Exhibit 10.r

CONFIDENTIAL

SEPARATION AGREEMENT

THIS SEPARATION AGREEMENT (this “Agreement”), is made between James Famini
(“Employee”) and Longs Drug Stores Corporation, a Maryland corporation (“Longs
Corporation”), and Longs Drug Stores California, Inc., a California corporation
(“Longs California” and, together with Longs Corporation, “Longs” or the
“Company”) and will become effective upon the Effective Date set forth in
Section 20.

RECITALS

WHEREAS, Employee has been employed by Longs California as Senior Vice President
and Regional Manager, and has served as a director of Longs Drug Stores
California, Inc., and the parties hereto desire to end those relationships, and
to settle, fully, finally and amicably, all claims against each other,
including, but not limited to, any claims related to the employment of Employee
and the termination of that employment.

NOW, THEREFORE, in order to provide such benefits and in consideration of the
mutual promises, covenants and representations set forth below and other good
and valuable consideration, the parties agree as follows:

1.             Relinquishment of Positions.  Employee has resigned effective
September 26, 2002 from his positions as Senior Vice President and Regional
Manager of Longs Drug Stores California, Inc.

2.             Earned Salary and Bonus.  Employee will be paid his earned salary
and accrued vacation through September 30, 2002.  Employee will be paid his full
third quarter fiscal year 2003 bonus no later than December 15, 2002.

3.             Payment of Good and Valuable Consideration.  Even though Employee
is not otherwise entitled to it, in consideration of Employee’s acceptance of
this Agreement and the release contained herein, Longs will provide the
following:

(a)   Subject to the deductions set forth in paragraph 3(d) and in paragraph 7,
Employee will be paid four hundred sixty four thousand and twenty five dollars
($464,025.00) as follows: two hundred  ninety seven thousand three hundred 
fifty eight dollars and thirty three cents ($297, 358.33) of said amount on or 
before January 31, 2003; and the remaining amount, or one hundred sixty six
thousand six hundred sixty six dollars and sixty seven cents ($166,666.67) on
or  before January 31, 2004.  There will be no tax or other withholdings from
these payments.  These are the  gross payments that will be made to Employee,
reduced only by the deductions set forth in Paragraph 3(d) and Paragraph 7.

(b)   During the period he is eligible for, and elects COBRA continuation
coverage, and for a period of 6 months after COBRA eligibility ends, employee
will be paid an amount per month equal to five hundred dollars ($500);
notwithstanding the foregoing, such payments will terminate in the month that
Employee becomes eligible for health insurance coverage from a subsequent
employer, if Employee becomes so eligible prior to the termination

 

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of the COBRA continuation coverage period.  Such payments will be mailed or
delivered to Employee on Longs California’s second regular payroll date of each
month.

(c)           Employee will be paid six thousand one hundred seventy-eight
dollars ($6,178) on the first business day that is three (3) days after the
Effective Date as reimbursement for the anticipated contributions of Employee
and his current eligible dependents under the Longs Executive Medical Plan
during the eighteen month period following the Effective Date.

(d)           The Company will pay the fair market value, or negotiated value,
whichever is less, of the value of Employee’s 2001 model year Lexus RX300 and
transfer ownership to Employee.  However, said value, which was  $28,300 as of
December 4, 2002, will be deducted from the gross amount to be paid Employee in
January 31, 2003, pursuant to Paragraph 3(a) above.  Employee will be
responsible for all additional amounts due to the sale of the vehicle including,
but not limited to, any applicable sales tax, license and registration fees.

(e)           Employee’s resignation will be deemed to be “Normal Retirement”
for purposes of
(i) his outstanding options to purchase Company common stock under Longs’ 1995
Long-Term Incentive Plan (the “1995 Plan”) and (ii) his award of 1,800 shares of
restricted Company common stock under the 1995 Plan, which restricted stock
award was granted to him on March 15, 2000.

Under the terms of the 1995 Plan, Employee will receive 911 shares of the 1800
shares of the restricted stock granted to him, without any restrictions, upon
the Effective Date of this Agreement.

Employee has 29,000 stock options as of his retirement.  Employee has three
years from his normal retirement date (the normal retirement date is September
26, 2002), to exercise these stock options awarded to him.

(f)            Employee’s attorney fees and costs for services rendered in
relation to this Agreement, up to a maximum amount of $5,000.

(g)           Any tax obligations of Employee and tax liability therefor,
including any penalties and interest based upon such tax obligation, that arises
from the benefits and payments made to him under this Agreement will be
Employee’s responsibility and liability.  Longs California will report each
payment provided for in this Section 3 on form W-2, or form 1099,  for the tax
year in which the payment was made.

(h)           Longs will pay premiums to maintain Employee as a covered
individual under Longs group life insurance plan for a period of 36 months
following the effective date of resignation.  Long term disability coverage does
not extend beyond Employee’s termination date stated above.

(i)            The ownership of the laptop computer provided to Employee for
Employee’s use is transferred to Employee, as of the Effective Date of this
Agreement.  Employee agrees that all confidential or trade secret information of
Company has been deleted from the laptop.

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(j)            Company will provide Employee with outplacement services provided
by Lee, Hecht & Harrison, consistent with Company’s custom and practice, for one
year from the Effective Date of this Agreement.

4.             No Other Benefits; No Admission of Liability.  Employee
acknowledges that except as specifically set forth in Sections 2 and 3, Employee
will not be entitled to any other payments or benefits after September 26,
2002.  Employee also acknowledges that the Agreement for Termination Benefits in
the Event of a Change in Control entered into between Employee and Longs
California will terminate as of September 26, 2002.  Notwithstanding the
foregoing, in the event there is a “Change in Control” of Longs as described in
such agreement, the payments set forth in Sections 3(a), 3(b), 3(c) and 3(d) of
this Agreement that remain unpaid will be payable within thirty (30) days
following such Change in Control.  The furnishing of the consideration for this
Agreement will not be deemed or construed at any time or for any purpose as an
admission of liability by Longs or Employee to the other.

5.             Indemnification Against Claims.  To the fullest extent provided
by law, Longs will indemnify and hold Employee harmless from any liability,
claim, demand, cost, expense and attorneys’ fees incurred by him as a result of
any actions or omissions by him in the course of his service to the Company as
an employee, officer or director.

6.             Confidentiality and Non-Disclosure.

(a)           Unless required or otherwise permitted by law, Employee will keep
confidential and will not disclose to others, including present or former Longs
employees, any information described below:

(i)            Longs’ “Confidential Information”.  As used in this Agreement,
“Confidential Information” includes, but is not limited to the following: 
(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
regarding Longs’ NonStop Solutions project and related data, (l) cost-benefit
analysis regarding pharmacy distribution, (m) Longs’ PRO program, (n) store and
pharmacy inventory data, (o) pharmacy purchase data, (p) information regarding
pharmacy automated dispensing system(s) and robotic technology, (q) corporate
strategic planning information, (r) pharmacy prescription processing system,
(s) computer programs and know how, (t) business and marketing plans and
strategies, and (u) unpublished financial statements, budgets, projections,
prices, costs and customer lists whether developed before or after the Effective
Date;

(ii)           Longs’ “Trade secrets”, as defined under the Uniform Trade
Secrets Act, California Civil Code section 3426.1;

(iii)          Any information that affords Longs a competitive advantage in the
retail industry;

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(iv)          Longs’ proprietary information including but not limited to,
supplier lists, product marketing or any other information obtained during his
employment with Longs; and

(v)           Information with respect to acquisitions and mergers or sales or
other dispositions of businesses or material assets by, of or with Longs.

(b)           The provisions of this Section 6 will not apply to (i) information
which is generally known within the industry or in the public domain prior to
the Effective Date, (ii) information which, not as a result of the disclosure by
Employee, becomes part of the public domain, (iii) information which is
available as a matter of public record and (iv) information which is hereafter
lawfully disclosed to Employee by a third party (other than any employees or
agents of Longs).

(c)           The non-disclosure obligations of this Section 6 will not apply to
disclosures made by Employee in response to any deposition, interrogatory,
request for documents, subpoena, civil investigative demand or similar legal
process (“legally compelled disclosure”) provided that Employee complies with
the  conditions of this Section 6(c).  In the event that Employee is requested
or becomes subject to make a legally compelled disclosure of any of the
Confidential Information, Employee will first provide Longs with prompt prior
written notice of such requirement so that Longs may seek a protective order or
other appropriate remedy and/or waive compliance with the terms of this Section
6.

(d)           On or before the Effective Date, Employee will turn over to Longs
all Company confidential files, records, and other documents.  In addition,
Employee will return all property in his possession owned by Longs.

                7.             Repayment of Loan.  Employee will repay to Longs
the remaining relocation loan amount, or $64,024.20, as required under the
Relocation Agreement with Longs dated August 23, 2000.  Said amount will be
deducted from the gross amount of the first payment that will be made to
Employee on January 31, 2003.

                8.             Non-Solicitation.  Employee will not, for a
period of three years after the Effective Date:

(e)           directly or indirectly request, induce or attempt to influence any
past, current or future customer of Longs, or any current or future supplier of
goods or services to Longs, to avoid, curtail or cancel any business it
transacts with Longs; or

(f)            directly or indirectly request, induce or attempt to influence
any current or future employee of, or independent contractor or consultant to,
Longs to terminate his or her employment with or services to Longs, 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 Longs.

              9.             Non-Disparagement.  Both Employee and Longs,
through its directors and officers, will not make any unfavorable or disparaging
remarks about the other to third parties, including, without limitation, to any
current or former employee, consultant, independent

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contractor, customer, supplier or vendor of Longs.  However, the Company’s
non-disparagement obligation pursuant to this Agreement will extend solely to
the actions of Longs’ directors and officers.  For this purpose, “officers” is
defined as those persons identified by the Board of Directors as subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended.

10.           Cooperation.  Employee will cooperate with Longs, its attorneys or
experts retained by Longs or its attorneys in connection with any litigation
matters involving Longs that are pending on the Effective Date or that may arise
thereafter from events or alleged events occurring prior to the Effective Date. 
The Company will reimburse Employee for all reasonable expenses incurred in
connection with such cooperation and, if such cooperation is required after the
date that is two (2) years after the Effective Date, the Company will also
compensate Employee for time reasonably spent in connection with such
cooperation at an hourly rate equivalent to his salary in effect at the time of
his resignation.

11.           No Other Claims.  Employee represents and warrants that he has not
filed against Longs or any of its representatives, any claim, complaint, charge
or suit with any federal, state or other agency, court, board, office or other
forum or entity, including without limitation, any application for workers’
compensation benefits.  Employee will not, at any time hereafter, file any such
claim, complaint, charge or suit based upon circumstances arising before the
Effective Date, other than a claim arising from a breach by the Company of this
Agreement (which will be subject to Section 12), and if any agency, court,
board, office, forum or other entity assumes jurisdiction of any such claim,
complaint, charge or suit, he will request such entity to withdraw from the
matter.  A breach of this Section 10 will entitle Longs to damages as provided
by law and will relieve Longs of all obligations to Employee as provided in this
Agreement.

12.           General Release.

(a)           Employee, on behalf of himself and his heirs, executors,
administrators, successors and assigns, does hereby irrevocably and
unconditionally release, acquit and forever discharge Longs Corporation, Longs
California, and all of their respective affiliates, stockholders, directors,
officers, employees, representatives, successors, assigns, agents and attorneys
from any and all charges, complaints, grievances, claims, liabilities,
obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including
attorneys’ fees and costs actually incurred), of whatever kind or nature, known
or unknown, suspected or unsuspected, joint or several (“Claims”), which
Employee has had or may hereafter claim to have had, against any such persons or
entities by reason of any matter, act, omission, cause or event whatever that
has occurred up to and including the Effective Date other than those obligations
set forth in this Agreement.  This release and waiver of Claims specifically
includes, without limitation:  (i) all Claims arising from or relating in any
way to any act or failure to act by any employee, officer or director of Longs,
(ii) all Claims arising from or relating in any way to the employment
relationship of Employee with Longs and/or the termination thereof, including
any Claims which have been asserted or could have been asserted against Longs,
and (iii) any and all Claims which might have been asserted by Employee in any
suit, claim, or charge, for or on account of any matter or things whatsoever
that has occurred up to and including the Effective Date, under any

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and all laws, constitutions, statutes, orders, regulations, or any other claim
of right(s), including without limitation, any claim under (as amended) the Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1991, the Employee Retirement Income Security Act
of 1974, the Americans with Disabilities Act, the California Fair Employment and
Housing Act, the California Labor Code, any other federal, state or local
statute or law governing employment or the termination of employment, and any
Claim in contract or tort.

(b)           For the purpose of implementing a full and complete release and
discharge, Employee expressly acknowledges that this Agreement with the general
release set forth in this Section 12 is intended to include in its effect,
without limitation, all Claims which Employee does not know or suspect to exist
in his favor at the time of execution of this Agreement, and that this Agreement
and such general releases contemplate the extinguishment of all such Claims. 
Employee expressly waives and relinquishes all rights and benefits he may have
under Section 1542 of the California Civil Code which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

(c)           Longs Corporation and Longs California release all claims against
Employee, to the same extent Employee has released claims against them.

13.           Arbitration and Equitable Relief.

(a)            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, will 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, and the parties specifically reserve all rights to appeal such
judgment as if it were rendered in a court of law.

(b)           Notwithstanding Section 13(a), 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.

14.           Binding Agreement.  This Agreement will be binding upon and inure
to the benefit of Employee and Longs and their respective heirs, administrators,
representatives, executors, successors and assigns.  Employee hereby designates
Karen Lyn Famini as his beneficiary under this Agreement.

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15.           Attorneys’ Fees.  If one party commences an action against the
other to enforce or interpret the terms of this Agreement, or to obtain a
declaration of rights under this Agreement, the prevailing party will be
entitled to reasonable attorneys’ fees, costs and expenses incurred in such
action or any appeal or enforcement of such action, in addition to any other
relief to which that party may be entitled under this Agreement.

16.           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.

17.           Method of Execution.  This Agreement may be executed in
counterparts and each counterpart will be deemed a duplicate original.

18.           Governing Law.  This Agreement is deemed to have been made and
entered into in the State of California and will in all respects be interpreted,
enforced and governed under the laws of the State of California.  The language
of all parts of this Agreement will in all cases be construed as a whole
according to its fair meaning and not strictly for or against any party.

19.           Severability.  The provisions of this Agreement are severable and
should any provision of this Agreement be declared or be determined by any
arbitrator or court to be illegal or invalid, any such provision will be
stricken, and the validity of the remaining parts, terms or provisions will not
be affected.

20.           Older Workers Benefit Protection Act.  Pursuant to the
requirements of the Older Workers Benefit Protection Act, Employee has up to
twenty-one (21) days from the date of his receipt of this Agreement to consider
and sign this Agreement, although Employee may accept it at any time within
those 21 days.  Employee hereby acknowledges that he has been advised to consult
an attorney about this Agreement.  Once Employee accepts the terms of this
Agreement and signs this Agreement, he has seven (7) days to revoke his
acceptance.  To revoke this Agreement, Employee must send to the Secretary of
Longs Corporation a written statement of revocation by registered mail, return
receipt requested.  If he does not revoke this Agreement, this Agreement will
become effective on the eighth day after he signs it (the “Effective Date”).

21.           Confidentiality of Agreement.

(a)         Employee represents that he has not disclosed the terms of this
Agreement and, until such time that Longs is required by law to publicly
disclose the terms of this Agreement, Employee will keep the terms, amounts and
all other specific facts of this Agreement completely confidential and will not
disclose any information concerning this Agreement to any person or entity,
other than that which is legally required and other than to his immediate family
and professional representatives; provided, that disclosure to his immediate
family or professional representatives is conditioned on the fact that they
agree to keep such information confidential and not disclose it to others.

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(b)         In the event Employee discloses, in violation of this Section 21,
the alleged facts upon which this Agreement is based, the amount of
consideration tendered to him, or the terms of the Agreement, Longs will be
entitled to terminate any payment due under this Agreement or take any other
action legally allowable.

22.           Entire Agreement.  This Agreement sets forth the entire agreement
between the parties as to the subject matter hereof and supersedes any and all
prior agreements or understandings between the parties written or oral.  No
waiver, alteration, or modification of any of the provisions of this Agreement
will be binding unless in writing and signed by the party against whom
enforcement of the change or modification is sought.  Failure or delay on the
part of either party to enforce any right, power, or privilege under this
Agreement will not be deemed to constitute a waiver thereof.

 

Date:

12-26-02

 

 

 

/s/ James Famini

 

 

 

 

 

James Famini

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

 

Longs Drug Stores Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Linda Watt

 

 

 

 

 

Authorized Signatory

 

 

 

 

 

 

Date:

1-2-03

 

 

 

Longs Drug Stores California, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ O.D. Jones

 

 

 

 

 

Authorized Signatory

 

 

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