Exhibit 10.37

LONGS DRUG STORES CORPORATION

2003 EXECUTIVE INCENTIVE PLAN

(As amended through November 13, 2007)

 

1. Purpose

The purpose of this Plan is to motivate and reward eligible employees for good
performance by making a portion of their cash compensation dependent on the
achievement of certain Performance Goals related to the performance of Longs
Drug Stores Corporation (the “Company”) and its operating units. This Plan is
designed to ensure that the incentives paid hereunder to executive officers of
the Company are deductible under Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations and interpretations promulgated thereunder
(the “Code”). Accordingly, the adoption of this Plan as to “covered employees”
under Code Section 162(m) is subject to the approval of the Company’s
stockholders pursuant to Code Section 162(m).

 

2. Definitions

The following definitions shall be applicable throughout the Plan:

(a) “Award” means the amount of bonus payable under the Plan to a Participant
with respect to a Performance Period.

(b) “Board” means the Board of Directors of the Company.

(c) “Committee” means the Compensation Committee of the Board or another
Committee designated by the Board which is comprised of two or more “outside
directors” as defined in Code Section 162(m).

(d) “Participant” means any officer or key employee of the Company who is
designated as a Participant by the Committee.

(e) “Performance Goals” means one or more objective measurable performance
factors as determined by the Committee with respect to each Performance Period
based upon one or more factors, including, but not limited to: operating income
before provisions for LIFO accounting, taxes, contributions to the Company’s
profit sharing plan, and executive bonuses; cash flow return on investment;
sales revenue; operating cash flow; pre-tax earnings; earnings; profit; earnings
before taxes; earnings before interest, depreciation, taxes and amortization;
working capital; return on equity; net income; operating income; revenue;
earnings per share, economic value added (“EVA”), stock price, price/earnings;
return on assets (or total assets) return on earning assets; operating expenses;
selling, general and administrative expenses; inventory (or inventory turnover);
debt; profit margin (net income/sales); accounts receivable (or accounts
receivable turnover, collection periods); writeoffs; cash; cost of goods sold;
liquidity (current assets/current liabilities); and debt to equity. Bonuses paid
to Participants who are not subject to the limitations of Code Section 162(m)
may take into account other factors.

(f) “Performance Period” means any period not exceeding 36 months as determined
by the Committee, in its sole discretion. The Committee may establish different
Performance Periods for different Participants, and the Committee may establish
concurrent or overlapping Performance Periods.

 

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(g) “Plan” means this Longs Drug Stores Corporation 2003 Executive Incentive
Plan, as amended from time to time.

 

3. Administration

The Plan shall be administered by the Committee, which shall have the
discretionary authority to interpret the provisions of the Plan, including all
decisions on eligibility to participate, the establishment of payment targets
and the amount of the Awards payable under the Plan. The decisions of the
Committee shall be final and binding on all parties making claims under the
Plan.

 

4. Eligibility

Officers and key employees of the Company shall be eligible to participate in
the Plan as determined at the sole discretion of the Committee.

 

5. Amount of Bonus

With respect to each Participant, the Committee will establish one or more
Performance Periods, an individual Participant incentive target for each
Performance Period and the Performance Goal or Goals to be met during such
Performance Periods (increased or decreased, in each case in accordance with
factors adopted by the Committee with respect to the Performance Period that
relate to unusual or extraordinary items). The selection and adjustment of
applicable Performance Goals and targets shall occur in compliance with the
rules of Code Section 162(m). The maximum amount of any Awards that can be paid
under the Plan to any Participant during any Performance Period is the
annualized amount of 300% of the highest rate of base salary paid to any
executive of the Company with respect to the fiscal year ending in 2003 as
reported in the Company’s proxy statement for the 2003 annual meeting. The
Committee reserves the right, in its sole discretion, to reduce or eliminate the
amount of an Award otherwise payable to a Participant with respect to any
Performance Period in its sole discretion.

 

6. Payment of Bonus

(a) Unless otherwise determined by the Committee, a Participant must be on the
Company’s payroll on the date the bonus is to be paid. The Committee may make
exceptions to this requirement in the case of retirement, death or disability or
under other circumstances, as determined by the Committee in its sole
discretion.

(b) Bonus payments may be made (i) in cash, (ii) in shares of Company stock
granted under the Company’s 1995 Long-Term Incentive Plan, as replaced,
modified, amended or supplemented from time to time (the “1995 Stock Plan”) or
under the Company’s Non-Executive Long-Term Incentive Plan, as replaced,
modified, amended or supplemented from time to time (the “Non-Executive Plan”),
and/or (iii) in options to purchase Company stock granted under the Company’s
1995 Stock Plan or the Non-Executive Plan, as determined by the Committee in its
sole discretion. The number of shares granted shall be determined by dividing
the cash amount forgone by the Fair Market Value (as defined under the 1995
Stock Plan or the Non-Executive Plan) of a share on the date in question.
Options granted pursuant to this Section 6 shall have a fair value equal to the
amount of cash forgone, which fair value shall be based on the Black-Scholes or
other objective method determined by the Committee, in its sole discretion.

(c) Any distribution made under this Plan shall occur within a reasonable period
of time after the end of the Performance Period in which the Participant has
earned the Award; provided, that (i) no Award shall become payable to a
Participant with respect to any Performance Period until the Committee has
certified in writing that the terms and conditions underlying the payment of
such Award have been satisfied, and (ii) such distribution shall occur prior to
the 15th day of the 3rd month following the end of the tax year of the
Participant or the Company (whichever is later) in which the end of the
Performance Period occurs.

 

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(d) If a Participant entitled to the payment of an Award under the Plan dies
prior to the distribution of such Award, the distribution shall be made to the
Participant’s beneficiary, as designated under the Plan, within the same time
period in which the Award otherwise would have been paid to the Participant.

 

7. General

(a) REGISTRATION OF STOCK. The Company shall be under no obligation to register
under the Securities Act of 1933, as amended (the “Act”), any of the shares of
Company common stock distributed under the Plan, if any. If the shares of
Company common stock distributed under the Plan, if any, are in certain
circumstances exempt from registration under the Act, the Company may restrict
the transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

(b) TAX WITHHOLDING. The Company shall have the right to deduct from all Awards
paid in cash any federal, state or local income and/or payroll taxes required by
law to be withheld with respect to such payments. In the case of Awards settled
in Company common stock, the person receiving such common stock may be required
to pay to the Company the amount of any such taxes which the Company is required
to withhold with respect to such common stock or, at the Committee’s sole
discretion, the Company may withhold a number of shares of Company common stock
which have a fair market value equal to the amount of such withholdings. The
Company also may withhold from any other amount payable by the Company or any
affiliate to the Participant an amount equal to the taxes required to be
withheld from any Award.

(c) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. Nothing in the Plan shall confer on
any Participant the right to continued employment with the Company or any of its
affiliates, or affect in any way the right of the Company or any affiliate to
terminate the Participant’s employment at any time, and for any reason, or
change the participant’s responsibilities. Awards represent unfunded and
unsecured obligations of the Company and a holder of any right hereunder in
respect of any Award shall have no rights other than those of a general
unsecured creditor to the Company.

(d) BENEFICIARIES. To the extent the Committee permits beneficiary designations,
any payment of Awards due under this Plan to a deceased Participant shall be
paid to the beneficiary duly designated by the Participant in accordance with
the Company’s practices. If no such beneficiary has been designated or survives
the Participant, payment shall be made to the Participant’s legal
representative. A beneficiary designation may be changed or revoked by a
Participant at any time, provided the change or revocation is filed with the
Committee prior to the Participant’s death.

(e) NONTRANSFERABILITY. A person’s rights and interests under the Plan,
including any Award previously made to such person or any amounts payable under
the Plan, may not be assigned, pledged, or transferred except, in the event of a
Participant’s death, to a designated beneficiary as provided in the Plan, or in
the absence of such designation, by will or the laws of descent and
distribution.

(f) INDEMNIFICATION. Each person who is or shall have been a member of the
Committee and each employee of the Company or an affiliate who is delegated a
duty under the Plan shall be indemnified and held harmless by the Company from
and against any loss, cost, liability or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be a party or in which he may be
involved by reason of any action or

 

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failure to act under the Plan and against and from any and all amounts paid by
him in satisfaction of judgment in any such action, suit or proceeding against
him, provided such loss, cost, liability or expense is not attributable to such
person’s willful misconduct. Any person seeking indemnification under this
provisions shall give the Company prompt notice of any claim and shall give the
Company an opportunity, at its own expense, to handle and defend the same before
the person undertakes to handle and defend it on his own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

(g) EXPENSES. The expenses of administering the Plan shall be borne by the
Company.

(h) PRONOUNS. Masculine pronouns and other words of masculine gender shall refer
to both men and women.

(i) TITLES AND HEADINGS. The titles and headings of the sections in the Plan are
for convenience of reference only, and in the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control.

(j) INTENT. The intention of the Company and the Committee is to administer the
Plan in compliance with Code Section 162(m) so that the Awards paid under the
Plan to Participants who are or may become subject to Code Section 162(m) will
be treated as performance-based compensation under Code Section 162(m)(4)(C). If
any provision of the Plan does not comply with the requirements of Code
Section 162(m), then such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.

(k) GOVERNING LAW. The validity, construction, and effect of the Plan, any rules
and regulations relating to the Plan, and any Award shall be determined in
accordance with the laws of the State of California (without giving effect to
principles of conflicts of laws thereof) and applicable Federal law.

(l) AMENDMENTS AND TERMINATION. The Board may terminate the Plan at any time,
provided such termination shall not affect the payment of any Awards accrued
under the Plan prior to the date of the termination. The Board may, at any time,
or from time to time, amend or suspend and, if suspended, reinstate, the Plan in
whole or in part, provided however, that any amendment of the Plan shall be
subject to the approval of the Company’s shareholders to the extent required to
comply with the requirements of Code Section 162(m), or any other applicable
laws, regulations or rules.

 

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