Subject: Wholesale Supply Agreement

August 10, 2000


CVS Corporation One CVS Drive Woonsocket, RI 02895 Attn: Chris W. Bodine


Subject: WHOLESALE SUPPLY AGREEMENT


This letter will confirm the agreement (this "AGREEMENT") between Cardinal Health* ("CARDINAL") and CVS Meridian, Inc. ("CVS") under which CVS will purchase certain pharmaceutical and other products from Cardinal on the following terms and conditions:


SECTION 1. DESIGNATION AS PRIMARY WHOLESALER.


(a) RETAIL PHARMACIES. During the term of this Agreement, CVS will
designate Cardinal as the primary wholesale pharmaceutical supplier to
designated pharmacies, whether now or hereafter owned, managed or
operated by CVS (collectively, the "PHARMACIES" and individually, a
"PHARMACY"). A list of the Pharmacies (the "DESIGNATED PHARMACY LIST")
and a comprehensive list of all of the pharmacies owned, managed or
operated by CVS (the "TOTAL PHARMACY LIST") will be provided by CVS to
Cardinal from time to time during the term of this Agreement, and upon
Cardinal's request. The Qualified Annual Purchases of Merchandise (as
defined below) by such designated Pharmacies compared to CVS' Qualified
Annual Purchases of Merchandise by all of CVS' retail pharmacies will
constitute not less than the percentage set forth in the Section 1(a)
Disclosure Schedule.


(b) DISTRIBUTION CENTERS. During the term of this Agreement, CVS will
designate Cardinal as the primary wholesale pharmaceutical supplier to
all distribution centers, whether now or hereafter owned, managed or
operated by CVS ("CVS PHARMACY DCS"). A comprehensive list of all of
the CVS Pharmacy DCs as of the Commencement Date (the "TOTAL DC LIST")
is set forth in the Section 1(b) Disclosure Schedule.


(c) CVS PROCARE. This Agreement specifically excludes purchases which
are made on behalf of the CVS division known as "CVS ProCare".


SECTION 2. SALE OF MERCHANDISE AND BROKERAGE PURCHASES.


(a) PRIMARY REQUIREMENTS. Each of the Pharmacies and the CVS Pharmacy
DCs will purchase from Cardinal during the term of this Agreement its
Primary Wholesale Requirements (as defined in the Section 2(a)
Disclosure Schedule) of pharmaceutical products ("RX PRODUCTS"), which
consist of purchases of Rx


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Products for (a) delivery directly to the Pharmacies ("STORE RX
PURCHASES"); and (b) delivery directly to the CVS Pharmacy DCs
("BROKERAGE PURCHASES"). CVS may purchase from Cardinal, at CVS'
discretion, for delivery directly to the Pharmacies, its health and
beauty aids, home health care products and other inventory carried by
Cardinal ("STORE OTHER PURCHASES"). For purposes of this Agreement, the
term "QUALIFIED PURCHASES" with respect to a period means all purchases
of Merchandise made and paid for by CVS (and in some circumstances,
either the CVS Pharmacy DCs or the Pharmacies are specifically
designated) from Cardinal during that period, net of all returns and
credits (related to ordering, shipping or accounting errors). For
purposes of this Agreement, the term "MERCHANDISE" will mean the Rx
Products (and Store Other Purchases, with respect to the Pharmacies
only).


(b) BROKERAGE PURCHASES. The Section 2(b) Disclosure Schedule describes
the terms by which CVS will make its Brokerage Purchases through
Cardinal.


(c) DISCONTINUED MERCHANDISE. Cardinal will stock certain Merchandise
that Cardinal would not otherwise stock but for CVS' request, except
food items and Merchandise with limited dating ("SPECIALLY STOCKED
MERCHANDISE"), subject to such credit considerations concerning the
applicable manufacturer as Cardinal may reasonably consider appropriate
(including but not limited to, potential insolvency or outstanding
balance owed to Cardinal without legitimate reason for dispute). CVS
guarantees that at least six (6) pieces of each item of Specially
Stocked Merchandise will be purchased from each of Cardinal's
distribution centers per month. If Cardinal notifies CVS that less than
six (6) pieces of an item of Specially Stocked Merchandise were
purchased in a month from one of Cardinal's distribution centers, then
Cardinal may elect to discontinue carrying such item in its
distribution centers. If Cardinal elects to discontinue carrying any
such item, CVS will accept and purchase the remaining Specially Stocked
Merchandise at the purchase price for such Specially Stocked
Merchandise until the Specially Stocked Merchandise is depleted;
provided, however, that Cardinal will use reasonable efforts to ensure
that the item is discontinued in the most cost-effective manner, which
may include, but not be limited to, returning such item directly to the
manufacturer. Alternatively, Cardinal and CVS may mutually agree to a
drop-ship arrangement in lieu of Cardinal stocking the item.


(d) GENERALLY. CVS will be liable for any payment owing to Cardinal
from any Pharmacy or CVS Pharmacy DC for purchases made hereunder.
Cardinal reserves the right at all times to determine what Merchandise
it will carry based upon product quality, manufacturer indemnity,
insurance, and other policies, and other standards determined by it,
and may delete from its available inventory items of Merchandise with
limited or no movement activity.


SECTION 3. PURCHASE PRICE. As further described in Sections 3(a) and 3(b) Disclosure Schedules, CVS will pay a purchase price ("COST OF GOODS") for products purchased under this Agreement as follows:


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(a) STORE RX PURCHASES AND STORE OTHER PURCHASES. CVS will pay a Cost
of Goods for Merchandise in an amount equal to "Cardinal's Cost" plus
the percentage set forth in the Section 3(a) Disclosure Schedule. The
term "CARDINAL'S COST" as used herein means the manufacturer's
published wholesale acquisition cost for Merchandise at the date of
Cardinal's invoice to CVS, adjusted to reflect any then-applicable
contract pricing, but without reduction for cash discounts.
Manufacturer off-invoice quantity discounts and promotional allowances
which are intended by the manufacturer to be passed through to
Cardinal's retail national chain accounts will be made available to
CVS.


The purchase price for selected Merchandise, including but not
limited to, multisource pharmaceuticals, CardinalSOURCE(SM) generics,
private label products, medical surgical supplies, home health
care/durable medical equipment, Merchandise acquired from vendors not
offering customary cash discount or other terms, and other
non-pharmaceutical Merchandise will not be based upon Cardinal's
Cost-plus pricing described above but will instead be net-billed in
accordance with the terms and conditions established by Cardinal
(including applicable mark-up) for such Merchandise. Merchandise
described in this paragraph is sometimes referred to as "SPECIALLY
PRICED MERCHANDISE." CVS may, but will have no obligation to, purchase
any specified volume or percentage of its requirements for Specially
Priced Merchandise, except as described in the Section 3(a) Disclosure
Schedule.


All orders must be electronically transmitted via Telxon units
or other electronic order entry system approved by Cardinal to qualify
for the pricing specified in the Section 3(a) Disclosure Schedule.
Cardinal and CVS agree and acknowledge that electronic ordering is a
material and critical part of this Agreement and Cardinal's pricing to
CVS. Accordingly, if Cardinal identifies that a Pharmacy or Pharmacies
are causing Cardinal to consistently receive orders other than via
electronically, Cardinal will notify CVS of the problem in writing, and
CVS will use its reasonable efforts to resolve such problem within
seven (7) business days of receiving notice from Cardinal. Thereafter,
non-electronically transmitted orders are subject to Cardinal's Cost
plus 2% pricing (excluding orders for Merchandise which are delivered
to the Pharmacies outside of Cardinal's normal delivery schedule as
described in Section 5 of this Agreement, orders for Schedule II Rx
Products or override orders). Cardinal will promptly notify CVS of any
such orders subject to Cardinal's Cost plus 2% pricing pursuant to this
section.


(b) BROKERAGE PURCHASES. CVS will pay a purchase price for all
Brokerage Purchases in an amount equal to the cost set forth on the
Section 3(b) Disclosure Schedule.


(c) COST OF GOODS ADJUSTMENT. CVS' Cost of Goods will be subject to
adjustment as described in the Section 3(c) Disclosure Schedule.


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(d) ADDITIONAL VOLUME DISCOUNT. CVS is entitled to receive an
additional volume discount as described in the Section 3(d) Disclosure
Schedule.


(e) GENERALLY. CVS acknowledges and agrees that its obligation to pay
the purchase price for all Brokerage Purchases, Store Rx Purchases,
Store Other Purchases and other amounts due or to become due under this
Agreement will not be subject to any reduction, setoff, defense,
counterclaim, or deferment for any reason, except as further described
in this subsection (e), and except as described in the Section 10(a)
Disclosure Schedule relating to returns. If Cardinal fails to pay CVS
amounts due (that are not legitimately disputed by Cardinal) pursuant
to the Sections 7(a), 12(a) or 12(b) Disclosure Schedules, then CVS may
setoff such amounts (that are not legitimately disputed by Cardinal)
against amounts due Cardinal for Brokerage Purchases, Store Rx
Purchases, or Store Other Purchases. Any deductions incorrectly or
improperly recognized (i.e., excluding legitimately disputed amounts)
by CVS will be paid to Cardinal as soon as possible and in any event no
later than fifteen (15) days following notification from Cardinal of
such incorrect or improper deduction; provided, however, that with
respect to such legitimately disputed amounts, CVS agrees to pay when
due the remainder of each invoice which is not disputed, and provided
further that CVS will pay when due any such legitimately disputed
amounts after mutually satisfactory reconciliation; and provided
further that nothing in this subsection will be construed to permit CVS
to fail to cause Cardinal to receive payment when due of legitimately
undisputed amounts.


SECTION 4. PAYMENT TERMS.


(a) STORE RX PURCHASES AND STORE OTHER PURCHASES. CVS will cause
Cardinal to receive payment in full and remittance by automated
clearinghouse ("ACH") for all Store Rx Purchases and Store Other
Purchases according to the schedule set forth in the Section 4
Disclosure Schedule.


(b) BROKERAGE PURCHASES. CVS will cause Cardinal to receive payment in
full by ACH for all Brokerage Purchases according to the schedule set
forth in the Section 4 Disclosure Schedule.


(c) AUTOMATED CLEARINGHOUSE. All payments made by CVS to Cardinal under
this Agreement will be made via ACH, to a financial institution
designated by Cardinal, so as to provide Cardinal with good funds
immediately available to Cardinal on the date such payment is due
according to the schedule set forth in the Section 4 Disclosure
Schedule. In the event that ACH is temporarily interrupted or cannot be
utilized, CVS will seek alternative payment methods to ensure that
Cardinal receives good funds immediately available to Cardinal on the
date such payment is due.


(d) GENERALLY.


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If Cardinal reasonably believes that CVS has suffered a
material adverse effect with respect to its financial position, then
Cardinal has the right to request that CVS provide it with information
within one (1) business day from the date CVS receives the request
(i.e., if CVS receives Cardinal's request at 3:00 p.m. Monday, the
information will be provided no later than 3:00 p.m. Tuesday) that
further describes or refutes (as applicable), in reasonable detail,
such material adverse effect, and that may resolve any such concerns
raised by Cardinal. In addition, CVS agrees to promptly notify Cardinal
in the event CVS has suffered a material adverse effect with respect to
its financial position, including, but not limited to an acceleration
event under its credit facilities. If Cardinal has requested such
information or CVS has notified Cardinal as set forth above and
Cardinal and CVS cannot promptly resolve any such issues pursuant to a
reasonable solution, then Cardinal may (i) limit CVS' daily purchases
thereafter to the daily average of CVS' Qualified Purchases during the
immediately preceding thirty (30) day period; (ii) modify payment
terms, and (iii) in the event that CVS is in Payment Default (as
defined below), give CVS notice of the amount of required payments
under this Agreement by 10:00 a.m. Eastern Standard Time on a business
day and require CVS to wire electronic confirmation of payment of such
amount by non-refundable wire transfer by 2:00 p.m. Eastern Standard
Time on the same business day. As used herein, a "PAYMENT DEFAULT"
shall mean a circumstance where CVS has failed to cause Cardinal to
receive payment when due. If any of the foregoing actions are taken by
Cardinal, the parties will meet every approximate thirty (30) days
following the execution of such action to review CVS' financial
condition, and to reasonably consider reinstating the payment terms
which were in effect prior to execution of such action.


If CVS reasonably believes that Cardinal has suffered a
material adverse effect with respect to its financial position that has
materially, adversely affected (or will imminently materially,
adversely affect) Cardinal's Adjusted Service Level as further
described in the Section 9 Disclosure Schedule, then CVS has the right
to request that Cardinal provide it with information within one (1)
business day from the date Cardinal receives the request (i.e., if
Cardinal receives CVS' request at 3:00 p.m. Monday, the information
will be provided no later than 3:00 p.m. Tuesday) that further
describes or refutes (as applicable), in reasonable detail, such
material adverse effect, and that may resolve any such concerns raised
by CVS. In addition, Cardinal agrees to promptly notify CVS in the
event Cardinal believes it has suffered, or will imminently suffer a
material adverse effect with respect to its financial position,
including an acceleration event under its credit facilities, that has
materially, adversely effected (or will imminently materially,
adversely affect) Cardinal's Adjusted Service Level as further
described in the Section 9 Disclosure Schedule, or Cardinal's ability
to pay amounts due CVS. If CVS has requested such information or
Cardinal has notified CVS as set forth above, and with respect to
service level issues, Cardinal cannot cure the resulting service level
issues within ten (10) days, or with respect to Cardinal's ability to
pay amounts due CVS, Cardinal cannot promptly resolve any such issues
pursuant to a reasonable solution, then CVS may terminate this


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Agreement upon providing written notice to Cardinal, subject to the
Section 9 Disclosure Schedule. If neither Cardinal's service level has
been (or will not imminently be, as applicable) materially, adversely
affected, nor Cardinal's ability to pay amounts due CVS, then CVS may
not terminate this Agreement.


(e) UNCONDITIONAL GUARANTY. As an inducement for Cardinal to supply
Merchandise and provide services to the subsidiaries and affiliates of
CVS, whether existing now or in the future (collectively, "BORROWERS"),
CVS Corporation (i) guarantees to Cardinal the punctual and full
payment (and not merely the ultimate collectability) of all sums now or
hereafter due from Borrowers to Cardinal; (ii) guarantees to Cardinal
the performance of all other obligations under this Agreement; and
(iii) agrees to indemnify and save harmless Cardinal against and from
any and all losses, damages, liabilities, and claims now or at any time
hereafter arising directly or indirectly out of any failure by
Borrowers to promptly and fully perform all of the obligations
hereunder.


SECTION 5. DELIVERY/ORDER SUBMISSION PROCEDURES. Cardinal will deliver the Merchandise F.O.B. to the Pharmacies and exercise its good faith efforts to provide an efficient delivery schedule designed to meet the mutual needs of Cardinal and the Pharmacies. All deliveries will be accompanied by an invoice and all delivery costs (not including emergency deliveries) absorbed by Cardinal. Cardinal will deliver Merchandise to each Pharmacy five (5) days per week (Monday through Friday, except Pharmacies located outside of the continental United States or other Pharmacies mutually agreed upon by the parties from time to time) in accordance with Cardinal's general delivery schedules established from time to time by the applicable Cardinal servicing division (exclusive of holidays, etc.). Any additional deliveries will constitute emergency deliveries, which if required, will incur a separate delivery charge at Cardinal's cost for such deliveries. Delivery schedules and purchase order deadlines may be reviewed and changed from time to time as mutually agreed upon by Cardinal and the Pharmacies. Delivery of Brokerage Purchases will be subject to the terms and conditions set forth in the Section 2 Disclosure Schedule.


The Pharmacies will submit all orders, except for orders for Schedule II drugs, for all Merchandise to Cardinal via Telxon units or other electronic order entry system approved by Cardinal. Any such equipment supplied by Cardinal will b ...