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Exhibit 10.28  

 
  DITECH COMMUNICATIONS CORPORATION
  2000 NON-QUALIFIED STOCK PLAN    
  

ADOPTED AUGUST 1, 2000

AMENDED NOVEMBER 22, 2000

AMENDED FEBRUARY 9, 2001

AMENDED JULY 12, 2001

AMENDED DECEMBER 21, 2001

AMENDED JUNE 19, 2002

AMENDED NOVEMBER 15, 2002

STOCKHOLDER APPROVAL NOT REQUIRED  

1.    Purposes.  

        (a)    Eligible Stock Award Recipients.    The persons eligible to receive Stock Awards are the Employees, Directors
and Consultants of the Company and its Affiliates. 

        (b)    Available Stock Awards.    The purpose of the Plan is to provide a means by which eligible recipients of Stock
Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Nonstatutory Stock Options,
(ii) restricted stock bonuses and (iii) rights to acquire restricted stock. 

        (c)    General Purpose.    The Company, by means of the Plan, seeks to retain the services of the group of persons
eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and
its Affiliates. 

2.    Definitions.  

        (a)  "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as
those terms are defined in Sections 424(e) and (f), respectively, of the Code. 

        (b)  "Board" means the Board of Directors of the Company. 

        (c)  "Code" means the Internal Revenue Code of 1986, as amended. 

        (d)  "Committee" means a committee of one or more members of the Board appointed by the Board in accordance with subsection
3(c). 

        (e)  "Common Stock" means the common stock of the Company. 

        (f)    "Company" means Ditech Communications Corporation, a Delaware corporation. 

        (g)  "Consultant" means any person, including an advisor, (i) engaged by the Company or an Affiliate to render
consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors who are not compensated by the Company for their services as Directors or Directors who are merely paid a director's fee by the Company for their services as Directors. 

        (h)  "Continuous Service" means that the Participant's service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no
interruption or termination of the Participant's Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute
an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that 

 

party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or
any other personal leave. 

        (i)    "Director" means a member of the Board of Directors of the Company. 

        (j)    "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the
Code. 

        (k)  "Employee" means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a
director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate. 

        (l)    "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        (m)  "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows: 

	(i)
	If
the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market
Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid if no sales were reported) as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board
deems reliable.

	(ii)
	In
the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board. 

        (n)  "Non-Employee Director" means a Director who either (i) is not a current Employee or Officer of the
Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not
engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee
director" for purposes of Rule 16b-3. 

        (o)  "Nonstatutory Stock Option" means an Option not intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Code and the regulations promulgated thereunder. 

        (p)  "Officer" means a person who possesses the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of
the Rules of the National Association of Securities Dealers, Inc. For purposes of the Plan, a person in the position of "Vice President" or higher shall be classified as an "Officer" unless the
Board or Committee expressly finds that such person does not possess the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of
Securities Dealers, Inc. 

        (q)  "Option" means a Nonstatutory Stock Option granted pursuant to the Plan. 

        (r)  "Option Agreement" means a written agreement between the Company and an Optionholder evidencing the terms and conditions
of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 

        (s)  "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Option. 

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        (t)    "Participant" means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Stock Award. 

        (u)  "Plan" means this Ditech Communications Corporation 2000 Non-Qualified Stock Plan. 

        (v)  "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor
to Rule 16b-3, as in effect from time to time. 

        (w)  "Securities Act" means the Securities Act of 1933, as amended. 

        (x)  "Stock Award" means any right granted under the Plan, including an Option, a stock bonus and a right to acquire
restricted stock. 

        (y)  "Stock Award Agreement" means a written agreement between the Company and a holder of a Stock Award evidencing the terms
and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

3.    Administration.  

        (a)    Administration by Board.    The Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in subsection 3(c). Any interpretation of the Plan by the Board and any decision by the Board under the Plan shall be final and binding on all persons. 

        (b)    Powers of Board.    The Board shall have the power, subject to, and within the limitations of, the express
provisions of the Plan: 

        (i)    To
determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or
combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive
Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person. 

        (ii)  To
effect, at any time and from time to time, with the consent of any adversely affected Optionholder, (1) the reduction of the exercise price of any outstanding
Option under the Plan, (2) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (A) a new Option under the Plan covering the same or a
different number of shares of common stock, (B) a stock bonus, (C) the right to acquire restricted stock, and/or (D) cash, or (3) any other action that is treated as a
repricing under generally accepted accounting principles. 

        (iii)  To
construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in
the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective. 

        (iv)  To
amend the Plan or a Stock Award as provided in Section 12. 

        (v)  Generally,
to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan. 

        (c)    Delegation to Committee.    The Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe. At the discretion of the Board, the Committee may
consist solely of two or more Non-Employee Directors in accordance with Rule 16b-3. Once appointed, the Committee shall continue to serve until otherwise directed by the
Board. From time to time the Board 

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may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause), and appoint new members in substitution therefor, fill vacancies however caused
and remove all members of the Committee, and thereafter directly administer the Plan. Notwithstanding anything in this Section 3 to the contrary, at any time the Board or the Committee may
delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Options to all Employees and Consultants who are not then subject to
Section 16 of the Exchange Act. 

4.    Shares Subject to the Plan.  

        (a)    Share Reserve.    Subject to the provisions of Section 11 relating to adjustments upon changes in Common
Stock, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate five million (5,000,000) shares of Common Stock. 

        (b)    Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole
or in part, without having been exercised in full, the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan. 

        (c)    Source of Shares.    The shares of Common Stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise. 

5.    Eligibility.  

        (a)    Eligibility for Stock Awards.    Stock Awards may be granted to Employees, Directors and Consultants. 

        (b)    Restrictions on Eligibility.    Notwithstanding the foregoing, the aggregate number of shares issued pursuant
to Stock Awards granted to Officers and Directors cannot exceed fifty percent (50%) of the number of shares reserved for issuance under the Plan as determined at the time of each such issuance to an
Officer or Director, except that there shall be excluded from this calculation shares issued to Officers not previously employed by the Company pursuant to Stock Awards granted as an inducement
essential to such individuals entering into employment contracts with the Company. 

        (c)    Consultants.    

        (i)    A
Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act
("Form S-8") is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both
(i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions. 

        (ii)  Form S-8
generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services
to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii) the services are not in connection with the offer or sale of
securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer's securities. 

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6.    Option Provisions.  

        Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: 

        (a)    Term.    The term of an Option shall be the term determined by the Board, either at the time of grant of the
Option or as the Option may be amended thereafter. 

        (b)    Exercise Price of a Nonstatutory Stock Option.    The exercise price of each Nonstatutory Stock Option shall be
not less than fifty percent (50%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may
be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code. 

        (c)    Consideration.    The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the
Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a deferred payment or other similar arrangement
with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board; provided, however, that at any time
that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. 

        In
the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. 

        (d)    Transferability of a Nonstatutory Stock Option.    A Nonstatutory Stock Option shall be transferable to the
extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 

        (e)    Vesting Generally.    The total number of shares of Common Stock subject to an Option may, but need not, vest
and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(e) are subject to
any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised. 

        (f)    Termination of Continuous Service.    In the event an Optionholder's Continuous Service terminates other than
upon the Optionholder's death or Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination)
but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder's Continuous Service (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of the Option as 

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set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate. 

        (g)    Extension of Termination Date.    An Optionholder's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set
forth in subsection 6(a), or (ii) the expiration of a period of three months after the termination of the Optionholder's Continuous Service during which the exercise of the Option would not be
in violation of such registration requirements. 

        (h)    Disability of Optionholder.    In the event that an Optionholder's Continuous Service terminates as a result of
the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within
such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or
(ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein,
the Option shall terminate. 

        (i)    Death of Optionholder.    In the event (i) an Optionholder's Continuous Service terminates as a result
of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder's death pursuant to subsection 6(d), but only within the
period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the
expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate. 

        (j)    Early Exercise.    The Option may, but need not, include a provision whereby the Optionholder may elect at any
time before the Optionholder's Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.
Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. 

7.    Provisions of Stock Awards other than Options.  

        (a)    Restricted Stock Bonus Awards. Each restricted stock bonus agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. The terms and conditions of restricted stock bonus agreements may change from time to time, and the terms and conditions of separate restricted
stock bonus agreements need not be identical, but each restricted stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions: 

        (i)    Consideration. A restricted stock bonus award may be awarded in consideration for past services actually rendered to the
Company or an Affiliate for its benefit. 

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        (ii)    Vesting. Shares of Common Stock awarded under the restricted stock bonus agreement may, but need not, be subject to a
share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board. 

        (iii)    Termination of Participant's Continuous Service. In the event a Participant's Continuous Service terminates, the
Company may reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the restricted stock bonus agreement. 

        (iv)    Transferability. Rights to acquire shares under the restricted stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the restricted stock bonus agreement, as the Board shall determine in its discretion, so long as Common Stock
awarded under the restricted stock bonus agreement remains subject to the terms of the restricted stock bonus agreement. 

        (b)    Restricted Stock Purchase Awards. Each restricted stock purchase agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate
restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions: 

        (i)    Purchase Price. The purchase price under each restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. The purchase price shall not be less than eighty-five percent (85%) of the Common Stock's Fair Market Value on the date
such award is made or at the time the purchase is consummated. 

        (ii)    Consideration. The purchase price of Common Stock acquired pursuant to the stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in
any other form of legal consideration that may be acceptable to the Board in its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. 

        (iii)    Vesting. Shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to
a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board. 

        (iv)    Termination of Participant's Continuous Service. In the event a Participant's Continuous Service terminates, the Company
may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the restricted stock
purchase agreement. 

        (v)    Transferability. Rights to acquire shares under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the
restricted stock purchase agreement remains subject to the terms of the restricted stock purchase agreement. 

8.    Covenants of the Company.  

        (a)    Availability of Shares.    During the terms of the Stock Awards, the Company shall keep available at all times
the number of shares of Common Stock required to satisfy such Stock Awards. 

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        (b)    Securities Law Compliance.    The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained. 

9.    Use of Proceeds from Stock.  

        Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 

10.    Miscellaneous.  

        (a)    Acceleration of Exercisability and Vesting.    The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time
at which it may first be exercised or the time during which it will vest. 

        (b)    Stockholder Rights.    No Participant shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms. 

        (c)    No Employment or other Service Rights.    Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the
terms of such Consultant's agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of
the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. 

        (d)    Investment Assurances.    The Company may require a Participant, as a condition of exercising or acquiring
Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is
acquiring Common Stock subject to the Stock Award for the Participant's own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply 

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with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 

        (e)    Withholding Obligations.    To the extent provided by the terms of a Stock Award Agreement, the Participant may
satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award; or
(iii) delivering to the Company owned and unencumbered shares of Common Stock. Notwithstanding the foregoing, the Company shall not be authorized to withhold shares of Common Stock at rates in
excess of minimum statutory withholding rates for federal and state tax purposes, including payroll taxes. 

11.    Adjustments upon Changes in Stock.  

        (a)  Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Stock Award,
without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a), and the outstanding Stock Awards will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. Such adjustments shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the
Company.") 

        (b)    Corporate Transactions.    In the event of (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, excluding in each case a capital reorganization in which the sole purpose is to
change the state of incorporation of the Company (individually, a "Corporate Transaction"), then any surviving corporation or acquiring corporation shall assume any Stock Awards outstanding under the
Plan or shall substitute similar stock awards (including an award to acquire the same consideration paid to the shareholders in the Corporate Transaction for those outstanding under the Plan). In the
event any surviving corporation or acquiring corporation refuses to assume such Stock Awards or to substitute similar stock awards for those outstanding under the Plan, then with respect to Stock
Awards held by Participants whose Continuous Service has not terminated, the vesting of such Stock Awards (and, if applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if applicable) at or prior to the Corporate Transaction. With respect to any other Stock Awards outstanding under the Plan,
such Stock Awards shall terminate if not exercised (if applicable) prior to the Corporate Transaction. 

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12.    Amendment of the Plan and Stock Awards.  

        (a)    Amendment of Plan.    The Board at any time, and from time to time, may amend the Plan. 

        (b)    Stockholder Approval.    The Board may, in its sole discretion, submit any amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements Section 422 of the Code, of Rule 16b-3, or any Nasdaq or
securities exchange listing requirements. 

        (c)    Contemplated Amendments.    It is expressly contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder and/or
to bring the Plan and/or Options into compliance therewith. 

        (d)    No Impairment of Rights.    Rights under any Stock Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 

        (e)    Amendment of Stock Awards.    The Board at any time, and from time to time, may amend the terms of any one or
more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the Participant and (ii) the Participant consents in writing. 

13.    Termination or Suspension of the Plan.  

        (a)    Plan Term.    The Board may suspend or terminate the Plan at any time. No Stock Awards may be granted under the
Plan while the Plan is suspended or after it is terminated. 

        (b)    No Impairment of Rights.    Suspension or termination of the Plan shall not impair rights and obligations under
any Stock Award granted while the Plan is in effect except with the written consent of the Participant. 

14.    Effective Date of Plan.  

        The
Plan shall become effective on the date on which it is adopted by the Board. 

15.    Choice of Law.  

        The
law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of laws rules. 

10

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DITECH COMMUNICATIONS CORPORATION 2000 NON-QUALIFIED STOCK PLANExhibit 10.1

SEPARATION
AGREEMENT

THIS SEPARATION AGREEMENT (this “Agreement”), is made
between Ronald Lovelady (“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 Regional Manager, and has served as a
director of Longs California, 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 Longs California’s Senior
Vice President and Regional Manager and as a Longs California director.

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 November 30, 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 deduction set forth in
paragraph 3(d), Employee will be paid four hundred thousand dollars ($400,000)
as follows: one-third (1/3) of said amount, or one hundred thirty three
thousand, three hundred thirty three and thirty three cents ($133,333.33) on or
about January 31, 2003; one-fourth (1/4) of said amount, or one hundred
thousand dollars ($100,000.00) on or about October 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 about January 31, 2004.

(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 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 three thousand
eight hundred ninety-five dollars and seventy eight cents ($3,895.78) 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 Acura MDX and transfer ownership to Employee.  However, said value, which was  $35, 273.00 as of October 7, 2002, will be
deducted from the 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.

(d)           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 17, 1998.

Under the terms of the 1995 Plan, Employee will receive 1629 shares of
the restricted stock granted to him, pro-rated to the effective date of
retirement.

Employee has 39,000 stock options as of his retirement.  Employee has three years from his normal
retirement date to exercise these stock options awarded to him.

(e)           Ownership of the laptop computer 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.

(f)            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.

(g)           Executive outplacement services with
Lee Hecht Harrison Inc. of Walnut Creek, California.  Lee Hecht Harrison will provide the services under its Executive
Outplacement Plan, a 12-month program.

(h)           Longs will recommend that Employee
receive a Longs “Gold Card” for his service to the Company.

(i)            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 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
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.             Purchase
or  Sale of Stock.  Employee
will abide by Longs insider trading policy for a period of 180 days after his
resignation date.   Blackout periods
within that time frame are 10/3/02 to 11/23/02 and 1/2/03 to 3/1/03.

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)           Subject to required disclosure under
the rules and regulations of the 1933 Securities Act and the 1934 Exchange Act
(10K-10Q-S8 filings for example)and 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;

 

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(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.

(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.             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.

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.

 

4

 

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 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.

 

5

 

(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 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.

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.  Employee hereby designates Janice Lovelady
as his beneficiary under this Agreement.

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.

 

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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 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 the fact that they agree 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:

  	
  10-23-02

  	
   

  	
  /s/ Ronald Lovelady

  
	
   

  	
   

  	
   

  	
   Ronald
  Lovelady

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  10-23-02

  	
   

  	
  Longs Drug Stores
  Corporation   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Harold R. Somerset

  
	
   

  	
   

  	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  10-18-02

  	
   

  	
  Longs Drug Stores
  California, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Linda Watt

  
	
   

  	
   

  	
   

  	
   

  	
  Authorized Signatory

  

 

 

 

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