Exhibit
10.1


 


SEPARATION
AGREEMENT


 


THIS SEPARATION AGREEMENT
(this “Agreement”), is made between Terry D. Burnside (“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 19.


 


RECITALS


 


WHEREAS, Employee has
been employed by Longs California as Senior Vice President and Chief Operating
Officer and has served as a director of Longs California, and the parties
hereto desire to end those relationships and Employee’s employment, 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 February 20, 2003 from his positions as Senior Vice President and
Chief Operating Officer of Longs California and as a Longs California
director.  Employee shall remain an
employee of Longs California (but shall not be required to perform services
except as provided in this Agreement) until May 1, 2003.


 


2.                               Earned
Salary and Bonus.  Employee will be
paid his earned salary and accrued vacation in accordance with Longs California
regular payroll procedures through May 1, 2003.  Employee will be paid his fourth quarter fiscal year 2003 bonus
(computed in accordance with the applicable formula) no later than March 31,
2003.  No additional bonus will accrue,
or be paid, to Employee.


 


3.                               Payment
of Good and Valuable Consideration. 
In consideration of Employee’s acceptance of this Agreement and the
release contained herein, Longs will provide the following:


 


(a)                          The
Company will pay Employee thirteen thousand four hundred sixty-one dollars and
fifty-three cents ($13,461.53), less applicable withholding tax and deductions,
every two weeks for a period of twenty-one and one-half (21 1/2) months (i.e.,
forty-seven (47) payments) in accordance with Longs California regular payroll
procedures beginning May 15, 2003.


 

















 


(b)                         Until
February 20, 2005, the Company will pay premiums for Employee and his eligible
dependents under the Longs PPO medical benefits plan; this provision shall cover
applicable COBRA payments during the specified period for continuation of
medical benefits.


 


(c)                          Until
February 20, 2005, the Company will reimburse Employee for the expenses of
Employee and his eligible dependents under the Longs Executive Medical Plan.


 


(d)                         Until the
termination of the Company’s automobile lease for Employee’s 1999 Mercedes
ML430 on September 30, 2003, the Company will continue to make the required
lease payments to the automobile lessor. 
At such lease termination date, the Company will cause Employee to have
the option to purchase the automobile for the same amount that the Company is
entitled to purchase the automobile under the lease at termination of the
lease, with Employee also liable for any applicable taxes and fees.  Whether or not Employee chooses to purchase
the 1999 Mercedes ML430, from October 2003 until February 2005, the Company
will pay Employee $625.41 (the current amount of the lease payment), less
applicable withholding tax, each month on the second regular payroll date for
the month.  Subject to prior approval by
the Company, Company will pay for normal vehicle maintenance during the lease
term, up to September 30, 2003. Such maintenance will be provided
according to the terms and conditions of Company’s corporate lease
program.  Employee will have use of the
company gas card up to and including May 1, 2003.


 


(e)                          The
Company will pay for executive level outplacement services selected by mutual
agreement of the Company and Employee for up to the lesser of (i) a period of
twelve (12) months and (ii) $12,000.


 


Employee’s resignation as
an employee of Longs California effective May 1, 2003 will be deemed
“Normal Retirement” for purposes of Longs’ 1995 Long-Term Incentive Plan;
accordingly, Employee will receive 3,908 shares of restricted stock on
May 1, 2003 and Employee’s options to purchase 119,000 shares of Longs
common stock shall become fully vested and exercisable on May 1,
2003.  Employee has three years from his
normal retirement date (the normal retirement date is May 1, 2003), to
exercise these stock options awarded to him.


 


(f)                            Ownership
of the laptop computer and Palm Pilot (including docking stations and
recharging units) used by Employee during his employment with Longs will be
transferred to Employee after all confidential, and business-related
information pertaining in any way to Longs or Employee’s employment with Longs,
has been deleted or otherwise permanently removed from the computer.


 


(g)                         Any tax
obligations of Employee and tax liability therefor, including any penalties and
interest based upon such tax obligations, that arise 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 for the tax year in
which the payment was made.


 


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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
February 20, 2003.  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 February 20, 2003. 
Notwithstanding the foregoing, in the event there is a “Change in
Control” of Longs as described in such agreement, the payments set forth in
Section 3(a) 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 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;


 


(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.


 


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(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 to make, or becomes subject to making, 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 files,
records and other documents.  In
addition, Employee will return to Longs all other property that is owned by
Longs and that remains in his possession.


 


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


 


(a)                          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


 


(b)                         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.


 


The restrictions set
forth in subsections (a) and (b) apply only to Employee and do not apply to any
future employer of Employee who provides goods or services to Longs.


 


8.                               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 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.


 


9.                               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


 


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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.


 


10.                         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.


 


11.                         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
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.


 


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(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 11 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 release contemplates 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.


 


12.                         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 12(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.


 


13.                         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.


 


14.                         Attorneys’
Fees.  Each party will bear its own
costs and attorneys’ fees incurred in the achieving the settlement and release
of the matters set forth in this Agreement. 
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.


 


15.                         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


 


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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.


 


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


 


17.                         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.


 


18.                         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.


 


19.                         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”).


 


20.                         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 their agreement to keep such
information confidential and not disclose it to others.


 


(b)                         In the
event Employee discloses, in violation of this Section 20, 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.


 


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21.                         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:

  	
    March 26,
  2003

  	
   

  	
  /s/ Terry D. Burnside

  	
   

  
	
   

  	
  Terry D. Burnside

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
    April 1,
  2003

  	
   

  	
  Longs Drug Stores
  Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  William J. Rainey

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
    April 1,
  2003

  	
   

  	
  Longs Drug Stores
  California, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda Watt

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  



 


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