Exhibit 10.4

 

This SECOND AMENDMENT AGREEMENT, dated as of April 30, 2003 (this “Agreement”),
is among the parties to that certain Amended and Restated Credit Agreement,
dated as of October 12, 2001 (as amended to the date hereof, the “Credit
Agreement”), among LONGS DRUG STORES CALIFORNIA, INC., a California corporation
(the “Borrower”), each lender from time to time party hereto (collectively, the
“Lenders” and individually, a “Lender”), BANK OF AMERICA, N.A., as
Administrative Agent and Swing Line Lender, and FLEET NATIONAL BANK, as
Syndication Agent and L/C Issuer.

 

The parties hereto agree as follows:

 

Section 1.                                            Definitions.  Terms
defined in the Credit Agreement as amended hereby are used herein with the same
meanings unless otherwise defined herein.

 

Section 2.                                            Amendments to the Credit
Agreement.  The Credit Agreement is hereby amended:

 

(a)                                  To amend and restate the definition of
“Applicable Rate” in Section 1.01 in its entirety as follows:

 

Applicable Rate

 

Pricing
Level

 

Consolidated
Adjusted Total Debt
to Consolidated
Adjusted EBITDAR
Ratio

 

Commitment
Fee

 

Eurodollar
Rate

 

Base Rate

 

1

 

³3.00:1

 

0.350

%

1.750

%

0.250

%

2

 

³ 2.50:1 but < 3.00:1

 

0.300

%

1.500

%

0.000

%

3

 

³ 2.00:1 but < 2.50:1

 

0.250

%

1.250

%

0.000

%

4

 

³ 1.50 but< 2.00

 

0.225

%

1.125

%

0.000

%

5

 

< 1.50:1

 

0.200

%

1.000

%

0.000

%

 

(b)                                 To insert new defined terms (in appropriate
alphabetical order) in Section 1.01 as follows:

 

“Asset Coverage Ratio” means, at any time for the Parent and its Subsidiaries on
a consolidated basis, the ratio of (a) (i) 70% of pharmacy and other receivables
(net) plus (ii) 55% of the sum, without duplication, of merchandise inventories
(net) and the LIFO reserve to (b) (i) Consolidated Funded Indebtedness plus (ii)
the aggregate undrawn face amount of all outstanding standby letters of credit
(including standby Letters of Credit hereunder) and all unreimbursed drawings
under such letters of credit.

 

“Consolidated Adjusted EBITDAR” means, for any four fiscal quarter period, for
the Parent and its Subsidiaries on a consolidated basis, an amount equal to
Adjusted Consolidated Net Income, plus or minus (as indicated) the

 

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following, without duplication, to the extent (unless otherwise stated) used or
included in the determination of such Adjusted Consolidated Net Income: plus (a)
Consolidated Interest Charges, plus (b) Consolidated Rent Expense, plus (c) the
amount of taxes, based on or measured by income, plus (d) the amount of
depreciation and amortization expense, plus (e) non-cash, non-recurring charges,
minus (f) non-recurring gains, minus (g) undistributed earnings from joint
ventures, plus (h) the amount of all reserves (including those for employee
severance and lease termination expense) taken with respect to the stores of the
Parent and its Subsidiaries actually closed during such period (provided that
the total amount of such reserves added under this clause (h) attributable to
any single fiscal year cannot exceed $40,000,000) and minus (i) the amount of
all cash expenditures during such period made in connection with store closures,
including payments in connection with employee severance and monthly lease and
termination payments on all closed store locations of the Parent and its
Subsidiaries and without regard to whether such cash expenditures were used or
included in the determination of Adjusted Consolidated Net Income for such
period.

 

(c)                                  To delete the defined term “Consolidated
EBITDAR” and substitute therefor the new defined term “Consolidated Adjusted
EBITDAR” wherever it appears in the Credit Agreement.

 

(d)                                 To amend and restate the definitions of
“Fixed Charge Coverage Ratio” and “Letter of Credit Sublimit” in Section 1.01 in
their entirety as follows:

 

“Fixed Charge Coverage Ratio” means for any four fiscal quarter period the ratio
of (a) Consolidated Adjusted EBITDAR to (b) the sum, without duplication, of (i)
Consolidated Interest Charges, (ii) Consolidated Rental Expense, (iii) the
amount by which all distributions from the Borrower to the Parent during such
period exceeded purchases of the capital stock of the Parent made by the Parent
during such period which did not violate the provisions of Section 7.05(d), and
(iv) the total amount of all principal payments of Indebtedness of the Borrower
scheduled to occur during such period.

 

*   *   *

 

“Letter of Credit Sublimit” means an amount equal to the lesser of the Aggregate
Commitments and $50,000,000.  The Letter of Credit Sublimit is part of, and not
in addition to, the Aggregate Commitments.

 

(e)                                  To amend and restate Section 7.05(d) in its
entirety as follows:

 

(d)                                 So long as no Default has occurred and is
continuing or would result therefrom, (i) Borrower may make distributions to
Parent and (ii) Borrower may purchase, or may make distributions to the Parent
for the purpose of the Parent purchasing, shares of capital stock of the Parent
for a total consideration not exceeding $50,000,000 for all such purchases by
the Borrower and the Parent, taken together, in any fiscal year of the Parent;
provided that to the extent that

 

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such purchases in any fiscal year ending after January 30, 2003, are less than
$50,000,000, the maximum amount of such purchases permitted for the subsequent
fiscal year shall be increased (but not by more than $10,000,000) by the amount
of such shortfall.

 

(f)                                    To amend and restate Section 7.14(a) in
its entirety as follows:

 

(a)                                  The Fixed Charge Coverage Ratio (A) as of
the end of any fiscal quarter ending on or after October 25, 2001 and on or
prior to April 25, 2002, shall be equal to or greater than 2.30 to 1.00, (B) as
of the end of any fiscal quarter ending on or after July 26, 2002, and prior to
January 25, 2003, shall be equal to or greater than 2.40 to 1.00, and (C) as of
the end of any fiscal quarter ending on or after January 25, 2003, be equal to
or greater than 1.65 to 1.00.

 

(g)                                 To amend and restate Section 7.14(c) in its
entirety as follows:

 

(c)                                  The Consolidated Adjusted Total Debt to
Consolidated Adjusted EBITDAR Ratio as of the end of any fiscal quarter shall be
equal to or less than 3.50 to 1.00.

 

(h)                                 To add a new subsection (d) to Section 7.14
as follows:

 

(d)                                 The Asset Coverage Ratio as of the end of
any fiscal quarter shall not be less than 1.25 to 1.00.

 

(i)                                     To amend the form of Compliance
Certificate, Exhibit D to the Credit Agreement, to reflect the amendments set
forth in subsections (b), (c), (d), (f), (g), and (h) above.

 

Section 3.                                            Limited Waiver.  Lenders
hereby waive any Event of Default under the Credit Agreement existing on the
Effective Date resulting from the Borrower’s failure to comply with the Credit
Agreement but only to the extent that such Event of Default will not exist after
giving effect to the amendments set forth in Section 2 of this Agreement.

 

Section 4.                                            Effect.  Except as
specifically set forth herein, this Agreement does not limit, modify, amend,
waive, grant any consent with respect to, or otherwise affect (a) any right,
power, or remedy of the Administrative Agent or any Lender under the Credit
Agreement or any other Loan Document or (b) any provision of the Credit
Agreement or any other Loan Documents, all of which shall remain in full force
and effect and are hereby ratified and confirmed.  This Agreement does not
entitle, or imply any consent or agreement to, any further or future
modification of, amendment to, waiver of, or consent with respect to any
provision of the Credit Agreement or any other Loan Document.

 

Section 5.                                            Fees.

 

(a)                                  On or before the time this Agreement
becomes effective pursuant to Section 7 hereof, the Borrower shall pay to the
Administrative Agent for the account of each Lender who has consented hereto
before the time the Administrative Agent gives notice of the effectiveness
hereof pursuant to such Section 7, an amendment fee (collectively, the
“Amendment Fee”) equal to 0.125% of such Lender’s Commitment.

 

(b)                                 The Borrower shall pay an amendment
arrangement fee to the Arranger for the

 

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Arranger’s own account, in the amounts and at the times specified in the letter
agreement, dated April 10, 2003 (the “Amendment Fee Letter”), between the
Borrower, the Arranger and Bank of America.

 

(c)                                  The fees payable pursuant to this Section
are fully earned and non-refundable when paid.

 

Section 6.                                            Costs.  The Borrower shall
pay all fees, costs, and expenses of any kind (including the reasonable fees and
disbursements of counsel) incurred by the Administrative Agent in connection
with the negotiation, preparation, and execution of this Agreement and the other
documents contemplated hereby.

 

Section 7.                                            Conditions of
Effectiveness.  This Agreement shall become effective as of the date hereof (the
“Effective Date”) when the conditions set forth below are satisfied (or waived
in accordance with the provisions of the Credit Agreement), and the
Administrative Agent gives notice of such effectiveness as below provided:

 

(a)                                  Counterparts of this Agreement.  Receipt by
the Administrative Agent of counterparts hereof signed by the Borrower and the
Required Lenders;

 

(b)                                 Fees.  Receipt by the Administrative Agent
for the account of the consenting Lenders of the Amendment Fee and receipt by
the Arranger of all fees then required to be paid to the Arranger under the
Amendment Fee Letter;

 

(c)                                  Payment of Certain Amounts.  Payment of all
fees, costs, and expenses specified in Section 6 of this Agreement (including
the fees, costs, and expenses of counsel to the Administrative Agent) and
notified by the Administrative Agent to the Borrower; and

 

(d)                                 Corporation Documents.  Receipt by the
Administrative Agent of all documents it may reasonably request relating to the
existence of Borrower, the corporate authority for and the validity of this
Agreement, and any other agreements, documents, instruments, or matters relevant
hereto, all in form and substance satisfactory to the Administrative Agent;

 

provided that this Agreement shall not become effective or be binding on any
party hereto unless the foregoing conditions are satisfied or waived as above
provided no later than May 1, 2003.  Promptly upon the occurrence thereof, the
Administrative Agent shall notify the Borrower, Parent, L/C Issuer, and each
Lender of the effectiveness of this Agreement.

 

Section 8.                                            Representations and
Warranties.  Borrower represents and warrants that:

 

(a)                                  The execution, delivery and performance by
the Borrower of this Agreement are within the Borrower’s corporate powers, have
been duly authorized by all necessary corporate action, and require no action by
or in respect of, or filing with, any governmental body, agency or official,
except as this Agreement may be required to be filed with respect to state or
federal securities law provisions, and the execution, delivery and performance
by the Borrower of this Agreement do not contravene, or constitute a default
under, any provision of applicable law or regulations or of the certificate or
articles of incorporation or the by-laws of Borrower or any of its Subsidiaries,
or any material agreement, judgment, injunction, order, decree or other
instrument binding upon Borrower or any of its Subsidiaries or any assets of
Borrower or any of its Subsidiaries, or result in the creation or imposition of
any lien on any asset of the Borrower or

 

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any of its Subsidiaries.

 

(b)                                 This Agreement constitutes the valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors’ rights, and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).

 

(c)                                  After giving effect to this Agreement, no
Default has occurred and is continuing, and after giving effect to this
Agreement, the representations and warranties of Borrower contained in the
Credit Agreement and the other Loan Documents delivered pursuant thereto are
true and correct in all material respects as of the date hereof as if made on
the date hereof, unless they specifically relate to an earlier date.

 

Section 9.                                            Counterparts; Facsimile
Signatures.  This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original with the same effect as
if all the signatures were on the same instrument.  Delivery of an executed
counterpart of the signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.  Any
party delivering an executed counterpart of the signature page to this Agreement
by telecopier shall thereafter promptly deliver a manually executed counterpart
of this Agreement, but the failure to deliver such manually executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.

 

Section 10.                                      Governing Law, Submission to
Jurisdiction, and Waiver of Jury Trial.  THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (PROVIDED
THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW) AND IS SUBJECT TO THE PROVISIONS OF SECTIONS 10.17 and 10.18
OF THE CREDIT AGREEMENT, RELATING TO SUBMISSION TO JURISDICTION AND WAIVER OF
JURY TRIAL, THE PROVISIONS OF WHICH ARE BY THIS REFERENCE HEREBY INCORPORATED
HEREIN IN FULL.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

BORROWER:

LONGS DRUG STORES CALIFORNIA, INC.

 

 

 

 

 

By

/s/  Steven F. McCann

 

 

 

(One of Two Required and Authorized Signatures)

 

Title:

Senior Vice President

 

 

 

Chief Financial Officer & Treasurer

 

 

 

 

 

 

And by

/s/  William J. Rainey

 

 

Title:  Secretary

 

 

 

 

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A.,
as Administrative Agent

 

 

 

 

 

By

 

/s/  Ken Puro

 

 

Name:

 

Ken Puro

 

 

Title:

 

Vice President

 

 

 

 

 

LENDERS:

BANK OF AMERICA, N.A., as a Lender and
Swing Line Lender

 

 

 

 

 

By

 

/s/  Ronald J. Drobny

 

 

Name:

 

Ronald J. Drobny

 

 

Title:

 

Senior Vice President

 

 

 

 

 

 

FLEET NATIONAL BANK, as a Lender,
Syndication Agent, and L/C Issuer

 

 

 

By

 

/s/  Stephen J. Garvin

 

 

Name:

 

Stephen J. Garvin

 

 

Title:

 

Managing Director

 

 

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BANK OF HAWAII

 

 

 

 

 

By

 

/s/  Dana Takushi

 

 

Name:

 

Dana Takushi

 

 

Title:

 

Vice President

 

 

 

 

 

 

WASHINGTON MUTUAL BANK

 

 

 

By

 

/s/  Tony Yee

 

 

Name:

 

Tony Yee

 

 

Title:

 

Assistant Vice President

 

 

 

 

 

 

UNION BANK OF CALIFORNIA, N.A.

 

 

 

 

 

By

 

/s/  Theresa L. Rocha

 

 

Name:

 

Theresa L. Rocha

 

 

Title:

 

Vice President

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION

 

 

 

 

 

By

 

/s/  Janet Jordan

 

 

Name:

 

Janet Jordan

 

 

Title:

 

Vice President

 

 

 

 

 

 

WELLS FARGO BANK, NATIONAL
ASSOCIATION

 

 

 

 

 

By

 

/s/  Jeff Bailard

 

 

Name:

 

Jeff Bailard

 

 

Title:

 

Vice President

 

 

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