Exhibit 10.27


 


EXECUTION COPY


 


PREEMPTIVE RIGHTS
AGREEMENT


 


Preemptive Rights
Agreement (this “Agreement”), dated as of July 30, 2004, by and
among Oak Hill Capital Partners, L.P., a Delaware limited partnership, Oak Hill
Capital Management Partners, L.P., a Delaware limited partnership, OHCP DR
Co-Investors, LLC, a Delaware limited liability company, (collectively, the “Class
A Members”), Duane Reade Shareholders, LLC (formerly known as Rex Corner
Holdings, LLC), a Delaware limited liability company (“Parent”), Duane
Reade Holdings, Inc. (formerly known as Rex Corner Holdings, Inc.), a Delaware
corporation (“Holdings”), Duane Reade Inc., a Delaware corporation and
wholly-owned subsidiary of Holdings (the “Company”), Anthony J.
Cuti (the “Chairman”) and certain other members of the management of the
Company listed on Schedule 1 hereto (as such Schedule may be updated
from time to time and together with the Chairman, the “Management
Stockholders”).


 


WHEREAS, on December 22,
2003, Duane Reade Acquisition Corp. (formerly known as Rex Corner Acquisition
Corp.), Parent and the Company entered into an Agreement and Plan of Merger (as
amended, the “Merger Agreement”), pursuant to which Duane Reade
Acquisition will merge into the Company, a Delaware corporation, with the
Company as the surviving corporation;


 


WHEREAS, immediately
following consummation of the transactions contemplated by the Merger
Agreement, the members of Parent will be the Class A Members and the Class B
Member;


 


WHEREAS, immediately
following consummation of the transactions contemplated by the Merger
Agreement, the Management Stockholders will be granted options to purchase
Common Stock (“Options”) pursuant to the Duane Reade Holdings 2004
Management Stock Option Plan (the “Option Plan”) and certain other
members of management will be awarded shares of phantom stock (the “Phantom
Stock” and each holder of Phantom Stock, a “Phantom Stockholder”)
pursuant to the Company Phantom Stock Plan;


 


WHEREAS, the parties wish
to afford the Management Stockholders certain preemptive rights in order to preserve the relative rights
afforded in (a) the Amended and Restated Limited Liability Company
Operating Agreement of Parent, dated as of the date hereof, by and among Oak
Hill Capital Partners, L.P., Oak Hill Capital Management Partners, L.P., OHCP DR
Co-Investors, LLC and the Chairman (the “LLC Agreement”) and the
(b) Stockholders and Registration Rights Agreement, dated as of date
hereof, by and among Holdings, Parent and the Management Stockholders (the “Stockholders
Agreement”), all as more fully set forth herein.


 


NOW, THEREFORE, in
consideration of the agreements and obligations set forth herein and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement hereby agree as follows:


 





















 


ARTICLE I 



DEFINITIONS


 


1.1                                 Definitions.  As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:


 


“Agreement” shall
have the meaning set forth in the Preamble.


 


“Board of Directors”
shall mean the Board of Directors of the Issuing Party, as applicable.


 


“Business Day”
shall have the meaning set forth in the Stockholders Agreement.


 


“Chairman’s Percentage
Interest” shall mean the sum of (a) the Chairman Transfer Percentage plus
(b) a quotient obtained by dividing (i) the number of shares of Common Stock
owned by the Chairman, by (ii) the aggregate number of issued and outstanding
Shares.


 


“Chairman Transfer
Percentage” shall have the meaning set forth in the Stockholders Agreement.


 


“Chosen Court”
shall have the meaning set forth in Section 3.6.


 


“Class A Members”
shall have the meaning set forth in the Preamble.


 


“Class B Member”
shall have the meaning set forth in the LLC Agreement.


 


“Class A
Representative” shall have the meaning set forth in the LLC Agreement.


 


“Class A Units”
shall have the meaning set forth in the LLC Agreement.


 


“Class B Units”
shall have the meaning set forth in the LLC Agreement.


 


“Common Stock”
shall have the meaning set forth in the Stockholders Agreement.


 


“Employment Agreement”
shall have the meaning set forth in the LLC Agreement.


 


“Governmental
Authority” shall have the meaning set forth in the Stockholders Agreement.


 


“IPO Effectiveness
Date” shall have the meaning set forth in the Stockholders Agreement.


 


2





















 


“Issuing Party”
shall mean the Company, Holdings, Parent or any Subsidiary of Parent as the
issuer of Subject Securities.


 


“LLC Agreement”
shall have the meaning set forth in the Recitals.


 


“Management Committee”
shall mean the Management Committee of the Issuing Party, as applicable.


 


“Management
Stockholders” shall have the meaning set forth in the Preamble.


 


“Merger Agreement”
shall have the meaning set forth in the Recitals.


 


“Notice of Proposed
Issuance” shall have the meaning set forth in Section 2.3.


 


“Option Plan” has
the meaning set forth in the Recitals.


 


“Options” has the
meaning set forth in the Recitals.


 


“Percentage Interest”
shall (a) as to any Management Stockholder other than the Chairman, have the
meaning set forth in the Stockholders Agreement and (b) as to the Chairman,
mean the Chairman Percentage Interest.


 


“Person” shall
have the meaning set forth in the Stockholders Agreement.


 


“Phantom Stock”
shall have the meaning set forth in the Recitals.


 


“Phantom Stockholder”
shall have the meaning set forth in the Recitals and shall refer to the
individuals listed on Schedule 2 hereof.


 


“Securities Act”
shall mean the United States Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission (or any similar agency
then having jurisdiction to enforce the Securities Act) promulgated thereunder.


 


“Subject Securities”
means (a) Shares of the capital of the Company, Holdings, Parent or any
Subsidiary of Parent or debt instruments convertible into such Shares or (b)
Units that are equivalent or senior to the rights and preferences of the Class
A Units or Class B Units or debt instruments convertible into Units that are
equivalent or senior to the rights and preferences of the Class A Units or
Class B Units.


 


“Shares” shall
have the meaning set forth in the Stockholders Agreement.


 


“Stockholders
Agreement” shall have the meaning set forth in the Recitals.


 


“Subscription Election”
shall have the meaning set forth in Section 2.4.


 


3





















 


“Subsidiary” shall
have the meaning set forth in the LLC Agreement.


 


“Ten Day Period”
shall have the meaning set forth in Section 2.4.


 


“Units” shall have
the meaning set forth in the LLC Agreement.


 


1.2                                 Usage
Generally.  The definitions in this Article I
shall apply equally to both the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  All references herein to
Articles, Sections and Schedules shall be deemed to be references to Articles
and Sections of, and Schedules to, this Agreement unless the context shall
otherwise require.  All
Schedules attached hereto shall be deemed incorporated herein as if set
forth in full herein and, unless otherwise defined therein, all terms used in
any Schedule shall have the meaning ascribed to such term in this
Agreement.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The words “hereof,” “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.  Unless otherwise expressly
provided herein, any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein shall mean
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein.


 


ARTICLE II 



PREEMPTIVE RIGHTS


 


2.1                                 General.  None of the Company, Holdings, Parent or any
Subsidiary of Parent shall issue any Subject Securities to the Class A Members
except in accordance with this Article II. 
For the avoidance of doubt, there shall be no restriction on the
issuance of Subject Securities to any Person other than the Class A Members or
of any other debt or equity securities to any Person, including the Class A
Members; provided, however, that any such issuance of equity
securities must (a) dilute the then existing Percentage Interest (as defined in
the LLC Agreement) of the Class A Members and the Class B Members on the same
basis and (b) dilute the then existing Shares held by Parent and the Management
Stockholders (in their capacity as stockholders of Holdings) on the same basis.


 


2.2                                 Review
of Financial Alternatives.  Prior to
an issuance of Subject Securities to the Class A Members, the Issuing Party
shall (a) review its and the Company’s available financing alternatives
and the cost effectiveness thereof with a nationally recognized investment bank
selected by the Parent, (b) determine, based upon the reasonable judgment
of the Board of Directors or the Management Committee of the Issuing Party, as
applicable, and, if the Chairman is not a member of the Board of Directors or
the Management Committee of such Issuing Party, in consultation with the


 


4





















 


Chairman, that such Subject
Securities are the most favorable (from the Issuing Party’s point of view)
source of financing readily available to the Issuing Party, taking into account
the needs of such Issuing Party, the facts and circumstances as of such time
and the likely terms of alternative financing, and (c) obtain, at the
Company’s sole expense, an opinion from such investment bank that such Subject
Securities are fair, from a financial point of view, to the Issuing Party.


 


2.3                                 Notice
of Proposed Issuance.  Prior to an
issuance of Subject Securities to the Class A Members, the Issuing Party shall
provide written notice to the Management Stockholders (the “Notice of
Proposed Issuance”) specifying the aggregate principal amount of such Subject
Securities and the principal terms thereof, and stating that the Management
Stockholders shall have the right to purchase a portion of such Subject
Securities on the terms and conditions set forth in Sections 2.4 and 2.5.


 


2.4                                 Notice
of Subscription Election.  Not later
than ten (10) Business Days following delivery to the Management Stockholders
of the Notice of Proposed Issuance (the “Ten Day Period”), the
Management Stockholders shall have the right (but not the obligation) to
deliver a notice to the Issuing Party pursuant to which the Management
Stockholders elect to purchase a portion of such Subject Securities at the same
price per Subject Security and upon the same terms and conditions specified in
the Notice of Proposed Issuance (the “Subscription Election”).  The Subscription Election shall be
irrevocable and must be received by the Issuing Party prior to the expiration
of the Ten Day Period.  The failure of any
of the Management Stockholders to deliver a Subscription Election within the
Ten Day Period shall be deemed a waiver by such Management Stockholder of his
or her right to purchase such Subject Securities.  If the Subject Securities are being offered
as a part of an investment unit together with other instruments, any
Subscription Election (or the absence of such an election) by each Management
Stockholder to purchase such Subject Securities shall also constitute an
election (or the waiver of such Management Stockholder’s right) to purchase a
like portion of such other instruments.


 


2.5                                 Percentage
Interest Purchase.  In connection
with the Issuance of Subject Securities to the Class A Members, each Management
Stockholder shall, pursuant to Section 2.4 and subject to delivery of a
Subscription Election, have the right (but not the obligation) to purchase from
the Issuing Party a percentage of such Subject Securities (based on the cash
value of such Subject Securities on the date of its issuance) equal to such
Management Stockholder’s Percentage Interest as of such time.  The portion of the Subject Securities to be
purchased by the Management Stockholders pursuant to a Subscription Election
shall reduce the amount of the Subject Securities to be purchased by the Class
A Members (based on the cash value of such Subject Securities on their date of
issuance).  Any such purchase by the
Management Stockholders shall be consummated upon the later to occur of
(x) forty-five (45) calendar days following delivery of the Notice of
Proposed Issuance to the Management Stockholders and (y) the effective
date of the issuance of such Subject Securities to the Class A Members.


 


5





















 


ARTICLE III 



MISCELLANEOUS


 


3.1                                 Notices.  Wherever provision is made in this Agreement
for the giving of any notice, such notice shall be in writing and shall be
delivered personally to such party, or sent by facsimile transmission or
overnight courier:


 


(a)                                  if
to Holdings:


 


Duane Reade Holdings, Inc.  

c/o Oak Hill Capital Partners, L.P. 

201 Main Street

Fort Worth, TX  76102

Facsimile:  (817) 339-7350 

Attention:  Ray Pinson


 


with a copy to:


 


Oak Hill Capital Management, Inc.

Park Avenue Tower

65 East 55th Street, 36 Floor

New York, NY  10022

Facsimile:  (212) 758-3572

Attention:  John R. Monsky, Esq.


 


and


 


Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY  10019-6064

Facsimile: (212) 757-3990

Attention:  Robert B. Schumer, Esq.


 


(b)                                 if
to the Class A Members:


 


c/o Oak Hill Capital Partners, L.P. 

201 Main Street

Fort Worth, TX  76102

Facsimile:  (817) 339-7350 

Attention:  Ray Pinson


 


6





















 


with a copy to:


 


Oak Hill Capital Management, Inc.

Park Avenue Tower

65 East 55th Street, 36 Floor

New York, NY  10022

Facsimile:  (212) 758-3572

Attention:  John R. Monsky, Esq.


 


with a copy to:


 


Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY  10019-6064

Facsimile: (212) 757-3990

Attention:  Robert B. Schumer, Esq.


 


(c)                                  if
to the Chairman:


 


Anthony J. Cuti

c/o Duane Reade Inc.

440 Ninth Avenue, 6th Floor

New York, NY  10001

Facsimile:  (212) 244-6525


 


and


 


Shearman & Sterling LLP


599 Lexington Avenue


New York, NY 
10022-6069


Facsimile: 
(212) 848-7179


Attention: 
Kenneth J. Laverriere, Esq.


 


(d)                                 if
to any other Management Stockholder, at its address as it appears on the record
books of Holdings, with a copy to:


 


Shearman & Sterling LLP


599 Lexington Avenue


New York, NY 
10022-6069


Facsimile: 
(212) 848-7179


Attention: 
Kenneth J. Laverriere, Esq.


 


or to such other address, in any such case, as any
party hereto shall have last designated by notice to the other party.  Notice shall be deemed to have been given on
the day that it is so delivered personally or sent by facsimile transmission
and the appropriate confirmation of successful transmission is received.  If sent by overnight courier, notice shall be
deemed to have been given the next Business Day after such communication is


 


7





















 


sent to the specified
address.  Any party may change its
address for notices by giving written notice of such change to the other parties.


 


3.2                                 Entire
Agreement.  This Agreement, together
with the schedule hereto and documents incorporated by reference herein,
constitutes the entire agreement of the parties hereto and supersedes any prior
understandings or written or oral agreements between the parties with respect
to the subject matter hereof. 
Notwithstanding the foregoing, this Agreement shall in no way supersede
the terms of the Employment Agreement (other than those contained in Exhibit
III to the Employment Agreement) or interfere with any rights of the Chairman
pursuant to the Employment Agreement (other than pursuant to Exhibit III
to the Employment Agreement).  To the
extent any of the rights and/or obligations herein are duplicative of any
rights and/or obligations in the Stockholders Agreement or the LLC Agreement
then this Agreement, the Stockholders Agreement and the LLC Agreement shall be
interpreted and construed to eliminate any such duplication.


 


3.3                                 Amendment.  Any amendment, supplement or modification of
or to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by (i) Holdings, (ii) Parent, (iii) the Class A
Representative, (iv) the Chairman and (v) the Management Stockholders (including
the Chairman) holding a majority of the voting power of the Shares held by the
Management Stockholders.


 


3.4                                 No
Waivers.  No delay on the part of any
party in exercising any right hereunder shall operate as a waiver thereof, nor
shall any waiver, express or implied, by any party of any right hereunder or of
any failure to perform or breach hereof by any other party constitute or be
deemed a waiver of any other right hereunder or of any other failure to perform
or breach hereof by the same or any other party, whether of a similar or
dissimilar nature thereof.


 


3.5                                 Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to the principles of conflicts of law thereof.


 


3.6                                 SUBMISSION
TO JURISDICTION; WAIVER OF JURY TRIAL; SELECTION OF FORUM.  EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
(A) THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK, NEW YORK OR (B) IN
THE EVENT THAT SUCH COURT LACKS JURISDICTION TO HEAR THE CLAIM, IN THE FEDERAL
OR STATE COURTS LOCATED IN WILMINGTON, DELAWARE (ANY SUCH COURT, THE “CHOSEN
COURT”) AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE CHOSEN COURTS, (II) WAIVES, TO THE EXTENT PERMITTED BY


 


8





















 


APPLICABLE LAW ANY
OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN
COURTS, (III) WAIVES ANY OBJECTION THAT ANY CHOSEN COURT IS AN
INCONVENIENT FORUM OR DOES NOT HAVE JURISDICTION OVER ANY PARTY HERETO,
(IV) IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A JURY TRIAL AND
(V) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR
PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 3.1
OF THIS AGREEMENT.


 


3.7                                 Further
Assurances.  Each of the parties
hereby agrees, at the request of any other party, to execute and deliver all
such other and additional instruments and documents and to do such other acts
and things as may be reasonably necessary or appropriate to carry out the
intent and purposes of this Agreement.


 


3.8                                 Assignment
of Contracts and Rights.  No party to
this Agreement may assign any of its rights or remedies or delegate any of its
obligations under this Agreement without the prior written consent of the Board
of Directors or the Management Committee, as applicable.


 


3.9                                 No
Third-Party Rights.  This Agreement
is made solely and specifically between and for the benefit of the parties
hereto, and their respective successors and assigns (subject to the express
provisions hereof relating to successors and assigns), and is not intended to
confer any benefits upon, or create any rights in favor of, any Person other
than the parties hereto.


 


3.10                           Successors
and Assigns.  Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective heirs,
personal representatives, successors and permitted assignees under this
Agreement.  Any Subsidiary of Parent
shall automatically become a party to this Agreement.


 


3.11                           Severability.  If any provision of this Agreement shall be
declared by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall survive to the extent it is not so
declared, and the validity, legality and enforceability of the other provisions
hereof shall not in any way be affected or impaired thereby, unless such action
would substantially impair the benefits to either party of the remaining
provisions of this Agreement.


 


3.12                           Remedies
Not Exclusive.  Except as otherwise
provided herein, no remedy herein conferred or reserved is intended to be
exclusive of any other available remedy or remedies, and each and every remedy
shall be cumulative and shall be in addition to every remedy under this
Agreement now or hereafter existing at law or in equity or by statute.


 


3.13                           Representation
by Counsel.  Each of the parties has
been represented by and has had an opportunity to consult legal counsel in connection
with the negotiation and execution of this Agreement.  No provision of this Agreement shall be


 


9





















 


construed against or
interpreted to the disadvantage of any party by any court or arbitrator or any
Governmental Authority by reason of such party having drafted or being deemed
to have drafted such provision.


 


3.14                           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument. 
This Agreement shall be binding when one or more counterparts,
individually or taken together, bear the signatures of each of the parties
reflected herein as signatories.


 


3.15                           Table
of Contents and Headings.  The table
of contents and headings in this Agreement are solely for convenience of
reference and shall not affect the interpretation or construction of any of the
provisions hereof.


 


3.16                           Rules
of Construction.  Unless the context
otherwise requires, references to sections or subsections refer to sections or
subsections of this Agreement.


 


3.17                           Term
of Agreement.  This Agreement shall
become effective upon the execution hereof and shall terminate upon the earlier
of (a) the IPO Effectiveness Date or (b) the twentieth anniversary of
the date hereof.


 


3.18                           Fees.  The Company agrees to pay the reasonable
legal fees and related expenses incurred by the Management Stockholders through
the date hereof in connection with the drafting, negotiation and execution of
this Agreement.


 


[Remainder of Page Intentionally Left Blank]


 


10





















 


IN WITNESS WHEREOF, the
undersigned have executed, or have caused to be executed, this Preemptive
Rights Agreement on the date first written above.


 


	
   

  	
  OAK HILL CAPITAL
  PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  OHCP Gen Par, L.P., its
  General

  
	
   

  	
   

  	
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  OHCP MPG, LLC, its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OAK HILL CAPITAL
  MANAGEMENT

  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  OHCP Gen Par, L.P., its
  General

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  OHCP MPG, LLC, its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OHCP DR CO-INVESTORS,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  OHCP Gen Par, L.P., its
  Managing

  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  OHCP MPG, LLC, its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
					



 


11





















 


	
   

  	
  DUANE READE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DUANE READE SHAREHOLDERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DUANE READE INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Michelle D. Bergman

  	
   

  
	
   

  	
  Name: 

  	
  Michelle D. Bergman

  
	
   

  	
  Title:

  	
  Vice President and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Anthony J. Cuti

  	
   

  
	
   

  	
  Anthony J. Cuti

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Gary Charboneau

  	
   

  
	
   

  	
  Gary Charboneau

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Timothy R. LaBeau

  	
   

  
	
   

  	
  Timothy R. LaBeau

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
  John K. Henry

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jerry M. Ray

  	
   

  
	
   

  	
  Jerry M. Ray

  
							



 


12





















 


Schedule 1


 


Management Stockholders


 


1.                                       Anthony
J. Cuti


 


2.                                       Gary
Charboneau


 


3.                                       Timothy
R. LaBeau


 


4.                                       John
K. Henry


 


5.                                       Jerry
M. Ray


 


1





















 


Schedule 2


Phantom Stockholders


 


1.                                       Gary
Charboneau


 


2.                                       Timothy
R. LaBeau


 


3.                                       John
K. Henry


 


4.                                       Jerry
M. Ray


 


 


1





















 


Table of Contents


 


	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
  1.2

  	
  Usage Generally

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II
  PREEMPTIVE RIGHTS

  	
   

  
	
   

  	
  2.1

  	
  General

  	
   

  
	
   

  	
  2.2

  	
  Review of Financial
  Alternatives

  	
   

  
	
   

  	
  2.3

  	
  Notice of Proposed Issuance

  	
   

  
	
   

  	
  2.4

  	
  Notice of Subscription
  Election

  	
   

  
	
   

  	
  2.5

  	
  Percentage Interest
  Purchase

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III
  MISCELLANEOUS

  	
   

  
	
   

  	
  3.1

  	
  Notices

  	
   

  
	
   

  	
  3.2

  	
  Entire Agreement

  	
   

  
	
   

  	
  3.3

  	
  Amendment

  	
   

  
	
   

  	
  3.4

  	
  No Waivers

  	
   

  
	
   

  	
  3.5

  	
  Applicable Law

  	
   

  
	
   

  	
  3.6

  	
  SUBMISSION
  TO JURISDICTION; WAIVER OF JURY TRIAL; SELECTION OF FORUM

  	
   

  
	
   

  	
  3.7

  	
  Further Assurances

  	
   

  
	
   

  	
  3.8

  	
  Assignment of
  Contracts and Rights

  	
   

  
	
   

  	
  3.9

  	
  No Third-Party Rights

  	
   

  
	
   

  	
  3.10

  	
  Successors and Assigns

  	
   

  
	
   

  	
  3.11

  	
  Severability

  	
   

  
	
   

  	
  3.12

  	
  Remedies Not Exclusive

  	
   

  
	
   

  	
  3.13

  	
  Representation by Counsel

  	
   

  
	
   

  	
  3.14

  	
  Counterparts

  	
   

  
	
   

  	
  3.15

  	
  Table of Contents and
  Headings

  	
   

  
	
   

  	
  3.16

  	
  Rules of Construction

  	
   

  
	
   

  	
  3.17

  	
  Term of Agreement

  	
   

  
	
   

  	
  3.18

  	
  Fees.
  The Company agrees to pay the reasonable legal fees and related expenses
  incurred by the Management Stockholders through the date hereof in connection
  with the drafting, negotiation and execution of this Agreement.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
  1

  	
   

  	
  Schedule of
  Management Stockholders

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Schedule of
  Phantom Stockholders

  	
   

  
						



 





















 




 


 





PREEMPTIVE RIGHTS AGREEMENT


 


by and among


 


OAK HILL CAPITAL PARTNERS, L.P.

OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.

OHCP DR CO-INVESTORS, LLC

DUANE READE HOLDINGS, INC.

DUANE READE SHAREHOLDERS, LLC 

ANTHONY J. CUTI

AND 

THE MANAGEMENT STOCKHOLDERS 

LISTED HEREIN


 


 










 


Dated:  July 30,
2004