014. See Exhibit (12) for a description of how the gain on sale of our U.S. credit card receivables portfolio and loss on early retirement of debt affected the 2014, 2013 and 2012 calculations.

We have additional liquidity through a committed $2.25 billion revolving credit facility that expires in October 2018. No balances were outstanding at any time during 2015 or 2014.

Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, at August 1, 2015, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term debt ratings are either reduced and the resulting rating is noninvestment grade, or our long-term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is noninvestment grade.

We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund obligations incurred as a result of our exit from Canada, fund obligations incurred as a result of the Data Breach and any related future technology enhancements, pay dividends and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing.

Contractual Obligations and Commitments

Our 2014 Form 10-K included a summary of contractual obligations and commitments as of January 31, 2015. During the three months ended August 1, 2015, there were no material changes outside the ordinary course of business.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements will have a material effect on our financial statements.

Forward-Looking Statements

This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or words of similar import. The principal forward-looking statements in this report include: Our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the process, timing and effects of discontinuing our Canadian operations, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, including net operating loss carryforwards and tax benefits related to discontinuing our Canadian operations, the anticipated sale of our pharmacy and clinic businesses and related gain, including the application of the proceeds from the sale and the impact on our future operations and financial performance, the expected benefits and timing of cash disbursements related to restructuring initiatives, the continued execution of our share repurchase program, our expected capital expenditures, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected outcome of, and adequacy of our reserves for, investigations, inquiries, claims and litigation, including those related to the Data Breach and discontinuing our Canadian operations, expected insurance recoveries, our adoption of chip-and-PIN technology, and the amount and timing of expense reduction resulting from remeasurement of our pension plan.

All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended January 31, 2015, which should be read in conjunction with the forward-looking statements in this report. In addition, other risks and uncertainties relating to the sale of our pharmacy and clinic businesses include those relating to the certainty around satisfying the conditions to closing the transaction, how our guests react to the transaction, the effectiveness of the ongoing relationship between us and CVS Health, and whether we will recognize the expected benefits from the transaction. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year ended January 31, 2015.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the second quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the Securities and Exchange Commission (SEC) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

No response is required under Item 103 of Regulation S-K, which requires disclosure of legal proceedings that are material, based on an analysis of the probability and magnitude of the outcome, nor have there been any material developments for any previously reported legal proceedings. For a description of other legal proceedings, including a discussion of litigation and government inquiries related to the Data Breach, see Part 1, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 8 of the Notes to Consolidated Financial Statements included in Part 1, Item 1, Financial Statements.

Item 1A. Risk Factors

There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2012, our Board of Directors authorized the repurchase of $5 billion of our common stock and in June 2015 expanded the program by an additional $5 billion for a total authorization of $10 billion. There is no stated expiration for the share repurchase program. Under this program, through August 1, 2015, we have repurchased 65.1 million cumulative shares of common stock at an average price of $67.19, for a total investment of $4.4 billion. The table below presents information with respect to Target common stock purchases made during the three months ended August 1, 2015, by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.



Period	Total Number of Shares Purchased ^(a)	Average Price Paid per Share ^(a)		Total Number of Shares Purchased as Part of the Current Program ^(a)	Dollar Value of Shares that May Yet Be Purchased Under the Program
May 3, 2015 through May 30, 2015
Open market and privately negotiated purchases	—	—		—	$	1,262,859,653
April 2015 ASR ^(b)(c)	1,087,072	80.74		1,087,072	1,297,472,745
May 31, 2015 through July 4, 2015
Open market and privately negotiated purchases	1,985,237	80.59		1,985,237	6,137,478,994
June 2015 ASR ^(b)	2,700,000	82.67		2,700,000	5,787,478,994
July 5, 2015 through August 1, 2015
Open market and privately negotiated purchases	2,455,261	81.89		2,455,261	5,586,415,344
June 2015 ASR ^(b)	1,094,039	82.67		1,094,039	5,622,772,741
Total	9,321,609	$	81.80	9,321,609	$	5,622,772,741

^(a)The table above includes shares reacquired upon the noncash settlement of prepaid forward contracts. At August 1, 2015, we held asset positions in prepaid forward contracts for 0.4 million shares of our common stock, for a total cash investment of $18.2 million, or an average per share price of $41.13. During the second quarter, no shares were reacquired under such contracts. Refer to Note 11 of the Financial Statements for further details of these contracts.

^(b) Refer to Note 10 of the Financial Statements for further details about our ASR transactions.

^(c)Represents the incremental shares received upon final settlement of the ASR initiated in first quarter 2015.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits



(2)H	Ÿ	Asset Purchase Agreement dated June 12, 2015 between Target Corporation and CVS Pharmacy, Inc.

(3)A		Amended and Restated Articles of Incorporation (as amended through June 9, 2010)⁽¹⁾

(3)B		By-laws (as amended through September 9, 2009)⁽²⁾

(10)JJ		Amended and Restated Target Corporation 2011 Long-Term Incentive Plan⁽³⁾

(10)KK	s	Form of Pharmacy Operating Agreement between Target Corporation and CVS Pharmacy, Inc.

(12)		Statements of Computations of Ratios of Earnings to Fixed Charges

(31)A		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(31)B		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)A		Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32)B		Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Ÿ Excludes the Seller Disclosure Schedule, Exhibits B through G and Schedules I and II referred to in the agreement which Target Corporation agrees to furnish supplementally to the Securities and Exchange Commission upon request. Exhibit A is separately filed as Exhibit (10)KK.

s Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

⁽¹⁾ Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed June 10, 2010.

⁽²⁾ Incorporated by reference to Exhibit (3)B to the Registrant’s Form 8-K Report filed September 10, 2009.

⁽³⁾ Incorporated by reference to Exhibit (10)JJ to the Registrant’s Form 8-K Report filed June 12, 2015.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	TARGET CORPORATION


Dated: August 25, 2015	By:	/s/ John J. Mulligan
			John J. Mulligan
			Executive Vice President,
			Chief Financial Officer and
			Chief Accounting Officer
			(Duly Authorized Officer and
			Principal Financial Officer)

EXHIBIT INDEX



Exhibit	Description	Manner of Filing

(2)H	Asset Purchase Agreement dated June 12, 2015 between Target Corporation and CVS Pharmacy, Inc.	Filed Electronically

(3)A	Amended and Restated Articles of Incorporation (as amended through June 9, 2010)	Incorporated by Reference

(3)B	By-Laws (as amended through September 9, 2009)	Incorporated by Reference

(10)JJ	Amended and Restated Target Corporation 2011 Long-Term Incentive Plan	Incorporated by Reference

(10)KK	Form of Pharmacy Operating Agreement between Target Corporation and CVS Pharmacy, Inc.	Filed Electronically

(12)	Statements of Computations of Ratios of Earnings to Fixed Charges	Filed Electronically

(31)A	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(31)B	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(32)A	Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(32)B	Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed Electronically

101.INS	XBRL Instance Document	Filed Electronically

101.SCH	XBRL Taxonomy Extension Schema	Filed Electronically

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed Electronically

101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed Electronically

101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed Electronically

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed Electronically

Exhibit (2)H

ASSET PURCHASE AGREEMENT

between

TARGET CORPORATION

and

CVS PHARMACY, INC.

Dated as of June 12, 2015

Page



TABLE OF CONTENTS


ARTICLE I

	Purchase and Sale of Transferred Assets		1

SECTION 1.02. Transferred Assets and Excluded Assets.		1
SECTION 1.03. Consents to Certain Assignments		6
SECTION 1.04. Assumption of Liabilities.		7
SECTION 1.05. Additional Agreements.		9


ARTICLE II

	Closing and Post-Closing Purchase Price Adjustments		10

SECTION 2.01. Closing.		10
SECTION 2.02. Transactions To Be Effected at the Closing.		10
SECTION 2.03. Closing Inventory.		12
SECTION 2.04. Closing Date Statement and Purchase Price Adjustments.		13
SECTION 2.05. Post-Closing Books and Records		14
SECTION 2.06. Net Pharmacy Loss Adjustment		14


ARTICLE III

	Representations and Warranties of Seller		15

SECTION 3.01. Organization and Standing.		15
SECTION 3.02. Authority; Execution and Delivery; Enforceability		15
SECTION 3.03. No Conflicts or Violations; No Consents or Approvals Required		16
SECTION 3.04. Financial Information.		16
SECTION 3.05. Transferred Assets Other than Intellectual Property.		17
SECTION 3.06. Real Property.		18
SECTION 3.07. Contracts.		19
SECTION 3.08. Permits.		19
SECTION 3.09. Taxes.		20
SECTION 3.10. Proceedings.		21
SECTION 3.11. Seller Benefit Plans; Employment Matters.		21
SECTION 3.12. Absence of Changes or Events		22
SECTION 3.13. Compliance with Applicable Laws.		22
SECTION 3.14. Certain Transactions		23
SECTION 3.15. Environmental Matters.		23
SECTION 3.16. Suppliers.		24

Page



SECTION 3.17. Privacy.		24
SECTION 3.18. Healthcare Regulatory		24
SECTION 3.19. Intellectual Property.		25
SECTION 3.20. Brokers or Finders.		26


ARTICLE IV

	Representations and Warranties of Purchaser		26

SECTION 4.01. Organization and Standing.		26
SECTION 4.02. Authority; Execution and Delivery; Enforceability.		26
SECTION 4.03. No Conflicts or Violations; No Consents or Approvals Required.		27
SECTION 4.04. Proceedings.		27
SECTION 4.05. Availability of Funds; Solvency.		27
SECTION 4.06. Brokers or Finders.		28


ARTICLE V

	Covenants		28

SECTION 5.01. Covenants Relating to Conduct of the Business.		28
SECTION 5.02. Access to Information.		30
SECTION 5.03. Confidentiality.		31
SECTION 5.04. Best Efforts.		32
SECTION 5.05. Pharmacy and Medical Records; Prescriptions.		34
SECTION 5.06. Notification; Licenses; Provider Numbers; HIPAA Compliance.		35
SECTION 5.07. Notices of Certain Events.		36
SECTION 5.08. Termination of Related Party Arrangements.		37
SECTION 5.09. Further Assurance.		37


ARTICLE VI

	Employment Matters		37

SECTION 6.01. Continuation of Employment; Credited Service.		37
SECTION 6.02. Continuation of Benefits		39
SECTION 6.03. Severance		40
SECTION 6.04. Tax-Qualified Savings/401(k) Plan.		41
SECTION 6.05. Certain Welfare Benefits Matters.		41
SECTION 6.06. Bonus/Incentive Plan		42
SECTION 6.07. Accrued Vacation and Paid Time Off		42
SECTION 6.08. Liabilities		42
SECTION 6.09. WARN Act		42

Page



SECTION 6.10. Administration; Employee Communications.		43
SECTION 6.11. Employment Tax Reporting Responsibility		43
SECTION 6.12. Immigration		43
SECTION 6.13. No Third-Party Beneficiaries		43


ARTICLE VII

	Conditions to Closing		44

SECTION 7.01. Conditions to Each Party’s Obligation.		44
SECTION 7.02. Conditions to Obligation of Purchaser.		44
SECTION 7.03. Conditions to Obligation of Seller.		45
SECTION 7.04. Frustration of Closing Conditions.		45


ARTICLE VIII

	Termination; Effect of Termination		46

SECTION 8.01. Termination.		46
SECTION 8.02. Effect of Termination.		47


ARTICLE IX

	Indemnification		48

SECTION 9.01. Indemnification by Seller.		48
SECTION 9.02. Indemnification by Purchaser.		48
SECTION 9.03. Indemnification Procedures.		48
SECTION 9.04. Limitations on Indemnification.		50
SECTION 9.05. Calculation of Indemnity Payments.		52
SECTION 9.06. Tax Treatment of Indemnification		52


ARTICLE X

	Tax Matters		52

SECTION 10.01. Allocation of Certain Taxes.		52
SECTION 10.02. Tax Matters.		52
SECTION 10.03. Transfer Taxes		53

iii

Page




ARTICLE XI

	Additional Agreements		54

SECTION 11.01. Publicity.		54
SECTION 11.02. Support Services.		54
SECTION 11.03. Post-Closing Information.		54
SECTION 11.04. Books and Records.		55
SECTION 11.05. Bulk Transfer Laws.		55
SECTION 11.06. Refunds and Remittances		55


ARTICLE XII

	Miscellaneous		55

SECTION 12.01. Assignment.		55
SECTION 12.02. No Third-Party Beneficiaries.		56
SECTION 12.03. Expenses.		56
SECTION 12.04. Notices		56
SECTION 12.05. Headings; Certain Definitions; Interpretation; Separate Counsel.		57
SECTION 12.06. Counterparts		61
SECTION 12.07. Integrated Contract		61
SECTION 12.08. Severability; Enforcement.		62
SECTION 12.09. Governing Law.		62
SECTION 12.10. Jurisdiction.		62
SECTION 12.11. Service of Process.		62
SECTION 12.12. Waiver of Jury Trial.		62
SECTION 12.13. Amendments.		63
SECTION 12.14. Specific Enforcement		63
SECTION 12.15. Parent Guarantee		63



EXHIBITS

Pharmacy Operating Agreement	A

Clinic Operating Agreement	B

Transition Services Agreement	C

Pharmacy Master License Agreement	D-1

Clinic Master License Agreement	D-2

File Transfer Agreement	E

Form of Power of Attorney	F

Master Lease Agreement	G


SCHEDULES

Seller Affiliates	I

Pharmacies and Medical Clinics	II

GLOSSARY OF DEFINED TERMS



Definition	Location of Defined Terms

ACA	Section 3.11(b)
Accounts Receivable	Section 12.05(b)
Acquisition	Section 1.01
Affiliate	Section 12.05(b)
Agreement	Preamble
Allocation	Section 10.02(b)
Ancillary Agreements	Section 3.02
Antitrust Laws	Section 5.04(a)
Applicable Law	Section 3.03
Assumed Liabilities	Section 1.04(a)
Blackout Period	Section 2.01 of the Seller Disclosure Schedule
Business	Introduction
business day	Section 12.05(b)
Business Employee	Section 6.01(a)
Business Material Adverse Effect	Section 12.05(b)
Business Space	Section 12.05(b)
Claims	Section 1.02(a)(vii)
Clinic Master License Agreement	Section 1.05(e)
Clinic Operating Agreement	Section 1.05(b)
Closing	Section 2.01
Closing Date	Section 2.01
Closing Date Statement	Section 2.04(a)
Closing Employee Census	Section 6.01(a)
Closing Inventory	Section 12.05(b)
CMS	Section 12.05(b)
COBRA	Section 6.02
Code	Section 3.09(a)
Confidentiality Agreement	Section 5.03(a)
Consent	Section 1.03(a)
Contracts	Section 1.02(a)(vi)
Data	Section 3.17
Data Converter	Section 5.05(a)
DEA	Section 5.04(f)
DOJ	Section 5.04(b)
$	Section 12.05(b)
Employee Census	Section 6.01(a)
Employment Screenings	Section 6.01(c)
Environmental Laws	Section 3.15(a)



Definition	Location of Defined Terms
Equipment	Section 1.02(a)(iv)
ERISA	Section 12.05(b)
ERISA Affiliate	Section 12.05(b)
Event	Section 12.05(b) (in definition of “Business Material Adverse Effect”)
Exchange Act	Section 12.05(b)
Excluded Assets	Section 1.02(b)
Excluded Taxes	Section 3.09(a)
Family	Section 12.05(b)
File Transfer Agreement	Section 1.05(f)
Final Appeal Date	Section 6.01(c)
Final Purchase Price	Section 2.04(c)
Financial Information	Section 3.04(a)
FTC	Section 5.04(b)
Fundamental Representations	Section 11.01(b)(iii)
GAAP	Section 12.05(b)
Governmental Entity	Section 3.03
Hazardous Materials	Section 3.15(a)
Health Care Law	Section 12.05(b)
HIPAA	Section 5.06(c)
HSR Act	Section 3.03
Included Current Assets	Section 12.05(b)
Included Current Liabilities	Section 12.05(b)
Indebtedness	Section 12.05(b)
Indemnified Party	Section 9.03(a)
Indemnifying Party	Section 9.03(a)
Independent Expert	Section 2.04(b)(ii)
Intellectual Property	Section 12.05(b)
Interim Employee Census	Section 6.01(a)
Inventory	Section 1.02(a)(i)
IRS	Section 9.06
Judgment	Section 3.03
Know-How	Section 1.02(a)(xiii)
knowledge of Seller	Section 12.05(b)
Lease Files	Section 3.06(b)
Leased Real Property	Section 3.06(b)
Leases	Section 3.06(b)
Leave Commencement Date	Section 6.01(a)
Liabilities	Section 12.05(b)
Liens	Section 3.05(a)
LTD Business Employees	Section 6.01(a)

vii



Definition	Location of Defined Terms
Losses	Section 9.01
Master Lease Agreement	Section 1.05(g)
Material Permits	Section 3.08(b)
Medicaid	Section 12.05(b)
Medicare	Section 12.05(b)
Most Recent Unaudited Financial Information	Section 3.04(a)
Multiemployer Plan	Section 12.05(b)
Notice of Objection	Section 2.04(b)(i)
Owned Property	Section 3.06(a)
Outside Date	Section 8.01(a)(iv)
Parent	12.15
Parties and Party	Preamble
PCBs	Section 3.15(a) (in definition of “Hazardous Materials”)
Permits	Section 1.02(a)(v)
Permitted Liens	Section 3.05(a)
person	Section 12.05(b)
Pharmacy and Medical Records	Section 5.05(a)
Pharmacy Master License Agreement	Section 1.05(d)
Pharmacy Operating Agreement	Section 1.05(a)
Post-Closing Tax Period	Section 3.09(a)
Power of Attorney	Section 2.02(a)(xii)
Pre-Closing Tax Period	Section 3.09(a)
Prescription Files	Section 1.02(a)(ii)(B)
Proceeding	Section 12.05(b)
Programs	Section 3.18
Purchase Price	Section 1.01
Purchaser	Preamble
Purchaser Disclosure Schedule	Article IV
Purchaser Indemnitees	Section 9.01
Purchaser Welfare Plans	Section 6.05(a)
Purchaser’s 401(k) Plan	Section 6.04(a)
Real Property	Section 3.06(b)
Receivables	Section 1.02(b)(vii)
Related Person	Section 12.05(b)
Restraint	Section 7.01(b)
Retained Liabilities	Section 1.04(b)
Reverse Termination Fee	Section 8.02(d)
Seller	Preamble
Seller Affiliates	Introduction
Seller Agents	Section 5.03(b)

viii



Definition	Location of Defined Terms
Seller Benefit Plan	Section 12.05(b)
Seller Disclosure Schedule	Article III
Seller Indemnitees	Section 9.02
Seller’s 401(k) Plan	Section 6.04(a)
Seller’s Allocable Portion	Section 10.03(a)
Social Security Act	Section 12.05(b) (in definition of “Medicaid”)
subsidiary	Section 12.05(b)
Target Closing Inventory	Section 2.04(c)(i)
Tax	Section 3.09(a)
Tax Return	Section 3.09(a)
Taxes	Section 3.09(a)
Taxing Authority	Section 3.09(a)
Third Party Claim	Section 9.03(a)
Transfer Taxes	Section 3.09(a)
Transfer Time	Section 6.01(c)
Transferred Assets	Section 1.02(a)
Transferred Contracts	Section 1.02(a)(vi)
Transferred Employee	Section 6.01(c)
Transferred Equipment	Section 1.02(a)(iv)
Transferred Intellectual Property	Section 1.02(a)(xii)
Transferred Inventory	Section 1.02(a)(i)
Transferred Know-How	Section 1.02(a)(xiii)
Transferred Permits	Section 1.02(a)(v)
Transition Services Agreement	Section 1.05(c)
WARN Act	Section 6.09
Will-Call Inventory	Section 1.04(c)

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT, dated as of June 12, 2015 (this “Agreement”), is between TARGET CORPORATION, a Minnesota corporation (“Seller”), and CVS PHARMACY, INC., a Rhode Island corporation (“Purchaser”). Each of Seller and Purchaser are referred to herein as a “Party” and collectively as the “Parties.”

INTRODUCTION

Seller, directly or indirectly through certain affiliated entities identified on Schedule I (collectively, the “Seller Affiliates”), owns, manages, operates, or provides management services to the retail pharmacies and medical clinics in the United States listed on Schedule II as modified or updated by Seller prior to the Closing (the “Business”). Seller and the Seller Affiliates wish to sell and assign, or cause to be sold or assigned, to Purchaser, and Purchaser wishes to purchase from Seller and the Seller Affiliates, the Transferred Assets, upon the terms and subject to the conditions of this Agreement. In addition, Purchaser has agreed to assume from Seller and the Seller Affiliates the Assumed Liabilities and Seller and the Seller Affiliates have agreed to retain the Excluded Assets and the Retained Liabilities, in each case, upon the terms and subject to the conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

Purchase and Sale of Transferred Assets

SECTION 1.01. Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall, and shall cause the Seller Affiliates to, sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall purchase, acquire and accept from Seller and the Seller Affiliates, free and clear of any Liens, all of Seller’s and the Seller Affiliates’ right, title and interest in, to and under the Transferred Assets as of the Closing and Seller and Purchaser shall enter into the Ancillary Agreements in accordance with the terms of this Agreement for an aggregate purchase price of $1,887,000,000 (the “Purchase Price”), payable as set forth in Section 2.02(b)(i) and subject to adjustment as set forth in Sections 2.04 and 2.06. Subject to the terms and conditions of this Agreement, at the Closing, Purchaser shall assume only the Assumed Liabilities. Notwithstanding anything herein to the contrary, Seller shall, or shall cause any Seller Affiliate to retain the Retained Liabilities. The purchase and sale of the Transferred Assets, the assumption of the Assumed Liabilities and Seller’s and the Seller Affiliates’ retention of the Excluded Assets and the Retained Liabilities are collectively referred to in this Agreement as the “Acquisition.”

SECTION 1.02. Transferred Assets and Excluded Assets.

(a) The term “Transferred Assets” means all of Seller’s and the Seller Affiliates’ right, title and interest in, to and under all of the assets, properties and rights of Seller

and the Seller Affiliates, to the extent that such assets, properties and rights exclusively relate to, are used exclusively in or held exclusively for the Business as they exist at the time of the Closing, including the following, which shall not in any event include any of the Excluded Assets:

(i) All (x) clinic inventory (e.g., vaccines) and pharmaceutical inventory, including prescription drug products, including full and partial containers, controlled substances, insulin, syringes, needles, test strips, and brand name and private label pseudoephedrine (PSE) products that are federally listed chemicals, that are required to be kept behind the pharmacy counter, owned by Seller or the Seller Affiliates as of the Closing (“Inventory”) and that are used or held for use primarily in the operation or conduct of the Business, but (y) excluding any expired Inventory of the Business as of the Closing Date consistent with the terms set forth in Section 2.03 of the Seller Disclosure Schedule (collectively, the “Transferred Inventory”);

(ii) (A) all current prescriptions, including all open prescriptions that have not yet been filled or have remaining refills and those for which the patients previously elected to receive automatic refills, of the Business, in each case, only if the same can be transferred or assigned to Purchaser in accordance with Applicable Law and (B) in each case, to the extent required by Applicable Law, all prescription files, records and data utilized or generated by Seller and the Seller Affiliates in the course of operating the Business, including all hard copy prescriptions, signature logs, customer lists, and all electronic data of the same maintained in any format by Seller or any Seller Affiliate (the “Prescription Files”);

(iii) all medical supplies (including bottles), clinic supplies, and medical devices owned by Seller or the Seller Affiliates as of the Closing that are used or held for use exclusively in the operation or conduct of the Business;

(iv) all other tangible personal property and interests therein, including all machinery, equipment, furniture (which will be deemed to include shelving and similar fixtures for purposes of this Agreement), furnishings, safes with combinations and keys, and office equipment, together with all parts, tools, spare parts and repair parts (“Equipment”), owned by Seller or any of the Seller Affiliates as of the Closing that are used exclusively in the Business (collectively, the “Transferred Equipment”);

(v) all permits, licenses, registrations, approvals, exemptions, orders, consents, franchises or the like or other authorizations from any Governmental Entity (“Permits”) issued to Seller or any of the Seller Affiliates that are used or held for use exclusively in the operation or conduct of the Business, including all Permits set forth in Section 1.02(a)(v) of the Seller Disclosure Schedule, in each case, solely to the extent such Permits are transferable to Purchaser in accordance with Applicable Law (the “Transferred Permits”), and copies of all filings with any Governmental Entity relating thereto that are in the possession of Seller or any of the Seller Affiliates;

(vi) any written or oral contracts, licenses, instruments, indentures, notes, undertakings, agreements, commitments, statements of work and other agreements, commitments or legally binding arrangements (“Contracts”) of Seller or any of the Seller

Affiliates primarily related to the Business (other than any Contract with a Related Person) that Seller and Purchaser mutually agree in writing to be assigned to Purchaser hereunder (the “Transferred Contracts”);

(vii) all rights, claims, credits, judgments, rights of recovery, rights of set-off, demands, actions, suits and causes of action of any kind, whether class, individual or otherwise in nature, in law or in equity (collectively, “Claims”) exclusively related to or arising out of any Transferred Asset or Assumed Liability after Closing;

(viii) all patient billing records, medical records, pharmacy or clinic manuals, patient files, patient complaint records, and Pharmacy and Medical Records for the two-year period prior to the Closing Date, in each case that (A) are owned by Seller or any of the Seller Affiliates, (B) are used or held for use exclusively in, or that arise exclusively out of, the operation or conduct of the Business, (C) can be transferred or assigned to Purchaser in accordance with Applicable Law, and (D) are reasonably separable from documents or databases that are not used or held for use exclusively in, or that do not arise exclusively out of, the operation or conduct of the Business;

(ix) (A) copies of Seller’s and the Seller Affiliates’ employee handbooks; records related to the Transferred Inventory; machinery and equipment maintenance files; PDX system records (including data and files); ATHENA system records (including data and files); correspondence with any Governmental Entities that is in the possession of Seller or any of the Seller Affiliates (other than correspondence related to (1) protected settlement discussions and (2) immaterial administrative issues); executed copies of the Transferred Contracts; databases; and customer and supplier lists; in each case to the extent exclusively related to the Business, whether in hard copy or computer format, and (B) copies of the records necessary for Purchaser to fulfill its obligation under Section 6.11;

(x) all guarantees and warranties of third parties in favor of Seller or any Seller Affiliate to the extent relating exclusively to the other Transferred Assets;

(xi) all rights to use the telephone and facsimile numbers used exclusively in the conduct or operation of the Business;

(xii) all (A) trademarks, trademark registrations, trademark applications, service marks, and trade names set forth in Section 1.02(a)(xii)(A) of the Seller Disclosure Schedule and the goodwill associated exclusively therewith (for the avoidance of doubt, Purchaser is not acquiring, and nothing herein grants Purchaser any right in any way to, the names and marks “TARGET,” “Expect More, Pay Less,” or the Bullseye Logo/Design or the names and marks of any of the Seller Affiliates (in style or design) or any name or mark derived from or including any of the foregoing and the goodwill associated therewith); (B) patents and patent applications set forth in Section 1.02(a)(xii)(B) of the Seller Disclosure Schedule; (C) domain names set forth in Section 1.02(a)(xii)(C) of the Seller Disclosure Schedule; and (D) copyrights, copyright registrations, copyright applications, and all rights to any of the foregoing owned by Seller or any Seller Affiliates that are used or held for use exclusively in the operation or conduct of the Business (for the avoidance of doubt, Purchaser is not acquiring, and nothing herein grants Purchaser any right in any way to, the names and

marks “TARGET,” “Expect More, Pay Less,” or the Bullseye Logo/Design or the names and marks of any of the Seller Affiliates (in style or design) or any name or mark derived from or including any of the foregoing and the goodwill associated therewith) (the items set forth in the foregoing clauses (A), (B), (C), and (D), the “Transferred Intellectual Property”);

(xiii) all trade secrets, proprietary inventions, know-how, formulae, processes, procedures, research records, records of inventions, test information, market surveys, and marketing know-how (collectively, “Know-How”) owned by Seller or any of the Seller Affiliates that are used or held for use exclusively in the operation or conduct of the Business (the “Transferred Know-How”); and

(xiv) the goodwill and going concern value associated with the operation of the Business and the Transferred Assets.

(b) Notwithstanding anything to the contrary contained in this Agreement, the Transferred Assets expressly exclude the following assets (collectively, the “Excluded Assets”), which Purchaser will not purchase or acquire and neither Seller nor any Seller Affiliate will sell, transfer, assign or deliver to Purchaser:

(i) any of Seller’s or Sellers’ Affiliates’ other retail operations (including retail operations located at the same locations as the Business), distribution centers, administrative offices and facilities (other than the pharmacies and medical clinics that comprise the Business), and all assets or properties located thereon or used in connection therewith, and rights appurtenant thereto, including, all real property (whether owned or leased), fixtures, leasehold improvements, Equipment, Inventory, records, supplies, manufacturer warranties, accounts receivable, Permits, credits, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items, goodwill and other assets not used exclusively in the Business and not transferred to and acquired by Purchaser under this Agreement;

(ii) (A) over-the-counter merchandise or Inventory (other than pseudoephedrine products, insulin, syringes, and needles), including over-the-counter merchandise or Inventory located behind the pharmacy counter and durable medical equipment, (B) private label merchandise or Inventory (other than private label PSE products that are federally listed chemicals), (C) any merchandise or Inventory that cannot be transferred to Purchaser under Applicable Law, and (D) any expired Inventory as of the Closing Date consistent with the terms in Section 2.03 of the Seller Disclosure Schedule;

(iii) all assets identified in Section 1.02(b)(iii) of the Seller Disclosure Schedule;

(iv) all computer equipment and systems, order-entry devices, point-of-sale systems, surveillance systems, and alarm systems;

(v) intercompany account assets of Seller and its Affiliates;

(vi) all cash, cash equivalents or securities of Seller or any of the Seller Affiliates (including any drawer cash);

(vii) all accounts and notes receivable and similar rights to receive payments (including in respect of rebates or volume discounts or from third party payors or government reimbursements) of Seller or any of the Seller Affiliates, including those arising out of the operation or conduct of the Business prior to the Closing (the “Receivables”);

(viii) all Claims, to the extent arising out of, relating to or in respect of any other Excluded Asset, any Retained Liability or the operation of the Business prior to Closing, including (A) any such items arising under insurance policies, and (B) all guarantees, warranties, indemnities and similar rights in favor of Seller or any of the Seller Affiliates in respect of any Excluded Asset, any Retained Liability or the operation of the Business prior to Closing;

(ix) any shares of capital stock or other equity interests of any Affiliate of Seller or any of the Seller Affiliates;

(x) any employee benefit plan and any asset relating to any employee benefit plan in which any employees of Seller or any of the Seller Affiliates participate;

(xi) any refunds or credits, claims for refunds or credits or rights to receive refunds or credits from any Taxing Authority with respect to Excluded Taxes;

(xii) any records (including accounting records) related to Excluded Taxes and all financial and Tax records relating to the Business that form part of Seller’s, any Seller Affiliates’ or any of their respective Affiliates’ general ledger;

(xiii) all records prepared in connection with the sale of the Business (or any portion thereof), including bids received from third persons and analyses relating to the Business (or any portion thereof);

(xiv) all rights of Seller or any of the Seller Affiliates under this Agreement and any other agreements, certificates and instruments relating to the sale of the Business (or any portion thereof) or otherwise delivered in connection with this Agreement;

(xv) other than the Transferred Intellectual Property, all Intellectual Property of Seller and the Seller Affiliates, including the names and marks “TARGET,” “Expect More, Pay Less,” and the Bullseye Logo/Design and the names and marks of any of the Seller Affiliates (in style or design) and any name or mark derived from or including any of the foregoing and the goodwill associated therewith, patents, copyrights, and identifying logos, internet domain names, websites, and trade dress;

(xvi) other than the Transferred Know-How, all Know-How of Seller and the Seller Affiliates;

(xvii) any (A) registration information and customer data and other information derived from customer loyalty cards, promotions, co-branded credit card programs and the like, (B) customer lists (including email addresses) related to Seller’s or any Seller Affiliate’s internet business operations, (C) guest data related to the non-Business operations of Seller or any Seller Affiliate, and (D) equipment related to the target.com business operations;

(xviii) to the extent permitted by Applicable Law, a copy of all Prescription Files and Pharmacy and Medical Records;

(xix) other than shelving and similar fixtures deemed to be furniture pursuant to Section 1.02(a)(iv), all Real Property and any other real property owned, leased, subleased, or otherwise occupied by Seller or any Seller Affiliate, together with all buildings, fixtures, structures, and improvements situated thereon and all easements, rights-of-way and other rights and privileges appurtenant thereto; and

(xx) all division or corporate-level services of the type currently provided to the Business by Seller, any of the Seller Affiliates or any of their respective Affiliates.

SECTION 1.03. Consents to Certain Assignments

(a) Notwithstanding anything in this Agreement to the contrary, but subject to the provisions of this Section 1.03 and Section 5.04, to the extent the transfer, sale, conveyance, delivery or assignment, or the attempted transfer, sale, conveyance, delivery or assignment, to Purchaser of any Transferred Asset would result in violation of Applicable Law or would require the consent, approval, authorization or waiver (“Consent”) of a person who is not a Party or an Affiliate of a Party (including Governmental Entities), and such Consent shall not have been obtained prior to the Closing, this Agreement shall not constitute a transfer, sale, conveyance, delivery or assignment, or an attempted transfer, sale, conveyance, delivery or assignment, thereof; provided, however, that, subject to the satisfaction or waiver of the conditions contained in Article VII and subject to Section 2.06, the Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account thereof. Following the Closing, Purchaser and Seller shall, and Seller shall cause each of the Seller Affiliates to, use their reasonable best efforts and cooperate with each other, to obtain any such required Consent as promptly as practicable after the Closing. Once such Consent is obtained, Seller shall, and shall cause the Seller Affiliates, as applicable, to transfer, sell, convey, deliver or assign to Purchaser the relevant Transferred Asset to which such Consent relates for no additional consideration. Purchaser agrees that neither Seller nor any of the Seller Affiliates will have any Liability whatsoever to Purchaser arising out of or relating to the failure to obtain any such Consent or because of any circumstances resulting therefrom unless failure to obtain that Consent is otherwise a breach of a representation, warranty, or covenant of Seller under this Agreement.

(b) To the extent that any Transferred Asset cannot be transferred to Purchaser at the Closing pursuant to this Section 1.03, Purchaser and Seller shall enter into mutually agreeable, reasonable arrangements to provide to the Parties the economic benefit and, to the extent permitted under Applicable Law, operational equivalent of the transfer of such Transferred Asset, including any indemnities, that they would have obtained had the asset been conveyed to Purchaser at the Closing. Purchaser shall, as agent or subcontractor for Seller or any Seller Affiliate, pay, perform and discharge fully the Liabilities of Seller or the applicable Seller Affiliate thereunder from and after the Closing Date. To the extent permitted under Applicable Law, Seller shall, and shall cause the applicable Seller Affiliate to, at Purchaser’s expense, hold in trust for and pay to Purchaser promptly upon receipt thereof, such Transferred Asset and all income, proceeds and other monies received by Seller or any Seller Affiliates to the extent related to such Transferred Asset in connection with the arrangements under this Section 1.03.

Notwithstanding anything herein to the contrary, the provisions of this Section 1.03 shall not apply to any Consent required under any Antitrust Laws, which Consent shall be governed by Section 5.04.

SECTION 1.04. Assumption of Liabilities.

(a) Upon the terms and subject to the conditions of this Agreement, effective as of the Closing, Purchaser will not assume, and will not pay, perform or discharge when due, any Liabilities of Seller, the Seller Affiliates, the Transferred Assets, the Business or otherwise, other than the following Liabilities (collectively, the “Assumed Liabilities”), which Assumed Liabilities Purchaser shall pay, perform, and discharge when due:

(i) all Liabilities of Seller or any of the Seller Affiliates under the Transferred Contracts and the Transferred Permits or otherwise arising out of, relating to, or in respect of any Transferred Asset but only to the extent such Liabilities (A) do not arise from any failure to perform, improper performance, warranty or other breach, default or violation by Seller or any Seller Affiliate, (B) do not arise from any Contract with a Related Person and (C) arise out of, relate to or are in respect of actions, omissions or events first occurring from and after the Closing;

(ii) all Liabilities arising out of, relating to or in respect of any and all products sold by the Business (including Liabilities for refunds, adjustments, allowances, recalls, exchanges and returns and warranty, product liability, merchantability and similar Claims or Proceedings relating to any such Liabilities) but only to the extent such Liabilities (A) do not arise from any failure to perform, improper performance, warranty or other breach, default or violation by Seller or any of Seller Affiliate and (B) arise out of, relate to or are in respect of actions, omissions or events first occurring from and after the Closing;

(iii) all Liabilities (including any third-party legal fees, defense costs and similar expenses) in respect of Claims and Proceedings, whether or not presently asserted, to the extent arising out of, relating to or in respect of the Transferred Assets or the operation or conduct of the Business but only to the extent such Liabilities (A) do not arise from any failure to perform, improper performance, warranty or other breach, default or violation by Seller or any Seller Affiliate and (B) arise out of, relate to or are in respect of actions, omissions or events occurring from and after the Closing;

(iv) all Taxes (including Transfer Taxes), other than Excluded Taxes, arising out of, relating to or in respect of the Transferred Assets or the operation or conduct of the Business;

(v) all Liabilities expressly assumed by Purchaser under Section 6.08;

(vi) all Liabilities arising out of or related to the use, disclosure, access, maintenance, transmission, or handling of the Pharmacy and Medical Records by the Data Converter, Purchaser, or any of their subcontractors or agents, whether before or after the Closing, including (1) all Liabilities arising under HIPAA, state data breach notification laws, state social security number protection laws, and all federal and state consumer protection

laws, and (2) all other Applicable Laws concerning the privacy or security of personal information; and

(vii) all Liabilities, other than the Excluded Liabilities, resulting from or arising out of (x) Purchaser’s ownership or operation of the Business and the Transferred Assets, or (y) the conduct of, the use, non-use or ownership (whether by leasehold or fee) of the Transferred Assets, in each case to the extent such other Liabilities arise during, accrue during, or are attributable to actions, omissions or events first occurring from and after the Closing.

The Assumed Liabilities described above do not limit the respective Liabilities of the Parties under any of the Ancillary Agreements.

(b) Notwithstanding any other provision of this Agreement, other than the Assumed Liabilities, all Liabilities of Seller or any Seller Affiliates, whether presently in existence or arising hereafter (collectively, the “Retained Liabilities”) shall be retained by Seller and Seller Affiliates and Purchaser shall not assume or be responsible to pay, perform or discharge any Retained Liability. For purposes of clarity, a Liability will be deemed to arise out of or relate to the period prior to Closing if the action, omission or event giving rise to such Liability (e.g., filling a prescription bottle with the wrong drug products or with expired drug products) occurred prior to Closing, even if the improper action, omission or event is not discovered until after Closing (e.g., when the patient picks up the improperly-filled prescription). Without limiting the foregoing, the Retained Liabilities shall include the following:

(i) all accounts payable and Liabilities of Seller or any of the Seller Affiliates;

(ii) all Excluded Taxes;

(iii) with respect to any Transferred Contract, any Liability (A) arising directly or indirectly from events occurring during the period prior to the Closing; or (B) arising in respect of any collective bargaining agreement to which Seller or any Seller Affiliate is a party;

(iv) all Liabilities retained by Seller and the Seller Affiliates under Section 6.08;

(v) all Liabilities of Seller or any Seller Affiliate arising out of, relating to, or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers and others;

(vi) all Liabilities for any damages or injuries to persons or property or for any tort or strict liability arising from events, actions or inactions relating to the Business, in each case, prior to the Closing;

(vii) all Liabilities in respect of any pending or threatened Proceeding arising out of, relating to or otherwise in respect of the operation of the Business or the Transferred

Assets to the extent relating to the operation of the Business or the Transferred Assets at or prior to the Closing;

(viii) all Indebtedness of Seller or any Seller Affiliates;

(ix) all Liabilities with respect to all Real Property and any other real property owned, leased, subleased, or otherwise occupied by Seller or any Seller Affiliate, together with all buildings, fixtures, structures, and improvements situated thereon and all easements, rights-of-way and other rights and privileges appurtenant thereto; and

(x) all Liabilities, other than the Assumed Liabilities, resulting from or arising out of (x) Seller’s or any Seller Affiliates’ ownership or operation of the Business and the Transferred Assets, or (y) the conduct of, the use, non-use or ownership (whether by leasehold or fee) of the Transferred Assets, in each case to the extent such other Liabilities arise during, accrue during, or are attributable to the period prior to Closing.

The Excluded Liabilities described above do not limit the respective Liabilities of the Parties under any of the Ancillary Agreements.

(c) From and after the Closing, Seller retains the right and authority to collect for its own account all Receivables and other related items that are included in the Excluded Assets and to endorse any checks or drafts received with respect to any Receivables or other related items that are included in the Excluded Assets. Purchaser will deliver to Seller any cash or other property received directly or indirectly by Purchaser or its Affiliates with respect to (i) the Receivables and other related items that are included in the Excluded Assets and (ii) co-pays from patients of will-call Inventory (i.e., pharmacy Inventory that is filled but not yet physically picked up by the patient as of the time of the physical inventory under Section 2.03) (“Will-Call Inventory”) that is not counted toward the Closing Inventory amount in accordance with Section 2.03 of the Seller Disclosure Schedule.

SECTION 1.05. Additional Agreements. At the Closing, Seller and Purchaser will execute and deliver:

(a) a pharmacy operating agreement, substantially in the form attached hereto as Exhibit A (the “Pharmacy Operating Agreement”);

(b) a clinic operating agreement, substantially in the form attached hereto as Exhibit B (the “Clinic Operating Agreement”);

(c) a transition services agreement, substantially in the form attached hereto as Exhibit C (the “Transition Services Agreement”);

(d) a master license agreement in connection with the Pharmacy Operating Agreement, substantially in the form attached hereto as Exhibit D-1 (the “Pharmacy Master License Agreement”);

(e) a master license agreement in connection with the Clinic Operating Agreement, substantially in the form attached hereto as Exhibit D-2 (the “Clinic Master License Agreement”);

(f) a file transfer agreement substantially in the form attached hereto as Exhibit E (the “File Transfer Agreement”); and

(g) a master lease agreement substantially in the form attached hereto as Exhibit G (the “Master Lease Agreement”).

ARTICLE II

Closing and Post-Closing Purchase Price Adjustments

SECTION 2.01. Closing. The closing of the Acquisition (the “Closing”) will take place at the offices of Faegre Baker Daniels LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, at 10:00 a.m. local time on the third business day following the satisfaction (or, to the extent permitted, the waiver) of the conditions set forth in Section 7.01, or, if on such day any other condition set forth in Article VII has not been satisfied (or, to the extent permitted, waived by the Party entitled to the benefit thereof), as soon as practicable after all the conditions set forth in Article VII have been satisfied or are capable of being satisfied (but subject to satisfaction) at Closing (or, to the extent permitted, waived by the Party entitled to the benefit thereof), or at such other place, time and date as may be agreed by Seller and Purchaser; provided, that (a) the Closing will not occur before the date that is 90 days after the date of this Agreement and (b) the Closing is subject to Section 2.01 of the Seller Disclosure Schedule. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.” The Closing will be deemed to be effective as of 12:01 a.m. on the Closing Date. All actions to be taken and all documents to be executed or delivered at Closing will be deemed to have been taken, executed and delivered simultaneously, and no action will be deemed taken and no document will be deemed executed or delivered until all have been taken, delivered and executed, except in each case to the extent otherwise stated in this Agreement or any such other document. If Seller and Purchaser agree, documents may be delivered at the Closing by electronic delivery, and (except as otherwise agreed) the receiving Party may rely on the receipt of such documents so delivered as if the original had been received.

SECTION 2.02. Transactions To Be Effected at the Closing.

At the Closing:

(a) Seller will deliver or cause to be delivered to Purchaser:

(i) appropriately executed deeds, bills of sale, assignments and other instruments of transfer relating to the Transferred Assets (other than the Transferred Intellectual Property), it being understood in each case that such deeds, bills of sale, assignments and other instruments of transfer will not require Seller or any Seller Affiliate to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement;

(ii) an officer’s certificate signed by a senior officer of Seller to the effect set forth in Sections 7.02(a), (b) and (d);

(iii) an officer’s certificate signed by a senior officer of Seller certifying (A) that the board of directors, or other managing body of Seller has adopted resolutions authorizing Seller’s entry into this Agreement and the consummation by Seller of the transactions contemplated by this Agreement, and (B) a specimen signature of an officer duly authorized thereby to execute this Agreement and the Ancillary Agreements on behalf of Seller or any Seller Affiliate;

(iv) a certificate of Seller’s non-foreign status complying with the provisions of United States Treasury Regulation Section 1.1445-2(b);

(v) an appropriately executed counterpart of the Pharmacy Operating Agreement;

(vi) an appropriately executed counterpart of the Clinic Operating Agreement;

(vii) an appropriately executed counterpart of the Transition Services Agreement;

(viii) an appropriately executed counterpart of the Pharmacy Master License Agreement;

(ix) an appropriately executed counterpart of the Clinic Master License Agreement;

(x) an appropriately executed counterpart of the File Transfer Agreement;

(xi) an appropriately executed counterpart of the Master Lease Agreement;

(xii) one or more appropriately executed Powers of Attorney, substantially in the form attached hereto as Exhibit F (“Power of Attorney”);

(xiii) all appropriately executed lease or license agreements with respect to the Real Properties of the Business necessary for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing;

(xiv) duly executed assignments of the U.S. trademark registrations and applications and patents and patent applications included in the Transferred Intellectual Property, in a form suitable for recording in the U.S. Patent and Trademark Office, a release of any liens and confirmation of recording of such release to the extent applicable to any Transferred Intellectual Property, and a general assignment for all other Transferred Intellectual Property; and

(xv) such documents of further assurance reasonably necessary and typical for transactions similar to the Acquisition, in form and substance reasonably satisfactory to Purchaser, in order to complete the Acquisition.

(b) Purchaser will deliver to Seller:

(i) payment, by wire transfer of immediately available funds to one or more accounts designated in writing by Seller (such designation to be made at least three business days prior to the Closing Date), in an amount equal to the Purchase Price;

(ii) appropriately executed counterparts to such deeds, bills of sale, assignments and other instruments of transfer, and appropriately executed assumption agreements and other instruments of assumption providing for the assumption of the Assumed Liabilities;

(iii) an officer’s certificate signed by a senior officer of Purchaser to the effect set forth in Sections 7.03(a) and (b).

(iv) an appropriately executed counterpart of the Pharmacy Operating Agreement;

(v) an appropriately executed counterpart of the Clinic Operating Agreement;

(vi) an appropriately executed counterpart of the Transition Services Agreement;

(vii) an appropriately executed counterpart of the Pharmacy Master License Agreement;

(viii) an appropriately executed counterpart of the Clinic Master License Agreement;

(ix) an appropriately executed counterpart of the File Transfer Agreement;

(x) an appropriately executed counterpart of the Master Lease Agreement; and

(xi) such documents of further assurance reasonably necessary and typical for transactions similar to the Acquisition, in form and substance reasonably satisfactory to Seller, in order to complete the Acquisition.

SECTION 2.03. Closing Inventory. Seller and Purchaser will jointly engage RGIS or a similar inventory service provider (supervised by licensed pharmacists designated by the Parties) to conduct a physical inventory of the Transferred Inventory on the close of business on the date immediately prior to the Closing Date; provided that the Will-Call Inventory will not be counted by the inventory service provider but will instead be determined based on a statement provided

by Seller to Purchaser. The Transferred Inventory will be valued in accordance with the principles set forth on Section 2.03 of the Seller Disclosure Schedule.

SECTION 2.04. Closing Date Statement and Purchase Price Adjustments.

(a) Closing Date Statement and Will-Call Return Statement. Within 21 days after Closing, Purchaser will prepare and deliver to Seller a statement setting forth the amount of Will-Call Inventory that was subsequently returned to stock due to the patient’s failure to pick-up that Will-Call Inventory. Within 45 days after the Closing Date, Seller will prepare and deliver to Purchaser a calculation by Seller of the Closing Inventory (the “Closing Date Statement”).

(b) Objections; Resolution of Disputes.

(i) Unless Purchaser notifies Seller in writing within 30 days after Seller’s delivery of the Closing Date Statement of any objection to the computation of the Closing Inventory set forth therein (the “Notice of Objection”), the Closing Date Statement will become final and binding at the end of such 30-day period. During such 30-day period Purchaser and its representatives and their advisors will be permitted to review all materials and information used by Seller in preparing the Closing Date Statement and Seller will make available such personnel as are reasonably necessary to assist Purchaser in its review of the Closing Date Statement. Any Notice of Objection must specify in reasonable detail the basis for the objections set forth therein.

(ii) If Purchaser provides the Notice of Objection to Seller within such 30-day period, Purchaser and Seller will, during the 30-day period following Seller’s receipt of the Notice of Objection, attempt in good faith to resolve Purchaser’s objections. During such 30-day period, Seller and its independent auditors and other representatives and their advisors will be permitted to review the working papers of Purchaser and, if applicable, Purchaser’s representatives relating to the Notice of Objection and the basis therefor. If Purchaser and Seller are unable to resolve all such objections within such 30-day period, the matters remaining in dispute that were properly included in the Notice of Objection will be submitted to PricewaterhouseCoopers LLP (or, if such firm declines to act, to another nationally recognized public accounting firm mutually agreed upon by Purchaser and Seller in writing and, if Purchaser and Seller are unable to so agree within 10 days after the end of such 30-day period, then Purchaser and Seller will each select such a firm and such firms will jointly select a third nationally recognized firm to resolve the disputed matters (such selected firm being the “Independent Expert”)). The Parties will instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than 30 days after its selection. The resolution of disputed items by the Independent Expert will be final and binding, and the determination of the Independent Expert will constitute an arbitral award that is final, binding and non-appealable and upon which a judgment may be entered by a court having jurisdiction over the Party against which such determination is to be enforced. The fees and expenses of the Independent Expert will be apportioned based upon the inverse proportion of the amount of the disputed items on the Closing Date Statement resolved in favor of such Party (i.e., so that the prevailing Party bears a lesser amount of such fees and expenses). The fees and disbursements of Purchaser’s representatives incurred in connection with their review of the Closing Date Statement and certification of any Notice of Objection will be borne by

Purchaser. The Closing Date Statement, as adjusted pursuant to this Section 2.04(b), shall be deemed to be the Closing Date Statement for purposes of calculating any adjustment to the Purchase Price pursuant to Section 2.04(c).

(c) Adjustment Payment. Within 10 days after the Closing Date Statement has become final and binding in accordance with Section 2.04(b):

(i) if Closing Inventory in the Closing Date Statement exceeds $510,000,000, then Purchaser shall pay to Seller an amount equal to (A) Closing Inventory, minus (B) $500,000,000 (the “Target Closing Inventory”), plus (C) simple interest thereon at a rate of 5% per annum from the Closing Date to the date payment is made in full, or

(ii) if Closing Inventory in the Closing Date Statement is less than $490,000,000, then Seller shall pay to Purchaser an amount equal to (A) Target Closing Inventory, minus (B) Closing Inventory, plus (C) simple interest thereon at a rate of 5% per annum from the Closing Date to the date payment is made in full, or

(iii) if Closing Inventory in the Closing Date Statement is between $490,000,000 and $510,000,000, then no payment will be made by either Party.

The Purchase Price, adjusted by the payment amounts described in clauses (i) through (iii), will be the “Final Purchase Price.” Any payment under this Section 2.04(c) will be made by wire transfer of immediately available funds to an account designated in writing by Purchaser or Seller, as the case may be.

SECTION 2.05. Post-Closing Books and Records. During the period of time from and after the Closing Date through the resolution of any adjustment to the Purchase Price contemplated by Section 2.04, Purchaser and Seller will afford the other Party and its independent auditors and other representatives in connection with (a) the calculation of the Closing Date Statement and (b) any adjustment to the Purchase Price contemplated by Section 2.04 access at all reasonable times to the personnel, properties, books and records of the Business relevant to the calculation or adjustment contemplated by Section 2.04.

SECTION 2.06. Net Pharmacy Loss Adjustment. If, from the date of this Agreement to the Closing Date, there is a net reduction of more than 20 retail pharmacies included in the Business due to (a) casualty or condemnation of a store, (b) affirmative action by Seller or any Seller Affiliate to close a store, or (c) Purchaser’s inability to derive the economic benefit of operating the retail pharmacy in a store (under any banner) due to Seller’s inability to obtain required consents or waivers from any landlord or developer or any other person (excluding a Governmental Entity), including for any matters set forth in Sections 3.06(d), (g), and (h) of the Seller Disclosure Schedule, then the Purchase Price payable at Closing will be reduced by an amount equal to:

(i) $1,100,000 multiplied by

(ii) (A) the net reduction in the number of retail pharmacies included in the Business from the date of this Agreement to the Closing Date due to the factors set forth in clauses (a) through (c) above, minus (B) 20.

The loss or closing of any retail pharmacy for any reason after the date of this Agreement and prior to Closing will not be a breach of any representation, warranty, covenant, or agreement of Seller under this Agreement and Purchaser will not be entitled to indemnification for any Losses as a result of the loss or closing of any retail pharmacy for any reason in clauses (a) through (c) above after the date of this Agreement through the Closing. The Purchase Price adjustment described in this Section 2.06 will be Purchaser’s sole remedy for a reduction in the number of retail pharmacies for any reason in clauses (a) through (c) above after the date of this Agreement through the Closing.

ARTICLE III

Representations and Warranties of Seller

Except as set forth in the disclosure schedules (the “Seller Disclosure Schedule”) delivered by Seller to Purchaser in connection with this Agreement on or prior to the date hereof (it being agreed that any matter disclosed in the Seller Disclosure Schedule with respect to any section of this Agreement shall not be disclosed against any other section of this Agreement unless the relevance of such disclosure to such other section is reasonably apparent on its face), Seller hereby represents and warrants to Purchaser as follows:

SECTION 3.01. Organization and Standing. Seller is validly existing and in good standing under the laws of the State of Minnesota. Each Seller Affiliate is validly existing under the laws of its jurisdiction of organization. Each of Seller and each of the Seller Affiliates has full corporate, company or partnership power and authority to enable it to own, lease or otherwise hold the Transferred Assets owned, leased or otherwise held by it and to conduct the Business as presently conducted by it.

SECTION 3.02. Authority; Execution and Delivery; Enforceability. Seller has full corporate power and authority to execute this Agreement and the other agreements and instruments to be executed and delivered in connection with this Agreement (the “Ancillary Agreements”) to which it is, or is specified to be, a party and to consummate the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Each of the Seller Affiliates has full corporate, company or partnership power and authority to execute the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated to be consummated by it by such Ancillary Agreements. Seller has taken all corporate action required by its articles of incorporation and by-laws to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Each of the Seller Affiliates has taken all corporate, company or partnership action required by its comparable organizational documents to authorize the execution and delivery of the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the transactions contemplated to be consummated by it by such Ancillary Agreements. Seller has duly executed and delivered this Agreement and on or prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid and binding obligation, enforceable against it in

accordance with the terms of this Agreement or such Ancillary Agreement subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles. Each of the Seller Affiliates on or prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute its legal, valid and binding obligation, enforceable against it in accordance with the terms of such Ancillary Agreement subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

SECTION 3.03. No Conflicts or Violations; No Consents or Approvals Required. Subject to the receipt of the Consents and the making of the filings and submissions referenced in the next sentence, the execution and delivery by Seller of this Agreement do not, the execution and delivery by Seller and each of the Seller Affiliates of each Ancillary Agreement to which it is, or is specified to be, a party will not and the consummation of, in the case of Seller, the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements, or, in the case of each of the Seller Affiliates, the transactions contemplated to be consummated by it by such Ancillary Agreements, will not conflict with, or result in any breach of or constitute a default under, or result in the creation of any Lien (other than Permitted Liens or Liens caused by Purchaser or its Affiliates) upon any of the Transferred Assets under, any provision of (a) in the case of Seller, its articles of incorporation or by-laws and, in the case of each of the Seller Affiliates, its comparable organizational documents, (b) any Contract to which Seller or any of the Seller Affiliates is a party and by which any of the Transferred Assets is bound or (c) any judgment, order, injunction, writ, award or decree (“Judgment”) or statute, law, ordinance, legally-binding rule or regulation (“Applicable Law”) applicable to Seller or any of the Seller Affiliates or any of the Transferred Assets, other than, in the case of clauses (b) and (c) above, any items, individually or in the aggregate, that would not reasonably be expected to materially and adversely impact the Transferred Assets, the Assumed Liabilities, or the Business (taken as a whole). No Consent of, or filing or submission with, any federal, state, local or foreign court of competent jurisdiction, governmental agency, authority, instrumentality or regulatory body (a “Governmental Entity”) is required to be obtained or made by or with respect to Seller or any of the Seller Affiliates in connection with the execution, delivery and performance of this Agreement or the consummation of the Acquisition, other than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”), (ii) the Consents, filings and submissions and expirations and terminations of waiting periods as may be required under any other applicable competition, merger control, antitrust or similar Applicable Law of any jurisdiction, (iii) the Consents, filings and submissions described in Section 5.04, (iv) compliance with and filings under the Exchange Act, (v) those that may be required solely by reason of Purchaser’s (as opposed to any third party’s) participation in the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements, and (vi) those the failure of which to obtain or make would not, individually or in the aggregate, reasonably be expected to materially and adversely impact the Transferred Assets, the Assumed Liabilities, or the Business (taken as a whole).

SECTION 3.04. Financial Information.

(a) In General. Seller does not regularly maintain separate Financial Information for the Business. Section 3.04(a) of the Seller Disclosure Schedule sets forth the following financial information (the “Financial Information”): (i) an unaudited statement of inventory of the Business at January 31, 2015 and February 1, 2014 and (ii) an unaudited statement of current assets and current liabilities of the Business at January 31, 2015, and (iii) an unaudited statement of revenue and direct expenses of the Business for the years ended January 31, 2015 and February 1, 2014 (such January 31, 2015 statements, the “Most Recent Unaudited Financial Information”). Except as set forth in Section 3.04(a) of the Seller Disclosure Schedule, the Financial Information has been prepared in accordance with the historical accounting principles, practices, methodologies and policies of Seller or the applicable Seller Affiliates with respect to the Business, applied on a basis consistent with prior periods and fairly presents in all material respects the Inventory of the Business at February 1, 2014 and January 31, 2015 and the income of the Business for the years ended February 1, 2014 and January 31, 2015, in each case subject to the adjustments described in the databooks, dated March 18, 2015 (pharmacy) and April 3, 2015 (clinics), provided to Purchaser.

(b) Financial Books and Records. The financial books and records with respect to the Business have been derived from the financial books and records of Seller and the Seller Affiliates, which books and records have been maintained in accordance with GAAP and customary business practices and fairly and accurately reflect, in all material respects, on a basis consistent with past periods and throughout the periods involved, the financial information of the Business. Neither Seller nor any Seller Affiliate has received any advice or notification from its independent accountants that Seller or any Seller Affiliate has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the books and records of Seller, any Seller Affiliate or any of their subsidiaries any material properties, assets, liabilities, revenues, expenses, equity accounts or other accounts with respect to the Business.

SECTION 3.05. Transferred Assets Other than Intellectual Property.

(a) Seller or a Seller Affiliate has, or as of the Closing will have, good and valid title to all Transferred Assets, other than those sold or otherwise disposed of since the date of this Agreement not in violation hereof, in each case free and clear of all mortgages, liens, charges, claims, pledges or other encumbrances of any kind (collectively, “Liens”), except (i) Liens arising under original purchase price conditional sales Contracts or equipment leases with third parties entered into in the ordinary course of business, and (ii) Liens for Taxes and other governmental charges that are not due and payable (the Liens described in clauses (i) and (ii) above, together with any Liens set forth in Section 3.05(a) of the Seller Disclosure Schedule, are referred to collectively as the “Permitted Liens”). All of the Transferred Assets are (x) in normal operating condition and repair, ordinary wear and tear excepted, and (y) not in need of maintenance or repair, except for ordinary routine maintenance or repairs that are not material in cost.

(b) This Section 3.05 does not relate to intellectual property matters, such items being the subject of Section 3.19.

SECTION 3.06. Real Property.

(a) Section 3.06(a) of the Seller Disclosure Schedule contains a list, as of the date of this Agreement, of all real property owned by Seller or any Seller Affiliate where the Business is operated, including owner, address and whether the Business conducted at that real property is a pharmacy or clinic (the “Owned Property”). Except as provided in Sections 3.06(d) and (g) of the Seller Disclosure Schedule, Seller or a Seller Affiliate has valid fee simple title to each Owned Property, free of liens and encumbrances that would prevent or materially impair the operation of the Business by Purchaser at such Owned Property.

(b) Section 3.06(b) of the Seller Disclosure Schedule contains a list, as of the date of this Agreement, of (i) all real property leased, subleased or otherwise occupied by Seller or any Seller Affiliate where a Business is operated (the “Leased Real Property”, together with the Owned Property, the “Real Property”), (ii) the leases and all amendments thereto for each such Leased Real Property (the “Leases”) and all other documents entered into in connection with the Leases or otherwise related thereto (including any assignments, guarantees or, with respect to any subleases, master leases) that materially impact the use or occupancy of the Business Space or the operation of the Business therein (the “Lease Files”), and (iii) the landlord, tenant, address, use, current rent and term, under each Lease, including an indication of renewal terms. Seller has delivered to Purchaser complete and correct copies of all of the Leases.

(c) Seller has valid leasehold title to, and is in possession of, each Leased Real Property under binding and enforceable Leases. Except as provided in Sections 3.06(d) and (g) of the Seller Disclosure Schedule, each Lease for a Leased Real Property does not impose any restrictions that would prevent or materially impair the operation of the Business by Purchaser at such Leased Real Property.

(d) Except as set forth on Section 3.06(d) of the Seller Disclosure Schedule, no third party consent (excluding consents for exterior signage) is required to lease, sublease or license the Business Space to Purchaser for the operation of the Business.

(e) (i) To the knowledge of Seller, there is no Proceeding which would reasonably be expected to affect the right of Purchaser to use the Business Space for operation of the Business, (ii) all Real Property has the real estate licenses, Permits, and notices of inspection necessary for the occupancy thereof and conduct of the Business therein, (iii) neither Seller nor any Seller Affiliate is in material default under any of the Leases and to the knowledge of Seller, no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or default, (iv) there are no subleases or other parties in possession of any portion of the Business Space, (v) there are no condemnations pending or, to the knowledge of Seller, threatened against any Real Property which would affect the right of Purchaser to continue using the Business Space for the operation of the Business therein, and (vi) each Business Space is supplied with utilities and other services necessary to operate the Business therein.

(f) To the knowledge of Seller, none of the Business Space, or the use of the Business Space for operation of the Business, violates the standards of zoning or other

Applicable Laws, or any matters of record, which would materially affect the operation of the Business by Purchaser in such Business Space.

(g) Except as provided in Section 3.06(g) of the Seller Disclosure Schedule, there are no restrictions (other than with respect to exterior signage) or other encumbrances that impose material restrictions on any portion of the Business or that will materially interfere with or prevent Purchaser’s use of any Business Space or the operation of the Business therein. None of Seller or, to the knowledge of Seller, any other Person is in violation of a condition or agreement contained in any easement, restrictive covenant or any similar instrument or agreement materially and adversely affecting the operation of the Business in any Real Property.

(h) Except as provided in Section 3.06(h) of the Seller Disclosure Schedule, no options, rights of first refusal, or rights of first offer have been granted or entered into which give any other party a right to purchase or acquire any interest in any Real Property or any part thereof, which would prevent or materially impair Purchaser from operating the Business therein or occupying the Business Space therein in the manner conducted prior to the Closing.

SECTION 3.07. Contracts. A true and complete copy of each Transferred Contract in the possession of Seller or any Seller Affiliate has been made available to Purchaser. All Transferred Contracts are valid, binding and in full force and effect and enforceable by Seller or a Seller Affiliate in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization and other Applicable Laws of general applicability relating to or affecting creditors’ rights and to general equity principles. As to each Transferred Contract, there does not exist thereunder any breach, violation or default on the part of Seller or a Seller Affiliate or, to the knowledge of Seller, any other party to such Transferred Contract, and there does not exist any event, occurrence or condition, including the consummation of the Acquisition, which (with or without notice, passage of time, or both) would constitute a breach, violation or default thereunder on the part of Seller or a Seller Affiliate, which breach, violation or default has, or would reasonably be expected to be, individually or in the aggregate, material. No waiver of any material right has been granted by Seller, any Seller Affiliate or any of the other parties thereto under any of the Transferred Contracts.

SECTION 3.08. Permits.

(a) The Transferred Permits are validly held by Seller or a Seller Affiliate, and Seller or the applicable Seller Affiliate has complied in all material respects with the terms and conditions thereof.

(b) During the 24 months immediately preceding the date of this Agreement, neither Seller nor any of the Seller Affiliates has received written notice of any Proceeding relating to the revocation or modification of any of the material Transferred Permits and, to the knowledge of Seller, there is no fact, error or admission relevant to any material Transferred Permit that would permit the suspension, revocation, withdrawal, modification or limitation or result in the threatened suspension, revocation, withdrawal, modification or limitation, or any loss of such Permit. No outstanding material violations are or have been recorded in respect of any of the Transferred Permits. Seller and the Seller Affiliates possess all Permits necessary to operate the Business as currently conducted (the “Material Permits”).

(c) None of the Transferred Permits would reasonably be expected to be subject to any material suspension, modification, revocation or non-renewal as a result of the execution and delivery of this Agreement or the consummation of the Acquisition.

SECTION 3.09. Taxes.

(a) For purposes of this Agreement:

“Code” means the Internal Revenue Code of 1986, as amended.

“Excluded Taxes” means all Liabilities of Seller or any Seller Affiliate or any of their respective Affiliates in respect of (i) any Tax for any Pre-Closing Tax Period, (ii) any income based Tax imposed on Seller or any Seller Affiliate related to gain recognized on the disposition of the Transferred Assets, and (iii) Sellers’ Allocable Portion of Transfer Taxes related to Real Property (if any) as provided in Section 10.03(b).

“Post-Closing Tax Period” means any taxable period (or portion thereof) beginning on or after the Closing Date.

“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending before the Closing Date.

“Tax” or “Taxes” means all forms of taxation of the Business imposed by any federal, state, provincial, local, foreign or other Taxing Authority, including income, franchise, property, sales, use, excise, employment, unemployment, payroll, social security, estimated, value added, ad valorem, transfer, recapture, withholding, health and other taxes of any kind, including any interest, penalties and additions thereto.

“Tax Return” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including any amendment made with respect thereto.

“Taxing Authority” means any federal, state, provincial, local or foreign government, any subdivision, agency, commission or authority thereof or any quasi-governmental body exercising tax regulatory authority.

“Transfer Taxes” means all sales (including bulk sales), use, value added, transfer, recording, ad valorem, privilege, documentary, gross receipts, registration, conveyance, excise, license, stamp or similar Taxes and fees arising out of, in connection with or attributable to the transactions effectuated pursuant to this Agreement.

(b) All Tax Returns required to be filed by the Code or by applicable state, provincial, local or foreign Tax laws to the extent such Tax Returns relate to Pre-Closing Tax Periods have been timely filed or will be timely filed, (ii) all Taxes due on such Tax Returns have been paid in full or will be timely paid in full by the due date thereof other than those being contested in good faith by appropriate proceedings, (iii) no claims have been asserted in writing against Seller or any Seller Affiliate with respect to any Taxes due on such Tax Returns and (iv) no Tax liens have been filed.

SECTION 3.10. Proceedings. Except as set forth in Section 3.10 of the Seller Disclosure Schedule, as of the date of this Agreement, there are no Proceedings pending or, to the knowledge of Seller, threatened, involving the Business, at law or in equity or before any Governmental Entity and pursuant to which a party seeks more than $1,000,000 from Seller or the applicable Seller Affiliate or injunctive relief or specific performance from Seller or the applicable Seller Affiliate involving the Business. Neither Seller nor any of the Seller Affiliates is a party or subject to or in default under any unsatisfied Judgment applicable to the conduct of the Business, other than any such Judgments that would not reasonably be expected to be material. This Section 3.10 does not relate to Tax matters, such items being the subject of Section 3.09, to matters with respect to Seller Benefit Plans or employment matters, such items being the subject of Section 3.11, to environmental matters, such items being the subject of Section 3.15, to healthcare regulatory matters, such items being the subject of Section 3.18, or to intellectual property matters, such items being the subject of Section 3.19.

SECTION 3.11. Seller Benefit Plans; Employment Matters.

(a) Section 3.11(a) of the Seller Disclosure Schedule sets forth a list, as of the date of this Agreement, of each material Seller Benefit Plan. With respect to each material Seller Benefit Plan, Seller has made available to Purchaser copies of the following (as applicable): (i) the most recent summary plan description and any summary of material modifications, or to the extent the Seller Benefit Plan is not subject to ERISA, description of such program, and (ii) the current IRS determination letter for any Seller Benefit Plan intended to be qualified under Section 401(a) of the Code.

(b) Each Seller Benefit Plan has been administered in accordance with its terms and is in compliance in all material respects with all applicable provisions of ERISA, the Code, COBRA, the Patient Protection and Affordable Care Act (“ACA”) and any other Applicable Laws. Neither Seller nor any ERISA Affiliate is subject to any liability under Title IV of ERISA or Section 412 of the Code that would reasonably be expected to become a liability of Purchaser and its Affiliates on or after the Closing Date. In respect of each Seller Benefit Plan intended to be qualified under Section 401(a) of the Code, Seller has received a favorable determination letter on a timely basis from the IRS that such Seller Benefit Plan is so qualified and there is no fact or circumstance that has adversely affected or could reasonably be expected to result in the disqualification of such Seller Benefit Plan. In respect of each Seller Benefit Plan that is a group health plan, there is no fact or circumstance that would reasonably be expected to result in the imposition of a material tax or penalty against Seller or any Seller Affiliate under the ACA with respect to the Business Employees, individually or in the aggregate.

(c) Neither Seller nor any ERISA Affiliate is obligated to contribute to any Multiemployer Plan on behalf of any Business Employee.

(d) Neither Seller nor any Seller Affiliate is party to any collective bargaining agreement with any labor organization covering the terms and conditions of employment for any Business Employee.

(e) The execution of this Agreement or any Ancillary Agreements and the performance of the transactions contemplated therein, will not (i) except as set forth in Section

3.11(e)(i) of the Seller Disclosure Schedule (which schedule may be modified or updated by Seller from time-to-time prior to the Closing), result in any payment or increase in benefit with respect to any Business Employee; or (ii) result in any payment or benefit that will or may be made by Seller that may be characterized as an “excess parachute payment” within the meaning of Section 280G of the Code.

(f) Seller is, with respect to the Business Employees, in compliance with all Applicable Laws, including those related to employment, employment practices, labor, terms and conditions of employment, classification of employees, and payment of wages, except where the failure to so comply has not had and would not, individually or in the aggregate, have a Business Material Adverse Effect.

(g) As of the date of this Agreement, there are no work stoppages, slowdowns, walkouts or strikes with respect to the Business Employees, nor to the knowledge of Seller, are any such actions threatened.

(h) Seller has in its files a Form I-9 that is validly and properly completed in accordance with Applicable Law for each Transferred Employee to the extent such form is required under Applicable Law. With regard to the Business Employees, Seller has not received any notice or other communication from any Governmental Entity or other person regarding any violation or alleged violation of any Applicable Law relating to hiring, recruiting, employing (or continuing to employ) anyone not authorized to work in the United States and has resolved any and all “no match” notifications from the Social Security Administration. Seller has a public access file for each Business Employee working under the H-1B visa program, and the public access file is in compliance with Section 655.760 of Title 20 of the Code of Federal Regulations. Seller is in compliance with the Department of Labor’s Labor Condition Application provisions set forth in Title 20 of the Code of Federal Regulations, Section 655.700 et seq.

SECTION 3.12. Absence of Changes or Events. Since the date of the Most Recent Unaudited Financial Information to the date of this Agreement, (a) Seller and the Seller Affiliates have conducted the Business in the ordinary course and in a manner consistent with past practice, and (b) there has not been any event that has had, or would be reasonably expected to have (either individually or in the aggregate), a Business Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth in Section 3.12 of the Seller Disclosure Schedule, since the date of the Most Recent Unaudited Financial Information to the date of this Agreement, Seller has not taken any action that, if taken after the date of this Agreement, would constitute a breach of Sections 5.01(a) – (m) or require the consent of Purchaser.

SECTION 3.13. Compliance with Applicable Laws.

The Business is not, and during the past two years has not been, in violation in any material respect, and, to the knowledge of Seller, no event has occurred or circumstance exists that (with or without notice or lapse of time) would constitute or result in a violation in any material respect by the Business of, or failure on the part of the Business to comply in any material respect with any Applicable Law that is or was applicable to the conduct or operation of the Business or the ownership or use of any of the Transferred Assets. This Section 3.13 does

not relate to Tax matters, such items being the subject of Section 3.09, to matters with respect to Seller Benefit Plans or employment matters, such items being the subject of Section 3.11, to environmental matters, such items being the subject of Section 3.15, to healthcare regulatory matters, such items being the subject of Section 3.18, or to intellectual property matters, such items being the subject of Section 3.19.

SECTION 3.14. Certain Transactions. There are no Contracts between Seller, a Seller Affiliate or any of their Affiliates, on the one hand, and any of the officers or employees of the Business (other than for services as officers or employees), on the other hand, including any Transferred Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any such person to the Business other than those that will be terminated under Section 5.07.

SECTION 3.15. Environmental Matters.

(a) For purposes of this Agreement:

“Environmental Laws” means any Applicable Law, treaty, judicial decision, Judgment, Permit or governmental restriction or any agreement with any Governmental Entity or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Hazardous Materials” means any pollutants, contaminants, toxic or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds, chemicals, natural or man-made elements or forces (including petroleum or any by-products or fractions thereof, any form of natural gas, lead, asbestos and asbestos-containing materials, building construction materials and debris, polychlorinated biphenyls (“PCBs”) and PCB-containing equipment, radon and other radioactive elements, ionizing radiation, electromagnetic field radiation and other non-ionizing radiation, sonic forces and other natural forces, infectious, carcinogenic, mutagenic or etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and urea formaldehyde foam insulation) that are regulated by, or may form the basis of liability under, any Environmental Laws.

(b) In connection with or relating to the Transferred Assets, except for non-compliance that would not prevent or materially impair Purchaser from occupying any Business Space or operating the Business therein and would not reasonably be expected to materially and adversely affect the Business (taken as a whole), Seller and the Seller Affiliates comply and have complied with all applicable Environmental Laws with respect to the Business, including obtaining any Permits required pursuant to Environmental Laws for the operation of the Business. Except for any violations or alleged violations or Liability that would not prevent or materially impair Purchaser from occupying any Business Space or operating the Business therein and would not reasonably be expected to materially and adversely affect the Business (taken as a whole), neither Seller nor any Seller Affiliate has received any written notice alleging any violation of, or Liability under, of any applicable Environmental Laws with respect to the Business, the Transferred Assets or as to the Business Space. To the knowledge of Seller, except for matters that would not prevent or materially impair Purchaser from occupying any Business

Space or operating the Business therein and would not reasonably be expected to materially and adversely affect the Business (taken as a whole), there are no pending, ongoing, or future Liabilities arising out of prior non-compliance with applicable Environmental Laws related to the Business, the Transferred Assets, or the Business Space. There has been no release or threatened release of Hazardous Materials in violation of any applicable Environmental Law, in or under any Real Property, or other violation of or non-compliance with any applicable Environmental Law with respect to any Real Property or operation of the Business therein, that would prevent or materially impair Purchaser from occupying any Business Space or operating the Business therein or that would reasonably be expected to materially and adversely affect the Business (taken as a whole).

(c) There are no Proceedings pending or, to the knowledge of Seller, threatened, involving the Business, the Transferred Assets or the Business Space at law or in equity or before any Governmental Entity pursuant to which a party seeks injunctive relief or specific performance from Seller or any Seller Affiliate involving any alleged violation of, or material Liability under, Environmental Law involving the Business, the Transferred Assets or the Business Space.

SECTION 3.16. Suppliers.

Section 3.16 of the Seller Disclosure Schedule sets forth a true and complete list of the 20 largest suppliers of the Business, on a consolidated basis determined by dollar volume of expenditures, for the fiscal year ended January 31, 2015.

SECTION 3.17. Privacy. Seller has complied in all material respects with all Applicable Laws addressing the privacy or security of protected health information, as defined by HIPAA 45 C.F.R. § 164.501, that Seller uses or holds for use in the operation of the Business (the “Data”). Seller has taken reasonable and customary measures consistent with generally accepted industry practices to protect the privacy of the Data. Seller has not suffered a privacy or security breach that would trigger notice obligations under HIPAA with respect to the privacy of such Data that has involved 500 or more individuals.

SECTION 3.18. Healthcare Regulatory.

(a) Solely with regard to any pharmacy or medical clinic of the Business for which Purchaser requests to transfer Seller’s NPI number and Medicare, Medicaid, or other state or federal health care program provider numbers pursuant to Section 5.06, each such pharmacy and medical clinic of the Business and, to the knowledge of Seller, the licensed professionals of Seller providing services for such pharmacy or medical clinic of the Business, meet all the requirements for participation in and payment under the Medicare, Medicaid and other state or federal health care programs in which that pharmacy or medical clinic of the Business participates (collectively “Programs”) and is a party to valid participation agreements for payment by such Programs if that pharmacy or medical clinic of the Business bills a particular Program for payment or is otherwise required to meet such requirements. Seller has not received any notice indicating that the enrollment or participation of any such pharmacy or medical clinic of the Business in a Program may be terminated or withdrawn nor, to Seller’s knowledge, is there any reason to believe that such enrollment or participation is likely to be terminated or

withdrawn. There is no Proceeding pending, received or, to the knowledge of Seller, threatened against Seller or any Seller Affiliate, or seeking injunctive relief or specific performance from Seller or a Seller Affiliate, relating to a violation of any Applicable Law pertaining to the Programs. Each such pharmacy or medical clinic of the Business has timely filed all claims or other reports required to be filed with respect to the purchase of products or services by third-party payors (including Medicare and Medicaid), and all such claims or reports are complete and accurate in all material respects. Seller has no liability to any payor with respect thereto, except for liabilities incurred in the ordinary course of business.

(b) Seller and each Seller Affiliate is in compliance, and for the past two years has complied, in all material respects with all Health Care Laws.

(c) To the knowledge of Seller, no personnel of Seller or any Seller Affiliate during such person’s employment with Seller or such Seller Affiliate has been convicted of or charged with a Medicare, Medicaid or other Federal Health Care Program (as defined in 42 U.S.C. § 1320a-7b(f)) related offense, or convicted of or charged with or investigated for a violation of federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, obstruction of an investigation or controlled substances. To the knowledge of Seller, no personnel of Seller or any Seller Affiliate during such person’s employment with Seller or a Seller Affiliate has been excluded or suspended from participation in Medicare, Medicaid or any other Federal Health Care Program, or has been debarred, suspended or are otherwise ineligible to participate in federal programs. To the knowledge of Seller, neither Seller nor any Seller Affiliate has contracted with any individual or entity that is suspended, excluded or debarred from participation in, or otherwise ineligible to participate in, a Federal Health Care Program.

(d) Seller is not a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders or similar agreements with or imposed by any Governmental Entity with regard to the operation of the Business.

SECTION 3.19. Intellectual Property.

(a) The Transferred Intellectual Property is owned solely and exclusively by Seller or one of the Seller Affiliates, free and clear of any Lien. The Transferred Intellectual Property, is subsisting and has not expired, been cancelled, or abandoned.

(b) Neither the execution, delivery or performance by Seller of this Agreement or the Ancillary Agreements, nor the consummation of any transactions contemplated hereby or thereby, shall result in the loss or impairment of, or give rise to any right of a third party to terminate, any rights of the Seller in or to any Transferred Intellectual Property owned by any of them.

(c) To the knowledge of Seller, the conduct of the Business, and Seller’s and the Seller Affiliates’ use of the Transferred Assets, do not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Person. To the knowledge of Seller, no Person is infringing, misappropriating or otherwise violating any Transferred Intellectual Property.

(d) There is no Proceeding pending or, to the knowledge of Seller, threatened (i) by or against Seller or any of the Seller Affiliates concerning any of the foregoing in Section 3.19(c), nor has Seller or any of the Seller Affiliates received any written notification that a license under any other Person’s Intellectual Property (other than licenses that are Transferred Assets) is or may be required to operate the Business, or (ii) in which the ownership, validity, registerability or enforceability of, or Seller’s or any of the Seller Affiliates’ right to use, any Transferred Intellectual Property is contested or challenged.

SECTION 3.20. Brokers or Finders. No agent, broker, investment banker or other firm or person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee from Seller or any Seller Affiliate in connection with any of the transactions contemplated by this Agreement, except Goldman, Sachs & Co., whose fees and expenses will be paid by Seller.

ARTICLE IV

Representations and Warranties of Purchaser

Except as set forth in the disclosure schedule (the “Purchaser Disclosure Schedule”) delivered by Purchaser to Seller in connection with this Agreement on or prior to the date hereof (it being agreed that any matter disclosed in the Purchaser Disclosure Schedule with respect to any section of this Agreement shall not be disclosed against any other section of this Agreement unless the relevance of such disclosure to such other section is reasonably apparent on its face), Purchaser hereby represents and warrants to Seller as follows:

SECTION 4.01. Organization and Standing. Purchaser is validly existing and in good standing under the laws of the State of Rhode Island and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to perform its obligations under this Agreement and each Ancillary Agreement and to consummate the Acquisition.

SECTION 4.02. Authority; Execution and Delivery; Enforceability. Purchaser has full corporate power and authority to execute this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated by this Agreement and such Ancillary Agreements. Purchaser has taken all corporate action required by its organizational documents to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the transactions contemplated by this Agreement and such Ancillary Agreements. Purchaser has duly executed and delivered this Agreement and on or prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid and binding obligation, enforceable against it in accordance with the terms of this Agreement or such Ancillary Agreement subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

SECTION 4.03. No Conflicts or Violations; No Consents or Approvals Required. Subject to the receipt of the Consents and the making of the filings and submissions referenced in the next sentence, the execution and delivery by Purchaser of this Agreement do not, the execution and delivery by Purchaser of each Ancillary Agreement to which it is, or is specified to be, a party will not and the consummation of the transactions contemplated by this Agreement and such Ancillary Agreements, will not conflict with, or result in any breach of or constitute a default under, any provision of (a) the organizational documents of Purchaser or any of its Affiliates, (b) any Contract to which Purchaser or any of its Affiliates is a party or by which any of their respective properties or assets is bound or (c) any Judgment or Applicable Law applicable to Purchaser or any of its Affiliates. No Consent of, or filing or submission with, any Governmental Entity is required to be obtained or made by or with respect to Purchaser or any of its Affiliates in connection with the execution, delivery and performance of this Agreement or the consummation of the Acquisition, other than (i) compliance with and filings under the HSR Act, (ii) the Consents, filings and submissions and expirations and terminations of waiting periods as may be required under any other applicable competition, merger control, antitrust or similar Applicable Law of any jurisdiction, (iii) the Consents, filings, and submissions described in Section 5.04, (iv) compliance with and filings under the Exchange Act, (v) those that may be required solely by reason of Seller’s (as opposed to any third party’s) participation in the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements, and (vi) those the failure of which to obtain or make would not reasonably be expected to have a material adverse effect on Seller’s ability to consummate the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements.

SECTION 4.04. Proceedings. There are not any (a) outstanding Judgments against Purchaser or any of its Affiliates, (b) Proceedings pending or, to the knowledge of Purchaser, threatened against Purchaser or any of its Affiliates, or (c) investigations by any Governmental Entity that are pending or, to the knowledge of Purchaser, threatened against Purchaser or any of its Affiliates that, in any such case, would reasonably be expected to have a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby (“Purchaser Material Adverse Effect”).

SECTION 4.05. Availability of Funds; Solvency.

(a) Purchaser has or will have prior to the Closing cash available or access to capital in an amount sufficient to enable it to consummate the Acquisition and the other transactions contemplated by this Agreement.

(b) As of the Closing and immediately after consummating the Acquisition and the other transactions contemplated by this Agreement, assuming the accuracy of the representations and warranties of Seller hereunder, Purchaser will not (i) be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair value of its assets or because the present fair salable value of its assets will be less than the amount required to pay its probable liability on its debts as they become absolute and matured), (ii) have unreasonably small capital with which to engage in its business, including the Business, or (iii) have incurred or plan to incur debts beyond its ability to repay such debts as they become absolute and matured.

SECTION 4.06. Brokers or Finders. No agent, broker, investment banker or other firm or person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee from Purchaser or any of its Affiliates in connection with any of the transactions contemplated by this Agreement, except Barclays Capital, Inc., whose fees and expenses will be paid by Purchaser.

ARTICLE V

Covenants

SECTION 5.01. Covenants Relating to Conduct of the Business.

Except for matters (x) set forth in Section 5.01 of the Seller Disclosure Schedule, (y) expressly agreed to in writing by Purchaser (which agreement may not be unreasonably withheld, conditioned or delayed) or (z) otherwise contemplated by the terms of this Agreement, from the date of this Agreement to the Closing, Seller will, and will cause the Seller Affiliates to, (i) conduct the Business in the ordinary course of business, (ii) use commercially reasonable efforts to maintain and preserve intact the Business, (iii) use commercially reasonable efforts to preserve the rights and goodwill of the Business and business relationships with customers, suppliers, distributors and others with whom Seller and the Seller Affiliates deal in connection with the conduct of the Business in the ordinary course of business, (iv) use commercially reasonable efforts to comply in all material respects with any Transferred Contracts of the Business, (v) comply in all material respects with all Applicable Laws, (vi) maintain the validity of existing pharmacy, clinical and other federal, state or local Permits, certifications and Medicare and Medicaid provider status, including any renewals or extensions thereof, consistent with past practices, and (vii) provide notice to Purchaser if Seller opens, closes, or relocates any store or other facility related to or containing the Business. Notwithstanding the foregoing, Purchaser acknowledges and agrees that relationships with Seller, the Seller Affiliates and certain of their respective Affiliates providing services to the Business will terminate as of the Closing as contemplated in Section 11.02 and that such termination will not constitute a breach of this Agreement. Without limiting the generality of the foregoing, prior to the Closing, except as set forth in Section 5.01 of the Seller Disclosure Schedule or with respect to matters as to which Purchaser will have no Liabilities after the Closing, and except as expressly contemplated by the terms of this Agreement or as required by Applicable Law, Seller will not, and will not cause any of the Seller Affiliates to, do any of the following in connection with the Business without the prior written consent of Purchaser (which consent may not be unreasonably withheld, conditioned, or delayed):

(a) adopt or amend in any material respect any Seller Benefit Plan in a manner affecting any Business Employee or grant to any Business Employee or to the Business Employees in the aggregate any material increase in compensation or benefits, except (i) as required by Applicable Law, (ii) in the ordinary course of business or as required under existing agreements or Seller Benefit Plans, (iii) as would relate to a substantial number of similarly situated employees of Seller, the Seller Affiliates or their respective Affiliates other than the Business Employees, or (iv) as described in Section 3.11(e)(i) of the Seller Disclosure Schedule; provided that the foregoing does not restrict Seller or the Seller Affiliates from entering into or making available to newly hired employees or to employees in the context of

promotions based on job performance or workplace requirements, in each case in the ordinary course of business, plans, agreements, benefits and compensation arrangements that have a value that is consistent with past practice; and provided further that Seller will promptly notify Purchaser of any changes described under this Section 5.01(a) that affect the Business Employees;

(b) incur or assume any Liabilities or Indebtedness for borrowed money of the Business, other than in the ordinary course of business, that would be Assumed Liabilities;

(d) enter into a Contract to acquire any pharmacies or medical clinics other than in connection with acquisitions of new retail stores;

(e) terminate, waive, modify or fail to take reasonable action to prevent termination, modification or expiration of, any existing Material Permits or Medicare and Medicaid provider numbers;

(f) materially change the amount of coverage, cancel or allow to lapse, or fail to renew, any insurance covering Seller or any Seller Affiliate with respect to the Business;

(g) divest, sell, transfer, lease, license, abandon, allow to lapse, mortgage, pledge or enter into a Contract or discussions with any other party to sell, remove or otherwise dispose of any Transferred Asset, except (i) pursuant to existing Contracts or commitments disclosed to Purchaser in writing prior to the date hereof, (ii) sales of Inventory and obsolete or excess Equipment sold or disposed of in the ordinary course of business, or (iii) in connection with a permitted store opening, closing or relocation;

(h) waive any claim or compromise, settle or agree to settle any Proceeding related to the Business, unless such settlement only involves payment of money or remediation actions that do not create a material limitation, restriction, or obligation on the Transferred Permits;

(i) fail to make capital expenditures necessary to satisfy applicable regulatory requirements with respect to the Business (which will not include any requirement to build-out consultation rooms);

(j) enter into any Contract outside the ordinary course of business, with aggregate payments in excess of $1,000,000 per annum, that if held by Seller or any Seller Affiliates as of immediately prior to the Closing would have constituted a Transferred Contract;

(k) enter into, modify, extend or cancel any third-party payor Contracts with respect to the Business that if held by Seller or any Seller Affiliates as of immediately prior to the Closing would have constituted a Transferred Contract, provided, that Seller and the Seller Affiliates may renew such third-party payor Contracts without consent so long as any such renewed third-party payor Contract is not binding upon Purchaser;

(l) in any material respect, amend, waive, modify, supplement, extend, terminate, fail to take reasonable action to renew, assign, encumber or otherwise transfer, in whole or in part, its rights and interests in or under any Transferred Contract or any Lease that would have an adverse impact on the Business in any material respect;

(m) adopted a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization related to, involving or in respect of the Business; or

(n) agree or commit, whether in writing or otherwise, to do any of the foregoing.

SECTION 5.02. Access to Information.

(a) From the date hereof to the Closing Date, Seller will, and will cause the Seller Affiliates to, (i) afford to Purchaser and its accountants, counsel, financial advisors and other similar representatives reasonable access during normal business hours and upon reasonable prior notice and at a time mutually agreed to by the Parties, to personnel, legal counsel, financial and other advisors and accountants of Seller and the Seller Affiliates engaged in the conduct of the Business or related to the Transferred Assets, and (ii) furnish to Purchaser, its accountants, counsel, financial advisors and other similar representatives such financial and operating data and other information relating to the Business and the Transferred Assets as Purchaser may reasonably request, and (iii) instruct the employees, counsel, auditors and financial and other advisors of Seller and the Seller Affiliates to cooperate with Purchaser in connection with the foregoing; provided, however, that in each case such access does not unreasonably disrupt the normal operations of Seller or any of the Seller Affiliates or the Business. Nothing contained in this Section 5.02 obligates Seller, any of the Seller Affiliates or any of their respective Affiliates to (1) violate any Applicable Law, (2) breach any duty of confidentiality owed to any person whether such duty arises contractually, statutorily or otherwise (provided that Seller shall, and shall cause the Seller Affiliates to, use commercially reasonable efforts to obtain any third party consents or waivers that would permit the supply of such information) or (3) jeopardize the protection of any attorney-client or attorney work product privilege or similar privilege.

(b) If applicable, from the date of this Agreement to the Closing Date, Seller will, and will cause the Seller Affiliates to, permit Purchaser reasonable access to each pharmacy or medical clinic of the Business after normal business hours and upon reasonable prior notice (or at such other times as permitted by Seller), at a time mutually agreed to by the Parties, in order to install wiring for communication devices and other store systems (including computers, security cameras and other systems) in a location to be mutually agreed to by the Parties and take other similar action at such pharmacy or medical clinic, all at Purchaser’s cost and without causing damage to, or disruption to the normal operations of, such pharmacy or medical clinic; provided that Purchaser shall not be permitted to install any equipment in the pharmacies and medical clinics until immediately following the Closing. Notwithstanding the foregoing, Purchaser shall be permitted to install and test, in each case at times and in a manner mutually agreed to by the Parties, security cameras in or around the pharmacies and medical clinics of the Business prior to the Closing, provided, however, that the security cameras may not be fully operational (i.e., connected and fully functioning) until after the Closing. Purchaser agrees to repair any damage which may be caused due to the exercise of its rights pursuant to this Section 5.02(b) and to

indemnify, defend and hold harmless the Seller Indemnitees from any and all Losses arising out of or in any way connected with Purchaser’s exercise of its rights pursuant to this Section 5.02(b). Seller’s obligation to provide the foregoing access shall be conditioned on the requirement that Purchaser shall not unreasonably interfere with the Business or the other operations of Seller or any Seller Affiliate.

SECTION 5.03. Confidentiality.

(a) Each of Purchaser and Seller acknowledges that the information being furnished or made available to it in connection with the Acquisition and the other transactions contemplated by this Agreement and the Ancillary Agreements is subject to the terms of a Confidentiality Agreement, dated November 14, 2014, between Purchaser and Seller (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only upon, the Closing, the Confidentiality Agreement will terminate with respect to information relating exclusively to the Business (other than the Retained Liabilities and Excluded Assets). Each of Purchaser and Seller acknowledges that any and all other information furnished or made available to it by the other Party or its representatives concerning such other Party and its Affiliates will remain subject to the terms and conditions of the Confidentiality Agreement for a period of 2 years after the Closing.

(b) For a period of 2 years following the Closing, Seller shall, and shall cause its Affiliates and its Affiliates’ officers, directors, employees, accountants, counsel, consultants, advisors and agents (collectively, “Seller Agents”) to, (i) maintain the confidentiality of, (ii) not use, and (iii) not divulge to any person, any documents and information concerning the Transferred Assets and the Assumed Liabilities and any confidential, non-public or proprietary information of Seller and its Affiliates with respect to the Business, except with the prior written consent of Purchaser, or as may be required by Applicable Law; provided, that Seller and the Seller Agents shall not be subject to such obligation of confidentiality for information that (x) otherwise becomes lawfully available to Seller or the Seller Agents after the Closing Date on a nonconfidential basis from a third party who is not under an obligation of confidentiality to Purchaser or (y) is or becomes generally available to the public without breach of this Agreement by any of Seller or the Seller Agents. If Seller or any Seller Agent shall be required by Applicable Law to divulge any such information, Seller or such Seller Agent shall provide Purchaser with prompt written notice of each request so that Purchaser may seek an appropriate protective order or other appropriate remedy, and Seller or such Seller Agent shall reasonably cooperate with Purchaser to obtain a protective order or other remedy; provided, that, in the event that a protective order or other remedy is not obtained, Seller or such Seller Agent shall furnish only that portion of such information which, upon the advice of its counsel, Seller or such Seller Agent is legally compelled to disclose and shall exercise commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any such information so disclosed. The obligation of Seller to hold any such documents and information in confidence shall be satisfied if Seller shall, and shall cause Seller Agents to, exercise the same care with respect to such documents and information as they would take to preserve the confidentiality of Seller’s own similar information. For so long as such information remains subject to the foregoing confidentiality obligations, neither Seller nor any Affiliate of Seller shall use the same for any purpose other than tax, accounting and regulatory and other compliance purposes and evaluating, enforcing and performing Seller’s rights and obligations under this Agreement and

the Ancillary Agreements, including rights to indemnification, or otherwise in connection with the transactions contemplated hereby and thereby.

(c) Nothing in this Section 5.03 limits the rights of Seller or any Seller Affiliate to use (i) a copy of Pharmacy and Medical Records and Prescription Files that Seller or such Seller Affiliate retains for regulatory, insurance, or defense of claims purposes, or as permitted or required by Applicable Law, in accordance with Section 5.05, or (ii) other records that Seller retains as Excluded Assets.

SECTION 5.04. Best Efforts. On the terms and subject to the conditions of this Agreement (including Sections 5.04(b) and 5.04(c)), each of Seller and Purchaser will use (and shall cause their respective Subsidiaries to use) its best efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to cause the conditions to Closing to be satisfied as promptly as practicable (and in any event no later than the Outside Date) and to consummate and make effective, in the most expeditious manner practicable, the Acquisition, including preparing and filing promptly and fully all documentation to effect all necessary filings, notifications, notices, petitions, statements, registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable Antitrust Laws), (ii) obtain as promptly as practicable (and in any event no later than the Outside Date) all approvals, consents, clearances, expirations or terminations of waiting periods, registrations, permits, authorizations and other confirmations from any Governmental Entity or third party necessary, proper or advisable to consummate the Acquisition, (iii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Acquisition (and in any event no later than the Outside Date), and (iv) obtain as promptly as practicable all necessary consents, approvals or waivers from third parties. For purposes of this Agreement, “Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a Governmental Entity that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. Each of Seller and Purchaser will not, and will not permit any of their respective Subsidiaries or other Affiliates to, take any actions that would reasonably be expected to result in any of the conditions set forth in Article VII either being materially delayed or not being satisfied.

(b) In furtherance and not in limitation of the foregoing, each of Seller and Purchaser will (i) as promptly as practicable, but in no event later than 10 business days after the date of the public announcement of this Agreement, unless agreed by both Seller and Purchaser, file or cause to be filed with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (the “DOJ”) a Notification and Report Form pursuant to the HSR Act with respect to the Acquisition and (ii) supply as promptly as practicable any additional information and documentary material that may be requested by the FTC, the DOJ or any other Governmental Entity pursuant to the HSR Act or any other Antitrust Law and use its best efforts to take, or cause to be taken (including by their respective Subsidiaries), all other actions consistent with this Section 5.04 necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as practicable (and in any event no later than the Outside Date). Each of Seller and Purchaser will furnish to the other

such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission under the HSR Act or such other Antitrust Law.

(c) Except as otherwise expressly set forth in this Section 5.04(c) and Section 5.04(c) of the Seller Disclosure Schedule, Purchaser agrees to take, or cause to be taken (including by its subsidiaries), any and all steps and to make, or cause to be made, any and all undertakings necessary to resolve such objections, if any, that a Governmental Entity may assert under any Antitrust Law with respect to the Acquisition, and to avoid or eliminate each and every impediment under any Antitrust Law that may be asserted by any Governmental Entity with respect to the Acquisition, in each case, so as to enable the Closing to occur as promptly as practicable and in any event no later than the Outside Date, including (i) proposing, negotiating, committing to and effecting, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of any businesses, assets, equity interests, product lines or properties of Purchaser (or any of its subsidiaries), (ii) creating, terminating, or divesting relationships, ventures, contractual rights or obligations of Purchaser or its subsidiaries and (iii) otherwise taking or committing to take any action that would limit Purchaser’s freedom of action with respect to, or its ability to retain or hold, directly or indirectly, any businesses, assets, equity interests, product lines or properties of Purchaser or its subsidiaries, in each case as may be required in order to obtain all approvals, consents, clearances, expirations or terminations of waiting periods, registrations, permits, authorizations and other confirmations required directly or indirectly under any Antitrust Law or to avoid the commencement of any action to prohibit the Acquisition under any Antitrust Law, or, in the alternative, to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any action or proceeding seeking to prohibit the Acquisition or delay the Closing beyond the Outside Date. For the avoidance of doubt, except as set forth in Section 5.04(c) of the Seller Disclosure Schedule, nothing in this Agreement shall require Seller to, and Purchaser may not and may not agree to, divest, hold separate or otherwise take any action that limits Purchaser’s, Seller’s or their respective subsidiaries’ freedom of action, ownership or control with respect to, any of the businesses, assets, equity interests, product lines or properties of Seller or any of its subsidiaries, including the Transferred Assets.

(d) In furtherance and not in limitation of the covenants of the Parties contained in this Section 5.04, if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging the Acquisition or any transaction contemplated by this Agreement or the Ancillary Agreements as violative of any Antitrust Law, each of Purchaser and Seller shall use best efforts (up to the Outside Date) to contest and resist, and Purchaser shall control, any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction, or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the Acquisition.

(e) Each of Seller and Purchaser, shall use (and shall cause their respective Subsidiaries to use) its best efforts to (i) cooperate in all respects with each other in connection with any filing or submission with a Governmental Entity in connection with the Acquisition and in connection with any investigation or other inquiry by or before a Governmental Entity relating to the Acquisition, including any proceeding initiated by a private party, (ii) promptly inform the other Party of (and supply to the other Party) any communication received by such Party from, or

given by such Party to, the FTC, the DOJ, or any other Governmental Entity and of any material communication received or given in connection with any proceeding by a private party, in each case in connection with the Acquisition, (iii) permit the other Party to review in advance and incorporate the other Party’s reasonable comments in any communication to be given by it to any Governmental Entity with respect to obtaining any clearances required under any Antitrust Law in connection with the Acquisition and (iv) consult with the other Party in advance of any meeting or teleconference with any Governmental Entity or, in connection with any proceeding by a private party, with any other Person, and, to the extent not prohibited by the Governmental Entity or other Person, give the other Party the opportunity to attend and participate in such meetings and teleconferences in connection with the Acquisition. Except as set forth in Section 5.04(c) of the Seller Disclosure Schedule, Purchaser shall have principal responsibility for devising and implementing the strategy for obtaining any necessary approval, for responding to any request, inquiry, or investigation, and for leading all meetings and communications with any Governmental Entity that has authority to enforce Antitrust Laws. The Parties shall take reasonable efforts to share information protected from disclosure under the attorney-client privilege, work product doctrine, joint defense privilege or any other privilege pursuant to this Section in a manner so as to preserve the applicable privilege.

(f) (i) Purchaser will file applications for issuance of all pharmacy, durable medical equipment seller, and other business Permits (including Drug Enforcement Administration (“DEA”) registration numbers and other applicable DEA forms, NCPDP/NPI numbers, and other similar registrations and numbers) for each pharmacy and medical clinic included in the Business with the appropriate Governmental Entities within the period required by Applicable Law, (ii) Seller will file any notices required with respect to the applications in sub-section (i) above, and (iii) Purchaser and Seller will use best efforts to accomplish and facilitate the issuance of any such pharmacy, durable medical equipment seller, and other business Permits to Purchaser. Purchaser will pay all costs associated with the application for issuance of such pharmacy, durable medical equipment seller, and other business Permits.

SECTION 5.05. Pharmacy and Medical Records; Prescriptions.

(a) Purchaser will engage a firm reasonably acceptable to Seller (the “Data Converter”) to convert the prescription records; medical records; customer records, lists, and profiles; documents, instruments, papers, books, in-store computer files and records and all other records of Seller or any Seller Affiliate in any media relating to patients, doctors, pharmaceuticals, controlled substances, and prescriptions administered by or filled at the pharmacies and medical clinics included in the Business or otherwise relating to the Business, in each case, that may be transferred or assigned to Purchaser under Applicable Law (collectively, the “Pharmacy and Medical Records”) to a format specified by Purchaser, with all costs and expenses of the Data Converter to be borne by Purchaser. If requested by Seller, Purchaser will cause the Data Converter to enter into a business associate agreement with Seller or Purchaser in connection with the conversion of the Pharmacy and Medical Records under this Section 5.05. Seller will, or will cause Seller Affiliates to, provide such access, information, and cooperation to the Data Converter as may be reasonably required to enable the Data Converter to deliver the Pharmacy and Medical Records to Purchaser at least 30 days prior to the Closing Date. The Data Converter may, in turn, provide Purchaser with access to the Pharmacy and Medical Records. Seller may retain a copy of all Pharmacy and Medical Records as reasonably necessary for

regulatory, insurance, defense of claims purposes, or as permitted or required by Applicable Law.

(b) Prior to the Closing Date, Purchaser (i) may use the Pharmacy and Medical Records solely for purposes of ensuring that Purchaser is ready and able to fill prescriptions and provide medical services as of the Closing; provided, however, that Purchaser may only use the minimally necessary Pharmacy and Medical Records to accomplish such purpose, and (ii) may not directly or through use of any subcontractor or agent, in whole or in part, aggregate or de-identify the Pharmacy and Medical Records.

(c) If Seller receives payment from any patient, third-party payor, or other source for any prescription filled or medical service performed by Purchaser on or after the Closing Date or Purchaser receives payment from any patient, third-party payor, or other source for any prescription filled or medical service performed by Seller or a Seller Affiliate before the Closing Date, the receiving Party will report to the other Party in reasonable detail within 60 days of receipt and will, simultaneously with or promptly after each report, pay to the other Party the aggregate amount of the misdirected payments reflected in such report.

(d) Seller shall, and shall cause the Seller Affiliates to, use commercially reasonable efforts to separate prior to the Closing all patient billing records, medical records, manuals, files and Pharmacy and Medical Records owned by Seller or any of the Seller Affiliates that are used or held for use exclusively in, or that arise exclusively out of, the operation or conduct of the Business from documents or databases that are not used or held for use exclusively in, or that do not arise exclusively out of, the operation or conduct of the Business.

SECTION 5.06. Notification; Licenses; Provider Numbers; HIPAA Compliance.

(a) Purchaser will notify Business patients, state boards of pharmacy, the DEA, and all other applicable authorities of the sale, transfer, acquisition, and possession of the Transferred Assets, including the Transferred Inventory, and the Pharmacy and Medical Records; provided, however, that prior to notifying Business patients, Purchaser must obtain written approval from Seller of the notice content; and provided further that Seller shall, and shall cause the Seller Affiliates to, submit any of such notifications that Seller or the Seller Affiliates are required to submit under Applicable Law. Purchaser will be responsible for determining which change of ownership requirements, new licensure requirements, and notice requirements are necessary for Purchaser to obtain all licenses and other Permits desired by Purchaser in connection with the Business and sale of the Transferred Assets. Upon request or reasonable notice to Seller, Seller shall, and shall cause the Seller Affiliates to, cooperate with Purchaser to effect the transfer of or in the application for, as and if Purchaser requests, licenses and all pharmacy and other Permits desired by Purchaser in connection with the Business or the sale of the Transferred Assets hereunder. Seller shall, and shall cause the Seller Affiliates to, further cooperate with Purchaser, as and if Purchaser requests, to effect a transfer to Purchaser of Seller’s and Seller Affiliates’ third party provider numbers, which transfer may include Seller’s and Seller Affiliates’ NPI and NCPDP numbers assigned to the pharmacies and medical clinics of the Business. Seller expressly acknowledges and agrees that the determination of whether or not to assume shall be at Purchaser’s sole discretion, and Purchaser may disclaim and decline assumption of the Medicare provider numbers of Seller or the Seller Affiliates in Purchaser’s

sole discretion. Additionally, except as otherwise expressly provided in a Power of Attorney, Purchaser expressly disclaims and declines assumption of any of Seller’s or any Seller Affiliate’s third party provider numbers or licenses that shall not be otherwise transferred to Purchaser pursuant to this Section 5.06(a) and Section 1.02(a)(v). Notwithstanding the foregoing, Purchaser shall not be deemed to have assumed any and all obligations or Liabilities of Seller, Seller Affiliates or the Transferred Assets with respect to all third party provider numbers and licenses arising from or related to acts or omissions occurring on or prior to the Closing and said obligations or Liabilities shall remain with Seller and Seller Affiliates. Notwithstanding anything herein to the contrary, the terms and provisions of this Section 5.06(a) shall survive the Closing.

(b) In the event that any third party provider numbers issued by any Governmental Entity necessary for the Purchaser’s ownership or operation of the pharmacies and medical clinics of the Business (including any Transferred Permit related to any DEA, any state board of pharmacy, and any state Medicaid license, registration or enrollment) shall not have been issued or transferred to Purchaser as of the Closing, or Purchaser has not obtained any licenses desired by Purchaser prior to the Closing, in each case as contemplated by the preceding subsection (a), Seller shall, and shall cause the Seller Affiliates to, allow Purchaser the right to use any such provider numbers or licenses as Purchaser may require pursuant to a Power of Attorney and any other instruments and agreements as are reasonably necessary to allow Purchaser to utilize Seller’s and the Seller Affiliates’ provider numbers or licenses, to the extent permitted under Applicable Law, in Purchaser’s ownership or operation of the Business. Such Power of Attorney shall be delivered by Seller or the Seller Affiliates, as applicable, on or before the Closing Date and shall be effective until the sooner of: (i) the period permitted under Applicable Law, or (ii) in the case of the applicable provider numbers, the transfer is completed or, at Purchaser’s election, Purchaser is issued new provider numbers and, in the case of the applicable licenses, the transfer is completed or, at Purchaser’s election, Purchaser obtains new licenses. Seller shall not, and shall cause the Seller Affiliates not to, surrender, cancel or terminate any third party provider numbers or licenses that are the subject of the Power of Attorney while the Power of Attorney is in effect. Purchaser’s exercise of the right to use provider numbers and licenses after the Closing as set forth in this paragraph does not limit the Assumed Liabilities of Seller as set forth in Section 1.04. Purchaser will indemnify Seller or the applicable Seller Affiliate for any and all Liabilities or Losses arising out of Purchaser’s use of any third party provider number or license of Seller or that Seller Affiliate.

(c) Each Party will make the Pharmacy and Medical Records available for access to patients and disclosures to other authorized third parties to the extent required by the Health Insurance Portability and Accessibility Act (“HIPAA”) and other Applicable Laws. Purchaser will respond to any inquiries relating to patient rights under HIPAA privacy standards after Closing; provided, that if Purchaser’s non-receipt from Seller of any Pharmacy and Medical Records prevents Purchaser from providing a complete response to such inquiries, then Seller will, upon written request from Purchaser, cooperate with Purchaser in preparing a response.

SECTION 5.07. Notices of Certain Events.

From the date hereof until the Closing Date, each Party shall promptly notify the other Party of:

(a) any written notice or other written communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by this Agreement;

(b) any written notice or other written communication from any Governmental Entity in connection with the transactions contemplated by this Agreement; and

(c) any Event, change or fact of which it is aware that will or is reasonably likely to result in any of the conditions set forth in Article VII becoming incapable of being satisfied.

Purchaser’s receipt of information pursuant to this Section 5.07 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement and shall not be deemed to amend or supplement the Seller Disclosure Schedules.

SECTION 5.08. Termination of Related Party Arrangements.

Except as set forth in Section 5.08 of the Seller Disclosure Schedule or as contemplated in any Ancillary Agreement, all accounts, transactions and Contracts related to the Business (other than those which constitute Retained Liabilities) between Seller or any of the Seller Affiliates, on the one hand, and any Related Person thereof, on the other hand, shall be terminated and cancelled without any consideration or further Liability to the Business or Purchaser and without the need for any further documentation, immediately prior to or at the Closing Date.

SECTION 5.09. Further Assurance. Following the Closing, if Seller or any Seller Affiliate becomes aware of, or Purchaser brings to the attention of Seller the existence of any Transferred Assets that were not properly transferred to Purchaser at Closing, then such Transferred Assets shall be transferred to Purchaser (or to one or more Affiliates of Purchaser designated by Purchaser) as soon as reasonably practicable thereafter for no additional consideration. This provision, however, shall not limit, in any way, the rights and remedies of Purchaser under this Agreement or any Ancillary Agreements. Following the Closing, each of the Parties shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required or desirable to carry out the provisions of this Agreement and the Ancillary Agreements and give effect to the transactions contemplated by this Agreement and the Ancillary Agreements.

ARTICLE VI

Employment Matters

SECTION 6.01. Continuation of Employment; Credited Service.

(a) For purposes of this Agreement, the term “Business Employee” refers to each employee of Seller or any of the Seller Affiliates who, as of the Closing Date, is employed primarily in connection with the Business; provided, that “Business Employee” does not include any Corporate level employee. Section 6.01(a)(i) of the Seller Disclosure Schedule sets forth a list of the pharmacy and clinic job titles of the Business Employees. Within 2 days from

the date of this Agreement, Seller will provide to Purchaser a list of Business Employees, in a form mutually agreeable by Purchaser and Seller and including the information set forth on Section 6.01(a)(ii) of the Seller Disclosure Schedule (an “Employee Census”). Seller will deliver to Purchaser an updated Employee Census at least once every 30 days after the delivery of the initial Employee Census and at such times as reasonably requested by Purchaser with 3 days notice, which shall not be more frequent than weekly, (each, an “Interim Employee Census”) and a final Employee Census one day after the Closing Date (the “Closing Employee Census”). The Closing Employee Census shall only include Business Employees employed as of the Closing Date. No later than 3 business days prior to the anticipated Closing Date, Purchaser will offer employment to all Business Employees listed on the most recent Interim Employee Census, except those on long-term disability (“LTD Business Employees”) or an unauthorized leave of absence, provided that (1) Seller has provided to Purchaser the Employee Census and each Interim Employee Census, as required under this Section 6.01(a), (2) any offer of employment to a Business Employee who is hired after the date of the last Interim Employee Census may be made within 72 hours of Purchaser receiving the Closing Employee Census; and (3) such offers of employment to any Business Employee on an approved leave of absence will be made contingent on such Business Employee’s return to work within 150 days following the date such Business Employee’s leave began (the “Leave Commencement Date”). Nothing herein shall preclude the Purchaser from making an offer of employment to an LTD Business Employee who is able to present documentation from a medical provider to the Purchaser showing that such LTD Business Employee is able to perform the essential functions of the job such LTD Business Employee held with Seller on the date of the Agreement, with or without a reasonable accommodation, so long as such LTD Business Employee does so within six months after the Closing Date.

(b) Seller and Seller Affiliates shall reconcile the Closing Employee Census within 5 business days after the Closing Date and promptly notify Purchaser of any additional Business Employees who were actively at work in the one week period prior to the Closing Date, but were not identified on any Employee Census due to an error or omission. Purchaser shall use its commercially reasonable best efforts to extend offers of employment to such Business Employees as described herein (subject to the conditions described in Section 6.01(c)) within 72 hours of receiving written notice from Seller. Purchaser shall have a reasonable period of time to conduct Purchaser’s customary pre-employment screenings. Employees who do not satisfy the conditions of the offer or do not accept the offer shall not become Transferred Employees for purposes of this Agreement. Purchasers shall have no liability with respect to such Business Employees and shall have no obligation to reimburse Seller for any wages or benefits costs associated with these Business Employees.

(c) Each offer of employment pursuant to Section 6.01(a) and (b) will (A) provide that employment with Purchaser shall become effective as of 12:01 a.m. on the Closing Date or, for those Business Employees on an approved leave of absence at the time the offer is made, as of 12:01 a.m. on the date such Business Employee returns to work within 150 days following the Leave Commencement Date; (B) be for a position that is comparable to the type of position held by the applicable Business Employee immediately prior to the Closing Date, at a geographic location that is within 10 miles of such Business Employee’s place of work immediately prior to the Closing Date; (C) contain terms regarding base salary or wages that are no less favorable than the base salary or wages applicable to the Business Employee immediately

prior to the Closing Date; and (D) otherwise comply in all respects with Applicable Laws and Purchaser’s covenants set forth in this Article VI. Notwithstanding anything to the contrary, each offer of employment shall be on an employment “at-will” basis and such employment shall be conditional upon such Business Employee’s satisfactory passage of Purchaser’s customary pre-employment background, criminal, immigration and other checks, meeting applicable Board of Pharmacy requirements (including fingerprinting) and upon such Business Employee’s satisfactory completion of a drug screening procedure (collectively, the “Employment Screenings”). Each Business Employee who accepts Purchaser’s offer of employment and satisfies the conditions of the Purchaser’s offer of employment, as of the first date he or she is either (i) actively at work on or after the Closing Date or (ii) returns from an approved leave of absence after the Closing Date and within 150 days of the Leave Commencement Date (as applicable in each case, the “Transfer Time”), is referred to herein as a “Transferred Employee.” Effective as of the Transfer Time, each Transferred Employee will cease to be an employee of Seller and will cease to participate in any Seller Benefit Plan. The offer of employment to any Business Employee who does not, upon conclusion of any applicable appeals (which shall be resolved within 10 days after such Business Employee’s receipt of a pre-adverse action letter (the “Final Appeal Date”)), pass all required Employment Screenings shall be promptly withdrawn and such Business Employee shall not be treated as a Transferred Employee for purposes of this Agreement. Notwithstanding the foregoing, Purchaser shall reimburse Seller, under the terms set forth in the Transition Services Agreement, for any salary or wages earned by, and the allocable cost of the employer portion of the premium for benefits provided to, such Business Employee for the period from the Closing Date through the Final Appeal Date. Nothing herein will be construed as a representation, warranty, covenant or guarantee by Seller or any Seller Affiliate that some or all of the Business Employees will accept the offer of employment from Purchaser. Notwithstanding anything to the contrary and regardless of any other provision in this Agreement, Purchaser shall not be obligated to continue to employ any Transferred Employee for any specific period of time following the Closing Date, subject to Applicable Law.

(d) From and after the Transfer Time, Purchaser will give each Transferred Employee full credit for such Transferred Employee’s service with Seller, the Seller Affiliates and any of their respective predecessor employers (to the same extent such service was recognized by Seller and the Seller Affiliates immediately prior to the Transfer Time, except to the extent such credit would result in duplication of benefits), for eligibility to participate and vesting purposes in any employee benefit plans or arrangements maintained by Purchaser and its Affiliates and for levels of any vacation, paid time off, or severance plan or arrangement maintained by Purchaser and its Affiliates.

SECTION 6.02. Continuation of Benefits. For the one-year period immediately following the Closing Date, Purchaser will, or will cause its Affiliates to, provide each Transferred Employee with (a) salary or a base wage rate, as applicable, that in each case is no less favorable to such Transferred Employee than that in effect immediately prior to the Transfer Time, (b) annual cash bonus opportunity no less favorable to such Transferred Employee than those annual cash bonus opportunities applicable to similar situated employees of Purchaser and its Affiliates, it being understood that such opportunity for the then current annual performance period shall be prorated for the remainder of the performance period between the Transfer Time and the end of the then current annual performance period, (c) beginning for the 2016 performance year, equity and equity-based compensation plans and arrangements that are

substantially comparable to those applicable to similarly situated employees of Purchaser and its Affiliates, and (d) employee benefit plans and arrangements (other than salary, annual cash bonus opportunities and equity and equity-based compensation plans and arrangements) that are at least substantially comparable in the aggregate to either those applicable to the Transferred Employees in effect immediately prior to the Transfer Time or those applicable to similarly situated employees of Purchaser and its Affiliates when applying the same eligibility criteria that apply in the normal course to Purchaser employees. To fulfill the obligations set forth in this Section 6.02(d) in respect to group medical, dental, and vision coverage, if considered reasonably necessary by Purchaser to effectuate an orderly transition of participation from Seller’s to Purchaser’s group medical, dental, and vision plans, Purchaser may provide such benefits to a Transferred Employee, by covering the portion of the cost of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) in respect of Seller’s group medical, dental and vision plans in an amount equal to the difference between (i) the COBRA premium applicable to such Transferred Employee and (ii) the amount of the Transferred Employee’s employee premium as in effect immediately prior to the Transfer Time. If Purchaser chooses to provide group medical, dental and vision coverage in this manner, (A) payment of such premiums by Purchaser would continue only during the period between the Transfer Time and the last date on which the Transferred Employee had the opportunity to enroll in Purchaser’s group medical, dental and vision plans, which date shall be no later than June 1, 2016; (B) Purchaser will pay the full amount of such premiums to Seller under the terms of the Transition Services Agreement and shall collect from each impacted Transferred Employee the employee portion of the premium, and (C) premiums will be based on the COBRA premiums established in the normal course by Seller under its applicable group health plans for the period at issue.

SECTION 6.03. Severance. Notwithstanding anything to the contrary in this Agreement, Purchaser agrees to provide each Transferred Employee whose employment is terminated (other than for cause) by Purchaser or its Affiliates during the one-year period immediately following the Closing Date with severance benefits that are no less favorable than the greater of (a) the severance benefits provided by the Seller severance plan applicable to such Transferred Employee immediately prior to the Closing Date (or, if no such severance plan is in effect at the time, the severance benefits typically provided to other similarly situated employees of Seller or the applicable Seller Affiliate), in either case, as set forth in Section 6.03 of the Seller Disclosure Schedules and (b) the severance benefits such Transferred Employee would be entitled to receive under the plan, program, policy, agreement or arrangement of Purchaser or its Affiliates applicable to similarly situated employees immediately prior to such termination, in each case taking into account such Transferred Employee’s length of service with Seller or the applicable Seller Affiliate as provided in Section 6.01(d). Seller and Purchaser intend that the Transferred Employees will have continuous and uninterrupted employment immediately before and immediately after the Closing. Purchaser will assume all Liabilities in respect of claims made by any Business Employees arising solely out of, relating to or in respect of (a) Purchaser’s failure to offer employment to any Business Employee in accordance with this Agreement or (b) any Transferred Employee’s termination of employment after the Transfer Time. In accordance with Section 6.08, Purchaser shall not have any obligations for any Liabilities in respect of Business Employees (i) who do not accept or (ii) except for the limited reimbursement set forth in Section 6.01(c), do not satisfy the conditions of, Purchaser’s offer of employment made in accordance with this Agreement.

SECTION 6.04. Tax-Qualified Savings/401(k) Plan.

(a) No later than the Closing Date, Purchaser will have in effect one or more defined contribution plans that each include a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (collectively, “Purchaser’s 401(k) Plan”) in which Transferred Employees shall be eligible to participate on the same terms and conditions as similarly situated employees of the Purchaser participate, taking into account such Transferred Employee’s length of service with Seller or the applicable Seller Affiliate as provided in Section 6.01(d). Each Transferred Employee participating in the Target Corporation 401(k) Plan (“Seller’s 401(k) Plan”) as of the Transfer Time will become eligible to participate in Purchaser’s 401(k) Plan as soon as administratively possible following the Transfer Time.

(b) Purchaser agrees to cause Purchaser’s 401(k) Plan to allow each Transferred Employee to make a “direct rollover” to Purchaser’s 401(k) Plan of the account balances of such Transferred Employee (including promissory notes evidencing any outstanding loans) under Seller’s 401(k) Plan if (i) such direct rollover is elected in accordance with Applicable Law by such Transferred Employee and (ii) such rollover is allowable under Applicable Law after any amendment required to implement this provision, as reasonably determined by the plan sponsor.

SECTION 6.05. Certain Welfare Benefits Matters.

(a) With respect to any employee benefit plan of Purchaser that provides group welfare benefits, including life insurance, health care, dental care, accidental death and dismemberment insurance, disability and other group welfare benefits in which Transferred Employees are eligible to participate (“Purchaser Welfare Plans”), Purchaser will (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Transferred Employees and their eligible dependents under the Purchaser Welfare Plans to the extent waived or satisfied under the applicable corresponding Seller Benefit Plan immediately prior to the Transfer Time and (ii) provide each Transferred Employee and his or her eligible dependents with credit for any co-payments and deductibles paid prior to the Transfer Time for the plan year in which the Transfer Time occurs for purposes of satisfying any applicable deductible or out-of-pocket requirements under any Purchaser Welfare Plans in which such Transferred Employee participates after the Transfer Time.

(b) Seller and the applicable Seller Affiliates will be responsible in accordance with their respective welfare plans in effect prior to the Transfer Time for all claims incurred under such plans (i) prior to the Transfer Time by Transferred Employees and their eligible dependents and (ii) prior to, on or after the Transfer Time for any Business Employee who does not become a Transferred Employee. Purchaser will be responsible in accordance with the applicable Purchaser Welfare Plans for all claims incurred on or after the Transfer Time by Transferred Employees and their eligible dependents. For purposes of this Section 6.05(b), a claim is deemed to have been incurred on (i) the date of death or dismemberment in the case of claims under life insurance and accidental death and dismemberment policies or (ii) the date on which the charge or expense giving rise to such claim is incurred (without regard to the date of inception of the related illness or injury or the date of the submission of the claim related thereto) in the case of all other claims.

(c) Seller is responsible for all claims for workers’ compensation benefits which are incurred prior to the Transfer Time by Transferred Employees that are payable under the terms and conditions of the workers’ compensation programs of Seller and the Seller Affiliates. Purchaser is responsible for all claims for workers’ compensation benefits that are first incurred from and after the Transfer Time by Transferred Employees that are payable under the terms and conditions of the workers’ compensation programs of Purchaser and its Affiliates. In respect of any claims for worker’s compensation benefits for which is considered incurred both prior to and after the Transfer Time, Seller and Purchaser will apportion Liability relating to such workers’ compensation claims in accordance with Applicable Law. For purposes of this Section 6.05(c), a claim for workers’ compensation benefits is deemed to be incurred when the event giving rise to the claim occurs.

SECTION 6.06. Bonus/Incentive Plan. Seller will make a prorated annual cash bonus/incentive payment to each Transferred Employee who is eligible for such bonus/incentive payment as of the Closing and remains employed through the Closing, in the amount (if any) of which will equal the product of the applicable Transferred Employee’s annual bonus/incentive amount (as described in the next sentence) multiplied by a fraction, the numerator of which is the number of days in the calendar year in which the Closing Date occurs that elapse prior to the Closing Date, and the denominator of which is 365. Seller may determine the annual bonus/incentive amount using any good faith methodology (which need not be the same for each Transferred Employee but shall be the same for groups of similarly situated employees), including by basing such amount upon target bonus or upon actual performance. Such prorated bonuses/incentives will be paid by Seller no later than the date on which Seller pays annual bonuses to other similarly situated employees of Seller and its Affiliates.

SECTION 6.07. Accrued Vacation and Paid Time Off. Seller or the applicable Seller Affiliate will pay each Transferred Employee any vacation pay and any other paid time off pay that has been accrued or earned but not yet taken through the Transfer Time as required under the applicable Seller Benefit Plan policies and Applicable Law with such payment occurring in a timely fashion and not later than the date such payment is required by Applicable Law.

SECTION 6.08. Liabilities. Except as otherwise specifically provided in this Article VI, effective as of the Closing, (a) Seller and the Seller Affiliates will retain all Liabilities relating to employment and employee benefits that are incurred or arise prior to the Closing Date and, in the case of amounts set forth on Section 3.11(e)(i) of the Seller Disclosure Schedules that arise on the Closing Date, in each case, that relate to the Business Employees (or any dependent or beneficiary of any Business Employee) and (b) Purchaser will not assume any such Liabilities. Except as otherwise specifically provided in this Article VI, effective as of the Closing, (i) Purchaser will assume all Liabilities that are incurred or arise on or after the Closing Date and that relate to any Transferred Employee (or any dependent or beneficiary of any Transferred Employee) other than those amounts set forth on Section 3.11(e)(i) of the Seller Disclosure Schedules and (ii) Seller and the Seller Affiliates will not retain any such Liabilities.

SECTION 6.09. WARN Act. Purchaser agrees to provide any required notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “WARN Act”), and any similar state or local law, and to otherwise comply with any such law with respect to any “plant closing” or “mass layoff” (as defined in the WARN Act) or group termination or similar

event affecting Business Employees (including as a result of the consummation of the transactions contemplated by this Agreement) and occurring on or after the Closing Date. Purchaser will not, and will cause its Affiliates not to, take any action on or after the Closing Date that would cause any termination of employment of any employees by Seller or the Seller Affiliates that occurs before the Closing Date to constitute a “plant closing” or “mass layoff” or group termination under the WARN Act or any similar state or local law, or that would create any Liability (including any penalty) to Seller or the Seller Affiliates for any employment terminations under Applicable Law. Seller will notify Purchaser prior to the Closing of any layoffs of any Business Employees in the 90-day period prior to the Closing.

SECTION 6.10. Administration; Employee Communications. Following the date of this Agreement, Seller and Purchaser will reasonably cooperate in all matters reasonably necessary to effect the transactions contemplated by this Article VI, including exchanging information and data relating to workers’ compensation, ACA compliance and reporting obligations, employee benefits and employee benefit plan coverages, and in obtaining any governmental approvals required hereunder.

(a) From the date of this Agreement to the Closing, Purchaser will consult with Seller and Seller will consult with Purchaser before distributing any communications to Business Employees relating to post-Closing employee benefits, post-Closing terms of employment, or (as to communications by Purchaser only) other matters relating to the transactions contemplated by this Agreement. Nothing in this Section 6.10 would limit Seller’s right to communicate with Business Employees as Seller employees generally or as participants in a Seller Benefit Plan.

(b) Following the Transfer Time, Seller will cease any direct communication with a Transferred Employee except to the extent such communication is required or permitted under this Agreement, the Seller Benefit Plans, the Pharmacy Operating Agreement, the Clinic Operating Agreement or the Transition Services Agreement.

SECTION 6.11. Employment Tax Reporting Responsibility. Purchaser and Seller shall follow the alternative procedure for employment tax reporting as provided in Section 5 of Rev. Proc. 2004-53, I.R.B. 2004-34. Accordingly, Seller will have no employment tax reporting responsibilities, and Purchaser will have full employment tax reporting responsibilities, for Transferred Employees as of 12:01 a.m. on the Closing Date. Seller shall provide all employment tax information at a time and in a format as shall be reasonably requested by the Purchaser.

SECTION 6.12. Immigration. Seller shall provide to Purchaser, not less than 30 days prior to the anticipated Closing Date, all immigration documentation for all Business Employees sponsored by Seller for any immigration related benefits.

SECTION 6.13. No Third-Party Beneficiaries. Notwithstanding any other provision herein to the contrary and without limiting the generality of Section 12.02, no provision of this Article VI will (a) be construed to establish, amend or modify any benefit or compensation plan, program, policy, agreement or arrangement, (b) limit the ability of Purchaser or any of its Affiliates to amend, modify or terminate any benefit or compensation plan, program, policy, agreement or arrangement at any time assumed, established, sponsored or maintained by any of

them or (c) create any third-party beneficiary rights or obligations in any person (including for the avoidance of doubt any Business Employee) other than the Parties or any right to employment or continued employment or to a particular term or condition of employment with Purchaser or any of its Affiliates.

ARTICLE VII

Conditions to Closing

SECTION 7.01. Conditions to Each Party’s Obligation. The obligations of each Party to consummate the transactions contemplated hereby are subject to the satisfaction (or waiver by Purchaser and Seller) on or prior to the Closing Date of the following conditions:

(a) Governmental Approvals. (i) The waiting period applicable to the Acquisition under the HSR Act will have expired or been terminated, and (ii) all other material Consents of, or filings or submissions with, or expirations or terminations of waiting periods imposed by, any Governmental Entity legally required for the consummation of the Acquisition and listed on Section 7.01(a) of the Seller Disclosure Schedules will have been obtained or made or will have occurred.

(b) No Injunctions or Restraints. No Applicable Law, Judgment or ruling (“Restraint”) enacted, entered, promulgated, amended, enforced or issued by any Governmental Entity shall be in effect restraining, enjoining, preventing or prohibiting the consummation of the Acquisition.

SECTION 7.02. Conditions to Obligation of Purchaser. The obligations of Purchaser to consummate the transactions contemplated hereby are subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the following conditions:

(a) Representations and Warranties. The representations and warranties of Seller contained in Section 3.01 (Organization and Standing), Section 3.02 (Authority; Execution and Delivery; Enforceability), and the first sentence of Section 3.05 (Transferred Assets Other than Intellectual Property) will be true and correct, except for de minimis inaccuracies, on and as of the date hereof and on and as of the Closing Date as though made on and as of the Closing Date. The representations and warranties of Seller contained in this Agreement (other than Section 3.01 (Organization and Standing), Section 3.02 (Authority; Execution and Delivery; Enforceability), and the first sentence of Section 3.05 (Transferred Assets Other than Intellectual Property)) will be true and correct (without regard to any qualifications as to material, materiality, material respects, or Material Adverse Effect (or any correlative term) contained in such representations and warranties) on and as of the date hereof and on and as of the Closing Date as though made on and as of such date, except to the extent such representations and warranties expressly relate to a specific date (in which case such representations and warranties will be true and correct on and as of such specific date), in each case except for breaches as to matters that would not reasonably be expected, in the aggregate, to have a Business Material Adverse Effect.

(b) Performance of Obligations of Seller. Seller will have duly performed or complied in all material respects with all agreements, conditions, obligations and covenants required by this Agreement to be performed or complied with by Seller at or prior to the Closing.

(c) Ancillary Agreements. Seller shall have duly executed and delivered or caused to be duly executed and delivered to Purchaser each of the items set forth in Section 2.02(a) and any other Ancillary Agreements contemplated hereby.

(d) Material Adverse Effect. The representations and warranties of Seller contained in Section 3.12(b) will be true and correct on and as of the date hereof and on and as of the Closing Date (as though made on and as of the Closing Date and as though the representations and warranties contained in Section 3.12(b) applied to the period from the date of the Most Recent Unaudited Financial Information to the Closing Date).

SECTION 7.03. Conditions to Obligation of Seller. The obligations of Seller to, or to cause the Seller Affiliates to, consummate the transactions contemplated hereby are subject to the satisfaction (or waiver by Seller) on or prior to the Closing Date of the following conditions:

(a) Representations and Warranties. The representations and warranties of Purchaser contained in Sections 4.01 (Organization and Standing) and 4.02 (Authority; Execution and Delivery; Enforceability) will be true and correct, except for de minimis inaccuracies, on and as of the date hereof and on and as of the Closing Date as though made on and as of the Closing Date. The representations and warranties of Purchaser in this Agreement (other than Sections 4.01 (Organization and Standing) and 4.02 (Authority; Execution and Delivery; Enforceability)) will be true and correct (without regard to any qualifications as to material, materiality, material respects, or Material Adverse Effect (or any correlative term) contained in such representations and warranties) on and as of the date hereof and on and as of the Closing Date as though made on and as of such date, except to the extent such representations and warranties expressly relate to a specific date (in which case such representations and warranties will be true and correct on and as of such specific date), in each case except for breaches as to matters that would not reasonably be expected, in the aggregate, to have a material adverse effect on the ability of Purchaser to consummate the Acquisition or otherwise comply with the terms of this Agreement.

(b) Performance of Obligations of Purchaser. Purchaser will duly have performed or complied in all material respects with all agreements, conditions, obligations and covenants required by this Agreement to be performed or complied with by Purchaser at or prior to the Closing.

(c) Ancillary Agreements. Purchaser shall have duly executed and delivered to Seller each of the Ancillary Agreements set forth in Section 2.02(b) to which it is a party.

SECTION 7.04. Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such Party’s failure to act in good faith or to use its best efforts to cause the Closing to occur, as required by Section 5.04.

ARTICLE VIII

Termination; Effect of Termination

SECTION 8.01. Termination.

(a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Acquisition and the other transactions contemplated by this Agreement may be abandoned at any time prior to the Closing:

(i) by mutual written consent of Seller and Purchaser;

(ii) by Seller, if any of the conditions set forth in Section 7.03 become incapable of fulfillment by the Outside Date and have not been waived by Seller;

(iii) by Purchaser, if any of the conditions set forth in Section 7.02 become incapable of fulfillment by the Outside Date and have not been waived by Purchaser;

(iv) by Seller or Purchaser, if the Closing does not occur on or prior to March 15, 2016 (the “Outside Date”); provided, however, that if as of such date all the conditions set forth in Sections 7.02 and 7.03 have been satisfied or waived, or would be capable of satisfaction at the Closing, then either the Purchaser or Seller may extend the Outside Date to September 15, 2016; and provided, further, that the right to terminate this Agreement under this Section 8.01(a)(iv) shall not be available to the Party seeking to terminate if any action of such Party or the failure of such Party to perform any of its obligations under this Agreement required to be performed at or prior to the Closing has been the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date and such action or failure to perform constitutes a breach of this Agreement; or

(v) by Seller or Purchaser (x) if there shall be any Applicable Law that would make the consummation of the transactions contemplated hereby illegal or otherwise prohibited or (y) any other Restraint having the effect set forth in Section 7.01(b) shall be in effect and shall have become final and nonappealable, such that the conditions set forth in Section 7.01 have become incapable of fulfillment by the Outside Date; provided, however, that the right to terminate this Agreement under this Section 8.01(a)(v) shall not be available to a Party if such Restraint was due to the failure of such Party to perform any of its obligations under this Agreement.

(b) In the event of termination by Seller or Purchaser pursuant to this Section 8.01, written notice thereof will forthwith be given to the other Party and the transactions contemplated by this Agreement will be abandoned, without further action by any Party. If the transactions contemplated by this Agreement are abandoned as provided herein:

(i) Each of Purchaser and Seller will, and will cause each of its directors, officers, employees, agents, representatives and advisors to, destroy all documents and other material received from the other Party or such other Party’s representatives relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof in accordance with and subject to the terms of the Confidentiality Agreement; and

(ii) all confidential information received by each of Purchaser and Seller, its directors, officers, employees, agents, representatives or advisors with respect to the businesses of the other Party and such other Party’s Affiliates (including with respect to the Business) will be treated in accordance with the Confidentiality Agreement, which will remain in full force and effect notwithstanding the termination of this Agreement in accordance therewith.

SECTION 8.02. Effect of Termination. If this Agreement is terminated and the transactions contemplated hereby are abandoned as permitted by Section 8.01, then the following will occur:

(a) This Agreement will become null and void and of no further force and effect, except for the provisions of (a) Section 5.03 relating to the obligation of Purchaser to keep confidential certain information and data obtained by it from Seller or Seller’s representatives, (b) Section 8.01 and this Section 8.02 (and any other provision herein related to the payment of the Reverse Termination Fee), (c) Section 11.01 relating to publicity, and (d) Article XII relating to miscellaneous matters, including responsibility for certain expenses (including finder’s fees and broker’s fees). Nothing in Section 8.01 or this Section 8.02 will be deemed to release any Party from any Liability for fraud or any breach by such Party of the terms, conditions and other provisions of this Agreement or to impair the right of any Party to compel specific performance by the other Party of its obligations under this Agreement.

(b) Purchaser shall return to Seller, or, if Seller gives written permission, destroy, all of the Pharmacy and Medical Records in whatever form or medium and retain no copies of such Pharmacy and Medical Records. Purchaser shall complete such return or destruction as promptly as possible, but in no event later than 15 days from the date of the termination of this Agreement. Promptly after the date that Purchaser returns or destroys all Pharmacy and Medical Records, Purchaser shall provide written confirmation to Seller that the return or destruction of the Pharmacy and Medical Records has been completed and that neither Purchaser nor any subcontractor or agent of Purchaser retains any Pharmacy and Medical Records in any form.

(c) Purchaser will indemnify, defend and hold harmless each of the Seller Indemnitees from and against any and all Losses suffered or incurred by such Seller Indemnitee arising out of or related to the use, disclosure, access, maintenance, transmission, or handling of the Pharmacy and Medical Records by the Data Converter, Purchaser, or any of their subcontractors or agents, whether before or after this Agreement is terminated, including all Liabilities arising under HIPAA, state data breach notification laws, state social security number protection laws, and all federal and state consumer protection laws, and all other Applicable Laws concerning the privacy or security of personal information.

(d) Notwithstanding any provision in this Agreement to the contrary, if this Agreement is terminated by Purchaser or Seller pursuant to either Section 8.01(a)(iv) or Section 8.01(a)(v) (in the case of Section 8.01(a)(v) to the extent arising in connection with any Antitrust Law) and, at the time of either such termination, all of the conditions to closing set forth in Sections 7.01 and 7.02 have been satisfied or waived in writing (or, if the Closing were to have taken place on the date of termination, such conditions would have been satisfied), other than the conditions set forth in Section 7.01(a) or Section 7.01(b) (if the Applicable Law, Judgment or ruling relates to any Antitrust Law), then Purchaser shall pay to the Seller an

amount in cash equal to $150,000,000 (the “Reverse Termination Fee”) within two (2) business days of such termination.

ARTICLE IX

Indemnification

SECTION 9.01. Indemnification by Seller. Subject to the limitations set forth in Section 9.04, from and after the Closing, Seller will indemnify, defend and hold harmless Purchaser and each of its Affiliates and each of their respective officers, directors, employees, agents and representatives (the “Purchaser Indemnitees”) from and against any and all claims, losses, damages, liabilities, obligations or expenses, including losses resulting from the defense, settlement or compromise of a claim or demand or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and expenses of investigation (collectively, “Losses”) suffered or incurred by such Purchaser Indemnitee (without duplication for any Loss for which indemnification may be provided under more than one provision of this Section 9.01) to the extent arising out of or resulting from any of the following:

(a) any breach of any representation or warranty of Seller contained in this Agreement;

(b) any breach of any covenant of Seller contained in this Agreement (for the avoidance of doubt, including the provisions set forth in Article XI); or

SECTION 9.02. Indemnification by Purchaser. Subject to the limitations set forth in Section 9.04, from and after the Closing, Purchaser will indemnify, defend and hold harmless Seller and each of its Affiliates and each of their respective officers, directors, employees, agents and representatives (the “Seller Indemnitees”) from and against any and all Losses suffered or incurred by such Seller Indemnitee (without duplication for any Loss for which indemnification may be provided under more than one provision of this Section 9.02) to the extent arising out of or resulting from any of the following:

(a) any breach of any representation or warranty of Purchaser contained in this Agreement;

(b) any breach of any covenant of Purchaser contained in this Agreement (for the avoidance of doubt, including the provisions set forth in Article XI); or

SECTION 9.03. Indemnification Procedures.

(a) Procedures Relating to Indemnification of Third Party Claims. If any party (the “Indemnified Party”) receives written notice of the commencement of any Proceeding or the assertion of any claim by a third party or the imposition of any penalty or assessment for which indemnity may be sought under Section 9.01 or 9.02 (a “Third Party Claim”), and such

Indemnified Party intends to seek indemnity pursuant to this Article IX, the Indemnified Party will promptly provide the other party (the “Indemnifying Party”) with written notice of such Third Party Claim, stating the nature, basis and the amount thereof, to the extent known, along with copies of the relevant notices and documents (including court papers, if applicable) evidencing such Third Party Claim and the basis for indemnification sought and otherwise in reasonable detail. The Indemnifying Party will have the right to assume the defense of the Indemnified Party against the Third Party Claim with counsel of its choice. So long as the Indemnifying Party has assumed the defense of the Third Party Claim in accordance herewith, (i) the Indemnifying Party will not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof (unless (1) the Indemnifying Party fails to defend diligently the action or proceeding within 10 days after receiving notice of such failure from the Indemnified Party, or (2) the Indemnified Party reasonably shall have concluded (upon advice of its counsel) that, with respect to such claims, the Indemnified Party may have legal defenses available to it that are not available to the Indemnifying Party or that a conflict of interest exists between the Indemnifying Party and the Indemnified Party), (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, it being understood that the Indemnifying Party will control such defense, (iii) the Indemnifying Party will not (A) admit to any wrongdoing or (B) consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim to the extent such judgment or settlement includes any statement as to or an admission of fact, culpability or a failure to act, by or on behalf of the Indemnified Party, provides for equitable relief or may materially and adversely affect the Indemnified Party, in each case, without the prior written consent of the Indemnified Party (such written consent not to be unreasonably withheld or delayed) and (iv) all the Indemnified Parties will cooperate in the defense or prosecution thereof, including the retention and (upon the Indemnifying Party’s request) the furnishing to the Indemnifying Party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material furnished hereunder. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party will not unreasonably withhold consent to any judgment or agree to any settlement, compromise or discharge with respect to a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim, which releases the Indemnified Party completely in connection with such Third Party Claim. Whether or not the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party will not file any papers, admit any liability or consent to the entry of any judgment or enter into any settlement with respect to, or otherwise compromise or discharge, such Third Party Claim without the prior written consent of the Indemnifying Party (such consent not to be unreasonably withheld or delayed). The parties will use commercially reasonable efforts to minimize Losses from Third Party Claims and will act in good faith in responding to, defending against, settling or otherwise dealing with such claims. The parties will also cooperate in any such defense and give each other reasonable access to all information relevant thereto.

(b) Procedures for Non-Third Party Claims. The Indemnified Party will promptly provide the Indemnifying Party with written notice of its discovery of any matter giving rise to a claim of indemnity pursuant to this Article IX that does not involve a Third Party Claim being asserted against or sought to be collected from the Indemnified Party, with such

written notice stating the nature, basis and the amount thereof, to the extent known, along with copies of the relevant notices and documents (including court papers, if applicable), evidencing such matter and the basis for indemnification sought and otherwise in reasonable detail. The failure to make timely delivery of such written notice by the Indemnified Party to the Indemnifying Party shall not relieve the Indemnifying Party from any liability under this Section 9.03 with respect to such matter, except to the extent the Indemnifying Party is actually materially prejudiced by failure to give such notice. The Indemnified Party will reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Such assistance and cooperation will include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.

SECTION 9.04. Limitations on Indemnification.

(a) Except as set forth in Section 9.04(b) below, the representations and warranties of the Parties in this Agreement, and the covenants and agreements of the Parties in this Agreement that do not expressly survive the Closing, shall survive the Closing Date for a period of 18 months following the Closing Date.

(b) The applicable statute of limitations shall be the survival period for any matter relating to (i) agreements and covenants that expressly survive Closing (except where such agreements or covenants are expressly limited to a specified period of time, in which case the specified period will be the survival period); (ii) fraud or willful or intentional misrepresentation of a material fact in connection with this Agreement or the Ancillary Agreements and the transactions contemplated hereby or thereby; or (iii) any alleged or actual violation of the representations and warranties made in any of the following sections of this Agreement: Section 3.01 – “Organization and Standing”; Section 3.02 - “Authority; Execution and Delivery; Enforceability”; the first sentence of Section 3.05 – “Transferred Assets Other than Intellectual Property”; Section 3.09 – “Taxes”; Section 3.20 – “Brokers or Finders”; Section 4.01 – “Organization and Standing”; Section 4.02 – “Authority; Execution and Delivery; Enforceability”; or Section 4.06 – “Brokers or Finders” (the items set forth in Section 11.01(b)(iii) are collectively referred to as the “Fundamental Representations”).

(i) neither Seller nor Purchaser will be liable, pursuant to Section 9.01(a) and (b) or 9.02(a) and (b), for any Losses suffered by any Purchaser Indemnitee or Seller Indemnitee, as applicable, arising out of a breach of any representation, warranty or covenant of Seller or Purchaser, as applicable, herein unless a claim therefor is asserted in writing prior to the expiration of the survival period described in clauses (a) and (b) above, failing which such claim will be waived and extinguished;

(ii) subject to subclause (v) below, neither Seller nor Purchaser will be liable, pursuant to Sections 9.01(a) and (b) or 9.02(a) and (b), as applicable, for any Losses suffered by any Purchaser Indemnitee or Seller Indemnitee, as applicable, unless the aggregate

of all Losses suffered by the Purchaser Indemnitees or Seller Indemnitees, as applicable, exceeds on a cumulative basis, an amount equal to 2% of the Purchase Price and then Seller or Purchaser, as applicable, will only be liable to the extent of any such excess (with respect to each of Seller and Purchaser, the “Indemnity Threshold”);

(iii) subject to subclause (v) below, the aggregate liability of each of Seller and Purchaser hereunder, pursuant to Section 9.01(a) and (b) or 9.02(a) and (b), as applicable, for Losses suffered by the Purchaser Indemnitees or Seller Indemnitees, as applicable, with respect a breach of any representation or warranty shall not exceed 7.5% of the Purchase Price (with respect to each of Seller and Purchaser, the “Indemnity Cap”);

(iv) in no event will Seller be obligated to indemnify the Purchaser Indemnitees or any other person with respect to any matter to the extent that such matter was taken into account in the calculation of the Final Purchase Price pursuant to Section 2.04(c); and

(v) neither the Indemnity Threshold nor the Indemnity Cap shall apply to any claims arising from a breach of the Fundamental Representations.

(d) Purchaser acknowledges and agrees that (i) other than the representations and warranties of Seller specifically contained in Article III of this Agreement, none of Seller, any of the Seller Affiliates or any other person has made any representation or warranty either expressed or implied (A) with respect to the Business, the Transferred Assets, the Assumed Liabilities or the transactions contemplated hereby or by the Ancillary Agreements or (B) as to the accuracy or completeness of any information regarding the Business, the Transferred Assets, the Assumed Liabilities or the transactions contemplated hereby or by the Ancillary Agreements furnished or made available to Purchaser and its representatives, (ii) Purchaser has not relied on any representation or warranty from Seller, any of the Seller Affiliates or any other person in determining to enter into this Agreement, except as expressly set forth in Article III of this Agreement and (iii) no Purchaser Indemnitee will have any claim or right to indemnification pursuant to this Article IX and none of Seller, any of the Seller Affiliates or any other person will have or be subject to any Liability to any Purchaser Indemnitee or any other person with respect to any information, documents or materials furnished by Seller, any of the Seller Affiliates or any of their respective officers, directors, employees, agents or advisors to Purchaser, including any information, documents or materials made available to Purchaser and its representatives in certain “data rooms,” management presentations or any other form in expectation of the transactions contemplated hereby or by the Ancillary Agreements (it being understood that this clause (iii) does not supersede or otherwise affect the representations and warranties of Seller specifically contained in Article III of this Agreement).

(e) Purchaser further acknowledges and agrees that, should the Closing occur, the sole and exclusive remedy of the Purchaser Indemnitees with respect to any and all claims relating to this Agreement, the Ancillary Agreements, the Business, the Transferred Assets, the Excluded Assets, the Assumed Liabilities, the Retained Liabilities or the transactions contemplated hereby or by the Ancillary Agreements (other than (i) a claim for payment due pursuant to Section 2.04(c) or (ii) claims of, or causes of action arising from, fraud or willful misconduct) will be pursuant to the indemnification provisions set forth in this Article IX. In

furtherance of the foregoing, except pursuant to the indemnification provisions set forth in this Article IX, Purchaser hereby waives, from and after the Closing, any and all rights, claims and causes of action (other than (i) a claim for payment due pursuant to Section 2.04(c) or (ii) claims of, or causes of action arising from, fraud or willful misconduct) Purchaser or any other Purchaser Indemnitee may have against Seller or any of the Seller Affiliates or any of their respective directors, officers, employees, agents or advisors arising under or based upon this Agreement, any Ancillary Agreement or any certificate delivered in connection herewith, any Applicable Law or otherwise.

SECTION 9.05. Calculation of Indemnity Payments. The amount of any Loss for which indemnification is provided under this Article IX will be net of any amounts actually realized and paid to the Indemnified Party (but deducting the present value of future insurance premium increases and all costs and expenses incurred by the Indemnified Party to recover such amounts) under insurance policies with respect to such Loss.

SECTION 9.06. Tax Treatment of Indemnification. For all Tax purposes, Purchaser and Seller shall treat (and shall cause each of their respective Affiliates to treat) any indemnity payment under this Agreement as an adjustment to the Final Purchase Price unless a final determination by the U.S. Internal Revenue Service (the “IRS”) (which determination will include the execution of an IRS Form 870‑AD or successor form) or the applicable Taxing Authority provides otherwise.

ARTICLE X

Tax Matters

SECTION 10.01. Allocation of Certain Taxes. The Party that has the primary obligation to do so under Applicable Law will file any Tax Return that is required to be filed in respect of Taxes described in this Section 10.01, and such Party will pay the Taxes shown on such Tax Return. If any portion of such Taxes paid by Purchaser (or any refund of Taxes received by Purchaser) is allocable to the Pre-Closing Tax Period, or any portion of such Taxes paid by Seller (or any refund of Taxes received by Seller) is allocable to the Post-Closing Tax Period, Purchaser or Seller (as applicable) will pay to the other Party such proportionate amount promptly after the payment of such Taxes (or the receipt of any such refund).

SECTION 10.02. Tax Matters.

(a) At least seven days prior to the Closing Date, in consultation with Seller, Purchaser will provide Seller with an estimate of the allocation of the total consideration (including Assumed Liabilities) among the Transferred Assets on a separate basis for each of Seller and each of the Seller Affiliates in accordance with Section 1060 of the Code, the Treasury Regulations promulgated thereunder and any similar provision of state, local or foreign law, as applicable. If Seller does not agree with such estimate, Seller and Purchaser will use good faith efforts to agree on an estimate prior to the Closing Date. If the Parties agree on an estimate prior to the Closing Date, the Parties will use such estimate for allocating the total consideration pursuant to this Agreement at the Closing. If the Parties cannot agree on an estimate prior to the

Closing Date, the Parties will use an estimate provided by Seller for allocating the total consideration pursuant to this Agreement at the Closing.

(b) Without regard to the estimate determined pursuant to Section 10.02(a), within 90 days after the determination of the Final Purchase Price, Purchaser will provide Seller a proposed allocation (the “Allocation”) prepared on a separate basis and for each of Seller and each of the Seller Affiliates, and in accordance with Section 1060 of the Code, the Treasury Regulations promulgated thereunder and any similar provision of state, local or foreign law, as applicable, of the total consideration (including Assumed Liabilities) among the Transferred Assets. The Allocation will become final and binding 30 days after Purchaser provides the Allocation to Seller, unless Seller objects in good faith that the Allocation is unreasonable. In that case, the Parties will attempt in good faith to agree upon the Allocation. If the Parties cannot agree on the Allocation, each Party will use its own allocation, as each such Party deems appropriate.

(c) Any adjustments to the Final Purchase Price will be allocated in accordance with the agreement reached as set forth in Section 10.02(a).

(d) Seller (and its Affiliates) and Purchaser (and its Affiliates) shall file all Tax Returns consistent with the final versions of the allocations and forms described in this Section 10.02.

SECTION 10.03. Transfer Taxes. Seller and Purchaser will cooperate in timely making all filings, returns, reports and forms as may be required in connection with Purchaser’s payment of Transfer Taxes. Seller and Purchaser, as appropriate, will execute and deliver, and Seller will cause each of the Seller Affiliates, as appropriate, to execute and deliver, all instruments and certificates reasonably necessary to enable the other Party to comply with any filing requirements relating to any such Transfer Taxes.

(a) Purchaser and Seller will split equally any Transfer Taxes related to Real Property, if any (Seller’s portion of which shall be “Seller’s Allocable Portion” of Transfer Taxes related to Real Property). Purchaser will pay any Transfer Taxes other than Seller’s Allocable Portion of Transfer Taxes related to Real Property. Any Transfer Taxes due on the Closing Date will be paid on the Closing Date; provided, however, that the Parties will use, and will cause each of their respective Affiliates to use, reasonable efforts to avail itself of any available exemptions from any such Transfer Taxes, and to cooperate with the other Party in providing any information and documentation that may be necessary to obtain such exemption. Seller or a Seller Affiliate will timely file all necessary tax returns with respect to the Transfer Taxes, provided that Purchaser will file any tax returns with respect to the Transfer Taxes that Purchaser is required to file under Applicable Law. Each Party will afford the other Party a reasonable opportunity to review and comment upon tax information required to be included in such tax returns prior to filing and will incorporate any reasonable good faith comments of the other Party into such tax returns.

(b) Purchaser and Seller shall provide each other with such information and assistance as is reasonably necessary, including access to records and personnel, for the

preparation of any Tax Returns or for the defense of any Tax claim or assessment, whether in connection with an audit or otherwise.

ARTICLE XI

Additional Agreements

SECTION 11.01. Publicity. No public release or announcement concerning the transactions contemplated hereby or by any Ancillary Agreement will be issued by any Party without the prior consent of the other Party, except as such release or announcement may be required by Applicable Law or the rules or regulations of any United States or foreign securities exchange, in which case the Party required to make the release or announcement will allow the other Party reasonable time to comment on such release or announcement in advance of such issuance; provided, however, that each of the Parties may make internal announcements to their respective employees that are consistent with the Parties’ prior public disclosures regarding the transactions contemplated hereby or by any Ancillary Agreement.

SECTION 11.02. Support Services. Purchaser acknowledges that as of the Closing, neither Seller nor any of the Seller Affiliates will have any obligation to provide any support or other services to Purchaser relating to the Business other than those services expressly required to be provided pursuant to the Pharmacy Operating Agreement, the Clinic Operating Agreement and the Transition Services Agreement, which agreements will be entered into by Seller and Purchaser as of the Closing.

SECTION 11.03. Post-Closing Information. Following the Closing, upon reasonable written notice to Purchaser, Purchaser will afford or cause to be afforded to Seller and the Seller Affiliates and their employees, counsel, auditors and representatives reasonable access during normal business hours and upon reasonable prior notice (at Seller’s own cost) to the personnel, properties, books, Contracts, commitments and records relating to the Business for any reasonable and legitimate business purpose, including in respect of litigation, insurance matters, financial reporting and accounting of Seller and the Seller Affiliates; provided, however, that such access does not unreasonably disrupt the normal operations of Purchaser or any of its Affiliates or the Business. Nothing contained in this Section 11.03 obligates Purchaser or any of its Affiliates to (i) violate any Applicable Law, (ii) breach any duty of confidentiality owed to any person whether such duty arises contractually, statutorily or otherwise or (iii) jeopardize the protection of any attorney-client or attorney work product privilege. Seller shall assume all liabilities arising out of or related to the use, disclosure, access, maintenance, transmission, or handling of any information disclosed to Seller or any of the Seller Affiliates pursuant to this Section 11.03.

SECTION 11.04. Books and Records. Purchaser will retain the books and records of the Business existing as of the Closing for no less than six years after the Closing or, if longer, in accordance with Purchaser’s record retention policies; provided, that Medicare and Medicaid records will be maintained for no less than 10 years plus the relevant plan year. Subject to Section 5.05(d), Purchaser recognizes that certain books and records may contain information relating to subsidiaries, divisions or businesses of Seller and the Seller Affiliates other than the Business and agrees that Seller and the Seller Affiliates may retain copies thereof.

SECTION 11.05. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller and the Seller Affiliates with the provisions of any so-called “bulk transfer laws” of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Transferred Assets to Purchaser in connection with the Acquisition and Seller shall indemnify the Purchaser Indemnitees from and against any Losses with respect to the failure to comply therewith.

SECTION 11.06. Refunds and Remittances. After the Closing, if Seller or any of the Seller Affiliates receives any refund or other amount which is a Transferred Asset or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, Seller promptly will remit, or cause to be remitted, such amount to Purchaser at the address set forth in Section 12.04. After the Closing, if Purchaser or any of its Affiliates receives any refund or other amount which is an Excluded Asset or is otherwise properly due and owing to Seller or any of the Seller Affiliates in accordance with the terms of this Agreement, Purchaser promptly will remit, or cause to be remitted, such amount to Seller at the address set forth in Section 12.04. After the Closing, if Purchaser or any of its Affiliates receives any refund or other amount which is related to claims (including workers’ compensation), litigation, insurance or other matters for which Seller is responsible hereunder, and which amount is not a Transferred Asset, or is otherwise properly due and owing to Seller in accordance with the terms of this Agreement, Purchaser promptly will remit, or cause to be remitted, such amount to Seller at the address set forth in Section 12.04. After the Closing, if Seller or any of the Seller Affiliates receives any refund or other amount which is related to claims (including workers’ compensation), litigation, insurance or other matters for which Purchaser is responsible hereunder, and which amount is not an Excluded Asset, or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, Seller promptly will remit, or cause to be remitted, such amount to Purchaser at the address set forth in Section 12.04.

ARTICLE XII

Miscellaneous

SECTION 12.01. Assignment. Neither this Agreement nor any of the rights and obligations of the Parties hereunder may be assigned or transferred by any of the Parties (including by operation of law in connection with a merger or consolidation of Purchaser, Seller or any Seller Affiliate) without the prior written consent of the other Party hereto (such consent not to be unreasonably withheld, delayed or conditioned), except that (a) Purchaser may assign any rights and obligations hereunder to any of its Affiliates, any entity to which it or any of its Affiliates provides management services in connection with the operation of a retail healthcare clinic, or any purchaser of substantially all of the assets of Purchaser, including the Transferred

Assets without the prior written consent of Seller and (b) Seller may assign any rights and obligations hereunder to any of its Affiliates without the prior written consent of Purchaser. Notwithstanding the foregoing, each of Seller and Purchaser will remain liable for all of their respective obligations under this Agreement. Subject to the first sentence of this Section 12.01, this Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Any attempted assignment or transfer in violation of this Section 12.01 will be void.

SECTION 12.02. No Third-Party Beneficiaries. Except as provided in Article IX, this Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein expressed or implied gives or will be construed to give to any person, other than the Parties and such successors and assigns, any legal or equitable rights, benefits or remedy of any nature whatsoever under or by reason of this Agreement.

SECTION 12.03. Expenses. Whether or not the transactions contemplated by this Agreement are consummated, except as otherwise expressly provided herein, each of the Parties is responsible for the payment of its own respective costs and expenses incurred in connection with the negotiations leading up to and the performance of its respective obligations pursuant to this Agreement and the Ancillary Agreements, including the fees of any attorneys, accountants, brokers or advisors employed or retained by or on behalf of such Party. Purchaser will pay all costs associated with the application for issuance of Permits (as described in Section 5.04) and for the transfer of Transferred Permits.

SECTION 12.04. Notices. All notices, requests, permissions, waivers and other communications hereunder must be in writing and will be deemed to have been given only (a) three business days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by electronic email transmission (including via .pdf files), provided that confirmation of the email transmission is received from the recipient (that is not automatically generated), (c) when delivered, if delivered personally to the intended recipient, or (d) one business day following sending by overnight delivery via a national courier service (receipt requested) and, in each case, addressed to a Party at the following address for such Party:

(i) if to Seller,

Target Corporation

1000 Nicollet Mall

Minneapolis, MN 55403

Attention: John Mulligan

with a copy (which will not constitute notice) to:

Target Corporation

1000 Nicollet Mall

Minneapolis, MN 55403

Attention: Timothy R. Baer

with a further copy (which will not constitute notice) to:



	Faegre Baker Daniels LLP
	2200 Wells Fargo Center
	90 South Seventh Street
	Minneapolis, MN 55402
	Attention: Michael A. Stanchfield
	Kate Sherburne

(ii) if to Purchaser,



	CVS Pharmacy, Inc.
	One CVS Drive
	Woonsocket, Rhode Island 02895
	Attention: General Counsel

with a copy (which will not constitute notice) to:



	Fried, Frank, Harris, Shriver & Jacobson LLP
	One New York Plaza
	New York, NY 10004
	Attention: Steven Scheinfeld
	Steven Steinman

or to such other address, facsimile or email as is furnished in writing by any such Party to the other Party in accordance with the provisions of this Section 12.04.

SECTION 12.05. Headings; Certain Definitions; Interpretation; Separate Counsel.

(a) The descriptive headings of the Articles and Sections of this Agreement, the Exhibits and Table of Contents to this Agreement, the Seller Disclosure Schedule and the Purchaser Disclosure Schedule are inserted for convenience only, do not constitute a part of this Agreement and do not affect in any way the meaning or interpretation of this Agreement. Unless context otherwise requires, all references herein to “Articles”, “Sections” “Disclosure Schedules” or “Exhibits” are deemed to be references to Articles or Sections hereof or Disclosure Schedules or Exhibits hereto unless otherwise indicated. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

(b) For all purposes hereof:

“Accounts Receivable” means (a) all trade accounts receivable and other rights to payment from customers of Seller or any Seller Affiliate with respect to the Business and (b) any claim, remedy or other right related to the foregoing.

“Affiliate” of any party means any person or entity controlling, controlled by or under common control with such party. For this purpose, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by Contract, or otherwise.

“business day” means a day, other than a Saturday or a Sunday, on which commercial banks are not required or authorized to close in Minneapolis, Minnesota.

“Business Material Adverse Effect” means (a) a material adverse effect on the business, condition (financial or otherwise), assets, liabilities, operations, or results of operations of the Business taken as a whole; or (b) any event, change, development, effect, condition, circumstance, matter, occurrence or state of facts (an “Event”) that prevents or materially delays, or would be reasonably expected to prevent or materially delay, the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements or the performance by Seller or the Seller Affiliates of any of their material obligations under this Agreement and the Ancillary Agreements; subject in the case of clauses (a) and (b) to the following sentence. For purposes of this Agreement, “Business Material Adverse Effect” does not include any Event to the extent relating to (i) changes in Applicable Law or applicable accounting regulations or principles or interpretations thereof, (ii) any outbreak or escalation of hostilities or war or any act of terrorism or any natural or man-made disaster, (iii) changes in the United States or foreign economies, financial markets or geopolitical conditions in general, (iv) changes in industries relating to the Business in general and not specifically relating to the Business, (v) the announcement by Seller of its intention to sell the Business, and (vi) the execution of this Agreement, the performance of any obligations under this Agreement or any of the Ancillary Agreements, and the announcement of the transactions contemplated hereby or thereby (including the identity of Purchaser) in accordance with the terms hereof, except with respect to clauses (i) through and (iv), to the extent (and only to the extent) that the Business is materially disproportionately impacted by such events in comparison to other pharmacies or medical clinics, as applicable, in the industry in which they operate.

“Business Space” means the Real Property that is dedicated exclusively to the operation of the Business.

“Closing Inventory” means the value of the Transferred Inventory as of 11:59 p.m. on the day immediately preceding the Closing Date, calculated in accordance with the principles set forth in Section 2.03 of the Seller Disclosure Schedule.

“CMS” means the Centers for Medicare and Medicaid Services and any successor Governmental Entity exercising similar authority.

“$” means United States dollars.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, with respect to any entity, any other entity (whether or not incorporated) that, together with such entity, would be treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“GAAP” means United States generally accepted accounting principles in effect from time to time.

“Family” means, with respect to a particular individual, (a) the individual, (b) the individual’s spouse and former spouse(s), (c) any other natural person who is related to the individual or the individual’s spouse within the first degree, and (d) any other natural person who resides with such individual.

“Health Care Law” means any Applicable Law relating to healthcare regulatory matters, including: (a) 42 U.S.C. §§ 1320a-7, 7a and 7b, which are commonly referred to as the “Federal Exclusion Statutes” (and include the Federal Anti-Kickback Statute); (b) 42 U.S.C. § 1395nn, which is commonly referred to as the “Stark Statute”; (c) 31 U.S.C. §§ 3729-3732, which is commonly referred to as the “Federal False Claims Act”; (d) 42 U.S.C. §§ 1320d through 1320d-7 and 45 C.F.R. §§ 160, 162, 164, and 170 which are commonly referred to as the “Health Insurance Portability and Accountability Act of 1996”; (e) 18 U.S.C. § 666, which is commonly referred to as the “Federal Bribery Statute;” (f) 18 U.S.C. § 1347, which is commonly referred to as the “Health Care Fraud Statute;” (g) 21 U.S.C. § 801 et seq., which is commonly referred to as the “Controlled Substances Act;” and (h) any similar federal, state or local statutes or regulations, in each case of clauses (a) through (f), applicable to the Business.

“Indebtedness” means (a) all indebtedness for the repayment of borrowed money, whether or not represented by bonds, debentures, notes or similar instruments, (b) all other indebtedness and obligations evidenced by bonds, debentures, notes or similar instruments, under loan agreements, security agreements, mortgages, or deeds of trust, (c) guarantees or similar contingent liabilities with respect to any indebtedness, obligation, claim or liability of any other person, (d) any interest on the foregoing and (e) any premiums, prepayment or termination fees, expenses or breakage costs due upon prepayment of the foregoing.

“Intellectual Property” means (a) trademarks, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registration in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application, (b) inventions and discoveries, whether patentable or not, in any jurisdiction, patents (including all reissues, divisions, continuations and extensions thereof), applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction, (c) trade secrets, (d) writings and other works, whether copyrightable or not, in any jurisdiction, (e) database rights, design rights, and privacy rights, and (f) any similar intellectual property or proprietary rights.

“knowledge of Seller” or any other similar knowledge qualification means the actual knowledge of the following individuals, after reasonable inquiry and investigation: Aaron Alt, José Barra, Christina Hennington, John Holcomb, Debbie Marshall, John Mulligan, and Kathryn Tesija.

“Liabilities” means obligations and liabilities of any nature, whether known or unknown, joint or several, express or implied, primary or secondary, direct or indirect, liquidated, absolute, disputed, secured, vested, accrued, contingent, executory, determined, determinable or otherwise and whether due or to become due.

“Medicaid” means the state governmental healthcare program pursuant to which healthcare providers are paid or reimbursed for care given or goods afforded to indigent individuals and administered pursuant to a plan approved by CMS under Title XIX of the Social Security Act, as amended (the “Social Security Act”).

“Medicare” means the federal governmental healthcare program established under Title XVIII of the Social Security Act and administered by CMS.

“Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

“person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

“Proceeding” means any claim, action, cause of action, demand, lawsuit, arbitration, audit, notice of violation, proceeding, investigation, litigation, citation, summons or subpoena of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Related Person” means, (a) with respect to an entity, (i) any Affiliate; (ii) each person that serves as a director, officer, partner, member, manager, executor, or trustee of such specified person (or in a similar capacity); and (iii) any person with respect to which such specified person serves as a general partner or a trustee (or in a similar capacity); or (b) with respect to an individual, (i) each other member of such individual’s Family; (ii) any person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family; and (iii) any person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, member, manager, executor, or trustee (or in a similar capacity).

“Seller Benefit Plan” means each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and each other plan, agreement, arrangement or policy relating to equity compensation, deferred compensation, incentive compensation, severance, fringe benefits or other employee compensation or benefits, in each case, maintained or contributed to or required to be maintained or contributed to by Seller or any of the Seller Affiliates for the benefit of any Business Employees.

“subsidiary” of any person means another person, an amount of the voting securities or other voting ownership or voting partnership interests of which sufficient to elect at least a

majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such first person.

(c) For all purposes hereof, the terms “include,” “includes,” and “including” are deemed followed by the words “without limitation.” The words “hereof,” “hereto,” “hereby,” “herein,” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “or” is not exclusive. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if.” The phrase “date hereof” or “date of this Agreement” refers to June 12, 2015. The words “ordinary course of business” shall be deemed to be followed by the words “consistent with past practice.” The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as the feminine and neuter genders of such terms. Any agreement, instrument, or Applicable Law defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or Applicable Law as from time to time amended, modified or supplemented and includes any successor legislation thereto and any regulations promulgated thereunder. References to a person are also to its permitted successors and assigns.

(d) The Parties have had the opportunity to consult with their own legal counsel and other advisors and are entering into this Agreement voluntarily and with a full understanding of the meaning and legal effects of each provision contained in this Agreement. The Parties and their respective legal counsel, if applicable, have been jointly involved in the negotiation and drafting of this Agreement and the language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent. In the event of any dispute regarding the interpretation of any provision of this Agreement, the Parties agree that this Agreement and the provisions hereof shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the authorship of any of the provisions of this Agreement.

SECTION 12.06. Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement, and will become effective when one or more counterparts have been signed by each of the Parties and delivered, in person or by facsimile, or by electronic image scan, receipt acknowledged, to the other Party.

SECTION 12.07. Integrated Contract. This Agreement, including the Seller Disclosure Schedule (and the Introduction thereto), the Purchaser Disclosure Schedule (and the Introduction thereto) and the Schedules and Exhibits hereto, any written amendments to the foregoing satisfying the requirements of Section 12.13 hereof, the Confidentiality Agreement and the Ancillary Agreements, including the schedules, exhibits and annexes thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede any previous agreements and understandings between the Parties with respect to such matters. All Schedules and Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any term used in the Seller Disclosure Schedule, the Purchaser Disclosure Schedule or any Schedule or Exhibit hereto but not otherwise defined therein is defined as set forth in this Agreement. There are no restrictions,

promises, representations, warranties, agreements or undertakings of either Party with respect to the transactions contemplated by this Agreement, the Confidentiality Agreement or the Ancillary Agreements other than those set forth herein or therein or in any other document required to be executed and delivered hereunder or thereunder. In the event of any conflict between the provisions of this Agreement (including the Seller Disclosure Schedule (and the Introduction thereto), the Purchaser Disclosure Schedule (and the Introduction thereto) and the Schedules and Exhibits hereto), on the one hand, and the provisions of the Confidentiality Agreement or the Ancillary Agreements (including the schedules, exhibits and annexes thereto), on the other hand, the provisions of this Agreement will control.

SECTION 12.08. Severability; Enforcement. The invalidity, illegality or unenforceability of any portion hereof will not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, each Party agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by Applicable Law, and each Party hereby consents and agrees that such scope may be judicially modified accordingly in any Proceeding brought to enforce such restriction.

SECTION 12.09. Governing Law. This Agreement and disputes relating hereto (whether for breach of Contract, tortious conduct or otherwise) will be governed and construed in accordance with the laws of the State of Delaware, without reference to its conflicts of law principles.

SECTION 12.10. Jurisdiction. Each Party irrevocably agrees that any Proceeding against them arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of Contract, tortious conduct or otherwise) will be brought exclusively in the Delaware Court of Chancery, or, if such court does not have subject matter jurisdiction, a court of the State of Delaware located in Wilmington, Delaware or the United States District Court for the District of Delaware, and irrevocably accepts and submits to the exclusive jurisdiction and venue of the aforesaid courts in personam with respect to any such Proceeding. Each of Purchaser and Seller irrevocably and unconditionally waives any objection to the laying of venue of any Proceeding arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of Contract, tortious conduct or otherwise) in (i) any court of the State of Delaware located in Wilmington, Delaware or (ii) the United States District Court for the District of Delaware and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Proceeding brought in any such court has been brought in an inconvenient forum. This Section 12.10 will not apply to any dispute under Section 2.04 that is required to be decided by the Independent Expert.

SECTION 12.11. Service of Process. Each Party agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in Section 12.04 will be effective service of process for any Proceeding in Delaware with respect to any matters for which it has submitted to jurisdiction pursuant to Section 12.10.

SECTION 12.12. Waiver of Jury Trial. Each Party acknowledges and agrees that any controversy which may arise under this Agreement or Ancillary Agreements is likely to involve

complicated and difficult issues and each Party hereby irrevocably and unconditionally waives to the fullest extent permitted by Applicable Law, any right it may have to a trial by jury in respect of any Proceeding arising out of or in connection with this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby or disputes relating hereto or thereto (whether for breach of Contract, tortious conduct or otherwise). Each Party (a) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other Party would not, in the event of any Proceeding, seek to enforce the foregoing waiver, (b) certifies that such Party has considered the implications of this waiver and (c) acknowledges that it and the other Party hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 12.12.

SECTION 12.13. Amendments. This Agreement may be amended, modified, supplemented, superseded or canceled and any of the provisions hereof may be waived only by an instrument in writing signed by each of the Parties or, in the case of a waiver, by or on behalf of the Party waiving compliance. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except where a specific time period is specified, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

SECTION 12.14. Specific Enforcement. Notwithstanding Section 9.04(d), the Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in any court of the State of Delaware located in Wilmington, Delaware or the United States District Court for the District of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity.

SECTION 12.15. Parent Guarantee. CVS Health Corporation (“Parent”) hereby guarantees the full payment, when required, of Purchaser’s financial obligations under this Agreement. This is a guarantee of payment, and not collection, and Seller and, where applicable, each other Seller Indemnitee may institute a Proceeding or bring a claim directly against Parent without instituting any Proceeding or bringing a claim against Purchaser. Notwithstanding the foregoing, but without limiting rights of the parties under Section 12.14, in no event shall Parent’s Liability to Seller or any other person pursuant to this Section 12.15 exceed Purchaser’s Liability with respect to such matter under this Agreement.

[Signature page follows]

IN WITNESS WHEREOF, Seller, Purchaser and Parent have duly executed this Agreement as of the date first written above.



TARGET CORPORATION, as Seller,

by
	/s/ John J. Mulligan
	Name: John J. Mulligan
	Title: Executive Vice President, Chief Financial Officer, and Chief Accounting Officer



CVS PHARMACY, INC., as Purchaser,

by
	/s/ David M. Denton
	Name: David M. Denton
	Title: EVP & CFO


Solely for purposes of Section 12.15 of the Agreement:
CVS HEALTH CORPORATION, as Parent,

by
	/s/ David M. Denton
	Name: David M. Denton
	Title: EVP & CFO

Exhibit (10)KK

CONFIDENTIAL TREATMENT REQUESTED

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed separately with the Securities Exchange Commission.

PHARMACY OPERATING AGREEMENT

BETWEEN

TARGET CORPORATION

AND

CVS PHARMACY, INC.

PHARMACY OPERATING AGREEMENT

THIS PHARMACY OPERATING AGREEMENT is made as of _____________ (the “Effective Date”), between Target Corporation, a Minnesota corporation (“Target”), and CVS Pharmacy, Inc., a Rhode Island corporation (“CVS”).

RECITALS

WHEREAS, Target operates retail stores which sell a broad assortment of general merchandise, including but not limited to apparel, electronics, beauty and personal care products, sporting goods, home goods and groceries, as well as providing various services to the general public;

WHEREAS, CVS operates retail pharmacies and drugstores nationally;

WHEREAS, on the date hereof, CVS, and/or its Affiliates acquired certain of Target’s pharmacy assets and MinuteClinic, L.L.C. (together with its owned and/or managed entities, “MinuteClinic”), an Affiliate of CVS, acquired certain of Target’s retail healthcare clinic assets (the “Acquisition”) pursuant to the Asset Purchase Agreement (as defined herein);

WHEREAS, in connection with the Acquisition, Target and CVS agreed that CVS will operate Pharmacies in certain Stores, and in connection therewith, Target has agreed to grant to CVS, and CVS has agreed to accept, either (i) a License to operate retail pharmacies at certain Stores on the terms and conditions set forth in this Agreement and the Pharmacy Master License Agreement entered into simultaneously herewith (as the same may be amended, modified or supplemented from time to time, the “Pharmacy Master License Agreement”), or (ii) a Lease to operate retail pharmacies at certain Stores on the terms and conditions set forth in this Agreement and the Pharmacy Master Lease Agreement entered into simultaneously herewith (as the same may be amended, modified or supplemented from time to time, the “Pharmacy Master Lease Agreement”);

WHEREAS, the Parties agree that all Pharmacy Spaces (as defined herein) shall be licensed to CVS, except to the extent a Governmental Entity has required that a Pharmacy Space be leased to CVS or as required by Law;

WHEREAS, in connection with the Acquisition, Target and MinuteClinic, L.L.C. are entering into that certain Clinic Operating Agreement (as the same may be amended, modified or supplemented from time to time, the “Clinic Operating Agreement”) simultaneously with the execution of this Agreement; and

WHEREAS, in addition to the agreements contained in the Master Occupancy Agreement, Target and CVS desire to memorialize their agreements related to the operation of the Pharmacies within the Stores, the opening and closing of Stores, the conduct of employees, signage, Intellectual Property, access to Stores and records and other operational matters, all as more particularly set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

1.Definitions. The following terms shall have the meanings set forth below:

1.1 Acquisition. Shall have the meaning specified in the Recitals of this Agreement.

1.2 Adjustment Year. Shall have the meaning specified in the Occupancy Costs Agreement.

1.3 Affiliate or Affiliates. With respect to any Person, any Person directly or indirectly Controlling, Controlled by, or under common Control with such Person.

1.4 Agreement. This Pharmacy Operating Agreement and all Exhibits, Attachments and Schedules hereto, as may be amended from time to time.

1.5 AHLA. Shall have the meaning specified in Section 25.17 of this Agreement.

1.6 Annual Forecast Plan. Shall have the meaning specified in Section 4.1 of this Agreement.

1.7 Applicable Rate. A measure of Target’s blended actual cost of payment acceptance (calculated using volume weighted tender penetration applied to the underlying cost of payment processing (e.g., processing fees, interchange and chargebacks) of each respective tender) for the prior twelve month period. As of the Effective Date, the Applicable Rate shall be [*]%.

1.8 Asset Purchase Agreement. That certain Asset Purchase Agreement, dated as of June 12, 2015, between CVS and Target, as amended, restated, supplemented or otherwise modified.

1.9 Background Intellectual Property. Shall have the meaning specified in Section 14.1 of this Agreement.

1.10 Bankruptcy Event. Shall have the meaning specified in Section 18.5 of this Agreement.

1.11 Business Day. A day, other than a Saturday or a Sunday, on which commercial banks are not required or authorized to close in Minneapolis, Minnesota.

1.12 Change of Control. Shall have the meaning specified in Section 18.4 of this Agreement.

1.13 Change of Control Outlet. Shall have the meaning specified in Section 18.4(ii)(b) of this Agreement.

1.14 Clinic Operating Agreement. Shall have the meaning specified in the Recitals of this Agreement.




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1.15 Common Areas. Shall have the meaning specified in the Pharmacy Master License Agreement or Pharmacy Master Lease Agreement, as applicable.

1.16 Confidential Information. Shall have the meaning specified in Section 21.1 of this Agreement.

1.17 Confidential Patient Information. Any personally identifiable information relating to CVS’s Patients or customers or prospective Patients or customers including, but not limited to, names, addresses, telephone numbers, social security numbers, driver’s license numbers, credit card information, location information, IP addresses or other device identifiers, account information, credit information, demographic information, and any other information that, either alone or in combination with other data, could provide information specific to a particular person.

1.18 Consultant. Shall have the meaning specified in Section 8.11(a) of this Agreement.

1.19 Control, Controlling or Controlled by. With respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person through the ownership of voting securities, by contract or otherwise.

1.20 CPI Index. Shall have the meaning specified in the Occupancy Costs Agreement.

1.21 CVS. Shall have the meaning specified in the first paragraph of this Agreement.

1.22 CVS Change of Control Outlet. Shall have the meaning specified in Section 18.4(ii)(b) of this Agreement.

1.23 CVS Identification. Shall have the meaning specified in Section 13.3 of this Agreement.

1.24 CVS Indemnified Parties. Shall have the meaning specified in Section 17.2 of this Agreement.

1.25 CVS Operating Standard. The operation of a pharmacy consistent in all material respects with the custom and practice of pharmacies operated by CVS’s retail pharmacies not located in the Stores that are similar in type to the Pharmacy (and taking into consideration the market area of the Pharmacy).

1.26 CVS Plans and Specs. Shall have the meaning specified in Section 4.2(b) of this Agreement.

1.27 CVS Products. The following products are CVS Products: (a) pharmaceutical products that are only available for purchase pursuant to a prescription and must be dispensed by a pharmacist or other licensed healthcare professional; (b)




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over-the-counter (“OTC”) products, skin care and other products for which a third party commercial or government program payor reimburses CVS and that CVS procures through its own distribution and supply chain network; and (c) pseudoephedrine (PSE) products that are federally listed chemicals as set forth in 21 CFR Section 1310.02(a).

1.28 CVS Related Third Party. Shall have the meaning specified in Section 12.3(a) of this Agreement.

1.29 CVS Restricted Competitors. Any or all, including any or all Successors, of [*], and their respective Affiliates.

1.30 CVS Senior Officer. Shall have the meaning specified in Section 7.2 of this Agreement.

1.31 CVS Standards. Shall have the meaning specified in Section 13.3 of this Agreement.

1.32 Effective Date. Shall have the meaning specified in the first paragraph of this Agreement.

1.33 Escalator. Shall have the meaning specified in the Occupancy Costs Agreement.

1.34 Event. Shall have the meaning specified in Section 18.3(b) of this Agreement.

1.35 Exception OTC Products. OTC products that, from to time, CVS and Target mutually agree in writing will be sold by CVS in the Pharmacy Space as CVS Products. CVS will order and pay for the Exception OTC Products from its suppliers directly and such items will be held by CVS in the Pharmacy Space.

1.36 Excluded Products and Services. Any prescription product or service set forth as a “Target Exclusion” in Exhibit A or added to the “Target Exclusion” list in accordance with Section 8.3(b).

1.37 Expanded Space. The Pharmacy Space in any Store that is expanded in size in accordance with the terms of this Agreement.

1.38 FMV Rent. Shall have the meaning specified in the Occupancy Costs Agreement.

1.39 FMV Request. Shall have the meaning specified in the Occupancy Costs Agreement.

1.40 FMV Reset Date. Shall have the meaning specified in the Occupancy Costs Agreement.




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1.41 Force Majeure Event. Catastrophic acts of terrorism, fire, explosion, earthquake, storm, flood, war, insurrection, riot, acts of God, or any comparable event beyond the reasonable control of the Party seeking to excuse performance under this Agreement.

1.42 GC Report. Shall have the meaning specified in Section 7.5 of this Agreement.

1.43 GLBA. Shall have the meaning specified in the Information Security Agreement.

1.44 Governance Committee. Shall have the meaning specified in Section 7.1 of this Agreement.

1.45 Governmental Entity. Any federal, state, local or foreign court of competent jurisdiction, governmental agency, authority, instrumentality or regulatory body.

1.46 Guest. Any consumer, customer or individual who shops within a Store where a Pharmacy is located, which shall not be limited to an individual who receives services at a Pharmacy.

1.47 Handle or Handling. Shall have the meaning specified in the Information Security Agreement.

1.48 HIPAA. Shall have the meaning specified in Section 8.1(a) of this Agreement.

1.49 Incident. Shall have the meaning specified in the Information Security Agreement.

1.50 Indemnified Party. Shall have the meaning specified in Section 17.3 of this Agreement.

1.51 Indemnifying Party. Shall have the meaning specified in Section 17.3 of this Agreement.

1.52 Independent Appraisal. Shall have the meaning specified in the Occupancy Costs Agreement.

1.53 Information Security Agreement. The Information Security Agreement, dated as of the date hereof, entered into by and between CVS and Target.

1.54 Initial Appraisal. Shall have the meaning specified in the Occupancy Costs Agreement.

1.55 Initial Occupancy Costs. Shall have the meaning specified in the Occupancy Costs Agreement.




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1.56 Initial PSF Rate. Shall have the meaning specified in the Occupancy Costs Agreement.

1.57 Intellectual Property. (a) trademarks, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registration in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application (collectively, “Trademarks”), (b) inventions and discoveries, whether patentable or not, in any jurisdiction, patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction, (c) trade secrets, (d) writings and other works, whether copyrightable or not, in any jurisdiction, (e) database rights, design rights, and privacy rights, and (f) any similar intellectual property or proprietary rights.

1.58 Large Format Store. A Store that is larger than [*] square feet.

1.59 Laws. All federal, state or local laws, statutes, ordinances, codes and regulations, including those regulating pharmacy licenses and Drug Enforcement Administration registrations for operating a Pharmacy, and rules promulgated by the Boards of Pharmacy applicable to a Pharmacy.

1.60 Lease. A lease granted under the Pharmacy Master Lease Agreement for a Pharmacy Space.

1.61 License. A license granted under the Pharmacy Master License Agreement for a Pharmacy Space.

1.62 Losses. Shall have the meaning specified in Section 17.1 of this Agreement.

1.63 Marketing Committee. Shall have the meaning specified in Section 10.1 of this Agreement.

1.64 Master Occupancy Agreement. Shall mean, collectively, the Pharmacy Master License Agreement and the Pharmacy Master Lease Agreement.

1.65 MinuteClinic. Shall have the meaning specified in the Recitals of this Agreement.

1.66 New Stores. Any new Target store opened by Target or its Affiliate after the Effective Date in which Target desires to include a Pharmacy or any existing Stores as set forth in Section 4.3.

1.67 Occupancy Costs. The amount payable for a Pharmacy Space in accordance with the terms set forth in the Occupancy Costs Agreement.




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1.68 Occupancy Costs Agreement. The Occupancy Costs Agreement, dated as of the date hereof, entered into by and between CVS and Target.

1.69 Operating Expenses. Shall have the meaning specified in the Occupancy Costs Agreement.

1.70 Operating Expense Share Estimate. Shall have the meaning specified in the Occupancy Costs Agreement.

1.71 Operating Protocols. Shall have the meaning specified in Section 3.1 of this Agreement.

1.72 OTC. Shall have the meaning specified in Section 1.27 of this Agreement.

1.73 Parent. Shall have the meaning specified in Section 24.1 of this Agreement.

1.74 Parties. Target and CVS.

1.75 Party. Target or CVS.

1.76 Patient. Any individual who receives Pharmacy Services from one or more of the Pharmacies.

1.77 Payment Processing Services. Access to authorization, acquisition, routing, and processing services for credit, debit and pre-paid card brands, cash, checks, and other product types as may be processed, from time to time, consistent with the Target Operating Standard through the Target POS in a Pharmacy.

1.78 PCI DSS. Shall have the meaning specified in the Information Security Agreement.

1.79 Performance Target. Shall have the meaning specified in Section 8.11(a) of this Agreement.

1.80 Person. Any individual, firm, corporation, partnership, limited liability company, trust, joint venture or other entity.

1.81 Pharmacist. Each individually licensed pharmacist who is an employee or otherwise retained by CVS to provide the Pharmacy Services on or after the Effective Date.

1.82 Pharmacy. Any retail pharmacy operated by CVS on or after the Effective Date within the Pharmacy Space (under the “CVS/pharmacy,” “Target Pharmacy” or other name reasonably designated by CVS) at the locations set forth in the Master Occupancy Agreement, at which CVS Products are sold and Pharmacy Services are provided. If for any reason CVS manages or services a retail pharmacy in accordance




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with the arrangements described in Section 3.3 below, such retail pharmacy shall be deemed a Pharmacy for the purposes of this Agreement.

1.83 Pharmacy Master Lease Agreement. Shall have the meaning specified in the Recitals of this Agreement.

1.84 Pharmacy Master License Agreement. Shall have the meaning specified in the Recitals of this Agreement.

1.85 Pharmacy Personnel. The Pharmacists, Pharmacy Technicians and other employees or contractors retained by CVS to operate the Pharmacies.

1.86 Pharmacy Services. The pharmacy services provided at the Pharmacies by Pharmacy Personnel, including stocking, dispensing and selling CVS Products and Exception OTC Products, medication counseling, lab testing of blood work, product selection counseling, administering immunizations and any cash or prescription drug discount card or copayment assistance programs (e.g., as described in Section 8.5(b)), and any CVS loyalty program (as described in Section 11), and other pharmacy services as permitted by Laws and that are consistent with the CVS Operating Standard; provided that the Pharmacy Services shall not include, and CVS shall be prohibited from providing, the Excluded Products and Services.

1.87 Pharmacy Space. The designated area Leased or Licensed by CVS in a Store as described in a Master Occupancy Agreement. If for any reason CVS manages or services a retail pharmacy in accordance with the arrangements described in Section 3.3 below, the area in which CVS manages or services the retail pharmacy shall be deemed Pharmacy Space for the purposes of this Agreement.

1.88 Pharmacy Technician. Each individual who is employed or retained by CVS as a technician to provide the Pharmacy Services on or after the Effective Date.

1.89 PII. Shall have the meaning specified in the Information Security Agreement.

1.90 PIN. Shall have the meaning specified in the Information Security Agreement.

1.91 Plans and Specs. Shall have the meaning specified in Section 4.2(b) of this Agreement.

1.92 Post-Period Volume. Shall have the meaning specified in Section 8.11(a) of this Agreement.

1.93 Pre-Period Volume. Shall have the meaning specified in Section 8.11(a) of this Agreement.

1.94 Program. Shall have the meaning specified in the Information Security Agreement.




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1.95 PSF Rate. Shall have the meaning specified in the Occupancy Costs Agreement.

1.96 Reconciliation Amount. Shall have the meaning specified in Section 8.4(c) of this Agreement.

1.97 Reconciliation File. Shall have the meaning specified in Section 8.4(c) of this Agreement.

1.98 Regulator. Shall have the meaning specified in the Information Security Agreement.

1.99 Regulatory Audit. Shall have the meaning specified in the Information Security Agreement.

1.100 Relocated Space. The Pharmacy Space in any Store that is relocated to an alternate space at the same Store.

1.101 Remodeled Store. The renovation, remodel and/or other capital improvement made by Target in a Store (but not including the Pharmacy Space, except as otherwise provided in Section 4.5).

1.102 Sales Amount. Shall have the meaning specified in Section 8.4(c) of this Agreement.

1.103 Senior Officers. Shall have the meaning specified in Section 7.2 of this Agreement.

1.104 Shortfall. Shall have the meaning specified in Section 8.11(a) of this Agreement.

1.105 Smaller Format Store. A Store that is [*] square feet or smaller.

1.106 Smaller Format Store/Leased. Shall have the meaning specified in the Occupancy Costs Agreement.

1.107 Smaller Format Store/Owned. Shall have the meaning specified in the Occupancy Costs Agreement.

1.108 Special Amendments. Shall have the meaning specified in Section 8.15(b) of this Agreement.

1.109 Standstill Period. Shall have the meaning specified in Section 15.3 of this Agreement.

1.110 State. Any state or territory of the United States.

1.111 Store. A Target store location within the United States and its territories, including the US Virgin Islands and Puerto Rico, that includes a Pharmacy as of the




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Effective Date, and those which, subject to the terms and conditions hereof, will include a Pharmacy; provided that a Store at which a Store Closure takes place shall not, as of the date of the Store Closure, be included in the definition of a Store.

1.112 Store Closure. The permanent closure of a Store for any reason or the cessation of operations under the Target brand at that Store.

1.113 Store Growth Group. The Stores existing as of the Effective Date that also exist on the [*] anniversary of the Effective Date (but excluding any Stores in which a Pharmacy has experienced meaningful or extended disruption due to a Force Majeure Event or a relocation pursuant to Section 4.4(a) hereof).

1.114 Successor. Any Person who acquires by purchase, divestiture, merger or otherwise all or substantially all of the stock, assets or business of another Person.

1.115 Target. Shall have the meaning specified in the first paragraph of this Agreement.

1.116 Target Assessment. Shall have the meaning specified in the Information Security Agreement.

1.117 Target Change of Control Outlet. Shall have the meaning specified in Section 18.4(ii)(a) of this Agreement.

1.118 Target Indemnified Parties. Shall have the meaning specified in Section 17.1 of this Agreement.

1.119 Target Identification. Shall have the meaning specified in Section 13.1 of this Agreement.

1.120 Target Operating Standard. The operation of the Stores consistent in all material respects with the custom, practice and standards of Target’s stores.

1.121 Target Personnel. The employees or contractors retained by Target or its Affiliates to operate the Stores (which shall not include Pharmacy Personnel).

1.122 Target Plans and Specs. Shall have the meaning specified in Section 4.2(a) of this Agreement.

1.123 Target POS. Target’s point of sale terminal and telecommunications system, including hardware and software as more fully described in Section 8.15 and Exhibit B.

1.124 Target Products. The products, services and merchandise sold by Target at the Stores (which shall not include CVS Products or Pharmacy Services).

1.125 Target Restricted Competitors. Any or all, including any or all Successors, of [*], and their respective Affiliates.




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1.126 Target Senior Officer. Shall have the meaning specified in Section 7.2 of this Agreement.

1.127 Target Standards. Shall have the meaning specified in Section 13.1 of this Agreement.

1.128 Target’s Occupancy Costs. Shall have the meaning specified in the Occupancy Costs Agreement.

1.129 Trademarks. Shall have the meaning specified in Section 1.57 of this Agreement.

1.130 Transaction. Shall have the meaning specified in Section 15.3(b) of this Agreement.

1.131 Transition Services Agreement. The Transition Services Agreement, dated as of the date hereof, entered into by and between MinuteClinic, CVS and Target.

1.132 Valuation Experts. Shall have the meaning specified in Section 19.1(c) of this Agreement.

1.133 Workers. Shall have the meaning specified in the Information Security Agreement.

2. Operating Agreement.

2.1 This Operating Agreement sets forth the terms of and governs the relationship between the Parties related to the operation of the Pharmacies within the Stores. To the extent applicable, the terms and provisions set out in this Agreement shall apply to each Pharmacy Space individually.

2.2 During the term of this Agreement, CVS shall operate a Pharmacy and provide Pharmacy Services within each Store and in Target’s headquarters in accordance with the CVS Operating Standard and subject to the other terms, conditions and provisions of this Agreement and any Master Occupancy Agreement (including Section 23(c) thereof). Target shall permit CVS to operate a Pharmacy within each Store and in Target’s headquarters in accordance with the terms of this Agreement and the Master Occupancy Agreement (including Section 23(c) thereof). At the Pharmacies, CVS shall only sell CVS Products and Exception OTC Products and shall only provide Pharmacy Services. In the event that a CVS Operating Standard is in conflict with the express terms of this Agreement or the Master Occupancy Agreement, the terms of this Agreement or the Master Occupancy Agreement shall govern.

2.3 Target shall operate the Stores in accordance with the Target Operating Standard and subject to the other terms, conditions and provisions of this Agreement and the Master Occupancy Agreement. In the event that a Target Operating Standard is in conflict with the express terms of this Agreement or the Master Occupancy Agreement, the terms of this Agreement or the Master Occupancy Agreement shall govern.




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2.4 CVS shall be entitled to exercise exclusive oversight and control of the Pharmacy operations, the sale of CVS Products and Exception OTC Products, and the provision of Pharmacy Services in each Pharmacy Space, subject to the terms and conditions of this Agreement, any applicable power of attorney and the Master Occupancy Agreement. Target shall retain oversight and control over the Store, including all shared infrastructure, all physical access points and the remainder of the Store, subject to CVS’s rights hereunder and under any applicable power of attorney and the Master Occupancy Agreement.

2.5 The Parties have endeavored to create an agreement that anticipates issues and decisions they shall face together in the future. Inevitably, issues may arise which CVS and Target did not anticipate. The Parties agree that they shall work together in good faith to maintain collaboration between the institutions and agree to discuss any issues of concern, providing written notice to the other and causing their Senior Officers to meet in person to seek to expeditiously resolve any differences.

3. General Pharmacy Operating Cooperation and Conversion.

3.1 The Parties shall designate a relationship manager for each Party. The relationship managers shall be responsible for developing operating protocols for the Pharmacy, the Pharmacy Personnel and Store teams, as may be amended from time to time (“Operating Protocols”). The Operating Protocols shall include policy and procedures for third party vendor access, after hours access to the Store by Pharmacy Personnel, emergency contact and escalation procedures as well as other matters the Parties mutually agree are necessary and appropriate to facilitate an effective and cooperative day-to-day operating model in accordance with this Agreement and the Master Occupancy Agreement.

3.2 Each Party shall commit sufficient and appropriate personnel and resources to ensure CVS is able to operate the Pharmacies in accordance with the terms of this Agreement as expeditiously as possible following the Effective Date. The Parties intend to have CVS operating all Pharmacies in accordance with the terms of this Agreement within one hundred eighty (180) days of the Effective Date, such time to be tolled for the period between November 15, 2015 through January 15, 2016 to the extent applicable, and specifically CVS shall have completed the following by such date, subject to Target’s compliance in all material respects with the Transition Services Agreement and this Agreement:

(a) Transitioned to the CVS dispensing system for all Pharmacies;

(b) Rebranded all Pharmacies under the trade name “CVS/pharmacy” (or such other name as reasonably designated by CVS), except as provided in Section 3.3 below;

(c) Obtained all of the necessary state and federal licenses and permits to operate the Pharmacies, excluding any Pharmacies for which such licenses or permits cannot be obtained; and




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(d) Completed all other necessary actions to operate the Pharmacies without the services contemplated in the Transition Services Agreement.

3.3 If for any reason CVS cannot rebrand a retail pharmacy under the name “CVS/pharmacy” but can operate a retail pharmacy under the “Target Pharmacy” name, CVS shall operate the retail pharmacy under the “Target Pharmacy” name and the Parties shall work together in good faith to structure such arrangement to enable CVS to operate the retail pharmacy in a manner [*]. If for any reason CVS cannot operate a retail pharmacy under the “CVS/pharmacy,” “Target Pharmacy” or other name reasonably designated by CVS, the Parties shall work together in good faith to structure an arrangement that would enable CVS [*]. The Parties shall work together in good faith to modify this Agreement or enter into new agreement(s) to reflect the foregoing provisions of this Section 3.3 to the extent necessary.

4. New Stores, Existing Expansions, Relocations and Closure.

4.1 Planning. On the Effective Date, for the remainder of the calendar year in which the Effective Date occurs and for the next succeeding calendar year, and then on or before October 1 of each subsequent calendar year, Target shall provide CVS with Target’s then-current annual forecast for New Stores, Relocated Spaces, Remodeled Stores and Store Closures, including projected opening, relocation, remodeling and closure/sale dates for the New Stores, Relocated Spaces, Remodeled Stores and Store Closures, respectively (the “Annual Forecast Plan”). Upon receipt of the Annual Forecast Plan, or as otherwise consistent with this Section 4, the Parties’ respective rights and obligations in regard to a New Store, Relocated Space, Remodeled Store and Store Closure shall be governed by the subsequent relevant provisions of this Section 4. CVS acknowledges that the Annual Forecast Plan is Confidential Information.

4.2 New Stores (Pharmacy). Where Target specifies in the Annual Forecast Plan that a Pharmacy is to be included in a New Store, CVS shall, unless explicitly set forth below in this Section 4.2 or as prohibited by Laws or third party restrictions on, or consent rights to, the operation of a pharmacy applicable to and binding upon Target and/or CVS (provided said third party restrictions or consent rights were not created by CVS), open a Pharmacy in each such New Store pursuant to this Agreement and the Master Occupancy Agreement. CVS shall use commercially reasonable efforts to open the Pharmacy in such New Store at the same time the New Store opens to the public. Target shall provide CVS with reasonable, periodic notices, updates, information and communications throughout its New Store opening and development process and reasonable access to the New Store so that CVS can properly license and staff the Pharmacy in accordance with said timeline and the terms and conditions of this Agreement. In each New Store that is to include a Pharmacy, the contiguous usable floor space available for the Pharmacy will be no less than required by Law and at least [*] square feet; provided, that (i) in a New Store where Target has commenced construction based on a store layout plan or has otherwise finalized a store layout plan for such New Store on or before the Effective Date, and such store layout plan has been delivered to CVS within thirty (30) days from the Effective Date, the contiguous usable floor space available for the Pharmacy will be as set forth in such layout plan, and (ii) if the New Store is a Smaller Format Store and




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Target cannot reasonably accommodate [*] square feet of contiguous usable floor space for the Pharmacy in such Store, then the Parties shall cooperate with each other in good faith to determine the space reasonably required by CVS in such Smaller Format Store to operate the Pharmacy and provide the Pharmacy Services; provided further, that in each such New Store that is a Smaller Format Store, the contiguous usable floor space available for the Pharmacy will be no less than required by Law and at least [*] square feet.

(a) For each New Store where a Pharmacy is to be included, Target shall provide CVS with reasonably detailed information regarding the location of the New Store, the size of the New Store and Pharmacy, a New Store layout plan (which shall include the location of the Pharmacy), signage and site lighting plans (collectively, the “Target Plans and Specs”).

(b) For each New Store, CVS shall designate for Target which pre-approved prototype designs will apply for the Pharmacy Space, or will provide to Target its detailed plan and specifications for the Pharmacy Space, including without limitation, power and infrastructure requirements (collectively, the “CVS Plans and Specs,” which together with the Target Plans and Specs are known as the “Plans and Specs”).

(c) Upon delivery of the Target Plans and Specs and the CVS Plans and Specs by each Party to the other Party, the Parties shall meet to discuss the New Store and the Pharmacy to be included in the New Store and shall agree on a build-out time frame for the Pharmacy Space. CVS shall have reasonable access to the New Store at regular periods prior to completion of construction of the Pharmacy. Any Pharmacy opened at a New Store shall be deemed a Pharmacy under this Agreement, and the Master Occupancy Agreement shall be supplemented consistent with its terms.

4.3 Existing Store Pharmacy Additions. Target has provided CVS with a list of all Target stores existing as of the Effective Date that do not have a Pharmacy. The Parties shall work together to jointly determine whether such Target stores are appropriate for the purpose of including a Pharmacy. Any such Target store in which the Parties agree to open a Pharmacy will be treated as a New Store and the notice, access and consultation terms of Section 4.2 shall apply mutatis mutandis.

4.4 Relocation and Expansion.

(a) Request by Target for Relocation.

(i) With respect to any Relocated Spaces, Target shall provide CVS with the Target Plans and Specs and the Parties shall meet to discuss the Relocated Space, including the location, design, size of, and signage for, the Pharmacy in such Relocated Space, and to ensure that the Relocated Space is of a size and configuration that will enable CVS to comply with all Laws at the Relocated Space. The Relocated Space shall be no less favorable to CVS in any material respect than the current Pharmacy Space, taking into account design, size, visibility, store traffic and Guest access. Target shall provide CVS with reasonable, periodic notices, and updates, information and communications throughout the relocation and opening and development process and




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reasonable access to the Relocated Space that would allow CVS to properly license and staff the Pharmacy in order to open it in accordance with the timeline agreed upon by the Parties and the terms and conditions of this Agreement. Target shall allow for signage that the Pharmacy is still open and operating during the relocation.

(ii) Target agrees to effect and coordinate any such relocation in a manner that does not cause the Pharmacy to cease operations during its regular operating hours or otherwise impair CVS’s applicable state pharmacy license(s) for the Pharmacy Space. As soon as reasonably practicable after a Pharmacy opens for business in the Relocated Space as set forth above, CVS shall vacate and surrender its previous space in accordance with the terms of the Master Occupancy Agreement. The Relocated Space shall become the Pharmacy Space at the Store for purposes of this Agreement and the Master Occupancy Agreement.

(b) Request by CVS for Expansion.

(i) From time to time, upon request and subject to the consent of Target in its sole discretion (except as otherwise provided in Section 4.4(b)(ii)), CVS may expand the size of the Pharmacy Space in a Store, provided that the cost of any such expansion is borne by CVS. Upon reaching such agreement, Target shall, at CVS’s expense, build the Expanded Space to a condition suitable to allow CVS to fit-out the Expanded Space with its furniture, fixtures and equipment. Target shall provide CVS with reasonable, periodic notices, and updates, information and communications throughout the expansion and opening and development process and reasonable access to the Expanded Space that would allow CVS to properly license the Pharmacy in accordance with the timeline agreed upon by the Parties and the terms and conditions of this Agreement. In addition, Target agrees to effect and coordinate any such expansion in a manner that does not cause the Pharmacy to cease operations during its regular operating hours or otherwise impair CVS’s applicable state pharmacy license(s) for the Pharmacy Space. On the opening date of a Pharmacy in the Expanded Space as set forth above, the new Expanded Space shall become the Pharmacy Space at the Store for purposes of this Agreement and the Master Occupancy Agreement. In addition, Target shall allow for, but CVS shall be responsible for the cost of, signage that the Pharmacy is still open and operating during the expansion.

(ii) If the prescription volume for the Pharmacy in a Smaller Format Store exceeds [*] prescriptions per week, on average, over a continuous six (6) month period, and the square footage of that Pharmacy is less than [*] square feet, then at the request of CVS, the Parties shall cooperate with each other in good faith to determine the space reasonably required by CVS to expand the Pharmacy. Consistent with Section 4.4(b)(i), CVS shall bear all costs associated with improving, developing, renovating and/or building the expanded Pharmacy Space pursuant to the foregoing.

4.5 Remodeling of Stores. With respect to any Remodeled Store, Target shall ensure that any renovation or remodeling of the Pharmacy Space in such Remodeled Store does not (i) change the size, configuration or location of the Pharmacy Space (unless agreed to by CVS) or (ii) cause the Pharmacy to cease operations during their regular operating




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hours or otherwise impair CVS’s applicable state pharmacy license(s) for the Pharmacy Space. In connection with any Remodeled Store, CVS may elect at its cost and expense to remodel and/or renovate the Pharmacy Space in conjunction with the work being performed by Target to the remainder of the Store, provided that if CVS has not committed to such renovation or remodel within ten (10) Business Days after written notice thereof from Target, Target shall have the right to make, upon at least ten (10) Business Days’ notice to CVS and subject to the terms of the Master Occupancy Agreement, the same cosmetic upgrades to the Pharmacy Space, such as painting and flooring, as are being made to the remainder of the Remodeled Store, at Target’s cost and expense and subject to the terms of this Agreement and the Master Occupancy Agreement. Target shall use commercially reasonable efforts to effect any such remodeling and/or renovation so that (a) such remodeling and/or renovation does not obstruct parking spaces needed by Patients to access the Pharmacies, and (b) CVS’s operation of the Pharmacy will not be otherwise unreasonably interfered with, but in no case shall Target be liable for any damages, expenses, or loss or reduction of CVS’s business, sales or profit resulting from such remodeling activity. Target shall allow for reasonable signage that the Pharmacy is still open and operating during any renovation or remodeling.

4.6 Build-Out Obligation.

(a) Any work in connection with a Pharmacy Space in a New Store, Relocated Space, or Expanded Space pursuant to Sections 4.2, 4.3 and 4.4 shall be performed by Target in accordance with the Plans and Specs and consistent with the Target Operating Standard, and Target shall use or cause to be used substantially the same materials for the Pharmacy Space as those used in the construction of the remainder of the New Store, Relocated Space, or Expanded Space. Target shall be responsible, [*], for (i) obtaining all building, utility, sign, health, sanitation, environmental and other permits, approvals and building licenses (for clarity, not including pharmacy licenses) required for development and construction of each New Store, Relocated Space, or Expanded Space, and (ii) developing and constructing the [*], all consistent with the Target Operating Standard and the Plans and Specs, to a condition suitable to allow CVS to fit-out the Pharmacy Space with its furniture, fixtures and equipment as set forth in Section 4.6(b) below.

(b) With regard to any work in connection with a Pharmacy Space in a New Store or Expanded Space (but excluding any Relocated Space, which work shall be the sole responsibility of Target except as otherwise provided herein), CVS shall be solely responsible for [*]. Costs with regard to work in connection with a Remodeled Store shall be incurred by the Parties as set forth in Section 4.5. For all Pharmacies, CVS shall be solely responsible for obtaining all business permits and licenses required for operating the Pharmacy. Any work that does not impact any part of the Store that is not within the Pharmacy Space or otherwise impact the Store infrastructure or utilities shall be performed by CVS using CVS’s vendors as qualified under CVS’s corporate vendor qualification program. To the extent any work impacts any part of the Store that is not within the Pharmacy Space or otherwise impacts the Store infrastructure or utilities, such work shall be performed in accordance with the Master Occupancy Agreement.




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4.7 Closure by Target. With respect to Store Closures planned under the Annual Forecast Plan, Target shall have the sole right to determine, whether for business or other reasons, to conduct a Store Closure with respect to one or more Stores containing a Pharmacy, subject to the following terms and conditions:

(a) Target shall provide CVS with at least three (3) months’ prior written notice of its intent to conduct a Store Closure and shall consult with CVS regarding any such Store Closure to allow for budgeting, asset write-off or transfer, and Patient file transfer.

(b) Target may have up to [*] ([*]) Store Closures in the net aggregate during a [*] ([*]) year period commencing on the Effective Date. For purposes of calculating [*] ([*]) Store Closures under this Section 4.7(b), any New Stores where a Pharmacy opens during the first [*] ([*]) years after the Effective Date shall be subtracted from the number of Store Closures. If Target has more than [*] ([*]) Store Closures in the net aggregate during such time period, then Target shall pay to CVS, as CVS’s sole remedy under this Section 4.7, $[*] per Store Closure in excess of [*] ([*]) Store Closures, which payment shall be made no later than seventy-five (75) days after the end of the [*] ([*]) year period.

(c) Subject to the foregoing, upon a Store Closure, the License or Lease for the affected Pharmacy Space will terminate solely with respect to such Pharmacy Space without terminating this Agreement in its entirety, CVS shall cease operations in the Pharmacy Space, subject to Laws (including any applicable notice periods with respect to Patients), and CVS shall remove all of CVS’s equipment, devices, products (including, without limitation, CVS Products), inventory, records and other properties of CVS from the Pharmacies. Subject to Laws, CVS shall have sole discretion with respect to the transition of Patients and pharmacy records upon any Store Closure.

(d) Notwithstanding any other provision in this Agreement, on and after the [*] ([*]) anniversary of the Effective Date, upon the minimum notice set forth in Section 4.7(a), Target shall have the right in its sole discretion to conduct Store Closures.

4.8 Improvements by CVS. Target acknowledges that CVS may, at its own cost from time to time, remodel and/or renovate all or part of any Pharmacy in accordance with the CVS Operating Standard and the Master Occupancy Agreement; provided that (i) CVS shall provide at least ten (10) days’ notice to Target if the remodeling and/or renovation does not impact any part of the Store that is not within the Pharmacy Space or otherwise impact the Store infrastructure or utilities, (ii) CVS shall provide at least thirty (30) days’ notice to Target if the remodeling and/or renovation impacts any part of the Store that is not within the Pharmacy Space or otherwise impacts the Store infrastructure or utilities; and (iii) except as otherwise required by Law or at the request of any Governmental Entity, any remodeling and/or renovation that impacts any part of the Store that is not within the Pharmacy Space or Store infrastructure or utilities and is conducted during the period beginning on November 15 of any calendar year and ending on January 15 of the following calendar year shall require the prior written consent of Target, which may be withheld in Target’s sole discretion. Any proposed alterations to any Pharmacy Space shall be subject to, and contingent upon the satisfaction of, the terms and conditions of




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the applicable Master Occupancy Agreement, including, but not limited to, the engagement of any contractors or vendors to perform such alterations (which shall be a party approved under Target’s corporate vendor qualification program to the extent such alteration impacts any part of the Store that is not within the Pharmacy Space or impacts Store infrastructure or utilities).

5. Occupancy Costs and Other Payments.

5.1 Occupancy Costs. All payments of the Occupancy Costs due to Target (as adjusted on account of New Stores, Expanded Space, Relocated Space and Store Closures) shall be paid as set forth in the Occupancy Costs Agreement.

5.2 Negotiated FMV. Payment of the Occupancy Costs to Target is not intended to be and shall not be interpreted or applied as permitting Target to share in the revenue or benefits of CVS Products or Pharmacy Services, but is the Parties’ negotiated agreement as to the reasonable fair market value of the common area maintenance, utilities and other items or services furnished pursuant to this Agreement and the Master Occupancy Agreement, as the case may be.

5.3 Other Payments. Any other payments due to a Party pursuant to the terms of this Agreement shall be paid as set forth in the applicable Section contemplating such payment or within seventy-five (75) days of receipt of an invoice for such payment, whichever time period is longer.

6. Signage.

6.1 Subject to any pre-existing limitations at Stores that include a Pharmacy as of the Effective Date, CVS shall have the right to place or erect signage on the interior and exterior of the Stores in which a Pharmacy is located and to install a panel on existing pylon signs and ground signs, each with the “CVS/pharmacy” brand (or such other name designated by CVS consistent with Section 3.3), space permitting. Notwithstanding the foregoing, the right to place and erect signage at Stores existing as of the Effective Date shall not enable CVS to alter the size or location of Target’s master branded exterior or pylon signs, and all signs placed or erected by CVS at Stores existing as of the Effective Date shall be consistent with agreed upon co-branding standards determined by the Marketing Committee and subject to Target’s reasonable review; provided that the Parties shall reasonably cooperate with each other in good faith to install or erect signage with the “CVS/pharmacy” brand (or such other name designated by CVS consistent with Section 3.3) in the size and location required by Law.

6.2 All signage referred to herein and the installation thereof shall comply with all Laws. The Parties shall use reasonable commercial efforts to obtain any required consents from third parties, including landlords, in connection with any compliant signage CVS desires to install or erect at the Stores. CVS shall be responsible for all costs of any Pharmacy signage, including installation and maintenance of any Pharmacy signage. CVS shall also be responsible for selecting and retaining a vendor approved under Target’s corporate vendor qualification program in connection with any Pharmacy signage to be installed or erected.




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6.3 Notwithstanding the foregoing, with respect to Pharmacy signage to be installed or erected at New Stores, the Parties shall cooperate in good faith and reasonably agree on appropriate signage consistent with agreed upon co-branding standards determined by the Marketing Committee in connection with any new signage being installed or erected at any Store (or at any pylon or ground sign relating to any New Store).

6.4 Notwithstanding the provisions of Section 6.1, CVS shall have no right to place or install any signage on the exterior or interior of Target’s headquarters buildings, provided, however, that CVS shall be permitted to erect signage at the store front of the Pharmacy operated by CVS at Target’s headquarters building, subject to Target’s approval as to the size, location and design of such signage.

7. Governance Committee.

7.1 The Parties shall create a joint governance committee (the “Governance Committee”) consisting of an equal number of senior officers designated by each Party. The Governance Committee members appointed by CVS shall have the titles of Executive Vice President, Pharmacy Services; Executive Vice President, Retail Operations; and Senior Vice President, IT Retail Systems. The Governance Committee members appointed by Target shall have the titles of Senior Vice President Merchandising; Senior Vice President Stores; and Vice President Technology. Each Party may replace one or more of its designees with a new designee of equal or senior title or role at any time upon written notice to the other Party. Each Party will promptly fill all of its Governance Committee vacancies as they arise by written notice to the other Party.

7.2 The Governance Committee will discuss business performance and plans, opportunities for future growth of the Pharmacy business, New Stores, customer service performance and other matters related to the governance of the relationship under this Agreement, the Clinic Operating Agreement, the Transition Services Agreement, the Master Occupancy Agreement, the Information Security Agreement and the Occupancy Costs Agreement as requested by any Governance Committee member from time to time. In addition, the Governance Committee will designate and delegate authority to project managers from each Party as necessary to facilitate the day-to-day relationship between the Parties. If the Governance Committee cannot agree on resolution of a material issue under this Agreement, the Clinic Operating Agreement, the Transition Services Agreement, the Master Occupancy Agreement, the Information Security Agreement or the Occupancy Costs Agreement, the Governance Committee shall request that the President of CVS/pharmacy (“CVS Senior Officer”), and the Chief Merchant of Target Corporation (“Target Senior Officer” and collectively the “Senior Officers”) meet within fourteen (14) days to attempt to resolve the disagreement. In the event of a continuing disagreement following the meeting of the Senior Officers, upon written notice from one Party to the other, the material issue shall be escalated to the Chief Executive Officers of each of CVS and Target for resolution.

7.3 The Governance Committee will meet at least quarterly for the first two (2) years following the Effective Date and at least semi-annually thereafter; provided that if any




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Governance Committee member requests to meet more frequently, the Governance Committee will meet more frequently, but not more frequently than monthly absent an emergency situation.

7.4 Regular meetings of the Governance Committee shall be held at such place, on such date, and at such time as shall have been established by the Governance Committee, provided that the Governance Committee members shall attempt to select a time that is reasonably convenient for all Governance Committee members to be present at such meeting. Written notice of the place, if any, date, and time of any such meeting shall be given not less than thirty (30) nor more than ninety (90) days before the date on which the meeting is to be held, to each Governance Committee member. The Governance Committee may meet by teleconference or other electronic means through which all participants are able to hear each other. Any Governance Committee member may establish an agenda for a meeting, which shall be provided to the other members in writing in advance of said meeting. The out-of-pocket costs (including travel and lodging) incurred by any Governance Committee member in attending such meeting shall be borne by the Party appointing such member. A member of the Governance Committee may designate an attendee to attend in place of that Governance Committee member for one (1) meeting a year.

7.5 No later than thirty (30) days following the last day of each calendar quarter, with respect to the Pharmacies existing during such calendar quarter, CVS shall provide the Governance Committee with an accounting of the business and customer service performance of the Pharmacies or such other report or information the Governance Committee may reasonably request from time to time, in each case in such form as mutually agreed by the members of the Governance Committee (collectively, a “GC Report”), to be reviewed at the following Governance Committee meeting; provided that CVS shall not be required to provide any Confidential Patient Information to the Governance Committee in connection with such GC Report or otherwise. Each GC Report will be accompanied by such supporting documentation as is reasonably requested by the Governance Committee.

8. Operations.

8.1 Compliance with Laws.

(a) Compliance with Laws by CVS. CVS shall, at its expense, operate the Pharmacies in compliance in all material respects with any and all Laws applicable to the operation of the Pharmacies. CVS shall obtain and maintain in all material respects any and all permits, licenses and regulatory approvals required in connection with its operation of the Pharmacies. CVS acknowledges that it is a “Covered Entity” as that term is defined under the Health Insurance Portability and Accessibility Act (“HIPAA”) and, as such, is responsible for maintaining the privacy and security of Confidential Patient Information it receives or creates as a result of its operation of Pharmacies.




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(b) Compliance with Laws by Target. Target shall, at its expense, operate the Stores in compliance in all material respects with any and all Laws applicable to the operation of the Stores.

(c) Chief Compliance Officers. The Chief Compliance Officers of CVS and Target (and their delegates) shall meet at least twice each year during the term of this Agreement at such times and places as agreed to between the Chief Compliance Officers (with additional meetings or reporting as agreed to between the Chief Compliance Officers) to discuss compliance issues and mutual cooperation of the Parties to ensure effective operation of each Party’s respective corporate compliance program.

8.2 Billing for Services. Target shall not be responsible for, and shall have no liability for, billing Federal health care programs or other public or commercial health plans for CVS Products or Pharmacy Services. CVS acknowledges that none of the obligations of Target under this Agreement constitute activities that would make Target a down-stream contractor or delegated entity for purposes of any “Federal health care program” as defined in 42 U.S.C. § 1320a-7b(f). The parties also acknowledge that Target’s provision of products and/or services under this Agreement does not make the Agreement a covered federal contract for federal contractor affirmative action purposes or create affirmative action obligations pursuant to such regulations (including Executive Order 11246).

8.3 CVS Products and Pharmacy Services.

(a) CVS shall sell, dispense, and provide CVS Products (including Exception OTC Products) and Pharmacy Services at the Pharmacies in accordance with the terms and conditions of this Agreement; provided that CVS shall not sell, dispense, or provide Excluded Products and Services or any products or services that are not CVS Products, Exception OTC Products or Pharmacy Services at any Pharmacy.

(b) Target may add individual CVS Products or Pharmacy Services to the “Target Exclusion” list set forth in Exhibit A by written notice to CVS; provided that Target may not add a CVS Product or Pharmacy Service to the “Target Exclusion” list if (1) Target dispenses or provides such product or service at any of the Stores as of the Effective Date; or (2) the CVS Product or Pharmacy Service is commonly offered by other drugstores, including, but not limited to, CVS Restricted Competitors, and provided further that Target’s addition of any CVS Product or Pharmacy Service to the “Target Exclusion” list will be subject to approval by the Governance Committee and will not be deemed Excluded Products and Services until approved by the Governance Committee. Pharmacy Services added to the “Target Exclusion” list in accordance with this Section 8.3(b) automatically become Excluded Products and Services.

8.4 Revenue Processing.

(a) All revenue from the CVS Products sold by, and Pharmacy Services provided by, any Pharmacy shall accrue to CVS. All other revenue from products sold or services




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performed in any Store, including by any Pharmacy, that are not CVS Products or Pharmacy Services, shall accrue to Target.

(b) Except as explicitly set forth in the Asset Purchase Agreement, each Party shall, at its expense, pay and discharge all license fees and all business, use, sales, gross receipts, income, property or other applicable taxes which may be charged or levied by reason of any act performed in connection with the operation of its business at or in connection with a Store.

(c) Target shall wire funds to CVS in an amount equal to the “Reconciliation Amount” by 3:00 p.m. (Eastern Standard Time) on the second Business Day of the week (e.g., on Tuesday if banks are open on Monday or on Wednesday if banks are closed on Monday or Tuesday) (each such date, a “Reconciliation Date”). The Reconciliation Amount shall equal the aggregate sales (net of returns), including all sales taxes (as calculated by CVS), in connection with the Pharmacy Services processed and collected through the Target POS from Sunday through Saturday of the preceding week (the “Sales Amount”), minus the Applicable Rate multiplied by the Sales Amount. In addition, on each Reconciliation Date, Target shall transmit to CVS via a mutually agreed upon data transfer method, a file containing all transaction level sales data for each sale that comprises the Sales Amount paid on that Reconciliation Date (the “Reconciliation File”). Exhibit F contains a list of all data fields to be included in the Reconciliation File. No more than one time in a twelve-month period, Target may notify CVS in writing of changes to the Applicable Rate, including the underlying rationale and the methodology for calculating any such changes. The new Applicable Rate shall go into effect ten (10) Business Days after CVS’s receipt of such notice.

8.5 Pricing.

(a) Except as provided in Section 8.5(b), CVS shall determine, in its sole discretion and in accordance with the CVS Operating Standard, the prices charged by it to its Patients for Pharmacy Services and CVS Products (including Exception OTC Products) in the Pharmacies.

(b) As of the Effective Date, CVS shall accept a prescription drug discount card at all Pharmacies that will include a discount generic pharmaceutical product list with $4 and $9 prices for 30 days supply and $10 and $24 prices for 90 days supply. The initial list of pharmaceutical products covered by the prescription cash discount card program as of the Effective Date shall include the drugs on the Target generic pharmaceutical product list posted on the Target web site as of the date of signing of the Asset Purchase Agreement. CVS shall maintain the prescription cash discount card program at all Pharmacies for at least [*] ([*]) years from the Effective Date. CVS shall have the right, from time to time after the Effective Date, to adapt or modify the cash discount card program in its sole discretion. CVS shall not charge any Guest a membership fee for the prescription cash discount card program.

8.6 Customer Solicitations. CVS shall not solicit Guests in the Common Areas of a Store and shall not promote any products or services other than the Pharmacy Services




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and CVS Products at the Pharmacies, unless such acts are approved in advance in writing by Target.

8.7 Refuse and Disposal. CVS shall be solely responsible for (i) ensuring CVS Products are disposed of appropriately by the Pharmacies in accordance with applicable Law, (ii) appropriate disposal of all Confidential Patient Information, and medical, hazardous, and environmental wastes that result from providing the Pharmacy Services, and (iii) the costs and execution of any controlled substances takeback programs required by Law.CVS shall qualify the vendors performing any aspect of the foregoing under CVS’s corporate vendor qualification policy and shall have the right to select such vendors in CVS’s sole discretion.

8.8 CVS Assistance. CVS shall establish reasonable operating procedures to ensure that, at the request of any Guest, Pharmacy Personnel reasonably assist such Guest in identifying appropriate OTC products, skin care, and other Target Products in the Stores that are consistent with managing the Guest’s health.

8.9 Hours. CVS will initially set the operating hours of each Pharmacy operated by CVS as of the Effective Date in accordance with the operating hours of such Pharmacy in place on the Effective Date. CVS will set the operating hours of each Pharmacy in a New Store in accordance with the CVS Operating Standard. CVS shall periodically review the operating hours of each Pharmacy in relation to other pharmacies in the competing market area and CVS may thereafter adjust the operating hours of its Pharmacies, after consultation with, and reasonable written notice to, Target, provided that (i) no Pharmacy may be open earlier or later than the Store in which it is located, and (ii) no Pharmacy will be open on days during which a Store is closed.

8.10 Pharmacy Staffing & Operations. CVS shall use its commercially reasonable efforts to ensure the Pharmacies are staffed and do not cease operations during their regular operating hours. Except with respect to any Force Majeure Event or as otherwise set forth in the Master Occupancy Agreement, in the event that any Pharmacy’s operations are disrupted for more than one (1) day, CVS shall assign appropriate staff from another location to ensure that the Pharmacy in the Store is open for normal Pharmacy operating hours.

8.11 Service Levels.

(a) Script Growth Performance Target. The Parties will measure the script volume of each of the Pharmacies existing [*] (the “Pre-Period Volume”). On the [*] anniversary of the Effective Date, the Parties will measure the script volume of the Store Growth Group for the twelve month period preceding the [*] (the “Post-Period Volume”). In the event the cumulative growth percentage of the [*] (the “Performance Target”), CVS shall pay to Target $[*] million for each [*] shortfall in the Performance Target, provided that such payment shall not exceed $[*] million in the aggregate. Any such payment shall be made to Target within seventy-five (75) days after the end of such [*] ([*]) year period. Beginning with the [*]anniversary of the Effective Date, CVS agrees that it will plan for business growth at the Pharmacies in a manner that is [*]. In the event (i) the




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cumulative growth for the previous [*] period in total script volume on a [*] as of each January 1st (commencing after the [*] anniversary of the Effective Date) is less than [*]% of the [*] (based on IMS Health listings or a comparable source determined by the Parties in good faith) (the “Shortfall”), and (ii) the Shortfall is more than [*] ([*]) percentage points greater than the shortfall would be if only the [*] (as determined above), then CVS shall engage a nationally recognized consulting company (the “Consultant”), at its own cost and expense, to review the Shortfall and recommend how to decrease or eliminate the Shortfall. Target shall have the right to approve the Consultant, which approval shall not be unreasonably withheld, conditioned or delayed, and to receive a copy of the Consultant’s report. As long as the condition described in clause (ii) above continues, CVS shall implement the Consultant's recommendations in the order that CVS determines to be most effective to remediate the condition, provided that they do not require operational or other changes to the Stores (except with respect to the Pharmacies), and shall also dedicate a senior officer to oversee the Consultant’s work and the implementation of the Consultant’s recommendation(s) and to regularly update the Target Senior Officer on the progress of the implementation.

(b) Patient Contacts/Complaints. Any calls Target receives regarding Patient complaints, whether at Stores or through Target call centers, shall be forwarded to pre-designated CVS call centers. Except for the Target Products sold by any Pharmacy, Target shall not be responsible for, and shall have no liability for, addressing or resolving any Patient complaint with respect to CVS Products or Pharmacy Services sold or provided by the Pharmacies. Standard incident reporting with respect to Pharmacy operations in the Stores will be provided to the Governance Committee in the GC Report. CVS shall notify Target of any complaint CVS receives from any third party in connection with the operation of a Pharmacy that alleges improper, negligent or unlawful conduct by Target or a Target team member.

(c) Patient Survey. CVS shall survey Patients on a regular basis consistent with the frequency of such Patient surveys administered in CVS’s pharmacies not located in the Stores. CVS and Target shall cooperate with each other to ensure the Patient surveys used at the Pharmacies align with the priorities of both businesses and their Guests. From time to time, the Governance Committee will review the survey to ensure that it continues to meet the priorities of both businesses and their Guests. Target may include questions regarding use of the Pharmacy and satisfaction with Pharmacy Services on its Guest surveys.

8.12 Access to Stores. CVS and its agents and Pharmacy Personnel shall have the right of access to the Pharmacy Space, loading docks and other loading areas of the Store for the purpose of receiving product during hours when the applicable Store is open for business and immediately prior to opening and after closing of the Store as required to perform their duties and pursuant to the Operating Protocols and otherwise in accordance with the Master Occupancy Agreement. If CVS requests access to the Pharmacy Space at such time that no Target Personnel would otherwise be present at the Store, CVS shall only receive such access if Target Personnel are present, and CVS shall reimburse Target for the actual costs incurred by Target to open the Store and for the Target Personnel required to support the foregoing access of CVS. Target shall invoice CVS for such costs,




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and CVS shall pay Target such costs within seventy-five (75) days of receipt of the invoice.

8.13 Mail. Target shall deliver to CVS, reasonably promptly upon receipt thereof, a copy of all notices, statements or mail (including e-mail) and other communications primarily related to the Pharmacies (including communications from customers, suppliers, distributors, agents and others with respect to the Pharmacies).

8.14 Pharmacy Operating and Audit Costs. Except as explicitly set forth herein, CVS shall bear all costs in operating the Pharmacies, including without limitation physical inventories and internal control reports associated with the Pharmacies.

8.15 Payment Processing.

(a) Point of Sale Equipment and Software. Target shall provide the Target POS utilized in the Pharmacies. Target shall repair and maintain and replace the Target POS as necessary due to normal use. To the extent repairs, maintenance or replacement is due to misuse or damage caused by Pharmacy Personnel, it will be charged to CVS. Furthermore, Target shall facilitate or provide all necessary technical support for the Target POS. If any license is required to access the software within the Target POS, as between CVS and Target, such software shall be deemed to be Background Intellectual Property, and Target grants to CVS a license to such software under the provisions of Section 14.1.

(b) Payment Processing Policies. CVS shall ensure that (i) no Person other than Pharmacy Personnel utilize the Target POS or engage the Payment Processing Services, and (ii) Pharmacy Personnel shall comply with all other applicable terms relating to Payment Processing Services and the Target POS as set forth in Exhibit B and the Transition Services Agreement.

9. Information Security.

9.1 CVS and Target have executed the Information Security Agreement.

9.2 To the extent either party determines that additional data security measures or system access rights are required in connection with the Pharmacies, the parties agree to work cooperatively to address such requirements and to use commercially reasonable efforts to reach a mutually agreeable resolution.

10. Marketing.

10.1 The Parties shall form a committee consisting of an equal number of members with expertise in marketing designated by each Party (the “Marketing Committee”). The Marketing Committee members appointed by CVS shall have the titles of Vice President, Marketing; Vice President, Advertising; and Senior Vice President & Chief Communication Officer. The Marketing Committee members appointed by Target shall have the titles of Vice President Communications; SVP Marketing; and Senior Group Manager, Marketing. Each Party may replace one or more of its designees with a new




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designee of equal or senior title or role at any time upon written notice to the other Party. Each Party will promptly fill all of its Marketing Committee vacancies as they arise by written notice to the other Party. The Marketing Committee shall meet quarterly, provided that it may meet more often, subject to the mutual agreement of the Parties.

10.2 The Marketing Committee shall collaborate to prepare advertising, marketing and publicity materials for the purposes of promoting the Parties’ relationship and a “wellness” strategy jointly developed by CVS and Target (and which shall consider marketing efforts regarding MinuteClinic pursuant to its relationship with Target under the Clinic Operating Agreement).

10.3 Each Party shall fund $[*] towards a marketing budget during the first year period from the Effective Date, which shall be allocated and funded as determined by the Marketing Committee. The Marketing Committee shall determine the marketing budget commitment of each Party for the second and third years following the Effective Date; provided that the commitment from each Party shall not be less than $[*] in each of those years. Following the [*] year of this Agreement, the marketing budget commitment shall be determined by the Marketing Committee, and each Party shall share equally in all future marketing budget commitments.

10.4 The Marketing Committee shall report periodically to the Governance Committee and shall make its recommendations with respect to design, format, signage, merchandising fixtures, platforms and distribution channels. If the Marketing Committee cannot agree on the marketing budget in future years, the dispute shall be escalated to the Governance Committee.

10.5 The Parties will agree on appropriate references to the other Party and the Parties’ relationship across their websites, apps, and other digital properties. Each Party shall include in the store locator function of its website the ability for website visitors to find all Pharmacy locations. Within a reasonable period after the Effective Date, each Party will launch an updated website incorporating the branding and operation functions mutually agreed upon by the Parties. From time to time, the Parties may jointly determine whether they will develop additional applications for implementation in conjunction with the Parties’ relationship.

10.6 Each Party may use its own customer database to promote its respective business.

11. Loyalty Programs.

CVS will offer a loyalty program at the Pharmacies. CVS’s loyalty program at the Pharmacies will be consistent with its offering at its pharmacies that are not located in the Stores. CVS will use commercially reasonable efforts and work in good faith to facilitate a Target loyalty program at the Pharmacies at the request of Target; provided that offering such program at the Pharmacies complies with Laws and has been approved by the Governance Committee.




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12. Personnel.

12.1 Employment/Retention by CVS.

(a) From and after the Effective Date, CVS shall have sole responsibility and exclusive authority for (i) staffing the Pharmacies with Pharmacy Personnel, and (ii) hiring or contracting with, managing, supervising, controlling, directing and assigning work, establishing and enforcing hours, shifts and performance and behavior standards, disciplining and terminating, and for compensating and providing benefits and insurance for Pharmacy Personnel and other personnel needed to efficiently operate the Pharmacies. CVS shall be responsible for complying in all material respects with all Laws relating to such employment or retention. CVS will not represent in any manner that Pharmacy Personnel are Target Personnel or take action suggestive in any manner of an employment relationship between Target and Pharmacy Personnel. Target has no right to and shall not impose, decide or effectively recommend any action relating to wages, hours, terms and conditions of employment or discipline or termination of employment or hiring or retention of Pharmacy Personnel.

(b) Background Check/Job-Related Criminal Conviction. CVS will utilize its customary pre-employment background, criminal, immigration and other checks, meeting applicable Board of Pharmacy requirements.

12.2 Employment/Retention by Target. Target shall have sole responsibility and exclusive authority for hiring or contracting with, managing, supervising, controlling, directing and assigning work, establishing and enforcing hours, shifts and performance and behavior standards, disciplining and terminating, and for compensating and providing benefits and insurance for Target Personnel at the Stores. Target shall be responsible for complying in all material respects with all Laws relating to such employment or retention. Target will not represent in any manner that Target Personnel at the Stores are Pharmacy Personnel or employees of CVS in any capacity or take action suggestive in any manner of an employment relationship between CVS and Target Personnel. CVS has no right to and shall not impose, decide or effectively recommend any action relating to wages, hours, terms and conditions of employment or discipline or termination of employment or hiring or retention of Target Personnel.

12.3 Conduct.

(a) Target’s Community Solicitations Policy (Use of Store Parking Lots, Sidewalks, Facilities) is attached as Exhibit C. Neither this Agreement, the Master Occupancy Agreement or the CVS Operating Standard provide CVS with any discretion to modify or violate Target’s Community Solicitations Policy. CVS shall ensure Pharmacy Personnel and any related third party, including but not limited to vendors, service providers, other individuals under CVS control, and any individual or third party accessing the Store in connection with CVS or its Pharmacy Personnel (collectively “CVS Related Third Party”), adhere to Target’s Community Solicitation Policy. If any Pharmacy Personnel or CVS Related Third Party violates the Community Solicitation Policy, CVS shall be responsible for all reasonable out of pocket legal fees and costs incurred by Target




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in connection with enforcing or defending the enforceability of Target’s Community Solicitations Policy, subject to an annual cap of $1,000,000 (including with respect to any claims made under the corresponding provision of the Clinic Operating Agreement).

(b) CVS shall also use commercially reasonable efforts to comply with and ensure that its Pharmacy Personnel comply with Target’s policies and rules regarding safety and security, workplace conduct and information security (including policies and rules regarding the possession of firearms and weapons, the possession or use of drugs and alcohol, and inappropriate behavior, discrimination and harassment), provided such policies and rules are provided to CVS in writing and a reasonable period for review is provided. CVS shall use commercially reasonable efforts to cause Pharmacy Personnel to follow such reasonable rules and regulations as may from time to time be promulgated by Target, including to park their automobiles in such locations as are designated for such purpose by Target for all Store employees from time to time.

(c) Notwithstanding the foregoing, and except in cases of conduct that is either illegal or disruptive on the sales floor, Target shall notify CVS of any objectionable conduct or actions of any Pharmacy Personnel that is inconsistent with Target’s policies, and give CVS a reasonable cure period to rectify the conduct or actions that Target finds objectionable. If such conduct or actions continue beyond reasonable written notice to CVS, Target may request that CVS remove such employee promptly after such request is made. Nothing herein shall be construed as permitting or requiring any action that constitutes unlawful retaliation or discrimination for engaging in activities protected by applicable Laws.

(d) Notwithstanding the foregoing, and except in cases of conduct that is either illegal or disruptive in the Pharmacy, CVS shall notify Target, of any objectionable conduct or actions of any of Target Personnel that is inconsistent with Target’s policies, and give Target a reasonable cure period to rectify the conduct or actions that CVS finds objectionable. If such conduct or actions continue beyond reasonable written notice to Target, CVS may request that Target remove such employee from the vicinity of the Pharmacy Space promptly after such request is made. Nothing herein shall be construed as permitting or requiring any action that constitutes unlawful retaliation or discrimination for engaging in activities protected by applicable Laws.

12.4 Use of Space.

(a) All Pharmacy Personnel shall be permitted to make use of the Common Areas of a Store provided for Guests, and private lactation rooms, if any, provided for the use of Target Personnel.

(b) Target shall provide in each Store existing as of the Effective Date reasonable space in a back-office or similarly restricted area to allow CVS to place (at CVS’s cost) at least ten (10) lockers to secure and store items by Pharmacy Personnel, and, unless sufficient space exists in the Pharmacy Space, shall ensure that a location exists, outside the view of Patients, to post notices required or recommended by Law to be shown to Pharmacy Personnel.




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(c) Except as otherwise provided in this Section 12.4(c), Pharmacy Personnel shall not be authorized to use the break-rooms provided for the use of Target Personnel. In connection with any New Store that is a Large Format Store, Target shall develop, build and construct, on or prior to the date that CVS begins operating the Pharmacy in such New Store, a break-room of at least 150 square feet to be used by Pharmacy Personnel, as reasonably agreed to by the Parties and consistent with the other terms and conditions of Sections 4.2 and 4.6. In connection with any New Store that is a Smaller Format Store, the Parties shall discuss in good faith and mutually agree upon an appropriate break-room space to be used by Pharmacy Personnel, provided that if no other appropriate break room solution for Pharmacy Personnel is agreed to, the break room provided for the use of Target Personnel shall be shared on an alternating schedule to be reasonably agreed to by the parties such that Target Personnel and Pharmacy Personnel shall not occupy the break room space at the same time. To the extent any break-room space described under this Section 12.4 is dedicated exclusively to Pharmacy Personnel (and, if applicable, Clinic Personnel (as defined in the Clinic Operating Agreement)), the square footage of such break-room space will be deemed to be included in the aggregate square footage of the Pharmacy Space for purposes of calculating Occupancy Costs (but not, for the avoidance of doubt, for any of the square footage requirements set forth in Section 4.2 or Section 4.4(b)(ii)).

12.5 Parking. Target shall provide Pharmacy Personnel with the use of parking spaces on the same terms and conditions as provided to Target Personnel.

12.6 Target Discounts. As part of the consideration between Target and CVS, and not as a third party benefit to any other person or persons, Target may, from and after the Effective Date and for so long as it may elect to do so, grant Pharmacy Personnel (including spouses and/or dependents of such employees consistent with Target’s standard discount policy) a discount at all Target Stores from customary retail prices offered by Target, all in accordance with such rules as to qualification, procedure, amount and restrictions as may be established from time to time by Target to govern employee discounts authorized by Target to its own employees on merchandise and services sold by Target. CVS may decline the consideration provided in this Section 12.6 by giving prior written notice to Target. To facilitate the provision of the discount, CVS shall provide the data and information set forth in Exhibit D.

12.7 Communications with Pharmacy Personnel. Target shall refrain from any direct communication with Pharmacy Personnel except to the extent such communication is (a) made pursuant to the Operating Protocols; (b) required by the terms of an employee benefit plan of Target in which the Pharmacy Personnel participated; (c) regarding employee benefits or compensation matters related to the period during which such Pharmacy Personnel was an employee of Target; or (d) otherwise reasonable or necessary for purposes for the ongoing operation of a Store or Target in the ordinary course of business.

12.8 Training.




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(a) As part of CVS’s new hire training program, CVS shall provide an initial training program in each Store for all Pharmacy Personnel regarding use of point of sale equipment, the Operating Protocols and essential Store information (such as shared spaces, designated areas, Store personnel and contacts, and emergency policies and procedures).

(b) At its option, Target shall provide a training program in each Store for the Pharmacy Personnel regarding the Target brand and the co-branding standards determined by the Marketing Committee, which training shall not exceed 15 minutes per employee per calendar year.

(c) CVS shall provide Pharmacy Personnel with annual update training regarding the CVS brand and the co-branding standards determined by the Marketing Committee, use of point of sale equipment, and emergency policies and procedures, which training shall not exceed 45 minutes per employee per calendar year.

13. Use of Identification.

13.1 CVS acknowledges and agrees that (a) Target has an interest in maintaining and protecting the image and reputation of its name, Trademarks, trade dress, logos, designs, any description that would reveal Target’s identity and other indicia of source, goodwill or identification, whether registered or not (the “Target Identification”), and (b) the Target Identification must be used in a manner consistent with the brand standards established by Target and agreed upon by the Parties (the “Target Standards”), which will address, among other matters, quality control, enforcement and maintenance. Target hereby grants to CVS and its Affiliates a non-exclusive, non-transferable (subject to Section 25.3), non-sublicensable, royalty-free, right and license during the term of this Agreement to use the Target Identification within the United States and its territories, including the US Virgin Islands and Puerto Rico, in connection with performing its obligations and exercising its rights under this Agreement, subject to the Target Operating Standard and to Target’s prior approval of each use (which approval may not be unreasonably withheld, delayed or conditioned).

13.2 Target reserves all rights in and to the Target Identification not expressly granted to CVS in this Section. CVS acknowledges and agrees that as between the Parties, Target is the sole and exclusive owner of all right, title and interest in and to the Target Identification, including all goodwill of the business connected with the use of, or symbolized by, the Target Identification. All goodwill generated by CVS’s and its Affiliates’ use of the Target Identification inures solely to the benefit of Target.

13.3 Target acknowledges and agrees that (a) CVS has an interest in maintaining and protecting the image and reputation of their respective names, Trademarks, trade dress, logos, designs, any description that would reveal CVS’s identity and other indicia of source, goodwill or identification, whether registered or not (the “CVS Identification”), and (b) the CVS Identification must be used in a manner consistent with the brand standards established by CVS and agreed upon by the Parties (the “CVS Standards”), which will address, among other matters, quality control, enforcement and maintenance.




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CVS hereby grants to Target and its Affiliates a non-exclusive, non-transferable (subject to Section 25.3), non-sublicensable, royalty-free right and license during the term of this Agreement to use the CVS Identification within the United States and its territories, including the US Virgin Islands and Puerto Rico, in connection with performing its obligations and exercising its rights under this Agreement, subject to the CVS Standards and to CVS’s prior approval of each use (which approval may not be unreasonably withheld, delayed or conditioned).

13.4 CVS reserves all rights in and to the CVS Identification not expressly granted to Target in this Section. Target acknowledges and agrees that as between the Parties, CVS is the sole and exclusive owner of all right, title and interest in and to the CVS Identification, including all goodwill of the business connected with the use of, or symbolized by, the CVS Identification. All goodwill generated by Target’s and its Affiliates’ use of the CVS Identification inures solely to the benefit of CVS.

14. Intellectual Property.

14.1 Background Intellectual Property. Target and CVS acknowledge that the other Party or its Affiliates have developed and own Intellectual Property prior to entering into this Agreement (such Intellectual Property (excluding with regard to Target the Target Identification, and with regard to CVS the CVS Identification), each Party’s “Background Intellectual Property”). The respective Background Intellectual Property of each Party is recognized as a valuable asset of Target and CVS, respectively, and includes all Intellectual Property that is or has been conceived, created, acquired, developed, owned or controlled by such Party either before the commencement of this Agreement, or in the performance of any work by or for such Party outside of this Agreement which is not in reliance on Intellectual Property constituting Background Intellectual Property. All Background Intellectual Property shall remain the sole and exclusive property of the Party owning it prior to entering into this Agreement and shall be returned or destroyed by the other Party as promptly as commercially practicable upon the request of the other Party or following termination of this Agreement.

(a) During the term of this Agreement, each Party grants to the other Party and its Affiliates a non-exclusive, non-transferable (subject to Section 25.3), non-sublicensable, royalty free license in, to and under the granting Party’s Background Intellectual Property in the United States and its territories, including the US Virgin Islands and Puerto Rico, for the sole purpose of fulfilling the other Party’s obligations under this Agreement.

(b) The licenses granted under this Section 14.1 terminate automatically upon termination of this Agreement. Each Party reserves all rights in its Background Intellectual Property not expressly granted to the other Party in this Section 14.1 or the Transition Services Agreement, and nothing shall prevent a Party from licensing or granting to third parties the right to use its Background Intellectual Property in any manner. The sharing of Background Intellectual Property is subject to the confidentiality provisions of this Agreement.




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14.2 Project Intellectual Property. Intellectual Property (excluding Target Identification and CVS Identification) that is conceived, created, developed, or reduced to practice by any Party or its Affiliates in the performance of any work under this Agreement shall be considered “Project Intellectual Property.”

(a) “Target’s Project Intellectual Property” is any Project Intellectual Property conceived, created, developed, or reduced to practice solely by employees or agents of Target or its Affiliates based on Target’s Background Intellectual Property, technology and/or information.

(b) “CVS’s Project Intellectual Property” is any Project Intellectual Property conceived, created, developed, or reduced to practice solely by employees or agents of CVS or its Affiliates based on CVS’s Background Intellectual Property, technology and/or information.

(c) Each Party acknowledges that the other Party’s Project Intellectual Property is owned solely by that other Party. During the term of this Agreement, each Party grants to the other Party and its Affiliates a non-exclusive, non-transferable (subject to Section 25.3), non-sublicensable, royalty free license in, to and under the granting Party’s Project Intellectual Property in the United States and its territories, including the US Virgin Islands and Puerto Rico, for the sole purpose of fulfilling the other Party’s obligations under this Agreement. The licenses granted under this Section 14.2(c) terminate automatically upon termination of this Agreement. Each Party reserves all rights in its Project Intellectual Property not expressly granted to the other Party in this provision, and nothing shall prevent a Party from licensing or granting to third parties the right to use its Background Intellectual Property in any manner. The sharing of Project Intellectual Property is subject to the confidentiality provisions of this Agreement.

(d) “Joint Project Intellectual Property” is any Project Intellectual Property jointly developed by Target and CVS. Each Party acknowledges that the Joint Project Intellectual Property is jointly owned by the Parties without any duty of accounting between the Parties. Neither Party shall assign, sell or disclose Joint Project Intellectual Property to any other Person (except to its Affiliates) without the prior written consent of the other Party, such consent shall not be unreasonably withheld, delayed or conditioned. The creation of Joint Project Intellectual Property does not, without more, grant either Party any ownership or rights in any Background Intellectual Property which the Joint Intellectual Property may be related to or derived from.

14.3 Each Party agrees to provide prior written notice to the other Party if it plans to seek patent protection in any jurisdiction for any invention constituting Joint Project Intellectual Property (in whole or in part) under Section 14.2(d).

15. Exclusivity; Standstill.

15.1 Notwithstanding any other provision of this Agreement to the contrary, and except to the extent contemplated by section 5.04 (c) of the Asset Purchase Agreement, neither Target nor its Affiliates shall, throughout the term of this Agreement, within the




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United States and its territories, including the US Virgin Islands and Puerto Rico (i) own, Control, operate or manage a retail pharmacy, whether store-based, mail order or online, (ii) lease, sublease or otherwise permit the use of any space in a Store or on any of the real property on which any such Store is located (excluding the Pharmacy Space), or permit the use of any such space, for the purpose of a retail pharmacy, or (iii) or agree, resolve, authorize or commit to do any of the foregoing.

15.2 Without limiting any other provision of this Agreement, CVS shall not, throughout the term of this Agreement, within the United States and its territories, including the US Virgin Islands and Puerto Rico, enter into a substantially similar arrangement with, or otherwise establish or develop pharmacy operation(s) which are open to the general public in locations owned or operated by, any Target Restricted Competitor.

15.3 Standstill. During the period that begins on the Effective Date and ends on the fifth anniversary of such date (the “Standstill Period”), except with the prior written consent of the other Party or as contemplated by this Agreement, the Asset Purchase Agreement, the Clinic Operating Agreement, the Pharmacy Master License Agreement, or the Pharmacy Master Lease Agreement, each Party will not, and will cause each of its Affiliates not to, in any manner, directly or indirectly, either alone or in concert with others:

(a) acquire, or agree, offer, seek or propose to acquire, or cause to be acquired (by merger, tender offer, purchase, statutory share exchange, joint venture or otherwise), ownership (including any beneficial ownership as defined in Rule 13d‑3 under the Securities Exchange Act of 1934, as amended) of any of the other Party’s assets (other than acquisitions in the ordinary course of business or that are being discussed by the Parties as of the Effective Date) or of any voting stock of the other Party;

(b) agree, offer, seek or propose to merge or consolidate with, or enter into any business combination or joint venture with, or effect any recapitalization, restructuring, liquidation, dissolution or other similar extraordinary transaction involving, the other Party or any of the other Party’s Affiliates (any such transaction contemplated by clause (a) or this clause (b), a “Transaction”);

(c) seek or propose to influence or control the management or policies of the other Party or to obtain representation on the other Party’s board of directors, or solicit, or participate in the solicitation of, proxies or consents with respect to any voting securities of the other Party in connection with the election of directors or any other matter;

(d) make any public announcement with respect to any of the foregoing or take any other action that might require that the other Party make a public announcement regarding any of the foregoing; or

(e) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing.




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The provisions of this Section 15.3 shall terminate with respect to either Party upon any of: (x) the public announcement by the other Party that it has entered into a definitive agreement providing for a Transaction or (y) the commencement of any tender offer or exchange offer by any person, entity or group that is not opposed by the other Party’s board of directors and that, if consummated in accordance with its terms, would result in such person, entity or group beneficially owning 50% or more of the voting securities of the other Party immediately following the consummation of such tender or exchange offer. It is understood and agreed that a request from one Party to the other Party seeking the written consent referred to above shall not, in and of itself, be a violation or breach of this Section 15.3.


16.	Insurance & Waiver of Subrogation

16.1 Each Party will, at such Party’s sole expense, obtain and maintain until termination of this Agreement and for such reasonable times thereafter (including appropriate tail policies) policies of insurance as set forth on Exhibit E.

16.2 Notwithstanding anything in this Agreement to the contrary, Target and CVS each waives and releases any claims against the other Party which may arise for damage to any Store, Pharmacy Space or to the property therein resulting from any fire or other casualty of the kind covered or coverable by All Risk (also known as Causes of Loss-Special Form) insurance policies, regardless of whether or not, or in what amounts, such insurance is now, or may hereafter be, carried by the Parties. Without limiting the foregoing, each Party shall bear all risk of loss with respect to its inventory, and each Party waives and releases all claims against the other for all loss, damage, and destruction of its inventory from any cause. Each Party shall cause its insurers to issue a waiver of subrogation with respect to the insurance policies to be procured under Sections (1), (4) and (6) of Exhibit E.


17.	Indemnification

17.1 Indemnification of Target. Subject to Section 16.2, CVS will indemnify, defend and hold harmless Target, its Affiliates and each of their respective directors, officers, employees, agents, representatives, independent contractors, successors and assigns (collectively, the “Target Indemnified Parties”) from and against all claims, actions, lawsuits, proceedings, damages, liabilities, losses, penalties, fines, costs, obligations and other expenses, including, without limitation, losses resulting from the defense, settlement or compromise of a claim or demand or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and expenses of investigation, whether or not a lawsuit or other proceeding is filed (collectively, “Losses”), suffered or incurred by such Target Indemnified Party to the extent arising out of, resulting from or relating to any of the following: (i) the operation of any Pharmacy from and after the Effective Date; (ii) any personal injury, death or property damage occurring in any Pharmacy (unless caused by a Target Indemnified Party) or caused by CVS, Pharmacy Personnel or their agents or contractors whether or not such act is within the scope of the authority or employment of such persons, from and after the Effective Date; (iii) any material breach




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of any representation, warranty, covenant or obligation of CVS under this Agreement or the Master Occupancy Agreement; (iv) the employment, retention or termination of any Pharmacy Personnel on or after the Effective Date, including the provision of any benefits or insurance to such Pharmacy Personnel; and (v) any of CVS’s Background Intellectual Property, the CVS Identification or CVS’s Project Intellectual Property (but excluding Intellectual Property acquired by CVS or its Affiliates pursuant to the Asset Purchase Agreement, provided that this exclusion will not apply to such Losses to the extent arising from CVS’s modifications to such Intellectual Property), in each case licensed hereunder and used by Target within the scope of such license, infringes a third party's Intellectual Property rights. Notwithstanding the foregoing, CVS shall not be required to indemnify any Target Indemnified Party for any Losses incurred by such Target Indemnified Party to the extent such Losses were caused by, arose out of or related to (x) the negligence or willful misconduct of Target or any Target Indemnified Party or (y) any breach of this Agreement or the Master Occupancy Agreement by Target.

17.2 Indemnification of CVS. Subject to Section 16.2, Target will indemnify, defend and hold harmless CVS, its Affiliates and each of their respective directors, officers, employees, agents, representatives, independent contractors, successors and assigns (collectively, the “CVS Indemnified Parties”) from and against all Losses suffered or incurred by such CVS Indemnified Party to the extent arising out of, resulting from or relating to any of the following: (i) the operation of any Pharmacy prior to the Effective Date, (ii) the development or construction of the infrastructure or utilities related to any Pharmacy Space, (iii) the operation of any Store (other than the portion occupied by any Pharmacy from and after the Effective Date); (iv) any personal injury, death or property damage occurring in any Store (other than the portion occupied by any Pharmacy from and after the Effective Date) (unless caused by a CVS Indemnified Party from and after the Effective Date) or caused by Target or Target Personnel, or their agents or contractors, whether or not such act is within the scope of the authority or employment of such persons; (v) any material breach of any representation, warranty, covenant or obligation of Target under this Agreement or the Master Occupancy Agreement; (vi) the employment, retention or termination of any Target Personnel at the Stores including the provision of any benefits or insurance to such Pharmacy Personnel; and (vii) any of Target’s Background Intellectual Property, the Target Identification or Target’s Project Intellectual Property, in each case licensed hereunder and used by CVS within the scope of such license, infringes a third party's Intellectual Property rights. Notwithstanding the foregoing, Target shall not be required to indemnify any CVS Indemnified Party for any Losses incurred by such CVS Indemnified Party to the extent such Losses were caused by, arose out of or related to (x) the negligence or willful misconduct of CVS or any CVS Indemnified Party or (y) any breach of this Agreement or the Master Occupancy Agreement by CVS.

17.3 Indemnification Procedure. The indemnification obligations under Sections 17.1 and 17.2 are conditioned upon the Party entitled to indemnification hereunder (an “Indemnified Party”) promptly notifying in writing the Party required to provide indemnification hereunder (the “Indemnifying Party”) after learning of any Losses subject to indemnity hereunder; provided that the failure to promptly notify the




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Indemnifying Party shall not limit or impair the Indemnified Party’s right to defense and indemnification hereunder except to the extent that the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party may, in its sole discretion and at its own expense, assume control of the defense of such claim with counsel reasonably acceptable to the Indemnified Party. The Indemnified Party shall cooperate in all reasonable respects with the Indemnifying Party, subject to the Indemnifying Party’s reimbursement of the Indemnified Party’s reasonably incurred out-of-pocket expenses in so doing. For any claim subject to indemnification under Sections 17.1 or 17.2, the Indemnified Party may choose to be separately represented at its own expense; provided that (i) the Indemnified Party shall be entitled to be separately represented at the Indemnifying Party’s expense if in the reasonable opinion of counsel to the Indemnified Party, a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable and (ii) if the Indemnifying Party has not acknowledged its obligation to defend such claim or does not diligently defend the Indemnified Party with counsel reasonably acceptable to the Indemnified Party, such Indemnified Party shall have the right to retain counsel, the cost of which shall be subject to the indemnification provisions of Section 17.1 or Section 17.2, as applicable. The Indemnifying Party shall not, except with the consent of the Indemnified Party (which shall not be unreasonably withheld, delayed or conditioned), enter into any settlement (a) that does not include as a term thereof the giving by the person asserting such claim to all Indemnified Parties of a release from all liability with respect to such claim or consent to entry of any judgment or (b) that provides for any relief other than the payment of monetary Losses subject to the right to indemnity therefor pursuant to this Agreement.

17.4 LIMITATION OF LIABILITY. EXCEPT AS OTHERWISE PROVIDED HEREIN OR WITH RESPECT TO (A) DEATH, BODILY INJURY, OR DAMAGE TO TANGIBLE PROPERTY CAUSED BY A PARTY OR ITS AFFILIATES, (B) GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR A PARTY’S INTENTIONAL BREACH OF THIS AGREEMENT, AND (C) EACH PARTY’S OBLIGATIONS UNDER THIS SECTION 17 AND/OR BREACH OF THE CONFIDENTIALITY OBLIGATIONS UNDER SECTION 21, NEITHER PARTY NOR ITS AFFILIATES, NOR ITS OR THEIR PERSONNEL, PARTNERS, SHAREHOLDERS, SUCCESSORS OR ASSIGNEES, WILL HAVE ANY LIABILITY OR RESPONSIBILITY TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY INDIRECT, EXEMPLARY, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, REGARDLESS OF HOW CHARACTERIZED) WITH RESPECT TO ANY CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF THOSE DAMAGES, AND WHETHER THE CLAIM ARISES OUT OF BREACH OF CONTRACT, TORT OR OTHERWISE.


18.	Term and Termination.

18.1 This Agreement commences as of the Effective Date and continues until terminated pursuant to the terms of this Section 18.

18.2 This Agreement may be terminated at any time by mutual written agreement of Target and CVS.




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18.3 Either Party may terminate this Agreement:

(a) upon one hundred eighty (180) days’ prior written notice of termination to the other Party in the event the other Party or its Affiliates or their respective directors or officers commits an act, omits to take an action, or is the subject of an adverse determination of a Governmental Entity or in a litigation or similar proceeding that materially and adversely harms the goodwill or reputation of the other Party, which harm could not reasonably be expected to be temporary and could reasonably be expected to impact such Party broadly (and not in respect of any single Store or subset of Stores), and could reasonably be expected to have a material and adverse effect on the goodwill or reputation of the terminating Party if it continued its association with the other Party; or

(b) upon prior written notice of termination to the other Party effective one hundred and eighty (180) days following the other Party’s receipt of written notice of termination, if any event (including, in the case of CVS, CVS’s failure to maintain participation in any “Federal health care program” as defined in 42 U.S.C. § 1320a-7b(f), or the debarment, exclusion, or suspension of CVS from participation in any federal procurement program), change, development, effect, condition, circumstance, matter, occurrence or state of facts (an “Event”) has a material adverse effect on (i) the other Party’s ability to fulfill its obligations under this Agreement or (ii) the business, condition (financial or otherwise), assets, liabilities, operations or results of operations of the other Party in the Stores (and not in respect of any single Store or subset of Stores), which Event continues unremedied for a period of one hundred twenty (120) days after the terminating Party provides written notice to the other Party describing the nature of the Event, provided, however, that an Event shall not include (1) changes in Law or applicable accounting regulations or principles or interpretations thereof, (2) any Force Majeure Event, (3) changes in the United States or foreign economies, financial markets or geopolitical conditions in general, or (4) changes in industries relating to the business of the other Party in general and not specifically relating to the business of the other Party, except to the extent (and only to the extent) that the business of the other Party is materially disproportionately impacted by such events in comparison to others in the same business as the other Party; or

(c) upon prior written notice of termination to the other Party effective one hundred and eighty (180) days following the other Party’s receipt of written notice of termination, if any breach of this Agreement results in a material adverse effect on the business, condition (financial or otherwise), assets, liabilities, operations or results of operations of the other Party in the Stores (and not in respect of any single Store or subset of Stores), which breach continues unremedied for a period of one hundred twenty (120) days after the terminating Party provides written notice to the other Party of the breach;

provided that for purposes of clauses (a), (b) and (c) above, during such one hundred eighty (180) day period prior to the effective date of termination, the terminating Party shall cause its Senior Officer to be available to meet in person with the Senior Officer of the non-terminating Party to seek to expeditiously resolve any differences prior to the effective date of such termination.




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18.4 CVS may terminate this Agreement upon the occurrence of a Change of Control of Target, and Target may terminate this Agreement upon the occurrence of a Change of Control of CVS, in each case, as provided in this Section 18.4. “Change of Control” shall mean:

(a) with respect to Target, any consolidation, reorganization, arrangement, share exchange, private purchase, business combination, recapitalization, merger, sale or issuance of equity interests or other transaction or series of related transactions as a result of which (i) a CVS Restricted Competitor, or any successor or assign thereof (a “Target Change of Control Outlet”), would, directly or indirectly, hold beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership, of more than 50% of either the outstanding voting power or the outstanding equity interests of Target or its ultimate parent company resulting from such transaction or series of related transactions immediately after the consummation thereof, in each case on a fully diluted basis, or (ii) all, or substantially all, of the assets of Target are sold, leased, exchanged or otherwise transferred to a Target Change of Control Outlet; and

(b) with respect to CVS, any consolidation, reorganization, arrangement, share exchange, private purchase, business combination, recapitalization, merger, sale or issuance of equity interests or other transaction or series of related transactions as a result of which (i) a Target Restricted Competitor, or any successor or assign thereof (a “CVS Change of Control Outlet,” and together with the Target Change of Control Outlet, the “Change of Control Outlet”), would, directly or indirectly, hold beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership, of more than 50% of either the outstanding voting power or the outstanding equity interests of CVS or its ultimate parent company resulting from such transaction or series of related transactions immediately after the consummation thereof, in each case on a fully diluted basis, or (ii) all, or substantially all, of the assets of CVS are sold, leased, exchanged or otherwise transferred to a CVS Change of Control Outlet.

In the event of a Change of Control of a Party, the other Party shall have the right to terminate this Agreement subject to the following termination procedures. The Party subject to a Change of Control shall notify the other Party in writing of a Change of Control (or proposed Change of Control) as soon as practicable, but no later than three (3) Business Days after the occurrence of a Change of Control, which such written notice will specify the relevant Change of Control Outlet (and which notice, for the avoidance of doubt, will be considered Confidential Information). The terminating Party shall have sixty (60) days from receipt of such written notice (or, if later, sixty (60) days from the occurrence of a Change of Control) to provide written notice to the Party subject to a Change of Control and/or the relevant Change of Control Outlet, as applicable, that it is exercising its right to terminate this Agreement pursuant to this Section 18. Such termination will become effective on the earlier to occur of (i) the date designated by the terminating Party in such notice and (ii) the first anniversary of the date of the Change in Control.




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18.5 Subject to Laws, either Party may terminate this Agreement immediately upon written notice to the other Party upon the occurrence of a Bankruptcy Event of such other Party. “Bankruptcy Event” shall mean: with respect to either Party, if such Party (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Party or of all or any substantial part of its properties or assets, or (vii) if one hundred twenty (120) days after the commencement of any proceeding against the Party seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, the proceeding has not been dismissed, or if within one hundred twenty (120) days after the appointment without such Party’s consent or acquiescence of a trustee, receiver or liquidator of such Party or of all or any substantial part of its properties or assets, the appointment is not vacated or stayed, or within one hundred twenty (120) days after the expiration of any such stay, the appointment is not vacated.


19.	Effect of Termination and Surrender.

19.1 Effect of Termination.

(a) In the event CVS terminates this Agreement pursuant to Section 18, subject to Section 19.1(d), CVS shall sell, transfer, assign, convey and deliver to Target, and Target shall purchase, acquire and accept from CVS all of CVS’s right, title and interest in, to and under the Pharmacies as of such date of sale/purchase, including, without limitation, all CVS Products, inventory, records, Patient files, fixtures, furnishings and furniture, on substantially the same terms and conditions as set forth in the Asset Purchase Agreement; provided that (i) if CVS terminates the Agreement pursuant to Section 18.4 or 18.5 the purchase price shall be the fair market value of the assets being sold, transferred, assigned, conveyed and delivered, and (ii) if CVS terminates the Agreement pursuant to 18.3 the purchase price shall be [*]% of the fair market value of the assets being sold, transferred, assigned, conveyed and delivered; or

(b) In the event Target terminates this Agreement pursuant to Section 18, subject to Section 19.1(d), CVS shall sell, transfer, assign, convey and deliver to Target, and Target shall purchase, acquire and accept from CVS all of CVS’s right, title and interest in, to and under the Pharmacies as of such date of sale/purchase, including, without limitation, all CVS Products, inventory, records, Patient files, fixtures, furnishings and furniture, on substantially the same terms and conditions as set forth in the Asset Purchase Agreement; provided that (i) if Target terminates the Agreement pursuant to Sections 18.4 or 18.5 the purchase price shall be the fair market value of the assets being sold, transferred, assigned, conveyed and delivered, and (ii) if Target terminates the Agreement pursuant to 18.3 the purchase price shall be [*]% of the fair market value of the assets being sold, transferred, assigned, conveyed and delivered.




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(c) To determine the fair market value of the assets being sold, transferred, assigned, conveyed, and delivered pursuant to the sales process set forth in Sections 19.1(a) and (b), each Party shall designate an independent valuation firm of national standing, and the two valuation firms chosen by the Parties shall, by mutual agreement, select a third valuation firm of national standing (collectively, the “Valuation Experts”). Each of the three Valuation Experts shall make its own determination regarding the fair market value of the assets. The average of all three determinations of the fair market value of the assets shall be the final and definitive determination of fair market value for purposes of Sections 19.1(a) and (b).

(d) In the event either Party terminates this Agreement pursuant to Section 18, Target may elect, in lieu of the sale process set forth in Section 19.1(a) and 19.1(b), to effect an orderly transition with minimal Patient (including as defined under the Clinic Operating Agreement) disruption, subject to Laws requiring advance notice of a pharmacy or clinic closure to Patients (including as defined under the Clinic Operating Agreement), and CVS shall (i) cease operations of its Pharmacies and (ii) remove all CVS Products, inventory, records, Patient files, fixtures, furnishings and furniture and other properties of CVS from the Pharmacies and vacate the Pharmacy Space.

(e) Upon termination of this Agreement by either Party pursuant to Section 18:

Each Party shall (i) cease the use of the other Party’s non-public, confidential and proprietary information to which it has no rights following termination under this Agreement or any other agreement, and (ii) return to the other Party, or, if such other Party gives written permission, destroy, all of that confidential information and such other Party’s Background Intellectual Property and Project Intellectual Property, in whatever form or medium and retain no copies of such information or Intellectual Property. Each Party shall complete such return or destruction as promptly as commercially possible, but in no event later than fifteen (15) days from the date of the termination of this Agreement. Promptly after the date that a Party returns or destroys all such information and Intellectual Property, such Party shall provide written confirmation to the other Party that the return or destruction of the information and Intellectual Property has been completed and that neither such Party nor any subcontractor or agent thereof retains any such information or Intellectual Property in any form.

19.2 Cooperation. Each Party shall, and shall cause its Affiliates to, use commercially reasonable efforts to cooperate with the other Party in connection with the foregoing provisions of this Section 19. Notwithstanding Section 19.4, in the event there is a transition period in which CVS operates any Pharmacy following any effective date of termination in order to effect an orderly transition, then the Parties shall comply with the terms of this Agreement and the Master Occupancy Agreement with regard to a Pharmacy so long as CVS operates such Pharmacy.

19.3 Survival. The rights and obligations of the Parties set forth in Sections 14, 17, 18, 19, 20, 21, and 25 and any right, obligation or required performance of the Parties in this Agreement which, by its express terms or nature and context is intended to survive termination of this Agreement, shall survive any such termination.




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19.4 No Further Rights and Obligations. Other than the rights and obligations of the Parties set forth in this Section 19 and such obligations as may survive pursuant to the express provisions of this Agreement or the Master Occupancy Agreement, upon termination of this Agreement, CVS shall have no further rights, duties or obligations under this Agreement with respect to the Pharmacies and Target shall have no further rights, duties or obligations under this Agreement with respect to the Stores.

20. Representations and Warranties

Each Party represents and warrants to the other that: (i) it has the authority to enter into and perform this Agreement; (ii) neither the execution and delivery by it of this Agreement or the Master Occupancy Agreement, nor the consummation by it of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of its governing documents, or (b) violate any Law applicable to it in any material respect; (iii) it has the requisite knowledge, personnel, resources and know-how to fully perform and deliver it obligations set forth this Agreement in a professional and workman-like manner in accordance with specifications as set forth herein; (iv) it possesses all rights necessary to grant the other Party the rights and licenses granted to the other Party under this Agreement; (v) it will comply with all data security, consumer protection, marketing, and privacy Laws in all material respects, and its privacy policies, that apply to the collection, storage, use, access, disclosure, and protection of confidential Guest and Patient information, and will not cause the other Party to be in violation of such Laws in any material respect, and (vi) it shall not take any action that would restrict, prohibit or materially interfere with the operation of the Pharmacy by CVS (in the case of the representation made by Target) or the operation of the Store (other than the Pharmacy) by Target (in the case of the representation made by CVS).

21. Confidentiality and Press Releases.

21.1 Each Party agrees not to disclose or permit the disclosure of any of the terms of this Agreement or of any other confidential, non-public or proprietary information relating to the other Party or its business obtained in connection with this Agreement (collectively, “Confidential Information”); provided that such disclosure may be made (a) to any Person who is a member, partner, officer, director or employee, directly or indirectly, of such Party, or counsel to, or accountants of, or a consultant to such Party solely for their use and on a need-to-know basis; provided that such Persons are notified of the Party’s confidentiality obligations hereunder, (b) with the prior consent of the other Party, (c) subject to the next paragraph, pursuant to a subpoena or order issued by a Governmental Entity, or (d) to any Governmental Entity pursuant to Laws as reasonably determined by such Party.

21.2 In the event that a Party shall receive a request to disclose any Confidential Information under a subpoena or order or examination, such Party shall to the extent legally practicable (a) promptly notify the other Party, (b) consult with the other Party on the advisability of taking steps to resist or narrow such request, and (c) if disclosure is required or deemed advisable, cooperate with the other Party in any attempt such other




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Party may make to obtain an order or other assurance that confidential treatment will be accorded the Confidential Information that is disclosed.

21.3 Except as otherwise required by Law, the right to make, timing and content of any public announcements and press releases relating to this Agreement or the relationship contemplated herein shall be subject to the mutual approval of Target and CVS.

21.4 CVS, Target and Parent acknowledge and agree that that certain Confidentiality Agreement, dated as of November 14, 2014, is hereby terminated and shall be of no further force or effect from and after the Effective Date, and the provisions of Section 15.3 and this Section 21 shall control in lieu thereof.

21.5 Target and CVS shall develop, as part of the Operating Protocols, a mutually agreed upon approach to responding to press or media inquiries related to the Parties’ relationship and respective operations hereunder. Neither Party shall independently respond to any direct inquiry from the press or media soliciting information about the Parties’ relationship or Pharmacy or Clinic operations, unless it is pursuant to the Operating Protocols or the Parties have conferred and mutually agreed to a response.

22. Audits and Inspections.

22.1 Target and its representative shall have the right to visit and formally inspect, during regular operating hours, no more than [*] ([*]) Pharmacy locations, in the aggregate, in any calendar year upon reasonable advance written notice to CVS; provided that such visit does not unreasonably interfere with the operation of any Pharmacy and is no longer than one (1) Business Day in any Pharmacy. CVS shall not be required to provide any Confidential Patient Information in connection with any such inspection. In connection with any visit described above, Target shall have the right to inspect the relevant facilities or processes of CVS at the Stores. Target shall pay all reasonable fees and costs incurred by CVS in connection with such inspection.

22.2 Once per calendar year, and upon reasonable prior written notice to the other Party, the requesting Party may inspect and review documents relating to the operation of the corporate compliance program governing the Pharmacies or Stores, as applicable, including without limitation, results of compliance program auditing and monitoring conducted at the Pharmacies or Stores (only to the extent the subject of such auditing or monitoring activities could materially affect the operations of the Pharmacies), as applicable, and descriptions of material internal investigations undertaken with regard to the Pharmacies or Stores (only to the extent the subject of said investigation may materially affect the operations of the Pharmacies), as applicable; provided that such inspection and review (i) shall not affect either Party’s attorney-client privilege, work product privilege, or similar privileges, and (ii) shall not be longer than one (1) Business Day.

23. Cooperation and Monitoring.

23.1 Each Party shall provide written notice to the other Party of any circumstance or event that would reasonably be expected to have a materially disruptive effect on the




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operations of the other Party in any Store or Pharmacy, including without limitation any threatening or dangerous behavior by, or correspondence from, a Guest or employee that could cause the other Party to implement extra security precautions or protocols at any Store or Pharmacy. In the case of CVS, CVS shall provide written notice to Target of the denial, termination, suspension or breach of any nationwide, material third party payer agreement that could disrupt the furnishing of Pharmacy Services at the Pharmacies or any potential material disruption in Pharmacy operations, whether or not related to labor strikes, including without limitation a loss, suspension, or impairment of a state pharmacy license or DEA registration at a Pharmacy. In the case of Target, Target shall provide written notice to CVS of the termination of any nationwide, material contract that could receive adverse press, or any potential material disruption in Store operations. Each Party shall provide written notice under this Section 23.1 as soon as possible following discovery of the circumstance or event.

23.2 Each Party shall provide written notice to the other Party of any privacy or security breach of its confidential Patient or Guest information that affects five hundred (500) or more Patients or Guests that use the Pharmacy and that triggers notice under Federal or State laws. Such notice shall be provided to the other Party within two (2) days of a Party’s determination to provide written breach notification to Patients or Guests.

23.3 Each Party shall provide written notice to the other Party of administrative, civil, or criminal health care litigation or regulatory matters affecting any Pharmacy or Store, as applicable, in any material respect. Each Party shall provide written notice under this Section 23.3 as soon as possible following discovery of the circumstance or event. Following the initial notice, the disclosing Party shall provide the other Party with a regular update written notice regarding the status or resolution of such matters.

23.4 CVS will install its security technology and systems in each of the Stores with a Pharmacy and video monitor the Pharmacies in accordance with the CVS Operating Standard and the Master Occupancy Agreement. CVS and Target will collaborate and cooperate with each other to maximize the benefit of each other’s security technology and systems. In the event of any incident, the applicable CVS or Target field or corporate personnel will be responsible for coordinating with their respective Target or CVS counterparts regarding best practices for investigations and escalation of incidents.

23.5 Each Party will share information and jointly cooperate and assist the other Party to assess incidents involving Pharmacy Personnel or Guests that impact both Parties, including without limitation any claim, action, arbitration, proceeding or litigation of any nature against both Parties, and notifying the other Party of any incident or activity in any Store or Pharmacy that would cause a danger to Guests, Patients, Pharmacy Personnel, or Target Personnel, providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.




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23.6 Each Party will share information and jointly cooperate and assist the other Party in connection with any request for information reasonably requested by such other Party in connection with any audit or other third party request.

23.7 CVS shall have the sole right to litigate, arbitrate, mediate, defend, settle and otherwise control (i) any investigation into the theft or diversion of CVS Products, and any matters related thereto and (ii) any such matter with any Governmental Entity (including a State board of pharmacy) in connection with any Pharmacy, and Target shall reasonably cooperate with respect to any reasonable request made of Target by CVS in connection therewith.

23.8 If any event occurs that has a material adverse impact on CVS’s ability to operate Pharmacies within an entire State due to the loss or impairment of required licenses resulting from CVS’s actions or failure to act, and such event cannot be cured within ten (10) days of written notice thereof from Target, CVS and Target shall cooperate with each other in good faith to locate and retain a third party to operate the Pharmacies in such State for so long as CVS is unable to operate such Pharmacies. CVS shall be responsible for the cost and expense associated with locating and retaining the third party.

23.9 The above notice requirements set forth in this Section 23 do not require either Party to waive attorney-client or work product privilege, or provide information that is under seal by a court of law or regulatory matter.

24. Parent Guarantee.

24.1 CVS Health Corporation (“Parent”) hereby guarantees the full payment of any financial obligations of CVS under this Agreement and the Master Occupancy Agreement, provided, however, that Target shall initially seek payment from CVS of all financial obligations required under this Agreement or the Master Occupancy Agreement. Target may bring a claim directly against Parent only after it has commenced an action against CVS in accordance with the procedures described in Section 25.18 of this Agreement.

25. General Provisions.

25.1 Change in Laws. The Parties agree that they have attempted in good faith to structure this Agreement and their relationship in a way that complies with all applicable Laws, regulations and requirements relating to the business of health care. If any applicable Laws, regulations or requirements are amended or modified so that this Agreement or any material term or condition of this Agreement becomes illegal or unlawful, the Parties agree that they will negotiate in good faith to create another arrangement which approximates the legal equivalent of this Agreement.

25.2 Force Majeure Event. Neither Party to this Agreement is liable nor in default for any delay or failure in performance under this Agreement and such delay or failure of performance shall not constitute a breach of this Agreement if and to the extent that such delay or failure is the result of a Force Majeure Event. If a Party intends to invoke this provision, that Party shall provide notice to the other Party as soon as possible after the




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occurrence of the Force Majeure Event. Each Party shall exercise commercially reasonable efforts to mitigate the extent of such delay or failure. Should the delay or failure at one or more Stores or Pharmacies be expected to continue for more than ten (10) calendar days, the Parties shall convene the Governance Committee to meet and confer regarding appropriate resolution.

25.3 Assignment. Neither this Agreement nor the Master Occupancy Agreement nor any of the rights and obligations of the Parties hereunder or thereunder may be assigned or transferred (or in the case of CVS with respect to the Master Occupancy Agreement sublicensed or subleased) by any of the Parties without the prior written consent of the other Party hereto (such consent not to be unreasonably withheld, delayed or conditioned). Notwithstanding the foregoing: (1) CVS may assign this Agreement and the Master Occupancy Agreement in its entirety to a Successor to CVS that is not a Target Restricted Competitor, and only if such Successor enters into a written agreement pursuant to which that Successor agrees to assume all of CVS’s rights, obligations, and liabilities under this Agreement and the Master Occupancy Agreement; (2) Target may assign this Agreement and the Master Occupancy Agreement in its entirety to a Successor to Target that is not a CVS Restricted Competitor, and only if such Successor enters into a written agreement pursuant to which that Successor agrees to assume all of Target’s rights, obligations, and liabilities under this Agreement and the Master Occupancy Agreement; (3) Target may assign, transfer, pledge, mortgage or encumber the Master Occupancy Agreement pursuant to section 14.b thereof; and (4) either Party may assign or transfer (or, in the case of the Master Occupancy Agreement, sublease or sublicense) this Agreement and the Master Occupancy Agreement or any of its rights or obligations hereunder or thereunder to an Affiliate, provided that each of CVS and Target will remain liable for all of their respective obligations under this Agreement and the Master Occupancy Agreement. This Agreement will be binding upon and inure to the benefit of the Parties and their respective Successors and permitted assigns. Any attempted assignment or transfer in violation of this Section 25.3 will be void.

25.4 Governing Law. This Agreement and disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) will be governed and construed in accordance with the Laws of the State of New York, without reference to its conflicts of law principles; provided that matters related to the use and occupancy of any Pharmacy Space shall be governed by the Laws of the jurisdiction in which such Pharmacy Space is located.

25.5 Jurisdiction. Each Party irrevocably agrees that all matters arising out of or related to this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) will be brought exclusively in the United States District Court for the Southern District of New York, or, if such court does not have subject matter jurisdiction, a court of the State of New York located in New York, New York, and irrevocably accepts and submits to the exclusive jurisdiction and venue of the aforesaid courts in personam with respect to any proceeding; provided that matters related to the use and occupancy of any Pharmacy Space or disputes relating thereto will be brought exclusively in a court of competent jurisdiction of the State in which such Pharmacy Space is located. Each of CVS and




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Target irrevocably and unconditionally waives any objection to the laying of venue of any proceeding arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) in (i) with respect to matters related to the use and occupancy of any Pharmacy Space or disputes relating thereto, the state court of competent jurisdiction of the State in which such Pharmacy Space is located, and (ii) with respect to all other matters, (x) any court of the State of New York located in New York, New York or (y) the United States District Court for the Southern District of New York, and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such proceeding brought in any such court has been brought in an inconvenient forum.

25.6 Service of Process. Each Party agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in Section 25.8 will be effective service of process for any proceeding in Delaware with respect to any matters for which it has submitted to jurisdiction pursuant to Section 25.5.

25.7 Waiver of Jury Trial. Each Party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and each Party hereby irrevocably and unconditionally waives to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any proceeding arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise). Each Party (a) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other Party would not, in the event of any proceeding, seek to enforce the foregoing waiver, (b) certifies that such Party has considered the implications of this waiver and (c) acknowledges that it and the other Party hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 25.7.

25.8 Notices. Except as otherwise provided in this Agreement, all notices, requests, permissions, waivers and other communications hereunder must be in writing and will be deemed to have been given only (a) three (3) Business Days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by electronic email transmission (including via .pdf files), provided that confirmation of the email transmission is received from the recipient (that is not automatically generated), (c) when delivered, if delivered personally to the intended recipient, or (d) one (1) Business Day following sending by overnight delivery via a national courier service (receipt requested) and, in each case, addressed to a Party at the following address for such Party:


(i)	if to Target,

Target Corporation

1000 Nicollet Mall

Minneapolis, MN 55403

Attn: EVP, Chief Merchandising Officer

Email: [*]




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with a copy (which will not constitute notice) to:

Target Corporation

1000 Nicollet Mall

Minneapolis, MN 55403

Attention: EVP, Chief Legal Officer

Email: [*]

with a further copy (which will not constitute notice) if the notice is being delivered pursuant to Section 23 to:

Target Corporation

Attn: Vice President, Compliance

1000 Nicollet Mall

Minneapolis, MN 55403


(ii)	if to CVS,

CVS Pharmacy, Inc.

One CVS Drive

Woonsocket, Rhode Island 02895

Attention: Executive Vice President, Pharmacy Services

Email: [*]

with a copy to:

CVS Pharmacy, Inc.

One CVS Drive

Woonsocket, Rhode Island 02895

Attention: General Counsel

Email: [*]




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with a copy (which will not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attention: Steven G. Scheinfeld

Email: [*]

with a further copy (which will not constitute notice) if the notice is being delivered pursuant to Section 23 to:

CVS Pharmacy, Inc.

200 Highland Drive

Woonsocket, Rhode Island 02895

Attention: Chief Compliance Officer

Email: [*]

or to such other address or email as is furnished in writing by any such Party to the other Party in accordance with the provisions of this Section 25.8.

25.9 Amendments. This Agreement may be amended, modified, supplemented, superseded or canceled and any of the provisions hereof may be waived only by an instrument in writing signed by each of the Parties or, in the case of a waiver, by or on behalf of the Party waiving compliance. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except where a specific time period is specified, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

25.10 Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement, and will become effective when one or more counterparts have been signed by each of the Parties and delivered, in person or by facsimile, or by electronic image scan, receipt acknowledged, to the other Party.

25.11 Severability; Enforcement. The invalidity, illegality or unenforceability of any portion hereof will not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, each Party agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by applicable Law, and each Party hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.




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25.12 Entire Agreement. This Agreement, the Transition Services Agreement, the Master Occupancy Agreement, the Information Security Agreement and the Occupancy Costs Agreement, including the schedules, exhibits and annexes attached hereto and thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede any previous agreements and understandings between the Parties with respect to such matters. All Exhibits, Schedules, and Attachments annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any term used in any Exhibit, Schedule, or Attachment hereto but not otherwise defined therein is defined as set forth in this Agreement. There are no restrictions, promises, representations, warranties, agreements or undertakings of either Party with respect to the transactions contemplated by this Agreement, the Transition Services Agreement, the Master Occupancy Agreement, the Information Security Agreement or the Occupancy Costs Agreement other than those set forth herein or therein or in any other document required to be executed and delivered hereunder or thereunder. In the event of any conflict or inconsistency between the provisions of this Agreement (and the Exhibits, Schedules, or Attachments hereto), on the one hand, and the provisions of the Transition Services Agreement, Master Occupancy Agreement, the Information Security Agreement or the Occupancy Costs Agreement (including the schedules, exhibits and annexes thereto), on the other hand, the provisions of this Agreement will control.

25.13 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein are to be interpreted, and all accounting determinations hereunder are to be made, in accordance with U.S. Generally Accepted Accounting Principles.

25.14 Performance by Affiliates. Certain of the responsibilities and duties of CVS under this Agreement may be performed by an Affiliate, but, nonetheless, CVS shall remain liable to Target for any breach of this Agreement by such Affiliate. Similarly, certain of the responsibilities and duties of Target under this Agreement may be performed by an Affiliate, but, nonetheless, Target shall remain liable to CVS for any breach of this Agreement by such Affiliate.

25.15 Independent Contractors. The nature of the commercial relationship between CVS and Target will be that of independent contractors. Nothing contained in or done pursuant to this Agreement will be construed as creating a partnership, agency or joint venture; and neither Party will be bound by any representation, act or omission of the other Party with respect to third parties.

25.16 Other Activities. Subject to the provisions of Section 15, the Parties: (a) recognize that the other Party, its Affiliates and their respective members, partners, shareholders, officers, directors, employees, agents and representatives, have or may in the future have other business interests, activities and investments, independently or with others, some of which may be in conflict or competition with the business of the Stores and the Pharmacies; (b) agree that the other Party, its Affiliates and their respective members, partners, shareholders, officers, directors, employees, agents and representatives, are entitled to carry on such other business interests, activities and investments; (c) agree that




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[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed separately with the Commission.

neither the other Party, its Affiliates nor any of their respective members, partners, shareholders, officers, directors, employees, agents or representatives, shall have any right, by virtue of this Agreement or otherwise, in or to such business interests, activities and investments; and (d) agree that the pursuit of such business interests, activities and investments, even if competitive with the business of the Stores and the Pharmacies, shall not be deemed wrongful or improper.

25.17 Dispute Resolution. Without limiting the rights of the Parties to seek specific enforcement under Section 25.18, each Party agrees that prior to filing any lawsuit against the other Party for any matter arising out of or related to this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) the Parties shall attempt in good faith to settle the dispute through non-binding mediation under the auspices of the American Health Lawyers Association (“AHLA”). The Parties will jointly notify AHLA of their intent to use the mediation service, select a mediator from the AHLA roster, and mediate pursuant to the terms of the AHLA’s Agreement to Mediate. In the event the Parties cannot agree on a third-party mediator within fourteen (14) days, the mediator shall be selected by the AHLA. The mediation will be convened in Washington, D.C. The Parties shall pay the expenses of the mediator on an equal basis. If the dispute cannot be resolved by nonbinding mediation within thirty (30) days following the end of the good faith period, any Party may choose to pursue any other remedies.

25.18 Specific Enforcement. The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

25.19 References. Unless the context clearly requires otherwise, (i) “or” is not exclusive, and (ii) “includes” and “including” are not limiting.

[Remainder of page intentionally left blank]




Pharmacy Operating Agreement	Page 50
[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed separately with the Commission.

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first shown above.



TARGET CORPORATION

By:
Print Name:
Title:


CVS PHARMACY, INC.
By:
Print Name:
Title:


SOLELY FOR PURPOSES OF SECTIONS 21.4 and 24.1

CVS HEALTH CORPORATION
By:
Print Name:
Title:

Pharmacy Operating Agreement

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibits

Exhibit A – Target Exclusion List

Exhibit B – Payment Processing Services

Exhibit C – Target’s Community Solicitations Policy

Exhibit D – Target Discounts

Exhibit E – Insurance

Exhibit F – Reconciliation File Data Fields

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit A

Target Exclusion List


•	Medical marijuana


•	Infusion services

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit B

Payment Processing Services

Payment Processing Policies. CVS shall use commercially reasonable efforts to ensure that CVS and Pharmacy Personnel comply with the following requirements:


1.	Charges for which Payment Processing Services are engaged must relate only to valid and legitimate purchases by Patients of CVS Products or Pharmacy Services actually provided at and by the Pharmacy submitting the charges.


2.	Payment Processing Services can only be used for payment immediately after the purchases for which charges are imposed and cannot be used for past due amounts or amounts billed to a Patient for payment in the future.


3.	No fees or other charges or conditions will be imposed upon a Patient for the use by a Patient of a credit, debit or pre-paid card to pay at the Target POS in the Pharmacy.


4.	Prompts on the Target POS equipment provided must be followed.


5.	Patients will be given a receipt for all payments for which Payment Processing Services are engaged as may be required by applicable payment card network rules.


6.	Payment Processing Services may not be engaged for cash advances.


7.	Any and all additional procedures and policies provided by Target to CVS relating to Payment Processing Services, provided such procedures and policies are reasonable and are required by a payment network, acquiring bank, settling bank or any other entity with rights to impose such procedures and policies upon CVS.

Special Amendment to Bank Card Processing Agreements. Target is a party to Bank Card Merchant Agreements and Corresponding Amendments. To the extent required by any Bank Card Processor, CVS agrees to enter into Special Amendments to those Bank Card Merchant Agreements and Corresponding Amendments to allow for the processing of transactions at the Target POS in the Pharmacies (“Special Amendments”). Notwithstanding the commercially reasonable standard in this Exhibit, CVS agrees that it will comply with any obligations thereunder, and, to the extent applicable, CVS will ensure that applicable Pharmacy Personnel comply with obligations applicable to them under the Special Amendments and their use of the Payment Processing Services.

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit C

Target’s Community Solicitations Policy

[See attached]

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.



Community Solicitations Use of Store Parking Lots, Sidewalks, Facilities		TARGET CORPORATE POLICIES
Number:	100-50-10	Effective:	04/2014
Sponsor:	Assets Protection	Supersedes:	02/2013

POLICY

Target Corporation restricts the use of its parking lots and facilities to business use only. Individuals not employed by Target or by a Target vendor providing services to Target are prohibited from soliciting, distributing literature, selling merchandise, or holding events at all times anywhere on Target-owned property or leased property when Target has a right to exclude, including parking lots and sidewalks. Please see Target’s No Solicitation/No Distribution Policy for additional information applicable to solicitation by Target team members.

Some state laws protect limited forms of expressive activity in the common areas of large regional shopping centers. These protections generally do not apply to solicitation at or in front of Target stores, even if a store is located in a large regional shopping center. Stores seeking assistance with solicitation should contact their Assets Protection Business Partner.

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.



No Solicitation/No Distribution by Team Member		TARGET CORPORATE POLICIES
Number:	200-40-13	Effective:	03/2014
Sponsor:	Human Resources – Labor Relations	Supersedes:	11/2009

POLICY

Target wants to make sure all team members can work free of the distraction and pressure that may be created by solicitation and distribution. We also want to ensure our guests a distraction- free shopping experience. That's why Target maintains a No Solicitation/No Distribution Policy for all team members and others with authorized access to Target property.

The policy is simple: During working time (yours or your fellow team members’) you may not “solicit” team members. “Soliciting” includes things like asking co-workers to join organizations or pools, to buy memberships or subscriptions, or to make pledges or gifts to charities. “Working time” does not include meal and break periods (whether paid or unpaid), or any other time when a team member is not expected to be engaged in work activities.

The “No Distribution” part of the policy prohibits team members from distributing literature during working time or in work areas at any time.

Individuals not employed by Target or by a Target vendor providing service to Target are prohibited from soliciting, distributing literature, selling merchandise, or holding events at all times anywhere on Target-owned property or leased property when the Company has a right to exclude, including parking lots and sidewalks.

As a limited exception to this Policy, because Target supports United Way and other non-profit grant partners, some of these organizations may be permitted to solicit or distribute information without violating this Policy; however, Employee Relations must approve the activity.

Contact Community Relations at community.relations@target.com for approval if your office wishes to conduct an annual drive.

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit D

Target Discounts

To help Target accurately execute on its obligation to provide the discount described in Section 12.6 of the Agreement, CVS will provide Target with a monthly file feed containing the information listed below, as well as such other information that Target may reasonably require:


•	name and identifying number for all active Pharmacy Personnel,


•	name and identifying number for all Pharmacy Personnel hired by CVS during the preceding month,


•	name and identifying number for all Pharmacy Personnel whose employment terminated during the preceding month.

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit E

Insurance

Without duplication for any insurance requirements pursuant to the Master Occupancy Agreement or the Clinic Operating Agreement, each Party will, at such Party’s sole expense, obtain and maintain until termination of this Agreement and for such reasonable times thereafter (including appropriate tail policies) policies of insurance from companies authorized to transact business in the state(s) where operations shall occur and who hold a current rating of at least A-VII or better in the current Best’s Insurance Reports published by A.M. Best Company adequate to fully protect such Parties from and against all expenses, claims, actions, liabilities and losses related to the subjects covered by such policies, which will include:

Commercial general liability, including bodily injury, property damage, personal and advertising injury liability, and contractual liability covering operations, independent contractor and products/completed operations hazards, with limits of not less than $1,000,000 for any one occurrence and $2,000,000 annual aggregate, endorsed to include the other Party, its officers, directors and employees as additional insureds;


2.	Workers’ compensation as provided for under any workers’ compensation or similar law in the jurisdiction where work is performed with an employer’s liability limit of not less than $500,000 for bodily injury by accident or disease;


3.	Business auto liability covering ownership, maintenance or use of all owned, hired and non-owned autos used in connection with this Agreement with limits of not less than $1,000,000 combined single limit per accident for bodily injury and property damage liability, endorsed to include the other Party, its officers, directors and employees as additional insureds;


4.	Umbrella/excess liability with limits of not less than $50,000,000 per occurrence and annual aggregate in excess of the commercial general liability, business auto liability and employer’s liability including the other Party, its officers, directors and employees as additional insureds;


5.	solely with respect to CVS, professional or druggist liability coverage with limits of not less than $50,000,000 per occurrence, endorsed to include Target, its officers, directors and employees as additional insureds;


6.	“All Risk” property insurance covering not less than the full replacement cost of the property owned or leased by such Party at the Stores, with a waiver of subrogation in favor of the other Party; and


7.	Network/Cyber-Liability/E-Commerce insurance covering acts, errors, or omissions arising out of such Party’s obligations under this Agreement in an amount not less than $50,000,000 per occurrence and $100,000,000 annual

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

aggregate. This provision shall only apply as long as coverage is commercially available at the designated limits.

Target shall provide that its insurance policies set forth above in paragraphs 1, 3, 4, and 6 shall be primary with respect to each Store (other than the portion occupied by any Pharmacy in each such Store), and with respect to such space, CVS’s insurance policies shall be excess and non-contributory. CVS shall provide that its insurance policies set forth above in paragraphs 1, 3, 4, and 6 shall be primary with respect to each Pharmacy Space, and with respect to such space, Target’s insurance policies shall be excess and noncontributory. For any “Claims Made” policy not renewed or replaced, the Party will purchase or obtain an extended reporting period or “tail” of not less than two (2) years. All policies, except the Network/Cyber-Liability/E-Commerce insurance, shall be “occurrence” form. Each Party shall endeavor to have the insurance policy carrier provide the other Party with prior written notice of cancellation or material change according to policy provisions. The insurance coverage required to be provided by either Party pursuant to this Agreement may not be construed as a limitation on such Party’s responsibility or liability or as a cap on Losses. Where a policy noted above shall be endorsed to include the other Party as an Additional Insured, the procuring Party shall deliver to the other Party a Certificate of Insurance on or prior to the Effective Date confirming such endorsement.

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit F

Reconciliation File Data Fields

[To be attached at Closing]

[*] Indicates confidential portions omitted pursuant to a request for confidential treatment filed
separately with the Commission.

Exhibit (12)

TARGET CORPORATION

Computations of Ratios of Earnings to Fixed Charges for the

Six Months Ended August 1, 2015 and August 2, 2014

and for the Most Recent Five Fiscal Years



Ratio of Earnings to Fixed Charges	Six Months Ended					Fiscal Year Ended
(dollars in millions)	Aug 1, 2015		Aug 2, 2014			Jan 31, 2015			Feb 1, 2014			Feb 2, 2013			Jan 28, 2012		Jan 29, 2011
Earnings from continuing operations before income taxes	$	2,180	$	1,460		$	3,653		$	4,121		$	5,056		$	4,621	$	4,495
Capitalized interest, net	7		(6		)	(1		)	(14		)	(12		)	6		2
Adjusted earnings from continuing operations before income taxes	2,187		1,454			3,652			4,107			5,044			4,627		4,497
Fixed charges:
Interest expense ^(a)	309		315			619			641			721			750		776
Interest portion of rental expense	54		55			108			108			106			110		110
Total fixed charges	363		370			727			749			827			860		886
Earnings from continuing operations before income taxes and fixed charges	$	2,550	$	1,824		$	4,379		$	4,856		$	5,871		$	5,487	$	5,383
Ratio of earnings to fixed charges	7.02		4.93			6.02			6.48			7.10			6.38		6.08

^(a)Includes interest on debt and capital leases (including capitalized interest) and amortization of debt issuance costs. Excludes interest income, the loss on early retirement of debt and interest associated with uncertain tax positions, which is recorded within income tax expense.

Exhibit (31)A

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certifications

I, Brian C. Cornell, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Target Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 25, 2015

/s/ Brian C. Cornell

Brian C. Cornell

Chairman and Chief Executive Officer

Exhibit (31)B

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certifications

I, John J. Mulligan, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Target Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 25, 2015

/s/ John J. Mulligan

John J. Mulligan

Executive Vice President and Chief Financial Officer

Exhibit (32)A

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO 18 U.S.C. SECTION 1350

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Target Corporation, a Minnesota corporation (“the Company”), for the quarter ended August 1, 2015, as filed with the Securities and Exchange Commission on the date hereof (“the Report”), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:


1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: August 25, 2015

/s/ Brian C. Cornell

Brian C. Cornell

Chairman and Chief Executive Officer

Exhibit (32)B

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO 18 U.S.C. SECTION 1350

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 25, 2015

/s/ John J. Mulligan

John J. Mulligan

Executive Vice President and Chief Financial Officer

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