Exhibit 10.5

 

RETENTION AGREEMENT

 

THIS RETENTION AGREEMENT (the “Agreement”) is entered into as of
                           , 20      (the “Effective Date”), by and between
                                  (the “Executive”) and Longs Drug Stores of
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                            (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 $                         . 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

 

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claims and covenant not to sue in a form that is satisfactory to the Corporation
upon termination of employment.  If the Executive does not properly execute such
a release 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)).

 

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;

 

(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;

 

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(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.

 

(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.

 

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(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.

 

(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 of California, Inc., 141 N. 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

 

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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.

 

(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.

 

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(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.

 

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.

 

 

 

 

 

 

 

, Executive

 

 

 

 

 

 

 

LONGS DRUG STORES OF CALIFORNIA, INC.

 

 

 

 

 

 

 

 

By:

 

Its:

 

 

 

 

 

 

 

 

By:

 

Its:

 

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