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Exhibit 10.26

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

        THIS AMENDMENT (the "Amendment") is made effective as of the 16th day of
June 2002 and shall hereby constitute the third amendment to the employment
agreement, dated October 27, 1997, and effective as of June 18, 1997, as amended
on March 13, 2000 and May 21, 2001 (the "Agreement"), and is made by and between
Duane Reade Inc., a Delaware corporation (the "Company"), and Anthony Cuti (the
"Executive"). Capitalized terms that are not otherwise defined in this Amendment
shall have the meanings assigned to them in the Agreement.

WITNESSETH:

        WHEREAS, the Executive and the Company entered into the Agreement,
effective June 18, 1997, and Executive is currently employed by the Company
under the Agreement; and

        WHEREAS, pursuant to Section 34 of the Agreement, the Company and the
Executive may amend the Agreement by an instrument in writing, signed by the
Executive and the Chairman of the Board of Directors of the Company; and

        WHEREAS, the parties desire to enter into this Amendment, which
Amendment shall be effective as of the date first set forth above;

        NOW THEREFORE, and in consideration of the foregoing and the mutual
agreements set forth herein, the parties, intending to be legally bound, agree
as follows:

        1.    Amendments.    

        (a)  Definitions.    (i) Under Section 1 of the Employment Agreement,
the following definition is hereby added after the definition of the definition
of "Affiliate" and before the definition of "Base EBITDA Target":

        "Annual Post-2004 Enhancement" shall mean, as of December 1, 2004 and
each anniversary thereof (each, an "Extension Date"), a compensation and
benefits package offered by the Company to the Executive that includes all of
the following:

        (i)    a Base Salary and Incentive Bonus each in an amount at least 75%
greater than the corresponding amounts in effect immediately prior to such
Extension Date;

        (ii)  a SERP Payment equal to an annual retirement benefit payable
during the Executive's lifetime of at least 100% of the Earnings Amount; and

        (iii)  other terms and provisions identical to those set forth in this
Agreement.

The parties to this Agreement acknowledge and agree that any Annual Post-2004
Enhancement will require the Company to provide the Executive with a SERP
Payment in accordance with the terms of this definition in lieu of, and not in
addition to, the SERP Payment described under Section 15(a) below.

        (ii)  The definition of "Sale of the Company" under Section 1 of the
Employment Agreement is hereby deleted in its entirety and replaced by the
following:

        "Sale of the Company" shall mean the consummation of one of the
following events:

        (i)    any Independent Third Party is or becomes the Beneficial Owner
(as defined below), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities. For purposes of this Agreement, the term "Beneficial
Owner" shall have the meaning given to such term in Rule 13d-3 under the
Exchange Act;

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        (ii)  the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation (or other entity), other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 25% of the combined voting power of the
Company's then outstanding securities shall not constitute a Sale of the
Company;

        (iii)  any stockholder of the Company acquires (or has the right to
acquire) 50% or more of the Company's outstanding Common Stock;

        (iv)  the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets;

        (v)  the date that all of the following shall have occurred: (A) DLJ
ceases to own at least 1,200,000 shares of Common Stock; (B) on the Extension
Date, the Company has not offered the Executive the Annual Post-2004
Enhancement; and (C) a Termination Date; or

        (vi)  the date on which the individuals who, as of the Effective Date,
constitute the Board, and subsequently elected members of the Board whose
election is approved or recommended by at least a majority of such current
members, or their successors whose election was so approved or recommended
(other than any subsequently elected members whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board), cease
for any reason to constitute at least a majority of the Board.

        (b)  Term of Employment.    Section 2(a) of the Employment Agreement is
hereby deleted in its entirety and replaced by the following:

        (a)  The Company will employ the Executive and the Executive will enter
the employ of the Company, for the period set forth in this Section 2, in the
positions set forth in Section 3 and upon the other terms and conditions herein
provided. The initial term of employment under this Agreement (the "Initial
Term") will be for the period beginning on the Start Date and ending on such
date as the Agreement is superceded by a new employment agreement between the
Company and the Executive, unless earlier terminated as provided in Section 17.

        2.    Continuing Effect of the Agreement.    The Agreement shall
continue in full force and effect as amended herein.

        3.    Counterparts.    This Amendment may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.

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        IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.

    THE EXECUTIVE
 
 

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Anthony Cuti
440 Ninth Avenue
New York, New York 10001
 
 
DUANE READE INC.
 
 
By:
 

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Name: Anthony Cuti
Title: Chairman of the Board
(In compliance with the employment
agreement, dated October 27, 1997, and
effective as of June 18, 1997)
 
 
By:
 

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Name: David Jaffe
Title: Chairman of the Compensation
Committee of the Board of
Directors

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Exhibit 10.26

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT