**Exhibit 10.6**

 

**CONFORMED COPY**

 

 

**PublishedCUSIP Number: 26358GAA5**

** **

**$155,000,000 SENIORSECURED TERM CREDIT AGREEMENT**

** **

**dated as of July 30, 2004**

** **

**among**

** **

**DUANE READE HOLDINGS,INC.,**

** **

**DUANE READE, INC.,**

** **

**DUANE READE(a New York general partnership),**

** **

**THE CO-BORROWERS FROMTIME TO TIME PARTY HERETO,**

** **

**THE LENDERS FROM TIME TOTIME PARTY HERETO,**

** **

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

** **

**CREDIT SUISSE FIRSTBOSTON, CAYMAN ISLANDS BRANCH,as Syndication Agent,**

** **

**and**

** **

**CITICORP NORTH AMERICAINC.**

**WELLS FARGO BANK,NATIONAL ASSOCIATION,as Co-Documentation Agents**

 

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** **

**BANC OF AMERICASECURITIES LLC**

**CREDIT SUISSE FIRSTBOSTON, CAYMAN ISLANDS BRANCH,as Joint Lead Arrangers**

** **

**BANCOF AMERICA SECURITIES LLCCREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCHCITIGROUP GLOBAL MARKETS INC.,as Joint Book Managers**

 

 

 

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**Table of Contents***

** **
| **ARTICLE I  DEFINITIONS AND ACCOUNTING TERMS**         |       |
|---------------------------------------------------------|------------|
|                                                    |       |
| Section 1.01                                            |       | Defined Terms |   |
| Section 1.02                                            |       | Other Interpretative Provisions |   |
| Section 1.03                                            |       | Accounting Terms and Determinations |   |
| Section 1.04                                            |       | Annualization; Rounding |   |
| Section 1.05                                            |       | References to Agreements and Laws |   |
| Section 1.06                                            |       | Times of Day |   |
|                                                    |       |   |   |
| **ARTICLE II  THE CREDIT FACILITY**                     | ** ** |
| ** **                                              | ** ** |
| Section 2.01                                            |       | Commitments to Lend |   |
| Section 2.02                                            |       | Notice of Borrowing |   |
| Section 2.03                                            |       | Funding of Loans. |   |
| Section 2.04                                            |       | Evidence of Loans. |   |
| Section 2.05                                            |       | Interest. |   |
| Section 2.06                                            |       | Extension and Conversion. |   |
| Section 2.07                                            |       | Maturity of Loans |   |
| Section 2.08                                            |       | Prepayments; Change of Control. |   |
| Section 2.09                                            |       | Replacement of Lenders |   |
| Section 2.10                                            |       | Fees |   |
| Section 2.11                                            |       | Pro-rata Treatment |   |
| Section 2.12                                            |       | Sharing of Payments |   |
| Section 2.13                                            |       | Payments; Computations. |   |
|                                                    |       |   |   |
| **ARTICLE III  TAXES, YIELD PROTECTION AND ILLEGALITY** | ** ** |
|                                                    | ** ** |
| Section 3.01                                            |       | Taxes. |   |
| Section 3.02                                            |       | Illegality |   |
| Section 3.03                                            |       | Inability to Determine Rates |   |
| Section 3.04                                            |       | Increased Costs and Reduced Return;  Capital Adequacy. |   |
| Section 3.05                                            |       | Funding Losses |   |
| Section 3.06                                            |       | Base Rate Loans Substituted for Affected  Eurodollar Loans |   |
| Section 3.07                                            |       | Survival |   |
|                                                    |       |   |   |
| **ARTICLE IV  CONDITIONS PRECEDENT TO LOANS**           | ** ** |
| ** **                                              | ** ** |
| Section 4.01                                            |       | Conditions to Closing |   |

 

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*                 TheTable of Contents is not part of the Credit Agreement.

 

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| **ARTICLE V  REPRESENTATIONS AND WARRANTIES** | ** ** |
|-----------------------------------------------|------------|
|                                          | ** ** |
| Section 5.01                                  |       | Existence, Qualification and Power;  Compliance with Laws |   |
| Section 5.02                                  |       | Authorization; No Contravention |   |
| Section 5.03                                  |       | Governmental Authorization; Other Consents |   |
| Section 5.04                                  |       | Binding Effect |   |
| Section 5.05                                  |       | Financial Condition; No Material Adverse  Effect. |   |
| Section 5.06                                  |       | Litigation |   |
| Section 5.07                                  |       | No Default |   |
| Section 5.08                                  |       | Ownership of Property; Liens |   |
| Section  5.09                                 |       | Environmental  Compliance |   |
| Section  5.10                                 |       | Insurance |   |
| Section  5.11                                 |       | Taxes |   |
| Section  5.12                                 |       | ERISA  Compliance. |   |
| Section 5.13                                  |       | Subsidiaries |   |
| Section 5.14                                  |       | Margin Regulations; Investment Company  Act; Public Utility Holding Company Act. |   |
| Section 5.15                                  |       | Disclosure |   |
| Section 5.16                                  |       | Compliance with Law |   |
| Section 5.17                                  |       | Intellectual Property |   |
| Section 5.18                                  |       | Purpose of Loans |   |
| Section 5.19                                  |       | Labor Matters |   |
| Section 5.20                                  |       | Solvency |   |
| Section 5.21                                  |       | Collateral Documents. |   |
| Section 5.22                                  |       | Securities of the Company |   |
| Section  5.23                                 |       | Certain  Transactions. |   |
|                                          |       |   |   |
| **ARTICLE  VI  AFFIRMATIVE COVENANTS**        | ** ** |
| ** **                                    | ** ** |
| Section  6.01                                 |       | Financial  Statements |   |
| Section  6.02                                 |       | Certificates;  Other Information |   |
| Section  6.03                                 |       | Notices |   |
| Section  6.04                                 |       | Payment  of Obligations |   |
| Section  6.05                                 |       | Preservation  of Existence Etc |   |
| Section  6.06                                 |       | Maintenance  of Properties |   |
| Section 6.07                                  |       | Insurance; Certain Proceeds. |   |
| Section 6.08                                  |       | Compliance with Law |   |
| Section 6.09                                  |       | Books and Records; Lender Meeting |   |
| Section 6.10                                  |       | Inspection Rights |   |
| Section 6.11                                  |       | Use of Proceeds |   |
| Section 6.12                                  |       | Additional Loan Parties; Additional  Security. |   |
| Section 6.13                                  |       | Interest Rate Protection Agreements |   |
| Section 6.14                                  |       | Contributions |   |
| Section 6.15                                  |       | Repurchase of Existing Convertible Notes;  Maintenance of Minimum Availability Under ABL Credit Agreement |   |
| Section 6.16                                  |       | Co-Borrowers |   |

 

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| **ARTICLE VII  NEGATIVE COVENANTS** | ** ** |
|-------------------------------------|------------|
| ** **                          | ** ** |
| Section 7.01                        |       | Incurrence of Indebtedness |   |
| Section  7.02                       |       | Restriction  on Liens |   |
| Section 7.03                        |       | Nature of Business |   |
| Section  7.04                       |       | Consolidation,  Merger and Dissolution |   |
| Section  7.05                       |       | Asset  Dispositions |   |
| Section 7.06                        |       | Investments. |   |
| Section 7.07                        |       | Restricted Payments, etc |   |
| Section 7.08                        |       | Prepayments of Indebtedness, etc. |   |
| Section 7.09                        |       | Transactions with Affiliates |   |
| Section 7.10                        |       | Fiscal Year; Organizational and Other  Documents |   |
| Section 7.11                        |       | Restrictions with Respect to  Intercorporate Transfers |   |
| Section 7.12                        |       | Ownership of Subsidiaries; Limitations on  Holdings and the Borrower. |   |
| Section 7.13                        |       | Sale and Leaseback Transactions |   |
| Section 7.14                        |       | Impairment of Security Interests |   |
| Section 7.15                        |       | No Other “Designated Senior Indebtedness” |   |
| Section 7.16                        |       | Financial Covenants. |   |
| Section 7.17                        |       | Independence of Covenants |   |
|                                |       |   |   |
| **ARTICLE VIII  DEFAULTS**          | ** ** |
| ** **                          | ** ** | ** ** | ** ** |
| Section 8.01                        |       | Events of Default |   |
| Section 8.02                        |       | Acceleration; Remedies |   |
| Section 8.03                        |       | Allocation of Payments After Event of  Default. |   |
|                                |       |   |   |
| **ARTICLE IX  AGENCY PROVISIONS**   | ** ** |
| ** **                          | ** ** |
| Section 9.01                        |       | Appointment and Authorization of the  Administrative Agent. |   |
| Section 9.02                        |       | Delegation of Duties |   |
| Section 9.03                        |       | Exculpatory Provisions |   |
| Section 9.04                        |       | Reliance on Communications. |   |
| Section 9.05                        |       | Notice of Default |   |
| Section 9.06                        |       | Credit Decision; Disclosure of Information  by Administrative Agent; No Reliance on Arranger’s or Agents’ Customer  Identification Program. |   |
| Section 9.07                        |       | Indemnification |   |
| Section 9.08                        |       | Administrative Agent in Its Individual  Capacity |   |
| Section 9.09                        |       | Successor Agents |   |
| Section 9.10                        |       | Administrative Agent May File Proofs of  Claim |   |
| Section 9.11                        |       | Collateral and Guaranty Matters |   |
| Section 9.12                        |       | Other Agents; Arrangers and Managers |   |
| Section 9.13                        |       | Agents’ Fees; Joint Lead Arranger Fee |   |
|                                |       |   |   |
| **ARTICLE X  MISCELLANEOUS**        | ** ** |
| ** **                          | ** ** | ** ** | ** ** |
| Section  10.01                      |       | Amendments,  Etc. |   |
| Section 10.02                       |       | Notices and Other Communications;  Facsimile Copies. |   |

 

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| Section 10.03 |   | No Waiver; Cumulative Remedies                                   |   |
|---------------|--------|------------------------------------------------------------------|--------|
| Section 10.04 |   | Attorney Costs, Expenses and Taxes                               |   |
| Section 10.05 |   | Indemnification                                                  |   |
| Section 10.06 |   | Payments Set Aside                                               |   |
| Section 10.07 |   | Successors and Assigns.                                          |   |
| Section 10.08 |   | Confidentiality and Disclosure                                   |   |
| Section 10.09 |   | Set-off                                                          |   |
| Section 10.10 |   | Interest Rate Limitation                                         |   |
| Section 10.11 |   | Counterparts                                                     |   |
| Section 10.12 |   | Integration                                                      |   |
| Section 10.13 |   | Survival of Representations and  Warranties                      |   |
| Section 10.14 |   | Severability                                                     |   |
| Section 10.15 |   | Tax Forms.                                                       |   |
| Section 10.16 |   | Headings                                                         |   |
| Section 10.17 |   | Governing Law; Submission to  Jurisdiction.                      |   |
| Section 10.18 |   | Waiver of Right to Trial by Jury                                 |   |
| Section 10.19 |   | USA Patriot Act Notice; Lenders’  Compliance Certification. |   |
| Section 10.20 |   | Defaulting Lenders                                               |   |
| Section 10.21 |   | Binding Effect                                                   |   |
| Section 10.22 |   | Conflict                                                         |   |

 
| **Schedules:**      |   |                                                                   |
|---------------------|--------|------------------------------------------------------------------------|
|                |   |                                                                   |
| Schedule 1.01A | -      | Consolidated EBITDA                                                    |
| Schedule 1.01B | -      | Management Group                                                       |
| Schedule 1.01C      | -      | Fixed Charge Coverage Ratio                                            |
| Schedule 1.01D      | -      | ABL Priority Collateral                                                |
| Schedule 2.01  | -      | Lenders and Commitments                                                |
| Schedule 5.03  | -      | Required Consents, Authorizations, Notices and  Filings                |
| Schedule 5.06  | -      | Litigation                                                             |
| Schedule 5.12       | -      | ERISA Matters                                                          |
| Schedule 5.13  | -      | Subsidiaries                                                           |
| Schedule 5.17  | -      | Intellectual Property                                                  |
| Schedule 5.22  | -      | Ownership of the Company                                               |
| Schedule 7.01       | -      | Existing Indebtedness                                                  |
| Schedule 7.02       | -      | Existing Liens                                                         |
| Schedule 7.06       | -      | Investments                                                            |
| Schedule 7.07(iii)  | -      | Redemption/repurchase of Equity Interests:  Employment Agreements |
| Schedule 7.07(vii)  | -      | Restricted Payments to be made on the Closing Date                     |
| Schedule 7.09       | -      | Transactions with Affiliates                                           |
| Schedule 10.02 | -      | Administrative Agent’s Office, Certain Addresses for  Notices     |
|                |   |                                                                   |
| **Exhibits:**       |   |                                                                   |
|                |   |                                                                   |
| Exhibit A-1    | -      | Form of Notice of Borrowing                                            |
| Exhibit A-2    | -      | Form of Notice of Extension/Conversion                                 |
|                |   |                                                                   |
| Exhibit B      | -      | Form of Note                                                           |

 

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| Exhibit C   | -      | Form of Assignment and Assumption                                       |
|------------------|--------|-------------------------------------------------------------------------|
|             |   |                                                                    |
| Exhibit D   | -      | Form of Compliance Certificate                                          |
|             |   |                                                                    |
| Exhibit E   | -      | Form of Opinion of Counsel for the Borrower and the  Other Loan Parties |
|             |   |                                                                    |
| Exhibit F   | -      | Form of Guaranty                                                        |
|             |   |                                                                    |
| Exhibit G-1 | -      | Form of Security Agreement                                              |
| Exhibit G-2 | -      | Form of Pledge Agreement                                                |
| Exhibit G-3 | -      | Form of Perfection Certificate                                          |
|             |   |                                                                    |
| Exhibit H   | -      | Form of Intercompany Note                                               |
|             |   |                                                                    |
| Exhibit I   | -      | Form of Intercompany Note Subordination Provisions                      |
|             |   |                                                                    |
| Exhibit J   | -      | Form of Loan Party Accession Agreement                                  |
|             |   |                                                                    |
| Exhibit K   | -      | Form of OFAC/Anti-Terrorism Compliance Certificate                      |
|             |   |                                                                    |
| Exhibit L   | -      | [Reserved]                                                              |
|             |   |                                                                    |
| Exhibit M   | -      | Form of Co-Borrower Agreement                                           |
|             |   |                                                                    |
| Exhibit N   | -      | Form of Solvency Certificate                                            |

 

v

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**CREDIT AGREEMENT**

 

This Credit Agreement is entered into as of July 30,2004 among DUANE READE HOLDINGS, INC., a Delaware corporation (“Holdings”),DUANE READE, INC., a Delaware corporation (“the “Company”), DUANE READE,a New York general partnership (“Duane Reade”), the other Co-Borrowersfrom time to time party hereto, each lender from time to time party hereto(collectively, the “Lenders” and, individually, a “Lender”), BANKOF AMERICA, N.A., as Administrative Agent, CREDIT SUISSE FIRST BOSTON, CAYMANISLANDS BRANCH, as Syndication Agent, and CITICORP NORTH AMERICA INC. and WELLSFARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents.

 

Holdings, the Company and Duane Reade have requestedthe Lenders to provide a term loan facility in the aggregate principal amountof $155,000,000 for the purposes described herein.  The Lenders are willing to make the requestedcredit facility available on the terms and conditions set forth herein.  Accordingly, in consideration of the mutualcovenants and agreements herein contained, the parties hereto covenant andagree as follows:

 

# **ARTICLEI**DEFINITIONS AND ACCOUNTING TERMS

# ** **

## **Section1.01****  Defined Terms.**  As used in this Agreement, the followingterms shall have the meanings set forth below:

##  

“ABL Collateral Release Agreement” means theCollateral Release Agreement dated as of the date hereof among Duane Reade, theCompany, their respective subsidiaries and the ABL Facility Agent.

 

“ABL Credit Agreement” means the CreditAgreement dated as of July 21, 2003 among Duane Reade, as borrower, theCompany, DRI I, DR International and DR Realty, as facility guarantors, thebanks and other lending institutions party thereto from time to time, FleetNational Bank, as administrative agent and issuing bank, Fleet Retail FinanceInc., as collateral agent, Congress Financial Corporation, as documentationagent, General Electric Capital Corporation, as syndication agent, and FleetSecurities Inc., as arranger, as amended by Amendment No. 1 thereto dated as ofthe date hereof and as the same may be further amended, modified orsupplemented from time to time in accordance with the provisions thereof and ofthis Agreement.

 

“ABL Documents” means, collectively, the ABLCredit Agreement, together with any notes, guaranties, pledge agreements,security agreements, assignments, control agreements, lockbox letters or otherinstruments and agreements executed pursuant thereto, and the CollateralRelease Agreement, in each case together with all schedules and exhibitsthereto and as the same may be amended, modified or supplemented from time totime.

 

“ABL Facility Agent” means Fleet Retail GroupInc., as collateral agent for the lenders party from time to time to the ABLCredit Agreement.

 

“ABL Priority Collateral” has the meaning setforth on Schedule 1.01D.

 

“ABL Security Agreement Amendment” meansAmendment No. 1 dated as of July 30, 2004 to the Security Agreement dated as ofJuly 21, 2003 among Duane Reade, the Company, DRI I, DR International and DRRealty in favor of the ABL Facility Agent.

 

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“Accession Agreement” means a Loan PartyAccession Agreement, substantially in the form of Exhibit J hereto,executed and delivered by an Additional Subsidiary Guarantor after the ClosingDate in accordance with Section 6.12(a).

 

“Acquisition” means the transactionscontemplated by the DRI Merger Agreement.

 

“Acquisition Documents” means the DRI MergerAgreement, including all schedules and exhibits thereto, and all otherdocuments, agreements and instruments relating to the Acquisition, in each caseas the same may be amended, modified or supplemented from time to time inaccordance with the provisions thereof and of this Agreement.

 

“Additional Collateral Documents” has themeaning set forth in Section 6.12.

 

“Additional Subsidiary Guarantor” means eachPerson that becomes a Subsidiary Guarantor after the Closing Date by executionof an Accession Agreement as provided in Section 6.12.

 

“Adjusted Eurodollar Rate” means, for eachInterest Period for each Eurodollar Loan comprising part of the same Group, thequotient obtained (expressed as a decimal, carried out to five decimal places)by dividing (i) the applicable Eurodollar Rate for such Interest Period by (ii)1.00 minus the Eurodollar Reserve Percentage.

 

“Administrative Agent” means Bank of America,N.A., in its capacity as administrative agent under the Term Loan Documents, orany successor administrative agent.

 

“Administrative Agent’s Office” means theAdministrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02,or such other address or account as the Administrative Agent may from time totime notify the Company and the Lenders.

 

“Administrative Questionnaire” means anAdministrative Questionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person,another Person that directly, or indirectly through one or more intermediaries,Controls or is Controlled by or is under common Control with the Personspecified.

 

“Agent” means the Administrative Agent, theSyndication Agent, the Co-Documentation Agents or the Collateral Agent, and “Agents”means any two or more of them.

 

“Agent-Related Persons” means the AdministrativeAgent or the Collateral Agent, together with their respective Affiliates(including, in the case of Bank of America in its capacity as theAdministrative Agent, each of Banc of America Bridge LLC and Banc of AmericaSecurities LLC), and the officers, directors, employees, agents andattorneys-in-fact of such Persons and Affiliates.

 

“Agreement” means this Credit Agreement, asamended, modified or supplemented from time to time.

 

“Amerisource Bergen” means Amerisource BergenDrug Corporation, a Delaware corporation and successor to Bergen Brunswig DrugCompany, and its successors and assigns.

 

“Amerisource Bergen Agreement” means the PrimeVendor and Consignment Agreement dated November 12, 1999 between AmerisourceBergen and Duane Reade, as amended.

 

2

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modified or supplemented from time to time.

 

“Anti-Terrorism Laws” means any Laws relatingto terrorism or money-laundering, including, without limitation, (i) ExecutiveOrder No. 13224 on Terrorist Financing, effective September 24, 2001 andrelating to Blocking Property and Prohibiting Transactions with Persons WhoCommit, Threaten to Commit, or Support Terrorism, (ii) the U.S. Patriot Act,(iii) the International Emergency Economic Power Act, 50 U.S.C. §1701 et seq.,(iv) the Bank Secrecy Act, (v) the Trading with the Enemy Act, 50 U.S.C. App. 1et seq. and (vi) any related rules and regulations of the U.S. TreasuryDepartment’s Office of Foreign Assets Control or any other GovernmentalAuthority, in each case as the same may be amended, supplemented, modified,replaced or otherwise in effect from time to time.

 

“Applicable Lending Office” means with respectto any Lender and for each Type of Loan, the “Lending Office” of such Lender(or of an Affiliate of such Lender) designated for such Type of Loan in suchLender’s Administrative Questionnaire or in any applicable Assignment andAssumption pursuant to which such Lender became a Lender hereunder or suchother office of such Lender (or of an Affiliate of such Lender) as such Lendermay from time to time specify to the Administrative Agent and the Borrower asthe office by which its Loans of such Type are to be made and maintained.

 

“Applicable Margin” means (i) for purposesof calculating the applicable interest rate for Eurodollar Loans, 3.25% and(ii) for purpose of calculating the applicable interest rate for Base RateLoans, 2.25%.

 

“Approved Fund” has the meaning set forth in Section 10.07(g).

 

“Asset Disposition” means any sale, lease,transfer or other disposition (including any such transaction effected by wayof merger or consolidation and including any sale or other disposition ofEquity Interests of a Subsidiary, but excluding any Equity Issuance or any saleor other disposition by way of Casualty or Condemnation) by any Group Companyof any asset; provided, however, that the following shall notconstitute Asset Dispositions:

 

#### (i)            salesof inventory and/or pharmacy files in the ordinary course of business for fairvalue;

####  

#### (ii)           anysale, lease, transfer or other disposition of any asset by a Borrower toanother Borrower or to any Subsidiary Guarantor if the Loan Parties shall be incompliance with the terms of Section 6.12 after giving effect to suchdisposition;

####  

#### (iii)          liquidations or sales of Cash Equivalents andForeign Cash Equivalents;

####  

#### (iv)          anysingle transaction or series of related transactions that involves assetshaving a fair market value of less than $1,000,000;

####  

#### (v)           dispositionsof obsolete, `damaged, worn-out or surplus tangible assets in the ordinarycourse of business and in a commercially reasonable manner;

####  

#### (vi)          anysale, lease or other transfer by a Subsidiary of the Company of all orsubstantially all or any part of its assets (including any such transactioneffected by way of merger or consolidation) to the Company or any Wholly-OwnedDomestic Subsidiary of the Company, so long as the security interests grantedto the Collateral Agent for the benefit of the Finance Parties pursuant to theCollateral Documents in such assets shall remain in full force and

 

3

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#### effect andperfected (to at least the same extent as in effect immediately prior to suchsale, lease or other transfer);

####  

#### (vii)         any sale, lease or other transfer by anynon-Wholly-Owned Domestic Subsidiary or Foreign Subsidiary of the Company ofall or any part of its assets (including any such transaction effected by wayof merger or consolidation) to any other non-Wholly-Owned Domestic Subsidiaryor Foreign Subsidiary of the Company, so long as the security interests grantedto the Collateral Agent for the benefit of the Finance Parties pursuant to theCollateral Documents in such assets shall remain in full force and effect andperfected (to at least the same extent as in effect immediately prior to suchsale, lease or other transfer);

####  

#### (viii)        sales or dispositions by Holdings or anySubsidiary of the Company of Equity Interests in Holdings or such Subsidiary toqualify directors where required by applicable Law or to satisfy otherrequirements of applicable Law with respect to the ownership of EquityInterests in Foreign Subsidiaries;

####  

#### (ix)           anylease, as lessor or sublessor, or license, as licensor or sublicensor, by anyGroup Company of real or personal property in the ordinary course of business;

####  

#### (x)            dispositionsof defaulted receivables and similar obligations in the ordinary course ofbusiness and not as part of an accounts receivable financing transaction; and

####  

#### (xi)           assignmentsof store leases in the ordinary course of business; provided that nomore than 20 store leases are assigned per year pursuant to this clause (xi).

####  

“Assignment and Assumption” means an Assignmentand Assumption, substantially in the form of Exhibit C hereto.

 

“Attorney Costs” means and includes all fees,expenses and disbursements of any law firm or other external counsel and,without duplication, the allocated cost of internal legal services and allexpenses and disbursements of internal counsel.

 

“Attributable Indebtedness” means at any date,without duplication, (i) in respect of any Capital Lease of any Person, thecapitalized amount thereof that would appear on a balance sheet of such Personprepared as of such date in accordance with GAAP, (ii) in respect of anySynthetic Lease Obligation of any Person, the capitalized or principal amountof the remaining lease payments under the relevant lease that would appear on abalance sheet of such Person prepared as of such date in accordance with GAAPif such lease or other agreement were accounted for as a Capital Lease and(iii) in respect of any Sale/Leaseback Transaction, the lesser of (A) thepresent value, discounted in accordance with GAAP at the debt rate implicit inthe related lease, of the obligations of the lessee for rental payments over theremaining term of such lease (including any period for which such lease hasbeen extended or may, at the option of the lessor be extended) and (B) the fairmarket value of the assets subject to such transaction.

 

“Audited Financial Statements” means the auditedconsolidated balance sheet of the Company and its Consolidated Subsidiaries foreach of the fiscal years ended December 29, 2001, December 28, 2002 andDecember 27, 2003, and the related consolidated statements of income oroperations, shareholders’ equity and cash flows for the fiscal year of theCompany and its Consolidated Subsidiaries then ended, including the notesthereto.

 

“Bank of America” means Bank of America, N.A.,a national banking association, and its successors.

 

4

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“Bank Secrecy Act” means the FinancialRecordkeeping and Reporting of Currency and Foreign Transactions Act of 1970,31 U.S.C. 1051, et seq., as the same may be amended, supplemented, modified,replaced or otherwise in effect from time to time.

 

“Base Rate” means, for any day, a rate perannum equal to the higher of (i) the Federal Funds Rate plus 1⁄2 of 1% and (ii)the rate of interest in effect for such day as publicly announced from time totime by Bank of America as its “prime rate”. The “prime rate” is a rate set by Bank of America based upon variousfactors including Bank of America’s costs and desired return, general economicconditions and other factors, and is used as a reference point for pricing someloans, which may be priced at, above or below such announced rate.  Any change in such rate announced by Bank ofAmerica shall take effect at the opening of business on the day specified inthe public announcement of such change.

 

“Base Rate Loan” means a Loan that bears interestbased on the Base Rate.

 

“Borrower” means (i) the Company, (ii) DuaneReade and (iii) any additional Co-Borrower party hereto from time to time, and“Borrowers” means any two or more of them.

 

“Borrower Materials” has the meaning set forthin Section 6.02.

 

“Business Acquisition” means the acquisition bythe Company or one or more of its Wholly-Owned Subsidiaries of all of theEquity Interests of, or all (or any division, line of business or anysubstantial part) of the assets or property of, another Person.

 

“Business Day” means any day other than aSaturday, Sunday or other day on which commercial banks are authorized to closeunder the Laws of, or are in fact closed in, the state where the AdministrativeAgent’s Office is located, except that if such day relates to a borrowing of, apayment or prepayment of principal of or interest on, or the Interest Periodfor, a Eurodollar Loan, or a notice by a Borrower with respect to any suchborrowing, payment, prepayment or Interest Period, such day shall also be a dayon which dealings in Dollar deposits are conducted by and between banks in theLondon interbank eurodollar market.

 

“Capital Lease” of any Person means any leaseof (or other arrangement conveying the right to use) property (whether real,personal or mixed) by such Person as lessee which would, in accordance withGAAP, be required to be accounted for as a capital lease on the balance sheetof such Person.

 

“Capital Lease Obligations” means, with respectto any Person, all obligations of such Person as lessee under Capital Leases,in each case taken at the amount thereof accounted for as liabilities inaccordance with GAAP.

 

“Capitalization Documents” has the meaning setforth in Section 4.01(f).

 

“Cardinal Reserve” means, at any date, theamount reserved on the balance sheet of the Company for estimated losses inlitigation relating to the Company’s ongoing dispute with Cardinal Health.

 

“Cash Equivalents” means:

 

#### (i)            securitiesissued or directly and fully guaranteed or insured by the United States ofAmerica or any agency or instrumentality thereof (provided that the fullfaith and credit

 

5

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#### of the UnitedStates of America is pledged in support thereof) having maturities of not morethan one year from the date of acquisition;

####  

#### (ii)           Dollar-denominatedcertificates of deposit of (A) any Lender, (B) any domestic commercial bank ofrecognized standing having capital and surplus in excess of $500,000,000 or (C)any bank whose short-term commercial paper rating from S&P is at least A-1or the equivalent thereof or from Moody’s is at least P-1 or the equivalentthereof (any such bank being an “Approved Lender”), in each case withmaturities of not more than 180 days from the date of acquisition;

####  

#### (iii)          commercial paper and variable or fixed ratenotes issued by any Approved Lender (or by the parent company thereof) or anyvariable rate notes issued by, or guaranteed by, any domestic corporation notan Affiliate of the Company rated A-1 (or the equivalent thereof) or better byS&P or P-1 (or the equivalent thereof) or better by Moody’s and maturingwithin 270 days of the date of acquisition;

####  

#### (iv)          repurchaseagreements with a term of not more than 30 days with a bank or trust company(including any of the Lenders) or recognized securities dealer having capitaland surplus in excess of $500,000,000 for direct obligations issued by or fullyguaranteed by the United States of America in which the Company or one or moreof its Subsidiaries shall have a perfected first priority security interest(subject to no other Liens) and having, on the date of purchase thereof, a fairmarket value of at least 100% of the amount of the repurchase obligations; and

####  

#### (v)           Investments,classified in accordance with GAAP as current assets, in money marketinvestment programs registered under the Investment Company Act of 1940, asamended, which are administered by reputable financial institutions havingcapital of at least $500,000,000 and the portfolios of which are limited toInvestments of the character described in the foregoing clauses (i)through (iv).

####  

“Casualty” means any casualty, loss, damage,destruction or other similar loss with respect to real or personal property orimprovements.

 

“Casualty Insurance Policy” means any insurancepolicy maintained by any Group Company covering losses with respect toCasualties.

 

“Change of Control” means a “change of control”as defined (i) in the ABL Credit Agreement or (ii) the Senior Subordinated NoteIndenture.

 

“Change of ControlOffer” has the meaning set forth in Section 2.08(c).

 

“Change of ControlPrepayment Date” has the meaning set forth in Section 2.08(c).

 

“Change of ControlPrepayment Premium” has the meaning set forth in Section 2.08(c).

 

“Closing Date”means the date on or after the Effective Date when the borrowing of the TermLoans occurs in accordance with Section 4.01.

 

“Closing Date EquityIssuance” has the meaning set forth in Section 4.01(f).

 

6

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“Co-Borrower”means each Subsidiary of the Company which becomes a co-borrower hereunder onor after the Closing Date by execution and delivery of a Co-Borrower Agreement.

 

“Co-Borrower Agreement” means a Co-BorrowerAgreement, substantially in the form of Exhibit M hereto, executed byone or more Subsidiaries of the Company agreed to by the Joint Lead Arrangers,in each case as a Co-Borrower hereunder and under the other Term LoanDocuments, and the Administrative Agent, as the same may be amended, modifiedor supplemented from time to time.

 

“Co-Documentation Agents” means Citicorp NorthAmerica Inc. and Wells Fargo Bank, National Association, in each case in theircapacity as co-documentation agent for the Lenders under the Term LoanDocuments.

 

“Code” means the Internal Revenue Code of 1986,as amended, and any successor statute thereto, as interpreted by the rules andregulations issued thereunder, in each case as in effect from time to time.

 

“Collateral” means all of the property which issubject or is purported to be subject to the Liens granted by the CollateralDocuments.

 

“Collateral Agent” means Bank of America, N.A.,a national banking association, in its capacity as collateral agent for theFinance Parties under the Collateral Documents, and its successor or successorsin such capacity.

 

“Collateral Documents” means, collectively, theSecurity Agreement, the Pledge Agreement, the Depositary Bank Agreements, anyAdditional Collateral Documents, any additional pledges, security agreements,patent, trademark or copyright filings or mortgages required to be deliveredpursuant to the Term Loan Documents and any instruments of assignment, controlagreements, lockbox letters or other instruments or agreements executedpursuant to the foregoing.

 

“Commitment” means, with respect to any Lender,the commitment of such Lender to make a single term Loan on the Closing Date ina principal amount equal to such Lender’s Commitment Percentage of theCommitted Amount.

 

“Commitment Percentage” means, for each Lender,the percentage (carried out to the ninth decimal place) identified as itsCommitment Percentage on Schedule 2.01.

 

“Committed Amount” means $155,000,000.

 

“Company” means Duane Reade Inc., a Delawarecorporation, and its successors.

 

“Compliance Certificate” means a certificate substantiallyin the form of Exhibit D hereto.

 

“Condemnation” means any taking of property orassets, or any part thereof or interest therein, for public or quasi-public useunder the power of eminent domain, by reason of any public improvement orcondemnation or in any other manner.

 

“Condemnation Award” means all proceeds of anyCondemnation or transfer in lieu thereof.

 

7

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“Consolidated Adjusted Working Capital” meansat any date the excess of (i) Consolidated Current Assets (excluding cash andCash Equivalents classified as such in accordance with GAAP) over (ii)Consolidated Current Liabilities (excluding the current portion of anyConsolidated Funded Indebtedness).

 

“Consolidated Capital Expenditures” means forany period the aggregate amount of all expenditures (whether paid in cash orother consideration or accrued as a liability) that would, in accordance withGAAP, be included as additions to property, plant and equipment and othercapital expenditures of the Company and its Consolidated Subsidiaries for suchperiod, as the same are or would be set forth in a consolidated statement ofcash flows of the Company and its Consolidated Subsidiaries for such period(including the amount of assets leased under any Capital Lease), but excluding(to the extent that they would otherwise be included) any such expendituresmade for the replacement or restoration of assets to the extent paid for by anyCasualty Insurance Policy or Condemnation Award with respect to the asset orassets being replaced or restored to the extent such expenditures are permittedunder the Term Loan Documents.

 

“Consolidated Current Assets” means at any datethe consolidated current assets of the Company and its ConsolidatedSubsidiaries determined as of such date.

 

“Consolidated Current Liabilities” means at anydate (i) the consolidated current liabilities of the Company and itsConsolidated Subsidiaries plus (ii) all Guaranty Obligations of the Company orany Consolidated Subsidiary of the Company in respect of the currentliabilities of any Person (other than the Company or a Consolidated Subsidiaryof the Company), all determined as of such date.

 

“Consolidated EBITDA” means for any period thesum of:

 

#### (i)            ConsolidatedNet Income for such period (excluding therefrom (x) any extraordinary item ofgain or loss and (y) any gain or loss from discontinued operations); plus

####  

#### (ii)           anamount, without duplication, which, in the determination of Consolidated NetIncome for such period, has been deducted for (A) Consolidated InterestExpense, (B) lease expense in respect of Synthetic Lease Obligations andSale/Leaseback Transactions accounted for as Operating Leases under GAAP, (C)provisions for Federal, state and local income and similar taxes, (D) depreciation,amortization (including, without limitation, amortization of goodwill and otherintangible assets), impairment of goodwill and other non-recurring, non-cashcharges (including deferred rent expense, but excluding any such non-cashcharge to the extent that it represents (x) amortization of a prepaid cashexpense that was paid in a prior period or (y) other than any NLRB Accrual forsuch period, an accrual of, or a reserve for, cash charges or expenses in anyfuture period), (E) any losses (or minus any gains) realized upon thedisposition of property outside the ordinary course of business, (F)adjustments in respect of the items, for the periods, and in amounts notexceeding the respective amounts therefor, set forth on Schedule 1.01Ahereto, (G) any financial advisory fees, accounting fees, legal fees and othersimilar advisory and consulting fees and related out-of-pocket expensesincurred as a result of the Acquisition or in connection with the earlyredemption of the Existing Convertible Notes and deducted from net incomeduring the period ending December 31, 2004, (H) any underwriting fees,amendment fees, closing fees, out-of-pocket fees and other fees incurred inconnection with the Loans and the other financings contemplated by this Agreement,(I) Permitted Management Fees paid in accordance with Section 7.09(i)hereof, (J) Executive Compensation Payments, (K) non-recurring cash charges setforth on Schedule 1.01A and (L) non-cash compensation charges and othernon-cash expenses or charges arising from the grant of or issuance or repricingof

 

8

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#### Equity Interestsor other equity-based awards or any amendment or substitution of any EquityInterest or other equity-based awards, all determined in accordance with GAAP;minus

####  

#### (iii)          any amount which, in the determination ofConsolidated Net Income for such period, has been added for any non-cash incomeor non-cash gains, all as determined in accordance with GAAP.

####  

For purposes of calculating Consolidated EBITDA forany period of four consecutive fiscal quarters (each, a “Reference Period”)pursuant to any determination of the Leverage Ratio, the Interest CoverageRatio or the Fixed Charge Coverage Ratio, if during such Reference Period (orin the case of pro-forma calculations, during the period from the last day ofsuch Reference Period to and including the date as of which such calculation ismade) any Group Company shall have made an Asset Disposition or a PermittedBusiness Acquisition, Consolidated EBITDA for such Reference Period shall becalculated after giving effect thereto on a Pro-Forma Basis giving effect toprojected or anticipated cost savings and synergies permitted or required byRegulations S-K or S-X under the Securities Act or otherwise agreed to by theAdministrative Agent in its reasonable discretion.

 

“Consolidated Funded Indebtedness” means at anydate the Funded Indebtedness of the Company and its Consolidated Subsidiariesas of such date, determined on a consolidated basis.

 

“Consolidated Indebtedness” means at any datethe Indebtedness of the Company and its Consolidated Subsidiaries, determinedon a consolidated basis as of such date.

 

“Consolidated Interest Expense” means, for anyperiod, (i) the total interest expense of the Company and its ConsolidatedSubsidiaries, whether paid or accrued and whether or not capitalized(including, without limitation, amortization of debt issuance costs andoriginal issue discount, non-cash interest payments, the interest component ofany deferred payment obligations, the interest component of all payments underCapital Leases and under Operating Leases in respect of Sale/LeasebackTransactions and the implied interest component of Synthetic Lease Obligations(regardless of whether accounted for as interest expense under GAAP), allcommissions, discounts and other fees and charges owed with respect to lettersof credit and bankers’ acceptances and net costs in respect of Swap Obligationsconstituting interest rate swaps, collars, caps or other arrangements requiringpayments contingent upon interest rates of the Company and its ConsolidatedSubsidiaries), determined on a consolidated basis for such period; providedthat any interest on Indebtedness of another Person that is guaranteed by the Companyor any of its Consolidated Subsidiaries or secured by (or for which the holderof such Indebtedness has an existing right, contingent or otherwise, to besecured by) a Lien on, or payable out of the proceeds of the sale of orproduction from, assets of the Company or any of its Consolidated Subsidiaries(whether or not such guarantee or Lien is called upon) shall be included, minus(ii) the total interest income of the Company and its ConsolidatedSubsidiaries, determined on a consolidated basis for such period.

 

“Consolidated Net Income” means, for anyperiod, the net income (or net loss) after taxes of the Company and itsConsolidated Subsidiaries for such period, determined on a consolidated basisin accordance with GAAP; provided that, without duplication, (i) thereshall be excluded from the calculation of Consolidated Net Income for anyperiod (A) the income (or loss) of any Person in which any other Person (otherthan the Company or any of its Wholly-Owned Consolidated Subsidiaries) has anownership interest, except to the extent that any such income is actuallydistributed in cash to the Company or such Wholly-Owned Consolidated Subsidiaryduring such period, (B) the income (or loss) of any Person accrued prior to thedate it becomes a Consolidated Subsidiary of the Company or is merged with orinto or consolidated with the Company or any of its Consolidated Subsidiariesor that Person’s assets are acquired by the Company or any of its ConsolidatedSubsidiaries, except as provided in the

 

9

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definition of “Pro-Forma Basis” herein and (C)the income of any Subsidiary of the Company (other than a Loan Party) to theextent that the declaration or payment of Restricted Payments or similardistributions by that Subsidiary of that income is not at the time permitted byoperation of the terms of its charter or any agreement, instrument, judgment,decree, order, statute, rule or governmental regulation applicable to thatSubsidiary and (ii) there shall be deducted in the determination ofConsolidated Net Income for any period the aggregate amount of all RestrictedPayments exceeding $300,000 made by the Company to Holdings during such periodpursuant to Section 7.07(v) or (vi).

 

“Consolidated Scheduled Debt Payments” means,for any period, the sum of all scheduled payments of principal on ConsolidatedFunded Indebtedness (including, without limitation, Purchase MoneyIndebtedness, the principal component of Capital Lease Obligations and theprincipal component of payments under Operating Leases in respect ofSale/Leaseback Transactions and Synthetic Lease Obligations paid or payableduring such period), but excluding payments due on revolving loans andswingline loans during such period; provided that Consolidated ScheduledDebt Payments for any period shall not include voluntary prepayments ofConsolidated Funded Indebtedness, mandatory prepayments of the Loans or othermandatory prepayments (other than by virtue of scheduled amortization) ofConsolidated Funded Indebtedness (but Consolidated Scheduled Debt Payments fora period shall be adjusted to reflect the effect on scheduled payments ofprincipal for such period of the application of any mandatory prepayments ofConsolidated Funded Indebtedness during or preceding such period).

 

“Consolidated Subsidiary” means with respect toany Person at any date any Subsidiary of such Person or other entity theaccounts of which would be consolidated with those of such Person in itsconsolidated financial statements if such statements were prepared as of suchdate in accordance with GAAP.

 

“Contractual Obligation” means, as to anyPerson, any provision of any security issued by such Person or of anyagreement, instrument or other undertaking to which such Person is a party orby which it or any of its property is bound.

 

“Control” means the possession, directly orindirectly, of the power to direct or cause the direction of the management andpolicies of such Person, whether through the ability to exercise voting power,by contract or otherwise.  “Controlling”and “Controlled” have meanings correlative thereto.

 

“Debt Equivalents” of any Person means (i) anyEquity Interest of such Person which by its terms (or by the terms of anysecurity for which it is convertible or for which it is exchangeable orexercisable), or upon the happening of any event or otherwise, (A) matures oris mandatorily redeemable or subject to any mandatory repurchase requirement,pursuant to a sinking fund or otherwise, (B) is convertible into or exchangeablefor Indebtedness or Debt Equivalents or (C) is redeemable or subject to anyrepurchase requirement arising at the option of the holder thereof, in whole orin part, on or prior to the first anniversary of the Maturity Date and (ii) ifsuch Person is a Subsidiary of the Borrower, any Preferred Stock of suchPerson; provided, however, that an Equity Interest of any Personshall not constitute a Debt Equivalent solely because such Equity Interest issubject to a mandatory repurchase requirement upon the occurrence of any Changeof Control or Asset Disposition.

 

“Debt Issuance” means the issuance by any GroupCompany of any Indebtedness.

 

“Debtor Relief Laws” means the Bankruptcy Codeof the United States, and all other liquidation, conservatorship, bankruptcy,assignment for the benefit of creditors, moratorium, rearrangement,receivership, insolvency, reorganization, or similar debtor relief Laws of theUnited States or other applicable jurisdictions from time to time in effect andaffecting the rights of creditors generally.

 

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“Default” means any condition or event whichconstitutes an Event of Default or which with the giving of notice or lapse oftime or both would, unless cured or waived, become an Event of Default.

 

“Depositary Bank Agreement” means an agreementbetween a Loan Party and any bank or other depositary institution,substantially in the form of Exhibit D to the Security Agreement orotherwise in form and substance satisfactory to the Administrative Agent, asthe same may be amended, modified or supplemented from time to time.

 

“Dollars” and the sign “$” means lawfulmoney of the United States of America.

 

“Domestic Subsidiary” means with respect to anyPerson each Subsidiary of such Person that is organized under the laws of theUnited States or any political subdivision or any territory thereof, and “DomesticSubsidiaries” means any two or more of them.

 

“DR Acquisition” means Duane Reade AcquisitionCorp., a Delaware corporation.

 

“DR International” means Duane ReadeInternational, Inc., a Delaware corporation, and its successors.

 

“DR Realty” means Duane Reade Realty, Inc., aDelaware corporation, and its successors.

 

“DR Shareholders LLC” means Duane ReadeShareholders, LLC, a Delaware limited liability company, and its successors.

 

“DRI I” means, DRI I, Inc., a Delawarecorporation, and its successors.

 

“DRI Merger” means the merger of DR Acquisitionwith and into the Company, with the Company as the surviving entity of suchmerger.

 

“DRI Merger Agreement” means the Agreement andPlan of Merger dated as of December 22, 2003 among Holdings, DR Acquisition andthe Company, as amended by Amendment No. 1 dated as of June 10, 2004,Amendment No. 2 dated as of June 13, 2004 and Amendment No. 3 datedas of June 18, 2004, and as the same may be further amended, modified orsupplemented from time to time.

 

“Duane Reade” means Duane Reade, a New Yorkgeneral partnership, and its successors.

 

“Effective Date” means the date this Agreementbecomes effective in accordance with Section 10.21.

 

“Eligible Assignee” has the meaning set forthin Section 10.07(g).

 

“Employee Benefit Arrangements” means in anyjurisdiction the benefit schemes or arrangements in respect of any employees orpast employees operated by any Group Company or in which any Group Companyparticipates and which provide benefits on retirement, ill-health, injury,death or voluntary withdrawal from or termination of employment, includingtermination indemnity payments and life assurance and post-retirement medicalbenefits.

 

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“Environmental Laws” means any and all Federal,state, local, and foreign statutes, Laws, regulations, ordinances, rules,judgments, orders, decrees, permits, concessions, grants, franchises, licenses,agreements or governmental restrictions relating to pollution and theprotection of the environment or the release of any materials into theenvironment, including those related to hazardous substances or wastes, air emissionsand discharges to waste or public systems.

 

“Environmental Liability” means any liability,contingent or otherwise (including any liability for damages, costs ofremediation, fines, penalties or indemnities), of any Group Company resultingfrom or based on (i) violation of any Environmental Law, (ii) the generation,use, handling, transportation, storage, treatment or disposal of any HazardousMaterial, (iii) exposure to any Hazardous Material, (iv) the release orthreatened release of any Hazardous Material into the environment or (v) anycontract, agreement or other consensual arrangement pursuant to which liabilityis assumed or imposed with respect to any of the foregoing.

 

“Equity Equivalents” means with respect to anyPerson any rights, warrants, options, convertible securities, exchangeablesecurities, indebtedness or other rights, in each case exercisable for orconvertible or exchangeable into, directly or indirectly, Equity Interests ofsuch Person or securities exercisable for or convertible or exchangeable intoEquity Interests of such Person, whether at the time of issuance or upon thepassage of time or the occurrence of some future event.

 

“Equity Interests” means all shares of capitalstock, partnership interests (whether general or limited), limited liabilitycompany membership interests, beneficial interests in a trust and any otherinterest or participation that confers on a Person the right to receive a shareof profits or losses, or distributions of assets, of an issuing Person, butexcluding any debt securities convertible into such Equity Interests.

 

“Equity Issuance” means (i) any sale orissuance by any Group Company to any Person other than Holdings or aWholly-Owned Subsidiary of Holdings of any Equity Interests or any EquityEquivalents (other than any such Equity Equivalents that constituteIndebtedness) and (ii) the receipt by any Group Company of any cash capitalcontributions, whether or not paid in connection with any issuance of EquityInterests of any Group Company, from any Person other than Holdings or aWholly-Owned Subsidiary of Holdings.

 

“ERISA” means the Employee Retirement IncomeSecurity Act of 1974, as amended, and any rule or regulation issued thereunder.

 

“ERISA Affiliate” means each business or entitywhich is a member of a “controlled group of corporations”, under “commoncontrol” or an “affiliated service group” with a Group Company within themeaning of Section 414(b), (c) or (m) of the Code, or required to beaggregated with a Group Company under Section 414(o) of the Code or isunder “common control” with a Group Company, within the meaning ofSection 4001(a)(14) of ERISA.

 

“ERISA Event” means:

 

#### (i)            areportable event as defined in Section 4043 of ERISA and the regulationsissued under such Section with respect to a Plan, excluding, however, suchevents as to which the PBGC by regulation has waived the requirement ofSection 4043(a) of ERISA that it be notified within 30 days of theoccurrence of such event;

####  

#### (ii)           therequirements of Section 4043(b) of ERISA apply with respect to acontributing sponsor, as defined in Section 4001(a)(13) of ERISA, of anyPlan, and an event

 

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#### described inparagraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA isreasonably expected to occur with respect to such Plan within the following 30days;

####  

#### (iii)          the failure to meet the minimum fundingstandard of Section 412 of the Code with respect to any Plan other than aMultiemployer Plan (whether or not waived in accordance withSection 412(d) of the Code), the application for a minimum funding waiverunder Section 303 of ERISA with respect to any Plan other than aMultiemployer Plan, the failure to make by its due date a required installmentunder Section 412(m) of the Code with respect to any Plan or the failureto make any required contribution to a Multiemployer Plan;

####  

#### (iv)          theincurrence of any liability (or the reasonable expectation thereof) by a GroupCompany or any ERISA Affiliate pursuant to Title I or IV of ERISA or thepenalty or excise tax provisions of the Code relating to employee benefit plans(as defined in Section 3 of ERISA), or the occurrence or existence of anyevent, transaction or condition that could reasonably be expected to result inthe incurrence of any such liability by a Group Company or any ERISA Affiliate,or in the imposition of any lien on any of the rights, properties or assets ofa Group Company or any ERISA Affiliate, in either case pursuant to Title I orIV of ERISA or to such penalty or excise tax provisions of the Code or toSection 401(a)(29) or 412 of the Code;

####  

#### (v)           theprovision by the administrator of any Plan pursuant to Section 4041(a)(2)of ERISA of a notice (or the reasonable expectation of such provision ofnotice) of intent to terminate such Plan in a distress termination described inSection 4041(c) of ERISA, the institution by the PBGC of proceedings toterminate any Plan or the occurrence of any event or condition which mightconstitute grounds under ERISA for the termination of, or the appointment of atrustee to administer, any Plan;

####  

#### (vi)          thewithdrawal of a Group Company or ERISA Affiliate in a complete or partialwithdrawal (within the meaning of Section 4203 and 4205 of ERISA) from anyMultiemployer Plan if there is any potential material liability therefor, orthe receipt by a Group Company or ERISA Affiliate of notice from anyMultiemployer Plan that it is in reorganization or insolvency pursuant toSection 4241 or 4245 of ERISA, or that it intends to terminate or hasterminated under Section 4041A or 4042 of ERISA;

####  

#### (vii)         the imposition of liability (or the reasonableexpectation thereof) on a Group Company or ERISA Affiliate pursuant toSection 4062, 4063, 4064 or 4069 of ERISA or by reason of the applicationof Section 4212(c) of ERISA;

####  

#### (viii)        the assertion of a material claim (other thanroutine claims for benefits) against any Plan other than a Multiemployer Planor the assets thereof, or against a Group Company or ERISA Affiliate inconnection with any Plan;

####  

#### (ix)           thereceipt from the United States Internal Revenue Service of notice of thefailure of any Plan (or any other Employee Benefit Arrangement intended to bequalified under Section 401(a) of the Code) to qualify underSection 401(a) of the Code, or the failure of any trust forming part ofany Plan to qualify for exemption from taxation under Section 501(a) ofthe Code; or

####  

#### (x)            theestablishment or amendment by a Group Company or ERISA Affiliate of any WelfarePlan that provides post-employment welfare benefits in a manner that wouldincrease the liability of a Group Company.

 

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“Eurodollar Loan” means at any date a Loanwhich bears interest at a Eurodollar Rate.

 

“Eurodollar Rate” means for any Interest Periodwith respect to any Eurodollar Loan:

 

#### (i)            therate per annum equal to the rate determined by the Administrative Agent to bethe offered rate that appears on the page of the Telerate screen (or anysuccessor thereto) that displays an average British Bankers AssociationInterest Settlement Rate for deposits in Dollars (for delivery on the first dayof such Interest Period) with a term equivalent to such Interest Period,determined as of approximately 11:00 A.M. (London time) two Business Days priorto the first day of such Interest Period; or

####  

#### (ii)           ifthe rate referred to in clause (i) above does not appear on such page orservice or such page or service not be available, the rate per annum equal tothe rate determined by the Administrative Agent to be the offered rate on suchother page or other service that displays an average British BankersAssociation Interest Settlement Rate for deposits in Dollars (for delivery onthe first day of such Interest Period) with a term equivalent to such InterestPeriod, determined as of approximately 11:00 A.M. two Business Days prior tothe first day of such Interest Period; or

####  

#### (iii)          if the rates referenced in the preceding clauses(i) or (ii) are not available, the rate per annum determined by theAdministrative Agent as the rate of interest at which deposits in Dollars fordelivery on the first day of such Interest Period in same day funds in theapproximate amount of the Eurodollar Loan being made, continued or converted byBank of America (or, if Bank of America is not the Administrative Agent, theLender which is then the, or an Affiliate of, Administrative Agent), and with aterm equivalent to such Interest Period as would be offered by Bank ofAmerica’s (or such other Lender’s) London branch to major banks in the Londoninterbank eurodollar market at their request at approximately 4:00 P.M. (Londontime) two Business Days prior to the first day of such Interest Period.

####  

“Eurodollar Reserve Percentage” for any dayduring any Interest Period, the reserve percentage (expressed as a decimal,carried out to five decimal places) in effect on such day, whether or notapplicable to any Lender, under regulations issued from time to time by theBoard of Governors of the Federal Reserve System (or any other entity succeedingto the functions currently performed thereby) for determining the maximumreserve requirement (including any emergency, supplemental or other marginalreserve requirement) with respect to Eurocurrency funding (currently referredto as “Eurocurrency liabilities”).  TheAdjusted Eurodollar Rate for each outstanding Eurodollar Loan shall be adjustedautomatically as of the effective date of any change in the Eurodollar ReservePercentage.

 

“Event of Default” has the meaning set forth inSection 8.01.

 

“Excess Cash Flow” means for any period anamount (without duplication of any addition or subtraction) equal to (i)Consolidated EBITDA for such period plus (ii) all cash extraordinary gains, ifany, during such period (whether or not accrued in such period), plus (iii) (x)the decrease, if any, in Consolidated Adjusted Working Capital, less (y) thedecrease, if any, in the principal amount of all loans and other obligationsoutstanding under the ABL Credit Agreement, in each case from the first day tothe last day of such period, minus (iv) the amount, if any, which, in thedetermination of Consolidated Net Income for such period, has been included inrespect of income or gain from Asset Dispositions of the Company and itsConsolidated Subsidiaries, minus (v) the aggregate amount of ConsolidatedCapital Expenditures during such period not financed with the proceeds of anyDebt Issuance or Equity Issuance, minus (vi) Consolidated Interest Expenseactually paid in cash by the Company and its Consolidated Subsidiaries duringsuch period, minus (vii) Consolidated Cash Taxes actually paid by the Company

 

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during such period, minus (viii) ConsolidatedScheduled Debt Payments actually paid by the Company and its ConsolidatedSubsidiaries during such period, minus (ix) optional prepayments of the Loansduring such period minus (x) (x) the increase, if any, in Consolidated AdjustedWorking Capital less (y) the increase (other than as necessary to fund thepurchase of the Existing Convertible Notes in accordance with the ExistingConvertible Notes Tender Documents), if any, in the principal amount of allloans and other obligations outstanding under the ABL Credit Agreement, in eachcase from the first day to the last day of such period, minus (xi) theaggregate amount of all Restricted Payments actually paid in cash by theCompany and its Consolidated Subsidiaries during such period in accordance withSection 7.07(iv) and up to $300,000 of Restricted Payments actually paidin cash by the Company and its Consolidated Subsidiaries during such period inaccordance with Section 7.07(v), in each case other than with theproceeds of any Equity Issuance, minus (xii) to the extent not financed withthe proceeds of any Debt Issuance or Equity Issuance, the aggregate amount ofcash payments during such period in respect of (A) Permitted BusinessAcquisitions allowed pursuant to Section 7.06(b), (B) PermittedManagement Fees and (C) Executive Compensation Payments (reduced for purposesof this clause (C) by up to $13,100,000 of amounts received by theCompany in respect of the 1998 SERP/split dollar life insurance policy referredto in the clause (iii) of the definition of “Executive CompensationPayments”) minus (xiii) the aggregate amount of cash payments made during suchperiod in respect of any NLRB Accrual accounted for in such period, plus (xiv)the WTC Net Insurance Amount for such period and minus (xv) payments in respectof the litigation relating to the collective bargaining agreement with theAllied Trade Council and with Cardinal Health other than (A) amounts taken intoaccount in computing the NLRB Accrual for such period and (B) amounts deductedto determine the WTC Net Insurance Amount for such period.

 

“Excess Proceeds” has the meaning specified in Section7.05.

 

“Exchange Act” means the Securities ExchangeAct of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exchange Notes” means one or more promissorynotes issued pursuant to a registered offer to exchange the Senior SubordinatedNotes for a new issue of debt securities of the Company to be issued under theSenior Subordinated Indenture in the same aggregate principal amount as andwith terms that will be identical in all respects to the Senior SubordinatedNotes (except that the Exchange Notes will not contain transfer restrictionsapplicable to the Senior Subordinated Notes).

 

“Excluded Equity Issuance” means (i) anyissuance by any Subsidiary of the Company of its Equity Interests to theCompany or any other Wholly-Owned Domestic Subsidiary of the Company,(ii) the receipt by any Wholly-Owned Subsidiary of the Company of acapital contribution from the Company or a Subsidiary of the Company and(iii) any Qualifying Equity Issuance by Holdings.

 

“Excluded Taxes” has the meaning specified in Section3.01(a).

 

“Executive Compensation Payments” means any andall of the following: (i) a payment or payments not to exceed $24.5 million inrespect of the cancellation of the Company’s obligations to its President undera 2002 split dollar life insurance and related supplemental pensionarrangement; (ii) a settlement payment or payments not to exceed $5 million inrespect of, among other things, the President’s outstanding options; (iii) apayment or payments not to exceed $3.1 million in respect of the cash surrendervalue of the 1998 SERP/split dollar life insurance policy to be transferred tothe President following the consummation of the DRI Merger; (iv) bonuses paidin such period by the Company to certain senior managers of the Company inconnection with the collection of the WTC Business Interruption InsurancePolicy, provided that the aggregate amount of such bonuses does notexceed $5,000,000; (v) annual retention payments not to exceed $4.5 million in respectof annual retention

 

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payments to be paid to the President and (vi) anyseverance payments required to be paid to the President pursuant to hisemployment agreement with the Company as in effect on the Closing Date.

 

“Existing Convertible Notes” means theCompany’s 2.1478% Senior Convertible Notes due April 16, 2022.

 

“Existing Convertible Notes Escrow Account”means the Escrow Account established with Bank of America for the deposit andwithdrawal of amounts necessary to pay the face amount of the outstandingExisting Convertible Notes and accrued and unpaid interest thereon pursuant tothe Existing Convertible Notes Tender Documents.

 

“Existing Convertible Notes Tender Documents”means the documents pursuant to which the Company will offer to purchase forcash any and all outstanding Existing Convertible Notes in the form required bythe Indenture governing the Existing Convertible Notes and under applicable Lawand all other documents and instruments relating thereto, in each case as thesame may be amended, modified or supplemented from time to time.

 

“Extraordinary Receipts” means tax refundsreceived as a rebate or refund relating to any federal or state income taxespaid, pension reversions resulting from any surplus assets of any Plan, and anyother payment amounts not received or expected in the ordinary course ofbusiness (other than proceeds of any litigation or settlement or AssetDisposition, Casualty or Condemnation), in each case in excess of$1,000,000.  For the avoidance of doubt,Extraordinary Receipts shall not include the aggregate amount received by anyLoan Party in connection with any litigation or claim or any settlement thereofrelating to the WTC Business Interruption Insurance Policy or any other amountreceived which would otherwise be included in the definition of Excess CashFlow for the related period.

 

“Failed Loans” has the meaning set forth in Section2.03(d).

 

“Federal Funds Rate” means for any day the rateper annum (rounded upward, if necessary, to a whole multiple of 1/100th of 1%)equal to the weighted average of the rates on overnight Federal fundstransactions with members of the Federal Reserve System arranged by Federalfunds brokers on such day, as published by the Federal Reserve Bank of New Yorkon the Business Day next succeeding such day; provided that (i) if suchday is not a Business Day, the Federal Funds Rate for such day shall be suchrate on such transactions on the next preceding Business Day as so published onthe next succeeding Business Day, and (ii) if no such rate is so published onsuch next succeeding Business Day, the Federal Funds Rate for such day shall bethe average rate (rounded upward, if necessary, to a whole multiple of 1/100 of1%) quoted to Bank of America on such day on such transactions as determined bythe Administrative Agent.

 

“Fee Letter” means one or more letteragreements dated as of June 18, 2004 from Bank of America, Banc of AmericaBridge, Banc of America Securities LLC, Credit Suisse First Boston LLC, CreditSuisse First Boston, Cayman Islands Branch, Wells Fargo Bank, NationalAssociation, Citigroup World Markets Inc., Citicorp North America Inc., UBSSecurities LLC and/or UBS Loan Finance LLC to Holdings, as the same may beamended, supplemented or modified from time to time.

 

“Finance Document” means each Term LoanDocument and each Swap Agreement between one or more Loan Parties and a SwapCreditor entered into in accordance with clause (a)(ix) of thedefinition of “Permitted Indebtedness”, and “Finance Documents”means all of them, collectively.

 

“Finance Obligations” means, at any date,(i) all Term Loan Obligations and (ii) all Swap Obligations of a LoanParty permitted hereunder owed or owing to any Swap Creditor.

 

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“Finance Party” means each Lender, each SwapCreditor, each Agent and each Indemnitee and their respective successors andassigns, and “Finance Parties” means any two or more of them,collectively.

 

“Fixed Charge Coverage Ratio” means, for anyperiod, the ratio determined for such period in accordance with Schedule1.01C.

 

“Foreign Cash Equivalents” means any Investmentin certificates of deposit or bankers’ acceptances of any bank organized underthe laws of Canada, Japan or any country that is a member of the EuropeanEconomic Community whose short-term commercial paper rating from S&P is atleast A-1 or the equivalent thereof or from Moody’s is at least P-1 or theequivalent thereof; provided in each case that such Investment matureswithin one year from the date of acquisition thereof by a Foreign Subsidiary ofthe Company.

 

“Foreign Lender” has the meaning set forth in Section 10.15(a)(i).

 

“Foreign Subsidiary” means with respect to anyPerson any Subsidiary of such Person that is not a Domestic Subsidiary of suchPerson.

 

“Funded Indebtedness” means, with respect toany Person and without duplication, (i) all Indebtedness of such Person of thetypes referred to in clauses (i), (ii), (iii), (iv),(v), (vi) and (vii) and of the definition of“Indebtedness” in this Section 1.01, (ii) all Indebtedness ofothers of the type referred to in clause (i) above secured by (or forwhich the holder of such Indebtedness has an existing right, contingent orotherwise, to be secured by) a Lien on, or payable out of the proceeds ofproduction from, any property or asset of such Person, whether or not theobligations secured thereby have been assumed by such Person, (iii) allGuaranty Obligations of such Person with respect to Indebtedness of others ofthe type referred to in clause (i) above and (iv) all Indebtedness ofthe type referred to in clause (i) above of any other Person (includingany Partnership in which such Person is a general partner and anyunincorporated joint venture in which such Person is a joint venturer) to theextent such Person would be liable therefor under any applicable law or anyagreement or instrument by virtue of such Person’s ownership interest in orother relationship with such entity, except to the extent the terms of suchIndebtedness provide that such Person shall not be liable therefor.

 

“GAAP” means generally accepted accountingprinciples in the United States set forth in the opinions and pronouncements ofthe Accounting Principles Board and the American Institute of Certified PublicAccountants and statements and pronouncements of the Financial AccountingStandards Board or such other principles as may be approved by a significantsegment of the accounting profession in the United States, that are applicableto the circumstances as of the date of determination, consistently applied.

 

“Governmental Authority” means any nation orgovernment, any state or other political subdivision thereof, any agency,authority, instrumentality, regulatory body, court, administrative tribunal,central bank or other entity exercising executive, legislative, judicial,taxing, regulatory or administrative powers or functions of or pertaining togovernment.

 

“Group” means at any time a group of Loansconsisting of (i) all Loans which are Base Rate Loans at such time or (ii) allLoans which are Eurodollar Loans having the same Interest Period at such time; providedthat, if a Loan of any particular Lender is converted to or made as a Base RateLoan pursuant to Article III, such Loan shall be included in thesame Group or Group of Loans from time to time as it would have been had it notbeen so converted or made.

 

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“Group Company” means any of Holdings, theCompany or their respective Subsidiaries (regardless of whether or notconsolidated with Holdings or the Company for purposes of GAAP), and “GroupCompanies” means all of them, collectively.

 

“Guarantor” means each of Holdings and theSubsidiary Guarantors.

 

“Guaranty” means the Guaranty, substantially inthe form of Exhibit F hereto, dated as of the Closing Date amongHoldings, the Subsidiary Guarantors and the Administrative Agent, as the samemay be amended, modified or supplemented from time to time.

 

“Guaranty Obligation” means, with respect toany Person, without duplication, any obligation (other than endorsements in theordinary course of business of negotiable instruments for deposit orcollection) guarantying, intended to guaranty, or having the economic effect ofguarantying, any Indebtedness or other obligation of any other Person in anymanner, whether direct or indirect, and including, without limitation, anyobligation, whether or not contingent, (i) to purchase any such Indebtedness orother obligation or any property constituting security therefor, (ii) toadvance or provide funds or other support for the payment or purchase of suchIndebtedness or obligation or to maintain working capital, solvency or otherbalance sheet condition of such other Person (including, without limitation,maintenance agreements, support agreements, comfort letters, take or payarrangements, put agreements or similar agreements or arrangements) for thebenefit of the holder of Indebtedness or other obligation of such other Person,(iii) to lease or purchase property, securities or services primarily for thepurpose of assuring the owner of such Indebtedness or other obligation or (iv)to otherwise assure or hold harmless the owner of such Indebtedness orobligation against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to anylimitations set forth therein) be deemed to be an amount equal to the outstandingprincipal amount (or maximum principal amount, if larger) of the Indebtednessor other obligation in respect of which such Guaranty Obligation is made.

 

“Hazardous Materials” means all explosive orradioactive substances or wastes and all hazardous or toxic substances, wastesor other pollutants, including petroleum or petroleum distillates, asbestos orasbestos-containing materials, polychlorinated biphenyls, radon gas, infectiousor medical wastes and all other substances or wastes of any nature regulatedpursuant to any Environment Law.

 

“Holdings” means Duane Reade Holdings, Inc., aDelaware corporation, and its successors.

 

“incur” has the meaning set forth in Section7.01(a).

 

“Indebtedness” means, as to any Person at aparticular time, without duplication, all of the following, whether or notincluded as indebtedness or liabilities in accordance with GAAP:  (i) all obligations of such Person forborrowed money, (ii) all obligations of such Person evidenced by bonds,debentures, notes or other similar instruments, (iii) all obligations of suchPerson under conditional sale or other title retention agreements relating toproperty purchased by such Person to the extent of the value of such property(other than customary reservations or retentions of title under agreements withsuppliers entered into in the ordinary course of business), (iv) allobligations, other than intercompany items, of such Person to pay the deferredpurchase price of property or services (other than trade accounts payablearising in the ordinary course of business and due within six months of theincurrence thereof), (v) the Attributable Indebtedness of such Person inrespect of Capital Lease Obligations, Sale/Leaseback Transactions and SyntheticLease Obligations (regardless of whether accounted for as indebtedness underGAAP), (vi) all obligations of such Person to purchase securities or otherproperty which arise out of or in connection with the sale of the same orsubstantially similar securities or property, (vii) all non-contingentobligations (and, for purposes of Section 7.01 and Section 8.01(c),all contingent obligations), of such

 

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Person to reimburse any bank or other Person inrespect of amounts paid under a letter of credit, bankers’ acceptance orsimilar instrument, (viii) all obligations of others secured by (or for whichthe holder of such obligations has an existing right, contingent or otherwise,to be secured by) a Lien on, or payable out of the proceeds of production from,any property or asset of such Person, whether or not such obligation is assumedby such Person; provided that the amount of any Indebtedness of othersthat constitutes Indebtedness of such Person solely by reason of this clause(viii) shall not for purposes of this Agreement exceed the greater of bookvalue or the fair market value of the property and assets subject to such Lien,(ix) all Guaranty Obligations of such Person in respect of Indebtedness of anyother Person, (x) all Debt Equivalents of such Person and (xi) the Indebtednessof any other Person (including any partnership in which such Person is ageneral partner and any unincorporated joint venture in which such Person is ajoint venturer) to the extent such Person would be liable therefor underapplicable law or any agreement or instrument by virtue of such Person’sownership interest in or other relationship with such entity, except to theextent the terms of such Indebtedness provide that such person shall not beliable therefor.

 

“Indemnified Liabilities” has the meaning setforth in Section 10.05.

 

“Indemnitees” has the meaning set forth in Section 10.05.

 

“Insurance Proceeds” means all insuranceproceeds (other than business interruption insurance proceeds), damages,awards, claims and rights of action with respect to any Casualty.

 

“Intercreditor Agreement” means theIntercreditor Agreement dated as of the Closing Date between the CollateralAgent and the ABL Facility Agent, as the same may be amended, modified,supplemented or replaced from time to time.

 

“Intercompany Note” means a promissory notecontemplated by Section 7.06(a)(xiii) or (xiv),substantially in the form of Exhibit H hereto, and “IntercompanyNotes” means any two or more of them.

 

“Interest Coverage Ratio” means for any periodthe ratio of (i) Consolidated EBITDA to (ii) the excess of (A) ConsolidatedInterest Expense for such period over (B) the sum (in each case solely to theextent included in Consolidated Interest Expense for such period) of (x)deferred amortization costs and (y) interest expense (income) accruing on theCardinal Reserve and the NLRB Reserve.

 

“Interest Payment Date” means (i) as to BaseRate Loans, the last Business Day of each March, June, September and Decemberand the Maturity Date and (ii) as to Eurodollar Loans, the last day of eachapplicable Interest Period and the Maturity Date, and in addition where theapplicable Interest Period for a Eurodollar Loan is greater than three months,then also the date three months from the beginning of the Interest Period andeach three months thereafter.

 

“Interest Period” means with respect to eachEurodollar Loan, a period commencing on the date of borrowing specified in theapplicable Notice of Borrowing or on the date specified in the applicableNotice of Extension/Conversion and ending one, two, three or six monthsthereafter, as the applicable Borrower may elect in the applicable notice; providedthat:

 

#### (i)            anyInterest Period which would otherwise end on a day which is not a Business Dayshall be extended to the next succeeding Business Day unless such Business Dayfalls in another calendar month, in which case such Interest Period shall endon the next preceding Business Day;

 

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#### (ii)           anyInterest Period which begins on the last Business Day of a calendar month (oron a day for which there is no numerically corresponding day in the calendarmonth at the end of such Interest Period) shall end on the last Business Day ofa calendar month;

####  

#### (iii)          if so prohibited in writing by the RequiredLenders, no Interest Period may be selected at any time when a Default or anEvent of Default is then in existence; and

####  

#### (iv)          noInterest Period may be selected which would end after the Maturity Date.

####  

“Investment” in any Person means (i) the acquisition(whether for cash, property, services, assumption of Indebtedness, securitiesor otherwise) of assets (other than inventory, machinery, equipment and otherassets acquired in the ordinary course of business on an arm’s-length basis),Equity Interests, Equity Equivalents, Indebtedness, Debt Equivalents or othersecurities of such Person, (ii) any deposit with, or advance, loan or otherextension of credit to or for the benefit of such Person (other than depositsmade in connection with the purchase of equipment or inventory in the ordinarycourse of business) or (iii) any other capital contribution to or investment insuch Person, including by way of Guaranty Obligations of any obligation of suchPerson, any support for a letter of credit issued on behalf of such Person orincurred for the benefit of such Person or, in the case of any Subsidiary ofthe Company, any release, cancellation, compromise or forgiveness in whole orin part of any Indebtedness owing by such Person.

 

“Investor Group” means the Sponsor Group andthe Management Group.

 

“Joint Lead Arrangers” means Banc of AmericaSecurities LLC and Credit Suisse First Boston, Cayman Islands Branch, in theirrespective capacities as joint lead arranger for the credit facility providedherein.

 

“Joint Book Managers” means Banc of AmericaSecurities LLC, Credit Suisse First Boston, Cayman Islands Branch and CiticorpGlobal Markets Inc., in their respective capacities as joint book managers forthe credit facility provided herein.

 

“Law” means, collectively, all international,foreign, Federal, state and local statutes, treaties, rules, guidelines,regulations, ordinances, codes and administrative or judicial precedents orauthorities, including the interpretation or administration thereof by anyGovernmental Authority charged with the enforcement, interpretation oradministration thereof, and all applicable administrative orders, directedduties, requests, licenses, authorizations and permits of, and agreements with,any Governmental Authority, in each case whether or not having the force oflaw.

 

“Leaseholds” means with respect to any Personall of the right, title and interest of such Person as lessee or licensee in,to and under leases or licenses of land, improvements and/or fixtures.

 

“Lender” means each bank or other lendinginstitution listed on Schedule 2.01 and each Eligible Assignee thatbecomes a Lender pursuant to Section 10.07(b) and their respectivesuccessors.

 

“Leverage Ratio” means on any day the ratio of(i) Consolidated Indebtedness as of the last day of the fiscal quarter of theCompany ending on, or most recently preceding, such date, calculated net ofamount then available for withdrawal in cash from the Existing ConvertibleNotes Escrow Account for the payment of the tender price of the ExistingConvertible Notes, to (ii) Consolidated EBITDA for the four consecutive fiscalquarters of the Company ended on, or most recently preceding, such day.

 

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“Lien” means, with respect to any asset, anymortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,lien (statutory or other), charge, or preference, priority or other securityinterest or preferential arrangement of any kind or nature whatsoever(including any conditional sale or other title retention agreement, anyfinancing lease having substantially the same economic effect as any of theforegoing, and the filing of any financing statement under the UniformCommercial Code or comparable Laws of any jurisdiction), including the interestof a purchaser of accounts receivable, chattel paper, payment intangibles orpromissory notes.

 

“Limited Recourse Indebtedness” means, withrespect to any Person, Indebtedness to the extent:  (i) such Person (A) provides no credit supportof any kind (including any undertaking, agreement or instrument that wouldconstitute Indebtedness), (B) is not directly or indirectly liable as aguarantor or otherwise or (C) does not constitute the lender; and (ii) nodefault with respect thereto would permit upon notice, lapse of time or bothany holder of any other Indebtedness (other than the Loans) of such Person todeclare a default on such other Indebtedness or cause the payment thereof to beaccelerated or payable prior to its stated maturity.

 

“Loan” means a loan (or a portion of any Loan)made under Section 2.01; provided that, if any such loan or loans(or portions thereof) are combined or subdivided pursuant to a Notice ofExtension/Conversion, the term “Loan” shall refer to the combined principalamount resulting from such combination or to each of the separate principalamounts resulting from such subdivision, as the case may be.

 

“Loan Party” means each of Holdings, eachBorrower, each Co-Borrower and each Subsidiary Guarantor, and “Loan Parties”means any combination of the foregoing.

 

“Management Agreement” means the ManagementServices Agreement, dated as of the date hereof between Oak Hill CapitalManagement, Inc. and DR Acquisition, as the same may be amended, modified orsupplemented from time to time in accordance with the provisions thereof and ofthis Agreement.

 

“Management Group” means the Persons identifiedon Schedule 1.01B.

 

“Margin Stock” means “margin stock” as suchterm is defined in Regulation U.

 

“Material Adverse Effect” means (i) anymaterial adverse effect upon the business, assets, properties, liabilities,results of operations or condition (financial or otherwise) of Holdings and itsConsolidated Subsidiaries, taken as a whole, (ii) a material adverse effect onthe ability of a Loan Party to consummate the transactions contemplated herebyto occur on the Closing Date, (iii) a material impairment of the ability of anyLoan Party to perform any of its obligations under any Term Loan Document towhich it is a party or (iv) a material impairment of the rights and benefits ofthe Lenders under any Term Loan Document.

 

“Maturity Date” means July 30, 2010.

 

“Moody’s” means Moody’s Investors Service,Inc., a Delaware corporation, and its successors or, absent any such successor,such nationally recognized statistical rating organization as the Company andthe Administrative Agent may select.

 

“Multiemployer Plan” means a “multiemployerplan” as defined in Section 3(37) or 4001(a)(3) of ERISA.

 

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“NLRB Accrual” means, for any period, anon-cash charge deducted in determining Consolidated Net Income for such periodin respect of an estimated loss contingency that would result upon applicationof a National Labor Relations Board Administrative Law Judge’s recommendationor a recommendation of another relevant Governmental Authority in litigationrelating to the Company’s collective bargaining agreement with the AlliedTrades Council, determined in accordance with GAAP.

 

“NLRB Reserve” means, at any date, the amountreserved on the balance sheet of the Company for estimated losses in litigationrelating to the Company’s collective bargaining agreement with the Allied TradeCouncil.

 

“Net Cash Proceeds” means:

 

#### (i)            withrespect to any Asset Disposition, Casualty or Condemnation, (A) the grossamount of cash proceeds (or Insurance Proceeds and Condemnation Awards, in thecase of any Casualty or Condemnation, except to the extent and for so long assuch Insurance Proceeds or Condemnation Awards constitute Reinvestment Funds)actually paid to or actually received by any Group Company in respect of suchAsset Disposition, Casualty or Condemnation (including any cash proceedsreceived as income or other proceeds of any noncash proceeds of any AssetDisposition, Casualty or Condemnation as and when received), less (B) theamount, if any, of all taxes (other than income taxes) and all income taxes (asestimated in good faith by a senior financial or senior accounting officer ofthe Company giving effect to the overall tax position of Holdings and itsSubsidiaries) (to the extent that the amount of such taxes shall have been setaside for the purpose of paying such taxes when due), and customary fees,brokerage fees, commissions, costs and other expenses (other than those payableto any Group Company or Affiliates, other than pursuant to the ManagementAgreement as in effect on the Closing Date) that are incurred in connectionwith such Asset Disposition, Casualty or Condemnation and are payable by theseller or the transferor of the assets or property to which such AssetDisposition, Casualty or Condemnation relates, but only to the extent notalready deducted in arriving at the amount referred to in clause (i)(A)above; less (C) appropriate amounts that must be set aside as a reserve inaccordance with GAAP against any liabilities associated with such AssetDisposition, Casualty or Condemnation; less (D) if applicable, the amount ofany Indebtedness secured by a Permitted Lien that has been repaid or refinancedin accordance with the terms of such Indebtedness with the proceeds of suchAsset Disposition, Casualty or Condemnation, including, without limitation, theamount of any Indebtedness required to be repaid or prepaid with the proceedsof such Asset Disposition, Casualty or Condemnation pursuant to the terms ofthe ABL Credit Agreement and the Intercreditor Agreement; and less (E) anypayments to be made by any Group Company as agreed between such Group Companyand the purchaser of any assets subject to an Asset Disposition, Casualty orCondemnation in connection therewith; and

####  

#### (ii)           withrespect to any Equity Issuance or Debt Issuance, the gross amount of cashproceeds paid to or received by any Group Company in respect of such EquityIssuance or Debt Issuance as the case may be (including cash proceedssubsequently as and when received at any time in respect of such EquityIssuance or Debt Issuance from non-cash consideration initially received orotherwise), net of underwriting discounts and commissions or placement fees,investment banking fees, legal fees, consulting fees, accounting fees and othercustomary fees and expenses directly incurred by any Group Company inconnection therewith (other than those payable to any Group Company or any Affiliateof any Group Company other than pursuant to the Management Agreement as ineffect on the Closing Date).

 

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“Note” means a promissory note, substantiallyin the form of Exhibit B hereto, evidencing the joint and severalobligations of the Borrowers to repay outstanding Loans, as such note may beamended, modified or supplemented from time to time.

 

“Notice of Borrowing” means a request by aBorrower for a Loan, substantially in the form of Exhibit A-1 hereto.

 

“Notice of Extension/Conversion” has themeaning set forth in Section 2.06.

 

“Operating Lease” means, as applied to anyPerson, a lease (including leases which may be terminated by the lessee at anytime) of any property (whether real, personal or mixed) by such Person aslessee which is not a Capital Lease.

 

“Organization Documents” means, (i) withrespect to any corporation, the certificate or articles of incorporation andthe bylaws (or equivalent or comparable constitutive documents with respect toany non-U.S. jurisdiction); (ii) with respect to any limited liability company,the certificate or articles of formation or organization and operatingagreement; and (iii) with respect to any partnership, joint venture, trust orother form of business entity, the partnership, joint venture or otherapplicable agreement of formation or organization and any agreement,instrument, filing or notice with respect thereto filed in connection with itsformation or organization with the applicable Governmental Authority in thejurisdiction of its formation or organization and, if applicable, anycertificate or articles of formation or organization of such entity.

 

“Other Taxes” has the meaning set forth in Section 3.01.

 

“PBGC” means the Pension Benefit Guaranty Corporationestablished pursuant to Subtitle A of Title IV of ERISA or any entitysucceeding to any or all of its functions under ERISA.

 

“Perfection Certificate” means with respect toany Loan Party a certificate, substantially in the form of Exhibit G-3to this Agreement, completed and supplemented with the schedules andattachments contemplated thereby to the satisfaction of the Collateral Agentand duly executed by the chief executive officer and the chief legal officer ofsuch Loan Party.

 

“Permit” means any license, permit, franchise,right or privilege, certificate of authority or order, or any waiver of theforegoing, issued or issuable by any Governmental Authority.

 

“Permitted Business Acquisition” means aBusiness Acquisition; provided that:

 

#### (i)            theEquity Interests or property or assets acquired in such acquisition relate to aline of business similar to the business of the Company or any of itsSubsidiaries engaged in on the Closing Date or reasonably related, ancillary orcomplementary thereto;

####  

#### (ii)           therepresentations and warranties made by the Loan Parties in each Term LoanDocument shall be true and correct in all material respects at and as of thedate of such acquisition (as if made on such date after giving effect to suchacquisition), except to the extent such representations and warrantiesexpressly relate to an earlier date (in which case such representations andwarranties shall be true and correct in all material respects at and as of suchearlier date);

 

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#### (iii)          the Administrative Agent or the CollateralAgent, as applicable, shall have received all items in respect of the EquityInterests or property or assets acquired in such acquisition required to bedelivered by Section 6.12;

####  

#### (iv)          inthe case of an acquisition of the Equity Interests of another Person, (A)except in the case of the incorporation of a new Subsidiary or an acquisitioninvolving consideration of less than $5,000,000, the board of directors (orother comparable governing body) of such other Person shall have duly approvedsuch acquisition and (B) the Equity Interests acquired shall constitute atleast 100% of the total Equity Interests of the issuer thereof;

####  

#### (v)           noDefault or Event of Default shall have occurred and be continuing immediatelybefore or immediately after giving effect to such acquisition, and the Borrowershall have delivered to the Administrative Agent a Pro-Forma ComplianceCertificate demonstrating that, upon giving effect to such acquisition on a Pro-FormaBasis (with pro-forma adjustments reasonably satisfactory to the AdministrativeAgent), the Company shall be in compliance with all of the financial covenantsspecified in Section 7.16 hereof as of the last day of the most recentperiod of four consecutive fiscal quarters of the Company which precedes orends on the date of such acquisition and with respect to which theAdministrative Agent has received the consolidated financial informationrequired under Section 6.01(a) and (b) and the Compliance Certificaterequired by Section 6.02(b); and

####  

#### (vi)          aftergiving effect to such acquisition, the Excess Availability (as defined in theABL Credit Agreement as in effect on the date hereof) shall be at least$50,000,000.

####  

“Permitted Indebtedness” means:

 

### (a)           inthe case of the Company and its Subsidiaries:

###  

#### (i)            Indebtednessof the Company, Duane Reade and one or more Co-Borrowers (and GuarantyObligations by the Subsidiary Guarantors in respect of such Indebtedness) underthe ABL Credit Agreement in an aggregate principal amount at any one timeoutstanding not to exceed the greater of (x) $275,000,000 and (y) (1) 85% ofaccounts receivable of the Company and its Subsidiaries as of the end of themost recently ended fiscal quarter for which consolidated financial statementsare available, plus (2) 80% of inventory of the Company and its Subsidiaries asof the end of the most recently ended fiscal quarter for which consolidatedfinancial statements are available;

####  

#### (ii)           theExisting Convertible Notes and the other Indebtedness of the Company and itsSubsidiaries outstanding on the Closing Date and disclosed on Schedule 7.01(collectively, the “Existing Debt”) and any modifications, refinancings,refundings, renewals or extensions thereof; provided, that (A) the amountof such Indebtedness is not increased at the time of such modification,refinancing, refunding, renewal or extension except by an amount equal to areasonable premium or other reasonable amount paid, and fees and expensesreasonably incurred, in connection with such refinancing and by an amount equalto any existing commitments unutilized thereunder or as otherwise permittedpursuant to Section 7.01, and (B) the terms and conditions (including,if applicable, as to collateral and subordination) of any such modified,extending, refunding or refinancing Indebtedness are not materially lessfavorable to, and do not adversely affect the interests of, the Lenders ascompared to the terms and conditions of the Indebtedness being modified,extended, refunded or refinanced;

 

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#### (iii)          Indebtedness of the Loan Parties under thisAgreement and the other Term Loan Documents;

####  

#### (iv)          Indebtednessarising under the Senior Subordinated Note Indenture, the Senior SubordinatedNotes, the Exchange Notes and any Permitted Refinancing thereof;

####  

#### (v)           AttributableIndebtedness and Purchase Money Indebtedness of the Company and itsSubsidiaries incurred after the Closing Date to finance Capital Expenditures; providedthat (A) the aggregate amount of all such Debt does not exceed $15,000,000 atany time outstanding, (B) the Debt when incurred shall not be more than 105% ofthe lesser of the cost or fair market value as of the time of acquisition ofthe asset financed, (C) such Debt is issued and any Liens securing such Debtare created concurrently with, or within 180 days after, the acquisition of theasset financed and (D) no Lien securing such Debt shall extend to or cover anyproperty or asset of any Group Company other than the asset so financed andattachments thereto and the proceeds thereof;

####  

#### (vi)          Indebtednessof the Company or its Subsidiaries secured by Liens permitted by clauses(xvi), (xvii) and (xviii) of Section 7.02 and anyother Indebtedness of a Person whose Equity Interests or assets are acquired ina Permitted Business Acquisition which is acquired or assumed by the Borroweror a Subsidiary of the Borrower in such Permitted Business Acquisition and anyPermitted Refinancing thereof; provided that (A) such Indebtedness wasnot incurred in connection with, or in anticipation of, the events described insuch clauses or such Permitted Business Acquisition, and (B) such Debt (otherthan pre-existing Attributable Indebtedness and Purchase Money Indebtedness)does not constitute indebtedness for borrowed money;

####  

#### (vii)         unsecured Subordinated Debt of the Company orany of its Subsidiaries that is issued to a seller of assets or Person acquiredin a Permitted Business Acquisition and any Permitted Refinancing thereof if,immediately prior to and after giving effect thereto, (A) no Event of Defaultshall exist or result therefrom and (B) the Company and its Subsidiaries willbe in compliance on a Pro-Forma Basis with the financial covenants set forth inSection 7.16;

####  

#### (viii)        contingent liabilities in respect of anyindemnification, adjustment of purchase price, earn-out, non-compete,consulting, deferred compensation and similar obligations of the Company andits Subsidiaries incurred in connection with the Acquisition, Permitted BusinessAcquisitions and Asset Dispositions;

####  

#### (ix)           SwapObligations of the Company or any Subsidiary under Swap Agreements to theextent entered into after the Closing Date in compliance with Section 6.13or to manage interest rate, foreign currency exchange rate and commoditypricing risks and not for speculative purposes;

####  

#### (x)            Indebtednessowed to any Person providing property, casualty or liability insurance to theCompany or any Subsidiary of the Company, so long as such Indebtedness shallnot be in excess of the amount of the unpaid cost of, and shall be incurredonly to defer the cost of, such insurance for the year in which suchIndebtedness is incurred and such Indebtedness shall be outstanding only duringsuch year;

####  

#### (xi)           Indebtednessconsisting of Guaranty Obligations (A) by the Company in respect ofIndebtedness and leases permitted to be incurred by Wholly-Owned DomesticSubsidiaries of the Company, (B) by Domestic Subsidiaries of the Company ofIndebtedness and

 

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#### leases permittedto be incurred by the Company or Wholly-Owned Domestic Subsidiaries of theCompany and (C) by Foreign Subsidiaries of the Company of Indebtedness andleases permitted to be incurred by Foreign Subsidiaries of the Company;

####  

#### (xii)          inter-company Indebtedness owing to theCompany or a Subsidiary of the Company to the extent permitted by Section7.06(a)(xiii) or (xiv);

####  

#### (xiii)         Indebtedness of Foreign Subsidiaries nototherwise permitted by clause (xii) above incurred on or after theClosing Date to finance working capital requirements and Permitted Refinancingsthereof in an aggregate principal amount which, when taken together with thethen outstanding principal amount of all Indebtedness of Foreign Subsidiariesreferred to in clause (ii) above, if any, does not exceed the sum of(A) the aggregate principal amount of all Indebtedness of ForeignSubsidiaries outstanding on the Closing Date and disclosed on Schedule 7.01plus (B) $5,000,000 (or its equivalent in one or more applicable foreigncurrencies);

####  

#### (xiv)        Indebtedness arising from the honoring by abank or other financial institution of a check, draft or similar instrumentdrawn against insufficient funds in the ordinary course of business; providedthat (A) such Indebtedness (other than credit or purchase cards) isextinguished within three Business Days of its incurrence and (B) suchIndebtedness in respect of credit or purchase cards in extinguished within 60days from its incurrence;

####  

#### (xv)         Indebtednessrepresenting deferred compensation to employees of the Company and itsSubsidiaries;

####  

#### (xvi)        for the avoidance of doubt, obligations due toAmerisource Bergen on account of the consignment of pharmaceutical inventorypursuant to the Amerisource Bergen Agreement; and

####  

#### (xvii)       Attributable Indebtedness in respect ofSale/Leaseback Transactions permitted under Section 7.13; and

####  

### (b)           inthe case of Holdings:

###  

#### (i)            Indebtednessof Holdings under this Agreement and the other Term Loan Documents;

####  

#### (ii)           unsecured,subordinated Guaranty Obligations of Holdings in respect of Indebtedness of theCompany and one or more Co-Borrowers arising under the Senior SubordinatedNotes, the Exchange Notes and any Permitted Refinancing thereof;

####  

#### (iii)          Indebtedness of Holdings to the Company andits Subsidiaries to the extent otherwise permitted under this Agreement providedthat any Indebtedness of Holdings owing to a Subsidiary that is not a Borroweror a Subsidiary Guarantor is made pursuant to an intercompany note in the formattached hereto as Exhibit H, is unsecured and is subordinated in rightof payment (whether at stated maturity, acceleration or otherwise) to thepayment and performance of the Borrowers’ obligations under the Term LoanDocuments pursuant to subordination provisions in the form of Exhibit Ihereto;

####  

#### (iv)          Indebtednessof Holdings consisting of Guarantee Obligations of Indebtedness permitted underclauses (a)(i), (a)(v)(a)(vii), (a)(viii) and (a)(xiii)of this definition of “Permitted Indebtedness”;

 

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#### (v)           Indebtednessarising from the honoring by a bank or other financial institution of a check,draft or similar instrument drawn against insufficient funds in the ordinarycourse of business; provided that (A) such Indebtedness (other thancredit or purchase cards) is extinguished within three Business Days of itsincurrence and (B) such Indebtedness in respect of credit or purchase cards inextinguished within 60 days from its incurrence; and

####  

#### (vi)          Indebtednessof Holdings representing the obligation of Holdings to make payments withrespect to the cancellation or repurchase of certain Equity Interests ofofficers, employees or directors (or their estates) of Holdings and itsSubsidiaries, to the extent permitted by Section 7.07(iii).

####  

“Permitted Liens” has the meaning set forth in Section 7.02.

 

“Permitted Management Fees has the meaning setforth in Section 7.09(i).

 

“Permitted Refinancing” means, with respect toany Person, any modification, refinancing, refunding, renewal or extension ofany Indebtedness of such Person; provided that (i) the principal amount(or accreted value, if applicable) thereof does not exceed the principal amount(or accreted value, if applicable) of, and accrued and unpaid interest on, theIndebtedness so modified, refinanced, refunded, renewed or extended except byan amount equal to a reasonable premium or other reasonable amount paid, andfees and expenses reasonably incurred, in connection with such modification,refinancing, refunding, renewal or extension and by an amount equal to anyexisting commitments unutilized thereunder or as otherwise permitted pursuantto Section 7.01, (ii) such modification, refinancing, refunding, renewalor extension has a final maturity date equal to or later than the final maturitydate of, and has a Weighted Average Life to Maturity equal to or greater thanthe Weighted Average Life to Maturity of, the Indebtedness being modified,refinanced, refunded, renewed or extended, (iii) if the Indebtedness beingmodified, refinanced, refunded, renewed or extended is subordinated in right ofpayment to the Term Loan Obligations, such modification, refinancing,refunding, renewal or extension is subordinated in right of payment to the TermLoan Obligations on terms at least as favorable to the Lenders as thosecontained in the documentation governing the Indebtedness being modified,refinanced, refunded, renewed or extended, (any written confirmation by theAdministrative Agent that such terms are at least favorable shall be binding onthe parties hereto), (iv) the terms and conditions (including, if applicable,as to collateral) of any such modified, refinanced, refunded, renewed orextended Indebtedness are not materially less favorable to the Loan Parties orthe Lenders than the terms and conditions of the Indebtedness being modified,refinanced, refunded, renewed or extended (any written confirmation by theAdministrative Agent that such terms are at least favorable shall be binding onthe parties hereto), (v) such modification, refinancing, refunding, renewal orextension is incurred by the Person who is the obligor on the Indebtednessbeing modified, refinanced, refunded, renewed or extended and (vi) at the timethereof, no Default shall have occurred and be continuing.

 

“Permitted Subordinated Indebtedness” means anyunsecured Indebtedness that (i) is expressly subordinated to the prior paymentin full in cash of the Term Loan Obligations on terms and conditions no lessfavorable to the Lenders than the terms and conditions of the SeniorSubordinated Notes, (ii) by its terms is not required to be repaid, in whole orin part, before the first anniversary of the Maturity Date (other than at theoption of the holder thereof as a result of a Change of Control or AssetDisposition, but in no event prior to the earlier of the Maturity Date or thepayment in full of all Term Loan Obligations) and (iii) is issued pursuant tocredit documents having covenants, subordination provisions and events ofdefault that are reasonably satisfactory in form and substance to theAdministrative Agent but that in no event are less favorable, including withrespect to rights of acceleration, to the issuer thereof than the terms hereof,or of the Senior Subordinated Notes (in the case of Permitted SubordinatedIndebtedness of the Company, any Co-Borrower or any Subsidiary Guarantor),

 

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taken as a whole; provided that any suchindebtedness shall constitute Permitted Subordinated Indebtedness only if bothbefore and after giving effect to the issuance or incurrence thereof, noDefault or Event of Default shall have occurred and be continuing.

 

“Person” means any natural person, corporation,limited liability company, trust, joint venture, association, company, partnership,Governmental Authority or other entity.

 

“Plan” means an employee pension benefit planwhich is covered by Title IV of ERISA or subject to the minimum fundingstandards under Section 412 of the Code maintained by or contributed to byany Group Company or any ERISA Affiliate.

 

“Pledge Agreement” means the Pledge Agreement,substantially in the form of Exhibit G-2 hereto, dated as of thedate hereof among Holdings, the Company, the Co-Borrowers, SubsidiaryGuarantors and the Collateral Agent, as the same may be amended, supplementedor modified from time to time.

 

“Pledged Collateral” has the meaning set forthin the Pledge Agreement.

 

“Pre-Commitment Information” means, taken as anentirety, (i) information contained in the Confidential Information Memorandumdated June 2004 and (ii) any other written information in respect of Holdings,the Company, any Subsidiary of Holdings or the Company or the Acquisitionprovided to any Joint Lead Arranger, any Joint Book Manager or any Agent orLender by or on behalf of the Sponsor or any Loan Party prior to the ClosingDate.

 

“Preferred Stock” means, as applied to theEquity Interests of a Person, Equity Interests of any class or classes (howeverdesignated) which is preferred as to the payment of dividends or distributions,or as to the distribution of assets upon any voluntary or involuntaryliquidation or dissolution of such Person, over the Equity Interests of anyother class of such Person.

 

“Pro-Forma Basis” means, for purposes ofcalculating compliance of any transaction with any provision hereof, that thetransaction in question shall be deemed to have occurred as of the first day ofthe most recent period of four consecutive fiscal quarters of the Company whichprecedes or ends on the date of such transaction and with respect to which theAdministrative Agent has received the financial information for the Company andits Consolidated Subsidiaries required under Section 6.01(a) or (b),as applicable, and the Compliance Certificate required by Section 6.02(b)for such period.  In connection with anycalculation of the financial covenants set forth in Section 7.16 upongiving effect to a transaction on a “Pro-Forma Basis,” (i) any Indebtednessincurred by the Company or any of its Subsidiaries in connection with suchtransaction (or any other transaction which occurred during the relevant fourfiscal quarter period) shall be deemed to have been incurred as of the firstday of the relevant four fiscal-quarter period, (ii) if such Indebtedness has afloating or formula rate, then the rate of interest for such Indebtedness forthe applicable period for purposes of the calculations contemplated by thisdefinition shall be determined by utilizing the rate which is or would be ineffect with respect to such Indebtedness as at the relevant date of suchcalculations and (iii) income statement items (whether positive or negative)attributable to all property acquired in such transaction or to the Investmentcomprising such transaction, as applicable, shall be included as if suchtransaction has occurred as of the first day of the relevantfour-fiscal-quarter period, without giving effect to cost savings,(iv) such other pro-forma adjustments (including in respect of costsavings) which would be permitted or required by Regulations S-K and S-X underthe Securities Act shall be taken into account and (v) such otheradjustments as may be reasonably agreed between the Company and theAdministrative Agent shall be taken into account.

 

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“Pro-Forma Compliance Certificate” means acertificate of the chief financial officer or chief accounting officer of theCompany delivered to the Administrative Agent in connection with any“transaction” as defined in the definition of “Pro-Forma Basis” aboveand containing reasonably detailed calculations (with pro-forma adjustmentsreasonably satisfactory to the Administrative Agent), upon giving effect to theapplicable transaction on a Pro-Forma Basis, of the Interest Coverage Ratio,the Fixed Charge Coverage Ratio and the Leverage Ratio as of the last day ofthe most recent period of four consecutive fiscal quarters of the Company whichprecedes or ends on the date of the applicable transaction and with respect towhich the Administrative Agent shall have received the consolidated financialinformation for the Company and its Consolidated Subsidiaries required under Section6.01(a) or (b), as applicable, and the Compliance Certificaterequired by Section 6.02(b) for such period.

 

“Purchase Money Indebtedness” meansIndebtedness of the Company or any of its Subsidiaries incurred for the purposeof financing all or any part of the purchase price or cost of construction orimprovement of property used in the business of the Company or such Subsidiary;provided that such Indebtedness is incurred within 180 days after suchproperty is acquired or, in the case of improvements, constructed.

 

“Qualifying Equity Issuance” means the issuanceby Holdings for cash of its common stock to any Person in the Sponsor Group orthe Management Group or of any stock options to any Person pursuant toHolding’s or the Company’s stock option plans or any employment agreement withsuch Person if:  (i) 100% of the Net CashProceeds of such issuance shall be promptly contributed by Holdings to theCompany; (ii) no Default or Event of Default shall have occurred or becontinuing on the date of issuance, both before and after giving effectthereto; (iii) after giving effect thereto, no Change of Control shall haveoccurred; (iv) such stock shall be issued in a private placement exempt fromregistration under the Securities Act; and (v) within five Business Days aftersuch issuance, the Company shall have delivered to the Administrative Agent acertificate of the chief financial officer or chief accounting officer of theCompany attesting to the satisfaction of the foregoing conditions, describingthe uses of the proceeds of such issuance and attesting that such use shall notconstitute a Default or an Event of Default.

 

“Qualified Capital Stock” means common stock ofHoldings issued in a Qualifying Equity Issuance.

 

“Real Property” means, with respect to anyPerson, all of the right, title and interest of such Person in and to land,improvements and fixtures, including Leaseholds.

 

“Register” has the meaning set forth in Section 10.07(c).

 

“Regulation T, U or X” means Regulation T, U orX, respectively, of the Board of Governors of the Federal Reserve System asamended, or any successor regulation.

 

“Reinvestment Funds” means, with respect to anyInsurance Proceeds or any Condemnation Award, that portion of such funds asshall, according to a certificate of the senior financial officer of theCompany delivered to the Administrative Agent within 15 Business Days after theoccurrence of the Casualty or Condemnation giving rise thereto (and in any caseprior to the receipt thereof by any Group Company), be reinvested in therepair, restoration or replacement of the properties that were the subject ofsuch Casualty or Condemnation; provided that (i) such certificate shallbe accompanied by evidence reasonably satisfactory to the Administrative Agentthat any property subject to such Casualty or Condemnation has been or will berepaired, restored or replaced to a condition that is substantially similar tothat immediately prior to such Casualty or Condemnation (with such change asare reasonably approved by the Company), (ii) pending such reinvestment, theentire amount of such

 

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proceeds in excess of $5,000,000 (excluding anyproceeds with respect to ABL Priority Collateral if then required to beotherwise applied under the terms of the ABL Documents) shall be applied asrequired by the third sentence of Section 6.07(b) (and if such proceedsare less than $5,000,000 such proceeds shall be paid directly to the applicableGroup Company), (iii) from and after the date of delivery of such certificate,the Company or one or more of its Subsidiaries shall diligently proceed, in acommercially reasonable manner, to complete the repair, restoration orreplacement of the properties that were the subject of such Casualty orCondemnation as described in such certificate and (iv) no Default or Event ofDefault shall have occurred and be continuing; and provided, further,that, if any of the foregoing conditions shall cease to be satisfied at anytime, such funds shall no longer be deemed Reinvestment Funds and such fundsshall immediately be applied to prepayment of the Loans in accordance with Section 2.08(b).

 

“Replacement Assets” means (i) non-currenttangible assets that will be used or useful in a business permitted by Section7.03 or (ii) those assets or Equity Interests that are the subject of aPermitted Business Acquisition.

 

“Replacement Date” has the meaning set forth inSection 2.09.

 

“Required Lenders” means Lenders whoseaggregate principal amount of outstanding Loans constitutes more than 50% ofthe aggregate principal amount of all outstanding Loans at such time.  A Lender that is an Affiliate of Holdings orany of its Subsidiaries and any Loans held by any such Lender shall not beincluded in the calculation of “Required Lenders”.

 

“Responsible Officer” means the chief executiveofficer, president, chief financial officer, treasurer or assistant treasureror secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that issigned by a Responsible Officer of a Loan Party shall be conclusively presumedto have been authorized by all necessary corporate, partnership and/or otheraction on the part of such Loan Party and such Responsible Officer shall beconclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payment” means (i) any dividend orother distribution (whether in cash, securities or other property but excludingany such dividend or other distribution payable solely in Equity Interests(exclusive of Debt Equivalents) of the Company), direct or indirect, on accountof any class of Equity Interests or Equity Equivalents of the Company, now orhereafter outstanding, (ii) any payment (whether in cash, securities or otherproperty), including any sinking fund or similar deposit, on account of thepurchase, redemption, retirement, acquisition, cancellation, termination orsimilar payment, purchase or other acquisition for value, direct or indirect,of any class of Equity Interests or Equity Equivalents of the Company or anyAffiliate of Holdings or the Company including any Subsidiary of Holdings orthe Company, now or hereafter outstanding (other then Equity Interests orEquity Equivalents of any Wholly-Owned Subsidiary of the Company), (iii) anypayment made to retire, or to obtain the surrender of, any outstandingwarrants, options or other rights to acquire any class of Equity Interests or EquityEquivalents of the Company or any Affiliate of Holdings or the Companyincluding any Subsidiary of Holdings or the Company, now or hereafteroutstanding (other than Equity Interests or Equity Equivalents of anyWholly-Owned Subsidiary of the Company) and (iv) any payment or prepayment ofprincipal of, premium, if any, or interest on, redemption, purchase,retirement, defeasance, sinking fund or similar payment with respect to, anySubordinated Indebtedness.

 

“Sale/Leaseback Transaction” means any director indirect arrangement with any Person or to which any such Person is a partyproviding for the leasing to Holdings or any of its Subsidiaries of anyproperty, whether owned by Holdings or any of its Subsidiaries as of theClosing Date or later acquired, which has been or is to be sold or transferredby Holdings or any of its Subsidiaries to such

 

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Person or to any other Person from whom funds havebeen, or are to be, advanced by such Person on the security of such property.

 

“S&P” means Standard & Poor’s RatingsGroup, a division of McGraw Hill, Inc., a New York corporation, and itssuccessor or, absent any such successor, such nationally recognized statisticalrating organization as the Company and the Administrative Agent may select.

 

“SEC” means the Securities and ExchangeCommission, or any Governmental Authority succeeding to any of its principalfunctions.

 

“SEC Filings” has the meaning specified in Section4.01(j).

 

“Security Agreement” means the SecurityAgreement, substantially in the form of Exhibit G-1 hereto, dated as ofthe date hereof among Holdings, the Company, Duane Reade, any Co-Borrower, anySubsidiary Guarantors and the Collateral Agent, as the same may be amended,modified or supplemented from time to time.

 

“Senior Indebtedness” means (i) allIndebtedness of the Company, Duane Reade, any Co-Borrower or any SubsidiaryGuarantor outstanding under the ABL Credit Agreement (and the other ABLDocuments), this Agreement and all Swap Agreements with respect thereto orhereto, whether outstanding on the date hereof or incurred hereafter, (ii) allother Indebtedness of the Company, Duane Reade, any Co-Borrower or anySubsidiary Guarantor that is not subordinated in right of payment to the Term LoanObligations (including any Guaranty related thereto) and (iii) all obligationswith respect to the items listed in the preceding clauses (i) and (ii)(including any interest accruing after the commencement by or against any LoanParty of any proceedings under any Debtor Relief Laws, whether of not suchinterest is an allowed claim under any applicable Law).

 

“Senior Leverage Ratio” means on any day theratio of (i) Consolidated Indebtedness (exclusive of Subordinated Indebtedness)as of the last day of the fiscal quarter of the Company ending on, or mostrecently preceding, such date, calculated net of the amount then available forwithdrawal in cash from the Existing Convertible Notes Escrow Account for thepayment of the tender price of the Existing Convertible Notes, to (ii)Consolidated EBITDA for the four consecutive fiscal quarters of Holdings endedon, or most recently preceding, such day.

 

“Senior Subordinated Note” means any one of the9.75% Senior Subordinated Notes due 2011 issued by DR Acquisition and DuaneReade, as co-issuers, in favor of the Senior Noteholders pursuant to the SeniorSubordinated Note Indenture, as such Senior Subordinated Notes may be amended,modified or supplemented from time to time in accordance with the limitations setforth herein, and “Senior Subordinated Notes” means any two or more ofthem, collectively.

 

“Senior Subordinated Note Documents” means theSenior Subordinated Note Indenture, the Senior Subordinated Notes, the ExchangeNotes, the Senior Subordinated Purchase Agreement, in each case including allexhibits and schedules thereto, and all other agreements, documents andinstruments relating to the Senior Subordinated Notes, in each case as the samemay be amended, modified or supplemented from time to time in accordance withthe provisions thereof and of this Agreement.

 

“Senior Subordinated Note Indenture” means, ifapplicable, the Indenture dated as of the Closing Date among DR Acquisition,Duane Reade. the other Co-Borrowers party thereto from time to time and US BankNational Association, as trustee, as such Senior Subordinated Note Indenturemay be

 

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amended, modified or supplemented from time to time inaccordance with the provisions of this Agreement.

 

“Senior Subordinated Noteholder” means any oneof the holders from time to time of the Senior Subordinated Notes.

 

“Senior Subordinated Note Purchase Agreement”means, if applicable, the Purchase Agreement dated as of the Closing Date amongDR Acquisition, Duane Reade and the initial Senior Subordinated Noteholdersnamed therein relating to the purchase by such initial Senior SubordinatedNoteholders of the Senior Subordinated Notes, as the same may be amended,modified or supplemented from time to time in accordance with the provisionsthereof and of this Agreement.

 

“Significant Subsidiary” means any Subsidiarythat would be a “significant” subsidiary of the Company within themeaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

 

“Solvent” means, with respect to any Person asof a particular date, that on such date (i) such Person is able to pay itsdebts and other liabilities, contingent obligations and other commitments asthey mature in the normal course of business, (ii) such Person does not intendto, and does not believe that it will, incur debts beyond such Person’s abilityto pay as such debts mature, (iii) such Person is not engaged in a business ora transaction, and is not about to engage in a business or a transaction, forwhich such Person’s assets would constitute unreasonably small capital aftergiving due consideration to the prevailing practice in the industry in whichsuch Person is engaged or is to engage, (iv) the fair value of the assets ofsuch Person is greater than the total amount of liabilities, including, withoutlimitation, contingent liabilities, of such Person and (v) the present fairvalue (i.e., the amount that may be realized within a reasonable time,considered to be six months to one year, either through collection or sale atthe regular market value, conceiving the latter as the amount that could beobtained for the assets in question within such period by a capable anddiligent businessman from an interested buyer who is willing to purchase underordinary selling conditions) of the assets of such Person will exceed theamount that will be required to pay the probable liability on such Person’sexisting debts as they become absolute and matured its debts and otherliabilities (including contingent, subordinated, unmatured and unliquidateddebts and liabilities).  For purposes ofthis definition, “debt” means any legal liability, whether matured, unmatured,liquidated or unliquidated, absolute, fixed or contingent, or (ii) a right toan equitable remedy for breach of performance if such breach gives rise to apayment, whether or not such right is an equitable remedy, is reduced tojudgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,disputed, undisputed, secured or unsecured.

 

“Sponsor” means Oak Hill Capital Partners, L.P.and Oak Hill Capital Management, Inc., and their respective successors.

 

“Sponsor Group” means the Sponsor and any ofits Subsidiaries or Affiliates and certain co-investors; provided thateach such Subsidiary, Affiliate or co-investor is reasonably acceptable to theAdministrative Agent.

 

“Stockholders’ Agreement” means theShareholders’ Agreement dated as of the date hereof among Holdings, DRShareholders, LLC, the Sponsor and certain other indirect stockholders of theCompany named therein, as the same may be amended, modified or supplementedfrom time to time in accordance with the provisions thereof and of thisAgreement.

 

“Subordinated Indebtedness” means (i) theSenior Subordinated Notes, (ii) any Rollover Securities or Exchange Notesissued in exchange for Senior Subordinated Notes and (iii) all other PermittedSubordinated Indebtedness.

 

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“Subsidiary” means with respect to any Personany corporation, partnership, limited liability company, association or otherbusiness entity of which (i) if a corporation, more than 50% of the totalvoting power of stock entitled (without regard to the occurrence of anycontingency) to vote in the election of directors, managers or trustees thereofis at the time owned or controlled, directly or indirectly, by that Person orone or more of the other Subsidiaries of that Person or a combination thereof,or (ii) if a partnership, limited liability company, association or businessentity other than a corporation, more than 50% of the partnership or othersimilar ownership interests thereof is at the time owned or controlled,directly or indirectly, by that Person or one or more Subsidiaries of thatPerson or a combination thereof.  Forpurposes hereof, a Person or Persons shall be deemed to have more than 50%ownership interest in a partnership, limited liability company, association orother business entity if such Person or Persons shall be allocated more than50% of partnership, association or other business entity gains or losses orshall be or control the managing director, manager or a general partner of suchpartnership, association or other business entity.  Unless otherwise specified, all referencesherein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary orSubsidiaries of the Company.

 

“Subsidiary Guarantor” means each Subsidiary ofHoldings existing on the Closing Date (other than a Foreign Subsidiary) andeach Subsidiary of Holdings (other than a Foreign Subsidiary, except to theextent otherwise provided in Section 6.12(d)) that becomes a party tothe Guaranty guaranteeing the obligations of the Borrowers after the ClosingDate (by execution of an Accession Agreement referring to the Guaranty orotherwise), and “Subsidiary Guarantors” means any two or more of them.

 

“Swap Agreement” means (i) any and all rateswap transactions, basis swaps, credit derivative transactions, forward ratetransactions, commodity swaps, commodity options, forward commodity contracts,equity or equity index swaps or options, bond or bond price or bond index swapsor options or forward bond or forward bond price or forward bond indextransactions, interest rate options, forward foreign exchange transactions, captransactions, floor transactions, collar transactions, currency swaptransactions, cross-currency rate swap transactions, currency options, spotcontracts or any other similar transactions or any combination of any of theforegoing (including any options to enter into any of the foregoing), whetheror not any such transaction is governed by or subject to any master agreementand (ii) any and all transactions of any kind, and the related confirmations,which are subject to the terms and conditions of, or governed by, any form ofmaster agreement published by the International Swaps and DerivativesAssociation, Inc., any International Foreign Exchange Master Agreement or anyother master agreement (any such master agreement, together with any relatedschedules, a “Master Agreement”), including any such obligations orliabilities under any Master Agreement.

 

“Swap Creditor” means any Lender or anyAffiliate of any Lender from time to time party to one or more Swap Agreementswith a Loan Party (even if any such Lender for any reason ceases after theexecution of such agreement to be a Lender hereunder), and its successors andassigns, and “Swap Creditors” means any two or more of them,collectively.

 

“Swap Obligations” of any Person means allobligations (including, without limitation, any amounts which accrue after thecommencement of any bankruptcy or insolvency proceeding with respect to suchPerson, whether or not allowed or allowable as a claim under any proceedingunder any Debtor Relief Law) of such Person in respect of any Swap Agreement,excluding any amounts which such Person is entitled to set-off against itsobligations under applicable law.

 

“Swap Termination Value” means, at any date andin respect of any one or more Swap Agreements, after taking into account theeffect of any legally enforceable netting agreements relating to such SwapAgreements, (i) for any date on or after the date such Swap Agreements havebeen closed out and termination value(s) determined in accordance therewith,such termination value(s), and (ii) for any

 

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date prior to the date referenced in clause (i),the amount(s) determined as the mark-to-market value(s) for such SwapAgreements, as determined based upon one or more mid-market or other readilyavailable quotations provided by any recognized dealer in such Swap Agreements(which may include any Lender).

 

“Syndication Agent” means Credit Suisse FirstBoston, Cayman Islands Branch, in its capacity as syndication agent for theLenders hereunder, and its successor or successors in such capacity.

 

“Syndication Date” means the earlier of (i) thedate on which the Joint Lead Arrangers determine in their sole discretion (andnotify the Company) that the primary syndication (and the resulting addition ofLenders pursuant to Section 10.07(b)) has been completed, and (ii)60 days after the Closing Date.

 

“Synthetic Lease Obligation” means the monetaryobligation of a Person under (i) a so-called synthetic, off-balance sheet ortax retention lease or (ii) an agreement for the use or possession of propertycreating obligations that do not appear on the balance sheet of such Person butwhich, upon the insolvency or bankruptcy of such Person, would be characterizedas the indebtedness of such person (without regard to accounting treatment).

 

“Taxes” has the meaning set forth in Section 3.01.

 

“Term Loan Documents” means this Agreement, theNotes, the Guaranty, the Collateral Documents, the Intercreditor Agreement,each Perfection Certificate, the Fee Letter, the Intercompany Notes, eachCo-Borrower Agreement and each Accession Agreement, collectively, and all otherrelated agreements and documents issued or delivered hereunder or thereunder orpursuant hereto or thereto, in each case as the same may be amended, modified orsupplemented from time to time.

 

“Term Loan Obligations” means, withoutduplication:

 

#### (i)            allprincipal of and interest (including, without limitation, any interest whichaccrues after the commencement of any proceeding under any Debtor Relief Lawwith respect to any Loan Party, whether or not allowed or allowable as a claimin any such proceeding) on any Loan under, or any Note issued pursuant to, thisAgreement or any other Term Loan Document;

####  

#### (ii)           allfees, expenses, indemnification obligations and other amounts of whatevernature now or hereafter payable by any Loan Party (including, withoutlimitation, any amounts which accrue after the commencement of any proceedingunder any Debtor Relief Law with respect to any Loan Party, whether or notallowed or allowable as a claim in any such proceeding) pursuant to thisAgreement or any other Term Loan Document;

####  

#### (iii)          all expenses of the Agents as to which one ormore of the Agents have a right to reimbursement under Section 10.04of this Agreement or under any other similar provision of any other Term LoanDocument, including, without limitation, any and all sums advanced by theCollateral Agent to preserve the Collateral or preserve its security interestsin the Collateral;

####  

#### (iv)          allamounts paid by any Indemnitee as to which such Indemnitee has the right toreimbursement under Section 10.05 of this Agreement or under anyTerm Loan Document; and

 

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#### (v)           inthe case of Holdings and each Subsidiary Guarantor, all amounts now orhereafter payable by Holdings or such Subsidiary Guarantor and all otherobligations or liabilities now existing or hereafter arising or incurred(including, without limitation, any amounts which accrue after the commencementof any proceeding under any Debtor Relief Law with respect to any Borrower,Holdings or such Subsidiary Guarantor, whether or not allowed or allowable as aclaim in any such proceeding) on the part of Holdings or such SubsidiaryGuarantor pursuant to this Agreement, the Guaranty or any other Term LoanDocument;

####  

together in each case with all renewals,modifications, consolidations or extensions thereof.

 

“Threshold Amount” means $10,000,000.

 

“Transaction” means the events contemplated bythe Transaction Documents.

 

“Transaction Documents” means the AcquisitionDocuments, the Capitalization Documents, the Senior Subordinated NoteDocuments, the ABL Documents, the Intercreditor Agreement and the Term LoanDocuments, collectively, and “Transaction Document” means any one ofthem.

 

“Type” means with respect to any Loan whethersuch Loan is a Eurodollar Loan or a Base Rate Loan.

 

“UMFPP” means the Union Mutual Fund PensionPlan.

 

“Unapplied Excess Cash Flow” means at any datethat portion, if any, of Excess Cash Flow for the portion of the Company’s 2004fiscal year elapsed from and after the Closing Date and for all full fiscalyears thereafter ending prior to such date that is not required to be used toprepay the Loans in accordance with Section 2.08(b)(i).

 

“Unfunded Liabilities” means the amount (ifany) by which the present value of all nonforfeitable benefits under each Planexceeds the current value of such Plan’s assets allocable to such benefits, alldetermined in accordance with the respective most recent valuations for suchPlan using applicable PBGC plan termination actuarial assumptions (the terms“present value” and “current value” shall have the same meanings specified inSection 3 of ERISA).

 

“United States” means the United States ofAmerica, including each of the States and the District of Columbia, butexcluding its territories and possessions.

 

“U.S. Patriot Act” means the Uniting andStrengthening America by Providing Appropriate Tools Required to Intercept andObstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into lawOctober 26, 2001)), as the same may be amended, supplemented, modified,replaced or otherwise in effect from time to time.

 

“Weighted Average Life to Maturity” means, whenapplied to any Indebtedness at any date, the number of years obtained bydividing:  (i) the sum of the productsobtained by multiplying (A) the amount of each then remaining installment,sinking fund, serial maturity or other required payments of principal,including payment at final maturity, in respect thereof, by (B) the number ofyears (calculated to the nearest one-twelfth) that will elapse between suchdate and the making of such payment; by (ii) the then outstanding principalamount of such Indebtedness.

 

“Welfare Plan” means a “welfare plan” as suchterm is defined in Section 3(1) of ERISA.

 

35

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“Wholly-Owned Subsidiary,” “Wholly-OwnedConsolidated Subsidiary” and “Wholly-Owned Domestic Subsidiary”mean, with respect to any Person at any date, any Subsidiary, ConsolidatedSubsidiary or Domestic Subsidiary, as applicable, of such Person all of theshares of capital stock or other ownership interests of which (exceptdirectors’ qualifying shares) are at the time directly or indirectly owned bysuch Person.

 

“WTC Business Interruption Insurance Policy”means the Duane Reade property insurance policy number 144SP0390 issued by theSt. Paul Fire and Marine Insurance Company for the effective policy periodOctober 1, 2000 to October 1, 2001.

 

“WTC Net Insurance Amount” means, for anyperiod, the aggregate amount received during such period by any Loan Party inconnection with any litigation or claim or any settlement thereof relating tothe WC Business Interruption Insurance Policy minus the aggregate amount then recordedas the Cardinal Reserve and the NLRB Reserve.

 

## **Section1.02****  Other Interpretative Provisions. **With reference tothis Agreement and each other Term Loan Document, unless otherwise specifiedherein or in such other Term Loan Document:

##  

### (a)           Themeanings of defined terms are equally applicable to the singular and pluralforms of the defined terms.

###  

### (b)           Thewords “herein,” “hereto,” “hereof” and “hereunder”and words of similar import when used in any Term Loan Document shall refer tosuch Term Loan Document as a whole and not to any particular provisionthereof.  Article, Section,Exhibit and Schedule references are to the Term Loan Document inwhich such reference appears.  The term “including”is by way of example and not limitation. The term “documents” includes any and all instruments, documents,agreements, certificates, notices, reports, financial statements and otherwritings, however evidenced, whether in physical or electronic form.

###  

### (c)           Inthe computation of periods of time from a specified date to a later specifieddate, the word “from” means “from and including,” the words “to”and “until” each mean “to but excluding” and the word “through”means “to and including”.

###  

### (d)           Section headingsherein and in the other Term Loan Documents are included for convenience ofreference only and shall not affect the interpretation of this Agreement or anyother Term Loan Document.

###  

## **Section 1.03****  Accounting Terms and Determinations. **Except as otherwise expressly provided herein,all accounting terms used herein shall be interpreted, and all financialstatements and certificates and reports as to financial matters required to bedelivered to the Lenders hereunder shall be prepared, in accordance with GAAPapplied on a consistent basis.  Allfinancial statements delivered to the Lenders hereunder shall be accompanied bya statement from the Company that GAAP has not changed since the most recentfinancial statements delivered by the Company to the Lenders or if GAAP haschanged describing such changes in detail and explaining how such changesaffect the financial statements.  Allcalculations made for the purposes of determining compliance with thisAgreement shall (except as otherwise expressly provided herein) be made byapplication of GAAP applied on a basis consistent with the most recent annualor quarterly financial statements delivered pursuant to Section 6.01(or, prior to the delivery of the first financial statements pursuant to Section 6.01,consistent with the financial statements described in Section 5.05(a));provided, however, if (i) the Company shall object to determiningsuch compliance on such basis at the time of delivery of such financialstatements due to any

 

36

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change in GAAP or the rules promulgatedwith respect thereto or (ii) either the Administrative Agent or the RequiredLenders shall so object in writing within 60 days after delivery of suchfinancial statements (or after the Lenders have been informed of the change inGAAP affecting such financial statements, if later), then such calculationsshall be made on a basis consistent with the most recent financial statementsdelivered by the Company to the Lenders as to which no such objection shallhave been made, and the Company shall provide to the Administrative Agent andthe Lenders financial statements and other documents required under thisAgreement or as reasonably requested hereunder setting forth a reconciliationbetween calculations made before and after giving effect to such change inGAAP.

 

## **Section1.04****  Annualization; Rounding.**  If any determination hereunder is required bythe terms hereof to be made for a period of four consecutive fiscal quarters ata time at which fewer than four full fiscal quarters have elapsed since the ClosingDate, such determination shall (except as otherwise expressly provided herein)be made for the period elapsed from the Closing Date through the most recentfiscal quarter then ended (annualized on a simple arithmetic basis, if suchdetermination is to be used in a ratio with a balance sheet item).  Any financial ratios required to bemaintained by any Group Company pursuant to this Agreement shall be calculatedby dividing the appropriate component by the other component, carrying theresult to one place more than the number of places by which such ratio isexpressed herein and rounding the result up or down to the nearest number (witha rounding-up if there is no nearest number).

##  

## **Section 1.05**** ****References to Agreements and Laws.**  Unlessotherwise expressly provided herein, (i) references to Organization Documents,agreements (including the Term Loan Documents) and other contractualinstruments shall be deemed to include all subsequent amendments, restatements,extensions, supplements and other modifications thereto, but only to the extentthat such amendments, restatements, extensions, supplements and othermodifications are not prohibited by any Term Loan Document; and (ii) referencesto any Law shall include all statutory and regulatory provisions consolidating,amending, replacing, supplementing or interpreting such Law.

##  

## **Section 1.06**** ****Times of Day.**  Unless otherwise specified, allreferences herein to times of day shall be references to Eastern time (daylightor standard, as applicable).

##  

# **ARTICLEII**THE CREDIT FACILITY

# ** **

## **Section 2.01****  Commitments to Lend. **EachLender severally agrees, on the terms and conditions set forth in thisAgreement, to make a single Loan to the Company and Duane Reade, jointly andseverally, on the Closing Date in a principal amount not exceeding itsCommitment.  The borrowing of the Loanshereunder on the Closing Date shall be made from the several Lenders ratably inproportion to their respective Commitments. The Commitments are not revolving in nature, and amounts repaid or prepaidprior to the Maturity Date may not be reborrowed.  The Commitments of the Lenders shallterminate automatically immediately after the making of the Loans on theClosing Date.

##  

## **Section2.02****  Notice of Borrowing. **The Borrowers shall give theAdministrative Agent a Notice of Borrowing not later than 10:00 A.M. on thethird Business Day (or such shorter period as may be agreed by theAdministrative Agent in its sole discretion) before the Closing Date,specifying:

##  

#### (i)            theproposed Closing Date, which shall be a Business Day; and

####  

#### (ii)           theaggregate amount of Loans of each Type to be included in the borrowing of Loanson the Closing Date.

 

37

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Upon receipt of the Notice of Borrowing, theAdministrative Agent shall promptly notify each Lender of such Lender’s ratableshare of the Loans referred to therein, and such Notice of Borrowing shall notthereafter be revocable by the Borrowers.

 

## **Section2.03****  Funding of Loans.**

##  

### (a)           *Funding of Loans*.  Not later than 1:00 P.M. on the Closing Date,each Lender shall make available its share of the Loans, in Federal or otherimmediately available funds, to the Administrative Agent at the AdministrativeAgent’s Office.  Unless the AdministrativeAgent determines that any applicable condition specified in Article IVhas not been satisfied, the Administrative Agent shall make the funds soreceived available to the Company and Duane Reade in like funds as received bythe Administrative Agent either by (i) crediting the accounts of the Companyand/or Duane Reade on the books of Bank of America with the aggregate amount ofsuch funds or (ii) wire transfer of such funds, in each case in accordance withinstructions provided to (and reasonably acceptable to) the Administrative Agentby the Company and Duane Reade or, if a borrowing shall not occur on such datebecause any condition precedent herein shall not have been met, promptly returnthe amounts received from the Lenders in like funds, without interest.

###  

### (b)           *Funding by the Administrative Agent in Anticipationof Amounts Due from the Lenders*. Unless the Administrative Agent shall have received notice from a Lenderprior to the making of the Loans on the Closing Date that such Lender will notmake its Loans available to the Administrative Agent, the Administrative Agentmay assume that such Lender has made such Loans available to the AdministrativeAgent on the Closing Date in accordance with subsection (a) of thisSection 2.03, and the Administrative Agent may, in reliance upon suchassumption, make available to the Borrowers by crediting accounts of theCompany and Duane Reade maintained with Bank of America on such date acorresponding amount.  If and to theextent that such Lender shall not have so made its Loans available to theAdministrative Agent, such Lender, severally with the Borrowers, and theBorrowers, jointly and severally, agree to repay to the Administrative Agentforthwith on demand such corresponding amount in immediately available fundswith interest thereon, for each day from and including the date such amount ismade available to the Borrowers to but excluding the date of payment to theAdministrative Agent, at (i) in the case of a payment to be made by suchLender, the greater of the Federal Funds Rate and a rate determined by theAdministrative Agent in accordance with banking industry rules on interbankcompensation and (ii) in the case of a payment to be made by the Borrower, theinterest rate applicable to Base Rate Loans. If the Borrowers and such Lender shall pay such interest to theAdministrative Agent for the same or an overlapping period, the AdministrativeAgent shall promptly remit to the Borrowers, collectively, the amount of suchinterest paid by the Borrowers for such period. If such Lender shall repay to the Administrative Agent suchcorresponding amount, such amount so repaid shall constitute such Lender’s Loanfor purposes of this Agreement.  Anypayment by the Borrowers shall be without prejudice to any claim the Borrowersmay have against a Lender that shall have failed to make such payment to theAdministrative Agent.

###  

### (c)           *Obligations of Lenders Several*.  The obligations of the Lenders hereunder tomake Loans are several and not joint. The failure of any Lender to make a Loan required to be made by ithereunder shall not relieve any other Lender of its obligation, if any,hereunder to make any Loan, but no Lender shall be responsible for the failureof any other Lender to make the Loan to be made by such other Lender.

###  

### (d)           *Failed Loans*.  If any Lender shall fail to make a Loan (a “FailedLoan”) which such Lender is otherwise obligated hereunder to make to theBorrowers on the Closing Date, and the Administrative Agent shall not havereceived notice from the Borrowers or such Lender that any condition precedentto the making of the Failed Loan has not been satisfied, then, until suchLender shall

 

38

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### have made or bedeemed to have made (pursuant to the last sentence of this subsection (d))the Failed Loan in full or the Administrative Agent shall have received noticefrom the Borrowers or such Lender that any condition precedent to the making ofthe Failed Loan was not satisfied at the time the Failed Loan was to have beenmade, whenever the Administrative Agent shall receive any amount from aBorrower for the account of such Lender, (i) the amount so received (up to theamount of such Failed Loan) will, upon receipt by the Administrative Agent, bedeemed to have been paid to the Lender in satisfaction of the obligation forwhich paid, without actual disbursement of such amount to the Lender, (ii) theLender will be deemed to have made the same amount available to theAdministrative Agent for disbursement as a Loan to the Borrowers (up to the amountof such Failed Loan) and (iii) if the Administrative Agent has previously madesuch amount available to the Borrowers on behalf of such Lender pursuant to theprovisions hereof, the Administrative Agent will reimburse itself (up to theamount of the amount made available to the Borrowers); provided, however,that the Administrative Agent shall have no obligation to apply any such amountto or deem it applied as provided herein unless the Administrative Agent shallhave determined in its sole discretion that to so apply such amount will notviolate any law, rule, regulation or requirement applicable to theAdministrative Agent.  Upon any suchdisbursement by the Administrative Agent, such Lender shall be deemed to havemade a Base Rate Loan to the Borrowers in satisfaction, to the extent thereof,of such Lender’s obligation to make the Failed Loan.

###  

## **Section2.04****  Evidence of Loans**.

##  

### (a)           *Lender Accounts*.  Each Lender shall maintain in accordance withits usual practice an account or accounts evidencing the indebtedness to suchLender resulting from each Loan made by such Lender hereunder on the ClosingDate, including the amount of principal and interest payable and paid to suchLender from time to time under this Agreement.

###  

### (b)           *Administrative Agent Records*.  The Administrative Agent shall maintainaccounts in which it will record (i) the amount of each Loan made hereunder,the Type of the Loan made and the Interest Period, if any, applicable thereto,(ii) the amount of any principal or interest due and payable or to become dueand payable from the Borrowers to each Lender hereunder and (iii) the amount ofany sum received by the Administrative Agent hereunder from the Borrowers andeach Lender’s share thereof.

###  

### (c)           *Evidence of Indebtedness*.  The entries made in the accounts maintainedpursuant to subsections (a) and (b) of this Section 2.04shall be prima facie evidence of the existence and amounts of the obligationstherein recorded; provided, however, that the failure of anyLender or the Administrative Agent to maintain such accounts or any errortherein shall not in any manner affect the obligations of the Borrowers torepay the Loans in accordance with their terms.

###  

### (d)           *Notes*. Notwithstanding any other provision of this Agreement, if any Lendershall request and receive a Note as provided in Section 10.07 orotherwise, then the Loans of such Lender shall be evidenced by a single Note,substantially in the form of Exhibit B, payable to the order ofsuch Lender for the account of its Applicable Lending Office in an amount equalto the aggregate unpaid principal amount of such Lender’s Loans.

###  

### (e)           *Note Endorsements*.  Each Lender having one or more Notes shallrecord the date, amount and Type of each Loan made by it and the date andamount of each payment of principal made by the Borrowers with respect thereto,and may, if such Lender so elects in connection with any transfer orenforcement of any Note, endorse on the reverse side or on the schedule, ifany, forming a part thereof appropriate notations to evidence the foregoinginformation with respect to each outstanding Loan evidenced thereby; providedthat the failure of any Lender to make any such recordation or endorsement

 

39

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### shall not affectthe obligations of the Borrowers hereunder or under any such Note.  Each Lender is hereby irrevocably authorizedby the Borrowers so to endorse each of its Notes and to attach to and make apart of each of its Notes a continuation of any such schedule as and whenrequired.

###  

## **Section2.05****  Interest.**

##  

### (a)           *Rate Options Applicable to Loans*.  Prior to the Syndication Date, each Loanshall be a Base Rate Loan or a Eurodollar Loan with a one-month Interest Period(ending on the same date for all Eurodollar Loans), as the Borrowers mayrequest pursuant to Section 2.02. On and after the Syndication Date, each Loan shall be a Base Rate Loanor a Eurodollar Loan, as the Borrowers may request pursuant to Section 2.06.  Loans of more than one Type may beoutstanding at the same time; providedhowever, that theBorrowers may not request any extension or conversion of Eurodollar Loanswhich, if made, would result in an aggregate of more than six separate Groupsof Eurodollar Loans being outstanding hereunder at any one time.  For this purpose, Loans having differentInterest Periods, regardless of whether commencing on the same date, shall beconsidered separate Groups.  Interesthereunder shall be due and payable in accordance with the terms hereof beforeand after judgment and before and after the commencement of any proceedingunder any Debtor Relief Law.

###  

### (b)           *Base Rate Loans*.  Each Loan which is made as, or convertedinto, a Base Rate Loan shall bear interest on the outstanding principal amountthereof, for each day from the date such Loan is made as, or converted into, aBase Rate Loan until it becomes due or is converted into a Eurodollar Loan, ata rate per annum equal to the Base Rate for such day plus the then ApplicableMargin.  Such interest shall be joint andseveral obligations of the Borrowers payable in arrears on each InterestPayment Date and, with respect to the principal amount of any Base Rate Loanconverted to a Eurodollar Loan, on the date such Base Rate Loan is soconverted.  Any overdue principal of orinterest on any Base Rate Loan shall bear interest, payable on demand, for eachday until paid at a rate per annum equal to the sum of 2% plus the Base Ratefor such day plus the Applicable Margin for Base Rate Loans for such day.

###  

### (c)           *Eurodollar Loans*.  Each Eurodollar Loan shall bear interest onthe outstanding principal amount thereof, for each day during the InterestPeriod applicable thereto, at a rate per annum equal to the sum of the AdjustedEurodollar Rate for such Interest Period plus the then Applicable Margin.  Such interest shall be joint and severalobligations of the Borrowers payable for each Interest Period on each InterestPayment Date.  Any overdue principal ofor interest on any Eurodollar Loan shall bear interest, payable on demand, foreach day until paid at a rate per annum equal to the sum of 2% plus the sum of(i) the Adjusted Eurodollar Rate applicable to such Loan at the date suchpayment was due plus (ii) the Applicable Margin for Eurodollar Loans for suchday (or, if the circumstances described in Section 3.02 shallexist, at a rate per annum equal to the sum of 2% plus the Base Rate for suchday plus the Applicable Margin for Base Rate Loans for such day).

###  

### (d)           *Determination and Notice of Interest Rates*.  The Administrative Agent shall determine eachinterest rate applicable to the Loans hereunder.  The Administrative Agent shall give promptnotice to the Company and the Lenders of each rate of interest so determined,and its determination thereof shall be conclusive in the absence of manifesterror.

###  

### (e)           *Default Interest*.  Any overdue principal of and, to the extentpermitted by law, overdue interest on any Loan and any other amounts owingherein or under the other Term Loan Documents and not paid when due shall bearinterest, payable on demand, at a per annum rate equal to (i) in the case ofprincipal of any Loan, the rate set forth in the third sentence of Section 2.05(c)in respect of Eurodollar Loans or in the third sentence of Section 2.05(b)in respect of Base Rate Loans and (ii) in the case of any other amount, ifexpressly provided for herein, at the rate so provided and otherwise at theBase Rate plus the Applicable Margin for Base Rate Loans plus 2.00%.

 

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## **Section2.06****  Extension and Conversion.**

##  

### (a)           *Continuation and Conversion Options*.  The Loans shall bear interest initially atthe type of rate specified by the Borrowers in the Notice of Borrowing.  Thereafter, the Borrowers shall have theoption, on any Business Day, to elect to change or continue the type ofinterest rate borne by each Group of Loans (subject in each case to theprovisions of the definition of “Interest Period” and to Section 2.05and Article III), as follows:

###  

#### (i)            ifsuch Loans are Base Rate Loans, the Borrowers may elect to convert such Loansto Eurodollar Loans as of any Business Day; and

####  

#### (ii)           ifsuch Loans are Eurodollar Loans, the Borrowers may elect to convert such Loansto Base Rate Loans or elect to continue such Loans as Eurodollar Loans for anadditional Interest Period, subject to Section 3.05 in the case ofany such conversion or continuation effective on any day other than the lastday of the then current Interest Period applicable to such Loans.

####  

Each such election shall be made by delivering anotice, substantially in the form of Exhibit A-2 hereto (a “Noticeof Extension/Conversion”) to the Administrative Agent not later than 12:00Noon on the third Business Day before the conversion or continuation selectedin such notice is to be effective.  ANotice of Extension/Conversion may, if it so specifies, apply to only a portionof the aggregate principal amount of the relevant Group of Loans; providedthat (i) such portion is allocated ratably among the Loans comprising suchGroup and (ii) the portion to which such Notice of Borrowing applies, and theremaining portion to which it does not apply, are each $2,000,000 or any largermultiple of $500,000.

 

### (b)           *Contents of Notice of Extension/Conversion*.  Each Notice of Extension/Conversion shallspecify:

###  

#### (i)            theGroup of Loans (or portion thereof) to which such notice applies;

####  

#### (ii)           thedate on which the conversion or continuation selected in such notice is to beeffective, which shall comply with the applicable clause of subsection 2.06(a)above;

####  

#### (iii)          if the Loans comprising such Group are to beconverted, the new Type of Loans and, if the Loans being converted are to beEurodollar Loans, the duration of the next succeeding Interest Periodapplicable thereto; and

####  

#### (iv)          ifsuch Loans are to be continued as Eurodollar Loans for an additional InterestPeriod, the duration of such additional Interest Period.

####  

Each Interest Period specified in a Notice ofExtension/Conversion shall comply with the provisions of the definition of theterm “Interest Period”.  If no Notice ofExtension/Conversion is timely received prior to the end of an Interest Periodfor any Group of Eurodollar Loans, the Borrowers shall be deemed to haveelected that such Group be converted to Base Rate Loans as of the last day ofsuch Interest Period.

 

### (c)           *Notification to Lenders*.  Upon receipt of a Notice ofExtension/Conversion from the Borrowers pursuant to subsection 2.06(a)above, the Administrative Agent shall promptly notify each Lender of thecontents thereof and such notice shall not thereafter be revocable by theBorrowers.

###  

### (d)         *Limitation onConversion/Continuation Options*.  The Borrowers shall not beentitled to elect to convert any Loans to, or continue any Loans for anadditional Interest Period as,

 

41

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### Eurodollar Loans if (i) the aggregate principal amountof any Group of Eurodollar Loans created or continued as a result of suchelection would be less than $2,000,000 or (ii) a Default shall have occurredand be continuing when the Borrowers deliver notice of such election to theAdministrative Agent and the Administrative Agent or the Required Lenders havenotified the Company that Eurodollar Loans are not available during thecontinuance of such Default.

###  

### (e)           *Accrued Interest*.  Accrued interest on a Loan (or portionthereof) being extended or converted shall be paid by the Borrowers (i) withrespect to any Base Rate Loan being converted to a Eurodollar Loan, on the lastBusiness Day of the first fiscal quarter of the Company ending on or after thedate of conversion and (ii) otherwise, on the date of extension or conversion.

###  

## **Section2.07****  Maturity of Loans. **The Loans shall mature on theMaturity Date and all Loans then outstanding (together with accrued interestthereon and fees in respect thereof) shall be joint and several obligations ofthe Borrowers due and payable on such date.

##  

## **Section2.08****  Prepayments; Change of Control.**

##  

### (a)           *Voluntary Prepayments*.  The Borrowers shall have the rightvoluntarily to prepay Loans in whole or in part from time to time, subject to Section 3.05but otherwise without premium or penalty except as expressly provided in this Section2.08(a); provided, however, that (i) each partial prepaymentof Loans shall be in a minimum principal amount of $1,000,000 or a wholemultiple of $500,000 in excess thereof, in the case of Eurodollar Loans, and$500,000 or a whole multiple of $100,000 in excess thereof, in the case of BaseRate Loans and (ii) the Borrowers shall have given prior written or telecopynotice (or telephone notice promptly confirmed by written or telecopy notice)to the Administrative Agent, by 11:00 A.M., at least three Business Days priorto the date of prepayment.  Each noticeof prepayment shall specify the prepayment date and the principal amount to be prepaid.  Each notice of prepayment shall beirrevocable and shall commit the Borrowers, jointly and severally, to prepaysuch Loan by the amount stated therein on the date stated therein, unless suchnotice is in connection with a refinancing of the Loans in which case suchnotice may be conditioned on consummation of such refinancing.  Whenever any repayment or prepayment ofprincipal of any Loans is made pursuant to this Section 2.08(a) on orbefore the second anniversary of the Closing Date, the Borrowers, jointly andseverally, shall on the date of such prepayment, pay to the Lenders aprepayment premium equal to (i) if such prepayment occurs on or prior to thefirst anniversary of the Closing Date, 2.00% of the principal amount of theLoans so repaid or prepaid and (B) if such prepayment occurs after the firstanniversary but on or prior to the second anniversary of the Closing Date,1.00% of the principal amount of the Loans so prepaid.  All prepayments of Eurodollar Loans underthis Section 2.08(a) shall be accompanied by accrued interest onthe principal amount being prepaid to the date of payment.

###  

### (b)           *Mandatory Prepayments*.

###  

#### (i)            *Excess Cash Flow*.  Within 100 days after the end of each fiscalyear of Holdings (commencing with the fiscal year ending on or about December31, 2005), the Borrowers, jointly and severally, shall prepay the Loans in anamount equal to 50% of the Excess Cash Flow for such prior fiscal year.

####  

#### (ii)           *Asset Dispositions, Casualties and Condemnations,Extraordinary Receipts etc*. Within five Business Days of the receipt by any Group Company of NetCash Proceeds from any Asset Disposition that, after giving effect to Section7.05 hereof, gives rise to any Excess Proceeds, the Borrowers, jointly andseverally, shall prepay the Loans in an aggregate amount required under Section7.05.  Within five Business Days ofthe receipt by any Group Company of Net Cash Proceeds from any Casualty orCondemnation or of Extraordinary

 

42

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#### Receipts, as applicable,the Borrowers, jointly and severally, shall prepay the Loans in an aggregateamount equal to 100% of the Net Cash Proceeds of such Casualty or Condemnationor of such Extraordinary Receipts, as applicable.  For the avoidance of doubt, the Borrowershereby acknowledge and agree that no prepayment or other early redemption orretirement of any Senior Subordinated Notes required as a result of an AssetDisposition may be made prior to the making of all prepayments of the Loansrequired under this Section 2.08(b)(ii).

####  

#### (iii)          *DebtIssuances*.  Immediatelyupon receipt by any Group Company of proceeds from any Debt Issuance (otherthan any Permitted Indebtedness or other Indebtedness permitted to be incurredunder Section 7.01), the Borrowers shall, jointly and severally, prepaythe Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of suchDebt Issuance.

####  

#### (iv)          *Equity Issuances*.  Within two Business Days after receipt by anyGroup Company of proceeds from any Equity Issuance (other than any ExcludedEquity Issuance), the Borrowers shall, jointly and severally, prepay the Loansin an aggregate amount equal to 50% of the Net Cash Proceeds of such EquityIssuance.

####  

#### (v)            *Payments in Respect of Subordinated Indebtedness*.  Immediately upon receipt by theAdministrative Agent or any Lender of any amount so payable pursuant to thesubordination provision of any Indebtedness of Holdings or any of itsSubsidiaries that is subordinate to the Term Loan Obligations, all proceedsthereof shall be applied as set forth in subsection (vi) below.

####  

#### (vi)          *Application of Mandatory Prepayments*.  All amounts required to be paid pursuant tothis Section 2.08(b) shall be applied first to Base Rate Loans andthen to Eurodollar Loans in direct order of Interest Period maturities, in eachcase ratably among the Loans.  Allprepayments under this Section 2.08(b) shall be subject to Section3.05.  All prepayments of EurodollarLoans under this Section 2.08(b) shall be accompanied by accruedinterest on the principal amount being prepaid to the date of payment.

####  

#### (vii)         *PrepaymentAccount*.  Amounts to beapplied as provided in subsection (vi) above to the prepayment of Loansshall be applied first to reduce outstanding Base Rate Loans.  Any amounts remaining after each such applicationshall, at the option of the Borrowers, be applied to prepay Eurodollar Loansimmediately and/or shall be deposited in a separate Prepayment Account (asdefined below) for the Loans.  TheAdministrative Agent shall apply any cash deposited in the Prepayment Account,upon withdrawal by the Collateral Agent, to prepay Eurodollar Loans on the lastday of their respective Interest Periods (or, at the direction of theBorrowers, on any earlier date) until all outstanding Loans have been prepaidor until all the allocable cash on deposit in the Prepayment Account has beenexhausted.  For purposes of thisAgreement, the term “Prepayment Account” shall mean an account (which mayinclude the Prepayment Account established under the Security Agreement) establishedby the Borrowers with the Collateral Agent and over which the Collateral Agentshall have exclusive dominion and control, including the exclusive right ofwithdrawal for application in accordance with this subsection (vii).  The Collateral Agent will, at the request ofthe Borrowers, invest amounts on deposit in the Prepayment Account in CashEquivalents that mature prior to the last day of the applicable InterestPeriods of the Eurodollar Loans to be prepaid; provided, however,that (i) the Collateral Agent shall not be required to make any investmentthat, in its sole judgment, would require or cause the Collateral Agent to bein, or would result in any, violation of any Law, (ii) such Cash Equivalentsshall be subjected to a first priority perfected security interest in favor ofthe Collateral Agent and (iii) if any Event of Default shall have occurred andbe continuing, the selection of such Cash Equivalents shall be in the solediscretion of the Collateral Agent.  The

 

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#### Borrowers shallindemnify the Collateral Agent for any losses relating to such investments inCash Equivalents so that the amount available to prepay Eurodollar Loans on thelast day of the applicable Interest Periods is not less than the amount thatwould have been available had no investments been made pursuant thereto.  Other than any interest or profits earned onsuch investments, the Prepayment Accounts shall not bear interest.  Interest or profits, if any, on theinvestments in any Prepayment Account shall accumulate in such PrepaymentAccount until all outstanding Loans of any applicable Class with respect towhich amounts have been deposited in the Prepayment Accounts have been prepaidin full, at which time so much thereof as is not required to make payment ofthe Term Loan Obligations which have become due and payable (whether byscheduled maturity, acceleration or otherwise) shall be withdrawn by theCollateral Agent on the next Business Day following the day on which the CollateralAgent considers the funds deposited therein to be collected funds and disbursedto the Borrowers or their order. If the maturity of the Loans has beenaccelerated pursuant to Section 8.02, the Administrative Agent may, inits sole discretion, cause the Collateral Agent to withdraw amounts on depositin the Prepayment Account and apply such funds to satisfy any of the Term LoanObligations in the order set forth in Section 8.03.

####  

#### (viii)        *PaymentsCumulative*.  Except orotherwise expressly provided in this Section 2.08, paymentsrequired under any subsection or clause of this Section 2.08are in addition to payments made or required under any other subsection orclause of this Section 2.08.

####  

#### (ix)           *Notice*.  The Borrowers shall give to theAdministrative Agent and the Lenders at least five Business Days’ prior writtenor telecopy notice of each and every event or occurrence requiring a prepaymentunder Section 2.08(b)(i), (ii), (iii), or (iv)including, if applicable, the amount of Net Cash Proceeds expected to bereceived therefrom and the expected schedule for receiving such proceeds; provided,however, that in the case of any prepayment event consisting of aCasualty or Condemnation, the Borrowers shall give such notice within fiveBusiness Days after the occurrence of such event.

####  

### (c)           *Change of Control Offer*.  If a Change of Control occurs, each Lenderwill have the right to require that the Borrowers prepay all or any part ofsuch Lender’s Loans pursuant to an offer to prepay (each such offer being hereinreferred to as a “Change ofControl Offer”) as set forth belowand in accordance with the procedures set forth in this Section 2.08(c).  In the Change of Control Offer, theBorrowers, jointly and severally, will offer to prepay all of the Loans at parplus, if such Change of Control Offer is made at any time on or before thethird anniversary of the Closing Date, a prepayment premium (the “Change ofControl Prepayment Premium”) equal to 1.00% of the aggregate principalamount of the Loans being prepaid, in cash, together with accrued and unpaidinterest thereon to the date of prepayment (the “Change of ControlPrepayment Date”).  Within 30 daysafter any Change of Control or, at the Borrowers’ option, prior to such Changeof Control but after it is publicly announced, the Borrowers shall notify theAdministrative Agent and give written notice of the Change of Control to eachLender specifying:

###  

#### (i)            thata Change of Control has occurred or will occur and the date of such event andthat such Lender has the right to require the Borrowers to prepay such Lender’sLoans at par plus, if applicable, the Change of Control Prepayment Premium;

####  

#### (ii)           thatthe Change of Control Offer is being made pursuant to this Section2.08(c)and that all Loans properly tendered pursuant to the Change of Control Offerwill be accepted for prepayment at par plus any applicable Change of ControlPrepayment Premium;

 

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#### (iii)          the Change of Control Prepayment Date, whichshall be fixed by the Company on a Business Day no earlier than 30 days norlater than 60 days from the date the notice is mailed; provided that theChange of Control Prepayment Date may not occur prior to the Change of Control;

####  

#### (iv)          thatnotice of acceptance of the Change of Control Offer must be received by theAdministrative Agent and the Company at least three Business Days prior to theChange of Control Prepayment Date;

####  

#### (v)           thatLoans with respect to which the Change of Control Offer is accepted inaccordance with this Section 2.08(c) and not withdrawn shall be prepaid,together with any applicable Change of Control Prepayment Premium and accruedand unpaid interest thereon, on the Change of Control Prepayment Date;

####  

#### (vi)          thatany Loans not tendered for prepayment will continue to accrue interest inaccordance with Section 2.05 hereof;

####  

#### (vii)         that, unless the Borrowers default in theprepayment of the Loans tendered pursuant to such Change of Control Offer, anyLoans accepted for prepayment pursuant to the Change of Control Offer shallcease to accrue interest after the Change of Control Prepayment Date; and

####  

#### (viii)        other procedures that a Lender must follow toaccept a Change of Control Offer or to withdraw acceptance of the Change ofControl Offer.

####  

Upon receipt by the Company of the proper notice ofacceptance of the Change of Control Offer, the Lender in respect of which suchacceptance was made shall (unless such acceptance is properly withdrawn) thereafterbe entitled to receive solely the principal amount of such Loan together withany applicable Change of Control Prepayment Premium and accrued and unpaidinterest thereon to the Change of Control Prepayment Date.  Upon acceptance of the Change of ControlOffer with respect to any Loan in accordance with the foregoing provisions,such Loan shall be paid by the Borrowers at par plus any applicable Change ofControl Prepayment Premium and accrued and unpaid interest thereon to theChange of Control Prepayment Date.  Ifany Loan with respect to which the Change of Control Offer was accepted inaccordance with the provisions of this Section 2.08(c) shall not be soprepaid on the Change of Control Prepayment Date, the principal thereof (andChange of Control Prepayment Premium, if any, thereon) shall, until paid, bearinterest from the Change of Control Prepayment Date at the rate specified in Section2.05(e)(ii) borne by such Loan in accordance with Section 2.05.  Lenders electing to have Loans prepaid willbe required to provide notice to the Administrative Agent and the Company oftheir acceptance of the Change of Control Offer at least three Business Daysprior to the Change of Control Prepayment Date.

 

The Borrowers shall, not later than 10:00 a.m. (NewYork time) on the Change of Control Prepayment Date, deposit with theAdministrative Agent an amount of cash sufficient to pay the aggregateprincipal amount of Loans which are to be prepaid, together with the aggregateamount of the Change of Control Prepayment Premium, if any, applicable theretoand all accrued and unpaid interest thereon to the Change of Control PurchaseDate.

 

For the avoidance of doubt, the Borrowers herebyacknowledge and agree that no prepayment or other early redemption or retirementof any Senior Subordinated Notes required as a result of a Change of Controlmay be made prior to the making of all prepayments of the Loans required underthis Section 2.08(c).

 

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An acceptance of a Change of Control Offer made inaccordance with the foregoing provisions may be withdrawn by means of a writtennotice of withdrawal delivered no later than 1 full Business Day prior to theChange of Control Payment Date by the applicable Lender to the AdministrativeAgent specifying, as applicable:

 

#### (i)            thename of the Lender;

####  

#### (ii)           theprincipal amount of the Loans to which such notice of withdrawal is beingsubmitted; and

####  

#### (iii)          the principal amount, if any, of the Loansthat remains subject to the original Change of Control Prepayment Notice.

####  

The Borrowers shall not be required to make a Changeof Control Offer upon a Change of Control if a third party makes the Change ofControl Offer in the manner, at the times and otherwise in compliance with therequirements applicable to a Change of Control Offer made by the Borrowers andprepays all Loans at par plus any applicable Change of Control PrepaymentPremium with respect to which such Change of Control Offer is validly acceptedand which have not been withdrawn under such Change of Control Offer.

 

## **Section2.09****  Replacement of Lenders. **If (i) any Lender has demandedcompensation or indemnification pursuant to Section 3.01 or Section 3.04,(ii) the obligation of any Lender to maintain Eurodollar Loans has beensuspended pursuant to Section 3.02 or 3.03(ii) or (iii) anyLender has failed to consent to a proposed amendment, waiver, discharge ortermination which pursuant to the terms of Section 10.01 or anyother provision of any Term Loan Document requires the consent of a greaterpercentage of Lenders than Required Lenders and with respect to which theRequired Lenders shall have granted their consent, the Borrowers shall have theright, if no Default or Event of Default then exists and at their sole effortand expense, to replace such Lender by causing such Lender to assign its Loansto one or more existing Lenders or Eligible Assignees pursuant to Section 10.07;provided, however, that (x) if the Borrowers elect to exercisesuch right with respect to any Lender pursuant to clause (i) or (ii)above, it shall be obligated to replace all Lenders that have made similarrequests for compensation pursuant to Section 3.01 or 3.04or whose obligations to maintain Eurodollar Loans have been similarly suspendedand (y) in the case of any replacement of a Lender under the circumstancesdescribed in clause (iii) above, the applicable amendment, waiver,discharge or termination that the Borrowers have requested shall becomeeffective upon giving effect to such replacement (and any related Assignmentand Assumption required to be effected in connection therewith under this Section2.09).  The replacement of a Lenderpursuant to this Section 2.09 shall be effective on the fifthBusiness Day (the “Replacement Date”) following the date of notice ofsuch replacement to the Lenders through the Administrative Agent, subject tothe satisfaction of the following conditions:

##  

#### (i)            theBorrowers shall have paid to the Administrative Agent the assignment feespecified in Section 10.07(b)(iv);

####  

#### (ii)           eachreplacement Lender and/or Eligible Assignee, and the Administrative Agent onbehalf of each Lender subject to replacement, shall have satisfied theconditions to an Assignment and Assumption set forth in Section 10.07(b)and, in connection therewith, the replacement Lender(s) and/or EligibleAssignee(s) shall pay to each Lender subject to replacement an amount equal tothe principal of, and all accrued but unpaid interest on, its outstanding Loans(including any amounts under Section 3.05);

 

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#### (iii)          the Borrowers shall have paid to theAdministrative Agent for the account of each replaced Lender an amount equal toall obligations owing to such replaced Lenders by the Borrowers pursuant to thisAgreement and the other Term Loan Documents (other than those obligations ofthe Borrowers referred to in clause (i) above);

####  

#### (iv)          inthe case of any such assignment resulting from a claim for compensation under Section3.04 or payments required to be made pursuant to Section 3.01, suchassignment will result in a reduction in such compensation or paymentsthereafter; and

####  

#### (v)           suchassignment does not conflict with applicable Law.

####  

A Lender shall not be required to make any suchassignment if, prior thereto, as a result of a waiver by such Lender orotherwise, the circumstances entitling the Borrowers to require such assignmentcease to apply.

 

## **Section2.10****  Fees. **The Borrowers, jointly andseverally, hereby agree to pay to each of the Agents, for their own respectiveaccounts, fees in the amounts and at the times specified in the FeeLetter.  Such fees shall be fully earnedwhen paid and shall not be refundable for any reason whatsoever.  The Borrowers, jointly and severally, herebyagree to pay to the Lenders such fees as shall have been separately agreed uponin writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid andshall not be refundable for any reason whatsoever.

##  

## **Section2.11****  Pro-rata Treatment. **Except to the extent otherwiseprovided herein, each Loan, each payment or prepayment of principal of orinterest on any Loan, each payment of fees and each conversion or continuationof any Loan, shall be allocated pro-rata among the relevant Lenders in accordancewith their respective Commitment Percentages (or, if the Commitments haveexpired or been terminated, in accordance with the respective principal amountsof the outstanding Loans); provided that, in the event any amount paidto any Lender pursuant to this Section 2.11 is rescinded or mustotherwise be returned by the Administrative Agent, each Lender shall, upon therequest of the Administrative Agent, repay to the Administrative Agent theamount so paid to such Lender, with interest for the period commencing on thedate such payment is returned by the Administrative Agent until the date theAdministrative Agent receives such repayment at a rate per annum equal to,during the period to but excluding the date two Business Days after suchrequest, the Federal Funds Rate, and thereafter, the Base Rate plus 2.00% perannum.

##  

## **Section2.12****  Sharing of Payments. **The Lenders agree among themselvesthat, except to the extent otherwise provided herein, if any Lender shallobtain payment in respect of any Loan or any other obligation owing to suchLender under this Agreement through the exercise of a right of setoff, banker’slien or counterclaim, or pursuant to a secured claim under Section 506 ofthe Bankruptcy Code or other security or interest arising from, or in lieu of,such secured claim, received by such Lender under any applicable Debtor ReliefLaws or otherwise, or by any other means, in excess of its pro-rata share ofsuch payment as provided for in this Agreement, such Lender shall promptly payin cash or purchase from the other Lenders a participation in such Loans andother obligations in such amounts and make such other adjustments from time totime as shall be equitable to the end that all Lenders share such payment inaccordance with their respective ratable shares as provided for in thisAgreement; provided that nothing in this Section 2.12 shallimpair the right of any Lender to exercise any right of set-off or counterclaimit may have for payment of indebtedness of any Borrower other than its indebtednesshereunder.  The Lenders further agreeamong themselves that if payment to a Lender obtained by such Lender throughthe exercise of a right of setoff, banker’s lien, counterclaim or other eventas aforesaid shall be rescinded or must otherwise be restored, each Lenderwhich shall have shared the benefit of such payment shall, by payment in cashor a repurchase of a participation theretofore sold, return its share of thatbenefit

 

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## (together with itsshare of any accrued interest payable with respect thereto) to each Lenderwhose payment shall have been rescinded or otherwise restored.  Holdings and the Borrowers agree that anyLender so purchasing such a participation may, to the fullest extent permittedby law, exercise all rights of payment, including setoff, banker’s lien orcounterclaim, with respect to such participation as fully as if such Lenderwere a holder of such Loan or other obligation in the amount of suchparticipation.  The Administrative Agentwill keep records (which shall be conclusive and binding in the absence ofmanifest error) of participations purchased under this Section and will ineach case notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participationpursuant to this Section shall from and after such purchase have the right togive all notices, requests, demands, directions and other communications underthis Agreement with respect to the portion of the Loan or other obligation purchasedto the same extent as though the purchasing Lender were the original owner ofthe obligations purchased.  If under anyapplicable Debtor Relief Law, any Lender receives a secured claim in lieu of asetoff to which this Section 2.12 applies, such Lender shall, tothe extent practicable, exercise its rights in respect of such secured claim ina manner consistent with the rights of the Lenders under this Section 2.12to share in the benefits of any recovery on such secured claim.

##  

## **Section2.13****  Payments; Computations.**

##  

### (a)           *Payments by the Borrowers*.  Each payment of principal of and interest onLoans and fees hereunder shall be paid not later than 2:00 P.M. on the datewhen due, in Federal or other funds immediately available to the AdministrativeAgent at the Administrative Agent’s Office. Each such payment shall be made without condition or deduction for anycounterclaim, defense, recoupment or setoff and irrespective of any claim ordefense to payment which might in the absence of this provision be asserted byany Loan Party against the Administrative Agent or any Lender.  Payments received after 2:00 P.M. shall bedeemed to have been received on the next Business Day, and any applicableinterest or fee shall continue to accrue. Each Borrower shall, at the time it makes any payments under thisAgreement, specify to the Administrative Agent the Group of Loans, fees orother amounts payable by the Borrowers hereunder to which such payment is to beapplied (and if it fails to specify or if such application would beinconsistent with the terms hereof, the Administrative Agent shall, subject to Section 2.11,distribute such payment to the Lenders in such manner as the AdministrativeAgent may deem appropriate).  TheAdministrative Agent will distribute such payments to the applicable Lenders onthe date of receipt thereof, if such payment is received prior to 2:00 P.M.;otherwise the Administrative Agent will distribute such payment to theapplicable Lenders on the next succeeding Business Day.  Whenever any payment hereunder shall be dueon a day which is not a Business Day, the date for payment thereof shall beextended to the next succeeding Business Day unless (in the case of EurodollarLoans) such Business Day falls in another calendar month, in which case thedate for payment thereof shall be the next preceding Business Day.  If the date for any payment of principal isextended by operation of law or otherwise, interest thereon shall be payablefor such extended time.  Each Borrowerhereby authorizes and directs the Administrative Agent to debit any accountmaintained by such Borrower with the Administrative Agent to pay when due anyamounts required to be paid from time to time under this Agreement.

###  

### (b)           *Distributions by the Administrative Agent*.  Unless the Administrative Agent shall havereceived notice from the Borrowers prior to the date on which any payment isdue to the Lenders hereunder that the Borrowers will not make such payment infull, the Administrative Agent may assume that the Borrowers have made suchpayment in full to the Administrative Agent on such date, and theAdministrative Agent may, in reliance upon such assumption, cause to bedistributed to each Lender on such due date an amount equal to the amount thendue such Lender.  If and to the extentthat the Borrowers shall not have so made such payment, each Lender shall repayto the Administrative Agent forthwith on demand such amount distributed to suchLender together with interest thereon, for each day

 

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### from the date suchamount is distributed to such Lender until the date such Lender repays suchamount to the Administrative Agent, at the Federal Funds Rate.

###  

### (c)           *Computations*.  Except for Base Rate Loans, in which caseinterest shall be computed on the basis of a 365 or 366 day year as the casemay be (unless the Base Rate is determined by reference to the Federal FundsRate), all computations of interest and fees hereunder shall be made on thebasis of the actual number of days elapsed over a year of 360 days.  Interest shall accrue from and include thedate of borrowing (or continuation or conversion) but excluding the date ofpayment; provided that any Loan that is repaid on the same day on whichit is made shall, subject to Section 2.13(a), bear interest for oneday.

###  

# **ARTICLEIII**TAXES, YIELD PROTECTION AND ILLEGALITY

# ** **

## **Section3.01****  Taxes.**

##  

### (a)           *Payments Net of Certain Taxes*.  Any and all payments by the Borrowers to orfor the account of the Administrative Agent or any Lender under any Term LoanDocument shall be made free and clear of and without deduction for any and allpresent or future taxes, duties, levies, imposts, deductions, assessments,fees, withholdings or similar charges, and all liabilities with respectthereto, excluding, in the case of the Administrative Agent and each Lender,taxes imposed on or measured by its overall net income, and franchise taxes (inlieu of net income taxes) or branch profits tax (under Section 884 of the Codeor a similar provision of foreign tax law) imposed on it, by the jurisdiction(or any political subdivision thereof) under the Laws of which theAdministrative Agent or such Lender, as the case may be, is organized ormaintains a lending office (all such non-excluded taxes, duties, levies, imposts,deductions, assessments, fees, withholdings or similar charges, and liabilitiesbeing hereinafter referred to as “Taxes” and all such excluded taxesbeing hereinafter referred to as “Excluded Taxes”).  If any Borrower shall be required by any Lawsto deduct any Taxes from or in respect of any sum payable under any Term LoanDocument to the Administrative Agent or any Lender, (i) the sum payable shallbe increased as necessary so that after making all required deductions(including deductions applicable to additional sums payable under thisSection), each of the Administrative Agent and such Lender receives an amountequal to the sum it would have received had no such deductions been made, (ii)the applicable Borrower shall make such deductions, (iii) the applicableBorrower shall pay the full amount deducted to the relevant taxation authorityor other authority in accordance with applicable Laws, and (iv) within 30 daysafter the date of such payment, the Borrowers shall furnish to theAdministrative Agent (which shall forward the same to such Lender) the originalor a certified copy of a receipt evidencing payment thereof.

###  

### (b)           *Other Taxes*.  In addition, the Borrowers jointly andseverally agree to pay any and all present or future stamp, court or documentarytaxes and any other excise or property taxes or charges or similar levies whicharise from any payment made under any Term Loan Document or from the execution,delivery, performance, enforcement or registration of, or otherwise withrespect to, any Term Loan Document (hereinafter referred to as “Other Taxes”).

###  

### (c)           *Borrowers’ Indemnification*.  The Borrowers, jointly and severally, agreeto indemnify the Administrative Agent and each Lender for (i) the full amountof Taxes and Other Taxes (including any Taxes or Other Taxes imposed orasserted by any jurisdiction on amounts payable under this Section) paid by theAdministrative Agent and such Lender and (ii) any liability (includingadditions to tax, penalties, interest and expenses) arising therefrom or withrespect thereto, in each case whether or not such Taxes or Other Taxes werecorrectly or legally imposed or asserted by the relevant GovernmentalAuthority.  Payment under this subsection (c)shall be made within 30 days after the date the Lender or the AdministrativeAgent makes a demand therefor.

 

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### (d)           *Certain Recoveries*.  If the Administrative Agent or any Lenderdetermines, in its sole discretion, that it has received a refund of any Taxesas to which it has been indemnified by the Borrowers or with respect to whichthe Borrowers have paid additional amounts pursuant to this Section 3.01,it shall pay to the relevant Borrower an amount equal to such refund (but onlyto the extent of indemnity payments made, or additional amounts paid, by suchBorrower under this Section 3.01 with respect to the Taxes giving riseto such refund), net of all out-of-pocket expenses of the Administrative Agentor such Lender, as the case may be, and without interest (other than interestpaid by the relevant Governmental Authority with respect to such refund); provided,however, that the Borrowers, upon the request of the AdministrativeAgent or such Lender, agree to repay the amount paid over to the relevantBorrower (plus any penalties, interest or other charges imposed by the relevantGovernmental Authority) to the Administrative Agent or such Lender in the eventthe Administrative Agent or such Lender is required to repay such refund tosuch Governmental Authority.  This paragraph(d) shall not be construed to require the Administrative Agent or anyLender to make available its tax returns (or any other information relating toits taxes that it deems confidential) to the Borrowers or any other Person.

###  

## **Section3.02****  Illegality. **If, on or after the date of thisAgreement, the adoption of any applicable Law, or any change in any applicableLaw, or any change in the interpretation or administration thereof by anyGovernmental Authority, central bank or comparable agency charged with theinterpretation or administration thereof, or compliance by any Lender (or itsApplicable Lending Office) with any request or directive (whether or not havingthe force of Law) of any such authority, central bank or comparable agency shallmake it unlawful or impossible for any Lender (or its Applicable LendingOffice) to make, maintain or fund any of its Eurodollar Loans and such Lendershall so notify the Administrative Agent, the Administrative Agent shallforthwith give notice thereof to the other Lenders and the Company, whereupon,until such Lender notifies the Company and the Administrative Agent that thecircumstances giving rise to such suspension no longer exist, the obligation ofsuch Lender to make Eurodollar Loans, or to convert outstanding Loans intoEurodollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section 3.02,such Lender shall designate a different Applicable Lending Office if suchdesignation will avoid the need for giving such notice and will not, in thejudgment of such Lender, be otherwise disadvantageous to such Lender.  If such notice is given, each Eurodollar Loanof such Lender then outstanding shall be converted to a Base Rate Loan either(i) on the last day of the then current Interest Period applicable to suchEurodollar Loan, if such Lender may lawfully continue to maintain and fund suchLoan to such day or (ii) immediately, if such Lender shall determine that itmay not lawfully continue to maintain and fund such Loan to such day.

##  

## **Section3.03****  Inability to Determine Rates. **If on or prior to thefirst day of any Interest Period for any Eurodollar Loan:

##  

#### (i)            theAdministrative Agent determines (which determination shall be conclusive) thatby reason of circumstances affecting the relevant market, adequate andreasonable means do not exist for ascertaining the applicable Eurodollar Ratefor such Interest Period; or

####  

#### (ii)           Lendershaving 50% or more of the aggregate amount of the outstanding Loans advise theAdministrative Agent that the Eurodollar Rate as determined by theAdministrative Agent will not adequately and fairly reflect the cost to suchLenders of funding their Eurodollar Loans for such Interest Period;

####  

the Administrative Agent shall forthwith give noticethereof to the Company and the Lenders, whereupon, until the AdministrativeAgent notifies the Company that the circumstances giving rise to suchsuspension no longer exist, (i) the obligations of the Lenders to makeEurodollar Loans, or to continue or convert outstanding Loans as or intoEurodollar Loans shall be suspended and (ii) each outstanding Eurodollar

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Loans shall be converted into a Base Rate Loan on thelast day of the then current Interest Period applicable thereto.

 

## **Section3.04****  Increased Costs and Reduced Return;Capital Adequacy.**

##  

### (a)           Ifthe adoption of or any change in any applicable Law or in the interpretation orapplication thereof applicable to any Lender (or its Applicable LendingOffice), or compliance by any Lender (or its Applicable Lending Office) withany request or directive (whether or not having the force of Law) from anycentral bank or other Governmental Authority, in each case made subsequent tothe Effective Date (or, if later, the date on which such Lender becomes aLender):

###  

#### (i)            shallsubject such Lender (or its Applicable Lending Office) to any tax of any kindwhatsoever with respect to any Eurodollar Loans made by it or any of its Notes,or change the basis of taxation of payments to such Lender (or its ApplicableLending Office) in respect thereof (except for (A) Taxes and Other Taxescovered by Section 3.01 (including Taxes imposed solely by reasonof any failure of such Lender to comply with its obligations under Section 10.15)and (B) Excluded Taxes);

####  

#### (ii)           shallimpose, modify or hold applicable any reserve, special deposit, compulsory loanor similar requirement against assets held by, deposits or other liabilities inor for the account of, advances, loans or other extensions of credit by, or anyother acquisition of funds by, any office of such Lender (or its ApplicableLending Office) which is not otherwise included in the determination of theEurodollar Rate hereunder; or

####  

#### (iii)          shall impose on such Lender (or itsApplicable Lending Office) any other condition (excluding any tax of any kindwhatsoever);

####  

and the result of any of the foregoing is to increasethe cost to such Lender (or its Applicable Lending Office) of making,converting into, continuing or maintaining any Eurodollar Loans or to reduceany amount receivable hereunder in respect thereof, then, in any such case,upon notice to the Company from such Lender, through the Administrative Agent,in accordance herewith, the Borrowers, jointly and severally, shall beobligated to promptly pay such Lender, upon its demand, any additional amountsnecessary to compensate such Lender on an after-tax basis (after taking intoaccount applicable deductions and credits in respect of the amount indemnified)for such increased cost or reduced amount receivable.

 

### (b)           Ifany Lender shall have determined that the adoption or the becoming effectiveof, or any change in, or any change by any Governmental Authority, central bankor comparable agency charged with the interpretation or administration thereofin the interpretation or administration of, any applicable Law regardingcapital adequacy, or compliance by such Lender or its parent corporation withany request or directive regarding capital adequacy (whether or not having theforce of Law) of any such Governmental Authority, central bank or comparableagency has or would have the effect of reducing the rate of return on suchLender’s (or parent corporation’s) capital or assets as a consequence of itscommitments or obligations hereunder to a level below that which such Lender,or its parent corporation, could have achieved but for such adoption,effectiveness, change or compliance (taking into consideration such Lender’s(or parent corporation’s) policies with respect to capital adequacy), then,upon notice from such Lender to the Company, the Borrowers, jointly andseverally, shall be obligated to pay to such Lender such additional amount oramounts as will compensate such Lender on an after-tax basis (after taking intoaccount applicable deductions and credits in respect of the amount indemnified)for such reduction, provided that the Borrowers shall not be required tocompensate any Lender pursuant to subsection (a) above or this subsection(b) for any additional costs or reductions incurred more than 180

 

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### days prior to thedate such Lender notifies the Company of the circumstances giving rise to suchadditional costs or reductions and of such Lender’s intentions to claimcompensation therefor, and provided further that, if the change in Law or inthe interpretation or administration thereof giving rise to such additionalcosts or reductions is retroactive, then the 180-day period referred to aboveshall be extended to include the period of retroactive effect thereof.  Each determination by any such Lender ofamounts owing under this Section 3.04 shall, absent manifest error,be conclusive and binding on the parties hereto.

###  

### (c)           Acertificate of each Lender setting forth in sufficient detail the calculationof such amount or amounts as shall be necessary to compensate such Lender orits holding company as specified in subsection (a) or (b)above, as the case may be, shall be delivered to the Company and shall be conclusiveabsent manifest error.  The Borrowersshall pay each Lender the amount shown as due on any such certificate deliveredby it within 10 Business Days after receipt of the same.

###  

### (d)           Promptlyafter any Lender becomes aware of any circumstance that will, in its solejudgment, result in a request for increased compensation pursuant to this Section 3.04,such Lender shall notify the Company thereof. Failure on the part of any Lender so to notify the Company or to demandcompensation for any increased costs or reduction in amounts received orreceivable or reduction in return on capital with respect to any period shallnot constitute a waiver of such Lender’s right to demand compensation withrespect to such period or any other period, except as expressly providedotherwise above.  The protection of this Section 3.04shall be available to each Lender regardless of any possible contention of theinvalidity or inapplicability of the law, rule, regulation, guideline or otherchange or condition which shall have occurred or been imposed.

###  

## **Section3.05****  Funding Losses. **The Borrowers shall indemnify eachLender against any loss or expense excluding any loss of anticipated profitswhich such Lender may sustain or incur as a consequence of (i) any failure byany Borrower to fulfill on the Closing Date the conditions set forth in Article IV,(ii) any failure by any Borrower to borrow or to refinance, convert or continueany Loan hereunder after irrevocable notice of such Loan, refinancing,conversion or continuation has been given pursuant to Section 2.02or 2.06, (iii) any payment, prepayment or conversion of a EurodollarLoan, whether voluntary or involuntary, pursuant to any other provision of thisAgreement or otherwise made on a date other than the last day of the InterestPeriod applicable thereto, (iv) any default in payment or prepayment of theprincipal amount of any Loan or any part thereof or interest accrued thereon,as and when due and payable (at the due date thereof, by irrevocable notice ofprepayment or otherwise), (v) the occurrence of any Event of Default or (vi)the assignment of any Eurodollar Loan other than on the last day of theInterest Period applicable thereto as a result of a request by the Borrowerspursuant to Section 2.09, including, in each such case, any loss orreasonable expense sustained or incurred or to be sustained or incurred inliquidating or employing deposits from third parties acquired to effect ormaintain such Loan or any part thereof as a Eurodollar Loan.  Such loss or expense shall be the amount asreasonably determined by such Lender as the excess, if any, of (i) the amountof interest which would have accrued to such Lender on the amount so paid,prepaid, converted, not borrowed or assigned at a rate of interest equal to theAdjusted Eurodollar Rate for such Loan, for the period from the date of suchpayment, prepayment, conversion, failure to borrow or assignment to the lastday (x) in the case of a payment, prepayment, conversion or assignment otherthan on the last day of the Interest Period for such Loan, of the then currentInterest Period for such Loan, or (y) in the case of such failure to borrow, ofthe Interest Period for such Loan which would have commenced on the date ofsuch failure to borrow, over (ii) the amount of interest which would haveaccrued to such Lender on such amount by placing such amount on deposit for acomparable period with leading banks in the London interbank market.  A certificate of any Lender setting forth insufficient detail the calculation of any amount or amounts which such Lender isentitled to receive pursuant to this Section 3.05 shall bedelivered to the Company and shall be conclusive absent manifest error.

 

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**Section 3.06****  Base Rate Loans Substituted for AffectedEurodollar Loans. **If (i) the obligation of anyLender to make, or to continue or convert outstanding Loans as or to,Eurodollar Loans has been suspended pursuant to Section 3.02 or(ii) any Lender has demanded compensation under Section 3.01 or 3.04with respect to its Eurodollar Loans, and in any such case the Borrowers shall,by at least five Business Days’ prior notice to such Lender through theAdministrative Agent, have elected that the provisions of this Section 3.06shall apply to such Lender, then, unless and until such Lender notifies theCompany that the circumstances giving rise to such suspension or demand forcompensation no longer exist, all Loans which would otherwise be continued asor converted to Eurodollar Loans shall instead be Base Rate Loans (on whichinterest and principal shall be payable contemporaneously with the relatedEurodollar Loans of the other Lenders). If such Lender notifies the Company that the circumstances giving riseto such suspension or demand for compensation no longer exist, the principalamount of each such Base Rate Loan shall be converted into a Eurodollar Loan onthe first day of the next succeeding Interest Period applicable to the relatedEurodollar Loans of the other Lenders.

##  

## **Section3.07****  Survival.**  All of the Borrowers’ obligations under this Article IIIshall survive termination of the Commitments and repayment of all other TermLoan Obligations hereunder.

##  

# **ARTICLEIV**CONDITIONS PRECEDENT TO LOANS

# ** **

## **Section4.01****  Conditions to Closing. **The obligation of each Lender tomake a Loan on the Closing Date is subject to the satisfaction of the followingconditions:

##  

### (a)           *Executed Term Loan Documents*.  Receipt by the Administrative Agent of dulyexecuted copies of:  (i) this Agreement;(ii) the Notes; (iii) the Guaranty; (iv) the Collateral Documents; (v) theIntercreditor Agreement and (vi) all other Term Loan Documents, each in formand substance satisfactory to the Joint Lead Arrangers and the Lenders in theirsole discretion.

###  

### (b)           *Legal Matters*.  All legal matters incident to this Agreementand the Loans hereunder shall be reasonably satisfactory to the Joint LeadArrangers and the Administrative Agent and to Fried Frank Harris Shriver &Jacobson LLP, counsel for the Joint Lead Arrangers and the AdministrativeAgent.

###  

### (c)           *Organization Documents*.  The Administrative Agent shall havereceived:  (i) a copy of the OrganizationDocuments, including all amendments thereto, of each Loan Party, certified asof a recent date by the Secretary of State of its respective state oforganization, and a certificate as to the good standing of each Loan Party fromsuch Secretary of State, as of a recent date; (ii) a certificate as to the goodstanding of each Loan Party, as of a recent date, from the Secretary of Stateor other applicable authority of its respective jurisdiction of organizationand from each other state in which such Loan Party is qualified or is requiredto be qualified to do business, together in each case, to the extent generallyavailable, with a certificate or other evidence of good standing as to paymentof any applicable franchise or similar taxes from the appropriate taxingauthority of each such jurisdiction; (iii) a certificate of the Secretary orAssistant Secretary of each Loan Party dated the Closing Date and certifying(A) that the Organization Documents of such Loan Party have not been amendedsince the date of the last amendment thereto shown on the certificate of goodstanding furnished pursuant to clause (i) above; (B) that attachedthereto is a true and complete copy of the agreement of limited partnership,operating agreement or by-laws of such Loan Party, as applicable, as in effecton the Closing Date and at all times since a date prior to the date of theresolutions described in clause (C) below, (C) that attached thereto isa true and complete copy of resolutions duly adopted by the board of directorsor other governing body of such Loan Party authorizing the execution, deliveryand performance of the Term Loan Documents to which it is to be a party and, inthe case of the Borrowers, the borrowings hereunder, and that such resolutionshave not

 

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### been modified,rescinded or amended and are in full force and effect; and (D) as to theincumbency and specimen signature of each officer executing any Term LoanDocument or any other document delivered in connection herewith on behalf ofsuch Loan Party; and (iv) a certificate of another officer as to the incumbencyand specimen signature of the Secretary or Assistant Secretary executing thecertificate pursuant to clause (iii) above.

###  

### (d)           *Officer’s Certificates*.  The Administrative Agent shall have received(i) a certificate, dated the Closing Date and signed by a ResponsibleOfficer of each of Holdings and the Company, confirming compliance with theconditions precedent set forth in paragraphs (u) and (v) belowand (ii) a certificate, dated the Closing Date signed by a ResponsibleOfficer of each other Loan Party, confirming compliance with the conditionprecedent set forth in paragraph (u) below.

###  

### (e)           *Opinions of Counsel*.  On the Closing Date, the Administrative Agentshall have received:

###  

#### (i)            afavorable written opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP,special counsel to the Loan Parties, addressed to the Agents, and each Lender,dated the Closing Date, substantially in the form of Exhibit Ehereto and covering such additional matters incident to the transactionscontemplated hereby as the Joint Lead Arrangers or the Required Lenders mayreasonably request;

####  

#### (ii)           fromcounsel to the Loan Parties, copies of each opinion delivered by them asrequired under the ABL Documents, accompanied in each case by a letter fromsuch counsel stating that the Agents and the Lenders are entitled to rely onsuch opinions as if they were addressed to the Agents and the Lenders; and

####  

#### (iii)          from counsel to one or more of Holdingsand/or DR Acquisition in respect of the Acquisition, copies of each opinion (ifany) delivered by them as required under the DRI Merger Agreement, accompaniedin each case by a letter from such counsel stating that the Agents and theLenders are entitled to rely on such opinions as if they were addressed to theAgents and the Lenders.

####  

### (f)            *Capitalization*.  On or prior to the Closing Date, (i) Holdingsshall have received gross cash proceeds of not less than $234,000,000 (of whichnot less than $120,000,000 shall have been provided, directly or indirectly, bythe Sponsor Group) in connection with the purchase by the Investor Group ofcommon equity of Holdings (the “Closing Date Equity Issuance”), (ii)Holdings shall have contributed the aggregate gross cash proceeds of theClosing Date Equity Issuance to the common equity of the Company, (iii) whenaggregated with the gross cash proceeds of the Senior Subordinated Notes, thecash proceeds of the Closing Date Equity Issuance shall be sufficient, andshall be used by the Borrowers, to pay the cash consideration payable under theDRI Merger Agreement, to consummate the Acquisition and to pay all fees andexpenses owing in connection therewith and (iv) the Administrative Agent shallhave received true and correct copies, certified as such by an appropriateofficer of Holdings, of all subscription agreements, registration rightsagreements, shareholder agreements and other documents and instrumentsdelivered in connection with the Closing Date Equity Issuance (collectively,the “Capitalization Documents”), each of which shall be in full forceand effect and shall be in form and substance reasonably satisfactory to theJoint Lead Arrangers.

###  

### (g)           *ABL Credit Agreement and Related Agreements*.  On or prior to the Closing Date, (i) DuaneReade, the Company, DRI I, DR International and DR Realty shall have enteredinto Amendment No. 1 to the ABL Credit Agreement, the ABL Collateral ReleaseAgreement and the ABL Security Agreement Amendment on terms that are reasonablysatisfactory to the Joint Lead Arrangers, (ii)

 

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### the AdministrativeAgent shall have received true and correct copies of the ABL Documents,certified as such by an appropriate officer of Duane Reade, (iii) the ABLFacility Agent shall have executed and delivered each of the ABL CollateralRelease Agreement, the ABL Security Agreement Amendment and the IntercreditorAgreement, in each case on terms reasonably satisfactory to the Joint LeadArrangers and (iv) the aggregate undrawn committed amount available to be drawnunder the ABL Credit Agreement, giving effect to all borrowings and paymentsthereunder on the Closing Date and calculated after giving pro-forma effect tothe repayments on all Existing Convertible Notes (assuming that such repaymentwas financed dollar-for dollar using amounts on deposit in the ExistingConvertible Notes Escrow Account and the proceeds of Loans under the ABL CreditAgreement) shall not be less than $80,000,000.

###  

### (h)           *Issuance of the Senior Subordinated Notes*.  On or prior to the Closing Date, the Companyand Duane Reade shall have (A) entered into the Senior Subordinated NoteIndenture on terms that are reasonably satisfactory to the Joint LeadArrangers, (B) the Company and Duane Reade shall have executed and deliveredthe Senior Subordinated Notes, (C) the Administrative Agent shall have receivedtrue and correct copies, certified as such by an appropriate officer of theCompany, of the Senior Subordinated Note Indenture and each of the SeniorSubordinated Notes as originally executed and delivered, each of which shall bein full force and effect, (D) the Company shall have received gross cashproceeds of at least $195,000,000 from the issuance of the Senior SubordinatedNotes (it being understood that such cash proceeds shall include all amountsdirectly applied to pay underwriting and placement commissions and discountsand related fees), (E) such proceeds shall have been released to theCompany from any applicable escrow arrangement and (F) the Company shall haveutilized the full amount of such cash proceeds to make payments owing inconnection with the Transaction prior to or concurrently with the utilizationof any proceeds of the Loans for such purpose.

###  

### (i)            *Consummation of the Acquisition*.  On or prior to the Closing Date, there shallhave been delivered to the Administrative Agent true and correct copies of thefinal Acquisition Documents, certified as such by an appropriate officer of theCompany, and all terms and conditions of the Acquisition Documents shall nothave been altered, amended or otherwise changed or supplemented or anycondition therein waived in any material respect from those in effect on July22, 2004 without the prior written consent of the Joint Lead Arrangers.  The DRI Merger, including all of the termsand conditions thereof, shall have been duly approved by the board of directorsand the shareholders of each of DR Acquisition and the Company, and allAcquisition Documents shall have been duly executed and delivered by theparties thereto and shall be in full force and effect.  The representations and warranties set forthin the Acquisition Documents shall be true and correct in all material respectsas if made on and as of the Closing Date. Each of the conditions precedent to the Group Companies’ obligations toconsummate the Acquisition as set forth in the Acquisition Documents shall havebeen satisfied to the reasonable satisfaction of the Joint Lead Arrangers orwaived with the consent of the Joint Lead Arrangers.  On the Closing Date, prior to the funding ofthe Loans, the DRI Merger shall have been consummated in accordance with allapplicable laws and the DRI Merger Agreement (without giving effect to anymaterial amendment or modification thereof or waiver with respect thereto,including, but not limited to, any modification, amendment, supplement or materialwaiver relating to any disclosure schedule or exhibit, unless consented toby the Joint Lead Arrangers). Simultaneously with the DRI Merger, all shares of capital stock of theCompany, as the surviving entity in the DRI Merger, shall be pledged pursuantto the Pledge Agreement, and all stock certificates evidencing such shares ofcapital stock after giving effect to the DRI Merger shall have been deliveredto the Collateral Agent.  On the ClosingDate, the certificate of merger with respect to the DRI Merger shall have beenfiled with the appropriate Governmental Authority having primary jurisdictionover affairs of corporations in Delaware.

###  

### (j)            *Other Indebtedness*.  After the consummation of the transactionscontemplated by the Transaction Documents on the Closing Date, the GroupCompanies shall have no material liabilities (actual or contingent) orPreferred Stock, except (i) as disclosed in (A) the most recent interim

 

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### balance sheetincluded in the financial statements delivered pursuant to subsection (p)below or (B) in the Company’s Form 10-K/A for the fiscal year ended December27, 2003, the Company’s Proxy Statement on Schedule 14A filed with the SEC onJune 30, 2004 and the Company’s Form 10-Q for the fiscal quarter ended March31, 2004 (collectively, the “SEC Filings”), (ii) for accounts payableincurred in the ordinary course of business consistent with past practice sincethe date of the most recent interim balance sheet included in the financialstatements delivered pursuant to subsection (p) below and not inviolation of the DRI Merger Agreement, (iii) Indebtedness under the Term LoanDocuments, the Senior Subordinated Notes and/or the ABL Documents and (iv) theExisting Convertible Notes.

###  

### (k)           *Perfection of Personal Property Security Interestsand Pledges;  Search Reports.*  On or prior to the Closing Date, theCollateral Agent shall have received:

###  

#### (i)            aPerfection Certificate from each Loan Party;

####  

#### (ii)           financingstatements (Form UCC-1 or such other financing statements or similar notices asshall be required by local law) in appropriate form for filing under theUniform Commercial Code or other applicable local law of each jurisdiction inwhich the filing of a financing statement or giving of notice may be required,or reasonably requested by the Collateral Agent, to perfect the securityinterests intended to be created by the Collateral Documents;

####  

#### (iii)          copies of reports from CT Corporation oranother independent search service reasonably satisfactory to the CollateralAgent listing all effective financing statements that name Holdings, DRAcquisition, the Company, Duane Reade, DRI I, DR International, DR Realty orany other Loan Party (under its present name and any previous name and, ifrequested by the Collateral Agent, under any trade names), as debtor or sellerthat are filed in the jurisdictions referred to in clause (ii) above,together with copies of such financing statements (none of which shall coverthe Collateral except to the extent evidencing Permitted Liens or for which theCollateral Agent shall have received termination statements (Form UCC-3 or suchother termination statements as shall be required by local law) fully executedfor filing);

####  

#### (iv)          searchesof ownership of intellectual property in the appropriate governmental officesand such patent, trademark and/or copyright filings as may be requested by theCollateral Agent to the extent necessary or advisable to perfect the Lenders’security interest in intellectual property Collateral;

####  

#### (v)           allof the Pledged Collateral, which Pledged Collateral shall be in suitable formfor transfer by delivery, or shall be accompanied by duly executed instrumentsof transfer or assignment in blank, accompanied in each case by any requiredtransfer tax stamps, all in form and substance satisfactory to the CollateralAgent; and

####  

#### (vi)          evidenceof the completion of all other filings and recordings of or with respect to theCollateral Documents and of all other actions as may be necessary or, in theopinion of the Collateral Agent, desirable to perfect the security interestsintended to be created by the Collateral Documents.

####  

### (l)            *Evidence of Insurance*.  Receipt by the Collateral Agent of copies ofinsurance policies or certificates of insurance of the Loan Parties and theirSubsidiaries evidencing liability and casualty insurance meeting therequirements set forth in the Term Loan Documents, including, but not limitedto, naming the Collateral Agent as additional insured and loss payee on behalfof the Lenders.

 

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### (m)          *Consents and Approvals*.  On the Closing Date, all necessarygovernmental (domestic or foreign), regulatory and third party approvals(including, without limitation, those with respect to real property leases andlicense agreements relating to intellectual property but excluding with respectto non-governmental and non-regulatory approvals those the failure to obtainwould not reasonably be expected to have a Material Adverse Affect) inconnection with the transactions contemplated by the DRI Merger Agreement andthe other Transaction Documents and otherwise referred to herein or thereinshall have been obtained and remain in full force and effect, and allapplicable waiting periods (including any applicable waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976) shall have expired, ineach case without any action being taken by any competent authority which couldrestrain or prevent such transactions or impose, in the reasonable judgment ofthe Joint Lead Arrangers, materially adverse conditions upon the consummationof such transactions.

###  

### (n)           *Litigation; Judgments*.  On the Closing Date, except as disclosed inthe SEC Filings, there shall be no actions, suits, proceedings orinvestigations pending or threatened (i) with respect to this Agreement or anyother Transaction Document or the transactions contemplated hereby or therebyor (ii) which the Joint Lead Arrangers or the Required Lenders shall determinecould reasonably be expected to have a Material Adverse Effect.  Additionally, there shall not exist anyjudgment, order, injunction or other restraint issued or filed or a hearingseeking injunctive relief or other restraint pending or notified prohibiting orimposing materially adverse conditions upon the consummation of thetransactions contemplated by the Transaction Documents and otherwise referredto herein or therein.

###  

### (o)           *Solvency Certificate*.  On or prior to the Closing Date, each LoanParty shall have delivered or caused to be delivered to the AdministrativeAgent a solvency certificate from the chief financial officer of each of theLoan Parties, in form and substance reasonably satisfactory to the Joint LeadArrangers, setting forth the conclusions that, after giving effect to theAcquisition and the consummation of all financings contemplated herein,Holdings and its Subsidiaries (on a consolidated basis), Holdings (on astand-alone basis), the Company (on a stand-alone basis), the Company and its Subsidiaries(on a consolidated basis) and Duane Reade (on a stand-alone basis) is Solventand will not be rendered insolvent by the indebtedness incurred in connectionherewith.

###  

### (p)           *Financial Information*.  The Administrative Agent and each of theLenders shall have received: (i) audited annual financial statements of theCompany for each of the 2001, 2002 and 2003 fiscal years*,*(ii) unaudited financial statements of the Company for any interim quarterlyand monthly periods which have ended since the most recent such auditedfinancial statements at least 15 days prior to the Closing Date, together withunaudited financial statements for the twelve month period ended on the lastday of the most recent of such fiscal periods and (iii) pro-forma financialstatements as to Holdings and its Consolidated Subsidiaries giving effect tothe transactions contemplated to occur on or prior to the Closing Date pursuantto the Transaction Documents*,* which in eachcase*,* (A) shall be reasonably satisfactoryin form and substance to the Joint Lead Arrangers*,*(B) shall not be materially inconsistent with the Pre-Commitment Informationand (C) shall meet the requirements of Regulation S-X under the Securities Actand all other accounting rules and regulations of the SEC promulgatedthereunder and may contain the adjustments set forth on Schedule 1.01Ahereto.  In addition, the AdministrativeAgent and each of the Lenders shall have received: (i) forecasts prepared bymanagement of Loan Parties*,* each in formreasonably satisfactory to the Joint Lead Arrangers*,*of balance sheets*,* income statements and cash flowstatements on a quarterly basis for the first year following the Closing Dateand on an annual basis for each year thereafter prior to the Maturity Date;(ii) evidence satisfactory to the Joint Lead Arrangers that (A) theConsolidated EBITDA of the Company and its Consolidated Subsidiaries for thetwelve-month period ending as of the most recent date for which financialstatements have been delivered pursuant to the first sentence of this paragraph(p) was not less than $84,000,000*,* and (B) thepro-forma Leverage Ratio of Holdings and its Consolidated Subsidiaries as ofthe most recent date for which financial statements have been deliveredpursuant to first sentence of this paragraph (p) to the

 

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### ConsolidatedEBITDA of Holdings and its Consolidated Subsidiaries for the twelve-monthperiod then ended (which pro formaratio shall be calculated reflecting the transactions contemplated to occur onor prior to the Closing Date on a Pro-FormaBasis) was not greater than 5.8 to 1.0; and (iv) written certificationsfrom the chief executive officer and chief financial officer of each ofHoldings and the Borrowers that would be required by Section 906 and Section302 of the Sarbanes-Oxley Act of 2002.

###  

### (q)           *Material Adverse Effect*.  Since December 27, 2003, there shall not haveoccurred any Material Adverse Effect.

###  

### (r)            *Payment of Fees*.  All costs, fees and expenses due to the JointLead Arrangers, the Joint Book Managers, the Agents, and the Lenders on orbefore the Closing Date shall have been paid.

###  

### (s)           *Counsel Fees*.  The Borrowers shall have paid directly tocounsel to the Administrative Agent all fees, charges and disbursements ofcounsel to the Administrative Agent to the extent invoiced prior to or on theClosing Date, plus such additional amounts of fees, charges and disbursementsas shall constitute its reasonable estimate of such fees, charges anddisbursements incurred or to be incurred by it (provided that suchestimate shall not thereafter preclude a final settling of accounts between theBorrowers and such counsel).

###  

### (t)            *OFAC/Anti-Terrorism Compliance Certificate*.  The Administrative Agent shall have receiveda certificate substantially in the form of Exhibit K hereto, datedthe Closing Date and signed by a Responsible Officer of Holdings, certifyingthe matters set forth in Exhibit K.

###  

### (u)           *Representations and Warranties*.  The representations and warranties made bythe Loan Parties in any Term Loan Document shall be true and correct in allmaterial respects.

###  

### (v)           *No Default*.  No Default or Event of Default shall exist orbe continuing either prior or after giving effect to the Loans to be made onthe Closing Date.

###  

All corporate and legal proceedings and instrumentsand agreements relating to the transactions contemplated by this Agreement andthe other Transaction Documents or in any other document delivered inconnection herewith or therewith shall be satisfactory in form and substance tothe Joint Lead Arrangers and their counsel, and the Joint Lead Arrangers shallhave received all information and copies of all documents and papers, includingrecords of corporate proceedings, governmental approvals, good standingcertificates and bring-down telegrams, if any, which they reasonably may haverequested in connection therewith, such documents and papers where appropriateto be certified by proper corporate or Governmental Authorities.  The documents referred to in this Section 4.01shall be delivered to the Administrative Agent no later than the ClosingDate.  The certificates and opinionsreferred to in this Section 4.01 shall be dated the Closing Date.

 

The requirement that any document, agreement,certificate or other writing be satisfactory to the Required Lenders shall bedeemed to be satisfied if (i) such document, agreement, certificate or otherwriting was delivered to the Lenders not less than one Business Day prior tothe Closing Date, (ii) such document, agreement, certificate or other writingis satisfactory to the Joint Lead Arrangers and (iii) Lenders holding at least50% of the Commitments have not objected in writing to such document,agreement, certificate or other writing to the Administrative Agent prior tothe Closing Date.

 

Promptly after the Closing Date occurs, theAdministrative Agent shall notify the Company and the Lenders of the ClosingDate, and such notice shall be conclusive and binding on all partieshereto.  If the Closing Date does notoccur before 5:00 P.M. on August 18, 2004, the

 

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Commitments shall terminate at the close of businesson such date and all unpaid facility fees accrued to such date shall be due andpayable on such date.

 

# **ARTICLEV**REPRESENTATIONS AND WARRANTIES

# ** **

Each of Holdings and each Borrower represents andwarrants to the Administrative Agent and the Lenders that:

 

## **Section5.01****  Existence, Qualification and Power; Compliance with Laws.** Each Group Company (i) is a corporation, partnership or limitedliability company duly organized or formed, validly existing and in goodstanding under the Laws of the jurisdiction of its incorporation ororganization, (ii) has all requisite power and authority and all requisitegovernmental licenses, authorizations, consents and approvals to (A) own itsassets and carry on its business and (B) execute, deliver and perform itsobligations under the Term Loan Document to which it is a party, (iii) is dulyqualified and is licensed and in good standing under the Laws of eachjurisdiction where its ownership, lease or operation of properties or theconduct of its business requires such qualification or license and (iv) is incompliance with all Laws, except in each case referred to in clause (ii)(A),(iii) or (iv), to the extent that failure to do so could notreasonably be expected to have a Material Adverse Effect.

##  

## **Section5.02****  Authorization; No Contravention. **The execution,delivery and performance by each Loan Party of each Transaction Document towhich such Person is party have been duly authorized by all necessary corporateor other organizational action, and do not and will not:  (i) contravene the terms of any of suchPerson’s Organization Documents; (ii) violate any Law; or (iii) conflict withor result in any breach or contravention of, or the creation of any Lien(except for Permitted Liens) under, (A) any order, injunction, writ or decreeof any Governmental Authority or any arbitral award to which such Person or itsproperty is subject or (B) any Contractual Obligation to which such Person is aparty, other than, in the case of this clause (B), certain OperatingLeases for retail stores of the Company and its Subsidiaries (“Retail Leases”)(x) which have change of control provisions that could be contravened by theDRI Merger, but (y)(1) which do not pertain to more than one of the top 25Retail Leases (ranked by average weekly sales volume for the fiscal year endedDecember 28, 2002) or more than 20 of all Retail Leases and (2) under which adefault by virtue of the failure to obtain the consent of the landlordsthereunder to the DRI Merger and the other transactions contemplated herebycould not, individually or in the aggregate, reasonably be expected to have aMaterial Adverse Effect.

##  

## **Section5.03****  Governmental Authorization; Other Consents. **Exceptas set forth on Schedule 5.03 hereto, no approval, consent, exemption,authorization, or other action by, or notice to, or filing with, anyGovernmental Authority or any other Person is necessary or required inconnection with the execution, delivery or performance by, or enforcementagainst, any Loan Party of this Agreement or any other Transaction Document towhich it is a party.

##  

## **Section5.04****  Binding Effect. **This Agreement has been, and eachother Term Loan Document, when delivered hereunder, will have been, dulyexecuted and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each otherTerm Loan Document when so delivered will constitute, a legal, valid andbinding obligation of such Loan Party, enforceable against each Loan Party thatis party thereto in accordance with its terms, except (i) as suchenforceability may be limited by applicable bankruptcy, insolvency,reorganization, moratorium or similar laws affecting the enforcement ofcreditors’ rights generally and (ii) that rights of acceleration and theavailability of equitable remedies may be limited by equitable principles ofgeneral applicability (regardless of whether enforcement is sought byproceedings in equity or at law).

 

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## **Section5.05****  Financial Condition; No Material AdverseEffect.**

##  

### (a)           *Audited Financial Statements*.  The Audited Financial Statements: (i) wereprepared in accordance with GAAP consistently applied throughout the periodscovered thereby, except as otherwise expressly noted therein; (ii) fairlypresent in all material respects the financial condition of the Company and itsSubsidiaries as of the date thereof and their results of operations for therespective periods covered thereby in accordance with GAAP consistently appliedthroughout the periods covered thereby, except as otherwise expressly notedtherein; and (iii) except as disclosed in the SEC Filings, show all materialindebtedness and other liabilities, direct or contingent, of the Company andits Subsidiaries as of the date thereof, including liabilities for taxes,material commitments and Indebtedness.

###  

### (b)           *Interim Financial Statements*.  The unaudited consolidated balance sheet ofthe Company and its Consolidated Subsidiaries as of March 27, 2004 and therelated unaudited consolidated and consolidating statements of income and cashflows for the three months then ended, copies of which have been delivered toeach of the Lenders, fairly present in all material respects, in conformitywith GAAP applied on a basis consistent with the financial statements referredto in subsection (a) of this Section 5.05, theconsolidated financial position of the Company and its Consolidated Subsidiariesas of such date and their consolidated results of operations and cash flows forsuch three-month period (subject to normal year-end audit adjustments).  During the period from December 31, 2003to and including the Closing Date, there has been no sale, transfer or otherdisposition by the Company or any of its Consolidated Subsidiaries of anymaterial part of the business or property of the Company and its ConsolidatedSubsidiaries, taken as a whole, and no purchase or other acquisition by them ofany business or property (including any Equity Interests of any other Person)material in relation to the consolidated financial condition of the Company andits Consolidated Subsidiaries, taken as a whole, which is not reflected in theforegoing financial statements or in the notes thereto.  The balance sheets and the notes theretoincluded in the financial statements referred to in this subsection (b)and in subsection (a) above, together with the SEC Filings,disclose all material liabilities, actual or contingent, of the Company and itsConsolidated Subsidiaries as of the respective dates thereof.

###  

### (c)           *Material Adverse Change*.  Since the date of the most recent AuditedFinancial Statements, there has been no event or circumstance, eitherindividually or in the aggregate, that has had or could reasonably be expectedto have a Material Adverse Effect.

###  

### (d)           *Pro-Forma Financial Statements*.  The pro-forma balance sheet delivered to theLenders pursuant to Section 4.01(p) has been prepared in good faith bythe Company, based on the assumptions used to prepare the pro-forma financialinformation contained in the Pre-Commitment Information (which assumptions arebelieved by the Company on the date hereof and on the Closing Date to bereasonable), is based on the best information available to the Company as ofthe date of delivery thereof, accurately reflects all material adjustmentsrequired to be made to give effect to the Transactions, and presents fairly ona pro-forma basis the estimated consolidated financial position of the Companyand its Consolidated Subsidiaries as of March 27, 2004 assuming that theTransactions had actually occurred on that date.  None of Holdings or any of its Subsidiarieshas any reason to believe that such pro-forma balance sheet is misleading inany material respect in light of the circumstances existing at the time of thepreparation thereof.

###  

### (e)           *Projections*.  The projections prepared as part of, andincluded in, the Pre-Commitment Information have been prepared on a basisconsistent with the financial statements referred to in subsection (a)above and are based on good faith estimates and assumptions made by managementof the Company.  On the Closing Date,such management believes that such projections are reasonable and attainable,it being recognized by the Lenders, however, that projections as to futureevents are not to be

 

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### viewed as factsand that actual results during the period or periods covered by suchprojections may differ from the projected results and that such differences maybe material.

###  

### (f)            *No Undisclosed Liabilities*.  Except as fully reflected in the financialstatements described in subsection (a) and (b) above and inthe SEC Filings, and the Indebtedness incurred under this Agreement and theother Transaction Documents, (i) there were as of the Closing Date (and aftergiving effect to the Loans), no liabilities or obligations (excluding currentobligations incurred in the ordinary course of business) with respect to anyGroup Company of any nature whatsoever (whether absolute, accrued, contingentor otherwise and whether or not due and including obligations or liabilitiesfor taxes, long-term leases and unusual forward or other long-termcommitments), and (ii) neither Holdings nor the Company knows of any basis forthe assertion against any Group Company of any such liability or obligationwhich, either individually or in the aggregate, are or could reasonably beexpected to have, a Material Adverse Effect.

###  

## **Section5.06****  Litigation. **Except as set forth in Schedule5.06 hereto, there are no actions, suits, investigations or legal,equitable, arbitration or administrative proceedings pending or, to theknowledge of any Loan Party, threatened against or affecting any Group Companyin which there is a reasonable possibility of an adverse decision that(i) involve any Term Loan Document or any of the Transactions or(ii) if adversely determined, could reasonably be expected, individuallyor in the aggregate, to result in a Material Adverse Effect.

##  

## **Section5.07****  No Default.**  No Group Company is in default under or withrespect to any Contractual Obligation that could, either individually or in theaggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing orwould result from the consummation of the transactions contemplated by thisAgreement or any other Transaction Document.

##  

## **Section5.08****  Ownership of Property; Liens. **Each Group Companyhas good and marketable title to, or valid leasehold interests in, all itsmaterial properties and assets, except for minor defects in title that do notinterfere with its ability to conduct its business as currently conducted. Allsuch material properties and assets are free and clear of Liens other thanPermitted Liens.  Each Group Company hascomplied with all obligations under all leases to which it is a party, otherthan leases that, individually or in the aggregate, are not material to theGroup Companies, taken as a whole, and the violation of which will not resultin a Material Adverse Effect, and all such leases are in full force and effect,other than leases that, individually or in the aggregate, are not material tothe Group Companies, taken as a whole, and in respect of which the failure tobe in full force and effect will not result in a Material Adverse Effect. EachGroup Company enjoys peaceful and undisturbed possession under all such leaseswith respect to which it is the lessee, other than leases that, individually orin the aggregate, are not material to the Group Companies, taken as a whole,and in respect of which the failure to enjoy peaceful and undisturbedpossession will not result in a Material Adverse Effect.

##  

## **Section5.09****  Environmental Compliance. **Except as would notresult in a Material Adverse Effect, no Group Company has failed to comply withany applicable Environmental Law or to obtain, maintain, or comply with anypermit, license or other approval required under any Environmental Law or issubject to any Environmental Liability or has received notice of any claim withrespect to any Environmental Liability, and no Group Company knows of any basisfor any Environmental Liability against any Group Company.

##  

## **Section5.10****  Insurance.**  The properties of each Group Company areinsured with financially sound and reputable insurance companies not Affiliatesof the Company, in such amounts, with such deductibles and covering such risksas are customarily carried by companies engaged in similar businesses andowning similar properties in localities where the applicable Group Companyoperates.

 

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## **Section5.11****  Taxes. **Each Group Company has filed, orcaused to be filed, all federal income tax and all material federal, state,local and foreign tax returns required to be filed and paid (i) all amounts oftaxes shown thereon to be due (including interest and penalties) and (ii) allother material taxes, fees, assessments and other governmental charges(including mortgage recording taxes, documentary stamp taxes and intangibletaxes) owing by it, except for such taxes (A) which are not yet delinquent or(B) that are being contested in good faith and by proper proceedings diligentlypursued, and against which adequate reserves are being maintained in accordancewith GAAP.  As of the Closing Date, noLoan Party knows of any pending investigation of such party by any taxingauthority or proposed tax assessments against any Group Company that would, ifmade, have a Material Adverse Effect.

##  

## **Section5.12****  ERISA Compliance.**

##  

### (a)           Thereare no Unfunded Liabilities other than with respect to the UMFPP.  With respect to the UMFPP, to the knowledgeof the Borrowers, there are no Unfunded Liabilities as of the last valuationdate preceding the date hereof.

###  

### (b)           EachPlan, other than a Multiemployer Plan, complies in all material respects withthe applicable requirements of ERISA and the Code.

###  

### (c)           NoERISA Event has occurred or, subject to the passage of time, is reasonablyexpected to occur with respect to any Plan other than (i) with respect to theUMFPP, and only to the extent of $31,000,000 plus quarterly charges recognizedby the Company with respect to such liabilities after the date hereof andcalculated on the same basis as the related charge recorded in the AuditedFinancial Statements of the Company for its fiscal year ended December 27, 2003and only until 30 days after a final determination of such liabilities, thepotential failures by the Parent Borrower to make the appropriate contributionsto the UMFPP between the years 2000 and 2004 as described in Schedule 5.06, and(ii) as set forth on Schedule 5.12(c) hereto.

###  

### (d)           NoGroup Company:  (i) is or has been withinthe last six years a party to any Multiemployer Plan other than with respect tothe UMFPP, the Union Mutual Medical Fund or the Union Mutual Vacation Fund or(ii) has withdrawn from any Multiemployer Plan, other than as set forth on Schedule5.12(d) hereto.

###  

### (e)           Theexecution and delivery of this Agreement and the consummation of thetransactions contemplated hereunder will not involve any transaction that issubject to the prohibitions of Section 406 of ERISA or in connection withwhich taxes could be imposed pursuant to Section 4975(c)(1)(A)-(D) of theCode.

###  

### (f)            NoGroup Company or any ERISA Affiliate has any material contingent liability withrespect to any post-retirement benefit under a Welfare Plan, other than (i)liability for continuation coverage described in Part 6 of Title I of ERISA,(ii) pursuant to the Union Mutual Medical Fund, but only to the extent of suchamount described in Section 5.12(c) when aggregated with the liabilityto the UMFPP, and (iii) as set for on Schedule 5.12(f) hereto.

###  

### (g)           Allliabilities under the Employee Benefit Arrangements other than ExecutiveCompensation Payments are (i) funded to at least the minimum level required bylaw or, if higher, to the level required by the terms governing the EmployeeBenefit Arrangements, (ii) insured with a reputable insurance company, (iii)provided for or recognized in the most recent financial statements referred toin Section 5.05 or (iv) estimated in the notes to the most recentfinancial statements.

 

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### (h)           Thereare no circumstances which may give rise to a material liability in relation tothe Employee Benefit Arrangements which are not funded, insured, provided for,recognized or estimated in the manner described in clause (g) above.

###  

### (i)            EachGroup Company is in material compliance with all applicable Laws, trustdocumentation and contracts relating to the Employee Benefit Arrangements.

###  

## **Section5.13****  Subsidiaries. **Schedule 5.13 setsforth a complete and accurate list of all Subsidiaries of Holdings as of theClosing Date.  Schedule 5.13sets forth as of the Closing Date the jurisdiction of formation of each suchSubsidiary, the number of authorized shares of each class of Equity Interestsof each such Subsidiary, the number of outstanding shares of each class ofEquity Interests, the number and percentage of outstanding shares of each classof Equity Interests of each such Subsidiary owned (directly or indirectly) byany Person and the number and effect, if exercised, of all Equity Equivalentsof each such Subsidiary.  All theoutstanding Equity Interests of each Subsidiary of Holdings are validly issued,fully paid and non-assessable and were not issued in violation of thepreemptive rights of any shareholder and are owned by Holdings, directly orindirectly, free and clear of all Liens (other than those arising under theCollateral Documents).  As of the ClosingDate, other than as set forth on Schedule 5.13, no such Subsidiaryhas outstanding any Equity Equivalents nor does any such Person haveoutstanding any rights to subscribe for or to purchase or any options for thepurchase of, or any agreements providing for the issuance (contingent orotherwise) of, or any calls, commitments or claims of any character relatingto, its Equity Interests.  Holdings has noSubsidiaries, other than the Company and its Subsidiaries.

##  

## **Section5.14****  Margin Regulations; Investment CompanyAct; Public Utility Holding Company Act. **

##  

### (a)           NoGroup Company is engaged principally, or as one of its important activities, inthe business of extending credit for the purpose of purchasing or carrying“margin stock” within the meaning of Regulation U.  No part of the proceeds of the Loans will beused, directly or indirectly, for the purpose of purchasing or carrying any“margin stock” in violation of Regulation U. If requested by any Lender or the Administrative Agent, the Company willfurnish to the Administrative Agent and each Lender a statement to theforegoing effect in conformity with the requirements of FR Form U-1 referred toin Regulation U.  No Indebtedness beingreduced or retired out of the proceeds of the Loans was or will be incurred forthe purpose of purchasing or carrying any margin stock within the meaning ofRegulation U or any “margin security” within the meaning of Regulation T.  “Margin stock” within the meaning ofRegulation U does not constitute more than 25% of the value of the consolidatedassets of Holdings and its Consolidated Subsidiaries.  None of the transactions contemplated by thisAgreement (including the direct or indirect use of the proceeds of the Loans)will violate or result in a violation of the Securities Act, the Exchange Actor Regulation T, U or X.

###  

### (b)           NoGroup Company is subject to regulation under the Public Utility Holding CompanyAct of 1935, the Federal Power Act or the Investment Company Act of 1940, eachas amended.  In addition, none of theGroup Companies is (i) an “investment company” registered or required to beregistered under the Investment Company Act of 1940, as amended, (ii) controlledby such a company, or (iii) a “holding company,” a “subsidiary company” of a“holding company,” or an “affiliate” of a “holding company” or of a“subsidiary” of a “holding company,” within the meaning of the Public UtilityHolding Company Act of 1934, as amended.

###  

## **Section5.15****  Disclosure.  **No statement, information, report,representation, or warranty made by any Loan Party in any Term Loan Document orfurnished to the Administrative Agent or any Lender by or on behalf of any LoanParty in connection with any Term Loan Document, taken as a whole

 

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## and assupplemented from time to time up to and including the Closing Date, containsany untrue statement of a material fact or omits any material fact necessary tomake the statements therein, in light of the circumstances under which theywere made, not misleading.

##  

## **Section5.16****  Compliance with Law. **Each Group Company is incompliance with all requirements of Law (including Environmental Laws)applicable to it or to its properties, except for any such failure to complywhich could not reasonably be expected to cause a Material Adverse Effect.  To the knowledge of the Loan Parties as ofthe Closing Date, none of the Group Companies or any of their respectivematerial properties or assets is subject to or in default with respect to anyjudgment, writ, injunction, decree or order of any court or other GovernmentalAuthority.  As of the Closing Date, noneof the Group Companies has received any written communication from anyGovernmental Authority that alleges that any of the Group Companies is not incompliance in any material respect with any Law, except for allegations thathave been satisfactorily resolved and are no longer outstanding.

##  

## **Section5.17 ****Intellectual Property. **Except as set forth in Schedule 5.17hereto, the Company and its Subsidiaries own, or possess the right to use, allof the trademarks, service marks, trade names, copyrights, patents, patentrights, franchises, licenses and other rights that are reasonably necessary forthe operation of their respective businesses, except for those rights thefailure to own or possess could not reasonably be expected to have a MaterialAdverse effect.  To the best knowledge ofthe Company, no slogan or other advertising device, product, process, method,substance, part or other material now employed, or now contemplated to beemployed, by the Company or any Subsidiary infringes upon any intellectualproperty rights held by any other Person.

##  

## **Section5.18****  Purpose of Loans. **The proceeds of the Loans will beused on the Closing Date by Duane Reade and the Company to prepay loansoutstanding under the ABL Credit Agreement, to fund a portion of the ExistingConvertible Notes Escrow Account and to pay Transaction fees and expenses.

##  

## **Section5.19****  Labor Matters. **There are no strikes againstHoldings or any of its Subsidiaries, other than any strikes that, individuallyor in the aggregate, could not reasonably be expected to result in a MaterialAdverse Effect.  The consummation of theTransactions will not give rise to a right of termination or right ofrenegotiation on the part of any union under any collective bargainingagreement to which Holdings or any of its Subsidiaries is a party or by whichHoldings or any of its Subsidiaries (or any predecessor) is bound, other thancollective bargaining agreements which, individually or in the aggregate, arenot material to Holdings and its Subsidiaries taken as a whole.

##  

## **Section5.20****  Solvency. **Each Loan Party is and, afterconsummation of the Transactions, will be Solvent.

##  

## **Section 5.21**** Collateral Documents.**

##  

### (a)           *Article 9Collateral*.  Each of the Security Agreement and thePledge Agreement is effective to create in favor of the Collateral Agent, forthe ratable benefit of the Finance Parties, a legal, valid and enforceablesecurity interest in the Collateral described therein and, when financingstatements in appropriate form are filed in the offices specified on Schedule 4.01to the Security Agreement and the Pledged Collateral is delivered to theCollateral Agent in accordance with the Pledge Agreement, each of the SecurityAgreement and the Pledge Agreement shall constitute a fully perfected Lien on,and security interest in, all right, title and interest of the grantorsthereunder in such of the Collateral in which a security interest can beperfected under Article 9 of the Uniform Commercial Code, in each caseprior and superior in right to any other Person other than with respect toPermitted Liens.

 

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### (b)           *Intellectual Property*.  When the Assignment of Patents andTrademarks, substantially in the form of Exhibit A to the SecurityAgreement, is duly filed in the United States Patent and Trademark Office andthe Assignment of Copyrights, substantially in the form of Exhibit B tothe Security Agreement, is duly filed in the United States Copyright Office,the Security Agreement shall (assuming that the financing statements referredto paragraph (a) above have been filed in the appropriate filingoffices) constitute a fully perfected Lien on, and security interest in, allright, title and interest of the grantors thereunder in the IntellectualProperty covered in such Assignments, in each case prior and superior in rightto any other Person (it being understood that subsequent recordings in theUnited States Patent and Trademark Office and the United States CopyrightOffice may be necessary to perfect a lien on registered trademarks, trademarkapplications and copyrights acquired by the Loan Parties after the ClosingDate).

###  

### (c)           *Status of Liens*.  No filings or recordings are required inorder to perfect the security interests created under the Collateral Documents,except for filings or recordings listed on Schedule 4.01 to theSecurity Agreement, and all such listed filings and recordings have been orwill be made.

###  

## **Section5.22****  Securities of the Company**. Holdings owns good, valid and marketable title to all the outstandingcommon stock of the Company, free and clear of all Liens of every kind, whetherabsolute, matured, contingent or otherwise, other than those arising under theCollateral Documents.  Except as setforth on Schedule 5.22, there are no shareholder agreements orother agreements pertaining to Holdings’ beneficial ownership of the commonstock of the Company, including any agreement that would restrict Holdings’right to dispose of such common stock and/or its right to vote such commonstock.

##  

## **Section5.23****  Certain Transactions.**

##  

### (a)           *DRI Merger Agreement*.  On the Closing Date, (i) the DRI Merger Agreementhas not been amended or modified, since June 30, 2004 nor has any conditionthereof been waived by Holdings or DR Acquisition, (ii) all conditions to theobligations of Holdings and DR Acquisition to consummate the transactionscontemplated by the DRI Merger Agreement have been satisfied and (iii) thetransactions contemplated by the DRI Merger Agreement have been consummated inaccordance with the DRI Merger Agreement in all material respects and allapplicable requirements of Law.

###  

### (b)           *Senior Subordinated Notes*.  On the Closing Date, (i) the SeniorSubordinated Note Indenture has not been amended or modified, nor has anycondition thereof been waived by the Company in a manner adverse in anymaterial respect to the rights or interests of the Lenders and (ii) all fundsadvanced by the Senior Subordinated Noteholders have been used, together withthe proceeds of the Closing Date Equity Issuance, to consummate thetransactions contemplated by the DRI Merger Agreement.

###  

# **ARTICLEVI**AFFIRMATIVE COVENANTS

# ** **

Each of Holdings and each Borrower agrees that so longas any Term Loan Obligation or other amount payable hereunder or under any Noteor other Term Loan Document remains unpaid:

 

## **Section6.01****  Financial Statements. **The Company will furnish, or causeto be furnished, to the Administrative Agent for further distribution to eachof the Lenders:

 

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### (a)           *Annual Financial Statements*.  As soon as available, and in any event within90 days after the end of each fiscal year of the Company ending after theClosing Date, a consolidated balance sheet and income statement of the Companyand its Consolidated Subsidiaries as of the end of such fiscal year and therelated consolidated statements of operations and retained earnings and cashflows for such fiscal year, setting forth in comparative form consolidatedfigures for the preceding fiscal year, all such financial statements to beaudited by independent certified public accountants of recognized nationalstanding reasonably acceptable to the Administrative Agent and accompanied byan opinion of such accountants (which shall not be qualified or limited in anymaterial respect) to the effect that such consolidated financial statementshave been prepared in accordance with GAAP and present fairly in all materialrespects the consolidated financial position and consolidated results ofoperations and cash flows of the Company and its Consolidated Subsidiaries inaccordance with GAAP consistently applied (except for changes with which suchaccountants concur).

###  

### (b)           *Quarterly Financial Statements*.  As soon as available, and in any event within45 days after the end of each of the first three fiscal quarters in each fiscalyear of the Company, commencing with the fiscal quarter ending June 30, 2004, aconsolidated balance sheet of the Company and its Consolidated Subsidiaries asof the end of such fiscal quarter, together with related consolidatedstatements of operations and retained earnings and cash flows for such fiscal quarterand the then elapsed portion of such fiscal year, setting forth in comparativeform consolidated figures for the corresponding periods of the preceding fiscalyear, all such financial statements to be in form and detail and reasonablyacceptable to the Administrative Agent, and accompanied by a certificate of thechief financial officer of the Company to the effect that such quarterlyfinancial statements have been prepared in accordance with GAAP and presentfairly in all material respects the consolidated financial position andconsolidated results of operations and cash flows of the Company and itsConsolidated Subsidiaries in accordance with GAAP consistently applied, subjectto changes resulting from normal year-end audit adjustments and the absence offootnotes required by GAAP.

###  

As to any information contained in materials furnishedpursuant to Section 6.02(d), the Company shall not be separatelyrequired to furnish such information under Section 6.01(a) or (b),but the foregoing shall not be in derogation of the obligation of the Companyto furnish the information and materials described in Section 6.01(a)or (b) at the times specified therein.

 

## **Section6.02****  Certificates; Other Information.**  The Company willfurnish, or cause to be furnished, to the Administrative Agent for furtherdistribution to each of the Lenders, in form and detail reasonably satisfactoryto them:

##  

### (a)           *Auditors’ Certificate*.  Concurrently with the delivery of thefinancial statements referred to in Section 6.01(a), a certificateof its independent certified public accountants certifying such financialstatements and stating that in the course of the audit upon which their opinionon such financial statements was based (but without any special or additionalaudit procedures for the purpose), they obtained knowledge of no condition orevent relating to financial matters which constitutes a Default or an Event ofDefault or, if such accountants shall have obtained in the course of such auditknowledge of any such Default or Event of Default, disclosing in such writtenstatement the nature and period of existence thereof, it being understood thatsuch accountants shall be under no liability, directly or indirectly, to theLenders for failure to obtain knowledge of any such condition or event.

###  

### (b)           *Compliance Certificate*.  At the time of delivery of the financialstatements provided for in Sections 6.01(a) and 6.01(b)above, a Compliance Certificate of the chief financial officer of the Company(i) demonstrating compliance with the Leverage Ratio and the Interest CoverageRatio contained in Section 7.16 by calculation thereof as of the end ofthe fiscal period covered by such financial statements, (ii) stating that noDefault or Event of Default exists, or if any Default or Event of

 

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### Default doesexist, specifying the nature and extent thereof and what action the Companyproposes to take with respect thereto, (iii) stating whether, since the date ofthe most recent financial statements delivered hereunder, there has been anymaterial change in the GAAP applied in the preparation of the financialstatements of the Company and its Consolidated Subsidiaries, and, if so,describing such change and (iv) identifying all Asset Dispositions, Casualties,Condemnations, Debt Issuances (other than Debt Issuances permitted under Section7.01) and Equity Issuances (other than Excluded Equity Issuances) that weremade or Extraordinary Receipts that were received since the end of the previousfiscal quarter and setting forth a reasonably detailed calculation of the NetCash Proceeds received from all Asset Dispositions, Casualties, Condemnations,Debt Issuances (other than Debt Issuances permitted under Section 7.01)and Equity Issuances (other than Excluded Equity Issuances) and ExtraordinaryReceipts that were made or received since the end of the previous fiscalquarter.

###  

### (c)           *Auditor’s Reports*.  Promptly upon receipt thereof, a copy of anyfinal detailed audit reports, management letters or recommendations submittedto the board of directors (or the audit committee of the board of directors) ofany Group Company by independent accountants in connection with the accounts orbooks of any Group Company, or any audit of any of them.

###  

### (d)           *SEC Reports*.  Promptly after the same are available, copiesof each annual report, proxy or financial statement or other report orcommunication sent to any holder of registered securities of any Group Company,and copies of all annual, regular, periodic and special reports andregistration statements which any Group Company may file or be required to filewith the SEC under Section 13 or 15(d) of the Exchange Act, and nototherwise required to be delivered to the Administrative Agent pursuant hereto.

###  

### (e)           *Annual Business Plan and Budgets*.  At least 30 days after the end of each fiscalyear of the Company, beginning with the fiscal year ending December 31, 2004 abusiness plan and budget of the Company and its Consolidated Subsidiariescontaining, among other things, projected financial statements on a quarterlybasis for the next fiscal year and on an annual basis for each of theimmediately succeeding four fiscal years.

###  

### (f)            *Excess Cash Flow*.  Within 90 days after the end of each fiscalyear of the Company ending after the Closing Date, commencing with the fiscalyear ending on or about December 31, 2005, a certificate of the chief financialofficer of the Company containing information regarding the calculation ofExcess Cash Flow for such fiscal year.

###  

### (g)           *ERISA Reports*.  Promptly after the same are available, (or,with respect to Multiemployer Plans, become available to the Company) the mostrecently prepared actuarial reports in relation to the Employee BenefitArrangements for the time being operated by Group Companies which are preparedin order to comply with the then current statutory or auditing requirementswithin the relevant jurisdiction.  Ifrequested by the Administrative Agent, the Company will promptly instruct anactuary to prepare such actuarial reports and deliver those to theAdministrative Agent, if the Administrative Agent has reasonable grounds forbelieving that any relevant statutory or auditing requirement within therelevant jurisdiction is not being complied with.  Promptly upon request, the Company shall alsofurnish the Administrative Agent and the Lenders with such additionalinformation concerning any Plan as may be reasonably requested, includingcopies of each annual report/return (Form 5500 series), as well as allschedules and attachments thereto required to be filed with the Department ofLabor and/or the Internal Revenue Service pursuant to ERISA and the Code,respectively, for each “plan year” (within the meaning of Section 3(39) ofERISA).

###  

### (h)           *Additional Patents, Trademarks and Copyrights*.  At the time of delivery of the financialstatements and reports provided for in Section 6.01(a), a reportsigned by the chief financial

 

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### officer or otherResponsible Officer of the Company setting forth (i) a list of registrationnumbers for all patents, trademarks, service marks, tradenames and copyrightsawarded to any Group Company since the last day of the immediately precedingfiscal year of the Company and (ii) a list of all patent applications, trademarkapplications, service mark applications, trade name applications and copyrightapplications submitted by any Group Company since the last day of theimmediately preceding fiscal year and the status of each such application, allin such form as shall be reasonably satisfactory to the Administrative Agent.

###  

### (i)            *Domestication in Other Jurisdiction*.  Not less than 15 days prior to any change inthe jurisdiction of organization of any Loan Party, a copy of all documents andcertificates intended to be filed or otherwise executed to effect such change.

###  

### (j)            *Other Information*.  With reasonable promptness upon requesttherefor, such other information regarding the business, properties orfinancial condition of any Group Company as the Administrative Agent or anyLender may reasonably request, which may include such information as any Lendermay reasonably determine is necessary or advisable to enable it either (i) tocomply with the policies and procedures adopted by it and its Affiliates tocomply with the Bank Secrecy Act, the U.S. Patriot Act and all applicableregulations thereunder or (ii) to respond to requests for informationconcerning Holdings and its Subsidiaries from any governmental, self-regulatoryorganization or financial institution in connection with its anti-moneylaundering and anti-terrorism regulatory requirements or its complianceprocedures under the U.S. Patriot Act, including in each case informationconcerning the Company’s direct and indirect shareholders and its use of theproceeds of the Loans hereunder.

###  

Documents required to be delivered pursuant to Section 6.01(a)or (b) or Section 6.02(d) (to the extent any such documentsare included in materials otherwise filed with the SEC) may be deliveredelectronically and if so delivered shall be deemed to have been delivered onthe date (i) on which the Company posts such documents, or provides a linkthereto on the Company’s website on the Internet at the website address listedon Schedule 10.02; or (ii) on which such documents are posted onthe Company’s behalf on IntraLinks/IntraAgency or another relevant website, ifany, to which each Lender and the Administrative Agent have access (whether acommercial, third-party website or whether sponsored by the AdministrativeAgent); provided that:  (i) theCompany shall deliver paper copies of such documents to the AdministrativeAgent or any Lender that requests the Company to deliver such paper copiesuntil a written request to cease delivering paper copies is given by theAdministrative Agent or such Lender and (ii) the Company shall notify (whichmay be by facsimile or electronic mail) the Administrative Agent and eachLender of the posting of any such documents and provide to the AdministrativeAgent by electronic mail electronic versions (i.e., soft copies) of suchdocuments.  Notwithstanding anythingcontained herein, in every instance the Company shall be required to providepaper copies of the Compliance Certificates required by Section 6.02(b)to the Administrative Agent.  Except forsuch Compliance Certificates, the Administrative Agent shall have no obligationto request the delivery or to maintain copies of the documents referred toabove, and in any event shall have no responsibility to monitor compliance bythe Company with any such request for delivery, and each Lender shall be solelyresponsible for requesting delivery to it or maintaining its copies of suchdocuments.

 

The Borrowers hereby agree and acknowledge that theAdministrative Agent and/or the Joint Lead Arrangers will at their option makeavailable to the Lenders materials and/or information provided by or on behalfof the Borrowers, hereunder (collectively, “Borrower Materials”) byposting such Borrower Materials on IntraLinks or another similar electronicsystem (the “Platform”).  Theparties hereto further agree and acknowledge that certain of the Lenders may be“public-side” Lenders (i.e., Lenders that do not wish to receive materialnon-public information with respect to a Loan Party or its securities (each, a“Public Lender”).  The Borrowershereby agree that (i) all Borrower Materials to be

 

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made available to Public Lenders shall be clearly andconspicuously marked “PUBLIC” which, at a minimum, shall mean that the word“PUBLIC” shall appear prominently on the first page thereof; (ii) by markingBorrower Materials “PUBLIC,” the Borrowers shall be deemed to have authorizedthe Administrative Agent, the Joint Lead Arrangers and the Lenders to treatsuch Borrower Materials as either publicly available information or notmaterial information (although such materials may be sensitive and proprietary)with respect to a Loan Party or its securities for purposes of Untied Statesfederal and state securities laws; (iii) all Borrower Materials marked “PUBLIC”are permitted to be made available through a portion of the Platform designated“Public Investor,” and (iv) the Administrative Agent, the Joint Lead Arrangersand the Lenders shall treat any Borrower Materials that are not marked “PUBLIC”as being suitable only for posting on a portion of the Platform not designated“Public Investor.”

 

## **Section6.03****  Notices.**  The Company will promptly notify theAdministrative Agent and each Lender:

##  

#### (i)            ofthe occurrence of any Default or Event of Default;

####  

#### (ii)           ofany matter that has resulted or may reasonably be expected to result in aMaterial Adverse Effect, including: (A) breach or non-performance of, or anydefault under, any Contractual Obligation of Holdings or any of itsSubsidiaries; (B) any dispute, litigation, investigation, proceeding orsuspension between Holdings or any of its Subsidiaries and any GovernmentalAuthority; (C) the commencement of, or any material development in, anylitigation or proceeding affecting Holdings or any of its Subsidiaries,including pursuant to any applicable Environmental Law; (D) any litigation,investigation or proceeding affecting any Loan Party in which the amountinvolved exceeds $5,000,000, or in which injunctive relief or similar relief issought, which relief, if granted, could be reasonably expected to have aMaterial Adverse Effect;

####  

#### (iii)          of the occurrence of any ERISA Event;

####  

#### (iv)          ofany material change in accounting policies or financial reporting practice byHoldings or any of its Subsidiaries; and

####  

#### (v)           of(A) any event or condition, including any Reportable Event, that is reasonablylikely to lead to, an ERISA Event or (B) any change in the funding status ofany Plan that could have a Material Adverse Effect, together with a descriptionof any such event or condition or a copy of any such notice and a statement bythe chief financial officer of the Borrower briefly setting forth the detailsregarding such event, condition or notice and the action, if any, which hasbeen or is being taken or is proposed to be taken by the Company with respectthereto.

####  

Each notice pursuant to this Section 6.03shall be accompanied by a statement of a Responsible Officer of the Companysetting forth details of the occurrence referred to therein and stating whataction the Company has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(i)shall describe with particularity any and all provisions of this Agreement orthe other Term Loan Documents that have been breached.

 

## **Section6.04**** Payment of Obligations. **Each of the Group Companies willpay and discharge (i) all taxes, assessments and other governmental charges orlevies imposed upon it, or upon its income or profits, or upon any of itsproperties, before they shall become delinquent, (ii) all lawful claims(including claims for labor, materials and supplies) which, if unpaid, mightgive rise to a Lien upon any of

 

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## its properties and(iii) except as prohibited hereunder or under the terms of the Bridge Notes orthe Senior Subordinated Notes, as applicable or the ABL Credit Agreement, allof its other Indebtedness as it shall become due; provided, however,that no Group Company shall be required to pay any such tax, assessment,charge, levy, claim or Indebtedness which is being contested in good faith byappropriate proceedings diligently pursued and as to which adequate reserveshave been established in accordance with GAAP, unless the failure to make anysuch payment (i) could give rise to an immediate right to foreclose on a Liensecuring such amounts or (ii) could reasonably be expected to have a MaterialAdverse Effect.

##  

## **Section6.05****  Preservation of Existence Etc. **Except as a result ofor in connection with a dissolution, merger or disposition of a Subsidiary ofthe Company permitted under Section 7.04 or Section 7.05,each Group Company will:  (i) preserve,renew and maintain in full force and effect its legal existence and goodstanding under the Laws of the jurisdiction of its organization; (ii) take allreasonable action to maintain all rights, privileges, permits, licenses andfranchises necessary or desirable in the normal conduct of its business, exceptto the extent that failure to do so could not reasonably be expected to have aMaterial Adverse Effect; and (iii) preserve or renew all of its registeredpatents, trademarks, trade names and service marks, the non-preservation ofwhich could reasonably be expected to have a Material Adverse Effect.

##  

## **Section6.06****  Maintenance of Properties.**  Each Group Companywill:  (i) maintain, preserve and protectall of its material properties and equipment necessary in the operation of itsbusiness in good working order and condition, ordinary wear and tear excepted;(ii) make all necessary repairs thereto and renewals and replacements thereofexcept where the failure to do so could not reasonably be expected to have aMaterial Adverse Effect; and (iii) use the standard of care typical in theindustry in the operation and maintenance of its facilities.

##  

## **Section6.07****  Insurance; Certain Proceeds.**

##  

### (a)           *Insurance Policies*.  Each of the Group Companies will at all timesmaintain in full force and effect insurance (including worker’s compensationinsurance, liability insurance, casualty insurance and business interruptioninsurance) in such amounts, covering such risks and liabilities and with suchdeductibles or self-insurance retentions as are in accordance with normalindustry practice (or as are otherwise required by the Collateral Documents).  The Collateral Agent shall be named as losspayee or mortgagee, as its interest may appear, with respect to all suchproperty and casualty policies and additional insured with respect to all suchother policies (other than key man life insurance, workers’ compensation andemployee health policies), and each provider of any such insurance shall agree,by endorsement upon the policy or policies issued by it or by independentinstruments furnished to the Collateral Agent, that the insurance carrier shallpay all proceeds (other than proceeds in respect of the ABL PriorityCollateral) in excess of $1,000,000 or, if it shall have received notice fromthe Collateral Agent that an Event of Default has occurred and is continuingall proceeds (other than proceeds in respect of the ABL Priority Collateral),otherwise payable to Holdings or one or more of its Subsidiaries under suchpolicies directly to the Collateral Agent (which agreement shall be evidencedby a “standard” or “New York” lender’s loss payable endorsement in the name ofthe Collateral Agent on Accord Form 27) and that it will give the CollateralAgent thirty days’ prior written notice before any such policy or policiesshall be altered or canceled, and that no act or default of any Group Companyor any other Person shall affect the rights of the Collateral Agent or theLenders under such policy or policies.

###  

### (b)           *Loss Events*.  In case of any Casualty or Condemnation withrespect to any property of any Group Company or any part thereof (other thanproperty constituting ABL Priority Collateral) having a fair market value inexcess of $1,000,000, the Company shall promptly give written notice thereof tothe Administrative Agent generally describing the nature and extent of suchdamage,

 

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### destruction ortaking.  In such case, the Company shall,or shall cause such Group Company to, promptly repair, restore or replace theproperty of such Person (or part thereof) which was subject to such Casualty orCondemnation at such Person’s cost and expense, whether or not the InsuranceProceeds or Condemnation Award, if any, received on account of such event shallbe sufficient for that purpose (subject in the case of leased property, to therights of lessors thereof); provided, however, that such propertyneed not be repaired, restored or replaced to the extent the failure to makesuch repair, restoration or replacement (i)(A) is desirable to the properconduct of the business of such Person in the ordinary course and otherwise inthe best interest of such Person and (B) would not materially impair the rightsand benefits of the Collateral Agent or the Finance Parties under theCollateral Documents or any other Term Loan Document or (ii) the failure torepair, restore or replace the property is attributable to the application ofthe Insurance Proceeds from such Casualty or the Condemnation Award from suchCondemnation to payment of the Term Loan Obligations in accordance with thefollowing provisions of this Section 6.07(b).  Subject to the Intercreditor Agreement, ifHoldings or any of its Subsidiaries shall receive any Insurance Proceeds from aCasualty (other than proceeds in respect of ABL Priority Collateral) orCondemnation Award from a Condemnation with respect to property notconstituting ABL Priority Collateral in excess of $5,000,000, such Person willimmediately pay over such proceeds to the Administrative Agent for payment ofthe Term Loan Obligations in accordance with Section 2.08(b), or ifsuch funds constitute Reinvestment Funds, either (i) immediately pay over suchproceeds to the Collateral Agent to be held by the Collateral Agent in theReinvestment Funds Account established under the Security Agreement, or (ii)pay over such proceeds to the ABL Facility Agent (as such term is defined inthe ABL Credit Agreement) in accordance with the ABL Credit Agreement inrepayment of outstanding loans under the ABL Credit Agreement, providedthat the aggregate amount of all such Reinvestment Funds used to repay amountsoutstanding under the ABL Credit Agreement, net of all amounts subsequentlyborrowed under the ABL Credit Agreement and used in the restructuring orreplacement of Collateral in accordance with this Section 6.07(b) shallnot at any time exceed $5,000,000.  TheAdministrative Agent agrees to cause the Collateral Agent to release suchInsurance Proceeds or Condemnation Awards to the Borrower upon its request andas needed from time to time to pay for the repair, restoration or replacementof the portion of the property subject to such Casualty or Condemnation if, butonly if, the conditions set forth in clauses (iv) and (v) of thefirst proviso of the definition of “Reinvestment Funds” are satisfied atthe time of such request.

###  

## **Section6.08****  Compliance with Law. **Each of the Group Companies willcomply with all requirements of Law applicable to it and its properties to theextent that noncompliance with any such requirement of Law could reasonably beexpected to have a Material Adverse Effect. Without limiting the generality of the foregoing, each of the GroupCompanies will do, and cause each of its ERISA Affiliates to do, each of thefollowing:  (i) maintain each Planin compliance in all material respects with the applicable provisions of ERISA,the Code and other Federal or state law; (ii) cause each Plan which isqualified under Section 401(a) of the Code to maintain suchqualifications; (iii) make all required contributions to any Plan subjectto Section 412 of the Code; (iv) ensure that there are no UnfundedLiabilities which would have a Material Adverse Effect; (v) ensure that allliabilities under the Employee Benefit Arrangements are either: (A) funded toat least the minimum level required by law or, if higher, to the level requiredby the terms governing the Employee Benefit Arrangements; (B) insured with areputable insurance company; or (C) provided for or recognized in the financialstatements most recently delivered to the Administrative Agent under Section 6.01(a)or (b); and (vi) ensure that the contributions or premium payments to orin respect of all Employee Benefit Arrangements are and continue to be promptlypaid at no less than the rates required under the rules of such arrangementsand in accordance with the most recent actuarial advice received in relation tothe Employee Benefit Arrangement and generally in accordance with applicableLaw.

##  

## **Section6.09****  Books and Records; Lender Meeting. **Each of the GroupCompanies will keep complete and accurate books and records of its transactionsin accordance with good accounting

 

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## practices on thebasis of GAAP (including the establishment and maintenance of appropriatereserves) and will maintain such books and records and accounts in materialconformity with all applicable requirements of any Governmental Authorityhaving regulatory jurisdiction over any Group Company.  Unless the Administrative Agent shall notifythe Company that no meeting is required, within 120 days after the end of eachfiscal year of the Company, the Company will conduct a meeting of the Lendersto discuss such fiscal year’s results and the financial condition of theCompany and its Consolidated Subsidiaries. The chief financial officer of the Company and such other officers ofthe Company as the Company’s chief financial officer shall designate shall bepresent at each such meeting.  Suchmeetings shall be held at times and places convenient to the Lenders and to theCompany.

##  

## **Section6.10 ****Inspection Rights. **Upon reasonable notice and during normalbusiness hours but not on more than two occasions in the aggregate in any yearso long as no Default or Event of Default has occurred and is continuing, eachof the Group Companies will permit representatives appointed by the Agents orthe Required Lenders, including independent accountants, agents, employees,attorneys and appraisers, to visit and inspect its property, including itsbooks and records, its accounts receivable and inventory, its facilities andits other business assets, and to make photocopies or photographs thereof andto write down and record any information such representatives obtain, all atthe expense of the Borrower following the occurrence and during the continuanceof an Event of Default, and shall permit the Agents or such representatives toinvestigate and verify the accuracy of information provided to the Lenders andto discuss all such matters with the officers, employees, independentaccountants, attorneys and representatives of the Group Companies.

##  

## **Section6.11****  Use of Proceeds. **The Company and Duane Reade willuse the proceeds of the Loans solely for the purposes set forth in Section 5.18.

##  

## **Section6.12****  Additional Loan Parties; AdditionalSecurity.**

##  

### (a)           *Additional Subsidiary Guarantors*.  Each of Holdings and the Borrowers will take,and will cause each of its Subsidiaries (other than Foreign Subsidiaries) totake, such actions from time to time as shall be necessary to ensure that allSubsidiaries of Holdings (other than the Company, the Co-Borrowers and anyForeign Subsidiaries) are Subsidiary Guarantors.  Without limiting the generality of theforegoing, if any Group Company shall form or acquire any new Subsidiary, theCompany, as soon as practicable and in any event within 30 days after suchformation or acquisition, will provide the Collateral Agent with notice of suchformation or acquisition setting forth in reasonable detail a description ofall of the assets of such new Subsidiary and will cause such new Subsidiary(other than a Foreign Subsidiary) to:

###  

#### (i)            within30 days after such formation or acquisition, execute a Co-Borrower Agreement oran Accession Agreement pursuant to which such new Subsidiary shall agree tobecome (A) either a Co-Borrower hereunder or a “Guarantor” under the Guaranty,(B) an “Obligor” under the Security Agreement and (C) an “Obligor” under thePledge Agreement; and

####  

#### (ii)           deliversuch proof of organizational authority, incumbency of officers, opinions ofcounsel and other documents as is consistent with those delivered by each LoanParty pursuant to Section 4.01 on the Closing Date or as theAdministrative Agent, the Collateral Agent or the Required Lenders shall havereasonably requested.

####  

### (b)           *Additional Security*.  Each of Holdings and the Company will cause,and will cause each of its Subsidiaries (other than a Foreign Subsidiary or aCo-Borrower) to cause, (i) all of its material owned Real Properties (otherthan any Real Property owned as of the Closing Date) and personal propertylocated in the United States, (ii) to the extent deemed to be appropriate bythe Administrative

 

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### Agent or theRequired Lenders in its or their sole and reasonable discretion, all of itsother owned Real Properties (other than any Real Property owned as of theClosing Date) and personal property and (iii) all other assets and propertiesof Holdings and its Subsidiaries intended to constitute collateral under theTerm Loan Documents but which are not covered by the original CollateralDocuments and as may be requested by the Collateral Agent or the RequiredLenders in their sole reasonable discretion to be subject at all times to firstpriority (subject only to Permitted Liens), perfected and, in the case of RealProperty, title insured Liens in favor of the Collateral Agent pursuant to theCollateral Documents or such other security agreements, pledge agreements,mortgages or similar collateral documents as the Collateral Agent shall requestin its sole reasonable discretion (collectively, the “Additional CollateralDocuments”).  In furtherance of theforegoing terms of this Section 6.12, the Company agrees topromptly provide the Administrative Agent with written notice of theacquisition by Holdings or any of its Subsidiaries of any Real Property locatedin the United States, setting forth in each case in reasonable detail thelocation and a description of the asset(s) so acquired.  Without limiting the generality of theforegoing, Holdings and the Company will cause, and will cause each of theirrespective Subsidiaries to cause, 100% of the Equity Interests of each of theirrespective direct and indirect Subsidiaries (but not more than 65% of suchEquity Interests, if such Subsidiary is a direct Foreign Subsidiary, or 0% if aForeign Subsidiary that is owned directly or indirectly by a ForeignSubsidiary) to be subject at all times to a first priority, perfected Lien infavor of the Collateral Agent pursuant to the terms and conditions of theCollateral Documents.

###  

If, subsequent to the Closing Date, a Loan Party shallacquire any intellectual property, securities, instruments, chattel paper orother personal property required to be delivered to the Collateral Agent asCollateral hereunder or under any of the Collateral Documents, the Companyshall promptly (and in any event within three Business Days after anyResponsible Officer of any Loan Party acquires knowledge of the same) notifythe Collateral Agent of the same.  Eachof the Loan Parties shall adhere to the covenants regarding the location ofpersonal property as set forth in the Security Agreement.

 

All such security interests and mortgages shall begranted pursuant to documentation reasonably satisfactory in form and substanceto the Collateral Agent and shall constitute valid and enforceable perfectedsecurity interests and mortgages superior to and prior to the rights of allthird Persons and subject to no other Liens except for Permitted Liens.  The Additional Collateral Documents or instrumentsrelated thereto shall have been duly recorded or filed in such manner and insuch places as are required by law to establish, perfect, preserve and protectthe Liens in favor of the Collateral Agent required to be granted pursuant tothe Additional Collateral Documents, and all taxes, fees and other chargespayable in connection therewith shall have been paid in full.  The Company shall cause to be delivered tothe Collateral Agent such opinions of counsel, title insurance and otherrelated documents as may be reasonably requested by the Collateral Agent toassure itself that this Section 6.12(b) has been complied with.

 

### (c)           Eachof Holdings and the Borrowers agrees that each action required by this Section 6.12shall be completed as soon as possible, but in no event later than 60 days aftersuch action is either requested to be taken by the Collateral Agent or theRequired Lenders or required to be taken by Holdings or any of its Subsidiariespursuant to the terms of this Section 6.12.

###  

## **Section6.13****  Interest Rate Protection Agreements.  **Within 90 days afterthe Closing Date, the Company will enter into and thereafter maintain in fullforce and effect interest rate swaps, rate caps, collars or other similaragreements or arrangements designed to hedge the position of the Borrowers withrespect to interest rates at rates and on terms reasonably satisfactory to theJoint Lead Arrangers, the effect of which shall be to fix or limit the interestthat would be payable in connection with Loans, and the Senior SubordinatedNotes in the principal amount of not less than $140,000,000 for a periodexpiring no earlier than 36 months after the Closing Date.  The Company will promptly deliver evidence ofthe execution and delivery of such agreements to the Joint Lead Arrangers.

 

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## **Section6.14****  Contributions. **Upon its receipt thereof, Holdingswill contribute as a common equity contribution to the capital of the Companyany cash proceeds received by Holdings after the Closing Date from any AssetDisposition, Casualty, Condemnation, Debt Issuance, Equity Issuance,Extraordinary Receipts or any cash capital contributions received by Holdingsafter the Closing Date.

##  

## **Section6.15****  Repurchase of Existing Convertible Notes; Maintenance of MinimumAvailability Under ABL Credit Agreement**.  Not later than 5:00PM on the 10thBusiness Day following the Closing Date, the Company shall mail for delivery toeach holder of Existing Convertible Notes an offer to repurchase the ExistingConvertible Notes at not more than 101% of the face amount thereof, togetherwith accrued and unpaid interest thereon, if any, on a date not more than 30days after the Closing Date.  So long asmore than 10% of the aggregate original face amount of the Existing ConvertibleNotes remain outstanding after the Closing Date, the Company shall cause ExcessAvailability (as defined in the ABL Credit Agreement as in effect on the datehereof) less amounts available in the Existing Convertible Notes Escrow Accountto at all times be at least equal to the aggregate face amount of suchoutstanding Existing Convertible Notes, together with any accrued but unpaidinterest thereon.

##  

## **Section6.16****  Co-Borrowers.**  Substantially concurrently with theconsummation of the DRI Merger, the Company will cause such Subsidiaries of theCompany as the Joint Lead Arrangers reasonably may request to become jointlyand severally liable for all Term Loan Obligations of the Company and DuaneReade hereunder and under the other Term Loan Documents, in each case pursuantto a Co-Borrower Agreement.

##  

# **ARTICLEVII**NEGATIVE COVENANTS

# ** **

Each of Holdings and each Borrower agrees that so longas any Term Loan Obligations or other amount payable hereunder or under anyNote or other Term Loan Document remains unpaid:

 

## **Section7.01****  Incurrence of Indebtedness.**  None of the GroupCompanies will, directly or indirectly, create, issue, incur, assume, guaranteeor otherwise in any manner become directly or indirectly liable for the paymentof or otherwise incur (collective, “incur”), any Indebtedness or SwapObligations, except:

##  

#### (i)            Holdings,the Company and its Subsidiaries may incur Permitted Indebtedness;

####  

#### (ii)           theCompany, any Co-Borrower and any Subsidiary Guarantor may incur SeniorIndebtedness if, on a Pro-Forma Basis for the period of four consecutive fiscalquarters ending on or most recently preceding the incurrence of such SeniorIndebtedness (treated as a single accounting period), the Fixed Charge CoverageRatio would have been equal to or greater than 2.25:1.00 and the SeniorLeverage Ratio would have been less than 4.00 to 1.00; and

####  

#### (iii)          the Company, any Co-Borrower and anySubsidiary Guarantor may incur Permitted Subordinated Indebtedness if, on aPro-Forma Basis for the period of four consecutive fiscal quarters ending on ormost recently preceding the incurrence of such Senior Indebtedness (treated asa single accounting period), the Fixed Charge Coverage Ratio would have beenequal to or greater than 2.25:1.00.

####  

## **Section7.02**** ****Restriction on Liens****. **None of the Group Companies willcreate, incur, assume or permit to exist any Lien on any property or assets(including Equity Interests or other securities

 

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## of any Person, including any Subsidiary of Holdings) now owned orhereafter acquired by it or on any income or rights in respect of any thereof,or sign or file or authorize the filing under the Uniform Commercial Code ofany jurisdiction of a financing statement that names any Group Company asdebtor, or sign any security agreement authorizing any secured party thereunderto file such a financing statement, except that the Company and itsSubsidiaries (and in the case of clause (ii) below only, Holdings andits Subsidiaries) may create, incur, assume or permit to exist Liens describedin any of the following clauses (collectively, “Permitted Liens”):

##  

#### (i)            Liensexisting on the Closing Date and listed on Schedule 7.02 hereto and anymodifications, replacements, renewals or extensions thereof; providedthat (A) the Lien does not extend to any additional property other than (x)after-acquired property that is affixed or incorporated into the propertycovered by such Lien and (y) proceeds and products thereof and (B) the renewal,extension or modification of the obligations secured or benefited by such Liensis permitted by Section 7.01;

####  

#### (ii)           Liensarising under the Collateral Documents;

####  

#### (iii)          Liens (other than any Liens imposed by ERISAor pursuant to any Environmental Law) for taxes, assessments or governmentalcharges or levies not yet due or being contested in good faith and byappropriate proceedings diligently pursued for which adequate reserves (in thegood faith judgment of the management of the Company) have been established inaccordance with GAAP (and as to which the property or assets subject to anysuch Lien is not yet subject to foreclosure, sale or loss on account thereof);

####  

#### (iv)          Liensimposed by Law securing the charges, claims, demands or levies of landlords,carriers, warehousemen, mechanics, carriers and other like persons which were incurredin the ordinary course of business and which (A) do not, individually or in theaggregate, materially detract from the value of the property or assets whichare the subject of such Lien or materially impair the use thereof in theoperation of the business of the Company or any of its Subsidiaries or (B)which are being contested in good faith by appropriate proceedings diligentlypursued for which adequate reserves (in the good faith judgment of themanagement of the Company) have been established in accordance with GAAP, whichproceedings have the effect of preventing the forfeiture or sale of theproperty or assets subject to such Lien;

####  

#### (v)           Liens(other than any Liens imposed by ERISA or pursuant to any Environmental Law)not securing Indebtedness or Swap Obligations incurred or deposits made in theordinary course of business in connection with workers’ compensation,unemployment insurance and other types of social security and other similarobligations incurred in the ordinary course of business;

####  

#### (vi)          Lienssecuring obligations in respect of surety bonds (other than appeal bonds),bids, leases, government contracts, performance and return-of-money bonds andother similar obligations incurred in the ordinary course of business; providedthat in the case of Liens on cash and Cash Equivalents, the amount of all cashand Cash Equivalents subject to such Liens may at no time exceed $250,000 inthe aggregate;

####  

#### (vii)         Liens upon specific items or inventory orother goods and proceeds of the Company or any of its Subsidiaries securingsuch Person’s obligations in respect of bankers’ acceptances or documentaryletters of credit issued or created for the account of such Person tofacilitate the shipment or storage of such inventory or other goods;

 

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#### (viii)        pledges or deposits of cash and CashEquivalents securing deductibles, self-insurance, co-payment, co-insurance,retentions and similar obligations to providers of insurance in the ordinarycause of business;

####  

#### (ix)           Lienson (A) incurred premiums, dividends and rebates which may become payable underinsurance policies and loss payments which reduce the incurred premiums on suchinsurance policies and (B) rights which may arise under State insuranceguarantee funds relating to any such insurance policy, in each case securingIndebtedness permitted to be incurred pursuant to clause (a)(x) of thedefinition of Permitted Indebtedness;

####  

#### (x)            Liensarising solely by virtue of any statutory or common Law provision relating tobanker’s liens, rights of set-off or similar rights, in each case incurred inthe ordinary course of business;

####  

#### (xi)           licenses,leases or subleases granted to third Persons in the ordinary course of businessnot interfering in any material respect with the business of any Group Company;

####  

#### (xii)          zoning restrictions, building codes,easements, rights of way, licenses, reservations, covenants, conditions,waivers, restrictions on the use of property or other minor encumbrances orirregularities of title not securing Indebtedness or Swap Obligations which donot, individually or in the aggregate, materially impair the use of anyproperty in the operation or business of Holdings or any of its Subsidiaries orthe value of such property for the purpose of such business;

####  

#### (xiii)         Liens arising from precautionary UniformCommercial Code financing statements regarding, and any interest or title of alicensor, lessor or sublessor under, Operating Leases permitted by thisAgreement;

####  

#### (xiv)        Liens arising from judgments, decrees orattachments (or securing of appeal bonds with respect thereto) in circumstancesnot constituting an Event of Default under Section 8.01; providedthat no cash or other property (other than proceeds of insurance payable byreason of such judgments, decrees or attachments) the fair value of whichexceeds $250,000 is deposited or delivered to secure any such judgment, decreeor award, or any appeal bond in respect thereof;

####  

#### (xv)         Lienssecuring Indebtedness permitted to be incurred under clause (a)(i)(limited solely to ABL Priority Collateral) and clauses (ii), (v)and (vi) of the definition of “Permitted Indebtedness”;

####  

#### (xvi)        any Lien existing on any asset of any Person atthe time such Person becomes a Subsidiary of the Company and not created incontemplation of such event;

####  

#### (xvii)       any Lien on any asset (other than on the EquityInterests of one or more Subsidiaries) of any Person existing at the time suchPerson is merged or consolidated with or into the Company or a Subsidiary ofthe Company and not created in contemplation of such event;

####  

#### (xviii)      any Lien existing on any asset (other than on theEquity Interests of one or more Subsidiaries) prior to the acquisition thereofby the Company or a Subsidiary of the Company and not created in contemplationof such acquisition;

 

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#### (xix)         Liens solely on any cash earnest moneydeposits made by the Company or any of its Subsidiaries in connection with anyletter of intent or purchase agreement with respect to a Permitted BusinessAcquisition;

####  

#### (xx)          Lienson cash and Cash Equivalents securing Swap Obligations owing to one or morePersons who are not Swap Creditors; provided that the aggregate amountof all cash and Cash Equivalents subject to such Liens may at no time exceed$2,500,000;

####  

#### (xxi)         Liens on any assets or Equity Interests of aForeign Subsidiary of the Company securing Indebtedness of such ForeignSubsidiary incurred pursuant to clause (a)(xiii) of the definition ofPermitted Indebtedness;

####  

#### (xxii)        Liens evidencing the consignment ofpharmaceutical inventory to the Borrowers by Amerisource Bergen pursuant to theAmerisource Bergen Agreement; and

####  

#### (xxiii)       other Liens incurred by the Company and itsSubsidiaries not securing Indebtedness if the aggregate fair market value ofthe property subject to such Liens, and the aggregate amount of the obligationssecured thereby, do not exceed $1,000,000.

####  

## **Section7.03 ****Nature of Business. **None of the Group Companies will engagein any business other than the business conducted by the Company and itsSubsidiaries as of the Closing Date and activities related thereto and similar,related or complimentary businesses.

##  

## **Section7.04****  Consolidation, Merger and Dissolution. **Except in connectionwith an Asset Disposition permitted by the terms of Section 7.05, noneof the Group Companies will enter into any transaction of merger orconsolidation or liquidate, wind up or dissolve itself or its affairs (orsuffer any liquidations or dissolutions); provided that:

##  

#### (i)            theDRI Merger shall be permitted;

####  

#### (ii)           anyDomestic Subsidiary of the Company may merge with and into, or be voluntarilydissolved or liquidated into, the Company, so long as (A) the Company is thesurviving corporation of such merger, dissolution or liquidation, (B) thesecurity interests granted to the Collateral Agent for the benefit of theFinance Parties pursuant to the Collateral Documents in the assets of theCompany and such Domestic Subsidiary so merged, dissolved or liquidated shallremain in full force and effect and perfected (to at least the same extent asin effect immediately prior to such merger, dissolution or liquidation), (C) noDefault or Event of Default shall have occurred and be continuing immediatelybefore or immediately after giving effect to such transaction and (D) noPerson other than the Company or a Subsidiary Guarantor receives anyconsideration in respect or as a result of such transaction;

####  

#### (iii)          any Domestic Subsidiary of the Company maymerge with and into, or be voluntarily dissolved or liquidated into, any otherDomestic Subsidiary of the Company, so long as (A) in the case of any suchmerger, dissolution or liquidation involving one or more Co-Borrowers orSubsidiary Guarantors, (x) a Co-Borrower or a Subsidiary Guarantor, asapplicable, is the surviving corporation of such merger, dissolution orliquidation, (y) no Person other than the Company, a Co-Borrower or aSubsidiary Guarantor receives any consideration in respect of or as a result ofsuch transaction, (B) the security interests granted to the CollateralAgent for the benefit of the Finance Parties pursuant to the CollateralDocuments in the assets of each Domestic Subsidiary so merged, dissolved orliquidated and in the Equity Interests of the surviving entity of such merger,dissolution or liquidation shall remain in full force and effect and perfected(to at

 

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#### least the sameextent as in effect immediately prior to such merger, dissolution orliquidation) and (C) no Default or Event of Default shall have occurred and becontinuing immediately before or immediately after giving effect to suchtransaction;

####  

#### (iv)          anyForeign Subsidiary of the Company may be merged with and into, or bevoluntarily dissolved or liquidated into, the Company or any Wholly-OwnedSubsidiary of the Company, so long as (A) in the case of any such merger,dissolution or liquidation involving one or more Co-Borrowers or SubsidiaryGuarantors, (x)  a Co-Borrower or such Subsidiary Guarantor, as the casemay be, is the surviving corporation of any such merger, dissolution orliquidation and (y) no Person other than the Company, a Co-Borrower or aSubsidiary Guarantor receives any consideration in respect of or as a result ofsuch transaction, (B) the security interests granted to the CollateralAgent for the benefit of the Finance Parties pursuant to the CollateralDocuments in the assets of such Foreign Subsidiary, if any, and the Company orsuch other Subsidiary, as the case may be, and in the Equity Interests of thesurviving entity of such merger, dissolution or liquidation shall remain infull force and effect and perfected (to at least the same extent as in effectimmediately prior to such merger, dissolution or liquidation) and (C) noDefault or Event of Default shall have occurred and be continuing immediatelybefore or immediately after giving effect to such transaction; and

####  

#### (v)           theCompany or any Subsidiary of the Company may merge with any Person (other thanHoldings) in connection with a Permitted Business Acquisition if (A) inthe case of any such merger involving the Company, the Company shall be thecontinuing or surviving corporation in such merger, (B) in the case of anysuch merger involving a Co-Borrower or a Subsidiary Guarantor, such Co-Borroweror Subsidiary Guarantor shall be the continuing or surviving corporation insuch merger or the continuing or surviving corporation in such merger shall,simultaneously with the consummation of such merger, become a Co-Borrower or aSubsidiary Guarantor, as applicable, having all the responsibilities andobligations of the Co-Borrower or Subsidiary Guarantor so merged, (C) theLoan Parties shall cause to be executed and delivered such documents,instruments and certificates as the Administrative Agent may reasonably requestso as to cause the Loan Parties to be in compliance with the terms of Section 6.12after giving effect to such transactions, (D) no Default or Event of Defaultshall have occurred and be continuing immediately before or immediately aftergiving effect to such transaction and (E) the Company shall have delivered tothe Administrative Agent a Pro-Forma Compliance Certificate demonstrating that,upon giving effect on a Pro-Forma Basis to such transaction, the Loan Parties willbe in compliance with all of the financial covenants set forth in Section7.16 as of the last day of the most recent period of four consecutivefiscal quarters of Holdings which precedes or ends on the date of suchtransaction and with respect to which the Administrative Agent has received theconsolidated financial information required under Section 6.01(a)or (b) and the Compliance Certificate required by Section 6.02(b).

####  

In the case of any merger or consolidation permittedby this Section 7.04 of any Subsidiary of Holdings which is not a LoanParty into a Loan Party, the Loan Parties shall cause to be executed anddelivered such documents, instruments and certificates as the AdministrativeAgent may reasonably request so as to cause the Loan Parties to be incompliance with the terms of Section 6.12 after giving effect to suchtransaction.  Notwithstanding anything tothe contrary contained above in this Section 7.04, no action shall bepermitted which results in a Change of Control.

 

## **Section7.05 ****Asset Dispositions. **None of the Group Companies will make anyAsset Disposition unless (i) the Company or any Subsidiary of the Company, asthe case may be, receives consideration at the time of such Asset Dispositionat least equal to the fair market value of the assets or Equity Interestsissued or sold or otherwise disposed of, (ii) such fair market value isdetermined by the

 

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## Company and, if inexcess of $5,000,000, its Board of Directors and evidenced by a resolution ofthe Board of Directors set forth in a certificate of a Responsible Officerdelivered to the Administrative Agent and (iii) at least seventy-five percent(75%) of the consideration therefore received by the Company or such Subsidiaryis in the form of cash, Cash Equivalents or Replacement Assets or a combinationthereof.

##  

For purposes of clause (iii) immediately above,each of the following shall be deemed to be cash:  (i) any liabilities (as shown on theCompany’s or such Subsidiary’s most recent balance sheet) of the Company or anysuch Subsidiary (other than contingent liabilities and liabilities that are bytheir terms subordinated to the Senior Subordinated Notes or any guaranteesrelated thereto) that are assumed by the transferee of any such assets and, inthe case of liabilities other than Limited Recourse Indebtedness, where theCompany and all such Subsidiaries are released from any further liability inconnection therewith; and (ii) any securities, notes or other obligations receivedby the Company or any such Subsidiary from such transferee that are within 180days of receipt thereof converted by the Borrower or such Subsidiary into cash(to the extent of the cash received in that conversion).  For purposes of clause (iii) above,any liabilities of the Company or any such Subsidiary that are not assumed bythe transferee of such assets in respect of which the Company and all suchSubsidiaries are not released from any future liabilities in connectiontherewith shall not be considered consideration.

 

Within 365 days after the receipt of any Net CashProceeds from an Asset Disposition, the Company may apply such Net CashProceeds at its option:  (i) to repaySenior Indebtedness and, if the Senior Indebtedness repaid is revolving creditIndebtedness, correspondingly to reduce commitments with respect thereto; (ii)to effect a Permitted Business Acquisition; (iii) to acquire other assets,including investments in property, or to make capital expenditures, that, ineither case, are used or useful in a business permitted by Section 7.03;or (iv) any combination of the foregoing. Pending the final application of any such Net Cash Proceeds, the Companymay temporarily reduce revolving credit borrowings or otherwise invest such NetCash Proceeds in any manner that is not prohibited hereunder.

 

Any Net Cash Proceeds from Asset Dispositions that arenot applied or invested as provided in the preceding paragraph will constitute“Excess Proceeds.”  When theaggregate amount of Excess Proceeds exceeds $5,000,000, the Borrowers willapply to total amount of all Excess Proceeds to prepay the Term Loans inaccordance with Section 2.08(b)(ii). Upon completion of each such prepayment of the Term Loans, the amount ofExcess Proceeds shall be reset at zero.

 

Upon consummation of an Asset Disposition permittedunder this Section 7.05, the Lien created thereon under the CollateralDocuments (but not the Lien on any proceeds thereof) shall be automaticallyreleased, and the Administrative Agent shall (or shall cause the CollateralAgent to) (to the extent applicable) deliver to the Company, upon the Company’srequest and at the Company’s expense, such documentation as is reasonablynecessary to evidence the release of the Collateral Agent’s security interests,if any, in the assets being disposed of, including amendments or terminationsof Uniform Commercial Code Financing Statements, if any, the return of stockcertificates, if any, and the release of any Subsidiary being disposed of inits entirety from all of its obligations, if any, under the Term LoanDocuments.

 

## **Section7.06****  Investments.**

##  

### (a)           *Investments*.  None of the Group Companies will hold, makeor acquire, any Investment in any Person, except the following:

###  

#### (i)            Investmentsexisting on the date hereof in Persons which are Subsidiaries on the datehereof and other Investments existing on the date hereof as set forth inSchedule 7.06 hereto;

 

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#### (ii)           theCompany or any Domestic Subsidiary of the Company may invest in cash and CashEquivalents;

####  

#### (iii)          Foreign Subsidiaries of the Company mayinvest in Foreign Cash Equivalents;

####  

#### (iv)          theCompany and any Subsidiary of the Company may acquire and hold receivablesowing to them, if created or acquired in the ordinary course of business andpayable or dischargeable in accordance with customary trade terms;

####  

#### (v)           theCompany and each Subsidiary of the Company may acquire and own Investments(including Indebtedness obligations) received in connection with the bankruptcyor reorganization of suppliers and customers and in settlement of delinquentobligations of, and other disputes with, customers and suppliers arising in theordinary course of business;

####  

#### (vi)          loansand advances by the Company and its Subsidiaries to employees of Holdings andits Subsidiaries for moving and travel and other similar expenses, in each casein the ordinary course of business, in an aggregate principal amount not toexceed $250,000 at any time outstanding (determined without regard to anywrite-downs or write-offs of such loans and advances);

####  

#### (vii)         deposits by the Company or any Subsidiary ofthe Company made in the ordinary course of business consistent with pastpractices to secure the performance of leases shall be permitted;

####  

#### (viii)        the Company or any of its Subsidiaries may makeloans and advances to Holdings for the purposes and in the amounts necessary topay the fees, expenses and taxes described in Section 7.07(v);

####  

#### (ix)           Holdingsmay make contributions to an employee stock ownership plan sponsored by it; providedthat such contributions are in Qualified Capital Stock, and Holdings may lendor contribute money to an employee stock ownership plan sponsored by it topermit such plan to immediately purchase Qualified Capital Stock from Holdingswith the proceeds of such loan or contribution;

####  

#### (x)            Holdingsmay acquire and hold obligations of one or more officers or other employees ofHoldings or any of its Subsidiaries in connection with such officers’ oremployees’ acquisition of shares of common stock of Holdings, so long as nocash is paid by Holdings or any of its Subsidiaries to such officers oremployees in connection with the acquisition of any such obligations;

####  

#### (xi)           Holdingsmay repurchase stock to the extent permitted by Section 7.07(iii);

####  

#### (xii)          Holdings may make equity contributions to thecapital of the Company;

####  

#### (xiii)         (A) the Company may make Investments in any ofits Wholly-Owned Domestic Subsidiaries and (B) any Subsidiary of the Companymay make Investments in the Company or any Wholly-Owned Domestic Subsidiary ofthe Company; provided in each case that (1) each item of intercompanyIndebtedness shall be evidenced by a promissory note in the form of ExhibitH hereto, (2) each promissory note evidencing intercompany loans andadvances

 

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#### made by a ForeignSubsidiary or a non-Wholly-Owned Domestic Subsidiary to the Company or aWholly-Owned Domestic Subsidiary of the Company shall contain the subordinationprovisions set forth in Exhibit I hereto and (3) each promissory noteevidencing intercompany loans and advances (other than promissory notes held byForeign Subsidiaries, except to the extent provided in Section 6.12(d))shall be pledged to the Collateral Agent pursuant to the Pledge Agreement;

####  

#### (xiv)        the Company and its Subsidiaries may makeInvestments in any Foreign Subsidiary or any non-Wholly-Owned DomesticSubsidiary of the Company (A) in the case of Investments by the Company or anyWholly-Owned Domestic Subsidiary of the Company, in an aggregate amounttogether with any Investments pursuant to clause (xv) below (determinedwithout regard to any write-downs or write-offs of any such Investmentsconstituting Indebtedness) at any one time outstanding not exceeding $2,500,000and (B) to the extent such Investments arise from the sale of inventory in theordinary course of business by the Company or such Subsidiary to such ForeignSubsidiary or non-Wholly-Owned Domestic Subsidiary for resale by such ForeignSubsidiary or non-Wholly-Owned Domestic Subsidiary (including any suchInvestments resulting from the extension of the payment terms with respect tosuch sales); provided that (A) each item of intercompany Indebtednessshall be evidenced by a promissory note in the form of Exhibit H heretoand (B) each promissory note evidencing intercompany loans and advances (otherthan promissory notes (x) issued by Foreign Subsidiaries of the Company to theCompany or any of its Domestic Subsidiaries or (y) held by ForeignSubsidiaries of the Company, in each case except to the extent provided in Section6.12(d)) shall be pledged to the Collateral Agent pursuant to the PledgeAgreement;

####  

#### (xv)         theBorrower and its Subsidiaries may make (A) cash Investments in Permitted JointVentures in an aggregate amount together with any Investment pursuant to clause(xiv)(A) above in any fiscal year not in excess of $2,500,000 (plus anyreturn representing return of capital in respect of any prior such Investment)and (B) noncash Investments in Permitted Joint Ventures in an aggregate amount,determined based on the greater of the book value or the fair market valuethereof as certified in a certificate of a financial officer of the Borrowerdelivered to the Administrative Agent, not in excess of $2,500,000 in anyfiscal year;

####  

#### (xvi)        Investments arising out of the receipt by theCompany or any of its Subsidiaries of non-cash consideration for the sale ofassets permitted under Section 7.05;

####  

#### (xvii)       the Company and its Subsidiaries may makeexpenditures in respect of Permitted Business Acquisitions; and

####  

#### (xviii)      other Investments not otherwise permitted by thisSection 7.06 in an aggregate amount (determined without regard to anywrite-downs or write-offs of any such Investments constituting Indebtedness butexcluding any portion thereof funded with proceeds of a Qualifying EquityIssuance or with Unapplied Excess Cash Flow) at any time outstanding notexceeding the sum of $5,000,000;

####  

provided that no Group Company maymake or own any Investment in Margin Stock in violation of any applicable Law.

 

### (b)           *Asset Acquisitions*.  No Group Company will make any acquisition ofassets outside the ordinary course of business; provided that (i) DRAcquisition may effect the Acquisition (subject to compliance with the applicableconditions precedent set forth in Article IV) and (ii) the Company andits Subsidiaries may make (A) Investments permitted by Section 7.06(a), (B)acquisition of assets permitted pursuant to the third paragraph of Section7.05, (C) acquisitions of assets not constituting

 

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### a BusinessAcquisition involving expenditures not in excess of $5,000,000 per year and (D)Permitted Business Acquisitions.

###  

## **Section7.07****  Restricted Payments, etc.**  None of the GroupCompanies will declare or pay any Restricted Payments (other than RestrictedPayments payable solely in Equity Interests (exclusive of Debt Equivalents) ofsuch Person), except that:

##  

#### (i)            anyWholly-Owned Subsidiary of the Company may make Restricted Payments to theCompany or to any Wholly-Owned Subsidiary of the Borrower;

####  

#### (ii)           anynon-Wholly-Owned Subsidiary of the Company may make Restricted Payments to theCompany or to any Wholly-Owned Subsidiary of the Company or ratably to allholders of its outstanding Equity Interests;

####  

#### (iii)          Holdings may redeem or repurchase EquityInterests (or Equity Equivalents) or make Restricted Payments to DRShareholders LLC to enable DR Shareholders LLC to redeem or repurchase EquityInterests (or Equity Equivalents) from (A) officers, employees, directors andconsultants of any Group Company (or their estates, spouses or former spouses)upon the death, permanent disability, retirement or termination of employmentof any such Person or otherwise in accordance with (x) the Stockholders’Agreement, (y) any equity or stock based plan or any employee stock ownershipplan maintained by Holdings or DR Shareholders LLC or any of their respectiveSubsidiaries, or (z) any employment or consulting agreement set forth on Schedule7.07(iii) hereto or (B) other holders of Equity Interests or EquityEquivalents in Holdings or DR Shareholders LLC, so long as the purpose of suchpurchase is to acquire common stock for reissuance to new officers, employeesand directors (or their estates) of any Group Company, to the extent soreissued within 12 months of any such purchase; provided that in allsuch cases (A) no Default or Event of Default is then in existence or wouldotherwise arise therefrom and (B) the aggregate amount of all cash paid inrespect of all such shares so redeemed or repurchased does not exceed$2,500,000 in any fiscal year of Holdings or $10,000,000 in the aggregate fromand after the Closing Date, plus, in each case the aggregate amount of any NetCash Proceeds of Equity Issuances are contributed by Holdings as equity capitalto the Company as a result of sales by Holdings of Equity Interests of Holdingsto officers, employees, directors and consultants and providedfurtherthat Holdings may purchase, redeem or otherwise acquire Equity Interests andEquity Equivalents of Holdings pursuant to this clause (iii) withoutregard to the restrictions set forth in the first proviso above forconsideration consisting of the proceeds of key man life insurance obtained forthe purposes described in this clause (iii);

####  

#### (iv)          solong as no Default or Event of Default is then in existence or would otherwisearise therefrom, the Company may make cash Restricted Payments to Holdings, andHoldings may make Restricted Payments to DR Shareholders LLC, if Holdings or DRShareholders, respectively, promptly uses such proceeds for the purposesdescribed in clause (iii) above;

####  

#### (v)           theCompany may make cash Restricted Payments to (A) Holdings to enable Holdings topay, or to enable Holdings to make Restricted Payments to DR Shareholders LLCto enable DR Shareholders LLC to pay, as the case may be, franchise taxes,accounting, legal and other fees required to maintain its respective corporateexistence and to provide for other operating costs, in each case related to theCompany, (B) DR Shareholders LLC or Holdings pursuant to the Tax SharingAgreement dated as of the date hereof among Holdings and its Subsidiaries, asamended, restated or modified from time to time, and (C) DR Shareholders LLC orHoldings in order to enable DR Shareholders LLC or Holdings to pay customaryand

 

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#### reasonable costsand expenses of a proposed offering of securities or incurrence of Indebtednessof DR Shareholders LLC or Holdings that is not consummated;

####  

#### (vi)          theCompany may make Restricted Payments to Holdings in an amount not to exceed$1,250,000 per fiscal year to enable Holdings to make payment of PermittedManagement Fees required under the Management Agreement and permitted to bepaid pursuant to Section 7.09(i);

####  

#### (vii)         Restricted Payments may be made on the ClosingDate to the extent set forth in Schedule 7.07 hereto;

####  

#### (viii)        repurchases of Capital Stock deemed to occurupon the cashless exercise of stock options and warrants shall be permitted;and

####  

#### (ix)           theCompany may make Restricted Payments in respect of interest and penalties onthe Senior Subordinated Notes to the extent allowed under Section 7.08(c).

####  

## **Section7.08 ****Prepayments of Indebtedness, etc.**

##  

### (a)           *Amendments of Debt Agreements*.  None of the Group Companies will, or willpermit any of their respective Subsidiaries to, after the issuance thereof,amend, waive or modify (or permit the amendment, waiver or modification of) anyof the terms, agreements, covenants or conditions of or applicable to anySubordinated Indebtedness issued by such Group Company if such amendment,waiver or modification would add or change any terms, agreements, covenants orconditions in any manner adverse to any Group Company, or shorten the finalmaturity or average life to maturity or require any payment to be made soonerthan originally scheduled or increase the interest rate applicable thereto orchange any subordination provision thereof.

###  

### (b)           *Prohibition Against Certain Payments of Principal andInterest of Other Indebtedness*. Except as provided in subsection (c) below, none of the GroupCompanies will (i) directly or indirectly, redeem, purchase, prepay, retire,defease or otherwise acquire for value, prior to scheduled maturity, scheduledrepayment or scheduled sinking fund payment, any Subordinated Indebtedness, orset aside any funds for such purpose, whether such redemption, purchase,prepayment, retirement or acquisition is made at the option of the maker or atthe option of the holder thereof, and whether or not any such redemption,purchase, prepayment, retirement or acquisition is required under the terms andconditions applicable to such Indebtedness, (ii) make any interest payment inrespect of any Subordinated Indebtedness or (iii) release, cancel, compromiseor forgive in whole or in part any Indebtedness evidenced by any IntercompanyNote.

###  

### (c)           *Certain Allowed Payments in Respect of SubordinatedIndebtedness*.  The Companymay make regularly scheduled interest payments as and when due or penalties, ifany,  in respect of the SeniorSubordinated Notes other than any such payments prohibited by the subordinationprovisions thereof.

###  

## **Section7.09****  Transactions with Affiliates.**  None of the GroupCompanies will engage in any transaction or series of transactions with (i) anyofficer, director, holder of any Equity Interest in or other Affiliate ofHoldings, (ii) any Affiliate of any such officer, director, holder or Affiliateor (iii) the Sponsor or any officer, director, holder of any Equity Interest inor other Affiliate of the Sponsor, other than:

 

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#### (i)            commencingwith the fiscal quarter of the Company ended September 30, 2004, the payment tothe Sponsor of management fees pursuant to the Management Agreement when due inan aggregate amount per annum (payable quarterly) not exceeding $1,250,000 (“PermittedManagement Fees”); provided that (A) no Default or Event of Defaultshall have occurred and be continuing immediately before or immediately aftergiving effect to such payment, (B) the amount in respect of such managementfees not then allowed to be paid in cash shall be deferred and shall not bepaid unless and to the extent that such fees would (if added to the amount ofmanagement fees owing in a subsequent period) be permitted to be paid hereunderand (C) all obligations of Holdings and its Subsidiaries with respect to suchdeferred amounts shall be subordinated and subject in right of payment to theprior payment of all Term Loan Obligations in full in cash on terms reasonablysatisfactory to the Administrative Agent;

####  

#### (ii)           reimbursementof reasonable out-of-pocket expenses of the Sponsor Group pursuant to theManagement Agreement in amounts not exceeding $250,000 in any fiscal year orotherwise as approved by the Administrative Agent in its sole and absolutediscretion;

####  

#### (iii)          transfers of assets to any Loan Party otherthan Holdings permitted by Section 7.05;

####  

#### (iv)          transactionsexpressly permitted by Section 7.01, Section 7.04, Section7.05, Section 7.06 or Section 7.07;

####  

#### (v)           compensation(including indemnities and reimbursement of reasonable expenses) of officersand directors;

####  

#### (vi)          benefitarrangements (including for the payment of reasonable fees and compensation)with any employee, consultant, officer or director of or any Group Company,including under any stock option or stock incentive plans, and customaryindemnification arrangements with such persons, in each case entered into inthe ordinary course of business and reasonable in amount;

####  

#### (vii)         transactions in existence on the Closing Dateto the extent disclosed in Schedule 7.09;

####  

#### (viii)        any transaction entered into among the Companyand its Wholly-Owned Domestic Subsidiaries or among such Wholly-Owned DomesticSubsidiaries;

####  

#### (ix)           anytransaction on the Closing Date constituting part of the Transaction;

####  

#### (x)            employeebenefit arrangements (including for the payment of reasonable fees andcompensation) with any employee, consultant, officer or director of any GroupCompany, including under any stock option or stock incentive plans, andcustomary indemnification arrangements with such persons, in each case enteredinto in the ordinary course of business or approved by the board of directorsof such Group Company;

####  

#### (xi)           transactionsinvolving the Company or any of its Subsidiaries on the one hand, and theSponsor or any of their Affiliates, on the other hand, in connection with (A)the Acquisition and transactions related thereto, (B) the ABL Credit Agreement,this Agreement and any amendment, modification, supplement, extension,refinancing, replacement, work-out, restructuring and other transactionsrelated to any of the foregoing, or (C) except as provided in clauses (i)and (ii) above, any management, financial advisory, financing,underwriting or

 

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#### placement servicesor any other investment banking, banking or similar services, that are approvedby a majority of the disinterested directors of the board of directors of theCompany;

####  

#### (xii)          loans or advances to employees in theordinary course of business in accordance with the past practices of theCompany or its Subsidiaries or otherwise approved by the board of directors ofthe Company, but in any event not to exceed $2,000,000 in the aggregateoutstanding at any one time;

####  

#### (xiii)         transactions pursuant to the Stockholders’Agreement and the Tax Sharing Agreement referred to in Section 7.07(v);and

####  

#### (xiv)        other transactions which are entered into ingood faith by the Company or any of its Subsidiaries on terms and conditions atleast as favorable to such Person as would be obtainable by it in a comparablearms’-length transaction with an independent, unrelated third party.  None of Holdings or any of its Subsidiarieswill enter into any management, consulting or similar agreement or arrangementwith, or otherwise pay any professional, consulting, management or similar feesto or for the benefit of, the Sponsor, or any successor or transferee of any ofthe foregoing, except for payments pursuant to the Management Agreementpermitted under clause (i), (ii) or (ix)above.

####  

Notwithstanding the foregoing, none of Holdings or anyof its Subsidiaries will enter into any management, consulting or similaragreement or arrangement (other than the Management Agreement) with, orotherwise pay any professional, consulting, management or similar fees to orfor the benefit of, the Sponsor Group or its successors or transferees, exceptfor payments pursuant to the Management Agreement permitted under clause (i)and (ii) above.

 

## **Section7.10 ****Fiscal Year; Organizational and Other Documents.**  None of the Group Companies will (i) changeits fiscal year or (ii) enter into any amendment, modification or waiver thatis adverse in any material respect to the Lenders to its articles orcertificate of incorporation, bylaws (or analogous organizational documents) orany agreement entered into by it with respect to its Equity Interests(including the Stockholders’ Agreement), in each case as in effect on theClosing Date.  The Company will cause theGroup Companies to promptly provide the Lenders with copies of all amendmentsto the foregoing documents and instruments as in effect as of the Closing Date.

##  

## **Section7.11 ****Restrictions with Respect to Intercorporate Transfers.** None of the Group Companies willcreate or otherwise cause or permit to exist any encumbrance or restrictionwhich prohibits or otherwise restricts (i) the ability of any Subsidiary of theCompany to (A) make Restricted Payments or pay any Indebtedness owed to theCompany or any Subsidiary of the Company, (B) pay Indebtedness or otherobligations owed to any Loan Party, (C) make loans or advances to the Companyor any Subsidiary of the Company, (D) transfer any of its properties or assetsto the Company or any Subsidiary of the Company or (E) act as a Co-Borrower ora Subsidiary Guarantor and pledge its assets pursuant to the Term LoanDocuments or any renewals, refinancings, exchanges, refundings or extensionsthereof or (ii) the ability of Holdings or any Subsidiary of Holdings tocreate, incur, assume or permit to exist any Lien upon its property or assetswhether now owned or hereafter acquired to secure the Term Loan Obligations,except in each case for prohibitions or restrictions existing under or byreason of:

##  

#### (i)            thisAgreement and the other Term Loan Documents;

####  

#### (ii)           applicableLaw;

 

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#### (iii)          restrictions contained in the (A) the SeniorSubordinated Notes, the Exchange Notes and the Indenture relating thereto andthe Existing Convertible Notes all as in effect on the date of this Agreement,and (B) the ABL Documents and, if such Indebtedness is renewed, extended orrefinanced, restrictions in the agreements governing any Permitted Refinancingthereof;

####  

#### (iv)          customarynon-assignment provisions with respect to leases or licensing agreementsentered into by the Company or any of its Subsidiaries, in each case enteredinto in the ordinary course of business and consistent with past practices;

####  

#### (v)           anyrestriction or encumbrance with respect to any asset of the Company or any ofits Subsidiaries or a Subsidiary of the Company imposed pursuant to anagreement which has been entered into for the sale or disposition of suchassets or all or substantially all of the capital stock or assets of suchSubsidiary, so long as such sale or disposition is permitted under thisAgreement; and

####  

#### (vi)          Lienspermitted under Section 7.02 and any documents or instruments governingthe terms of any Indebtedness or other obligations secured by any such Liens; providedthat such prohibitions or restrictions apply only to the assets subject to suchLiens.

####  

## **Section7.12****  Ownership of Subsidiaries; Limitations onHoldings and the Borrower.**

##  

### (a)           Holdingswill not (i) hold any assets other than the Equity Interests of the Company,(ii) have any material liabilities other than (A) liabilities under the TermLoan Documents, the ABL Credit Agreement, the Senior Subordinated Notes and theExchange Notes and other Indebtedness permitted to be incurred under clause(b) of the definition of “Permitted Indebtedness” and (B) tax liabilitiesin the ordinary course of business or (iii) engage in any business or activityother than (A) owning the common stock of the Company (including purchasingadditional shares of common stock after the Closing Date) and activitiesincidental or related thereto or to the maintenance of the corporate existenceof Holdings or compliance with applicable Law, (B) acting as a Guarantor underthe Guaranty and pledging its assets to the Collateral Agent, for the benefitof the Finance Parties, pursuant to the Collateral Documents to which it is aparty, (C) acting as a guarantor in respect of the Indebtedness arising underthe Senior Subordinated Note Indenture and the Senior Subordinated Notes, (D)acting as a guarantor in respect of the Indebtedness arising under the ABLCredit Agreement and the ABL Documents, and (E) issuing its own common stock inany Qualifying Equity Issuance.

###  

### (b)           Holdingsand the Company will not (i) permit any Person (other than the Company, anyCo-Borrower or any Wholly-Owned Subsidiary Guarantor) to own any EquityInterest of any Subsidiary of the Company, (ii) permit any Subsidiary of theCompany to issue Equity Interests to any Person, except (A) the Company, aCo-Borrower or any Wholly-Owned Subsidiary Guarantor or (B) to qualifydirectors where required by applicable Law or to satisfy other requirements ofapplicable Law with respect to the ownership of Equity Interests of ForeignSubsidiaries or (iii) permit the Company or any Subsidiary of the Company toissue any shares of Preferred Stock.

###  

### (c)           Holdingsand the Company will not permit any Person other than Holdings to hold anyEquity Interests or Equity Equivalents of the Company or any Person other thanthe Company, and Wholly-Owned Domestic Subsidiary of the Company and DRI I tohold any Equity Interests of Equity Equivalents of Duane Reade.

###  

## **Section7.13****  Sale and Leaseback Transactions. **No Group Companywill, directly or indirectly become or remain liable as lessee or as guarantoror other surety with respect to any

 

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## Sale/LeasebackTransaction other than Sale/Leaseback Transactions entered into after theClosing Date by the Company or its Subsidiaries in respect of up to 25% (innumber) in the aggregate of the total number of retail stores owned by theCompany and its Subsidiaries, taken as a whole, at the Closing Date; providedthat (A) after giving effect on a Pro-Forma Basis to such transaction, suchGroup Company shall be in compliance with all other provisions of thisAgreement, (B) the gross cash proceeds of any such transaction are at leastequal to the fair market value of such property (as determined by the Board ofDirectors, whose determination shall be conclusive if made in good faith) and(C) the Net Cash Proceeds are applied to prepay the Loans as required by Section 2.09(b)(iii).

##  

## **Section7.14****  Impairment of Security Interests. **None of the GroupCompanies will (i) take or omit to take any action which action oromission might or would materially impair the security interests in favor ofthe Collateral Agent with respect to the Collateral or (ii) grant to any Person(other than the Collateral Agent pursuant to the Collateral Documents) anyinterest whatsoever in the Collateral, except for Permitted Liens.

##  

## **Section7.15****  No Other “Designated Senior Indebtedness”. **Noneof Holdings or any Borrower shall designate, or permit the designation of, anyIndebtedness (other than under this Agreement, the other Finance Documents, orABL Documents or the Existing Convertible Notes) as “Designated SeniorIndebtedness” or any other similar term for the purpose of the definition ofthe same of the subordination provisions contained in the Senior SubordinatedNote Indenture, or any indenture governing any other SubordinationIndebtedness.

##  

## **Section7.16****  Financial Covenants.**

##  

### (a)           *Leverage Ratio*.  As of the close of business on any day on andafter the Closing Date, the Leverage Ratio at such date will not be greaterthan the ratio set forth below opposite the period during which such dateoccurs:

 

| **Period**                       | ** ** | **Ratio**   | ** ** |
|----------------------------------|------------|-------------|------------|
| Closing Date  through 09/30/2004 |       | 6.50 to 1.0 |       |
| 10/01/2004  through 12/31/2005   |       | 6.25 to 1.0 |       |
| 01/01/2006  through 12/31/2006   |       | 5.75 to 1.0 |       |
| 01/01/2007  through 12/31/2007   |       | 5.00 to 1.0 |       |
| 01/01/2008  through 12/31/2008   |       | 4.50 to 1.0 |       |
| Thereafter                       |       | 4.00 to 1.0 |       |

###  

### (b)           *Interest Coverage Ratio*.  The Interest Coverage Ratio for any period offour consecutive fiscal quarters of Holdings, in each case taken as a singleaccounting period, will not be less than (i) 2.00 to 1.00 for each fiscalquarter in the period commencing with the fiscal quarter ending on or aboutSeptember 30, 2004 and ending with the fiscal quarter ending on or aboutDecember 31, 2006 and (ii) 2.25 to 1.00 for each fiscal quarter thereafter.

###  

## **Section7.17****  Independence of Covenants. **All covenantscontained herein shall be given independent effect so that if a particularaction or condition is not permitted by any of such covenants, the fact thatsuch action or condition would be permitted by an exception to, or otherwise bewithin the limitations of, another covenant shall not avoid the occurrence of aDefault if such action is taken or condition exists.

 

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# **ARTICLEVIII**DEFAULTS

# ** **

## **Section8.01****  Events of Default. **An Event of Default shall existupon the occurrence of any of the following specified events or conditions(each an “Event of Default”):

##  

### (a)           *Payment*.  Any Loan Party shall:

###  

#### (i)            defaultin the payment when due (whether by scheduled maturity, acceleration orotherwise) of any principal of any of the Loans; or

####  

#### (ii)           default,and such default shall continue for three or more Business Days, in the paymentwhen due of any interest on the Loans, or of any fees or other amounts owinghereunder, under any of the other Term Loan Documents or in connectionherewith.

####  

### (b)           *Representations*.  Any representation, warranty or statementmade or deemed to be made by any Loan Party herein, in any of the other TermLoan Documents, or in any statement or certificate delivered or required to bedelivered pursuant hereto or thereto shall prove untrue in any material respecton the date as of which it was made or deemed to have been made.

###  

### (c)           *Covenants*.  Any Loan Party shall:

###  

#### (i)            defaultin the due performance or observance of any term, covenant or agreementcontained in Section 6.10, 6.11, 6.12, 6.14, 6.15,6.16 or Article VII;

####  

#### (ii)           defaultin the due performance or observance by it of any term, covenant or agreementcontained in Section 6.01, 6.02 or 6.03 and suchdefault shall continue unremedied for a period of ten Business Days after theearlier of a Responsible Officer of a Loan Party becoming aware of such defaultor notice thereof given by the Administrative Agent; or

####  

#### (iii)          default in the due performance or observanceby it of any term, covenant or agreement (other than those referred to in subsection (a),(b) or (c)(i) or (ii) of this Section 8.01)contained in this Agreement and such default shall continue unremedied for aperiod of 30 days after the earlier of a Responsible Officer of a Loan Partybecoming aware of such default or notice thereof given by the AdministrativeAgent.

####  

### (d)           *Other Term Loan Documents*.  (i) Any Loan Party shall default in thedue performance or observance of any term, covenant or agreement in any of theother Term Loan Documents and such default shall continue unremedied for aperiod of 30 days after the earlier of a Responsible Officer of a Loan Partybecoming aware of such default or notice thereof given by the AdministrativeAgent, (ii) except pursuant to the terms thereof, any Term Loan Documentshall fail to be in full force and effect or any Loan Party shall so assert or(iii) except pursuant to the terms thereof, any Term Loan Document shall failto give the Administrative Agent, the Collateral Agent and/or the Lenders thesecurity interests, liens, rights, powers and privileges purported to becreated thereby.

###  

### (e)           *Default Under Other Indebtedness*.

###  

#### (i)            anyGroup Company (A) fails to make payment when due (whether by scheduledmaturity, required prepayment, acceleration, demand or otherwise), regardlessof amount, in respect of any Indebtedness or Guaranty Obligation (other than inrespect of (x) Indebtedness outstanding under the Term Loan Documents and (y)Swap Agreements) under or

 

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#### in respect of theABL Credit Agreement, the Bridge Notes, the Senior Subordinated Notes or anyother Indebtedness or Guaranty Obligation having an aggregate principal amount(including undrawn committed or available amounts and including amounts owingto all creditors under any combined or syndicated credit arrangement) of morethan the Threshold Amount, (B) fails to perform or observe any other conditionor covenant, or any other event shall occur or condition shall exist, under anyagreement or instrument relating to any such Indebtedness or GuarantyObligation, if the effect of such failure, event or condition is to cause, orto permit the holder or holders or beneficiary or beneficiaries of suchIndebtedness or Guaranty Obligation (or a trustee or agent on behalf of suchholder or holders or beneficiary or beneficiaries), without or without the givingor notice or lapse of time or both, to cause such Indebtedness to be declaredto be due and payable prior to its stated maturity, or such Guaranty Obligationto become payable, or cash collateral in respect thereof to be demanded or (C)shall be required by the terms of such Indebtedness or Guaranty Obligation tooffer to prepay or repurchase such Indebtedness or the primary Indebtednessunderlying such Guaranty Obligation (or any portion thereof) prior to thestated maturity thereof as a result of a breach by such Group Company of, or adefault under, the documents or instruments governing such Indebtedness orGuaranty Obligation; or

####  

#### (ii)           thereoccurs under any Swap Agreement or Swap Obligation an Early Termination Date(as defined in such Swap Agreement) resulting from (A) any event of defaultunder such Swap Agreement as to which any Group Company is the Defaulting Party(as defined in such Swap Agreement) or (B) any Termination Event (as sodefined) as to which any Group Company is an Affected Party (as so defined),and, in either event, the Swap Termination Value owed by a Group Company as aresult thereof is greater than the Threshold Amount.

####  

### (f)            *Insolvency Events*.  (i) Any Group Company (other than aSubsidiary which is not a Significant Subsidiary) shall commence a voluntarycase or other proceeding seeking liquidation, reorganization or other reliefwith respect to itself or its debts under any Debtor Relief Law now orhereafter in effect or seeking the appointment of a trustee, receiver, liquidator,custodian or other similar official of it or any substantial part of itsproperty, or shall consent to any such relief or to the appointment of ortaking possession by any such official in an involuntary case or otherproceeding commenced against it, or shall make a general assignment for thebenefit of creditors, or shall fail generally to pay its debts as they becomedue, or shall take any corporate action to authorize any of the foregoing or(ii) an involuntary case or other proceeding shall be commenced against anyGroup Company (other than a Subsidiary which is not a Significant Subsidiary)seeking liquidation, reorganization or other relief with respect to it or itsdebts under any Debtor Relief Law now or hereafter in effect or seeking theappointment of a trustee, receiver, liquidator, custodian or other similarofficial of it or any substantial part of its property, and such involuntarycase or other proceeding shall remain undismissed and unstayed for a period of60 days, or any order for relief shall be entered against any Group Company(other than a Subsidiary which is not a Significant Subsidiary) under thefederal bankruptcy laws as now or hereafter in effect.

###  

### (g)           *Judgments*.  (i) One or more judgments, orders, decrees orarbitration awards is entered against any Group Company involving in theaggregate a liability (to the extent not covered by independent third-partyinsurance as to which the insurer does not dispute coverage), as to any singleor related series of transactions, incidents or conditions, in excess of theThreshold Amount, and the same shall not have been discharged, vacated orstayed pending appeal within 30 days after the entry thereof, or (ii) anynon-monetary judgment, order or decree is entered against any Group Company whichhas or would reasonably be expected to have a Material Adverse Effect, andthere shall be any period of 10 consecutive days during which a stay ofenforcement of such judgment or order, by reason of a pending appeal orotherwise, shall not be in effect.

 

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### (h)           *ERISA*. (i) An ERISA Event occurs which has resulted or could reasonably beexpected to result in liability of any Group Company or any ERISA Affiliatethat could reasonably be expected to have a Material Adverse Effect, or (ii)there shall exist an amount of Unfunded Liabilities, individually or in theaggregate, for all Plans (excluding for purposes of such computation any Planswith respect to which assets exceed benefit liabilities) that could reasonablybe expected to have a Material Adverse Effect.

###  

### (i)            *Guaranties*.  The Guaranty given by any Loan Parties or anyprovision thereof shall, except pursuant to the terms thereof, cease to be infull force and effect, or any Guarantor thereunder or any Person acting by oron behalf of such guarantor shall deny or disaffirm such Guarantor’sobligations under such Guaranty.

###  

### (j)            *Impairment of Collateral*.  Any security interest purported to be createdby any Collateral Document shall cease to be, or shall be asserted by any GroupCompany not to be, a valid, perfected, first or second priority, as applicable(except as otherwise expressly provided in such Collateral Document) securityinterest in the securities, assets or properties covered thereby, other than inrespect of assets and properties which, individually and in the aggregate, arenot material to the Group Companies taken as a whole or in respect of which thefailure of the security interests in respect thereof to be valid, perfectedfirst or second priority, as applicable, security interests will not in thereasonable judgment of the Administrative Agent or the Required Lenders have aMaterial Adverse Effect on the rights and benefits of the Lenders under theTerm Loan Documents taken as a whole.

###  

### (k)           *Subordinated Indebtedness*.  (i) Any Governmental Authority withapplicable jurisdiction determines that the Lenders are not holders ofDesignated Senior Indebtedness (as defined in the Senior Subordinated NoteIndenture) or (ii) the subordination provisions creating the SubordinatedIndebtedness shall, in whole or in part, terminate, cease to be effective orcease to be legally valid, binding and enforceable as to any holder of theSubordinated Indebtedness.

###  

## **Section8.02**** Acceleration; Remedies. **Upon the occurrence of an Event ofDefault, and at any time thereafter unless and until such Event of Default hasbeen waived in writing by the Required Lenders (or the Lenders as may berequired pursuant to Section 10.01), the Administrative Agent (orthe Collateral Agent, as applicable) shall, upon the request and direction ofsuch Lenders, by written notice to the Company, take any of the followingactions without prejudice to the rights of the Agents or any Lender to enforceits claims against the Loan Parties except as otherwise specifically providedfor herein.

##  

### (a)           *Acceleration of Loans*.  Declare the unpaid principal of and anyaccrued interest in respect of all Loans and any and all other indebtedness orobligations of any and every kind owing by a Loan Party to any of the Lendershereunder to be due whereupon the same shall be immediately due and payablewithout presentment, demand, protest or other notice of any kind, all of whichare hereby waived by the Loan Parties.

###  

### (b)           *Enforcement of Rights*.  Subject to the Intercreditor Agreement,enforce any and all rights and interests created and existing under the TermLoan Documents, including, without limitation, all rights and remedies existingunder the Collateral Documents, all rights and remedies against a Guarantor andall rights of set-off.

###  

Notwithstanding the foregoing, if an Event of Defaultspecified in Section 8.01(f) shall occur, then all Loans, allaccrued interest in respect thereof and all accrued and unpaid fees and otherindebtedness or obligations owing to the Lenders hereunder and under the otherTerm Loan Documents shall immediately become due and payable without the givingof any notice or other action by the

 

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Administrative Agent orthe Lenders, which notice or other action is expressly waived by the LoanParties.

 

Notwithstanding the fact that enforcement powersreside with the Administrative Agent, each Lender has, to the extent permittedby law, a separate right of payment and shall be considered a separate“creditor” holding a separate “claim” within the meaning of Section 101(5)of the Bankruptcy Code or any other insolvency statute.

 

In case any one or more of the covenants and/oragreements set forth in this Agreement or any other Term Loan Document shallhave been breached by any Loan Party and such breach constitutes an Event ofDefault, then the Administrative Agent may, subject to the IntercreditorAgreement, proceed to protect and enforce the Lenders’ rights either by suit inequity and/or by action at law, including an action for damages as a result ofany such breach and/or an action for specific performance of any such covenantor agreement contained in this Agreement or such other Term Loan Document.  Without limitation of the foregoing, theBorrowers agree that failure to comply with any of the covenants containedherein will cause irreparable harm and that specific performance shall beavailable in the event of any breach thereof. The Administrative Agent acting pursuant to this paragraph shall beindemnified by the Borrowers on a joint and several basis against allliability, loss or damage, together with all reasonable costs and expensesrelated thereto (including reasonable legal and accounting fees and expenses)in accordance with Section 10.05.

 

## **Section8.03****  Allocation of Payments After Event of Default**.

##  

### (a)           *Priority of Distributions*.  Each Borrower hereby irrevocably waives theright to direct the application of any and all payments in respect of itsFinance Obligations and any proceeds of Collateral after the occurrence andduring the continuance of an Event of Default and agrees that, notwithstandingthe provisions of Sections 2.08(b) and 2.13, after theoccurrence and during the continuance of an Event of Default, all amountscollected or received by the Administrative Agent, the Collateral Agent or anyFinance Party on account of amounts outstanding under any of the FinanceDocuments or in respect of the Collateral shall, subject to the IntercreditorAgreement, be paid over or delivered as follows:

###  

FIRST, to pay interest on and then principal of anyportion of the Loans that the Administrative Agent may have advanced on behalfof any Lender for which the Administrative Agent has not then been reimbursedby such Lender or the Borrowers;

 

SECOND, to the payment of all reasonable out-of-pocketcosts and expenses (including reasonable attorneys’ fees) of the AdministrativeAgent or the Collateral Agent in its capacity as such in connection withenforcing the rights of the Finance Parties under the Finance Documents,including all expenses of sale or other realization of or in respect of theCollateral, including reasonable compensation to the agents and counsel for theCollateral Agent, and all expenses, liabilities and advances incurred or madeby the Collateral Agent in connection therewith, and any other obligationsowing to the Collateral Agent in respect of sums advanced by the CollateralAgent to preserve the Collateral or to preserve its security interest in theCollateral;

 

THIRD, to the payment of all reasonable out-of-pocketcosts and expenses (including reasonable attorneys’ fees) of (i) each of theLenders in connection with enforcing its rights under the Finance Documents orotherwise with respect to the Term Loan Obligations owing to such Lender and(ii) each Swap Creditor in connection with enforcing any of its rights

 

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under the Swap Agreements or otherwise with respect tothe Swap Obligations owing to such Swap Creditor;

 

FOURTH, to the payment of all of the Term LoanObligations consisting of accrued fees and interest;

 

FIFTH, except as set forth in clauses FIRSTthrough FOURTH above, to the payment of the outstanding Term LoanObligations and Swap Obligations owing to any Finance Party, Pro-Rata, as setforth below, with (i) an amount equal to the Term Loan Obligations being paidto the Collateral Agent (in the case of Term Loan Obligations owing to theCollateral Agent) or to the Administrative Agent (in the case of all other TermLoan Obligations) for the account of the Lenders or any Agent, with theCollateral Agent, each Lender and the Agents receiving an amount equal to itsoutstanding Term Loan Obligations, or, if the proceeds are insufficient to payin full all Term Loan Obligations, its Pro-Rata Share of the amount remainingto be distributed, and (ii) an amount equal to the Swap Obligations being paidto the trustee, paying agent or other similar representative (each a “Representative”)for the Swap Creditors, with each Swap Creditor receiving an amount equal tothe outstanding Swap Obligations owed to it by the Loan Parties or, if theproceeds are insufficient to pay in full all such Swap Obligations, itsPro-Rata Share of the amount remaining to be distributed; and

 

SIXTH, to the payment of the surplus, if any, towhomever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts receivedshall be applied in the numerical order provided until exhausted prior toapplication to the next succeeding category; and (ii) each of the FinanceParties shall receive an amount equal to its Pro-Rata Share of amountsavailable to be applied pursuant to clauses ”THIRD” “FOURTH,”and “FIFTH” above.

 

### (b)           *Pro-Rata Treatment*.  For purposes of this Section 8.03,“Pro-Rata Share” means, when calculating a Finance Party’s portion ofany distribution or amount, that amount (expressed as a percentage) equal to afraction the numerator of which is the then unpaid amount of such FinanceParty’s Term Loan Obligations or Swap Obligations, as the case may be, and thedenominator of which is the then outstanding amount of all Term LoanObligations or Swap Obligations, as the case may be.  When payments to the Finance Parties arebased upon their respective Pro-Rata Shares, the amounts received by suchFinance Parties hereunder shall be applied (for purposes of makingdeterminations under this Section 8.03 only) (i) first, to theirTerm Loan Obligations and (ii) second, to their Swap Obligations.  If any payment to any Finance Party of itsPro-Rata Share of any distribution would result in overpayment to such FinanceParty, such excess amount shall instead be distributed in respect of the unpaidTerm Loan Obligations or Swap Obligations, as the case may be, of the otherFinance Parties, with each Finance Party whose Term Loan Obligations or SwapObligations, as the case may be, have not been paid in full to receive anamount equal to such excess amount multiplied by a fraction the numerator ofwhich is the unpaid Term Loan Obligations or Swap Obligations, as the case maybe, of such Finance Party and the denominator of which is the unpaid Term LoanObligations or Swap Obligations, as the case may be, of all Finance Partiesentitled to such distribution.

###  

### (c)           *Reliance by Collateral Agent*.  For purposes of applying payments received inaccordance with this Section 8.03, the Collateral Agent shall beentitled to rely upon (i) the Administrative Agent and (ii) the Representative,if any, for the Swap Creditors for a determination (which the AdministrativeAgent, each Representative for any Swap Creditor and the Finance Parties agree(or shall agree) to provide upon request of the Collateral Agent) of theoutstanding Term Loan Obligations and Swap Obligations owed to the Agents,  the Lenders or the Swap Creditors, as thecase

 

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### may be.  Unless it has actual knowledge (including byway of written notice from a Swap Creditor or any Representatives thereof) tothe contrary, the Collateral Agent, in acting hereunder, shall be entitled toassume that no Swap Agreements are in existence.

###  

# **ARTICLEIX**AGENCY PROVISIONS

# ** **

## **Section9.01**** Appointment and Authorization of the Administrative Agent**.

##  

### (a)           EachLender hereby irrevocably appoints, designates and authorizes theAdministrative Agent to take such action on its behalf under the provisions ofthis Agreement and each other Term Loan Document and to exercise such powersand perform such duties as are expressly delegated to it by the terms of thisAgreement or any other Term Loan Document, together with such powers as arereasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere hereinor in any other Term Loan Document, the Administrative Agent shall not have anyduties or responsibilities, except those expressly set forth herein, nor shallthe Administrative Agent have or be deemed to have any fiduciary relationshipwith any Lender or participant, and no implied covenants, functions, responsibilities,duties, obligations or liabilities shall be read into this Agreement or anyother Term Loan Document or otherwise exist against the AdministrativeAgent.  Without limiting the generalityof the foregoing sentence, the use of the term “agent” herein and in the otherTerm Loan Documents with reference to the Administrative Agent is not intendedto connote any fiduciary or other implied (or express) obligations arisingunder agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and isintended to create or reflect only an administrative relationship betweenindependent contracting parties.

###  

### (b)           Withoutlimiting the generality of Section 9.01(a), each Lender herebyirrevocably appoints, designates and authorizes the Administrative Agent tosign the Intercreditor Agreement on behalf of such Lender and acknowledges andagrees that (i) Bank of America or an Affiliate thereof may (but is notrequired to) act as “Revolving Credit Agent” and “Term Loan Agent” under (andas such terms are defined in) the Intercreditor Agreement, (ii) such Lenderwill be bound by the terms of the Intercreditor Agreement as a “Term LoanLender” and as a “Lender” thereunder, (iii) certain of the Collateral grantedunder the Collateral Documents will be subject to the prior Lien in favor ofthe “Revolving Credit Agent” as specified in the Intercreditor Agreement, and(iv) the Administrative Agent may exercise rights to purchase “Revolving LoanDebt” as contemplated by the Intercreditor Agreement (including, withoutlimitation, designating “Designated Term Purchaser(s)” to purchase the“Revolving Loan Debt”) in accordance with a request or consent of the RequiredLenders, and such request and any action taken or failure to act pursuantthereto shall be binding upon all the Lenders; provided that no suchrequest or consent shall require the Administrative Agent, any Lender or anyother Person to purchase any portion of the “Revolving Loan Debt” ascontemplated by the Intercreditor Agreement without the written consent of suchAdministrative Agent, Lender or other Person.

###  

## **Section9.02****  Delegation of Duties. **The Administrative Agent mayexecute any of its duties hereunder or under the other Term Loan Documents byor through agents, employees or attorneys-in-fact and shall be entitled toadvice of counsel and other consultants or experts concerning all matterspertaining to such duties.  TheAdministrative Agent shall not be responsible for the negligence or misconductof any agents or attorneys-in-fact selected by it in the absence of grossnegligence or willful misconduct.

##  

## **Section9.03****  Exculpatory Provisions. **No Agent-Related Person shall be(i) liable for any action lawfully taken or omitted to be taken by any of themunder or in connection herewith or in connection with any of the other TermLoan Documents or the transactions contemplated hereby or

 

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## thereby (exceptfor its own gross negligence or willful misconduct in connection with itsduties expressly set forth herein) or (ii) responsible in any manner to any ofthe Lenders or participants for any recitals, statements, representations orwarranties made by any of the Loan Parties contained herein or in any of theother Term Loan Documents or in any certificate, report, document, financialstatement or other written or oral statement referred to or provided for in, orreceived by an Agent under or in connection herewith or in connection with theother Term Loan Documents, or enforceability or sufficiency therefor of any ofthe other Term Loan Documents, or for any failure of any Loan Party to performits obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender orparticipant or be required to ascertain or inquire as to the performance orobservance of any of the terms, conditions, provisions, covenants or agreementscontained herein or therein or as to the use of the proceeds of the Loans or ofthe existence or possible existence of any Default or Event of Default or toinspect the properties, books or records of the Loan Parties or any Affiliatethereof.

##  

## **Section9.04 ****Reliance on Communications**.

##  

### (a)           TheAdministrative Agent shall be entitled to rely, and shall be fully protected inrelying, upon any writing, communication, signature, resolution,representation, notice, consent, certificate, affidavit, letter, telegram,facsimile, telex or telephone message, electronic mail message, statement orother document or conversation believed by it to be genuine and correct and tohave been signed, sent or made by the proper Person or Persons, and upon adviceand statements of legal counsel (including counsel to any Loan Party),independent accountants and other experts selected by the AdministrativeAgent.  The Administrative Agent shall befully justified in failing or refusing to take any action under any Term LoanDocument unless it shall first receive such advice or concurrence of theRequired Lenders as it deems appropriate and, if it so requests, it shall firstbe indemnified to its satisfaction by the Lenders against any and all liabilityand expense which may be incurred by it by reason of taking or continuing totake any such action.  The AdministrativeAgent shall in all cases be fully protected in acting, or in refraining fromacting, under this Agreement or any other Term Loan Document in accordance witha request or consent of the Required Lenders (or such lesser or greater numberof Lenders as may be expressly required hereby in any instance) and suchrequest and any action taken or failure to act pursuant thereto shall bebinding upon all the Lenders.

###  

### (b)           Forpurposes of determining compliance with the conditions specified in Section 4.01,each Lender that has signed this Agreement shall be deemed to have consentedto, approved or accepted or to be satisfied with, each document or other matterrequired thereunder to be consented to or approved by or acceptable orsatisfactory to a Lender unless the Administrative Agent shall have receivednotice from such Lender prior to the proposed Closing Date specifying itsobjection thereto.

###  

## **Section9.05****  Notice of Default. **The Administrative Agent shall notbe deemed to have knowledge or notice of the occurrence of any Default, exceptwith respect to defaults in the payment of principal, interest and feesrequired to be paid to the Administrative Agent for the account of the Lenders,unless the Administrative Agent shall have received written notice from aLender or the Company referring to this Agreement, describing such Default andstating that such notice is a “notice of default.”  The Administrative Agent will notify theLenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Defaultas may be directed by the Required Lenders in accordance with Article VIII;provided, however, that unless and until the Administrative Agenthas received any such direction, the Administrative Agent may (but shall not beobligated to) take such action, or refrain from taking such action, withrespect to such Default as it shall deem advisable or in the best interest ofthe Lenders.

 

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## **Section9.06****  Credit Decision; Disclosure of Information by Administrative Agent; NoReliance on Arranger’s or Agents’ Customer Identification Program**.

##  

### (a)           *Independent Credit Decision*.  Each Lender acknowledges that noAgent-Related Person has made any representation or warranty to it, and that noact by the Administrative Agent hereafter taken, including any consent to andacceptance of any assignment or review of the affairs of any Loan Party or anyAffiliate thereof, shall be deemed to constitute any representation or warrantyby any Agent-Related Person to any Lender as to any matter, including whetherAgent-Related Persons have disclosed material information in theirpossession.  Each Lender represents tothe Administrative Agent that it has, independently and without reliance uponany Agent-Related Person and based on such documents and information as it hasdeemed appropriate, made its own appraisal of and investigation into thebusiness, prospects, operations, property, financial and other condition andcreditworthiness of the Loan Parties and their respective Subsidiaries, and allapplicable bank or other regulatory Laws relating to the transactionscontemplated hereby, and made its own decision to enter into this Agreement andto extend credit to the Company and the other Loan Parties hereunder.  Each Lender also represents that it will,independently and without reliance upon any Agent-Related Person and based onsuch documents and information as it shall deem appropriate at the time,continue to make its own credit analysis, appraisals and decisions in taking ornot taking action under this Agreement and the other Term Loan Documents, andto make such investigations as it deems necessary to inform itself as to thebusiness, prospects, operations, property, financial and other condition andcreditworthiness of the Company and the other Loan Parties.  Except for notices, reports and otherdocuments expressly required to be furnished to the Lenders by theAdministrative Agent herein, the Administrative Agent shall not have any dutyor responsibility to provide any Lender with any credit or other informationconcerning the business, prospects, operations, property, financial and othercondition or creditworthiness of any of the Loan Parties or any of theirrespective Affiliates which may come into the possession of any Agent-RelatedPerson.

###  

### (b)           *US Patriot Act Customer Identification Programs*.  Each Lender acknowledges and agrees thatneither such Lender nor any of its Affiliates, participants or assignees mayrely on any Joint Lead Arranger or any Agent to carry out such Lender’s,Affiliate’s, participant’s or assignee’s customer identification program orother obligations required or imposed under or pursuant to the U.S. Patriot Actor the regulations thereunder, including the regulations contained in 31 C.F.R.103.121 (as hereafter amended or replaced, the “CIP Regulations”), orany other Anti-Terrorism Law, including any programs involving any of thefollowing items relating to or in connection with any of the Loan Parties,their Affiliates or agents, the Term Loan Documents or the transactionshereunder or contemplated hereby:  (i)any identification procedures; (ii) and recordkeeping; (iii) comparisons withgovernment lists, (iv) customer notices; or (v) other procedures required underthe CIP regulations or such other Laws.

###  

## **Section9.07****  Indemnification. **Whether or not the transactionscontemplated hereby are consummated, the Lenders agree to indemnify eachAgent-Related Person (to the extent not reimbursed by or on behalf of any LoanParty and without limiting the obligation of the Borrowers and the other LoanParties to do so), ratably according to their respective Commitments (or if theCommitments have expired or been terminated, in accordance with the respectiveprincipal amounts of outstanding Loans of the Lenders), from and against anyand all Indemnified Liabilities which may at any time (including withoutlimitation at any time following payment in full of the Term Loan Obligations)be imposed on, incurred by or asserted against any Agent-Related Person; providedthat no Lender shall be liable for the payment to any Agent-Related Person ofany portion of such Indemnified Liabilities resulting from such Person’s grossnegligence or willful misconduct; provided, however, that noaction taken in accordance with the directions of the Required Lenders shall bedeemed to constitute gross negligence or willful misconduct for purposes ofthis Section 9.07.  Withoutlimitation of the foregoing, each Lender shall reimburse the AdministrativeAgent upon demand for its ratable share of any costs or out-of-pocket expenses(including

 

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## reasonableAttorney Costs) incurred by the Administrative Agent in connection with thepreparation, execution, delivery, administration, modification, amendment orenforcement (whether through negotiations, legal proceedings or otherwise) of,or legal advice in respect of rights or responsibilities under, this Agreement,any other Term Loan Document, or any document contemplated by or referred toherein, to the extent that the Administrative Agent is not reimbursed for suchexpenses by or on behalf of the Borrowers. The agreements in this Section 9.07 shall survive thepayment of the Term Loan Obligations and all other obligations and amounts payablehereunder and under the other Term Loan Documents and the resignation of theAdministrative Agent.

##  

## **Section9.08****  Administrative Agent in Its Individual Capacity. **Bankof America and its Affiliates may make loans to, issue letters of credit forthe account of, accept deposits from, acquire equity interests in and generallyengage in any kind of banking, trust, financial advisory, underwriting or otherbusiness with each of the Loan Parties and their respective Affiliates asthough Bank of America were not the Administrative Agent hereunder and withoutnotice to or consent of the Lenders.  TheLenders acknowledge that, pursuant to such activities, Bank of America or itsAffiliates may receive information regarding any Loan Party or its Affiliates(including information that may be subject to confidentiality obligations infavor of such Loan Party or such Affiliate) and acknowledge that theAdministrative Agent shall be under no obligation to provide such informationto them.  With respect to its Loans, Bankof America shall have the same rights and powers under this Agreement as anyother Lender and may exercise such rights and powers as though it were not theAdministrative Agent and the terms “Lender” and “Lenders” include Bank ofAmerica in its individual capacity.

##  

## **Section9.09****  Successor Agents. **The Administrative Agent may atany time give notice of its resignation to the Lenders and the Borrowers.  Upon receipt of any such notice ofresignation, the Required Lenders shall have the right, with the consent of theBorrowers at all times other than during the existence of an Event of Default(which consent shall not be unreasonably withheld or delayed), to appoint asuccessor, which shall be a bank with an office in the United States, or anAffiliate of any such bank with an office in the United States.  If no such successor shall have been soappointed by the Required Lenders and shall have accepted such appointmentwithin 30 days after the retiring Administrative Agent gives notice of itsresignation, then the retiring Administrative Agent may on behalf of theLenders, with the consent of the Borrowers at all times other than during theexistence of an Event of Default (which consent shall not be unreasonablywithheld or delayed), appoint a successor Administrative Agent meeting thequalifications set forth above.  Upon theacceptance of its appointment as successor Administrative Agent hereunder, thePerson acting as such successor Administrative Agent shall succeed to all therights, powers and duties of the retiring Administrative Agent and the term “AdministrativeAgent” shall mean such successor Administrative Agent, and the retiringAdministrative Agent’s appointment, powers and duties as Administrative Agentshall be terminated without any other or further act or deed on the part of anyother Lender.  After any retiringAdministrative Agent’s resignation hereunder as Administrative Agent, theprovisions of this Article IX and Sections 10.04 and 10.05shall inure to its benefit as to any actions taken or omitted to be taken by itwhile it was Administrative Agent under this Agreement.

##  

## **Section9.10 ****Administrative Agent May File Proofs of Claim.**  In case of the pendency of any receivership,insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,composition or other judicial proceeding relative to any Loan Party, theAdministrative Agent (irrespective of whether the principal of any Loan shallthen be due and payable as herein expressed or by declaration or otherwise andirrespective of whether the Administrative Agent shall have made any demand onany Borrower) shall be entitled and empowered, by intervention in suchproceeding or otherwise:

 

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#### (i)            tofile and prove a claim for the whole amount of the principal and interest owingand unpaid in respect of the Loans and all other Term Loan Obligations that areowing and unpaid and to file such other documents as may be necessary oradvisable in order to have the claims of the Lenders and the AdministrativeAgent (including any claim for the reasonable compensation, expenses,disbursements and advances of the Lenders and the Administrative Agent andtheir respective agents and counsel and all other amounts due the Lenders andthe Administrative Agent under Sections 2.09 and 10.04)allowed in such judicial proceeding; and

####  

#### (ii)           tocollect and receive any monies or other property payable or deliverable on anysuch claims and to distribute the same;

####  

and any custodian, receiver, assignee, trustee,liquidator, sequestrator or other similar official in any such judicialproceeding is hereby authorized by each Lender to make such payments to theAdministrative Agent and, in the event that the Administrative Agent shallconsent to the making of such payments directly to the Lenders, to pay to theAdministrative Agent any amount due for the reasonable compensation, expenses,disbursements and advances of the Administrative Agent and its agents andcounsel, and any other amounts due the Administrative Agent under Sections 2.09and 10.04.

 

Nothing contained herein shall be deemed to authorizethe Administrative Agent to authorize or consent to or accept or adopt onbehalf of any Lender any plan of reorganization, arrangement, adjustment orcomposition affecting the Term Loan Obligations or the rights of any Lender orto authorize the Administrative Agent to vote in respect of the claim of anyLender in any such proceeding.

 

## **Section9.11****  Collateral and Guaranty Matters.**  The Lendersirrevocably authorize the Administrative Agent, at its option and in itsdiscretion:

##  

#### (i)            torelease any Lien on any property granted to or held by the Administrative Agentunder any Term Loan Document (A) upon termination of the Commitments andpayment in full of all Term Loan Obligations (other than contingentindemnification obligations), (B) that is sold or to be sold as part of or inconnection with any sale permitted hereunder or under any other Term LoanDocument, (C) required to be released pursuant to the Intercreditor Agreementor (D) subject to Section 10.01, if approved, authorized orratified in writing by the Required Lenders;

####  

#### (ii)           tosubordinate any Lien on any property granted to or held by the AdministrativeAgent under any Term Loan Document (A) to the holder of any Lien on suchproperty securing Indebtedness that is permitted by clauses (a)(i), (a)(v)and (a)(vi) of the definition of “Permitted Indebtedness” or (B)pursuant to the Intercreditor Agreement; and

####  

#### (iii)          to release any Guarantor from its obligationsunder the Guaranty and the applicable Collateral Documents if such Personceases to be a Subsidiary as a result of a transaction permitted hereunder.

####  

Upon request by the Administrative Agent at any time,the Required Lenders will confirm in writing the Administrative Agent’sauthority to release or subordinate its interest in particular types or itemsof property, or to release any Guarantor from its obligations under theGuaranty pursuant to this Section 9.11.

 

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## **Section9.12 ****Other Agents; Arrangers and Managers. **None of the Lenders or other Personsidentified on the facing page or signature pages of this Agreement as a“syndication agent,” “documentation agent,” “co-agent,” “book manager,” “leadmanager,” “arranger,” “lead arranger” or “co-arranger” shall have any right,power, obligation, liability, responsibility or duty under this Agreement otherthan, in the case of such Lenders, those applicable to all Lenders assuch.  Without limiting the foregoing,none of the Lenders or other Persons so identified shall have or be deemed tohave any fiduciary relationship with any Lender.  Each Lender acknowledges that it has notrelied, and will not rely, on any of the Lenders or other Persons so identifiedin deciding to enter into this Agreement or in taking or not taking actionhereunder.

##  

## **Section9.13 ****Agents’ Fees; Joint Lead Arranger Fee. **The Borrowers, jointly and severallyshall pay to the Administrative Agent for its own account, to the CollateralAgent for its own account and to the Joint Lead Arrangers, in their capacity asJoint Lead Arrangers, for their own account, fees in the amounts and at thetimes previously agreed upon between Holdings and the Administrative Agent, theCollateral Agent and the Joint Lead Arrangers, respectively, in each case withrespect to this Agreement, the other Term Loan Documents and the transactionscontemplated hereby and thereby.

##  

# **ARTICLE X**MISCELLANEOUS

# ** **

## **Section 10.01 ****Amendments, Etc. **

##  

### (a)           *Amendments Generally*.  No amendment or waiver of any provision ofthis Agreement or any other Term Loan Document, and no consent to any departureby any Borrower or any other Loan Party therefrom, shall be effective unless inwriting signed by the Required Lenders and each Borrower or the applicable LoanParty, as the case may be, and acknowledged by the Administrative Agent, andeach such waiver or consent shall be effective only in the specific instanceand for the specific purpose for which given; provided that (x) theAdministrative Agent and the Company may, with the consent of the other (andwithout the consent of any Lender), amend, modify or supplement this Agreementand any other Term Loan Document to cure any ambiguity, typographical error,defect or inconsistency if such amendment, modification or supplement does notadversely affect the rights of any Lender and (y) no such amendment, waiver orconsent shall:

###  

#### (i)            waiveany condition set forth in Section 4.01(a) without the writtenconsent of each Lender;

####  

#### (ii)           extendor increase the Commitment of any Lender (or reinstate any Commitmenttheretofore terminated pursuant here) without the written consent of suchLender;

####  

#### (iii)          postpone any date fixed by this Agreement orany other Term Loan Document for any payment (excluding mandatory prepayments)of principal, interest, fees or other amounts due to the Lenders (or any ofthem) hereunder or under any other Term Loan Document without the writtenconsent of each Lender directly affected thereby;

####  

#### (iv)          reduceor forgive the principal of, or the rate of interest specified herein on or anyprepayment premium under Section 2.08(a) or any Change of ControlPrepayment Premium applicable to, any Loan, or (subject to subsection (b)below) any fees or other amounts payable hereunder or under any other Term LoanDocument without the written consent of each Lender directly affected thereby; provided,however, that only the consent of the Required Lenders shall benecessary to amend any default rate of interest provided for herein or to waiveany obligation of any Borrower to pay interest at a default rate;

 

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#### (v)           changeSection 2.11, Section 2.12 or Section 8.03 in amanner that would alter the pro-rata sharing of payments required therebywithout the written consent of each Lender;

####  

#### (vi)          changeany provision of this Section or the definition of “Required Lenders”or any other provision hereof specifying the number or percentage of Lendersrequired to amend, waive or otherwise modify any rights hereunder or make anydetermination or grant any consent hereunder, without the written consent ofeach Lender;

####  

#### (vii)         release any Borrower or any Material LoanParty from its or their obligations under the Term Loan Documents without thewritten consent of each Lender (provided that the Administrative Agent may,without the consent of any other Lender, release any Guarantor that is sold ortransferred in compliance with Section 7.05);

####  

#### (viii)        release all or substantially all of theCollateral securing the Term Loan Obligations hereunder without the writtenconsent of each Lender (provided that the Collateral Agent may, withoutconsent from any other Lender, release any Collateral that is sold ortransferred by a Loan Party in compliance with Section 7.05 or asprovided in the Intercreditor Agreement);

####  

#### (ix)           effectany waiver, amendment or modification of Section 7.08(a) withrespect to the subordination provisions of any Indebtedness, without the priorwritten consent of each Lender; or

####  

#### (x)            requireany Lender to purchase any portion of the loans outstanding under the ABLCredit Agreement as contemplated by the Intercreditor Agreement without thewritten consent of such Lender.

####  

### (b)           *Fee Letter Amendment; Defaulting Lenders*.  Notwithstanding anything to the contraryherein, (i) the Fee Letter may be amended, or rights and privileges thereunderwaived, in a writing executed only by the parties thereto and (ii) noDefaulting Lender shall have any right to approve or disapprove any amendment,waiver or consent hereunder, except that the Commitment of such Lender may notbe increased or extended without the consent of such Lender.

###  

### (c)           *Payment Blockage Notices — Senior Subordinated Notes. *Notwithstanding the above, the right todeliver a Payment Blockage Notice (as defined in the Senior Subordinated NoteIndenture), shall reside solely with the Administrative Agent, and theAdministrative Agent shall deliver such Payment Blockage Notice, only upon thedirection of the Required Lenders.

###  

### (d)           *Proceedings Under Debtor Relief Laws*.  Notwithstanding the fact that the consent ofall the Lenders is required in certain circumstances as set forth above, (i)each Lender is entitled to vote as such Lender sees fit on any bankruptcyreorganization plan that affects the Loans, and each Lender acknowledges thatthe provisions of Section 1126(c) of the Bankruptcy Code supersede theunanimous consent provisions set forth herein and (ii) the Required Lenders mayconsent to allow a Loan Party to use cash collateral in the context of a bankruptcyor insolvency proceeding.

###  

## **Section10.02 ****Notices and Other Communications; Facsimile Copies**.

##  

### (a)           *General*.  Unless otherwise expressly provided herein,all notices and other communications provided for hereunder shall be in writing(including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to theapplicable address, facsimile number or

 

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### (subject to subsection (c)below) electronic mail address, and all notices and other communicationsexpressly permitted hereunder to be given by telephone shall be made to theapplicable telephone number, as follows:

###  

#### (i)            ifto the Company or the Administrative Agent, to the address, facsimile number,electronic mail address or telephone number specified for such Person on Schedule 10.02or to such other address, facsimile number, electronic mail address ortelephone number as shall be designated by such party in a notice to the otherparties;

####  

#### (ii)           ifto any other Co-Borrower, to the address, facsimile number, electronic mailaddress or telephone number specified for such Person in the applicableCo-Borrower agreement or to such other address, facsimile number, electronicmail address or telephone number as shall be designated by such party in anotice to other parties; and

####  

#### (iii)          if to any other Lender, to the address,facsimile number, electronic mail address or telephone number specified in itsAdministrative Questionnaire or to such other address, facsimile number, electronicmail address or telephone number as shall be designated by such party in anotice to the Company or the Administrative Agent.

####  

All such notices and other communications shall bedeemed to be given or made upon the earlier to occur of (i) actual receipt bythe relevant party hereto and (ii) (A) if delivered by hand or by courier, whensigned for by or on behalf of the relevant party hereto; (B) if delivered bymail, four Business Days after deposit in the mails, postage prepaid; (C) ifdelivered by facsimile, when sent and receipt has been confirmed by telephone;and (D) if delivered by electronic mail (which form of delivery is subject tothe provisions of subsection (c) below), when delivered; provided,however, that notices and other communications to the AdministrativeAgent pursuant to Article II shall not be effective until actuallyreceived by such Person.  In no eventshall a voicemail message be effective as a notice, communication orconfirmation hereunder.

 

### (b)           *Effectiveness of Facsimile Documents and Signatures*.  Term Loan Documents may be transmitted and/orsigned by facsimile.  The effectivenessof any such documents and signatures shall, subject to requirements of Law,have the same force and effect as manually-signed originals and shall be bindingon all Loan Parties, the Administrative Agent and the Lenders.  The Administrative Agent may also requirethat any such documents and signatures be confirmed by a manually-signedoriginal thereof; provided, however, that the failure to requestor deliver the same shall not limit the effectiveness of any facsimile documentor signature.

###  

### (c)           *Limited Use of Electronic Mail*.  Electronic mail and Internet and intranetwebsites may be used only to distribute routine communications, such asfinancial statements and other information as provided in Section 6.01,and to distribute Term Loan Documents for execution by the parties thereto, andmay not be used for any other purpose.

###  

### (d)           *Reliance by Administrative Agent and Lenders*.  The Administrative Agent and the Lendersshall be entitled to rely and act upon any notices purportedly given by or onbehalf of the Borrowers or any other Loan Party even if (i) such noticeswere not made in a manner specified herein, were incomplete or were notpreceded or followed by any other form of notice specified herein or(ii) the terms thereof, as understood by the recipient, varied from anyconfirmation thereof.  The Borrowersshall, jointly and severally,  indemnifyeach Agent-Related Person and each Lender from all losses, costs, expenses andliabilities resulting from the reliance by such Person on each noticepurportedly given by or on behalf of a Borrower.  All telephonic notices to and othercommunications with the Administrative

 

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### Agent may berecorded by the Administrative Agent, and each of the parties hereto herebyconsents to such recording.

###  

## **Section10.03****  No Waiver; Cumulative Remedies. **No failure by anyLender or the Administrative Agent to exercise, and no delay by any such Personin exercising, any right, remedy, power or privilege hereunder shall operate asa waiver thereof; nor shall any single or partial exercise of any right,remedy, power or privilege hereunder preclude any other or further exercise thereofor the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privilegesherein provided are cumulative and not exclusive of any rights, remedies,powers and privileges provided by Law.

##  

## **Section10.04 ****Attorney Costs, Expenses and Taxes. **The Borrowers, jointly and severally,agree (i) to pay or reimburse the Joint Lead Arrangers and the AdministrativeAgent for all reasonable costs and expenses incurred in connection with thedevelopment, preparation, negotiation and execution of this Agreement and theother Term Loan Documents and any amendment, waiver, consent or othermodification of the provisions hereof and thereof (whether or not thetransactions contemplated hereby or thereby are consummated), and the consummationand administration of the transactions contemplated hereby and thereby,including all Attorney Costs, and (ii) to pay or reimburse the AdministrativeAgent and each Lender for all costs and expenses incurred in connection withthe enforcement, attempted enforcement, or preservation of any rights orremedies under this Agreement or the other Term Loan Documents (including allsuch costs and expenses incurred during any “workout” or restructuring inrespect of the Term Loan Obligations and during any legal proceeding, includingany proceeding under any Debtor Relief Law), including all Attorney Costs.  The foregoing costs and expenses shallinclude all search, filing, recording, title insurance and appraisal chargesand fees and taxes related thereto, and other reasonable out-of-pocket expensesincurred by the Administrative Agent and the cost of independent publicaccountants and other outside experts retained by the Administrative Agent orany Lender.  All amounts due under this Section 10.04shall be payable within ten Business Days after demand therefor.  The agreements in this Section 10.04shall survive the termination of the Commitments and repayment of all Term LoanObligations.

##  

## **Section10.05 ****Indemnification. **Whether or not the transactions contemplatedhereby are consummated, the Borrowers, jointly and severally, shall indemnifyand hold harmless each Agent-Related Person, each Lender and their respectiveAffiliates, directors, officers, employees, counsel, agents, attorneys-in-fact,trustees and advisors and their respective successors and assigns (collectivelythe “Indemnitees”) from and against any and all liabilities,obligations, losses, damages, penalties, claims, demands, actions, judgments,suits, costs, expenses and disbursements (including reasonable Attorney Costs)of any kind or nature whatsoever which may at any time be imposed on, incurredby or asserted against any such Indemnitee in any way relating to or arisingout of or in connection with (i) the execution, delivery, enforcement,performance or administration of any Term Loan Document or any other agreement,letter or instrument delivered in connection with the transactions contemplatedthereby or the consummation of the transactions contemplated thereby, (ii) anyCommitment, Loan or the use or proposed use of the proceeds therefrom, (iii)the Transactions, or (iv) any actual or prospective claim, litigation,investigation or proceeding relating to any of the foregoing, whether based oncontract, tort or any other theory (including any investigation of, preparationfor, or defense of any pending or threatened claim, investigation, litigationor proceeding) and regardless of whether any Indemnitee is a party thereto (allthe foregoing, collectively, the “Indemnified Liabilities”), in allcases, whether or not caused by or arising, in whole or in part, out of thenegligence of the Indemnitee; provided that such indemnity shall not, asto any Indemnitee, be available to the extent that such liabilities,obligations, losses, damages, penalties, claims, demands, actions, judgments,suits, costs, expenses or disbursements are determined by a court of competentjurisdiction by final and nonappealable judgment to have resulted from thegross negligence or willful misconduct of such Indemnitee.  No Indemnitee shall be liable for any damages

 

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## arising from theuse by others of any information or other materials obtained through IntraLinksor other similar information transmission systems in connection with thisAgreement, nor shall any Indemnitee have any liability for any indirect orconsequential damages relating to this Agreement or any other Term LoanDocument or arising out of its activities in connection herewith or therewith(whether before or after the Closing Date). All amounts due under this Section 10.05 shall be payablewithin ten Business Days after demand therefor. The agreements in this Section shall survive the resignation of theAdministrative Agent, the replacement of any Lender, the termination of theCommitments and the repayment, satisfaction or discharge of all the other TermLoan Obligations.

##  

## **Section10.06 ****Payments Set Aside. **To the extent that any payment by or onbehalf of any Borrower is made to the Administrative Agent or any Lender, orthe Administrative Agent or any Lender exercises its right of set-off, and suchpayment or the proceeds of such set-off or any part thereof is subsequentlyinvalidated, declared to be fraudulent or preferential, set aside or required(including pursuant to any settlement entered into by the Administrative Agentor such Lender in its discretion) to be repaid to a trustee, receiver or anyother party, in connection with any proceeding under any Debtor Relief Law orotherwise, then (i) to the extent of such recovery, the obligation or partthereof originally intended to be satisfied shall be revived and continued infull force and effect as if such payment had not been made or such set-off hadnot occurred, and (ii) each Lender severally agrees to pay to theAdministrative Agent upon demand its applicable share of any amount sorecovered from or repaid by the Administrative Agent, plus interest thereonfrom the date of such demand to the date such payment is made at a rate perannum equal to the Federal Funds Rate from time to time in effect.

##  

## **Section10.07 ****Successors and Assigns**.

##  

### (a)           *Generally*.  The provisions of this Agreement shall bebinding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns permitted hereby, except that no Borrower mayassign or otherwise transfer any of its rights or obligations hereunder withoutthe prior written consent of each Lender and no Lender may assign or otherwisetransfer any of its rights or obligations hereunder except (i) to an EligibleAssignee in accordance with the provisions of subsection (b) ofthis Section, (ii) by way of participation in accordance with the provisions ofsubsection (d) of this Section, or (iii) by way of pledge orassignment of a security interest subject to the restrictions of subsection (f)of this Section (and any other attempted assignment or transfer by any partyhereto shall be null and void).  Nothingin this Agreement, expressed or implied, shall be construed to confer upon any Person(other than the parties hereto, their respective successors and assignspermitted hereby, Participants to the extent provided in subsection (d)of this Section and, to the extent expressly contemplated hereby, theIndemnitees) any legal or equitable right, remedy or claim under or by reasonof this Agreement.

###  

### (b)           *Assignments*.  Any Lender may at any time assign to one ormore Eligible Assignees all or a portion of its rights and obligations underthis Agreement (including, without limitation, all or a portion of its Loansand its Notes; provided, however, that:

###  

#### (i)            exceptin the case of an assignment of the entire remaining amount of the assigningLender’s Commitment and the Loans at the time owing to it or in the case of anassignment to a Lender or an Affiliate of a Lender or an Approved Fund withrespect to a Lender, the aggregate amount of the Commitment (which for thispurpose includes Loans outstanding thereunder) subject to any such assignment,determined as of the date the Assignment and Assumption with respect to suchassignment is delivered to the Administrative Agent or, if the “Trade Date” isspecified in the Assignment and Assumption, as of the Trade Date, shall not beless than $1,000,000 unless each of the Administrative Agent and, so long as noEvent of Default

 

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#### has occurred andis continuing, the Company otherwise consents (each such consent not to beunreasonably withheld, delayed or conditioned);

####  

#### (ii)           eachpartial assignment shall be made as an assignment of a proportionate part ofall the assigning Lender’s rights and obligations under this Agreement withrespect to the Loans or the Commitment assigned;

####  

#### (iii)          any assignment of a Commitment must beapproved by the Administrative Agent unless the proposed assignee is itself aLender (whether or not the proposed assignee would otherwise qualify as anEligible Assignee);

####  

#### (iv)          theparties to such assignment shall execute and deliver to the AdministrativeAgent an Assignment and Assumption in the form of Exhibit C (whichshall state that such assignment is subject to the terms of the IntercreditorAgreement and that the assignee is entitled to all of the benefits of, and issubject to all of the obligations under, the Intercreditor Agreement), togetherwith a processing and recordation fee of $3,500 (except, in the case ofcontemporaneous assignments by any Lender to one or more Approved Funds, only asingle processing fee shall be payable for such assignments), payable, subjectto Section 2.09, as agreed between the assigning Lender and theassignee;

####  

#### (v)           ifapplicable, the assignee shall deliver to the Administrative Agent theinformation referred to in Section 10.19(b); and

####  

#### (vi)          ifapplicable, the assignor shall deliver any Note subject to such assignment tothe Borrowers for cancellation.

####  

Subject to acceptance and recording thereof by theAdministrative Agent pursuant to subsection (c) of this Section,from and after the effective date specified in each Assignment and Assumption,the Eligible Assignee thereunder shall be a party to this Agreement and, to theextent of the interest assigned by such Assignment and Assumption, have therights and obligations of a Lender under this Agreement, and the assigningLender thereunder shall, to the extent of the interest assigned by suchAssignment and Assumption, be released from its obligations under thisAgreement (and, in the case of an Assignment and Assumption covering all of theassigning Lender’s rights and obligations under this Agreement, such Lendershall cease to be a party hereto but shall continue to be entitled to thebenefits of Sections 3.01, 3.04, 3.05, 10.04and 10.05 with respect to facts and circumstances occurring prior to theeffective date of such assignment).  Uponrequest, the Borrowers (at their expense) shall execute and deliver a Note orNotes to the assignee Lender.  Anyassignment or transfer by a Lender of rights or obligations under thisAgreement that does not comply with this subsection shall be treated forpurposes of this Agreement as a sale by such Lender of a participation in suchrights and obligations in accordance with subsection (d) of thisSection.

 

### (c)           *Register*.  The Administrative Agent, acting solely forthis purpose as an agent of the Borrowers, shall maintain at the AdministrativeAgent’s Office a copy of each Assignment and Assumption delivered to it and aregister for the recordation of the names and addresses of the Lenders, and theCommitments of, and principal amounts of the Loans owing to, each Lenderpursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall beconclusive, and the Borrowers, the Administrative Agent and the Lenders maytreat each Person whose name is recorded in the Register pursuant to the termshereof as a Lender hereunder for all purposes of this Agreement,notwithstanding notice to the contrary. Any assignment of any Loan, whether or not evidenced by a Note, shall beeffective only upon appropriate entries with respect thereto being made in theRegister (and each Note shall expressly so provide).  The Register shall be available forinspection by the Borrowers, at any

 

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### reasonable timeand from time to time upon reasonable prior notice.  In addition, at any time that a request for aconsent or a material or other substantive change to the Term Loan Documents ispending, (i) any Lender wishing to consult with other Lenders in connectiontherewith may request and receive from the Administrative Agent a copy of theRegister and (ii) upon request of the Administrative Agent and receipt of alist of the names of each Person named as a Lender in the then currentRegister, the Borrowers and Holdings will identify to the Administrative Agent eachsuch Lender which is an Affiliate of either Borrower or Holdings.

###  

### (d)           *Participations*.  Any Lender may at any time, without theconsent of, or notice to, any Borrower or the Administrative Agent, sellparticipations to any Person (other than a natural person or a Borrower or anySubsidiary of any Borrower) (each, a “Participant”) in all or a portionof such Lender’s rights and/or obligations under this Agreement (including allor a portion of its Loans owing to it); provided that (i) such Lender’sobligations under this Agreement shall remain unchanged, (ii) such Lender shallremain solely responsible to the other parties hereto for the performance ofsuch obligations and (iii) the Borrowers, the Administrative Agent and theother Lenders shall continue to deal solely and directly with such Lender inconnection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to whicha Lender sells such a participation shall provide that such Lender shall retainthe sole right to enforce this Agreement and to approve any amendment,modification or waiver of any provision of this Agreement; provided thatsuch agreement or instrument may provide that such Lender will not, without theconsent of the Participant, agree to any amendment, waiver or othermodification described in the first proviso to Section 10.01 thatdirectly affects such Participant. Subject to subsection (e) of this Section, the Borrowersagree that each Participant shall be entitled to the benefits of Sections 3.01,3.04 and 3.05 to the same extent as if it were a Lender and hadacquired its interest by assignment pursuant to subsection (b) ofthis Section.  To the extent permitted bylaw, each Participant also shall be entitled to the benefits of Section 10.09as though it were a Lender, provided such Participant agrees to besubject to Section 2.12 as though it were a Lender.

###  

### (e)           *Limitation on Certain Rights of Participants*.  A Participant shall not be entitled toreceive any greater payment under Section 3.01, 3.04 or 3.05than the applicable Lender would have been entitled to receive with respect tothe participation sold to such Participant, unless the sale of theparticipation to such Participant is made with the Company’s prior writtenconsent.  A Participant that would be aForeign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01unless the Company is notified of the participation sold to such Participantand such Participant agrees, for the benefit of the Borrowers, to comply with Section 10.15as though it were a Lender.

###  

### (f)            *Other Assignments*.  Any Lender may at any time pledge or assign asecurity interest in all or any portion of its rights under this Agreement(including under its Note, if any) to secure obligations of such Lender,including any pledge or assignment to secure obligations to a Federal ReserveBank; provided that no such pledge or assignment shall release suchLender from any of its obligations hereunder or substitute any such pledgee orassignee for such Lender as a party hereto.

###  

### (g)           *Certain Definitions*.  As used herein, the following terms have thefollowing meanings:

###  

“Eligible Assignee” means (i) a Lender, (ii) anAffiliate of a Lender, (iii) an Approved Fund and (iv) any other Person (otherthan a natural Person) approved by (A) the Administrative Agent, (B) unless (x)such Person is taking delivery of an assignment in connection with physicalsettlement of a credit derivatives transaction, (y) the assignment is beingmade to such person by an Agent on or prior to the Primary Syndication Date or(z) an Event of Default has occurred and is continuing at the time anyassignment is effected pursuant to Section 10.07(b), the Company(each such approval not to be unreasonably withheld or delayed

 

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and any such approval required of the Company to bedeemed given by the Company if no objection from the Company is received by theassigning Lender and the Administrative Agent within five Business Days afternotice of such proposed assignment has been provided by the assigning Lender tothe Company); provided, however, that none of Holdings and itsSubsidiaries shall qualify as Eligible Assignees; and provided, further,that no Person shall be an Eligible Assignee if such Person appears on the listof Specially Designated Nationals and Blocked Persons prepared by the U.S.Treasury Department’s Office of Foreign Assets Control or the purchase by suchPerson of an assignment or the performance by any Agent of its duties under theTerm Loan Documents with respect to such Person violates or would violate anyAnti-Terrorism Law.

 

“Fund” means any Person (other than a naturalperson) that is (or will be) engaged in making, purchasing, holding orotherwise investing in commercial loans and similar extensions of credit in theordinary course.

 

“Approved Fund” means any Fund that isadministered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii)an entity or an Affiliate of an entity that administers or manages a Lender.

 

## **Section10.08****  Confidentiality and Disclosure.** Each of theAdministrative Agent and the Lenders agrees to maintain the confidentiality ofthe Information (as defined below), except that Information may be disclosed(i) to its and its Affiliates’ directors, officers, employees and agents,including accountants, legal counsel and other advisors (it being understoodthat the Persons to whom such disclosure is made will be informed of theconfidential nature of such Information and instructed to keep such Informationconfidential); (ii) to the extent requested by any regulatory authority(including any self-regulatory authority, such as the National Association ofinsurance Commissioners); (iii) to the extent required by applicable Laws or regulationsor by any subpoena or similar legal process; (iv) to any other party to thisAgreement; (v) in connection with the exercise of any remedies hereunder orunder any other Term Loan Document or any action or proceeding relating to thisAgreement or any other Term Loan Document or the enforcement of rightshereunder or thereunder, (vi) subject to an agreement containing provisionssubstantially the same as those of this Section, to (A) any assignee or pledgeeof or Participant in, or any prospective assignee or pledgee of or Participantin, any of its rights or obligations under this Agreement or (B) any actual orprospective counterparty (or its advisors) to any swap or derivativetransaction relating to any Borrower and its obligations, (vii) with theconsent of the Company or (viii) to the extent such Information (A) becomespublicly available other than as a result of a breach of this Section or(B) becomes available to the Administrative Agent or any Lender on anonconfidential basis from a source other than a Borrower.  For purposes of this Section, “Information”means all information received from any Loan Party relating to any Loan Partyor any of their respective businesses, other than (i) any such information thatis available to the Administrative Agent or any Lender on a nonconfidentialbasis prior to disclosure by any Loan Party and (ii) Borrower Materials marked“PUBLIC” in accordance with Section 6.02.  Any Person required to maintain theconfidentiality of Information as provided in this Section shall beconsidered to have complied with its obligation to do so if such Person hasexercised the same degree of care to maintain the confidentiality of suchInformation as such Person would accord to its own confidential information.  Notwithstanding the foregoing, any Agent andany Lender may subject to obtaining the prior written consent of the Company,which consent shall not be unreasonably withheld place advertisements infinancial and other newspapers and periodicals or on a home page or similarplace for dissemination of information on the Internet or worldwide web as itmay choose, and circulate similar promotional materials, after the closing ofthe transactions contemplated by this Agreement in the form of a “tombstone” orotherwise describing the names of the Loan Parties, or any of them, and theamount, type and closing date of such transactions, all at their sole expense.

 

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## **Section10.09****  Set-off. **In addition to any rights now orhereafter granted under applicable law or otherwise, and not by way oflimitation of any such rights, upon the occurrence and during the continuanceof an Event of Default, each Lender (and each of its Affiliates) is authorizedat any time and from time to time, without presentment, demand, protest orother notice of any kind (all of such rights being hereby expressly waived), toset-off and to appropriate and apply any and all deposits (general or specific)and any other indebtedness at any time held or owing by such Lender (including,without limitation, branches, agencies or Affiliates of such Lender whereverlocated) to or for the credit or the account of any Loan Party againstobligations and liabilities of such Loan Party to the Lenders hereunder, underthe Notes, under the other Term Loan Documents or otherwise, irrespective ofwhether the Administrative Agent or the Lenders shall have made any demandhereunder and although such obligations, liabilities or claims, or any of them,may be contingent or unmatured or denominated in a currency different from thatof the applicable deposit or indebtedness, and any such set-off shall be deemedto have been made immediately upon the occurrence of an Event of Default eventhough such charge is made or entered on the books of such Lender subsequentthereto.  The Loan Parties hereby agreethat to the extent permitted by law any Person purchasing a participation inthe Loans, Commitments hereunder pursuant to Section 2.01,2.12or 10.07(d) may exercise all rights of set-off with respect to itsparticipation interest as fully as if such Person were a Lender hereunder andany such set-off shall reduce the amount owed by such Loan Party to the Lender.

##  

## **Section10.10**** Interest Rate Limitation. **Notwithstandinganything herein to the contrary, if at any time the interest rate applicable toany Loan, together with all fees, charges and other amounts that are treated asinterest on such Loan under applicable law (collectively, the “Charges”),shall exceed the maximum lawful rate (the “Maximum Rate”) that may becharged or contracted for, charged or otherwise received by the Lender holdingsuch Loan in accordance with applicable law, the rate of interest payable inrespect of such Loan hereunder, together with all Charges payable in respectthereof, shall be limited to the Maximum Rate and, to the extent lawful, theinterest and Charges that would have been payable in respect of such Loan butwere not payable as a result of the operation of this Section 10.10,shall be cumulated and the interest and Charges payable to such Lender inrespect of other Loans or periods shall be increased (but not above the MaximumRate therefor) until such Lender shall have received such cumulated amount,together with interest thereon at the Federal Funds Rate to the date ofpayment.

##  

## **Section10.11****  Counterparts. **This Agreement may be executed inany number of counterparts, each of which when so executed and delivered shallbe an original, but all of which shall constitute one and the same instrument.It shall not be necessary in making proof of this Agreement to produce oraccount for more than one such counterpart. Delivery of an executed counterpart by facsimile shall be effective asan original executed counterpart and shall be deemed a representation that theoriginal executed counterpart will be delivered.

##  

## **Section10.12****  Integration. **This Agreement, together with theother Term Loan Documents, comprises the complete and integrated agreement ofthe parties on the subject matter hereof and thereof and supersedes all prioragreements, written or oral, on such subject matter.  In the event of any conflict between theprovisions of this Agreement and those of any other Term Loan Document, theprovisions of this Agreement shall control; provided that the inclusionof supplemental rights or remedies in favor of the Administrative Agent or theLenders in any other Term Loan Document shall not be deemed a conflict withthis Agreement.  Each Term Loan Documentwas drafted with the joint participation of the respective parties thereto andshall be construed neither against nor in favor of any party, but rather inaccordance with the fair meaning thereof.

##  

## **Section10.13****  Survival of Representations and Warranties. **Allrepresentations and warranties made hereunder and in any other Term LoanDocument or other document delivered pursuant

 

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## hereto or theretoor in connection herewith or therewith shall survive the execution and deliveryhereof and thereof.  Such representationsand warranties have been or will be relied upon by the Administrative Agent andeach Lender, regardless of any investigation made by the Administrative Agentor any Lender or on their behalf and notwithstanding that the Administrative Agentor any Lender may have had notice or knowledge of any Default or Event ofDefault at the time of any Loan, and shall continue in full force and effect aslong as any Loan or any other Term Loan Obligation shall remain unpaid orunsatisfied.

##  

## **Section10.14****  Severability. **If any provision of this Agreementor the other Term Loan Documents is held to be illegal, invalid orunenforceable, (i) the legality, validity and enforceability of the remainingprovisions of this Agreement and the other Term Loan Documents shall not beaffected or impaired thereby and (ii) the parties shall endeavor in good faithnegotiations to replace the illegal, invalid or unenforceable provisions withvalid provisions the economic effect of which comes as close as possible to thatof the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particularjurisdiction shall not invalidate or render unenforceable such provision in anyother jurisdiction.

##  

## **Section10.15****  Tax Forms**.

##  

### (a)           *Certain Provisions Pertinent to Foreign Lenders*.

###  

#### (i)            EachLender that is not a “United States person” within the meaning of Section7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to theAdministrative Agent, prior to receipt of any payment subject to withholding underthe Code (or upon accepting an assignment of an interest herein), two dulysigned and properly completed copies of whichever of the following forms isapplicable: (A) Internal Revenue Service Form W-8BEN, certifying that suchForeign Lender is entitled to benefits under an income tax treaty to which theUnited States is a party that reduces to zero the rate of withholding onpayments of interest; (B) Internal Revenue Service Form W-8ECI; (C) InternalRevenue Service Form W-8IMY (including all appropriate attachments); (D) in thecase of a Foreign Lender claiming the benefits of the exemption for portfoliointerest under Section 881(c) of the Code, (x) a certificate to the effect thatsuch Non-US Lender is not (1) a “bank” within the meaning of Section 881(c)(3)(A)of the Code, (2) a “10 percent shareholder” of the Company within the meaningof Section 881(c)(3)(B) of the Code, or (3) a “controlled foreign corporation”described in Section 881(c)(3)(C) of the Code and (y) duly completed copies ofInternal Revenue Service Form W-8BEN; or (E) any other form or certificaterequired by any taxing authority (including any certificate required by Section871(h) of the Internal Revenue Code), certifying that such Foreign Lender isentitled to a complete exemption from tax on payments pursuant to thisAgreement or any other Term Loan Document. Thereafter and from time to time, each such Foreign Lender shall (A)promptly submit to the Administrative Agent such additional duly completed andsigned copies of one of such forms (or such successor forms as shall be adoptedfrom time to time by the relevant United States taxing authorities) as may thenbe available under then current United States laws and regulations to avoid, orsuch evidence as is satisfactory to the Company and the Administrative Agent ofany available complete exemption from, United States withholding taxes inrespect of all payments to be made to such Foreign Lender by the Borrowerpursuant to this Agreement, (B) promptly notify the Administrative Agent of anychange in circumstances which would modify or render invalid any claimedexemption or reduction, and (C) if any Borrower is required to pay anyadditional amount to or for the account of such Lender pursuant to Section3.01 hereof, then such Lender will use reasonable efforts to change thejurisdiction of its Applicable Lending office if, in the judgment of suchLender, such change would (x) eliminate or reduce any such additional paymentwhich may thereafter accrue, (y) not subject such Lender to any unreimbursedcost or expense and (z) not be otherwise disadvantageous to such Lender.

 

107

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#### (ii)           EachForeign Lender, to the extent it does not act or ceases to act for its ownaccount with respect to any portion of any sums paid or payable to such Lenderunder any of the Term Loan Documents (for example, in the case of a typicalparticipation by such Lender), shall deliver to the Administrative Agent on thedate when such Foreign Lender ceases to act for its own account with respect toany portion of any such sums paid or payable, and at such other times as may benecessary in the determination of the Administrative Agent (in the reasonableexercise of its discretion), (A) two duly signed completed copies of the formsor statements required to be provided by such Lender as set forth above, toestablish the portion of any such sums paid or payable with respect to whichsuch Lender acts for its own account that is not subject to U.S. withholdingtax, and (B) two duly signed completed copies of IRS Form W-8IMY (or anysuccessor thereto), together with any information such Lender chooses totransmit with such form, and any other certificate or statement of exemptionrequired under the Code, to establish that such Lender is not acting for itsown account with respect to a portion of any such sums payable to such Lender.

####  

#### (iii)          The Borrowers shall not be required to payany additional amount to any Foreign Lender under Section 3.01 (A) withrespect to any Taxes required to be deducted or withheld on the basis of theinformation, certificates or statements of exemption such Lender transmits withan IRS Form W-8IMY pursuant to this Section 10.15(a) or (B) if suchLender shall have failed to satisfy the foregoing provisions of this Section10.15(a); provided that if such Lender shall have satisfied therequirement of this Section 10.15(a) on the date such Lender became aLender or ceased to act for its own account with respect to any payment underany of the Term Loan Documents, nothing in this Section 10.15(a) shallrelieve the Borrowers of their obligation to pay any amounts pursuant to Section3.01 in the event that, as a result of any change in any applicable law,treaty or governmental rule, regulation or order, or any change in theinterpretation, administration or application thereof, such Lender is no longerproperly entitled to deliver forms, certificates or other evidence at asubsequent date establishing the fact that such Lender or other Person for theaccount of which such Lender receives any sums payable under any of the TermLoan Documents is not subject to withholding or is subject to withholding at areduced rate.

####  

#### (iv)          TheAdministrative Agent may, without reduction, withhold any Taxes required to bededucted and withheld from any payment under any of the Term Loan Documentswith respect to which no Borrower is required to pay additional amounts underthis Section 10.15(a).

####  

### (b)           *Certain Provisions Pertinent to US Lenders*.  Upon the request of the Administrative Agent,each Lender that is a “United States person” within the meaning ofSection 7701(a)(30) of the Code shall deliver to the Administrative Agenttwo duly signed completed copies of IRS Form W-9.  If such Lender fails to deliver such forms,then the Administrative Agent may withhold from any interest payment to suchLender an amount equivalent to the applicable back-up withholding tax imposedby the Code, without reduction.

###  

### (c)           *Lender Indemnification*.  If any Governmental Authority asserts that theAdministrative Agent did not properly withhold or backup withhold, as the casemay be, any tax or other amount from payments made to or for the account of anyLender, such Lender shall indemnify the Administrative Agent therefor,including all penalties and interest, any taxes imposed by any jurisdiction onthe amounts payable to the Administrative Agent under this Section, and costsand expenses (including Attorney Costs) of the Administrative Agent.  The obligation of the Lenders under thisSection shall survive the termination of the Commitments, repayment of allother Term Loan Obligations hereunder and the resignation of the AdministrativeAgent.

 

108

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## **Section10.16 ****Headings. **The headings of the sections and subsections hereof are provided forconvenience only and shall not in any way affect the meaning or construction ofany provision of this Agreement.

##  

## **Section10.17 ****Governing Law; Submission to Jurisdiction**.

##  

### (a)           THISAGREEMENT AND THE OTHER TERM LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTHIN SUCH OTHER TERM LOAN DOCUMENTS) AND THE RIGHTS AND OBLIGATIONS OF THEPARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED ANDINTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK(INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWOF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

###  

### (b)           Anylegal action or proceeding with respect to this Agreement or any other TermLoan Document may be brought in the courts of the State of New York in New YorkCounty, or of the United States for the Southern District of New York, and, byexecution and delivery of this Agreement, each of Holdings and each Borrowerhereby irrevocably accepts for itself and in respect of its property, generallyand unconditional, the nonexclusive jurisdiction of such courts.  Each of Holdings and each Borrowerirrevocably waives, to the fullest extent permitted by law, any objection whichit may now or hereafter have to the laying of the venue of any such proceedingbrought in such court and any claim that any such proceeding brought in anysuch court has been brought in an inconvenient forum.

###  

### (c)           Eachof Holdings and each Borrower hereby consents to process being served in anysuch suit, action or proceeding by the mailing of a copy thereof by registeredor certified mail, postage prepaid, return receipt requested, to Holdings’ orsuch Borrower’s address referred to in Section 10.02, as the casemay be.  Each of Holdings and eachBorrower agrees that such service (i) shall be deemed in every respecteffective service of process upon it in any such suit, action or proceeding and(ii) shall, to the fullest extent permitted by law, be taken and held to bevalid personal service upon and personal delivery to it.  Nothing in this Section 10.17shall affect the right of any Lender to serve process in any manner permittedby law or limit the right of any Lender to bring proceedings against Holdingsor any Borrower in the courts of any jurisdiction or jurisdictions.

###  

## **Section10.18 ****Waiver of Right to Trial by Jury. **EACH PARTY TO THIS AGREEMENT HEREBYEXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION ORCAUSE OF ACTION ARISING UNDER ANY TERM LOAN DOCUMENT OR IN ANY WAY CONNECTEDWITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OFTHEM WITH RESPECT TO ANY TERM LOAN DOCUMENT, OR THE TRANSACTIONS RELATEDTHERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHERFOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES ANDCONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BEDECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAYFILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT ASWRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OFTHEIR RIGHT TO TRIAL BY JURY.

##  

## **Section10.19****  USA Patriot Act Notice; Lenders’ Compliance Certification**.

##  

### (a)           *Notice to Borrowers*.  Each Lender and the Administrative Agent (foritself and not on behalf of any Lender) hereby notifies Holdings and eachBorrower that pursuant to the

 

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### requirements ofthe US Patriot Act it is required to obtain, verify and record information thatidentifies each of Holdings and each Borrower, which information includes thename and address of each Loan Party and other information that will allow suchLender or the Administrative Agent, as applicable, to identify each such LoanParty in accordance with the Act.

###  

### (b)           *Lenders’ Certification*.  Each Lender or assignee or participant of aLender that is not incorporated under the Laws of the United States or a Statethereof (and is not excepted from the certification requirement contained inSection 313 of the U.S. Patriot Act and the applicable regulations becauseit is both (i) an Affiliate of a depository institution or foreign bank thatmaintains a physical presence in the United States or foreign country and (ii)subject to supervision by a banking regulatory authority regulating suchaffiliated depository institution or foreign bank) shall deliver to theAdministrative Agent the certification or, if applicable, recertification,certifying that such Lender is not a “shell” and certifying to other matters asrequired by Section 313 of the U.S. Patriot Act and the applicableregulations thereunder:  (i) within 10days after the Closing Date or, if later, the date such Lender, assignee orparticipant of a Lender becomes a Lender, assignee or participant of a Lenderhereunder and (ii) at such other times as are required under the U.S. PatriotAct.

###  

## **Section10.20**** Defaulting Lenders. **Each Lender understands and agreesthat if such Lender is a Defaulting Lender then, notwithstanding the provisionsof Section 10.03, it shall not be entitled to vote on any matterrequiring the consent of the Required Lenders or to object to any matterrequiring the consent of all the Lenders adversely affected thereby; provided,however, that all other benefits and obligations under the Term LoanDocuments shall apply to such Defaulting Lender, except as provided in Section 2.03(d).

##  

## **Section10.21 ****Binding Effect. **This Agreement shall become effective atsuch time when it shall have been executed by Holdings, the Company, and theAdministrative Agent, and the Administrative Agent shall have received copieshereof (telefaxed or otherwise) which, when taken together, bear the signaturesof each Lender, and thereafter this Agreement shall be binding upon and inureto the benefit of Holdings, the Borrowers, the Administrative Agent and eachLender and their respective successors and assigns; provided, however,unless the conditions set forth in Section 4.01 have been satisfiedby the Loan Parties or waived by the Lenders on or before August 18, 2004, noneof Holdings, the Borrowers, the Administrative Agent or the Lenders shall haveany obligations under this Agreement.

##  

## **Section10.22 ****Conflict. **To the extent that there is a conflict or inconsistency between anyprovision hereof, on the one hand, and any provision of any other Term LoanDocument, on the other hand, this Agreement shall control.

 

[Signature Pages Follow]

 

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IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be duly executed bytheir respective authorized officers as of the day and year first abovewritten.

 
|   | DUANE READE HOLDINGS, INC.                  |
|--------|---------------------------------------------|
|   |                                        |   |
|   |                                        |   |
|   | By:                                         | JOHN K. HENRY |
|   |                                        | Name: John K. Henry |
|   |                                        | Title: Senior Vice President and Chief  Financial Officer |
|   |                                        |   |
|   | DUANE READE INC.                            |
|   |                                        |   |
|   |                                        |   |
|   | By:                                         | MICHELLE D. BERGMAN |
|   |                                        | Name: Michelle D. Bergman |
|   |                                        | Title: Vice President and General Counsel |
|   |                                        |   |
|   | DUANE READE, a New York general partnership |
|   |                                        |   |
|   |                                        |   |
|   | By:                                         | DUANE READE INC., General Partner |
|   |                                        |   |
|   |                                        |   |
|   | By:                                         | MICHELLE D. BERGMAN |
|   |                                        | Name: Michelle D. Bergman |
|   |                                        | Title: Vice President and General Counsel |
|   |                                        |   |
|   | By:                                         | DRI I INC., a General Partner |
|   |                                        |   |
|   |                                        |   |
|   | By:                                         | MICHELLE D. BERGMAN |
|   |                                        | Name: Michelle D. Bergman |
|   |                                        | Title: Vice President and General Counsel |

 

S-1

----

 
|   |   | BANK OF AMERICA, N.A.,   |
|--------|--------|--------------------------|
|   |   | as Administrative Agent  |
|   |   |                     |
|   |   |                     |
|   | By:    | JAMES W. FORD            |
|   |   | Name: James W. Ford      |
|   |   | Title: Managing Director |

 

S-2

----

 
|   | CREDIT SUISSE FIRST BOSTON,  CAYMAN ISLANDS BRANCH, |
|--------|-----------------------------------------------------|
|   |                                                | as Syndication Agent |
|   |                                                |   |
|   |                                                |   |
|   | By:                                                 | JOSEPH ADIPIETRO |
|   |                                                | Name:  Joseph Adipietro |
|   |                                                | Title:  Director |
|   |                                                |   |
|   | By:                                                 | JOSHUA PARRISH |
|   |                                                | Name:  Joshua Parrish |
|   |                                                | Title:  Associate |

 

S-3

----

 
|   | CITICORP NORTH AMERICA INC., |
|--------|------------------------------|
|   |                         | as Co-Documentation Agent |
|   |                         |   |
|   |                         |   |
|   | By:                          | JULIE PERSILY |
|   |                         | Name:  Julie Persily |
|   |                         | Title:  Managing Director and  Vice President |

 

S-4

----

 
|   | WELLS FARGO BANK, NATIONAL  ASSOCIATION, as Co-Documentation Agent |
|--------|--------------------------------------------------------------------|
|   |                                                               |   |
|   |                                                               |   |
|   | By:                                                                | JASON L. WEIGHTER |
|   |                                                               | Name:  Jason L. Weighter |
|   |                                                               | Title:  Vice President |

 

S-5

----

 
|   | BANC OF AMERICA BRIDGE LLC, as a Lender |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | By:                                     | JAMES W. FORD |
|   |                                    | Name: James W. Ford |
|   |                                    | Title: Managing Director |

 

S-6

----

 

**SCHEDULE 1.01A**

 

**ConsolidatedEBITDA**

 

1.             Consolidated EBITDA shall be calculated by making thefollowing adjustments:

 

**Normalized EBITDA Adjustments**

($ in millions)

 

 
| ** **                           | ** ** | **LTM  6/04** | ** ** | **LTM  9/04E** | ** ** | **LTM  12/04E** | ** ** | **LTM  3/05E** | ** ** | **LTM  6/05E** | ** ** | **LTM  9/05E** | ** ** | **LTM  12/05E** | ** ** |
|--------------------------------------|------------|---------------|------------|----------------|------------|-----------------|------------|----------------|------------|----------------|------------|----------------|------------|-----------------|------------|
| Non-recurring/non-operational items: |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
|                                 |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
| Non-recurring professional fees(1)   |       | $             | 4.6        |           | $          | 4.2             |       | $              | 2.9        |           | 3.0        |           | 3.0        |            | 3.0        |   | 3.0 |   |
| Blackout losses                      |       | 1.3           |       | —         |       | —          |       | —         |       | —         |       | —         |       | —          |       |
| Severance costs                      |       | .2            |       | .2             |       | .2              |       | —         |       | —         |       | —         |       | —          |       |
| Shelf relabeling program cost        |       | 1.0           |       | .5             |       | .1              |       | —         |       | —         |       | —         |       | —          |       |
|                                 |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
| Implemented cost reductions:         |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
|                                 |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
| Public company expenses              |       | 1.5           |       | 1.3            |       | .9              |       | —         |       | —         |       | —         |       | —          |       |
| Shelf relabeling cost savings        |       | 1.6           |       | .5             |       | —          |       | —         |       | —         |       | —         |       | —          |       |
| Workforce Reduction                  |       | 1.7           |       | 1.0            |       | .3              |       | —         |       | —         |       | —         |       | —          |       |
|                                 |       |          |       |           |       |            |       |           |       |           |       |           |       |            |       |
| **Total non-recurring items**        | ** ** | **$**         | **11.9**   | ** **     | **$**      | **7.7**         | ** ** | **$**          | **4.4**    | ** **     | **$**      | **3.0**        | ** ** | **$**           | **3.0**    | ** ** | **$** | **3.0** | ** ** | **$** | **3.0** | ** ** |
|                                      |            |               |            |                |            |                 |            |                |            |                |            |                |            |                 |            |  |  |  |  |  |  |  |

 

2.             Non-recurringsettlement costs in connection with the litigations described below to theextent deducted in determining Consolidated Net Income for the applicableperiod.

 

a.             DuaneReade Inc., Securities Litigation, U.S.D.C. S.D.N.Y. Case No. 1:02 CV 6478 (NRB). Class action suits on behalf of shareholders who purchased common stockbetween April 1, 2002 and July 24, 2002, inclusive, alleging violation offederal securities laws.  The complaintalleges that Duane Reade Inc. violated the federal securities laws by issuingmaterially false and misleading statements during the class period.  On December 1, 2003, the district judgegranted Duane Reade Inc.’s motion to dismiss the plaintiffs’ action, withprejudice.  The plaintiffs have appealedthe decision.

 

b.             *Ansoumana v. Gristedes,* U.S.D.C.  S.D.N.Y. Case No. 00-CV-0253 (ADH)(DFE).  Duane Reade Inc. is a defendant in a classaction suit regarding alleged violations of the Fair Labor Standards Act as toa group of individuals who provided delivery services on a contract basis toDuane Reade Inc.  In December 2002, thejudge in the action issued a partial 

 

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(1)  The adjustment to EBITDA in2005 may only be made for non-recurring professional fees and expenses incurredduring such period in connection with litigation relating to: (i) the WTCbusiness interruption insurance policy number 144SP0390 issued by the St. PaulFire and Marine Insurance Company, and (ii) the collective bargaining agreementwith the Allied Trades Council (including any related claim involving Local338).

 

----

 

summary judgment in favor of a subclass of theplaintiffs and against Duane Reade Inc. In December 2003, Duane Reade settled the issue of the amount of liabilityto the plaintiffs without any admission of wrongdoing and in an amountconsistent with Duane Reade’s previously established reserves.  The amount of attorney’s fees owed to theplaintiffs’ attorneys remains an open issue in the case.

 

c.             *Disabled in Action of Metropolitan New York, Inc. v.Duane Reade,* U.S.D.C. S.D.N.Y. Case No. 01-CV-4692 (WHP).  Duane Reade Inc. is the defendant in a suitfor alleged violations of the Americans with Disabilities Act (“ADA”).  Settlement discussions are active.  However, it is likely at this stage that aportion of the case will be litigated as the parties have been unable to reachagreement as the requirements of the ADA with respect to two issues.

 

d.             CardinalHealth Litigation.  Duane Reade Inc. isinvolved in an ongoing dispute with Cardinal Health, a former supplier ofpharmaceutical products.  Both partieshave claims against the other involving, among other claims, breach ofcontract, promissory estoppel and unjust enrichment.  Duane Reade Inc. is seeking from Cardinal anunspecified amount of damages and punitive damages.  Cardinal is seeking approximately $18 millionin damages plus attorney’s fees and interest. Non-party discovery in the case has concluded and it is expected to goto trial some time in late 2004 or 2005.

 

e.             *IrvingKroop, et al. v. Duane Reade*, NY, NY et al., 00 Civ. 9841 et al.  Trustees of several union benefitfunds have brought suit alleging that Duane Reade Inc. did not make certainrequired contributions to these funds from January 2000 through August2001.  The plaintiffs have recently fileda motion seeking summary judgment of $2.29 million of claims for allegedunderstanding and related penalties and interest.  In addition, at various times, the plaintiffshave stated that they believe Duane Reade Inc. may owe additional amounts.  However, any additional amounts that theplaintiffs may claim are not known at this time.  Duane Reade has filed a motion opposing theseclaims.

 

f.              AlliedTrades Council Dispute.  Duane Reade Inc.is party to an NLRB administrative proceeding regarding a dispute with theAllied Trades Council over whether a negotiating impasse was reached betweenDuane Reade Inc. and the union in 2001. The Allied Trades Council represents employees in 139 Duane Reade storesand was party to a collective bargaining agreement that had an expiration dateof August 31, 2001.  The bargaining overa new term for the collective bargaining agreement was not successful, and upondeclaring impasses at different times, the company unilaterally made changes incertain terms and conditions of employment. On February 18, 2004, an administrative law judge (ALJ) who had reviewedvarious matters related to this proceeding issued a decision and related recommendations,which concluded that the parties were not at impasse.  The remedies recommended by the ALJ included,among other things, a requirement that Duane Reade Inc. make its employeeswhole by reimbursing them for expenses ensuing from the company’s failure tomake contributions to certain union funds and to make such funds whole, plusinterest.  If this recommendation isadopted by the full NLRB and enforced by a circuit court of appeals, it couldresult in Duane Reade Inc. being required to contribute amounts that have yetto be determined into the union’s pension benefit, health and welfare andvacation funds.  Any potential requiredcontributions resulting from a final judicial determination of this matterwould potentially be subject to offset by a portion of the amounts that DuaneReade Inc. had paid for similar benefits provided to employees represented bythe Allied Trades Council.  Because thisis just the first phase of a long and complicated administrative process likelyto be followed by a judicial review of the NLRB findings, the final outcomecannot be reliably determined at this time. The ALJ’s recommendation is not a binding order and has no force andeffect of law.  Rather, it is a

 

2

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recommendation to the full NLRB in Washington, D.C.,which will conduct a review at some point in the future and decide to uphold,reject or modify the recommendation.  Thefull NLRB decision is also subject to judicial review by a circuit court ofappeals and a compliance hearing before any financial remedy can be determinedwith specificity.  Duane Reade Inc.recorded a pre-tax charge of $12.6 million for the year ended December 27, 2003and an additional pre-tax charge of $1.1 million in the quarter ended March 27,2004.  These charges represent DuaneReade Inc.’s current best estimate of the loss that would result uponapplication of the ALJ’s recommendation. Duane Reade Inc. notes that such charge is based upon the factsavailable to it at the time and such charges could be subject to significantmodification in the future, upon review by the full NLRB, the Federal Circuitof Appeals and completion of a compliance hearing and any appeals relating tothe outcome of that hearing.  Thesecharges reflect the amount of contributions that Duane Reade Inc. did not makeinto the vacation benefit funds for the period from July 1, 2001 through March27, 2004, and the amount of contributions that Duane Reade Inc. did not makeinto the pension and health and welfare funds from the August 31, 2001 expirationof the contract through March 27, 2004, with the combined amounts reduced by aportion of the benefits Duane Reade Inc. paid directly to or for the benefit ofthese employees over the same periods. They also include an interest cost for these net contributions from thedate they would have been paid until March 27, 2004.

 

g.             Item1. on Schedule 5.06

 

3

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**SCHEDULE 1.01B**

 

**ManagementGroup**

 

Management Group:

 

(a)           Anthony J. Cuti

(b)           Gary Charboneau

(c)           John Henry

(d)           Jerry Ray

(e)           Timothy LeBeau

 

----

 

**SCHEDULE 1.01C**

 

**Fixed Charge Coverage Ratio**

 

The “Fixed Charge Coverage Ratio” for anyperiod shall mean the ratio of (i) Consolidated Earnings for such period to(ii) Consolidated Fixed Charges for such period, in each case after giving proforma effect to, without duplication:

 

#### (i)              theincurrence of the Indebtedness giving rise to the need to make such calculationand (if applicable) the application of the net proceeds therefrom, including torefinance other Indebtedness, as if such Indebtedness was incurred, and theapplication of such proceeds occurred, on the first day of such period;

####  

#### (ii)             theincurrence, repayment or retirement of any other Indebtedness by the Companyand its Subsidiaries since the first day of such period as if such Indebtednesswas incurred, repaid or retired at the beginning of such period (except that,in making such computation, the amount of Indebtedness under any revolvingcredit facility shall be computed based upon the average daily balance of suchIndebtedness during such period);

####  

#### (iii)          inthe case of (A) Indebtedness of a Person whose Equity Interests or assets areacquired in a Permitted Business Acquisition which is acquired or assumed bythe Borrower or a Subsidiary of the Borrower in such Permitted BusinessAcquisition in accordance with clause (vi) of the definition of“Permitted Indebtedness” or (B) any Permitted Business Acquisition occurring atthe time of the incurrence of such Indebtedness, the related Permitted BusinessAcquisition, assuming such Permitted Business Acquisition had been consummatedon the first day of such period;

####  

#### (iv)          anyacquisition or disposition by the Company and its Subsidiaries of any companyor any business or any assets out of the ordinary course of business, whetherby merger, stock purchase or sale or asset purchase or sale, or any relatedrepayment of Indebtedness, in each case since the first day of such period,assuming such acquisition or disposition had been consummated on the first dayof such period;

####  

#### (v)           alladjustments to “EBITDA” for such period used to calculate “Adjusted EBITDA” forsuch period that are disclosed in the “Summary Unaudited Pro Forma FinancialInformation and Statistical Data” section included in the final offering memorandumrelating to the Senior Subordinated Notes; and

####  

#### (vi)          ProForma Cost Savings;

####  

provided that:

 

#### (i)            anysuch computation shall be set forth in an officer’s certificate duly executedby a Responsible Officer of the Company and delivered to the AdministrativeAgent prior to the consummation of the transaction giving rise to the need toperform such calculation;

####  

#### (ii)           inmaking such computation, the Consolidated Interest Expense attributable tointerest on any Indebtedness computed on a *pro forma* basisand (A) bearing a floating interest rate shall be computed as if the ratein effect on the date of computation had been the applicable rate for theentire period and (B) which was not outstanding during the period forwhich the computation is being made but which bears, at the option of suchPerson, a fixed or 

 

----

 

#### floating rate ofinterest, shall be computed by applying at the option of such Person either thefixed or floating rate; and

####  

#### (iii)          inmaking such computation, the Consolidated Interest Expense attributable tointerest on any Indebtedness under a revolving credit facility computed on a *pro forma*basis shall be computed based upon the averagebalance at the end of each calendar month of such Indebtedness during theapplicable period.

####  

Solely for purposes of this Schedule 1.01C, thefollowing terms have the meanings set forth below.  All other capitalized terms defined in theCredit Agreement to which this Schedule 1.01C is attached and nototherwise defined herein have, as used herein, the respective meanings providedfor therein.

 

“Consolidated Earnings” means for any periodthe sum (without duplication) of:

 

#### (i)            ConsolidatedNet Income for such period; plus

####  

#### (ii)           anamount which, in the determination of Consolidated Net Income for such period,has been deducted for (A) Consolidated Interest Expense, (B) ConsolidatedIncome Tax Expense, (C) Consolidated Non-cash Charges, (D) financial advisoryfees, accounting fees, legal fees and other similar advisory and consultingfees and related out-of-pocket expenses incurred as a result of any EquityIssuance or Debt Issuance permitted pursuant to the Agreement, (E)restructuring costs and acquisition integration costs and fees, including cashseverance payments made in connection with restructurings and acquisitions, orother types of special charges or reserves, (F) Permitted Management Fees paidin accordance with Section 7.09(i) of the Agreement, (G) deferred rentalexpense for such period which is in excess of the amount of cash rental expenseactually paid during such period, (H) non-cash charges or expenses relating torecording inventory on a LIFO basis, (I) so long as the Company and itsConsolidated Subsidiaries file a consolidated tax return, or are part of aconsolidated group for tax purposes, with Holdings or any other holdingcompany, the excess of (x) the Consolidated Income Tax Expense of the Companyand its Consolidated Subsidiaries for such period over (y) all tax paymentspayable in cash for such period (whether paid in such period or at any timeprior to such period) by the Company and its Consolidated Subsidiaries toHoldings or such other holding company under a tax sharing agreement orarrangement, all determined in accordance with GAAP and (J) non-recurringlosses; minus

####  

#### (iii)          thesum of (A) the aggregate amount of all deferred rental expense which wasdeducted in the determination of Consolidated Earnings in any prior periodpursuant to clause (ii)(G) above and with respect to which cash paymentswere made during the relevant period of determination plus (B) the aggregateamount of all non-cash charges or expenses relating to recording inventory on aLIFO basis which were deducted in the determination of Consolidated Earnings inany prior period pursuant to clause (ii)(H) above and with respect towhich cash payments were made during the relevant period of determination plus(C) the aggregate amount of all Consolidated Income Tax Expense which wasdeducted in the determination of Consolidated Earnings in any prior periodpursuant to clause (ii)(I) above and with respect to which cash paymentswere made during the relevant period of determination plus (D) the aggregateamount of all other cash payments during such period relating to non-cashcharges that were added back to Consolidated Net Income in the determination ofConsolidated Earnings for any prior period plus (E) all non-cash itemsincreasing Consolidated Net Income for such period.

 

2

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“Consolidated Fixed Charges” means, for anyperiod, without duplication, the sum of (i) Consolidated Interest Expense forsuch period plus (ii) the aggregate amount of all cash and non-cash dividends(other than those paid in the form of Equity Interests (other than DebtEquivalents)) paid on any Debt Equivalents or Preferred Stock of the Companyand its Consolidated Subsidiaries during such period.

 

“ConsolidatedIncome Tax Expense” means, for any period, the provision forfederal, state, local and foreign income taxes of the Company and itsConsolidated Subsidiaries for such period as determined in accordance withGAAP.

 

“Consolidated Interest Expense” means, for anyperiod, the sum (without duplication) of: (i) the total interest expense of the Company and its ConsolidatedSubsidiaries, whether paid or accrued and whether or not capitalized(including, without limitation, amortization of debt issuance costs andoriginal issue discount, non-cash interest payments, the interest component ofany deferred payment obligations, the interest component of all payments underCapital Leases and the implied interest component of Synthetic LeaseObligations (regardless of whether accounted for as interest expense underGAAP), all commissions, discounts and other fees and charges owed with respectto letters of credit and bankers’ acceptances and net costs in respect of SwapObligations constituting interest rate swaps, collars, caps or otherarrangements requiring payments contingent upon interest rates of the Companyand its Consolidated Subsidiaries), determined on a consolidated basis for suchperiod; provided that (A) any interest on Indebtedness of another Personthat is guaranteed by the Company or any of its Consolidated Subsidiaries orsecured by (or for which the holder of such Indebtedness has an existing right,contingent or otherwise, to be secured by) a Lien on, or payable out of theproceeds of the sale of or production from, assets of the Company or any of itsConsolidated Subsidiaries (whether or not such guarantee or Lien is calledupon) shall be included to the extent (but only to the extent) actually paid bythe Company or its Consolidated Subsidiaries and (B) dividend requirements ofthe Company and its Consolidated Subsidiaries during such period with respectto Debt Equivalents and of any Consolidated Subsidiary of the Company withrespect to Preferred Stock (except, in either case, dividends payable solely inshares of Equity Interests (other than Debt Equivalents) of the Company or suchConsolidated Subsidiary, as the case may be) shall be included, minus (ii) thetotal interest income of the Company and its Consolidated Subsidiaries,determined on a consolidated basis for such period in accordance with GAAP,minus (iii) in each case to the extent included in consolidated interestexpense for such period in accordance with GAAP, (A) the amortization duringsuch period of capitalized financing costs, (B) any charges during such periodresulting from the application of Statement of Financial Accounting StandardsNo. 150, “Accounting for Certain Financial Instruments with Characteristics ofBoth Liabilities and Equity” with respect to Equity Interests and (C) anycharges during such period resulting from the application of Statement ofFinancial Accounting Standards No. 145, “Rescission of FASB Statements No. 4,44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections”.

 

“Consolidated Net Income” means, for anyperiod, the net income (or net loss) after taxes of the Company and itsConsolidated Subsidiaries for such period, determined on a consolidated basisin accordance with GAAP; provided that there shall be excluded from thecalculation of Consolidated Net Income for any period (without duplication):

 

#### (i)            allextraordinary or nonrecurring gains (or extraordinary losses or nonrecurring, non-cashlosses), together with any related provision for taxes on any suchextraordinary or nonrecurring gain (and the tax effect of any suchextraordinary loss or nonrecurring, non-cash loss), realized by the Company orany of its Consolidated Subsidiaries during such period;

 

3

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#### (ii)           theincome (or loss) of any Person in which any other Person (other than theCompany or any of its Wholly-Owned Consolidated Subsidiaries) has an ownershipinterest and which is not a Consolidated Subsidiary of the Company, except tothe extent that any such income is actually distributed in cash to the Companyor such Wholly-Owned Consolidated Subsidiary during such period;

####  

#### (iii)          theincome of any Subsidiary of the Company (other than a Loan Party) to the extentthat the declaration or payment of Restricted Payments or similar distributionsby that Subsidiary of that income is not at the time permitted by operation ofthe terms of its charter or any agreement, instrument, judgment, decree, order,statute, rule or governmental regulation applicable to that Subsidiary;

####  

#### (iv)          anynon-cash income or non-cash loss for such period attributable to theapplication of the purchase method of accounting in accordance with GAAP;

####  

#### (v)           anygain or loss realized during such period upon the termination of any employeepension benefit plan, together with any related provision for taxes on any suchtermination (or the tax effect of any such termination);

####  

#### (vi)          anygain or loss realized during such period in respect of Asset Dispositions otherthan in the ordinary course of business (including, without limitation, AssetDispositions pursuant to Sale/Leaseback Transactions), together with anyrelated provision for taxes on any such Asset Disposition (or the tax effect ofany such Asset Disposition);

####  

#### (vii)         anyincome for such period arising as a result of the restoration of anycontingency reserve, except to the extent the original provision for suchreserve was made after the Closing Date;

####  

#### (viii)        anygain or loss arising from the acquisition of any securities during such periodor the extinguishment, under GAAP, during such period of any Indebtedness ofthe Company or its Consolidated Subsidiaries;

####  

#### (ix)           anyfinancial advisory fees, accounting fees, legal fees and other similar advisoryand consulting fees and related out-of-pocket expenses incurred during suchperiod as a result of the Transaction;

####  

#### (x)            alldeferred financing costs amortized or written off, and premiums and prepaymentpenalties paid, in each case during such period in connection with (A) theTransaction or (B) the refinancing of any Equity Interests (other than DebtEquivalents);

####  

#### (xi)           anycharges during such period resulting from the application of Statement ofFinancial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”or No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”;

####  

#### (xii)          unrealizedgains and losses associated with Swap Agreements;

####  

#### (xiii)         non-cashcompensation charges or other non-cash expenses or charges for such periodarising from the grant of or issuance or repricing of Equity Interests or anyamendment or substitution of any such Equity Interests; and

####  

#### (xiv)        thecumulative effect of a change in accounting principles.

 

4

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“Consolidated Non-cash Charges” means, for anyperiod, the aggregate depreciation, amortization and write-downs, write-offsand other non-cash charges of the Company and its Consolidated Subsidiaries ona consolidated basis for such period, as determined in accordance with GAAP(excluding any such non-cash charge to the extent that it represents an accrualof, or a reserve for, cash charges or expenses in any future period).

 

“Indebtedness”means, with respect to any Person, without duplication, (i) all indebtedness ofsuch Person for borrowed money or for the deferred purchase price of propertyor services, excluding any trade payables and other accrued current liabilitiesarising in the ordinary course of business, but including, without limitation,all obligations, contingent or otherwise, of such Person in connection with anyletters of credit issued under letter of credit facilities, acceptancefacilities or other similar facilities, (ii) all obligations of such Personevidenced by bonds, notes, debentures or other similar instruments, (iii) allindebtedness created or arising under any conditional sale or other titleretention agreement with respect to property acquired by such Person (even ifthe rights and remedies of the seller or lender under such agreement in theevent of default are limited to repossession or sale of such property), butexcluding trade payables and accrued expenses arising in the ordinary course ofbusiness, (iv) all obligations of such Person under Swap Agreements, (v) allCapital Lease Obligations of such Person, (vi) all Indebtedness referred to inclauses (i) through (v) above of other Persons and all dividends orsimilar distributions of other Persons, to the extent the payment of suchIndebtedness or dividends or similar distributions is secured by (or for whichthe holder of such Indebtedness has an existing right, contingent or otherwise,to be secured by) any Lien, upon or with respect to property (including,without limitation, accounts and contract rights) owned by such Person, eventhough such Person has not assumed or become liable for the payment of suchIndebtedness, (vii) all Guaranty Obligations of such Person in respect ofIndebtedness of any other Person, (viii) all Debt Equivalents issued by suchPerson, and (ix) all Preferred Stock of any Subsidiary of the Company.  The amount of any Indebtedness outstanding asof any date will be: (i) the accreted value of the Indebtedness, in the case ofany Indebtedness issued with original issue discount, and (ii) the principalamount of the Indebtedness, together with any interest on the Indebtedness thatis more than 30 days past due, in the case of any other Indebtedness.  Notwithstanding the foregoing, Indebtednessshall not include:  (i) trade accountspayable and other accrued liabilities arising in the ordinary course ofbusiness; (ii) obligations of such Person other than principal; or (iii) anyliability for federal, state or local taxes or other taxes or by such Person.

 

“Pro Forma Cost Savings” means, with respect toany period, the reductions in costs that occurred during such period that are(i) directly attributable to an asset acquisition and calculated on a basisthat is consistent with Article 11 of Regulation S-X under the Securities Actor (ii) implemented, committed to be implemented or the commencement ofimplementation of which has begun in good faith by the business that was thesubject of any such asset acquisition within six months of the date of theasset acquisition and that are supportable and quantifiable by the underlyingrecords of such business, as if, in the case of each of clauses (i) and (ii),all such reductions in costs had been effected as of the beginning of suchperiod, decreased by any incremental expenses incurred or to be incurred duringsuch period in order to achieve such reduction in costs.

 

5

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**SCHEDULE1.01D**

 

**ABLPriority Collateral**

 

All of the followingproperty and interests in property of the Loan Parties, whether now owned orexisting, or hereafter created, acquired or arising and wherever located:

 

(a)           AllAccounts;

 

(b)           AllInventory;

 

(c)           AllChattel Paper, Instruments and Documents;

 

(d)                                 All PaymentIntangibles constituting proceeds of other ABL Priority Collateral;

 

(e)                                  All prescriptionfiles, and all books, records, electronically stored data and informationrelating to the prescription files and all rights of access to such books,records and information;

 

(f)                                    All tax refunds andabatements, and rights to payment for credit extended;

 

(g)                                 All Deposit Accounts;

 

(h)                                 All Letter of CreditRights and Supporting Obligations relating to ABL Priority Collateral;

 

(i)                                     All books andrecords of the Loan Parties relating to any other foregoing; and

 

(j)                                     All products andproceeds of the foregoing, including, without limitation, proceeds of insurancepolicies to the extent such proceeds relate to any of the foregoing.

 

All capitalized terms used herein and not otherwise defined shall havethe same meaning herein as in the Uniform Commercial Code as in effect fromtime to time in the State of New York.

 

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**SCHEDULE 2.01**

 

**Lendersand Commitments**

 
| **Lender**                 | ** ** | **Commitment Amount** | ** **     | **Commitment  Percentage** | ** ** | **Commitment Date** | ** **    |
|----------------------------|------------|-----------------------|----------------|----------------------------|------------|---------------------|---------------|
|                       |       |                  |           |                       |       |                |          |
| Banc of America Bridge LLC |       | $                     | 155,000,000.00 |                       | 100.0000   | %                   | July 30, 2004 |   |
|                       |       |                  |           |                       |       |                |          |
| Totals                     |       | $                     | 155,000,000.00 |                       | 100.0000   | %                   |          |   |

 

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**SCHEDULE5.03**

 

**RequiredConsents, Authorizations, Notices and Filings**

 

1.                                       The New JerseyBoard of Pharmacy requires the submission of a “Transfer of OwnershipApplication” for each store located in New Jersey on or before the DRIMerger.  The New York Board of Pharmacymust be notified within thirty (30) days of the closing of the DRI Merger.  Since the federal identification numbers,directors and officers of the entities that possess the pharmacy licenses andthe Medicare and Medicaid provider agreements will not change at the closing ofthe DRI Merger, no other approvals or notices to the New York and New JerseyBoards of Pharmacy or to the applicable Medicare or Medicaid intermediaries,carriers and agencies must be made as a result of the closing of the DRIMerger.

 

2.                                       If there is asubsequent foreclosure of the assets or equity of the Company or of Duane Readeor if there is a change of the federal identification numbers of the entitiesthat possess the New York or New Jersey pharmacy licenses, the Drug EnforcementAgency registrations or the Medicare or Medicaid provider numbers andagreements, then new pharmacy licenses will be required to operate thepharmacies, new DEA registrations will be required and new Medicare and/orMedicaid provider agreements and numbers will be required.  This will require the filing of theappropriate applications with the applicable federal and state regulatoryauthorities.  In addition, if there is achange of the officers, directors or principal shareholders of an entity thatpossesses a New York pharmacy license, the New York Board of Pharmacy must benotified within thirty (30) days of the change. If there is a change of 5% or more of the directors of an entity thatpossesses a New York Medicaid provider number or agreement, then the New YorkMedicaid agency requires a change of ownership application.  The New Jersey and New York Medicareintermediary/carrier requires notice if any individual listed as an authorizedindividual of the Form 855B changes.  Inaddition, if there is a change in the individual listed as the power ofattorney for a pharmacy for the purposes of the Drug Enforcement Agencyregistration, then the Drug Enforcement Agency must be notified immediately ofthe change.

 

3.                                       See Section5.02(iii)(B) of the Credit Agreement.

 

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**SCHEDULE 5.06**

 

**Litigation**

 

1.             LitigationRelating to the DRI Merger.  Duane ReadeInc. is aware of six purported class action complaints challenging the DRIMerger that have been filed in the Court of Chancery of the State of Delaware(the “DelawareComplaints”), and three purported class action complaints that have beenfiled in the Supreme Court of the State of New York (the “New YorkComplaints”).  Two of the New YorkComplaints have been voluntarily dismissed without prejudice.  Both the Delaware Complaints and the New YorkComplaints named Mr. Anthony Cuti and certain other members of the board ofdirectors of Duane Reade Inc., certain executive officers and Duane Reade Inc.as defendants.  Four of the DelawareComplaints name Oak Hill Capital Partners, L.P. as a defendant.  One of the dismissed New York Complaintsnamed Oak Hill Capital Partners, L.P. as a defendant.  The Delaware Complaints were consolidated onJanuary 28, 2004, and on April 8, 2004 the plaintiffs in the Delaware actionsfiled a consolidated class action complaint. The consolidated complaint alleges that defendants failed to disclosematerial information in the preliminary proxy statement, which was filed withthe SEC on March 19, 2004.

 

Plaintiffs seek, amongother things, an order that the complaints are properly maintainable as a classaction, a declaration that defendants have breached their fiduciary duties andother duties, injunctive relief, an unspecified amount of monetary damages,attorneys’ fees, costs and expenses and any such other and further relief asthe court may deem just and proper. Duane Reade Inc. has received a letter, dated June 14, 2004, fromco-lead counsel for the plaintiffs in the stockholder litigation relating tothe transaction expressing “substantial concern” over Oak Hill’s proposal,which was announced in a press release on June 14, 2004, to reduce the pershare price set forth in the original merger agreement from $17.00 to $16.00.

 

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**SCHEDULE5.12**

 

**ERISAMatters**

 

 

Schedule 5.12(c) – ERISA Events

 

 

1.                                            ExecutiveLife Program Split Dollar Agreement between Anthony J. Cuti and Duane Reade,Inc., dated January 25, 2002.

 

2.                                            FuturityCorporate VUL Allocation Form Sun Life Assurance Company of Canada (U.S.),insuring John K. Henry.

 

3.                                            SplitDollar Life Insurance Policies covering Messrs. Cuti, Charboneau, Henry &Ray.

 

4.                                            Post-retirementmedical for Mr. Cuti and his spouse pursuant to the terms of Mr. Cuti’semployment agreement which are limited to a cost of $50,000 per year.

 

 

Schedule 5.12(d) – Multiemployer Plan

 

 

                The Companyhas ceased making contributions to the UMFPP, the Union Mutual Medical Fund andthe Union Mutual Vacation Fund with respect to its employees covered by theAllied Trade Council Bargaining Unit.

 

 

Schedule 5.12(f) – Welfare Plan

 

 

1.                                     Post-retirementmedical for Mr. Cuti and his spouse pursuant to the terms of his employmentagreement which are limited to a cost of $50,000 per year.

 

2.                                     FuturityCorporate VUL Allocation Form Sun Life Assurance Company of Canada (U.S.),insuring John K. Henry.

 

3.                                     SplitDollar Life Insurance Policies covering Messrs. Cuti, Charboneau, Henry andRay.

 

4.                                     ExecutiveLife Program Split Dollar Agreement between Anthony J. Cuti and Duane Reade,Inc., dated January 25, 2002.

 

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**SCHEDULE 5.13**

 

**Subsidiaries**

 
| **Name of Subsidiary**          | ** ** | **Jurisdiction of  Organization** | ** ** | **Number of  Authorized Shares of  each Class of Equity Interests** | ** ** | **Number of  outstanding Shares of  each Class of Equity Interests** | ** ** | **Number and Percentage  of Outstanding Shares of  each Class of Equity  Interests Owned by any  Person** | ** **         | **Number and  Effect, if  exercised, of  all Equity  Equivalents  of Subsidiary** |
|---------------------------------|------------|-----------------------------------|------------|---------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|--------------------|-----------------------------------------------------------------------------------|
|                            |       |                              |       |                                                                |       |                                                                 |       |                                                                                                      |               |                                                                              |
| Duane Reade Inc.                |       | Duane  Reade Holdings, Inc.       |       | Delaware                                                            |       | 100  Common Shares                                                   |       | 100/100%                                                                                                  | ** **         | ** **                                                                        |
| DRI I Inc.                      |       | Duane  Reade Inc.                 |       | Delaware                                                            |       | 1,000  Common Shares                                                 |       | 1,000/100%                                                                                                |               | None                                                                              |
| Duane Reade International, Inc. |       | Duane  Reade Inc.                 |       | Delaware                                                            |       | 1,000  Common Shares                                                 |       | 1,000/100%                                                                                                |               | None                                                                              |
| Duane Reade Realty, Inc.        |       | Duane  Reade Inc.                 |       | Delaware                                                            |       | 1,000  Common Shares                                                 |       | 1,000/100%                                                                                                |               | None                                                                              |
| Duane Reade                     |       | Duane  Reade Inc.            |       | New  York                                                           |       | N/A                                                                  |       | -  990/99%                                                                                                | (Duane Reade Inc.) |                                                                              | None |
|                            |       | DRI  I Inc.                       |       |                                                                |       |                                                                 |       | -  10/1%                                                                                                  | (DRI I Inc.)       |                                                                              |   |

 

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**SCHEDULE 5.17**

 

**IntellectualProperty**

 

None.

 

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**SCHEDULE 5.22**

 

**Ownershipof Duane Reade, Inc.**

 

 

1.                                          Stockholders and RegistrationAgreement, dated as of July 30, 2004, by and among Holdings, DR Shareholders,LLC and certain members of the management of the Company, as amended, restatedor modified from time to time

 

2.                                       Preemptive Rights Agreement, dated as July30, 2004, by and among Oak Hill Capital Partners, L.P., Oak Hill CapitalManagement Partners, L.P., OHCP DR Co-Investors, LLC, Duane Reade Shareholders,LLC, Duane Reade Holdings, Inc., Duane Reade Inc., Anthony J. Cuti and certainother members of the management of Duane Reade Inc. listed on Schedule 1thereto

 

----

 

**SCHEDULE7.01**

 

**ExistingIndebtedness**

 

 

1.             ABL CreditAgreement

 

2.                                       Capital Leasebetween Duane Reade Inc. and IBM Credit Corporation, dated March 22, 2002

 

3.                                       ExistingConvertible Notes

 

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**SCHEDULE 7.02**

 

**ExistingLiens**

 
| **Filing** | ** ** | **Secured Party  Name**                        | ** ** | **Debtor Name**                 | ** ** | **Filing  Jurisdiction** | ** ** | **Record  Date** | ** ** | **File #** | ** ** | **Related UCC-1 File  #** | ** ** | **Description**                                                                                                           |
|------------|------------|------------------------------------------------|------------|---------------------------------|------------|--------------------------|------------|------------------|------------|------------|------------|---------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|
| UCC1       |       | Fleet Retail Finance Inc., as Collateral Agent |       | Duane Reade Realty, Inc.        |       | DE SoS                   |       | 07/17/03         |       | 31831315   |       | —                    |       | Blanket                                                                                                                   |
| UCC3       |       | Fleet Retail Finance Inc., as Collateral Agent |       | Duane Reade Realty, Inc.        |       | DE SoS                   |       | 07/29/03         |       | 31960130   |       | 31831315                  |       | Amendment-restated collateral description excluding “Excluded  Collateral” which are various insurance policies |
| UCC1       |       | Fleet Retail Finance Inc., as Collateral Agent |       | Duane Reade International, Inc. |       | DE SoS                   |       | 07/17/03         |       | 31831331   |       | —                    |       | Blanket                                                                                                                   |
| UCC3       |       | Fleet Retail Finance Inc., as Collateral Agent |       | Duane Reade International, Inc. |       | DE SoS                   |       | 07/29/03         |       | 31950164   |       | 31831331                  |       | Amendment-restated collateral description excluding “Excluded  Collateral” which are various insurance policies |
| UCC1       |       | Matrix Funding Corporation                     |       | Rock Bottom Stores, Inc.        |       | NY SoS                   |       | 07/07/97         |       | 139656     |       | —                    |       | IBM Point of Sale equipment-Funding Agreement 10/14/96                                                                    |
| UCC3       |       | Matrix Funding Corporation                     |       | Rock Bottom Stores, Inc.        |       | NY SoS                   |       | 11/24/97         |       | 242625     |       | 139656                    |       | Amendment-Property described in original filing deleted and new  description provided                                     |
| UCC3       |       | Matrix Funding Corporation                     |       | Rock Bottom Stores, Inc.        |       | NY SoS                   |       | 11/26/97         |       | 244505     |       | 139656                    |       | Assignment to Lyon Credit Corporation                                                                                     |

 

1

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| UCC3 |   | Lyon Credit Corporation |   | Rock Bottom Stores, Inc. |   | NY SoS |   | 04/24/00 |   | 081081            |   | 139656 |   | Assignment to Hudson United Bank                                                                            |
|------|--------|-------------------------|--------|--------------------------|--------|--------|--------|----------|--------|-------------------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------|
| UCC3 |   | Hudson United Bank      |   | Rock Bottom Stores, Inc. |   | NY SoS |   | 05/11/00 |   | 093800            |   | 139656 |   | Amendment—Debtor name change to: Duane Reade, Inc.                                                     |
| UCC3 |   | Hudson United Bank      |   | Duane Reade, Inc.        |   | NY SoS |   | 04/03/02 |   | 076643            |   | 139656 |   | Continuation                                                                                                |
| UCC1 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 05/14/99 |   | 096353            |   | — |   | Equipment—Master Lease #37625, Schedule #39998                                                         |
| UCC3 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 07/23/99 |   | 147577            |   | 096353 |   | Amendment-no change to collateral.   Addition of new serial numbers Master Lease #37625, Sched. #39998 |
| UCC3 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 04/02/04 |   | 200402525  7682   |   | 096353 |   | Continuation                                                                                                |
| UCC1 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 05/14/99 |   | 096355            |   | — |   | Equipment—Master Lease #37625, Schedule #39997                                                         |
| UCC3 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 04/02/04 |   | 200404025  257670 |   | 096355 |   | Continuation                                                                                                |
| UCC3 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 09/02/99 |   | 177583            |   | 096355 |   | Amendment-no change to collateral.   Addition of new serial numbers Master Lease #37625, Sched. #39997 |
| UCC1 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 07/01/99 |   | 131468            |   | — |   | Equipment—Lease #40169                                                                                 |
| UCC3 |   | Orix USA Corporation    |   | Duane Reade              |   | NY SoS |   | 06/16/04 |   | 200406165  494738 |   | 131468 |   | Continuation                                                                                                |

 

2

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| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 07/01/99 |   | 131470           |   | — |   | Equipment—Master Lease #37625, Schedule #40168                        |
|------|--------|--------------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|------------------|--------|--------|--------|----------------------------------------------------------------------------|
| UCC3 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 04/02/04 |   | 200406165  49470 |   | 131470 |   | Continuation                                                               |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 08/12/99 |   | 162511           |   | — |   | Equipment—Master Lease #37625, Schedule #40279                        |
| UCC1 |   | El Camino Resources, Ltd.                  |   | Duane Reade       |   | NY SoS |   | 09/03/99 |   | 178286           |   | — |   | Equipment-Master Lease #4045, Schedule #001                                |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade       |   | NY SoS |   | 11/03/99 |   | 222085           |   | — |   | Equipment—RVA#3428                                                    |
| UCC3 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | NY SoS |   | 07/25/00 |   | 144827           |   | 231476 |   | Assignment to: The Chase Manhattan Bank                                    |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | NY SoS |   | 11/16/99 |   | 231481           |   | — |   | All prescription pharmaceutical products, insulin & syringes           |
| UCC3 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | NY SoS |   | 07/25/00 |   | 144840           |   | 231481 |   | Assignment to: The Chase Manhattan Bank                                    |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | NY SoS |   | 12/28/99 |   | 260226           |   | — |   | Equipment-all replacement parts, accessions & substitutions  #C0885003 |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade, Inc. |   | NY SoS |   | 12/28/99 |   | 260230           |   | — |   | Equipment-all replacement parts, accessions & substitutions  #C0885004 |

 

3

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| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | NY SoS |   | 01/05/00 |   | 002803 |   | — |   | All prescription pharmaceutical products, insulin & syringes                                           |
|------|--------|--------------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | NY SoS |   | 01/05/00 |   | 003065 |   | — |   | All prescription pharmaceutical products, insulin & syringes                                           |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade       |   | NY SoS |   | 02/24/00 |   | 037585 |   | — |   | Equipment-all replacement parts, accessions & substitutions  #C0885005                                 |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 04/27/00 |   | 083598 |   | — |   | Equipment—Master Lease #37625, Schedule #40890                                                        |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 06/09/00 |   | 114397 |   | — |   | Equipment—Master Lease #37625, Schedule #40960                                                        |
| UCC3 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 06/28/00 |   | 127069 |   | 114397 |   | Amendment-no change to collateral.   Addition of new serial numbers Master Lease #37625 Sched. #40960 |
| UCC1 |   | Crown Credit Company                       |   | Duane Reade       |   | NY SoS |   | 07/06/00 |   | 131963 |   | — |   | Crown Lift Trucks                                                                                          |
| UCC1 |   | Crown Credit Company                       |   | Duane Reade       |   | NY SoS |   | 07/06/00 |   | 131964 |   | — |   | Crown Lift Trucks                                                                                          |
| UCC1 |   | De Lage Landen Financial                   |   | Duane Reade, Inc. |   | NY SoS |   | 07/28/00 |   | 147798 |   | — |   | Equipment—Contract #24350027                                                                          |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | NY SoS |   | 08/10/00 |   | 156271 |   | — |   | Equipment—Master Lease #37625, Schedule #41135                                                        |

 

4

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| UCC3 |   | Orix USA Corporation                    |   | Duane Reade       |   | NY SoS |   | 09/08/00 |   | 174691 |   | 156271 |   | Amendment-no change to collateral.   Addition of new serial numbers Master Lease #37625 Sched. #41135 |
|------|--------|-----------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------|
| UCC1 |   | IBM Credit Corporation                  |   | Duane Reade Inc   |   | NY SoS |   | 12/27/00 |   | 247750 |   | — |   | All computer, information processing equipment—Supplement #914477  12/01/00                           |
| UCC1 |   | IBM Credit Corporation                  |   | Duane Reade Inc   |   | NY SoS |   | 01/25/01 |   | 018314 |   | — |   | All computer, information processing equipment—Supplement #909186  11/21/00                           |
| UCC1 |   | Orix USA Corporation                    |   | Duane Reade, Inc. |   | NY SoS |   | 02/06/01 |   | 025690 |   | — |   | Equipment—Master Lease #37625, Schedule #41597                                                        |
| UCC3 |   | Orix USA Corporation                    |   | Duane Reade, Inc. |   | NY SoS |   | 04/13/01 |   | 072541 |   | 025690 |   | Amendment-No change in collateral. New Serial Numbers added.                                               |
| UCC1 |   | Orix USA Corporation                    |   | Duane Reade, Inc. |   | NY SoS |   | 02/06/01 |   | 025692 |   | — |   | Equipment—Master Lease #37625, Schedule #41598                                                        |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032846 |   | — |   | Equipment—Master Lease #1409-10                                                                       |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032852 |   | — |   | Equipment—Master Lease #1409-10 Schedule 003                                                          |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032855 |   | — |   | Equipment—Master Lease #1409-10 Schedule 004                                                          |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032856 |   | — |   | Equipment—Master Lease #1409-10 Schedule 005                                                          |

 

5

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| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032858 |   | — |   | Equipment—Master Lease #1409-10 Schedule 006 |
|------|--------|-----------------------------------------|--------|------------------|--------|--------|--------|----------|--------|--------|--------|--------|--------|---------------------------------------------------|
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032861 |   | — |   | Equipment—Master Lease #1409-10 Schedule 007 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032863 |   | — |   | Equipment—Master Lease #1409-10 Schedule 008 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032864 |   | — |   | Equipment—Master Lease #1409-10 Schedule 009 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032865 |   | — |   | Equipment—Master Lease #1409-10 Schedule 010 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032867 |   | — |   | Equipment—Master Lease #1409-10 Schedule 011 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032868 |   | — |   | Equipment—Master Lease #1409-10 Schedule 012 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032869 |   | — |   | Equipment—Master Lease #1409-10 Schedule 014 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032870 |   | — |   | Equipment—Master Lease #1409-10 Schedule 016 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032872 |   | — |   | Equipment—Master Lease #1409-10 Schedule 017 |
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc. |   | NY SoS |   | 02/15/01 |   | 032873 |   | — |   | Equipment—Master Lease #1409-10 Schedule 018 |

 

6

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| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032874 |   | — |   | Equipment—Master Lease #1409-10 Schedule 019                                |
|------|--------|-----------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|--------|--------|--------|--------|----------------------------------------------------------------------------------|
| UCC1 |   | Delphi Energy Fund, Inc. (Assignee-CIT) |   | Duane Reade Inc.  |   | NY SoS |   | 02/15/01 |   | 032875 |   | — |   | Equipment—Master Lease #1409-10 Schedule 020                                |
| UCC1 |   | Crown Credit Corporation                |   | Duane Reade Inc.  |   | NY SoS |   | 03/08/01 |   | 045904 |   | — |   | Crown Lift Trucks                                                                |
| UCC1 |   | Crown Credit Corporation                |   | Duane Reade Inc.  |   | NY SoS |   | 04/06/01 |   | 067100 |   | — |   | Crown Lift Truck                                                                 |
| UCC1 |   | IBM Credit Corporation                  |   | Duane Reade Inc   |   | NY SoS |   | 04/25/01 |   | 080587 |   | — |   | All computer, information processing equipment—Supplement #955641  03/27/01 |
| UCC1 |   | Imaging Financial Service, Inc.         |   | Duane Reade, Inc. |   | NY SoS |   | 05/09/01 |   | 090626 |   | — |   | Kodak Picture Maker Units & accessories                                      |
| UCC1 |   | Colonial Pacific Leasing                |   | Duane Reade Inc.  |   | NY SoS |   | 05/24/01 |   | 101763 |   | — |   | Gretag masterflex digital camera module software, etc                            |
| UCC1 |   | Colonial Pacific Leasing                |   | Duane Reade Inc.  |   | NY SoS |   | 05/24/01 |   | 101764 |   | — |   | Gretag masterflex digital camera module software, etc                            |
| UCC1 |   | Orix Financial Services, Inc.           |   | Duane Reade, Inc. |   | NY SoS |   | 01/04/02 |   | 002620 |   | — |   | Equipment—Master Lease #37625, Schedule #41650                              |
| UCC1 |   | Orix Financial Services, Inc.           |   | Duane Reade       |   | NY SoS |   | 02/25/02 |   | 045582 |   | — |   | Equipment-Film along with cash and noncash proceeds                              |
| UCC1 |   | Orix Financial Services, Inc.           |   | Duane Reade       |   | NY SoS |   | 02/25/02 |   | 045726 |   | — |   | Gretag equipment                                                                 |

 

7

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| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/25/02 |   | 045753            |   | —          |   | Equipment-Film along with cash and noncash proceeds                      |
|------|--------|--------------------------------------|--------|------------------|--------|--------|--------|----------|--------|-------------------|--------|-----------------|--------|--------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/27/02 |   | 047365            |   | —          |   | Equipment-all replacement parts, accessions & substitutions          |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 03/18/02 |   | 063337            |   | —          |   | Gretag equipment                                                         |
| UCC1 |   | General Electric Capital Corporation |   | Duane Reade Inc. |   | NY SoS |   | 04/30/02 |   | 099949            |   | —          |   | Gretag equipment                                                         |
| UCC1 |   | Tennant Financial Services           |   | Duane Reade Inc. |   | NY SoS |   | 05/21/02 |   | 117870            |   | —          |   | Tennant Model 8300 Sweeper/Scrubber                                      |
| UCC1 |   | General Electric Capital Corporation |   | Duane Reade Inc. |   | NY SoS |   | 05/23/02 |   | 119837            |   | —          |   | Gretag equipment                                                         |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 12/19/02 |   | 200212192  818827 |   | —          |   | Gretag masterflex digital minilabs                                       |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/04/03 |   | 200302040  255667 |   | —          |   | Equipment-Printer along with cash and noncash proceeds                   |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/27/03 |   | 200302270  438954 |   | —          |   | Fuji frontier mini lab                                                   |
| UCC3 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 10/30/03 |   | 200310301  793381 |   | 200302270438954 |   | Amendment-No change in collateral.   New serial Numbers were added. |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/27/03 |   | 200302270  438978 |   | —          |   | Fuji frontier mini lab                                                   |
| UCC1 |   | Orix Financial Services, Inc.        |   | Duane Reade      |   | NY SoS |   | 02/27/03 |   | 200302270  438992 |   | —          |   | Fuji frontier mini lab                                                   |

 

8

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| UCC3 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 06/04/03 |   | 200306041  111991 |   | 200302270438992 |   | Amendment-No change in collateral.   New serial Numbers were added.                                                  |
|------|--------|-------------------------------------------------|--------|-------------|--------|--------|--------|----------|--------|-------------------|--------|-----------------|--------|---------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 03/13/03 |   | 200303130  556553 |   | —          |   | Fuji frontier mini lab                                                                                                    |
| UCC1 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 03/18/03 |   | 200303180  592319 |   | —          |   | Fuji frontier mini lab                                                                                                    |
| UCC3 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 06/04/03 |   | 200306041  111977 |   | 200303180592319 |   | Amendment-No change in collateral.   New serial Numbers were added.                                                  |
| UCC1 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 04/17/03 |   | 200304170  834488 |   | —          |   | Fuji frontier mini lab                                                                                                    |
| UCC3 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 06/04/03 |   | 200306041  111941 |   | 200304170834488 |   | Amendment-No change in collateral.   New serial Numbers were added.                                                  |
| UCC1 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 07/03/03 |   | 200307031  274399 |   | —          |   | Fuji frontier mini lab                                                                                                    |
| UCC3 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 07/21/03 |   | 200307211  358547 |   | 200307031274399 |   | Amendment-No change in collateral.   New serial Numbers were added.                                                  |
| UCC1 |   | Fleet Retail Finance, Inc., as Collateral Agent |   | Duane Reade |   | NY SoS |   | 07/17/03 |   | 200307173  41389  |   | —          |   | Blanket                                                                                                                   |
| UCC3 |   | Fleet Retail Finance, Inc., as Collateral Agent |   | Duane Reade |   | NY SoS |   | 07/29/03 |   | 200307291  395717 |   | 20030717341389  |   | Amendment-restated collateral description excluding “Excluded  Collateral” which are various insurance policies |
| UCC1 |   | Orix Financial Services, Inc.                   |   | Duane Reade |   | NY SoS |   | 07/23/03 |   | 200307231  369760 |   | —          |   | Fuji frontier mini lab                                                                                                    |

 

9

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| UCC1 |   | Key Equipment Finance, a Division of Key Corporate Capital Inc. |   | Duane Reade, Inc. |   | NY SoS                                    |   | 07/25/03 |   | 200307251  378573 |   | —          |   | All right, title & interest in & to Master Flex Digital 1008                                                                    |
|------|--------|-----------------------------------------------------------------|--------|-------------------|--------|-------------------------------------------|--------|----------|--------|-------------------|--------|-----------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 10/10/03 |   | 200310101  706158 |   | —          |   | Fuji frontier mini lab                                                                                                                  |
| UCC3 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 11/10/03 |   | 200311101  834997 |   | 200310101706158 |   | Amendment-No change in collateral.   New serial Numbers were added                                                                 |
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 11/25/03 |   | 200311251  900189 |   | —          |   | Fuji frontier mini lab                                                                                                                  |
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 12/01/03 |   | 200312011  917201 |   | —          |   | Fuji frontier mini lab                                                                                                                  |
| UCC3 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 12/22/03 |   | 200312222  005291 |   | 200312011917201 |   | Amendment-No change in collateral.   New serial Numbers were added                                                                 |
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NY SoS                                    |   | 12/10/03 |   | 200312101  956187 |   | —          |   | Fuji frontier mini lab                                                                                                                  |
| UCC1 |   | FINOVA Capital Corporation                                      |   | Duane Reade Inc.  |   | Richmond County, NY                       |   | 02/25/00 |   | 2000-510          |   | —          |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 02/26/02 |   | 20896072          |   | —          |   | Gretag equipment                                                                                                                        |
| UCC1 |   | Orix Financial Services, Inc.                                   |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 12/18/02 |   | 21355677          |   | —          |   | Gretag masterflex digital minilabs                                                                                                      |

 

10

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| UCC1 |   | Orix Financial Services, Inc.              |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 02/04/03 |   | 21419546 |   | —   |   | Equipment-Printer along with cash and noncash proceeds                    |
|------|--------|--------------------------------------------|--------|-------------------|--------|-------------------------------------------|--------|----------|--------|----------|--------|----------|--------|---------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc.              |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 02/24/03 |   | 21446733 |   | —   |   | Fuji frontier mini lab                                                    |
| UCC3 |   | Orix Financial Services, Inc.              |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 09/03/03 |   | 21446733 |   | 21446733 |   | Amendment-No change to collateral.   Addition of new serial numbers. |
| UCC1 |   | Orix Financial Services, Inc.              |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 12/01/03 |   | 21907357 |   | —   |   | Fuji frontier mini lab                                                    |
| UCC3 |   | Orix Financial Services, Inc.              |   | Duane Reade       |   | NJ Dept. of Treasury Commercial Recording |   | 12/26/03 |   | 21907357 |   | 21907357 |   | Amendment-No change to collateral.   Addition of new serial numbers. |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | NJ Dept. of Treasury Commercial Recording |   | 11/16/99 |   | 1941416  |   | —   |   | All prescription pharmaceutical products, insulin & syringes          |
| UCC3 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | NJ Dept. of Treasury Commercial Recording |   | 07/25/00 |   | 1941416  |   | 1941416  |   | Assignment to: The Chase Manhattan Bank                                   |

 

11

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| UCC1 |   | Bergen Brunswig Drug Company, as Consignor      |   | Duane Reade, Inc. |   | NJ Dept. of Treasury Commercial Recording |   | 11/16/99 |   | 1941417  |   | —   |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
|------|--------|-------------------------------------------------|--------|-------------------|--------|-------------------------------------------|--------|----------|--------|----------|--------|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC3 |   | Bergen Brunswig Drug Company, as Consignor      |   | Duane Reade, Inc. |   | NJ Dept. of Treasury Commercial Recording |   | 07/25/00 |   | 1941417  |   | 1941417  |   | Assignment to: The Chase Manhattan Bank                                                                                                 |
| UCC1 |   | Fleet Retail Finance, Inc., as Collateral Agent |   | DRI I Inc.        |   | DE SoS                                    |   | 07/17/03 |   | 31831307 |   | —   |   | Blanket                                                                                                                                 |
| UCC3 |   | Fleet Retail Finance, Inc., as Collateral Agent |   | DRI I Inc.        |   | DE SoS                                    |   | 07/29/03 |   | 31960163 |   | 31831307 |   | Amendment-restated collateral description excluding “Excluded  Collateral” which are various insurance policies               |
| UCC1 |   | FINOVA Capital Corporation                      |   | Duane Reade Inc.  |   | DE SoS                                    |   | 02/24/00 |   | 0011253  |   | —   |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
| UCC1 |   | Crown Credit Company                            |   | Duane Reade Inc.  |   | DE SoS                                    |   | 07/11/01 |   | 10670708 |   | —   |   | Crown Lift Truck                                                                                                                        |
| UCC1 |   | Crown Credit Company                            |   | Duane Reade Inc.  |   | DE SoS                                    |   | 07/11/01 |   | 10670757 |   | —   |   | Crown Lift Trucks                                                                                                                       |

 

12

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| UCC1 |   | GE Capital Colonial Pacific Leasing |   | Duane Reade, Inc. |   | DE SoS |   | 07/19/01 |   | 10734660 |   | — |   | Masterflex digital 1008 photo processing machine                                                                                        |
|------|--------|-------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | GE Capital Colonial Pacific Leasing |   | Duane Reade, Inc. |   | DE SoS |   | 07/20/01 |   | 10762133 |   | — |   | Masterflex digital 1008 photo processing machine                                                                                        |
| UCC1 |   | GE Capital Colonial Pacific Leasing |   | Duane Reade, Inc. |   | DE SoS |   | 08/01/01 |   | 10841861 |   | — |   | Masterflex digital 1008 photo processing machine                                                                                        |
| UCC1 |   | Crown Credit Company                |   | Duane Reade Inc.  |   | DE SoS |   | 10/03/01 |   | 11304208 |   | — |   | Crown Lift Trucks                                                                                                                       |
| UCC1 |   | Orix Financial Services, Inc.       |   | Duane Reade       |   | DE SoS |   | 10/11/01 |   | 11371603 |   | — |   | Equipment-under lease # 42144                                                                                                           |
| UCC1 |   | Orix Financial Services, Inc.       |   | Duane Reade       |   | DE SoS |   | 10/11/01 |   | 11372080 |   | — |   | Equipment-under lease #42145                                                                                                            |
| UCC1 |   | Orix Financial Services, Inc.       |   | Duane Reade Inc.  |   | DE SoS |   | 10/19/01 |   | 11441240 |   | — |   | Equipment-under lease #42188                                                                                                            |
| UCC1 |   | Crown Credit Company                |   | Duane Reade, Inc. |   | DE SoS |   | 11/05/01 |   | 11606164 |   | — |   | Crown Lift Truck                                                                                                                        |
| UCC1 |   | Orix Financial Services, Inc.       |   | Duane Reade, Inc. |   | DE SoS |   | 11/09/01 |   | 11648554 |   | — |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |

 

13

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| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade Inc. |   | DE SoS |   | 11/09/01 |   | 11648836 |   | — |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
|------|--------|-------------------------------|--------|------------------|--------|--------|--------|----------|--------|----------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade Inc. |   | DE SoS |   | 12/20/01 |   | 20170781 |   | — |   | Gretag masterflex digital minilab model                                                                                                 |
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade Inc. |   | DE SoS |   | 12/20/01 |   | 20170815 |   | — |   | Gretag masterflex digital minilab model                                                                                                 |
| UCC1 |   | Delphi Energy Fund, Inc.      |   | Duane Reade Inc. |   | DE SoS |   | 02/14/02 |   | 20402168 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 028                                                                              |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc. |   | DE SoS |   | 02/20/02 |   | 20444921 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 029                                                                              |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc. |   | DE SoS |   | 02/20/02 |   | 20445142 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 030                                                                              |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc. |   | DE SoS |   | 02/20/02 |   | 20445720 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 031                                                                              |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc. |   | DE SoS |   | 02/20/02 |   | 20446454 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 033                                                                              |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc. |   | DE SoS |   | 02/20/02 |   | 20446652 |   | — |   | Goods & equipment—Lease No. 1409-10, Schedule 034                                                                              |

 

14

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| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 02/20/02 |   | 20446868 |   | —   |   | Goods & equipment—Lease No. 1409-10, Schedule 035                        |
|------|--------|-------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|----------|--------|-----------------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade, Inc. |   | DE SoS |   | 02/15/02 |   | 20614358 |   | —   |   | Gretag equipment                                                                  |
| UCC3 |   | Orix Financial Services, Inc. |   | Duane Reade, Inc. |   | DE SoS |   | 06/17/02 |   | 21728595 |   | 20614358 |   | Amendment—Debtor name change to: Duane Reade                                 |
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade, Inc. |   | DE SoS |   | 02/25/02 |   | 20680664 |   | —   |   | Equipment—Film Tools                                                         |
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade, Inc. |   | DE SoS |   | 02/25/02 |   | 20680714 |   | —   |   | Equipment—Film Tools                                                         |
| UCC1 |   | Crown Credit Company          |   | Duane Reade, Inc. |   | DE SoS |   | 02/26/02 |   | 20681365 |   | —   |   | Crown Lift Trucks                                                                 |
| UCC1 |   | Bank of the West              |   | Duane Reade Inc.  |   | DE SoS |   | 03/19/02 |   | 20702567 |   | —   |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 001 |
| UCC1 |   | Bank of the West              |   | Duane Reade Inc.  |   | DE SoS |   | 03/19/02 |   | 20702781 |   | —   |   | Equipment, general intangibles-Master Lease Agreement 1423-10,  Schedule 002      |
| UCC1 |   | Bank of the West              |   | Duane Reade Inc.  |   | DE SoS |   | 03/19/02 |   | 20703128 |   | —   |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 003 |
| UCC1 |   | Bank of the West              |   | Duane Reade Inc.  |   | DE SoS |   | 03/19/02 |   | 20703458 |   | —   |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 004 |

 

15

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| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20703656 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 005 |
|------|--------|------------------|--------|------------------|--------|--------|--------|----------|--------|----------|--------|--------|--------|-----------------------------------------------------------------------------------|
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20703755 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 006 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20703904 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 007 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20704209 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 008 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20704530 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 009 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20704738 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 010 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20704944 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 011 |
| UCC1 |   | Bank of the West |   | Duane Reade Inc. |   | DE SoS |   | 03/19/02 |   | 20705396 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 012 |

 

16

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| UCC1 |   | Bank of the West              |   | Duane Reade Inc.  |   | DE SoS |   | 03/19/02 |   | 20705644 |   | — |   | Equipment, general intangibles—Master Lease Agreement 1423-10,  Schedule 014 |
|------|--------|-------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|--------|--------|-----------------------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc. |   | Duane Reade, Inc. |   | DE SoS |   | 03/18/02 |   | 20886295 |   | — |   | Gretag equipment                                                                  |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21068869 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 001                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21068919 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 002                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21068976 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 003                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21069065 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 004                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21069115 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 005                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21069214 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 006                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21069354 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 007                        |
| UCC1 |   | Allen and Company             |   | Duane Reade Inc.  |   | DE SoS |   | 04/30/02 |   | 21069545 |   | — |   | Goods & equipment—Lease No. 1426-10, Schedule 008                        |

 

17

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| UCC1 |   | Allen and Company                                              |   | Duane Reade Inc. |   | DE SoS |   | 04/30/02 |   | 21069701 |   | —   |   | Goods & equipment—Lease No. 1426-10, Schedule 009                                                                                         |
|------|--------|----------------------------------------------------------------|--------|------------------|--------|--------|--------|----------|--------|----------|--------|----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | FINOVA Capital Corporation                                     |   | Duane Reade Inc. |   | DE SoS |   | 05/15/02 |   | 21219348 |   | —   |   | In Lieu filing                                                                                                                                     |
| UCC1 |   | FINOVA Capital Corporation                                     |   | Duane Reade Inc. |   | DE SoS |   | 05/15/02 |   | 21219587 |   | —   |   | In Lieu filing                                                                                                                                     |
| UCC1 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc. |   | DE SoS |   | 05/08/02 |   | 21336647 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule Nos. 1-5                                                                      |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc. |   | DE SoS |   | 06/12/02 |   | 21440167 |   | 21336647 |   | Partial assignment to Key Equipment Finance, a division of Key  Corporate Capital Inc.—Master Lease Agreement No. 300327, Schedule No. 1 |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc. |   | DE SoS |   | 07/01/02 |   | 21612948 |   | 21336647 |   | Full assignment to Key Equipment Finance, a division of Key Corporate  Capital Inc.—Master Lease Agreement No. 300327, Schedule No. 1    |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc. |   | DE SoS |   | 07/02/02 |   | 21865611 |   | 21336647 |   | Full assignment to Excel Bank-Master Lease Agreement No. 300327,  Schedule No. 3                                                         |

 

18

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| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS |   | 07/08/02 |   | 21896780 |   | 21336647 |   | Full assignment to Excel Bank—Master Lease Agreement No. 300327,  Schedule No. 4       |
|------|--------|----------------------------------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|----------|--------|--------------------------------------------------------------------------------------------------|
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS |   | 07/08/02 |   | 21897176 |   | 21336647 |   | Full assignment to BankChicago—Master Lease Agreement No. 300327,  Schedule No. 2      |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS |   | 08/08/02 |   | 22060360 |   | 21336647 |   | Full assignment to Excel Bank, N.A.—Master Lease Agreement No. 300327,  Schedule No. 5 |
| UCC1 |   | IBM Credit Corporation                                         |   | Duane Reade Inc.  |   | DE SoS |   | 06/03/02 |   | 21637903 |   | —   |   | Equipment & software—IBM Credit Supplement #062946                                      |
| UCC1 |   | IBM Credit Corporation                                         |   | Duane Reade Inc.  |   | DE SoS |   | 06/06/02 |   | 21665698 |   | —   |   | Equipment & software—IBM Credit Supplement #026808                                      |
| UCC1 |   | Crown Credit Company                                           |   | Duane Reade, Inc. |   | DE SoS |   | 06/18/02 |   | 21744154 |   | —   |   | Crown Lift Trucks                                                                                |
| UCC1 |   | Crown Credit Company                                           |   | Duane Reade, Inc. |   | DE SoS |   | 06/18/02 |   | 21744170 |   | —   |   | Crown Lift Truck                                                                                 |
| UCC1 |   | The CIT Group/Equipment Financing, Inc.                        |   | Duane Reade Inc.  |   | DE SoS |   | 06/28/02 |   | 21843535 |   | —   |   | Equipment-Energy Management Control Systems                                                      |
| UCC1 |   | IBM Credit Corporation                                         |   | Duane Reade Inc.  |   | DE SoS |   | 07/01/02 |   | 21852924 |   | —   |   | Equipment & software—IBM Credit Supplement #092134                                      |
| UCC1 |   | Crown Credit Company                                           |   | Duane Reade, Inc. |   | DE SoS |   | 07/02/02 |   | 21869225 |   | —   |   | Crown Lift Truck                                                                                 |

 

19

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| UCC1 |   | The CIT Group/Equipment Financing, Inc.        |   | Duane Reade Inc.  |   | DE SoS |   | 08/27/02 |   | 22216533 |   | —   |   | Equipment-Energy Management Control Systems                           |
|------|--------|------------------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|----------|--------|-----------------------------------------------------------------------|
| UCC1 |   | Orix Financial Services, Inc.                  |   | Duane Reade, Inc. |   | DE SoS |   | 10/10/02 |   | 22657249 |   | —   |   | Equipment-under lease #42274                                          |
| UCC1 |   | The CIT Group/Equipment Financing, Inc.        |   | Duane Reade Inc.  |   | DE SoS |   | 11/04/02 |   | 22880783 |   | —   |   | Equipment-attachment not available                                    |
| UCC1 |   | IBM Credit LLC                                 |   | Duane Reade Inc.  |   | DE SoS |   | 01/07/03 |   | 30215338 |   | —   |   | Equipment & software—IBM Credit LLC Supplement #141857       |
| UCC1 |   | The CIT Group/Equipment Financing, Inc.        |   | Duane Reade Inc.  |   | DE SoS |   | 01/17/03 |   | 30308745 |   | —   |   | Equipment-Energy Management Control Systems                           |
| UCC1 |   | The CIT Group/Equipment Financing, Inc.        |   | Duane Reade Inc.  |   | DE SoS |   | 03/10/03 |   | 30731409 |   | —   |   | Equipment-Schedule No.4 dd.12/11/02 to Master Lease Agrmt             |
| UCC1 |   | Crown Credit Company                           |   | Duane Reade, Inc. |   | DE SoS |   | 06/03/03 |   | 31393209 |   | —   |   | Crown Lift Trucks                                                     |
| UCC1 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 06/11/03 |   | 31474249 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 6 |
| UCC3 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 06/18/03 |   | 31540585 |   | 31474249 |   | Full Assignment to Excel Bank                                         |
| UCC1 |   | Fleet Retail Finance Inc., as Collateral Agent |   | Duane Reade Inc.  |   | DE SoS |   | 07/17/03 |   | 31831323 |   | —   |   | Blanket                                                               |

 

20

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| UCC3 |   | Fleet Retail Finance Inc., as Collateral Agent |   | Duane Reade Inc.  |   | DE SoS |   | 07/29/03 |   | 31950321 |   | 31831323 |   | Amendment-restated collateral description excluding “Excluded  Collateral” which are various insurance policies |
|------|--------|------------------------------------------------|--------|-------------------|--------|--------|--------|----------|--------|----------|--------|----------|--------|---------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | De Lage Landen Financial Services, Inc.        |   | Duane Reade, Inc. |   | DE SoS |   | 06/19/03 |   | 31858938 |   | —   |   | Savin Equipment                                                                                                           |
| UCC1 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 07/24/03 |   | 31903858 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 7                                                     |
| UCC3 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 07/24/03 |   | 31904062 |   | 31903858 |   | Full Assignment to Sterling National Bank                                                                                 |
| UCC1 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 08/20/03 |   | 32165820 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 8                                                     |
| UCC3 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 08/20/03 |   | 32165861 |   | 32165820 |   | Full Assignment to First Bank of Highland Park                                                                            |
| UCC1 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 08/25/03 |   | 32202136 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 9                                                     |
| UCC3 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 09/05/03 |   | 32300906 |   | 32202136 |   | Full Assignment to First Bank of Highland Park                                                                            |
| UCC1 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 08/25/03 |   | 32202169 |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 10                                                    |
| UCC3 |   | IFC Credit Corporation                         |   | Duane Reade Inc.  |   | DE SoS |   | 09/05/03 |   | 32301029 |   | 32202169 |   | Full Assignment to First Bank of Highland Park                                                                            |

 

21

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| UCC1 |   | Crown Credit Company                                           |   | Duane Reade, Inc. |   | DE SoS            |   | 08/26/03 |   | 32207150     |   | —   |   | Crown Lift Trucks                                                      |
|------|--------|----------------------------------------------------------------|--------|-------------------|--------|-------------------|--------|----------|--------|--------------|--------|----------|--------|------------------------------------------------------------------------|
| UCC1 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 11/03/03 |   | 32875196     |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 11 |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 11/03/03 |   | 32875337     |   | 32875196 |   | Full assignment to Excel Bank, N.A.                                    |
| UCC1 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 12/18/03 |   | 33343459     |   | —   |   | All equipment under Master Lease Agreement No. 300327, Schedule No. 12 |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 12/18/03 |   | 33343947     |   | 33343459 |   | Full assignment to American Enterprise Bank                            |
| UCC1 |   | Orix USA Corporation                                           |   | Duane Reade       |   | Nassau County, NY |   | 08/13/99 |   | UC  99013451 |   | —   |   | Equipment—Master lease no. 37625, lease schedule no. 40279        |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor                     |   | Duane Reade, Inc. |   | Nassau County, NY |   | 12/03/99 |   | UC  99019499 |   | —   |   | All prescription pharmaceutical products, insulin & syringes       |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor                     |   | Duane Reade       |   | Nassau County, NY |   | 12/03/99 |   | UC  99019501 |   | —   |   | All prescription pharmaceutical products, insulin & syringes       |

 

22

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| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | Nassau County, NY |   | 12/29/99 |   | UC  99020542 |   | — |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds #C0885003 |
|------|--------|--------------------------------------------|--------|-------------------|--------|-------------------|--------|----------|--------|--------------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | Queens County, NY |   | 12/09/99 |   | 99  PQ20098  |   | — |   | All prescription pharmaceutical products, insulin & syringes                                                                                  |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | Queens County, NY |   | 12/09/99 |   | 99  PQ20099  |   | — |   | All prescription pharmaceutical products, insulin & syringes                                                                                  |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | Queens County, NY |   | 01/05/00 |   | 00  PQ00157  |   | — |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds           |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | Queens County, NY |   | 01/05/00 |   | 00  PQ00158  |   | — |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds           |

 

23

----

 
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | Queens County, NY |   | 03/07/00 |   | 00  PQ03845 |   | —      |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
|------|--------|--------------------------------------------|--------|-------------------|--------|-------------------|--------|----------|--------|-------------|--------|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Crown Credit Company                       |   | Duane Reade       |   | Queens County, NY |   | 07/11/00 |   | 00  PQ11229 |   | —      |   | Crown Lift Trucks                                                                                                                       |
| UCC1 |   | Crown Credit Company                       |   | Duane Reade       |   | Queens County, NY |   | 07/11/00 |   | 00  PQ11230 |   | —      |   | Crown Lift Trucks                                                                                                                       |
| UCC1 |   | Crown Credit Company                       |   | Duane Reade Inc.  |   | Queens County, NY |   | 03/12/01 |   | 01  PQ03982 |   | —      |   | Crown Lift Trucks                                                                                                                       |
| UCC1 |   | Crown Credit Company                       |   | Duane Reade Inc.  |   | Queens County, NY |   | 04/10/01 |   | 01  PQ05814 |   | —      |   | Crown Lift Truck                                                                                                                        |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | Kings County, NY  |   | 11/19/99 |   | 99  PK16826 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
| UCC3 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | Kings County, NY  |   | 07/27/00 |   | 00  PK10146 |   | 99  PK16826 |   | Assignment to: The Chase Manhattan Bank, as collateral agent                                                                            |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | Kings County, NY  |   | 11/19/99 |   | 99  PK16827 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade Inc.  |   | Kings County, NY  |   | 12/29/99 |   | 99  PK18851 |   | —      |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |

 

24

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| UCC1 |   | FINOVA Capital Corporation                   |   | Duane Reade Inc.         |   | Kings County, NY  |   | 03/06/00 |   | 00  PK02902 |   | —      |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
|------|--------|----------------------------------------------|--------|--------------------------|--------|-------------------|--------|----------|--------|-------------|--------|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | Orix USA Corporation                         |   | Duane Reade              |   | Kings County, NY  |   | 06/14/00 |   | 00  PK08154 |   | —      |   | Equipment—Master lease no. 37625, lease schedule no. 40960                                                                         |
| UCC3 |   | Orix USA Corporation                         |   | Duane Reade              |   | Kings County, NY  |   | 07/07/00 |   | 00  PK09317 |   | 00  PK08154 |   | Amendment-No change to collateral.   Addition of new serial numbers.                                                               |
| UCC1 |   | El Camino Resources, Ltd.                    |   | Duane Reade              |   | Queens County, NY |   | 08/13/99 |   | 99  PN43967 |   | —      |   | Equipment—Master lease no. 4045, Schedule no. 1                                                                                    |
| UCC1 |   | Fleet National Bank, as Administrative Agent |   | Duane Reade Realty, Inc. |   | Queens County, NY |   | 09/24/99 |   | 99  PN52642 |   | —      |   | Blanket                                                                                                                                 |
| UCC1 |   | FINOVA Capital Corporation                   |   | Duane Reade              |   | Queens County, NY |   | 11/04/99 |   | 99  PN59987 |   | —      |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor   |   | Duane Reade, Inc.        |   | Queens County, NY |   | 11/18/99 |   | 99  PN62825 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |

 

25

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| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | Queens County, NY |   | 11/18/99 |   | 99  PN62826 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
|------|--------|--------------------------------------------|--------|-------------------|--------|-------------------|--------|----------|--------|-------------|--------|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | FINOVA Capital Corporation                 |   | Duane Reade       |   | Queens County, NY |   | 01/03/00 |   | 00  PN00107 |   | —      |   | Equipment-and all replacement parts, accessions & substitutions  & all cash & noncash proceeds including insurance proceeds |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | Queens County, NY |   | 04/28/00 |   | 00  PN21919 |   | —      |   | Equipment—Master lease no. 37625, lease schedule no. 40890                                                                         |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade, Inc. |   | Queens County, NY |   | 07/20/00 |   | 00  PN36022 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
| UCC1 |   | Bergen Brunswig Drug Company, as Consignor |   | Duane Reade       |   | Queens County, NY |   | 07/20/00 |   | 00  PN36023 |   | —      |   | All prescription pharmaceutical products, insulin & syringes                                                                        |
| UCC1 |   | De Lage Landen Financial Services, Inc.    |   | Duane Reade, Inc. |   | Queens County, NY |   | 08/01/00 |   | 00  PN38140 |   | —      |   | Toshiba copier systems                                                                                                                  |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade       |   | Queens County, NY |   | 08/16/00 |   | 00  PN41092 |   | —      |   | Equipment—Master lease no. 37625, lease schedule no. 41135                                                                         |
| UCC3 |   | Orix USA Corporation                       |   | Duane Reade       |   | Queens County, NY |   | 09/22/00 |   | 00  PN46937 |   | 00  PN41092 |   | Amendment-No change to collateral.   Addition of new serial numbers.                                                               |
| UCC1 |   | Orix USA Corporation                       |   | Duane Reade, Inc. |   | Queens County, NY |   | 02/08/01 |   | 01  PN06340 |   | —      |   | Equipment—Master lease no. 37625, lease schedule no. 41597                                                                         |

 

26

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| UCC3 |   | Orix USA Corporation                                           |   | Duane Reade, Inc. |   | Queens County, NY |   | 04/24/01 |   | 01  PN19601       |   | 01  PN06340 |   | Amendment-No change to collateral.   Addition of new serial numbers.                       |
|------|--------|----------------------------------------------------------------|--------|-------------------|--------|-------------------|--------|----------|--------|-------------------|--------|-------------|--------|-------------------------------------------------------------------------------------------------|
| UCC1 |   | Orix USA Corporation                                           |   | Duane Reade, Inc. |   | Queens County, NY |   | 02/08/01 |   | 01  PN06341       |   | —      |   | Equipment—Master lease no. 37625, lease schedule no. 41598                                 |
| UCC1 |   | Imaging Financial Services Inc.                                |   | Duane Reade, Inc. |   | Queens County, NY |   | 05/21/01 |   | 01  PN23359       |   | —      |   | 3 Kodak picture maker units                                                                     |
| UCC1 |   | Colonial Pacific Leasing                                       |   | Duane Reade, Inc. |   | Queens County, NY |   | 06/13/01 |   | 01  PN28480       |   | —      |   | Gretag masterflex digital camera module software, etc.                                          |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 12/18/03 |   | 33343947          |   | 33343459    |   | Full assignment to American Enterprise Bank                                                     |
| UCC3 |   | Spectrum Medical Leasing, a division of IFC Credit Corporation |   | Duane Reade Inc.  |   | DE SoS            |   | 12/18/03 |   | 33343947          |   | 33343459    |   | Full assignment to American Enterprise Bank                                                     |
| UCC1 |   | Orix Financial Services Inc.                                   |   | Duane Reade       |   | NY SoS            |   | 03/30/04 |   | 200403305  247791 |   |        |   | Equipment-Printer & all accessories, replacements, along with cash  & non-cash proceeds |
| UCC3 |   | Orix Financial Services Inc.                                   |   | Duane Reade       |   | NY SoS            |   | 04/08/04 |   | 200404085  277523 |   |        |   | Amendment-restated Collateral Description by adding new serial numbers                          |

 

27

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| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 05/27/04 |   | 200405275  433818 |   |            |   | Equipment-covered under Lease Schedule No.15 to Master Lease Agrmt  No.300327                                          |
|------|--------|------------------------|--------|------------------|--------|--------|--------|----------|--------|-------------------|--------|-----------------|--------|------------------------------------------------------------------------------------------------------------------------|
| UCC3 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  528196 |   | 200405275433818 |   | Amendment-restated collateral description to amend all equip. covered  under Master Lease No.300327 Lease Sched No.015 |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 05/27/04 |   | 200452754  33844  |   |            |   | Equipment-covered under Lease Schedule No.13 to Master Lease Agrmt  No.300327                                          |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 05/27/04 |   | 200405275  434795 |   |            |   | Equipment-covered under Lease Schedule No.14 to Master Lease Agrmt  No.300327                                          |
| UCC3 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  28211  |   | 200405275434795 |   | Amendment-restated collateral description to amend all equip. covered  under Master Lease No.300327 Lease Sched No.014 |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 05/27/04 |   | 200405275  434834 |   |            |   | Equipment-covered under Lease Schedule No.16 to Master Lease Agrmt  No.300327                                          |

 

28

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| UCC3 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  528184 |   | 200405275434834 |   | Amendment-restated collateral description to amend all equip. covered  under Master Lease No.300327 Lease Sched No.016 |
|------|--------|------------------------|--------|------------------|--------|--------|--------|----------|--------|-------------------|--------|-----------------|--------|------------------------------------------------------------------------------------------------------------------------|
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  527877 |   |            |   | Equipment-covered under Lease Schedule No.16 to Master Lease Agrmt  No.300327                                          |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  527904 |   |            |   | Equipment-covered under Lease Schedule No.18 to Master Lease Agrmt  No.300327                                          |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SoS |   | 06/25/04 |   | 200406255  527954 |   |            |   | Equipment-covered under Lease Schedule No.19 to Master Lease Agrmt  No.300327                                          |
| UCC1 |   | IFC Credit Corporation |   | Duane Reade Inc. |   | NY SOS |   | 06/25/04 |   | 200406255  528019 |   |            |   | Equipment-covered under Lease Schedule No.17 to Master Lease Agrmt  No.300327                                          |

 

29

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**SCHEDULE 7.06**

 

**Investments**

 

 
| **Entity**                      | ** ** | **Entity Holds Interests in the Following:** |
|---------------------------------|------------|----------------------------------------------|
| Duane Reade Inc.                |       | 1.                                           | Investment in Arclight Systems LLC, a Delaware limited liability  company pursuant to the Arclight Systems LLC Limited Liability Company  Agreement, dated February 26, 2001 |
|                            |       |                                         |   |
|                            |       | 2.                                           | Investment in Chain Drug Consortium LLC, a Delaware limited liability  company pursuant to the Chain Drug Consortium Operating Agreement, dated  August 1, 2000, as amended June 7, 2003 |
|                            |       |                                         |   |
|                            |       | 3.                                           | Partnership interest in Duane Reade |
|                            |       |                                         |   |
| DRI I Inc.                      |       | 1.                                           | Partnership interest in Duane Reade |
|                            |       |                                         |   |
| Duane Reade International, Inc. |       | 1.                                           | Promissory Note issued by Duane Reade Inc. to Duane Reade International,  Inc. |

 

----

 

**SCHEDULE 7.07(iii)**

 

**Redemption/Repurchaseof Equity Interests: Employment Agreements**

 

 

Reference is made to each of the employment and consulting agreementsin Item 1. of Schedule 7.09 attached hereto.

 

----

 

**SCHEDULE 7.07(vii)**

 

**Restricted Payments To Be Made on theClosing Date**

 

 

1.                                       Repurchasesof outstanding common stock of DRI in connection with the Transaction.

 

2.                                       Cash-outpayments for outstanding options and any existing price guarantees of stockoptions in connection with the consummation of the Transaction.

 

3.                                       Issuancesof stock options and phantom stock awards of Holdings in connection with theconsummation of the Transaction.

 

----

 

**Transactions with Affiliates**

 

1.             The followingagreements and transactions:

 
| **Loan Party**                         | ** ** | **Description**                                                                                                                                                                                                                                             |
|----------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Duane Reade Inc.                       |       | Amended and Restated  Employment Agreement dated August 12, 2002, with Anthony J. Cuti.                                                                                                                                                                     |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Executive Life Program  Split Dollar Agreement between Anthony J. Cuti and Duane Reade, Inc., dated  January 25, 2002.                                                                                                                                      |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Employment Letter, dated  June 10, 1999, with John K. Henry.                                                                                                                                                                                                |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Employment Agreement,  dated October 9, 1996, as amended, with Jerry M. Ray.                                                                                                                                                                                |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Employment Agreement,  dated February 22, 1993, as amended, with Gary Charboneau.                                                                                                                                                                           |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Split Dollar Life  Insurance Policies covering Messrs. Cuti, Charboneau, Henry & Ray.                                                                                                                                                                   |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Long-term cash target  awards applicable to Messrs. Charboneau, Ray & Henry.                                                                                                                                                                            |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Employment Agreement,  dated June 25, 2003, with Timothy R. LaBeau.                                                                                                                                                                                         |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Consulting Agreement with  Transportation Services International, an entity operated by Joseph Cuti.                                                                                                                                                        |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Relationship with DRI  Investment Group, LLC, as more fully described in the Company’s most recent  Proxy Statement dated June 30, 2004.                                                                                                               |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Inc.                       |       | Management Services  Agreement, dated as of July 30, 2004, between Oak Hill Capital Management,  Inc. and Duane Reade Acquisition Corp., as the same may be amended, modified  or supplemented from time to time in accordance with the provisions thereof. |
|                                   |       |                                                                                                                                                                                                                                                        |
| Duane Reade Holdings and  Subsidiaries |       | Tax Sharing Agreement,  dated as of July 30, 2004, among Duane Reade Holdings, Inc. and its  Subsidiaries as amended, restated or modified from time to time.                                                                                               |

 

1

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| Duane Reade Holdings       |   | Stockholders and  Registration Rights Agreement, dated as of July 30, 2004, between Duane Reade  Holdings, Inc., Duane Reade Shareholders, LLC, and certain members of the  management of Duane Reade Inc., as amended, restated or modified from time to  time, and the transactions contemplated thereunder. |
|----------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade                |   | Employment Agreement,  dated as of March 19, 2004, and amended on June 18, 2004, between Anthony J.  Cuti and Duane Reade Acquisition Corp. and all transactions contemplated  thereunder                                                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade                |   | Employment Agreement,  dated as of March 16, 2004, between Gary Charboneau and Duane Reade  Acquisition Corp. and all transactions contemplated thereunder                                                                                                                                                     |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade                |   | Employment Agreement,  dated as of March 16, 2004, between Jerry Ray and Duane Reade Acquisition  Corp. and all transactions and payments contemplated thereunder                                                                                                                                              |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade                |   | Employment Agreement,  dated as of March 16, 2004, between Timothy LaBeau and Duane Reade  Acquisition Corp. and all transactions and payments contemplated thereunder                                                                                                                                         |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade                |   | Employment Agreement,  dated as of March 16, 2004, between John K. Henry and Duane Reade Acquisition  Corp. and all transactions and payments contemplated thereunder                                                                                                                                          |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade Holdings, Inc. |   | The Duane Reade Holdings,  Inc. 2004 Management Stock Option Plan                                                                                                                                                                                                                                              |
|                       |   |                                                                                                                                                                                                                                                                                                           |
|                       |   | option agreement under the  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option  Plan) to Anthony J. Cuti                                                                                                                                                                             |
|                       |   |                                                                                                                                                                                                                                                                                                           |
|                       |   | option agreement under the  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option  Plan) to Gary Charboneau                                                                                                                                                                             |
|                       |   |                                                                                                                                                                                                                                                                                                           |
|                       |   | option agreement under the  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option  Plan) to Jerry Ray                                                                                                                                                                                   |
|                       |   |                                                                                                                                                                                                                                                                                                           |
|                       |   | option agreement under the  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option  Plan) to Timothy LaBeau                                                                                                                                                                              |
|                       |   |                                                                                                                                                                                                                                                                                                           |
|                       |   | option agreement under the  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option  Plan) to John K. Henry                                                                                                                                                                               |
|                       |   |                                                                                                                                                                                                                                                                                                           |
| Duane Reade Inc.           |   | Duane Reade Inc. Phantom  Stock Plan                                                                                                                                                                                                                                                                           |

 

2

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| Duane Reade Inc. |   | Phantom Stock Award  Agreement between Duane Reade Inc. and Gary Charboneau                                                                                                                                                                                                                                                                                              |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                                                                                                                                                                                                                                     |
| Duane Reade Inc. |   | Phantom Stock Award  Agreement between Duane Reade Inc. and John K. Henry                                                                                                                                                                                                                                                                                                |
|             |   |                                                                                                                                                                                                                                                                                                                                                                     |
| Duane Reade Inc. |   | Phantom Stock Award  Agreement between Duane Reade Inc. and Timothy LaBeau                                                                                                                                                                                                                                                                                               |
|             |   |                                                                                                                                                                                                                                                                                                                                                                     |
| Duane Reade Inc. |   | Phantom Stock Award  Agreement between Duane Reade Inc. and Jerry Ray                                                                                                                                                                                                                                                                                                    |
|             |   |                                                                                                                                                                                                                                                                                                                                                                     |
|             |   | Preemptive Rights  Agreement, dated as July 30, 2004, by and among Oak Hill Capital Partners,  L.P., Oak Hill Capital Management Partners, L.P., OHCP DR Co-Investors, LLC,  Duane Reade Shareholders, LLC, Duane Reade Holdings, Inc., Duane Reade Inc.,  Anthony J. Cuti and certain other members of the management of Duane Reade  Inc. listed on Schedule 1 thereto |

 

2.             Schedule 5.12(c)and Schedule 5.12(f) are incorporated herein by reference.

 

3.             Schedule 7.06is incorporated herein by reference.

 

3

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**SCHEDULE 10.02**

 

**DuaneReade Inc., Duane Reade and Administrative Agent’s Office,Certain Addresses for Notices**

 

**DUANE READE INC.:**

440 Ninth Avenue, 6th Floor

New York, New York 10001

Attention:  John K. Henry

Telephone:  212 273 5700

Facsimile:  212 244 6525

 

**DUANE READE:**

440 Ninth Avenue, 6th Floor

New York, New York 10001

Attention:  John K. Henry

Telephone:  212 273 5700

Facsimile:  212 244 6525

 

**ADMINISTRATIVE AGENT:**

*Administrative Agent’s Office*

(*for payments and Requests for Loans*):

 

Bank of America, N.A.

CreditServices - Charlotte Servicing Team

Street Address: 101 North Tryon Street

Mail Code: Mail Code: NC1-001-15-04

City, State ZIP Code:  Charlotte,NC 28255

Attention: Deborah Gwin

Telephone: 704 387 2471

Facsimile: 704 409 0019

Electronic Mail: deborah.gwin@bankofamerica.com

 

Bank of America, N.A.

New York NY.

ABA # :  026009593

Acct # :  1366212250600

Attn: Credit Services

Reference:  Duane Reade

 

*Other Notices as Administrative Agent*:

Bank of America, N.A.

Street Address: 1455 Market Street, 5th Floor

Mail Code: CA5-701-05-19

City, State ZIP Code:  SanFrancisco, CA 94103

Attention:  Robert J.Rittelmeyer, Vice President

Telephone:  415 436 2616

Facsimile:  415 503 5099

Electronic Mail: robert.j.rittelmeyer@bankofamerica.com

 

1

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