**Exhibit10.4**

 

This SECONDAMENDMENT AGREEMENT, dated as of April 30, 2003 (this “Agreement”), is amongthe parties to that certain Amended and Restated Credit Agreement, dated as ofOctober 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 andSwing Line Lender, and FLEET NATIONAL BANK, as Syndication Agent and L/CIssuer.

 

The parties heretoagree as follows:

 

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

 

Section 2.                                            Amendmentsto the Credit Agreement.  The CreditAgreement is hereby amended:

 

(a)                                  Toamend and restate the definition of “Applicable Rate” in Section 1.01 in itsentirety as follows:

 

**ApplicableRate**

 
| **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                  |   | 31.50 but< 2.00                                                         |   | 0.225               | %      | 1.125                | %      | 0.000         | %      |
| 5                  |   | < 1.50:1                                                                     |   | 0.200               | %      | 1.000                | %      | 0.000         | %      |

 

(b)                                 Toinsert new defined terms (in appropriate alphabetical order) in Section 1.01 asfollows:

 

“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 LIFOreserve to (b) (i) Consolidated Funded Indebtedness plus (ii) the aggregateundrawn face amount of all outstanding standby letters of credit (includingstandby Letters of Credit hereunder) and all unreimbursed drawings under suchletters of credit.

 

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

 

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following, without duplication, to the extent (unlessotherwise stated) used or included in the determination of such AdjustedConsolidated Net Income: plus (a) Consolidated Interest Charges, plus(b) Consolidated Rent Expense, plus (c) the amount of taxes, based on ormeasured by income, plus (d) the amount of depreciation and amortizationexpense, plus (e) non-cash, non-recurring charges, minus (f)non-recurring gains, minus (g) undistributed earnings from jointventures, plus (h) the amount of all reserves (including those foremployee severance and lease termination expense) taken with respect to thestores 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 connectionwith store closures, including payments in connection with employee severanceand monthly lease and termination payments on all closed store locations of theParent and its Subsidiaries and without regard to whether such cashexpenditures were used or included in the determination of AdjustedConsolidated Net Income for such period.

 

(c)                                  Todelete the defined term “Consolidated EBITDAR” and substitute therefor the newdefined term “Consolidated Adjusted EBITDAR” wherever it appears in the CreditAgreement.

 

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

 

“Fixed Charge CoverageRatio” 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) theamount by which all distributions from the Borrower to the Parent during suchperiod exceeded purchases of the capital stock of the Parent made by the Parentduring 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 theBorrower scheduled to occur during such period.

 

*   *  *

 

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

 

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

 

(d)                                 Solong 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 Parentpurchasing, shares of capital stock of the Parent for a total consideration notexceeding $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 theextent that

 

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such purchases in any fiscal year ending after January30, 2003, are less than $50,000,000, the maximum amount of such purchasespermitted for the subsequent fiscal year shall be increased (but not by morethan $10,000,000) by the amount of such shortfall.

 

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

 

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

 

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

 

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

 

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

 

(d)                                 TheAsset Coverage Ratio as of the end of any fiscal quarter shall not be less than1.25 to 1.00.

 

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

 

Section 3.                                            LimitedWaiver.  Lenders hereby waive anyEvent of Default under the Credit Agreement existing on the Effective Dateresulting from the Borrower’s failure to comply with the Credit Agreement butonly to the extent that such Event of Default will not exist after givingeffect 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 withrespect to, or otherwise affect (a) any right, power, or remedy of theAdministrative Agent or any Lender under the Credit Agreement or any other LoanDocument or (b) any provision of the Credit Agreement or any other LoanDocuments, all of which shall remain in full force and effect and are herebyratified and confirmed.  This Agreementdoes not entitle, or imply any consent or agreement to, any further or futuremodification of, amendment to, waiver of, or consent with respect to anyprovision of the Credit Agreement or any other Loan Document.

 

Section 5.                                            Fees.

 

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

 

(b)                                 TheBorrower 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 inthe letter agreement, dated April 10, 2003 (the “Amendment Fee Letter”),between the Borrower, the Arranger and Bank of America.

 

(c)                                  Thefees payable pursuant to this Section are fully earned and non-refundable whenpaid.

 

Section 6.                                            Costs.  The Borrower shall pay all fees, costs, andexpenses of any kind (including the reasonable fees and disbursements ofcounsel) incurred by the Administrative Agent in connection with thenegotiation, preparation, and execution of this Agreement and the otherdocuments contemplated hereby.

 

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

 

(a)                                  Counterpartsof this Agreement.  Receipt by theAdministrative Agent of counterparts hereof signed by the Borrower and theRequired Lenders;

 

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

 

(c)                                  Paymentof Certain Amounts.  Payment of allfees, costs, and expenses specified in Section 6 of this Agreement (includingthe fees, costs, and expenses of counsel to the Administrative Agent) andnotified by the Administrative Agent to the Borrower; and

 

(d)                                 CorporationDocuments.  Receipt by theAdministrative Agent of all documents it may reasonably request relating to theexistence of Borrower, the corporate authority for and the validity of thisAgreement, and any other agreements, documents, instruments, or mattersrelevant hereto, all in form and substance satisfactory to the AdministrativeAgent;

 

providedthat this Agreement shall not become effective or be binding on any partyhereto unless the foregoing conditions are satisfied or waived as aboveprovided no later than May 1, 2003. Promptly upon the occurrence thereof, the Administrative Agent shallnotify the Borrower, Parent, L/C Issuer, and each Lender of the effectivenessof this Agreement.

 

Section 8.                                            Representationsand Warranties.  Borrower representsand warrants that:

 

(a)                                  Theexecution, delivery and performance by the Borrower of this Agreement arewithin the Borrower’s corporate powers, have been duly authorized by allnecessary corporate action, and require no action by or in respect of, orfiling with, any governmental body, agency or official, except as thisAgreement may be required to be filed with respect to state or federalsecurities law provisions, and the execution, delivery and performance by theBorrower of this Agreement do not contravene, or constitute a default under,any provision of applicable law or regulations or of the certificate orarticles of incorporation or the by-laws of Borrower or any of itsSubsidiaries, or any material agreement, judgment, injunction, order, decree orother instrument binding upon Borrower or any of its Subsidiaries or any assetsof Borrower or any of its Subsidiaries, or result in the creation or impositionof any lien on any asset of the Borrower or

 

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any of its Subsidiaries.

 

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

 

(c)                                  Aftergiving effect to this Agreement, no Default has occurred and is continuing, andafter giving effect to this Agreement, the representations and warranties ofBorrower contained in the Credit Agreement and the other Loan Documentsdelivered pursuant thereto are true and correct in all material respects as ofthe date hereof as if made on the date hereof, unless they specifically relateto an earlier date.

 

Section 9.                                            Counterparts;Facsimile Signatures.  ThisAgreement may be executed in any number of counterparts and by differentparties hereto in separate counterparts, each of which when so executed anddelivered shall be deemed to be an original with the same effect as if all thesignatures were on the same instrument. Delivery of an executed counterpart of the signature page to thisAgreement by telecopier shall be effective as delivery of a manually executedcounterpart of this Agreement.  Anyparty delivering an executed counterpart of the signature page to this Agreementby telecopier shall thereafter promptly deliver a manually executed counterpartof this Agreement, but the failure to deliver such manually executedcounterpart shall not affect the validity, enforceability, and binding effectof this Agreement.

 

Section 10.                                      GoverningLaw, Submission to Jurisdiction, and Waiver of Jury Trial.  THIS AGREEMENT SHALL BE GOVERNED BY, ANDCONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (PROVIDEDTHAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISINGUNDER FEDERAL LAW) AND IS SUBJECT TO THE PROVISIONS OF SECTIONS 10.17 and 10.18OF THE CREDIT AGREEMENT, RELATING TO SUBMISSION TO JURISDICTION AND WAIVER OFJURY TRIAL, THE PROVISIONS OF WHICH ARE BY THIS REFERENCE HEREBY INCORPORATEDHEREIN IN FULL.

 

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IN WITNESSWHEREOF,**theparties hereto have caused this Agreement to be duly executed as of the datefirst 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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