**Exhibit 10.4**

 

**AGREEMENT FOR TERMINATION BENEFITSIN THE EVENT OF A CHANGE IN CORPORATE CONTROL**

 

This Agreement, made this               day of                    ,20    , by and between                              (the “Executive”) and Longs Drug Stores California, Inc., a Californiacorporation (the “Corporation”).

 

W I T N E S S E T H:

 

Whereas, theExecutive is                                                      of the Corporation;

 

Whereas, theCorporation considers it essential to the best interests of its shareholders totake steps to retain key personnel such as the Executive and recognizesparticularly that uncertainty might arise among personnel in the context of anypossible or actual Change in Corporate Control, as hereinafter defined, whichcould result in the departure or distraction of key personnel to the detrimentof the Corporation and its shareholders; and

 

Whereas, theCorporation has determined that appropriate steps should be taken to reinforceand encourage the continued attention and dedication of key personnel of theCorporation including the Executive to their assigned duties withoutdistraction in the face of potentially disturbing circumstances arising fromany possible or actual Change in Corporate Control.

 

Now, Therefore, inconsideration of the covenants, terms, and conditions contained herein, theCorporation and the Executive agree:

 

I.                                         Definitions.

 

A.                                   “AdministrativeCommittee,” as used in this Agreement, shall mean the Board of Directors ofLongs Drug Stores Corporation (“Parent Corporation”) or a committee appointedby such Board of Directors to administer this Agreement.

 

B.                                     “Changein Corporate Control,” means the occurrence of any of the following:

 

1.                                       Theconsummation of a merger or consolidation of the Parent Corporation or theCorporation with or into another entity or any other corporate reorganization,if more than 50% of the combined voting power of the continuing or survivingentity’s securities outstanding immediately after such merger, consolidation orother reorganization is owned by persons who are not part of the samecontrolled group of the Parent Corporation immediately prior to such merger,consolidation or other reorganization, and who directly or indirectly in theaggregate owned less than 25% of the Parent Corporation’s or the Corporation’s,as the case may be, combined voting power represented by the ParentCorporation’s or the Corporation’s, as the case may be,

 

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outstanding securitiesimmediately prior to such merger, consolidation or other reorganization;

 

2.                                       Thesale, transfer or other disposition of all or substantially all of the ParentCorporation’s or the Corporation’s assets;

 

3.                                       Achange in the composition of the Board of Directors of the Parent Corporation(the “Parent Board”) over a period of 24 consecutive months or less such that amajority of the members of the Parent Board (rounded up to the next wholenumber) cease, by reason of one or more proxy contests for the election ofdirectors, to be comprised of individuals who either (i) have been directorscontinuously since the beginning of such period or (ii) have been elected, ornominated for election, as directors during such period by at least a majorityof the directors described in clause (i) who were still in office at the timesuch election or nomination was approved by the Parent Board;

 

4.                                       Thestockholders of the Parent Corporation approve the dissolution or liquidationof the Parent Corporation or the commencement by or against the ParentCorporation of a case under the federal bankruptcy laws or any other proceedingunder any other laws relating to bankruptcy, insolvency, reorganization,arrangement, debt adjustment or debtor relief or there is an involuntarydissolution of the Parent Corporation; or

 

5.                                       Anytransaction as a result of which any person becomes the “beneficial owner” (asdefined in Rule 13d-3 under the Securities Exchange Act of 1934 (“ExchangeAct”)), directly or indirectly, of securities of the Parent Corporation or theCorporation representing at least 50% of the total voting power represented bythe Parent Corporation’s or the Corporation’s, as the case may be, thenoutstanding voting securities.  Forpurposes of this Paragraph (v), the term “person” shall have the same meaningas when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude:

 

(a)                                  Atrustee or other fiduciary holding securities under an employee benefit plan ofthe Parent Corporation or any “subsidiary corporation” as defined in CodeSection 424(f) or any entity of which the Parent Corporation and/or one ormore such subsidiaries own not less than 50%;

 

(b)                                 Acorporation owned directly or indirectly by the stockholders of the ParentCorporation in substantially the same proportions as their ownership of thecommon stock of the Parent Corporation;

 

(c)                                  TheParent Corporation; and

 

(d)                                 TheCorporation.

 

A transactionshall not constitute a Change in Corporate Control if its sole purpose is tochange the state of the Parent Corporation’s or the Corporation’s incorporationor to create a holding company that will be owned in substantially the same 

 

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proportions by the persons who held the Parent Corporation’s or theCorporation’s securities immediately before such transaction.

 

C.                                     “Code,”as defined herein, shall mean the Internal Revenue Code of 1986, as amended todate.

 

D.                                    “Severanceof Employment,” as used herein, shall mean the termination of the Executive’semployment with the Parent Corporation and the Corporation (i) bydischarge by the Parent Corporation or the Corporation on or within two (2)years after the date of a Change in Corporate Control, (ii) by resignationof the Executive on or after, but less than one hundred eighty (180) daysafter, the date of a Change in Corporate Control, provided that suchresignation was preceded by a material and detrimental alteration in theExecutive’s position, responsibilities, compensation or benefits from those ineffect immediately prior to the Change in Corporate Control or (iii) byresignation of the Executive at any time within the period commencing onehundred eighty (180) days after the date of a Change in Corporate Control andending two (2) years after the date of such Change in Corporate Control.  Despite the foregoing, neither of thefollowing will constitute a Severance of Employment:

 

1.                                       Thetermination of the Executive’s employment by reason of death.

 

2.                                       Thedischarge of the Executive by the Corporation for gross and willful misconductrelating to the performance by the Executive of the Executive’s duties at theCorporation, provided that such misconduct is discovered after the date of theChange in Corporate Control.

 

II.                                     Administration.

 

The AdministrativeCommittee shall administer this Agreement and shall have the power and the dutyto make all determinations necessary for the implementation of this Agreement,including by way of example and not as a limitation, the occurrence of a Changein Corporate Control and the date of such change.  Any such determination (i) shall be made on the basis of allinformation known to the persons making the determination, after reasonableinquiry, (ii) may be made prospectively and subject to one or morecontingent events, and (iii) will be binding on the Corporation and theExecutive.

 

III.                                 Obligationsof the Corporation.

 

A.                                   Withinfifteen (15) days after a Severance of Employment or at such earlier time asmay be required by law, the Corporation shall pay to the Executive:

 

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1.                                       Thefull amount of any earned but unpaid base salary through the date of theSeverance of Employment, plus a cash payment for all unused vacation time whichthe Executive has accrued as of the Severance of Employment.

 

2.                                       Ifand only if the Corporation has made a final and good faith determination priorto the Severance of Employment as to the amount, if any, of Executive’s earnedbut unpaid bonus for the performance period (or periods) prior to theperformance period during which the Severance of Employment occurs (the“Severance Period”), an amount equal to any such amount (or amounts).

 

3.                                       Ifand only if the Corporation has not made a final and good faith determinationprior to the Severance of Employment as to the amount, if any, of Executive’searned but unpaid bonus for the performance period (or periods) prior to theSeverance Period, an amount equal to the bonus (or bonuses) that the Executivewould have received in the absence of a Severance of Employment in respect ofsuch period (or periods), as determined by the Corporation in good faith.

 

B.                                     Withinthirty (30) days after a Severance of Employment, the Corporation shall pay tothe Executive an amount equal to three (3) times the average of Executive’sannual base salary and bonus for the five-consecutive-taxable-year period (orshorter period of actual service) that includes the taxable year of the Changein Corporate Control, less one dollar. Solely for purposes of determining such average, the Executive’s bonusshall be annualized for short or incomplete years (if the Executive shall havereceived a pro-rated award) and shall be deemed to be the target amount for thetaxable year of the Change in Corporate Control. The Executive shall beeligible to make contributions to the Corporation’s Section 401(k) planfrom amounts payable to the Executive under Article III.A and thisparagraph.

 

C.                                     Withinforty-five (45) days after a Severance of Employment, the Corporation shall payto the Executive a pro-rated bonus award at the target amount in respect of theperformance period in which the Severance of Employment occurs based on thepercentage of the performance period that has elapsed as of the date of theSeverance of Employment.

 

D.                                    Withinthirty (30) days after a Severance of Employment, the Corporation shallestablish an irrevocable trust and contribute to it an amount equal to theExecutive’s deferred compensation account under the Deferred Compensation Planof 1995 and/or under other similar or successor plans of the Corporation (the“Plan”).  The trust shall conform to themodel “rabbi trust” agreement provided by the Internal Revenue Service inRevenue Procedure 92-64, as revised from time to time, and shall be structuredas an unfunded arrangement.  The trusteeof the trust shall be Boston Safe Deposit and Trust Company, or its successorin interest, or if Boston Safe Deposit and Trust Company is unable or unwillingto serve for any reason, such other financial institution selected mutually bythe Corporation and the Executive.

 

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E.                                      Inthe event of the Executive’s death after Severance of Employment and prior topayment to the Executive of amounts due under this Agreement, such paymentshall be made to the Executive’s surviving spouse, issue by right ofrepresentation, or estate, in that order.

 

F.                                      TheCorporation shall deduct from any payments to Executive under this Agreementamounts that the Corporation is required to withhold and pay either togovernment agencies on behalf of the Executive or under court order to anyperson.

 

G.                                     TheExecutive shall be entitled to full Excise Tax Restoration Payments such thatin the event that it is determined that any payment of any type to or for thebenefit of the Executive made by the Parent Corporation, by any of itsaffiliates, by any person who acquires ownership or effective control orownership of a substantial portion of the assets of the Parent Corporation(within the meaning of section 280G of the Code or by any affiliate ofsuch person, whether paid or payable pursuant to the terms of this Agreement orotherwise, including the accelerated vesting of stock options or otherequity-based awards (the “Total Payments”), would be subject to the excise taximposed by section 4999 of the Code or any interest or penalties withrespect to such excise tax (such excise tax, together with any such interest orpenalties, are collectively referred to as the “Excise Tax”), then theExecutive shall be entitled to receive an additional payment (an “Excise TaxRestoration Payment”) in an amount that shall fund the payment by the Executiveof any Excise Tax on the Total Payments as well as all income taxes imposed onthe Excise Tax Restoration Payment, any Excise Tax imposed on the Excise TaxRestoration Payment and any interest or penalties imposed with respect to taxeson the Excise Tax Restoration or any Excise Tax.

 

IV.                                 Termination.

 

This Agreementshall terminate and be of no further force or effect upon the discharge orresignation of the Executive for any reason at any time prior to the date of aChange in Corporate Control.

 

V.                                     Termof Agreement.

 

A.                                   ThisAgreement shall expire at the end of three (3) years from the date hereof;provided, however, that at each annual anniversary date of this Agreement, theexpiration date of the Agreement shall automatically be extended for one (1)additional year unless, in the thirty (30) day period immediately preceding anyanniversary date hereof, either the Corporation or the Executive, by writtennotice to the other, rejects the automatic extension of such expiration date.

 

B.                                     Notwithstandingthe expiration provisions set out in Article V.A, this Agreement shall notexpire for a period of two (2) years after the date of any Change in CorporateControl which occurs before this Agreement terminates or expires, and if aSeverance of Employment occurs before this Agreement terminates or expires,this Agreement will not expire until the Corporation has complied in allrespects with Article III.

 

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VI.                                 BindingEffect.

 

This Agreementshall be binding upon and shall inure to the benefit of the parties hereto andthe successors and assigns of the Corporation.

 

VII.                             Non-Assignmentby the Executive.

 

The Executiveshall not assign, hypothecate, or transfer any of the rights herein to anyperson.  Any attempt to assign,hypothecate or transfer the rights hereunder shall immediately terminate all ofthe Executive’s rights under this Agreement.

 

VIII.                         Attorneys’Fees.

 

In the event thatany suit, action or proceeding (including any appeal therefrom, but excludingany and all proceedings before the Administrative Committee) is brought by theExecutive to review any decision of the Administrative Committee pertaining tothis Agreement or to enforce any right hereunder, the prevailing party shall beentitled to recover from the other party reasonable attorneys’ fees and otherreasonable costs incurred in connection therewith.  During the pendency of any such suit, action or proceeding, theCorporation shall promptly pay all reasonable attorneys’ fees and reasonablecosts incurred by the Executive with respect to such suit, action orproceeding, subject to the Executive’s obligation hereunder to repay all suchsums (as well as the Corporation’s reasonable attorneys’ fees and reasonablecosts) if the court finds that the Corporation is the prevailing party in suchsuit, action or proceeding.

 

IX.                                PartialInvalidity.

 

Invalidity of anypart or provision of this Agreement shall not affect the enforceability of anyother part or provision of this Agreement.

 

X.                                    NoRight to Continued Employment.

 

Nothing hereinshall confer, nor shall it be construed to confer, on the Executive any rightto, guarantee of, or contract for a continued employment by the Corporation, orin any way limit the right of the Corporation to terminate the employment ofthe Executive.

 

XI.                                GoverningLaw.

 

This Agreementshall be governed by and construed in accordance with the laws of the State ofCalifornia, as applied to contracts executed and performed entirely inCalifornia.

 

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XII.                            Notices.

 

Any notices givenhereunder must be in writing and may be delivered in person or by certified orregistered mail, return receipt requested, postage prepaid.  Notices to Corporation should be deliveredto Longs Drug Stores California, Inc., 141 North Civic Drive, Walnut Creek,CA  94596, Attn:  Corporate Secretary, or to such otheraddress as Corporation from time to time furnishes to the Executive in anotice.  Notices to Executive should bedelivered to the address shown beneath Executive’s signature below, or to suchother address as the Executive from time to time furnishes to the Corporationin a notice.

 

XIII.                        EntireAgreement.

 

This Agreement sets forth the entire agreement betweenthe parties hereto.  This Agreementfully supersedes any and all prior agreements or understandings pertaining tosimilar benefits.

 

XIV.                        Amendments.

 

This Agreement maynot be modified except by a writing signed by both parties.  No such writing will be binding on theCorporation unless it is signed (a) by the signatories of this Agreement,(b) by (i) the Chairman, President, or any Vice-President of theCorporation and (ii) the Secretary or any Assistant Secretary of theCorporation, or (c) by another person or persons whose authority isaffirmed by (i) the Chairman, President, or any Vice-President of theCorporation and (ii) the Secretary or any Assistant Secretary of theCorporation.

 

In WitnessWhereof, this Agreement has been executed by the parties hereto on the day andyear first above written.

 
| Executive                |   | Longs Drug Stores California, Inc. |
|--------------------------|--------|------------------------------------|
|                     |   |                               |
|                     |   |                               |
|                     |   | By:                                |   |
| (signature)              |   | Warren Bryant,                     |
|                     |   | President and                      |
|                     |   | Chief Executive  Officer           |
|                     |   |                               |
|                     |   |                               |
|                     |   | By:                                |   |
| Street Address           |   | William J.  Rainey,                |
|                     |   | Senior Vice  President,            |
|                     |   | General Counsel  & Secretary   |
|                     |   |                               |
|                     |   |                               |
| City, State and Zip Code |   |                               |

 

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