Exhibit 10.42

RETENTION AGREEMENT

THIS RETENTION AGREEMENT (the “Agreement”) is entered into as of [date] (the
“Effective Date”), by and between [name] (the “Executive”) and Longs Drug Stores
California, Inc., a California corporation (the “Corporation”).

WHEREAS, the Board of Directors of Longs Drug Stores Corporation (the “Parent
Corporation”) and the Board of Directors of the Corporation have determined that
it is in the best interests of the Parent Corporation and the Corporation to
encourage the retention of the Executive by agreeing to provide reasonable
severance benefits to the Executive in the event of a Qualifying Termination (as
defined in Section 1).

NOW, THEREFORE, in consideration of the covenants and agreements contained in
this Agreement, the Executive and the Corporation hereby agree as follows:

1. Severance Payment and Benefits.

Subject to subsection 1(g), if during the Term (as defined below) the Executive
ceases to be employed by each and all of the Parent Corporation, the Corporation
and their respective affiliates by reason of termination for any reason other
than Just Cause (as defined in Section 3), Total Disability (as defined in
Section 3) or death (a “Qualifying Termination”), then the Executive shall be
entitled to receive severance payments from the Corporation as set forth in
subsection 1(b) (collectively, the “Severance Payment”) and the other benefits
as set forth in subsections 1(c) and 1(e). Subsections 1(d) and 1(f) shall apply
with respect to any termination of Executive’s employment during the Term,
including a Qualifying Termination.

(a) Term of Agreement. This Agreement shall be effective from the Effective Date
until the second anniversary of the Effective Date. If the Corporation does not
deliver to the Executive written notice of non-renewal at least 180 days before
the second anniversary of the Effective Date, then this Agreement shall
automatically renew for another two year period and shall automatically renew
for successive two year periods thereafter unless and until the Corporation
delivers to the Executive written notice of non-renewal at least 180 days before
the end of the then current period. Notwithstanding the foregoing, this
Agreement shall automatically terminate upon the earlier of (i) a Change in
Corporate Control and (ii) such time as Executive ceases to be employed by each
and all of the Parent Corporation, the Corporation and their respective
affiliates for any reason (the foregoing in this subsection 1(a), the “Term”).
The Executive shall not be entitled to any payments or benefits on account of
termination of this Agreement except following employment termination as
described in this Section 1. Notwithstanding anything to the contrary in this
subsection 1(a), the provisions of Sections 2 and 4 shall survive termination of
this Agreement. For purposes of this Agreement, “Change in Corporate Control”
shall have the meaning set forth in that certain Agreement for Termination
Benefits in the Event of a Change in Corporate Control between the Corporation
and the Executive, dated [date] (the “Change in Corporate Control Agreement”).

 

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(b) Severance Payment. The Severance Payment shall consist of payment to the
Executive of Executive’s annual base salary at the same rate, and on the same
schedule, as in effect immediately prior to the date of the Qualifying
Termination for a period of twenty-four (24) months (eighteen (18) months where
the date of the Qualifying Termination is on or after the second anniversary of
the Effective Date) (the “Severance Period”). Payment of the Severance Payment
shall commence on the normal Corporation payroll date following the later of the
delivery of the release referred to in subsection 1(g) to the Corporation or the
last day of any period such release may be revoked by the Executive (the
“Release Effective Date”).

(c) Health Coverage. The Executive (and, where applicable, the Executive’s
dependents) shall be entitled to continue participation in the Corporation’s
health care plan(s) (including the Corporation’s executive medical reimbursement
plan) in which the Executive participated immediately prior to the date of the
Qualifying Termination as if the Executive were still an executive of the
Corporation until the earlier of (i) the date that the Executive is offered
comparable coverage by another employer, (ii) the end of the Severance Period or
(iii) the Executive’s death. The coverage provided under this subsection 1(c)
shall run concurrently with and shall be offset against any continuation
coverage under Part 6 of Title I of the Employee Retirement Income Security Act
of 1974, as amended and Section 4980B of the Internal Revenue Code of 1986, as
amended. To the extent that the Corporation finds it undesirable to cover the
Executive under the health plan(s) of the Corporation, the Corporation shall
provide the Executive (at its own expense) with a comparable level of coverage
under individual policies.

(d) Other Employee Benefits. Except as provided in this Agreement, the
Executive’s participation in all employee benefit programs and management
perquisites shall cease upon his or her date of employment termination.
Executive’s outstanding stock options, unvested restricted stock, outstanding
SARs, outstanding phantom stock and accrued deferred compensation, if any, and
other accrued employee benefits not specifically addressed by this Agreement
shall be governed by the terms of the applicable plans and agreements and in
accordance with any applicable previous election(s) by the Executive.

(e) Outplacement Services. After the Release Effective Date, for one year after
the date of the Qualifying Termination, the Executive will be provided with
outplacement counseling services at the Corporation’s expense; provided,
however, the expense for such service shall not exceed $15,000.00. The
counseling shall include, but not be limited to, skill assessment, job market
analysis, resume preparation, interviewing skills, job search techniques and
negotiating, and shared office facilities and administrative support.

(f) No Other Benefits. Except as provided in this Agreement, the Executive shall
not be entitled to any other retention benefits from the Parent Corporation, the
Corporation or their respective affiliates in the event his or her employment
terminates for any reason during the Term.

(g) Conditions. The payments and benefits provided under this Section 1 (other
than those described in subsection 1(d)) are conditioned on Executive’s
continuing compliance with this Agreement and the applicable policies of the
Parent Corporation, the Corporation and their respective affiliates and the
Executive’s execution (and effectiveness) of a general release of claims and
covenant not to sue in a form that is satisfactory to the Corporation upon
termination

 

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of employment. If Executive does not properly execute such a release within
ninety (90) days after Executive’s termination of employment or if the Executive
attempts to revoke or revokes such a release the Executive will not be entitled
to any of the benefits provided under this Section 1 (other than those described
in subsection 1(d)).

(h) Notwithstanding any provision to the contrary in the Agreement, if the
Executive is deemed at the time of his separation from service to be a
“specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Internal
Revenue Code of 1986, as amended (the “Code”), to the extent delayed
commencement of any portion of the termination benefits to which Executive is
entitled under this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of
Executive’s termination benefits shall not be provided to Executive prior to the
earlier of (a) the expiration of the six-month period measured from the date of
the Executive’s “separation from service” (as such term is defined in the
Treasury Regulations issued under Section 409A of the Code) with the Corporation
and the Parent Corporation or (b) the date of Executive’s death. Upon the
expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all
payments deferred pursuant to this Section 1(h) shall be paid in a lump sum to
the Executive, and any remaining payments due under the Agreement shall be paid
as otherwise provided herein.

2. Confidential Information; Non-Competition; Non Disparagement.

(a) Confidential Information.

(i) Unless required or otherwise permitted by law or as may be necessary in the
ordinary course of performing Executive’s duties, the Executive shall keep
confidential and shall not disclose to others, including present or former
employees of the Parent Corporation, the Corporation and their respective
affiliates, any information described below:

(A) “Confidential Information.” As used in this Agreement, “Confidential
Information” includes, but is not limited to the following with respect to the
Parent Corporation, the Corporation and their respective affiliates: (a) weekly
sales and wage data, (b) profitability data, (c) financial planning and
forecasting data, (d) sales reports, including pharmacy prescription and sales
volume, (e) individual store and collective gross profit information,
(f) expense data, (g) return-on investment data, (h) return-on-asset data,
(i) bonus plans and reports, (j) warehouse distribution costs, (k) information
and related data regarding any project or program, (l) cost-benefit analysis
regarding pharmacy distribution, (m) store and pharmacy inventory data,
(n) pharmacy purchase data, (o) information regarding pharmacy automated
dispensing systems(s) and robotic technology, (p) corporate strategic planning
information, (q) pharmacy prescription processing system, (r) computer programs
and know how, (s) business and marketing plans and strategies, and
(t) unpublished financial statements, budgets, projections, prices, costs and
customer lists whether developed before or after the date of this Agreement;

 

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(B) “Trade secrets” of the Parent Corporation, the Corporation and their
respective affiliates, as defined under the Uniform Trade Secrets Act,
California Civil Code section 3426.1;

(C) Any information that affords the Parent Corporation, the Corporation or
their respective affiliates a competitive advantage in the retail industry;

(D) Proprietary information of the Parent Corporation, the Corporation and their
respective affiliates including but not limited to, supplier lists, product
marketing or any other information obtained by the Executive during his
employment with the Parent Corporation, the Corporation or their respective
affiliates; and

(E) Information with respect to acquisitions and mergers or sales or other
dispositions of businesses or material assets by, of or with the Parent
Corporation, the Corporation or their respective affiliates.

(ii) The provisions of this subsection 2(a) shall not apply to

(A) Information which is generally known within the industry or in the public
domain prior to the date of this Agreement;

(B) Information which, not as a result of the disclosure by the Executive,
becomes part of the public domain;

(C) Information which is available as a matter of public record; and

(D) Information which is hereafter lawfully disclosed to the Executive by a
third party (other than any employees or agents of the Parent Corporation, the
Corporation or their respective affiliates).

(iii) The non-disclosure obligations of this subsection 2(a) shall not apply to
the disclosures made by the Executive in response to any deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar legal process (“legally compelled disclosure”) provided that the
Executive complies with the conditions of this paragraph (iii). In the event
that the Executive is requested or becomes subject to make a legally compelled
disclosure of any of the Confidential Information, the Executive shall first
provide the Parent Corporation or the Corporation with prompt prior written
notice of such requirement so that the Parent Corporation or the Corporation may
seek a protective order or other appropriate remedy and/or waive compliance with
the terms of this subsection 2(a).

(iv) On or before the date of employment termination, the Executive shall turn
over to the Parent Corporation, the Corporation and their respective affiliates
all Parent Corporation, Corporation and affiliate confidential files, records,
and other documents. In addition, the Executive shall return all property in his
possession owned by the Parent Corporation, the Corporation and their respective
affiliates.

 

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(b) Non-Solicitation. During any period for which the Executive is receiving
payments from the Corporation, either as an employee or pursuant to Section 1,
the Executive shall not directly or indirectly:

(i) request, induce or attempt to influence any past, current or future customer
of the Parent Corporation, the Corporation or their respective affiliates, or
any current or future supplier of goods or services to the Parent Corporation,
the Corporation or their respective affiliates, to avoid, curtail or cancel any
business it transacts with the Parent Corporation, the Corporation or their
respective affiliates; and

(ii) request, induce or attempt to influence any current or future employee of,
or independent contractor or consultant to, the Parent Corporation, the
Corporation or their respective affiliates to terminate his or her employment
with or services to the Parent Corporation, the Corporation or their respective
affiliates, or induce, entice, hire or attempt to employ or retain the services
of any such employee, independent contractor or consultant other than on behalf
of the Parent Corporation, the Corporation or their respective affiliates.

(c) Non-Disparagement. The Executive shall not, during the Term and thereafter,
make any unfavorable or disparaging remarks about the Parent Corporation, the
Corporation and their respective affiliates to third parties, including, without
limitation, to any employee, consultant, independent contractor, customer,
supplier or vendor of the Parent Corporation, the Corporation and their
respective affiliates.

(d) Equitable Remedies. The Executive acknowledges that the specialized nature
of the Executive’s knowledge of the Confidential Information, trade secrets and
other intellectual property of the Parent Corporation and the Corporation are
such that a breach of his covenant not to solicit or confidentiality obligations
contained in this Section 2 would necessarily and inevitably result in a
disclosure, misappropriation and misuse of such Confidential Information and
other intellectual property. Accordingly, the Executive acknowledges and agrees
that such a breach would inflict unique and irreparable harm upon the Parent
Corporation, the Corporation and their respective affiliates and that the Parent
Corporation, the Corporation and their respective affiliates shall be entitled,
in addition to their other rights and available remedies (including the
Corporation’s cessation of payments under Section 1 or otherwise), to enforce,
in any court of competent jurisdiction by injunction or decree of specific
performance, the Executive’s obligations set forth herein.

3. Definitions. The following definitions shall apply for all purposes under
this Agreement:

(a) Just Cause. “Just Cause” shall mean the occurrence after the Effective Date
of one or more of the following: (i) failure by the Executive to substantially
perform the Executive’s duties, other than a failure resulting from the
Executive’s complete or partial incapacity due to physical or mental illness;
(ii) an act by the Executive that constitutes gross misconduct; (iii) a breach
by the Executive of a material provision of this Agreement; (iv) a material
violation of a federal or state law or regulation applicable to the business of
the Corporation; (v) material violation of the code of business conduct, code of
ethics or other policies of the Parent Corporation or the Corporation or
(vi) conviction of or the entering of a guilty plea or plea of no contest with
respect to a felony, the equivalent thereof, or any other crimes with respect to
which imprisonment is a punishment.

 

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(b) Total Disability. “Total Disability” shall mean the inability of the
Executive to perform his or her duties for a period of not less than six
(6) consecutive months as a result of Executive’s incapacity due to physical or
mental illness.

4. Miscellaneous Provisions.

(a) Notice. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Executive, mailed notices
shall be addressed to him or her at the home address which he or she most
recently communicated to the Corporation in writing. In the case of the
Corporation, mailed notices shall be addressed to Longs Drug Stores California,
Inc., 141 North Civic Drive, Walnut Creek, CA 94596, and all notices shall be
directed to the attention of its Corporate Secretary.

(b) Amendment; Waiver; Remedies. No provision of this Agreement may be amended,
modified, waived or discharged unless the amendment, modification, waiver or
discharge is agreed to in writing and signed by the Executive (or the
Executive’s personal or legal representative(s), executor(s), administrator(s),
successor(s), heir(s), distributee(s), devisee(s) and legatee(s)) and by two
authorized officers of the Corporation (other than the Executive) (with the
approval of the Board of Directors of the Corporation). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.

(c) Entire Agreement. This Agreement contains all the legally binding
understandings and agreements between the Executive and the Corporation
pertaining to the subject matter of this Agreement and supersedes all such
agreements, whether oral or in writing, previously entered into between the
parties. In the event of any inconsistency, conflict or ambiguity as to the
rights and obligations of the parties under this Agreement and the Change in
Corporate Control Agreement, the terms of this Agreement shall control and
supersede any such inconsistency, conflict and ambiguity.

(d) Withholding Taxes. All payments made under this Agreement shall be subject
to reduction to reflect taxes required to be withheld by law.

(e) Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), and the laws of the State of California to the
extent not preempted. This Agreement constitutes part of an employee welfare
benefit plan subject to the requirements of ERISA.

(f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision.

 

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(g) Arbitration. Any dispute, controversy or claim between the parties arising
out of or relating to this Agreement (whether based in contract or tort, in law
or equity), or any breach or asserted breach thereof, shall be determined and
settled exclusively by private and confidential arbitration in Walnut Creek,
California, in accordance with the rules for dispute resolution of
JAMS/ENDISPUTE. Judgment on the award may be entered in any court of competent
jurisdiction. Notwithstanding this subsection 4(g), the parties may apply to any
court of competent jurisdiction for a temporary restraining order, preliminary
injunction or other interim or provisional relief as may be necessary, without
breach of this Agreement and without abridgment of the powers of the arbitrator.
The parties hereby submit themselves to the Superior Court of California in and
for the County of Contra Costa for the purpose of enforcing this Agreement.

(h) No Assignment. This Agreement may not be assigned by the Executive otherwise
than by will or the laws of descent and distribution. Without limiting the
foregoing, the rights of the Executive to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by voluntary
or involuntary assignment or by operation of law, including bankruptcy,
garnishment, attachment or other creditor’s process, and any action in violation
of this subsection 4(h) shall be void. Subject to this subsection 4(h), this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, representatives, successors and assigns.

(i) Employment At Will; Limitation of Remedies. This Agreement shall not give
the Executive any rights to remain an employee or director of the Parent
Corporation, the Corporation and/or their respective affiliates. The Corporation
and the Executive acknowledge that the Executive’s employment is at will, as
defined under applicable law, and any such employment may be terminated at any
time and for any reason. If the Executive’s employment terminates for any reason
during the Term, the Executive shall not be entitled to any payments, benefits,
damages, awards or compensation other than as provided by this Agreement.

(j) Cooperation. After the date of employment termination for any reason,
Executive will cooperate with the Parent Corporation, the Corporation and their
respective affiliates, their attorneys or experts in connection with any matters
involving the Parent Corporation, the Corporation or their respective affiliates
that are pending on the date of the Executive’s employment termination or that
may arise thereafter from events or alleged events occurring prior to such date.
Either the Parent Corporation or the Corporation will reimburse Executive for
all reasonable expenses incurred in connection with such cooperation.

(k) Voluntary Participation. Each of the parties acknowledges that he or it has
read the Agreement, and that he or it enters into this Agreement freely,
voluntarily, without coercion and based on the party’s own judgment and not in
reliance upon any representations or promises made by the others, except those
contained in this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement (in the case
of the Corporation, by two duly authorized officers) as of the day and year
first above written.

 

  [name], Executive LONGS DRUG STORES CALIFORNIA, INC.   By:   [Officer Name]
Its:   [Title]   By:   [Officer Name] Its:   [Title]

 

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