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”).


 

















 


(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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