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EXHIBIT 10.23
SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amendment to Third Amended and Restated Credit Agreement,
dated as of October 31, 2000 (this "AMENDMENT AGREEMENT"), is made by and among
DUANE READE, a New York general partnership (the "BORROWER"), each Designated
Guarantor (such capitalized term and other capitalized terms used in this
preamble and the recitals below have the meaning set forth in, or as defined by
reference in, ARTICLE I), DLJ CAPITAL FUNDING, INC., as syndication agent (in
such capacity, the "SYNDICATION AGENT") for the Lenders, and FLEET NATIONAL
BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for
the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Designated Guarantors, various financial
institutions (the "LENDERS"), the Agents and Credit Lyonnais New York Branch, as
the documentation agent for the Lenders have heretofore entered into the Third
Amended and Restated Credit Agreement, dated as of March 17, 2000 (as amended or
otherwise modified prior to the date hereof the "EXISTING CREDIT AGREEMENT"and
as so amended, the "CREDIT AGREEMENT"); and
WHEREAS, the Borrower and the Designated Guarantors have requested, and
the Required Lenders have agreed, subject to the terms and conditions
hereinafter set forth, to amend the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINITIONS. The following terms (whether or not
underscored) when used in this Amendment Agreement shall have the following
meanings (such meanings to be equally applicable to the singular and plural form
thereof):
"AMENDMENT AGREEMENT" is defined in the PREAMBLE.
"AMENDMENT EFFECTIVE DATE" is defined in SECTION 3.1.
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"BORROWER" is defined in the PREAMBLE.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. OTHER DEFINITIONS. Terms for which meanings are provided
in the Credit Agreement are, unless otherwise defined herein or the context
otherwise requires, used in this Amendment Agreement with such meanings.
ARTICLE II
AMENDMENTS
Effective on (and subject to the occurrence of) the Amendment Effective
Date, the Existing Credit Agreement is hereby amended in accordance with this
ARTICLE II; except as so amended, the Existing Credit Agreement and all Exhibits
and Schedules thereto shall continue in full force and effect and are in all
respects hereby ratified and confirmed.
SECTION 2.1. AMENDMENT TO ARTICLE I OF THE EXISTING CREDIT AGREEMENT.
(a) Section 1.1 of such Article is hereby amended by inserting in the
proper alphabetical locations the following definitions:
"SECOND AMENDMENT" means the Second Amendment to the Third
Amended and Restated Credit Agreement, dated as of October 31, 2000,
among the Borrower, the Designated Guarantors, the Lenders parties
thereto and the Agents.
"SECOND AMENDMENT EFFECTIVE DATE" means the Amendment
Effective Date (as defined in the Second Amendment).
(b) The definition of "ADDITIONAL TERM C LOAN COMMITMENT AMOUNT" in
Section 1.1 of such Article is hereby amended and restated in its entirety to
read as follows:
"ADDITIONAL TERM C LOAN COMMITMENT AMOUNT" means on the Second
Amendment Effective Date, $0, as such amount may be increased so long
as the aggregate amount of Additional Term C Loans made hereunder does
not exceed $50,000,000, of which the Borrower has borrowed $30,000,000
prior to the Second Amendment Effective Date.
(c) The definition of "APPLICABLE MARGIN" in Section 1.1 of such
Article is hereby
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amended and restated in its entirety to read as follows:
"APPLICABLE MARGIN" means
(a) prior to the Second Amendment Effective Date, the rate
calculated in accordance with the Existing Credit Agreement as in
effect immediately prior to the Effective Date; and
(b) on and after the Second Amendment Effective Date, with
respect to the unpaid principal amount of:
(i) each Swing Line Loan (each of which shall be
borrowed and maintained only as a Base Rate Loan), each Term A
Loan and each Revolving Loan maintained as a Base Rate Loan,
by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term A Loans, Revolving Loans and Swing
Line Loans maintained as Base Rate Loans";
(ii) each Term A Loan and each Revolving Loan
maintained as a LIBO Rate Loan, by reference to the Leverage
Ratio and at the applicable percentage per annum set forth
below under the column entitled "Applicable Margin for Term A
Loans and Revolving Loans Maintained as LIBO Rate Loans";
(iii) each Term B Loan maintained as a Base Rate Loan
by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term B Loans maintained as Base Rate
Loans";
(iv) each Term B Loan maintained as a LIBO Rate Loan,
by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term B Loans maintained as LIBO Rate
Loans";
(v) each Term C Loan maintained as a Base Rate Loan
by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term C Loans maintained as Base Rate
Loans"; and
(vi) each Term C Loan maintained as a LIBO Rate Loan,
by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term C Loans maintained as LIBO Rate
Loans":
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<TABLE>
<CAPTION>
APPLICABLE
MARGIN FOR
TERM A LOANS, APPLICABLE
REVOLVING LOANS MARGIN FOR APPLICABLE APPLICABLE
AND TERM A LOANS AND MARGIN FOR MARGIN FOR
SWING LINE LOANS REVOLVING LOANS TERM B LOANS TERM B LOANS
MAINTAINED AS MAINTAINED AS MAINTAINED AS MAINTAINED AS
LEVERAGE RATIO BASE RATE LOANS LIBO RATE LOANS BASE RATE LOANS LIBO RATE LOANS
-------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
> 5.00 2.00% 3.00% 2.25% 3.25%
less than or equal to 5.00 and >= 4.00 1.75% 2.75% 2.00% 3.00%
less than or equal to 4.00 and >= 3.50 1.25% 2.25% 2.00% 3.00%
less than or equal to 3.50 and >= 3.00 0.75% 1.75% 2.00% 3.00%
less than or equal to 3.00 0.50% 1.50% 2.00% 3.00%
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
MARGIN FOR TERM MARGIN FOR TERM C
C LOANS LOANS
MAINTAINED AS MAINTAINED AS
LEVERAGE RATIO BASE RATE LOANS LIBO RATE LOANS
-------------- --------------- ---------------
<S> <C> <C>
> 5.00 2.25% 3.25%
less than or equal to 5.00 and >= 4.00 2.00% 3.00%
less than or equal to 4.00 and >= 3.50 2.00% 3.00%
less than or equal to 3.50 and >= 3.00 2.00% 3.00%
less than or equal to 3.00 2.00% 3.00%
</TABLE>
The Leverage Ratio used to compute the Applicable Margin for all Loans
shall be equal to the Leverage Ratio set forth in the Compliance
Certificate most recently delivered by Holdings to the Administrative
Agent pursuant to CLAUSE (D) of SECTION 7.1.1. Changes in the
Applicable Margin for such Loans resulting from a change in the
Leverage Ratio shall become effective upon delivery by Holdings to the
Administrative Agent of a new Compliance Certificate pursuant to CLAUSE
(D) of SECTION 7.1.1. If Holdings fails to deliver a Compliance
Certificate within the number of days required pursuant to CLAUSE (D)
of SECTION 7.1.1, the Applicable Margin for all Loans from and
including the first day after the date on which such Compliance
Certificate was required to be delivered through (but excluding) the
date Holdings delivers to the Administrative Agent an appropriately
completed Compliance Certificate shall conclusively equal the highest
Applicable Margin for all Loans of the same type set forth above.
SECTION 2.2. AMENDMENT TO ARTICLE II OF THE EXISTING CREDIT AGREEMENT.
Clause (a) Section 2.1.1 of the Existing Credit Agreement is hereby amended and
restated in its entirety as follows:
(a) At any time, and from time to time, on any date
on or after the Amendment Effective Date but prior to the
Additional Term C Loan Commitment Termination Date, each
Lender that agrees, pursuant to this Section, to have a
Percentage in excess of zero of an Additional Term C Loan
Commitment will make loans (each such loan an "ADDITIONAL TERM
C LOAN") to the Borrower pursuant to CLAUSE (G) of this
SECTION 2.1.1 (the commitment of each such Lender described in
this CLAUSE (A) of SECTION 2.1.1 is herein referred to as its
"ADDITIONAL TERM C LOAN COMMITMENT").
SECTION 2.3. AMENDMENT TO ARTICLE VII OF THE EXISTING CREDIT AGREEMENT.
Section 7.2.4 of the Existing Credit Agreement is hereby amended as follows:
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(a) Clause (b) of Section 7.2.4 of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
(b) LEVERAGE RATIO. Each of the Borrower and each Designated
Guarantor will not permit the Leverage Ratio as of the end of any
Fiscal Quarter ending after the Second Amendment Effective Date and
occurring during any period set forth below to be greater than the
ratio set forth opposite such period:
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<CAPTION>
PERIOD LEVERAGE RATIO
------ --------------
<S> <C>
third Fiscal Quarter of the 3.90:1
2000 Fiscal Year through and
including the second Fiscal
Quarter of the 2001 Fiscal
Year
third Fiscal Quarter of the 3.85:1
2001 Fiscal Year
fourth Fiscal Quarter of the 3.75:1
2001 Fiscal Year through and
including the third Fiscal
Quarter of the 2002 Fiscal
Year
fourth Fiscal Quarter of the 3.00:1
2002 Fiscal Year and each
Fiscal Quarter thereafter
</TABLE>
(b) Clause (c) of Section 7.2.4 of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
(c) INTEREST COVERAGE RATIO. Each of the Borrower and each
Designated Guarantor will not permit the Interest Coverage Ratio as of
the end of any Fiscal Quarter ending after the Second Amendment
Effective Date and occurring during any period set forth below to be
less than the ratio set forth opposite such period:
PERIOD INTEREST COVERAGE RATIO
------ -----------------------
third Fiscal Quarter of the 2.75:1
2000 Fiscal Year through the
third Fiscal Quarter of the
2002 Fiscal Year
fourth Fiscal Quarter of the 3.00:1
2002 Fiscal Year and each
Fiscal Quarter thereafter
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ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. AMENDMENT EFFECTIVE DATE. This Amendment Agreement (and
the amendments and modifications contained herein) shall become effective on the
date (the "AMENDMENT EFFECTIVE DATE") when each of the conditions set forth in
this ARTICLE III shall have been fulfilled to the reasonable satisfaction of the
Agents.
SECTION 3.1.1. EXECUTION OF COUNTERPARTS. The Agents shall have
received executed counterparts of this Amendment Agreement, duly executed and
delivered on behalf of each of the Borrower, the Designated Guarantors and the
Agents and the Administrative Agent shall have confirmed to the Borrower and the
Syndication Agent that it has received from the Required Lenders (which shall
include those Lenders holding greater than 50% of the aggregate amount of Loans
outstanding under each Tranche) their respective consents hereto.
SECTION 3.1.2. RESOLUTIONS, ETC. The Agents shall have received, with a
copy for each Lender, from each Obligor a certificate, dated the Amendment
Effective Date, of its Secretary, Assistant Secretary or general partners, as
applicable, as to (i) resolutions of its Board of Directors or all partnership
action, as applicable, then in full force and effect authorizing the execution,
delivery and performance of this Amendment Agreement, (ii) the incumbency and
signatures of those of its officers or general partners, as applicable,
authorized to act with respect to this Amendment Agreement and each such other
Loan Document executed by it and (iii) the full force and validity of its
Organic Documents and true and complete copies of all amendments thereto since
the Closing Date, upon which certificate each Agent, the Documentation Agent,
the Issuer and each Lender may conclusively rely until it shall have received a
further certificate of the Secretary, Assistant Secretary or general partners,
as applicable, of such Obligor canceling or amending such prior certificate.
SECTION 3.1.3. OPINION OF COUNSEL. The Agents shall have received an
opinion, dated the Second Amendment Effective Date and addressed to the Agents,
the Documentation Agent and all of the Lenders from Latham & Watkins, special
New York counsel to each of the Obligors, in form and substance reasonably
satisfactory to the Agents and its counsel.
SECTION 3.1.4. AMENDMENT FEE. The Agents shall have received, (a) for
the account of each Lender that delivers an executed consent to the Amendment
Agreement to the Syndication Agent prior to 5:00 p.m., New York City time,
October 31, 2000, an amendment fee in an amount equal to .125% of each such
Lender's Percentage of the sum of (i) the outstanding principal amount of Term
Loans owing to such Lender on such date PLUS (ii) the sum of the products of
such Lender's relevant Percentage of each Commitment of such Lender to make
Revolving Loans multiplied by the relevant Revolving Loan Commitment Amount on
such date and (b) all fees, costs and expenses due and payable pursuant to
Sections 3.3 and 11.3 of the Credit Agreement to the extent then invoiced.
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SECTION 3.1.5. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be satisfactory in form and substance
to the Agents and their counsel. The Agents and their counsel shall have
received all information, approvals, opinions, documents or instruments as the
Agents or their counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lenders to execute and deliver this Amendment Agreement, each of the Borrower
and each Designated Guarantor hereby represents and warrants as set forth below:
(a) Both before and immediately after giving effect to this
Amendment Agreement,
(i) the representations and warranties set forth in
Article VI of the Credit Agreement (excluding, however, those
contained in Section 6.7 of the Credit Agreement) and each
other Loan Document are, in each case, true and correct
(unless stated to relate solely to an earlier date, in which
case such representations and warranties shall be true and
correct as of such earlier date);
(ii) except as disclosed by the Borrower or any
Designated Guarantor to the Agents, the Documentation Agent
and the Lenders pursuant to Section 6.7 of the Credit
Agreement
(A) no labor controversy, litigation,
arbitration or governmental investigation or
proceeding (including any relating to any
Pharmaceutical Law) is pending or, to the knowledge
of the Borrower or any Designated Guarantor,
threatened against the Borrower, any Designated
Guarantor or any of their respective Subsidiaries
which could reasonably be expected to have a Material
Adverse Effect or which purports to affect the
legality, validity or enforceability of this Second
Amendment, the Credit Agreement, the Notes or any
other Loan Document; and
(B) no development has occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding (including any relating
to any Pharmaceutical Law) disclosed pursuant to
Section 6.7 of the Credit Agreement which could
reasonably be expected to have a Material Adverse
Effect; and
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(iii) no Default has (or will have) occurred and is
(or will be) continuing, and neither the Borrower, any
Designated Guarantor nor any of their respective Subsidiaries
are in material violation of any law or governmental
regulation or court order or decree (including any
Pharmaceutical Law).
ARTICLE V
MISCELLANEOUS
SECTION 5.1. CROSS-REFERENCES. References in this Amendment Agreement
to any Article or Section are, unless otherwise specified or otherwise required
by the context, to such Article or Section of this Amendment Agreement.
SECTION 5.2. LOAN DOCUMENT PURSUANT TO CREDIT AGREEMENT. This Amendment
Agreement is a Loan Document executed pursuant to the Credit Agreement and shall
be construed, administered and applied in accordance with all of the terms and
provisions of the Credit Agreement.
SECTION 5.3. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 5.4. COUNTERPARTS. This Amendment Agreement may be executed by
the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 5.5. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the signatories hereto have caused this Amendment
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BORROWER:
DUANE READE
By Duane Reade Inc., a general partner
By _______________________________
Title:
By DRI I Inc., a general partner
By _______________________________
Title:
PARENT GUARANTORS:
DUANE READE INC.
By ____________________________________
Title:
DRI I INC.
By ____________________________________
Title:
AFFILIATE GUARANTORS:
DUANE READE INTERNATIONAL, INC.
By ____________________________________
Title:
DUANE READE REALTY, INC.
By ____________________________________
Title:
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AGENTS:
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent
By ____________________________________
Title:
FLEET NATIONAL BANK, as the
Administrative Agent
By ____________________________________
Title:
