** **

**Exhibit10.3**

 

 

March 18, 2003

 

 

Mr. William J. Rainey

901 Deer Run Drive

Lawrence, Kansas 66049-4731

 

Dear Bill:

 

                It is a pleasureto confirm our offer and your acceptance of employment for the position ofSenior Vice President, General Counsel. This offer is based on the following mutual understanding:

 

1.                                       You will receive an annual salary of  $375,000 payable in equal bi-weekly amountsof $14,423.08 for the first year of employment.

 

2.                                       You will receive during your first yearof employment a bonus that is targeted at 50% of your base annual salary.  For the first year, Longs will guarantee 50%of this bonus, or $93,750. Thereafter, any bonus will be based on yourindividual as well as the Company’s overall performance.

 

3.                                       You will be paid a hiring bonus of$250,000, which will be taxed for state and federal income tax purposes. Shouldyou resign from the company within 3 years of your hire date, you will berequired to repay a prorated portion of this bonus as follows: 0-12 months,100%; 13-24 months, 67%; 25-36 months, 33%.

 

4.                                       You will be granted a non-qualified stockoption grant of 40,000 shares which will be valued as of the day youremployment begins with Longs Drugs according to the then current Companyvesting policy.

 

5.                                       You will be reimbursed for reasonablemoving expenses based on information submitted by you to the Company, whichwill be grossed up for state and federal income tax purposes where allowable byIRS regulations.  All realtor feesassociated with the sale of your primary residence in Kansas will be reimbursedper the Company’s current relocation policy.

 

6.                                       You will be reimbursed for up to sixmonths of reasonable temporary living expenses based on information submittedby you to the Company in order to assist you in finding a new residence.  Reasonable travel back and forth to Kansasas needed would be reimbursed until your relocation is completed.

 

7.                                       If you are unable to sell your residencewithin six months from date of hire, the Company will purchase your currentresidence at an agreed upon price based on the average of no less than twoappraisals by jointly approved appraisers with the timing of the purchase to bemutually agreed upon.

 

8.                                       Fifteen thousand dollars will be paid inadvance of your actual relocation to offset incidental costs associated withyour move.

 

9.                                       You will begin to accrue vacationimmediately at the rate of four weeks per year.

 

 

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10.                                 You will receive a car allowance in theamount of $710.00 per month that is payable on the second paycheck of eachmonth. This is considered taxable as income and will have appropriate federaland state income taxes withheld.

 

11.                                 You will immediately be placed on theExecutive Medical Plan including appropriate dependents.  This plan includes dental and vision care.

 

12.                                 Information regarding the followingprograms will be sent to you under separate cover and are included as part ofyour overall employment with Longs:

a.     Employee Savings and Profit sharing, lifeinsurance and long term disability

b.     Available medical insurance coverageoptions

c.      “Termination Benefits in the Event of aChange in Corporate Control”

 

13.                                 You will be provided the Company’scurrent standard agreement for termination benefits in the event of change incorporate control, as provided to other Company Senior Vice Presidents.

 

14.                                 It is mutually agreed that for a two yearinitial period of your employment with the Company, that the Company shall havelimited liability for severance.  Shouldthe work arrangements be dissolved during this two year period, the partiesmutually agree as follows:

 

A.                                   Should Longs choose to sever itsemployment relationship with you in the first two years for any reason otherthan for cause, the Company will provide a cash payment equal to one year’ssalary plus your bonus during the first year, and if in the second year, 90% ofthe estimated bonus for that year.  Forpurposes of this calculation, the estimated bonus will be based on theCompany’s operating plan.  At theconclusion of the one-year period, a settlement of the amount due to you willoccur.  The settlement will true up 90%of the estimated bonus to the actual amount if you had been employed duringthat period of time.

 

B.                                     Should you cause your employment to beterminated by your resignation or by being discharged for gross or willfulmisconduct relating to the performance by you of your duties at the Company, nocompensation will be due, other than that accrued to that point.

 

Bill, I am pleased to extend this offer and I look forward to workingwith you.

 
|   |   |   |   | Sincerely,                              |
|--------|--------|--------|--------|-----------------------------------------|
|   |   |   |   |                                    |
|   |   |   |   | **LONGS  DRUG STORES CALIFORNIA, INC.** |
|   |   |   |   |                                    |
|   |   |   |   | /s/  Warren  F. Bryant             |
|   |   |   |   | Warren F. Bryant                        |
|   |   |   |   | President and Chief Executive Officer   |

 

I accept your offer of employment as stated in thisletter with a start date of March 24, 2003.

 

 
| /s/  William  J. Rainey |   | March 19, 2003 |
|------------------------------|--------|----------------|
| William J. Rainey            |   | Date           |

 

 

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