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

  	
   

  
														



 


6

















 


	
   

  	
  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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