<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended October 24, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period from . . . . . . . . to . . . . . . . .
Commission file number 1-8978
LONGS DRUG STORES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland 68-0048627
------------------------------ ------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
141 North Civic Drive
Walnut Creek, California 94596
------------------------------ ------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (510) 937-1170
- -------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
There were 19,507,846 shares of common stock outstanding as of November 25,
1996.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
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STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the For the Three
Quarters Ended Quarters Ended
OCTOBER 24 October 26 OCTOBER 24 October 26
1996 1995 1996 1995
---------- ---------- ---------- -----------
------------(Thousands Except Per Share)-------------
<S> <C> <C> <C> <C>
SALES $666,909 $628,900 $2,013,820 $1,915,060
COSTS AND EXPENSES:
Cost of merchandise sold 490,451 462,257 1,474,812 1,408,173
Operating and administrative 160,884 151,928 477,574 449,282
-------- -------- ---------- ----------
INCOME BEFORE TAXES ON INCOME 15,574 14,715 61,434 57,605
TAXES ON INCOME 6,200 5,900 24,500 23,000
-------- -------- ---------- ----------
NET INCOME $9,374 $8,815 $36,934 $34,605
-------- -------- ---------- ----------
-------- -------- ---------- ----------
PER COMMON SHARE:
NET INCOME $.48 $.44 $1.87 $1.71
-------- -------- ---------- ----------
-------- -------- ---------- ----------
DIVIDENDS $.28 $.28 $.84 $.84
-------- -------- ---------- ----------
-------- -------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 19,535 19,964 19,705 20,288
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 24 October 26 January 25
1996 1995 1996
---------- ---------- ----------
----------------(Unaudited)-------------
----------------(Thousands)-------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 31,885 $ 25,552 $ 49,314
Pharmacy and other receivables 49,169 46,407 54,388
Merchandise inventories 358,550 329,267 316,497
Deferred income taxes 24,105 17,422 23,640
Other 1,878 2,042 2,687
------- ------- -------
Total current assets 465,587 420,690 446,526
------- ------- -------
PROPERTY:
Land 78,761 78,751 79,998
Buildings and leasehold improvements 324,173 312,894 313,766
Equipment and fixtures 265,583 246,251 247,831
Beverage licenses 7,226 7,109 7,163
------- ------- -------
Total property--at cost 675,743 645,005 648,758
Less accumulated depreciation 277,606 247,738 253,461
------- ------- -------
Property--net 398,137 397,267 395,297
------- ------- -------
OTHER NON-CURRENT ASSETS 11,404 12,008 11,734
------- ------- -------
TOTAL $875,128 $829,965 $853,557
------- ------- -------
------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $166,630 $159,685 $148,428
Short-term borrowings 9,900 -- --
Employee compensation and benefits 60,244 59,787 59,843
Taxes payable 26,557 24,650 37,808
Current portion of guarantee 3,054 2,811 2,174
Other 41,005 23,841 39,094
------- ------- -------
Total current liabilities 307,390 270,774 287,347
------- ------- -------
GUARANTEE OF PROFIT SHARING PLAN DEBT 5,996 9,050 8,311
------- ------- -------
DEFERRED INCOME TAXES 33,786 35,004 35,132
------- ------- -------
STOCKHOLDERS' EQUITY:
Common stock (19,535,000, 19,936,000,
and 19,816,000 shares outstanding) 9,767 9,968 9,908
Additional capital 110,246 109,156 107,608
Common stock contribution to
Profit Sharing Plan -- 4,550
Guarantee of Profit Sharing Plan
debt (9,050) (11,861) (10,485)
Retained earnings 416,993 407,874 411,186
--------- --------- ---------
Total stockholders' equity 527,956 515,137 522,767
--------- --------- ---------
TOTAL $875,128 $829,965 $853,557
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
For the Three Quarters Ended
OCTOBER 24 October 26
1996 1995
---------- -----------
---------(Thousands)-------
OPERATING ACTIVITIES:
Receipts from customers $2,018,664 $1,921,500
Payments for merchandise (1,498,664) (1,431,648)
Payments for operating,administrative,
and occupancy expenses (441,710) (411,533)
Income tax payments (37,071) (26,222)
---------- ----------
Net cash provided by operating
activities 41,219 52,097
---------- ----------
INVESTING ACTIVITIES:
Payments for property additions and
other assets (38,844) (39,461)
Receipts from property dispositions 4,273 1,475
---------- ----------
Net cash used in investing
activities (34,571) (37,986)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from short-term borrowings 9,900 --
Repurchase of common stock (19,393) (30,949)
Dividend payments (16,584) (17,128)
Proceeds from sale of common stock
to Profit Sharing Plan 2,000 2,000
---------- ----------
Net cash used in financing
activities (24,077) (46,077)
---------- ----------
DECREASE IN CASH AND EQUIVALENTS (17,429) (31,966)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 49,314 57,518
---------- ----------
CASH AND EQUIVALENTS AT END OF PERIOD $31,885 $25,552
---------- ----------
---------- ----------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $36,934 $34,605
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 32,062 30,005
Deferred income taxes (1,811) 287
Restricted stock awards 1,222 1,093
Tax benefits credited to stock-
holders'equity 70 98
Changes in assets and liabilities:
Pharmacy and other receivables 5,219 7,497
Merchandise inventories (42,053) (33,921)
Other current assets 809 692
Current liabilities 8,767 11,741
---------- ----------
Net cash provided by
operating activities $41,219 $52,097
---------- ----------
---------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
For the Year Ended January 25, 1996 and Three Quarters Ended October 24, 1996
<TABLE>
<CAPTION>
PROFIT GUARANTEE
COMMON STOCK SHARING OF PROFIT TOTAL
------------------ ADDITIONAL PLAN SHARING RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL CONTRIBUTIONS PLAN DEBT EARNINGS EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
(Thousands)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 26, 1995 20,560 $10,280 $107,216 $5,515 ($13,181) $414,268 $524,098
- --------------------------------------------------------------------------------------------------------------------------------
Net income 46,228 46,228
Dividends ($1.12 per share) (22,697) (22,697)
Profit Sharing Plan:
Issuance of stock for FY95 contributions 176 88 5,427 (5,515) 0
Stock portion of FY96 contribution 4,550 4,550
Sale of stock to plan 59 29 1,988 2,017
Purchase of stock from plan (114) (57) (2,644) (2,701)
Reduction of plan debt 2,696 2,696
Restricted stock awards 30 15 1,463 1,478
Tax benefits related to employee stock plans 127 127
Repurchase of common stock (895) (447) (5,842) (26,740) (33,029)
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BALANCE AT JANUARY 25, 1996 19,816 9,908 107,608 4,550 (10,485) 411,186 522,767
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UNAUDITED:
Net income 36,934 36,934
Dividends ($.84 per share) (16,584) (16,584)
Profit Sharing Plan:
Issuance of stock for FY96 contributions 91 45 4,010 (4,055) 0
Contributed in cash (495) (495)
Sale of stock to plan 45 22 1,978 2,000
Purchase of stock from plan (63) (31) (2,617) (2,648)
Reduction of plan debt 1,435 1,435
Restricted stock awards 36 18 1,204 1,222
Tax benefits related to employee stock plans 70 70
Repurchase of common stock (390) (195) (1,937) (14,613) (16,745)
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Balance at October 24, 1996 19,535 $9,767 $110,246 $ 0 ($9,050) $416,993 $527,956
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include Longs Drug Stores Corporation
(Company) and Longs Drug Stores California, Inc., its wholly-owned
subsidiary. All intercompany accounts and transactions have been
eliminated. The statements have been prepared on a basis consistent with
the accounting policies described in the Annual Report of the Company
previously filed with the Commission on Form 10-K for the year ended
January 25, 1996, and reflect all adjustments and eliminations which are,
in management's opinion, necessary for a fair statement of the results for
the periods. The financial statements for the periods ended October 24,
1996 and October 26, 1995 are unaudited. The Consolidated Balance Sheet at
January 25, 1996, and Statement of Stockholders' Equity for the year then
ended, presented herein, have been prepared from the audited financial
statements of the Company.
2. Certain reclassifications have been made to prior year financial statements
in order to conform to current financial statement presentation.
3. The financial statements have been prepared using the LIFO method of
accounting for inventories. The excess of specific cost inventory over
LIFO valuation was $132.5 million at October 24, 1996, $128.6 million at
October 26, 1995, and $129.8 million at January 25, 1996. A final
valuation of inventory under the LIFO method can be made only after
year-end based on ending inventory levels and inflation rates for the year.
Interim LIFO calculations are based on management's estimates of year-end
inventory levels and inflation rates for the year.
4. The Company has an unsecured revolving line of credit of $30.0 million at
prevailing interest rates. The line of credit expires June 30, 1997.
There was $20.1 million available for use at October 24, 1996.
5. During the first three quarters of fiscal year 1997, the Company
repurchased 453,000 shares of its common stock at a cost of $19.4 million
in accordance with a stock repurchase plan adopted by the Board of
Directors in November 1994. Included is the repurchase of 63,000 shares
from the Profit Sharing Plan at market values totaling $2.6 million. The
Company sold 45,000 shares of common stock to the Profit Sharing Plan
during second quarter at market values totaling $2.0 million.
6. The legal settlement, as described in the fiscal year 1996 Annual Report on
page 18, remains subject to the completion of a definitive settlement
agreement and court approval, in respect of which plaintiffs have agreed to
give their unconditional support. The Company has reflected the obligation
as a current liability.
7. In August 1996, the Board of Directors adopted a Shareholder Rights Plan in
which preferred stock purchase rights attach to each common share
outstanding as of the close of business on September 16, 1996. The plan
replaces an existing plan adopted in 1986 that expired September 16, 1996.
8. On November 19, 1996, the Board of Directors declared a two-for-one stock
split. The stock split will be in the form of a stock dividend to
shareholders of record December 3, 1996, payable January 10, 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
Third quarter sales increased 6% to $667 million. Same store sales grew 5.2%
for the quarter and 4.3% year-to-date. Contributing to the increase in same
store sales were strong increases in pharmacy sales and sales in stores less
than three years old.
Pharmacy sales increased 10.1% for the quarter, almost half the result of
increases in prescription volume. Year-to-date pharmacy sales increased 9.1%.
Pharmacy represented 33.7% of total sales in third quarter, up from 32.7% in the
prior year. Pharmacy sales reimbursed through third party arrangements
represented 79.4% of total pharmacy sales in third quarter.
GROSS MARGINS
Gross margin (including LIFO) was 26.5% for the quarter consistent with a year
ago. Year-to-date gross margin was 26.8% compared to 26.5% in the prior year.
Pharmacy margins continue to decline as third party sales become a larger
portion of pharmacy sales. Pressure on pharmacy margins is consistent within
the drug chain industry. In order to limit the negative impact of declines in
pharmacy margins, the Company has concentrated efforts to optimize merchandise
acquisition opportunities within the pharmacy and continues to emphasize minimum
profitability standards when renewing third party contracts.
The Company uses the Last-In First-Out (LIFO) method of inventory valuation.
The internal rate of inflation was zero in third quarter resulting in no LIFO
provision. Year-to-date the LIFO provision was $2.7 million compared to $3.6
million last year.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses as a percent of sales were 24.1% and
remained essentially flat for the quarter compared with the prior year's
quarter. Year-to-date expenses as a percent of sales rose 0.3% to 23.7%.
These changes were in line with our expectations.
OPERATING/NET INCOME
Operating income for the quarter was up 5.8%. Net income for the quarter
increased 6.3%, slightly more than the increases in sales and operating income.
Net income for the three quarters rose 6.7%, also ahead of the 5.2% increase in
sales. Earnings per share increased 8.7% to $0.48 in third quarter and 9.9% to
$1.87 year-to-date. Earnings per share increased at a greater rate than net
income due to share repurchases.
LIQUIDITY AND CAPITAL RESOURCES
CASH POSITION
Cash provided by operating activities decreased compared to prior year primarily
due to inventory building for the holiday season and the timing of income tax
payments.
Capital expenditures for the three quarters were comparable to last year at $39
million. The net number of stores in operation increased from 323 to 333 since
third quarter last year. The Company expects to open six stores in the fourth
quarter, including three stores as part of our initial entry into the Las Vegas
area. Longs has agreed to acquire the three stores from existing operators and
will operate them under the Rainbow Pharmacy name until the fall of next year.
Several other new stores and remodels are currently under construction, and
other new stores are in various stages of planning. A $12.7 million
Company-owned warehouse is expected to be completed and paid for in the fourth
quarter to replace an
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existing leased facility. Capital expenditures will increase this year
primarily due to the construction of the new warehouse.
Stock repurchases were $19.4 million year-to-date compared to $30.9 million last
year. Stock repurchases are at the discretion of the Board of Directors under
an authorization approved in November 1994 and are impacted by stock price and
available cash flow.
Cash and cash equivalents increased $6.3 million to $31.9 million compared to
third quarter last year. At quarter end, the Company borrowed $9.9 million on a
short-term line of credit to meet working capital needs. Included in cash was
approximately $14 million reserved for the payment for the settlement of the
lawsuit expected to be completed in the fourth quarter.
SEASONALITY AND 53-WEEK YEAR
The retail drug store business is seasonal, peaking in the fourth quarter due to
the Thanksgiving and Christmas holidays and the cold and flu season. The
Company's fiscal year ends the last Thursday in January. As a result, the
current fiscal year and the fourth quarter will have one additional week when
compared to the prior year. Sales will benefit as a result, offset somewhat by
fewer holiday shopping days between the Thanksgiving and Christmas holidays.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements regarding the
Company's expected performance for the future periods, and actual results
for such periods may materially differ. Such forward-looking statements
involve risks and uncertainties, including risks of changing market
conditions in the overall economy and the retail industry, consumer
demand, the opening of new stores, actual advertising expenditures by the
company, the success of the Company's advertising and merchandising
strategy and other factors detailed from time to time in the Company's
annual and other reports filed with the Securities and Exchange
Commission.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Copies of the renewal of the Agreements for Termination
Benefits dated August 22, 1996, are incorporated herein as
Exhibit 1, as executed by the Chairman, CEO and President;
Exhibit 2, as executed by the Senior Vice Presidents, Vice
Presidents, District Managers and Treasurer; Exhibit 3, as
executed by Select Key Executives and Store Managers as
previously filed with the Commission on April 28, 1986.
(b) Reports on Form 8-K
(10) The 1996 Shareholder Rights Agreement of Longs Drug Stores
Corporation dated August 20, 1996, was filed with the
Commission on September 16, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LONGS DRUG STORES CORPORATION
----------------------------------------
(REGISTRANT)
Date December 6, 1996 /s/ G. L. White
------------------ ----------------------------------------
G. L. White
Vice President--Controller
(PRINCIPAL ACCOUNTING OFFICER)
/s/ R. A. Plomgren
----------------------------------------
R. A. Plomgren
Senior Vice President--Development
(CHIEF FINANCIAL OFFICER)
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<PAGE>
AGREEMENT FOR TERMINATION BENEFITS
IN THE EVENT OF A CHANGE IN CORPORATE CONTROL
[For the Chairman and CEO and the President]
THIS AGREEMENT, made this ____ day of _________________, 19__, by and
between _____________________ (the "Executive") and LONGS DRUG STORES
CALIFORNIA, INC., a California corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Executive is ________________________ of the Corporation;
WHEREAS, the Corporation considers it essential to the best interests of
its shareholders to take steps to retain key personnel such as the Executive and
recognizes particularly that uncertainty might arise among personnel in the
context of any possible or actual Change in Control, as hereinafter defined,
which could result in the departure or distraction of key personnel to the
detriment of the Corporation and its shareholders; and
WHEREAS, the Corporation has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
personnel of the Corporation including the Executive to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from any possible or actual Change in Control.
NOW, THEREFORE, in consideration of the covenants, terms, and conditions
contained herein, the Corporation and the Executive agree:
I. DEFINITIONS.
A. "Administrative Committee," as used in this Agreement, shall mean
the Board of Directors of Longs Drug Stores Corporation ("Parent Corporation")
or a committee appointed by such Board of Directors to administer this
Agreement.
B. "Change in Control," as used herein, shall mean (i) any change in
the ownership or effective control of the Parent Corporation or the Corporation,
or (ii) any change in the ownership of a substantial portion of the assets of
the Parent Corporation or the Corporation; all within the meaning of Section
280G of the Code, as hereinafter defined, or any successor provision thereto,
regulations (including temporary and proposed regulations) promulgated
thereunder, and judicial interpretations of Section 280G and the regulations.
C. "Code," as defined herein, shall mean the Internal Revenue Code
of 1986, as amended to date.
D. "Severance of Employment," as used herein, shall mean the
termination of the Executive's employment with the Corporation either by
discharge by the Corporation or by
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resignation of the Executive on or within two (2) years after the date of a
Change in Control. Despite the foregoing, either of the following will
constitute a Severance of Employment:
1. The termination of the Executive's employment by reason of
death.
2. The discharge of the Executive by the Corporation for gross
and willful misconduct relating to the performance by the Executive of the
Executive's duties at the Corporation, provided that if there is at least one
Change in Control before such discharge, such misconduct occurs or is discovered
at any time after the date of the last Change in Control before such discharge.
II. ADMINISTRATION.
The Administrative Committee shall administer this Agreement and shall have
the power and the duty to make all determinations necessary for the
implementation of this Agreement, including by way of example and not as a
limitation, the occurrence of a Change in Control and the date of such change.
Any such determination (i) shall be made on the basis of all information known
to the persons making the determination, after reasonable inquiry, (ii) may be
made prospectively and subject to one or more contingent events, and (iii) will
be binding on the Corporation but not the Executive. Any disagreement between
the Corporation and the Executive concerning any such determination or the
administration, implementation or interpretation of this Agreement shall be
subject to the claims procedure as provided for in Article VIII.
III. OBLIGATIONS OF THE CORPORATION.
A. Within fifteen (15) days after a Severance of Employment or at
such earlier time as may be required by law, the Corporation shall pay to the
Executive:
1. The full amount of any earned but unpaid base salary through
the date of the Severance of Employment, plus a cash payment for all unused
vacation time which the Executive has accrued as of the Severance of Employment.
2. If and only if the Corporation has made a final and good
faith determination prior to the Severance of Employment as to the amount, if
any, of Executive's bonus for any quarter prior to the quarter during which the
Severance of Employment occurs (the "Severance Quarter") but such bonus has not
been paid prior to the Severance of Employment, a bonus equal to the amount, if
any, so determined.
3. If and only if the Corporation has not made a final and good
faith determination prior to the Severance of Employment as to Executive's
bonus, if any, for any quarter prior to the Severance Quarter, a bonus equal to
the bonus, if any, that the Executive would have received in the absence of a
Severance of Employment, as determined by the Corporation in good faith.
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B. Within thirty (30) days after a Severance of Employment, the
Corporation shall pay to the Executive an amount equal to three (3) times the
average annual compensation (annualized for short or incomplete years) earned by
the Executive from the Corporation which was includible in the Executive's gross
income for federal income tax purposes during the five-taxable-year period (or
period of actual service, if less than five years) immediately preceding the
taxable year of the Change in Control, less one dollar. The Executive shall be
eligible to make contributions to the Corporation's Section 401(k) plan from
amounts payable to the Executive under Article III.A and this paragraph.
C. Within forty-five (45) days after the end of the Severance
Quarter, the Corporation shall pay to the Executive a bonus for the Severance
Quarter in an amount equal to the bonus, if any, that the Executive would have
received in the absence of a Severance of Employment, as determined by the
Corporation in good faith. Such bonus shall be prorated for the portion of the
Severance Quarter prior to the Severance of Employment.
D. Within thirty (30) days after a Severance of Employment, the
Corporation shall establish an irrevocable trust and contribute to it an amount
equal to the Executive's deferred compensation account under the Deferred
Compensation Plan of 1995 and/or under other similar or successor plans of the
Corporation (the "Plan"). The trust shall conform to the model "rabbi trust"
agreement provided by the Internal Revenue Service in Revenue Procedure 92-64,
as revised from time to time, and shall be structured as an unfunded
arrangement. The trustee of the trust shall be Boston Safe Deposit and Trust
Company, or its successor in interest, or if Boston Safe Deposit and Trust
Company is unable or unwilling to serve for any reason, such other financial
institution selected mutually by the Corporation and the Executive.
E. In the event of the Executive's death after Severance of
Employment and prior to payment to the Executive of amounts due under this
Agreement, such payment shall be made to the Executive's surviving spouse, issue
by right of representation, or estate, in that order.
F. The Corporation shall deduct from any payments to Executive under
this Agreement amounts that the Corporation is required to withhold and pay
either to government agencies on behalf of the Executive or under court order to
any person.
IV. TERMINATION.
This Agreement shall terminate and be of no further force or effect upon
the discharge or resignation of the Executive for any reason at any time prior
to the date of a Change in Control.
V. TERM OF AGREEMENT.
A. This Agreement shall expire at the end of three (3) years from
the date hereof; provided, however, that at each annual anniversary date of this
Agreement, the expiration date of the Agreement shall automatically be extended
for one (1) additional year unless, in the thirty (30) day period immediately
preceding any anniversary date hereof, either the Corporation or the Executive,
by written notice to the other, rejects the automatic extension of such
expiration date.
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B. Notwithstanding the expiration provisions set out in Article V.A,
this Agreement shall not expire for a period of two (2) years after the date of
any Change in Control which occurs before this Agreement terminates or expires,
and if a Severance of Employment occurs before this Agreement terminates or
expires, this Agreement will not expire until the Corporation has complied in
all respects with Article III.
VI. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and the successors and assigns of the Corporation.
VII. NON-ASSIGNMENT BY THE EXECUTIVE.
The Executive shall not assign, hypothecate, or transfer any of the rights
herein to any person. Any attempt to assign, hypothecate or transfer the rights
hereunder shall immediately terminate all of the Executive's rights under this
Agreement.
VIII. CLAIMS PROCEDURE.
A. In the event of a disagreement between the Corporation and the
Executive on any matter arising under this Agreement, the Executive, in claiming
a benefit or requesting an interpretation or ruling under this Agreement, shall
present the claim or request in writing to the Administrative Committee, which
shall respond in writing as soon as practicable.
B. If a claim or request is denied, the Administrative Committee
shall prepare and deliver to the Executive a written notice of denial which
shall state (1) the reason for denial, with specific reference to the provisions
of this Agreement on which denial is based; (ii) a description of any additional
material or information required to prevail with the claim or request and an
explanation of why it is necessary; and (iii) an explanation of the Agreement's
claim review procedure.
C. If a claim or request is denied or the Executive has not received
a response within thirty (30) days, the Executive may request a review by notice
given in writing to the Administrative Committee. Such request must be made
within sixty (60) days after receipt by the Executive of the written notice of
denial, or in the event the Executive has not received a response, within ninety
(90) days after receipt by the Administrative Committee of the Executive's claim
or request. The claim or request shall be reviewed by the Administrative
Committee which may, but shall not be required to, grant the Executive a
hearing. On review, the Executive may have representation, examine pertinent
documents, and submit issues and comments in writing.
D. The decision on review shall normally be made within thirty (30)
days after the Administrative Committee's receipt of the Executive's request for
a review. If an extension of time is required for a hearing or other special
circumstances, the Executive shall be notified and the time limit shall be sixty
(60) days. The decision shall be in writing and shall state the reasons and
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the relevant provisions of the Agreement. Unless the Executive elects to pursue
judicial review of the Administrative Committee's decision, all decisions on
review shall be final and bind all parties concerned.
IX. ATTORNEYS' FEES.
In the event that any suit, action or proceeding (including any appeal
therefrom, but excluding any and all proceedings before the Administrative
Committee) is brought by the Executive to review any decision of the
Administrative Committee pertaining to this Agreement or to enforce any right
hereunder, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees and other reasonable costs incurred in
connection therewith. During the pendency of any such suit, action or
proceeding, the Corporation shall promptly pay all reasonable attorneys' fees
and reasonable costs incurred by the Executive with respect to such suit, action
or proceeding, subject to the Executive's obligation hereunder to repay all such
sums (as well as the Corporation's reasonable attorneys' fees and reasonable
costs) if the court finds that the Corporation is the prevailing party in such
suit, action or proceeding.
X. PARTIAL INVALIDITY.
Invalidity of any part or provision of this Agreement shall not affect the
enforceability of any other part or provision of this Agreement.
XI. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing herein shall confer, nor shall it be construed to confer, on the
Executive any right to, guarantee of, or contract for a continued employment by
the Corporation, or in any way limit the right of the Corporation to terminate
the employment of the Executive.
XII. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, as applied to contracts executed and performed
entirely in California.
XIII. NOTICES.
Any notices given hereunder must be in writing and may be delivered in
person or by certified or registered mail, return receipt requested, postage
prepaid. Notices to Corporation should be delivered to Longs Drug Stores
California, Inc., 141 North Civic Drive, Walnut Creek, CA 94596, Attn: Corporate
Secretary, or to such other address as Corporation from time to time furnishes
to the Executive in a notice. Notices to Executive should be delivered to the
address shown beneath Executive's signature below, or to such other address as
the Executive from time to time furnishes to the Corporation in a notice.
-5-
<PAGE>
XIV. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between the parties hereto.
This Agreement fully supersedes any and all prior agreements or understandings
pertaining to similar benefits.
XV. AMENDMENTS.
This Agreement may not be modified except by a writing signed by both
parties. No such writing will be binding on the Corporation unless it is signed
(a) by the signatories of this Agreement, (b) by (i) the CEO, President, or any
Vice-President of the Corporation and (ii) the Secretary or any Assistant
Secretary of the Corporation, or (c) by another person or persons whose
authority is affirmed by (i) the CEO, President, or any Vice-President of the
Corporation and (ii) the Secretary or any Assistant Secretary of the
Corporation.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the day and year first above written.
EXECUTIVE LONGS DRUG STORES CALIFORNIA, INC.
By:
- ----------------------------------- -----------------------------------
(signature) R. M. Long
Chief Executive Officer*
(One of Two Required and
Authorized Signatures)
- -----------------------------------
Street Address
- -----------------------------------
City, State and Zip Code And By:
-------------------------------
O.D. Jones
Secretary
- -----------------
* Stephen D. Roath will sign
Robert M. Long's Agreement
on behalf of Longs.
-6-
<PAGE>
AGREEMENT FOR TERMINATION BENEFITS
IN THE EVENT OF A CHANGE IN CORPORATE CONTROL
[For Senior Vice Presidents, Vice Presidents, District Managers
and the Treasurer]
THIS AGREEMENT, made this ____ day of _________________, 19__, by and
between _____________________ (the "Executive") and LONGS DRUG STORES
CALIFORNIA, INC., a California corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Executive is ________________________ of the Corporation;
WHEREAS, the Corporation considers it essential to the best interests of
its shareholders to take steps to retain key personnel such as the Executive and
recognizes particularly that uncertainty might arise among personnel in the
context of any possible or actual Change in Control, as hereinafter defined,
which could result in the departure or distraction of key personnel to the
detriment of the Corporation and its shareholders; and
WHEREAS, the Corporation has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
personnel of the Corporation including the Executive to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from any possible or actual Change in Control.
NOW, THEREFORE, in consideration of the covenants, terms, and conditions
contained herein, the Corporation and the Executive agree:
I. DEFINITIONS.
A. "Administrative Committee," as used in this Agreement, shall mean
the Board of Directors of Longs Drug Stores Corporation ("Parent Corporation")
or a committee appointed by such Board of Directors to administer this
Agreement.
B. "Change in Control," as used herein, shall mean (i) any change in
the ownership or effective control of the Parent Corporation or the Corporation,
or (ii) any change in the ownership of a substantial portion of the assets of
the Parent Corporation or the Corporation; all within the meaning of Section
280G of the Code, as hereinafter defined, or any successor provision thereto,
regulations (including temporary and proposed regulations) promulgated
thereunder, and judicial interpretations of Section 280G and the regulations.
C. "Code," as defined herein, shall mean the Internal Revenue Code
of 1986, as amended to date.
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<PAGE>
D. "Severance of Employment," as used herein, shall mean the
termination of the Executive's employment with the Corporation (i) by discharge
by the Corporation on or within two (2) years after the date of a Change in
Control, (ii) by resignation of the Executive on or after, but less than one
hundred eighty (180) days after, the date of a change in Control, provided that
such resignation was preceded by a material and detrimental alteration in the
Executive's position, responsibilities, compensation or benefits from those in
effect immediately prior to the Change in Control or (iii) by resignation of the
Executive at any time within the period commencing one hundred eighty (180) days
after the date of a Change in Control and ending two (2) years after the date of
such Change in Control. Despite the foregoing, neither of the following will
constitute a Severance of Employment:
1. The termination of the Executive's employment by reason of
death.
2. The discharge of the Executive by the Corporation for gross
and willful misconduct relating to the performance by the Executive of the
Executive's duties at the Corporation, provided that if there is at least one
Change in Control before such discharge, such misconduct occurs or is discovered
at any time after the date of the last Change in Control before such discharge.
II. ADMINISTRATION.
The Administrative Committee shall administer this Agreement and shall have
the power and the duty to make all determinations necessary for the
implementation of this Agreement, including by way of example and not as a
limitation, the occurrence of a Change in Control and the date of such change.
Any such determination (i) shall be made on the basis of all information known
to the persons making the determination, after reasonable inquiry, (ii) may be
made prospectively and subject to one or more contingent events, and (iii) will
be binding on the Corporation but not the Executive. Any disagreement between
the Corporation and the Executive concerning any such determination or the
administration, implementation or interpretation of this Agreement shall be
subject to the claims procedure as provided for in Article VIII.
III. OBLIGATIONS OF THE CORPORATION.
A. Within fifteen (15) days after a Severance of Employment or at
such earlier time as may be required by law, the Corporation shall pay to the
Executive:
1. The full amount of any earned but unpaid base salary through
the date of the Severance of Employment, plus a cash payment for all unused
vacation time which the Executive has accrued as of the Severance of Employment.
2. If and only if the Corporation has made a final and good
faith determination prior to the Severance of Employment as to the amount, if
any, of Executive's bonus for any quarter prior to the quarter during which the
Severance of Employment occurs (the "Severance Quarter") but such bonus has not
been paid prior to the Severance of Employment, a bonus equal to the amount, if
any, so determined.
-2-
<PAGE>
3. If and only if the Corporation has not made a final and good
faith determination prior to the Severance of Employment as to Executive's
bonus, if any, for any quarter prior to the Severance Quarter, a bonus equal to
the bonus, if any, that the Executive would have received in the absence of a
Severance of Employment, as determined by the Corporation in good faith.
B. Within thirty (30) days after a Severance of Employment, the
Corporation shall pay to the Executive an amount equal to three (3) times the
average annual compensation (annualized for short or incomplete years) earned by
the Executive from the Corporation which was includible in the Executive's gross
income for federal income tax purposes during the five-taxable-year period (or
period of actual service, if less than five years) immediately preceding the
taxable year of the Change in Control, less one dollar. The Executive shall be
eligible to make contributions to the Corporation's Section 401(k) plan from
amounts payable to the Executive under Article III.A and this paragraph.
C. Within forty-five (45) days after the end of the Severance
Quarter, the Corporation shall pay to the Executive a bonus for the Severance
Quarter in an amount equal to the bonus, if any, that the Executive would have
received in the absence of a Severance of Employment, as determined by the
Corporation in good faith. Such bonus shall be prorated for the portion of the
Severance Quarter prior to the Severance of Employment.
D. Within thirty (30) days after a Severance of Employment, the
Corporation shall establish an irrevocable trust and contribute to it an amount
equal to the Executive's deferred compensation account under the Deferred
Compensation Plan of 1995 and/or under other similar or successor plans of the
Corporation (the "Plan"). The trust shall conform to the model "rabbi trust"
agreement provided by the Internal Revenue Service in Revenue Procedure 92-64,
as revised from time to time, and shall be structured as an unfunded
arrangement. The trustee of the trust shall be Boston Safe Deposit and Trust
Company, or its successor in interest, or if Boston Safe Deposit and Trust
Company is unable or unwilling to serve for any reason, such other financial
institution selected mutually by the Corporation and the Executive.
E. In the event of the Executive's death after Severance of
Employment and prior to payment to the Executive of amounts due under this
Agreement, such payment shall be made to the Executive's surviving spouse, issue
by right of representation, or estate, in that order.
F. The Corporation shall deduct from any payments to Executive under
this Agreement amounts that the Corporation is required to withhold and pay
either to government agencies on behalf of the Executive or under court order to
any person.
IV. TERMINATION.
This Agreement shall terminate and be of no further force or effect upon
the discharge or resignation of the Executive for any reason at any time prior
to the date of a Change in Control.
-3-
<PAGE>
V. TERM OF AGREEMENT.
A. This Agreement shall expire at the end of three (3) years from
the date hereof; provided, however, that at each annual anniversary date of this
Agreement, the expiration date of the Agreement shall automatically be extended
for one (1) additional year unless, in the thirty (30) day period immediately
preceding any anniversary date hereof, either the Corporation or the Executive,
by written notice to the other, rejects the automatic extension of such
expiration date.
B. Notwithstanding the expiration provisions set out in Article V.A,
this Agreement shall not expire for a period of two (2) years after the date of
any Change in Control which occurs before this Agreement terminates or expires,
and if a Severance of Employment occurs before this Agreement terminates or
expires, this Agreement will not expire until the Corporation has complied in
all respects with Article III.
VI. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and the successors and assigns of the Corporation.
VII. NON-ASSIGNMENT BY THE EXECUTIVE.
The Executive shall not assign, hypothecate, or transfer any of the rights
herein to any person. Any attempt to assign, hypothecate or transfer the rights
hereunder shall immediately terminate all of the Executive's rights under this
Agreement.
VIII. CLAIMS PROCEDURE.
A. In the event of a disagreement between the Corporation and the
Executive on any matter arising under this Agreement, the Executive, in claiming
a benefit or requesting an interpretation or ruling under this Agreement, shall
present the claim or request in writing to the Administrative Committee, which
shall respond in writing as soon as practicable.
B. If a claim or request is denied, the Administrative Committee
shall prepare and deliver to the Executive a written notice of denial which
shall state (1) the reason for denial, with specific reference to the provisions
of this Agreement on which denial is based; (ii) a description of any additional
material or information required to prevail with the claim or request and an
explanation of why it is necessary; and (iii) an explanation of the Agreement's
claim review procedure.
C. If a claim or request is denied or the Executive has not received
a response within thirty (30) days, the Executive may request a review by notice
given in writing to the Administrative Committee. Such request must be made
within sixty (60) days after receipt by the Executive of the written notice of
denial, or in the event the Executive has not received a response, within ninety
(90) days after receipt by the Administrative Committee of the Executive's claim
or request. The claim or request shall be reviewed by the Administrative
Committee which may, but
-4-
<PAGE>
shall not be required to, grant the Executive a hearing. On review, the
Executive may have representation, examine pertinent documents, and submit
issues and comments in writing.
D. The decision on review shall normally be made within thirty (30)
days after the Administrative Committee's receipt of the Executive's request for
a review. If an extension of time is required for a hearing or other special
circumstances, the Executive shall be notified and the time limit shall be sixty
(60) days. The decision shall be in writing and shall state the reasons and the
relevant provisions of the Agreement. Unless the Executive elects to pursue
judicial review of the Administrative Committee's decision, all decisions on
review shall be final and bind all parties concerned.
IX. ATTORNEYS' FEES.
In the event that any suit, action or proceeding (including any appeal
therefrom, but excluding any and all proceedings before the Administrative
Committee) is brought by the Executive to review any decision of the
Administrative Committee pertaining to this Agreement or to enforce any right
hereunder, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees and other reasonable costs incurred in
connection therewith. During the pendency of any such suit, action or
proceeding, the Corporation shall promptly pay all reasonable attorneys' fees
and reasonable costs incurred by the Executive with respect to such suit, action
or proceeding, subject to the Executive's obligation hereunder to repay all such
sums (as well as the Corporation's reasonable attorneys' fees and reasonable
costs) if the court finds that the Corporation is the prevailing party in such
suit, action or proceeding.
X. PARTIAL INVALIDITY.
Invalidity of any part or provision of this Agreement shall not affect the
enforceability of any other part or provision of this Agreement.
XI. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing herein shall confer, nor shall it be construed to confer, on the
Executive any right to, guarantee of, or contract for a continued employment by
the Corporation, or in any way limit the right of the Corporation to terminate
the employment of the Executive.
XII. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, as applied to contracts executed and performed
entirely in California.
XIII. NOTICES.
Any notices given hereunder must be in writing and may be delivered in
person or by certified or registered mail, return receipt requested, postage
prepaid. Notices to Corporation should be delivered to Longs Drug Stores
California, Inc., 141 North Civic Drive, Walnut Creek,
-5-
<PAGE>
CA 94596, Attn: Corporate Secretary, or to such other address as Corporation
from time to time furnishes to the Executive in a notice. Notices to Executive
should be delivered to the address shown beneath Executive's signature below, or
to such other address as the Executive from time to time furnishes to the
Corporation in a notice.
XIV. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between the parties hereto.
This Agreement fully supersedes any and all prior agreements or understandings
pertaining to similar benefits.
XV. AMENDMENTS.
This Agreement may not be modified except by a writing signed by both
parties. No such writing will be binding on the Corporation unless it is signed
(a) by the signatories of this Agreement, (b) by (i) the CEO, President, or any
Vice-President of the Corporation and (ii) the Secretary or any Assistant
Secretary of the Corporation, or (c) by another person or persons whose
authority is affirmed by (i) the CEO, President, or any Vice-President of the
Corporation and (ii) the Secretary or any Assistant Secretary of the
Corporation.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the day and year first above written.
EXECUTIVE LONGS DRUG STORES CALIFORNIA, INC.
By:
- ----------------------------------- -----------------------------------
(signature) R. M. Long
Chief Executive Officer
(One of Two Required and
Authorized Signatures)
- -----------------------------------
Street Address
- -----------------------------------
City, State and Zip Code And By:
-------------------------------
O.D. Jones
Secretary
-6-
<PAGE>
AGREEMENT FOR TERMINATION BENEFITS
IN THE EVENT OF A CHANGE IN CORPORATE CONTROL
[For Selected Key Executives and Store Managers]
THIS AGREEMENT, made this ____ day of _________________, 19__, by and
between _____________________ (the "Executive") and LONGS DRUG STORES
CALIFORNIA, INC., a California corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Executive is ________________________ of the Corporation;
WHEREAS, the Corporation considers it essential to the best interests of
its shareholders to take steps to retain key personnel such as the Executive and
recognizes particularly that uncertainty might arise among personnel in the
context of any possible or actual Change in Control, as hereinafter defined,
which could result in the departure or distraction of key personnel to the
detriment of the Corporation and its shareholders; and
WHEREAS, the Corporation has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
personnel of the Corporation including the Executive to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from any possible or actual Change in Control.
NOW, THEREFORE, in consideration of the covenants, terms, and conditions
contained herein, the Corporation and the Executive agree:
I. DEFINITIONS.
A. "Administrative Committee," as used in this Agreement, shall mean
the Board of Directors of Longs Drug Stores Corporation ("Parent Corporation")
or a committee appointed by such Board of Directors to administer this
Agreement.
B. "Change in Control," as used herein, shall mean (i) any change in
the ownership or effective control of the Parent Corporation or the Corporation,
or (ii) any change in the ownership of a substantial portion of the assets of
the Parent Corporation or the Corporation; all within the meaning of Section
280G of the Code, as hereinafter defined, or any successor provision thereto,
regulations (including temporary and proposed regulations) promulgated
thereunder, and judicial interpretations of Section 280G and the regulations.
C. "Code," as defined herein, shall mean the Internal Revenue Code
of 1986, as amended to date.
-1-
<PAGE>
D. "Involuntary Severance of Employment," as defined herein, shall
mean the termination of the Executive's employment with the Corporation (i) by
discharge by the Corporation on or within two (2) years after the date of a
Change in Control or (ii) the resignation of the Executive on or within two (2)
years after the date of a Change of Control, provided that such resignation was
preceded by a material and detrimental alteration in the Executive's position,
responsibilities, compensation or benefits from those in effect immediately
prior to the Change in Control. Despite the foregoing, neither of the following
will constitute an Involuntary Severance of Employment:
1. The termination of the Executive's employment by reason of
death.
2. The discharge of the Executive by the Corporation for gross
and willful misconduct relating to the performance by the Executive of the
Executive's duties at the Corporation, provided that if there is at least one
Change in Control before such discharge, such misconduct occurs or is discovered
at any time after the date of the last Change in Control before such discharge.
II. ADMINISTRATION.
The Administrative Committee shall administer this Agreement and shall have
the power and the duty to make all determinations necessary for the
implementation of this Agreement, including by way of example and not as a
limitation, the occurrence of a Change in Control and the date of such change.
Any such determination (i) shall be made on the basis of all information known
to the persons making the determination, after reasonable inquiry, (ii) may be
made prospectively and subject to one or more contingent events, and (iii) will
be binding on the Corporation but not the Executive. Any disagreement between
the Corporation and the Executive concerning any such determination or the
administration, implementation or interpretation of this Agreement shall be
subject to the claims procedure as provided for in Article VIII.
III. OBLIGATIONS OF THE CORPORATION.
A. Within fifteen (15) days after an Involuntary Severance of
Employment or at such earlier time as may be required by law, the Corporation
shall pay to the Executive:
1. The full amount of any earned but unpaid base salary through
the date of the Involuntary Severance of Employment, plus a cash payment for all
unused vacation time which the Executive has accrued as of the Involuntary
Involuntary Severance of Employment.
2. If and only if the Corporation has made a final and good
faith determination prior to the Involuntary Severance of Employment as to the
amount, if any, of Executive's bonus for any quarter prior to the quarter during
which the Involuntary Severance of Employment occurs (the "Severance Quarter")
but such bonus has not been paid prior to the Involuntary Severance of
Employment, a bonus equal to the amount, if any, so determined.
-2-
<PAGE>
3. If and only if the Corporation has not made a final and good
faith determination prior to the Involuntary Severance of Employment as to
Executive's bonus, if any, for any quarter prior to the Severance Quarter, a
bonus equal to the bonus, if any, that the Executive would have received in the
absence of an Involuntary Severance of Employment, as determined by the
Corporation in good faith.
B. Within thirty (30) days after an Involuntary Severance of
Employment, the Corporation shall pay to the Executive an amount equal to three
(3) times the average annual compensation (annualized for short or incomplete
years) earned by the Executive from the Corporation which was includible in the
Executive's gross income for federal income tax purposes during the
five-taxable-year period (or period of actual service, if less than five years)
immediately preceding the taxable year of the Change in Control, less one
dollar. The Executive shall be eligible to make contributions to the
Corporation's Section 401(k) plan from amounts payable to the Executive under
Article III.A and this paragraph.
C. Within forty-five (45) days after the end of the Severance
Quarter, the Corporation shall pay to the Executive a bonus for the Severance
Quarter in an amount equal to the bonus, if any, that the Executive would have
received in the absence of an Involuntary Severance of Employment, as determined
by the Corporation in good faith. Such bonus shall be prorated for the portion
of the Severance Quarter prior to the Involuntary Severance of Employment.
D. Within thirty (30) days after an Involuntary Severance of
Employment, the Corporation shall establish an irrevocable trust and contribute
to it an amount equal to the Executive's deferred compensation account under the
Deferred Compensation Plan of 1995 and/or under other similar or successor plans
of the Corporation (the "Plan"). The trust shall conform to the model "rabbi
trust" agreement provided by the Internal Revenue Service in Revenue Procedure
92-64, as revised from time to time, and shall be structured as an unfunded
arrangement. The trustee of the trust shall be Boston Safe Deposit and Trust
Company, or its successor in interest, or if Boston Safe Deposit and Trust
Company is unable or unwilling to serve for any reason, such other financial
institution selected mutually by the Corporation and the Executive.
E. In the event of the Executive's death after an Involuntary
Severance of Employment and prior to payment to the Executive of amounts due
under this Agreement, such payment shall be made to the Executive's surviving
spouse, issue by right of representation, or estate, in that order.
F. The Corporation shall deduct from any payments to Executive under
this Agreement amounts that the Corporation is required to withhold and pay
either to government agencies on behalf of the Executive or under court order to
any person.
IV. TERMINATION.
This Agreement shall terminate and be of no further force or effect upon
the discharge or resignation of the Executive for any reason at any time prior
to the date of a Change in Control.
-3-
<PAGE>
V. TERM OF AGREEMENT.
A. This Agreement shall expire at the end of three (3) years from
the date hereof; provided, however, that at each annual anniversary date of this
Agreement, the expiration date of the Agreement shall automatically be extended
for one (1) additional year unless, in the thirty (30) day period immediately
preceding any anniversary date hereof, either the Corporation or the Executive,
by written notice to the other, rejects the automatic extension of such
expiration date.
B. Notwithstanding the expiration provisions set out in Article V.A,
this Agreement shall not expire for a period of two (2) years after the date of
any Change in Control which occurs before this Agreement terminates or expires,
and if an Involuntary Severance of Employment occurs before this Agreement
terminates or expires, this Agreement will not expire until the Corporation has
complied in all respects with Article III.
VI. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and the successors and assigns of the Corporation.
VII. NON-ASSIGNMENT BY THE EXECUTIVE.
The Executive shall not assign, hypothecate, or transfer any of the rights
herein to any person. Any attempt to assign, hypothecate or transfer the rights
hereunder shall immediately terminate all of the Executive's rights under this
Agreement.
VIII. CLAIMS PROCEDURE.
A. In the event of a disagreement between the Corporation and the
Executive on any matter arising under this Agreement, the Executive, in claiming
a benefit or requesting an interpretation or ruling under this Agreement, shall
present the claim or request in writing to the Administrative Committee, which
shall respond in writing as soon as practicable.
B. If a claim or request is denied, the Administrative Committee
shall prepare and deliver to the Executive a written notice of denial which
shall state (1) the reason for denial, with specific reference to the provisions
of this Agreement on which denial is based; (ii) a description of any additional
material or information required to prevail with the claim or request and an
explanation of why it is necessary; and (iii) an explanation of the Agreement's
claim review procedure.
C. If a claim or request is denied or the Executive has not received
a response within thirty (30) days, the Executive may request a review by notice
given in writing to the Administrative Committee. Such request must be made
within sixty (60) days after receipt by the Executive of the written notice of
denial, or in the event the Executive has not received a response, within ninety
(90) days after receipt by the Administrative Committee of the Executive's claim
or request. The claim or request shall be reviewed by the Administrative
Committee which may, but
-4-
<PAGE>
shall not be required to, grant the Executive a hearing. On review, the
Executive may have representation, examine pertinent documents, and submit
issues and comments in writing.
D. The decision on review shall normally be made within thirty (30)
days after the Administrative Committee's receipt of the Executive's request for
a review. If an extension of time is required for a hearing or other special
circumstances, the Executive shall be notified and the time limit shall be sixty
(60) days. The decision shall be in writing and shall state the reasons and the
relevant provisions of the Agreement. Unless the Executive elects to pursue
judicial review of the Administrative Committee's decision, all decisions on
review shall be final and bind all parties concerned.
IX. ATTORNEYS' FEES.
In the event that any suit, action or proceeding (including any appeal
therefrom, but excluding any and all proceedings before the Administrative
Committee) is brought by the Executive to review any decision of the
Administrative Committee pertaining to this Agreement or to enforce any right
hereunder, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees and other reasonable costs incurred in
connection therewith. During the pendency of any such suit, action or
proceeding, the Corporation shall promptly pay all reasonable attorneys' fees
and reasonable costs incurred by the Executive with respect to such suit, action
or proceeding, subject to the Executive's obligation hereunder to repay all such
sums (as well as the Corporation's reasonable attorneys' fees and reasonable
costs) if the court finds that the Corporation is the prevailing party in such
suit, action or proceeding.
X. PARTIAL INVALIDITY.
Invalidity of any part or provision of this Agreement shall not affect the
enforceability of any other part or provision of this Agreement.
XI. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing herein shall confer, nor shall it be construed to confer, on the
Executive any right to, guarantee of, or contract for a continued employment by
the Corporation, or in any way limit the right of the Corporation to terminate
the employment of the Executive.
XII. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, as applied to contracts executed and performed
entirely in California.
XIII. NOTICES.
Any notices given hereunder must be in writing and may be delivered in
person or by certified or registered mail, return receipt requested, postage
prepaid. Notices to Corporation should be delivered to Longs Drug Stores
California, Inc., 141 North Civic Drive, Walnut Creek,
-5-
<PAGE>
CA 94596, Attn: Corporate Secretary, or to such other address as Corporation
from time to time furnishes to the Executive in a notice. Notices to Executive
should be delivered to the address shown beneath Executive's signature below, or
to such other address as the Executive from time to time furnishes to the
Corporation in a notice.
XIV. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between the parties hereto.
This Agreement fully supersedes any and all prior agreements or understandings
pertaining to similar benefits.
XV. AMENDMENTS.
This Agreement may not be modified except by a writing signed by both
parties. No such writing will be binding on the Corporation unless it is signed
(a) by the signatories of this Agreement, (b) by (i) the CEO, President, or any
Vice-President of the Corporation and (ii) the Secretary or any Assistant
Secretary of the Corporation, or (c) by another person or persons whose
authority is affirmed by (i) the CEO, President, or any Vice-President of the
Corporation and (ii) the Secretary or any Assistant Secretary of the
Corporation.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the day and year first above written.
EXECUTIVE LONGS DRUG STORES CALIFORNIA, INC.
By:
- ----------------------------------- --------------------------------
(signature) R. M. Long
Chief Executive Officer
(One of Two Required and
Authorized Signatures)
- -----------------------------------
Street Address
- -----------------------------------
City, State and Zip Code And By:
-------------------------------
O.D. Jones
Secretary
-6-
<TABLE> <S> <C>
<PAGE>
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