Document:

Exhibit 10.26

 

Execution
Copy

 

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

 

dated as of December 20, 2004

 

among

 

DUANE READE HOLDINGS, INC.,

DUANE READE INC.,

DUANE READE (a New York general partnership),

DRI I, Inc.,

DUANE READE INTERNATIONAL, INC.

and

DUANE READE REALTY, INC.,

 

US BANK NATIONAL ASSOCIATION,

as Indenture Trustee,

 

and

 

US BANK NATIONAL ASSOCIATION,

as Collateral Agent

 

 

TABLE OF
CONTENTS*

 

	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
   

  
	
  Section 1.02

  	
  Rules
  of Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  OBLIGATIONS AND POWERS OF THE COLLATERAL
  AGENT

  	
   

  
	
   

  	
   

  
	
  Section 2.01

  	
  Appointment
  of the Collateral Agent

  	
   

  
	
  Section 2.02

  	
  Actions
  under Collateral Documents

  	
   

  
	
  Section 2.03

  	
  Instructions
  of Directing Creditors

  	
   

  
	
  Section 2.04

  	
  Certain
  Actions under the Collateral Documents and Intercreditor Agreement

  	
   

  
	
  Section 2.05

  	
  Other
  Actions by the Collateral Agent

  	
   

  
	
  Section 2.06

  	
  Nature
  of Duties

  	
   

  
	
  Section 2.07

  	
  No
  Obligations Imposed

  	
   

  
	
  Section 2.08

  	
  Inspection

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  ACTIONS BY CREDITORS; VOTING

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Directing
  Creditors Defined

  	
   

  
	
  Section 3.02

  	
  Exceptional
  Decisions

  	
   

  
	
  Section 3.03

  	
  Certificates
  of the Trustee, a Term Loan Agent and Swap Representative

  	
   

  
	
  Section 3.04

  	
  Calculations
  Binding

  	
   

  
	
  Section 3.05

  	
  Directing
  Creditors Held Harmless

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  EXERCISE OF REMEDIES; APPLICATION OF
  COLLATERAL PROCEEDS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  General
  Limitation on Exercise of Remedies

  	
   

  
	
  Section 4.02

  	
  Notices
  of Events of Default

  	
   

  
	
  Section 4.03

  	
  Notices
  of Acceleration

  	
   

  
	
  Section 4.04

  	
  Remedies

  	
   

  
	
  Section 4.05

  	
  No
  Inconsistent Actions

  	
   

  
	
  Section 4.06

  	
  Application
  of Proceeds

  	
   

  
	
  Section 4.07

  	
  Sharing
  of Asset Sale Proceeds and Event of Loss Proceeds

  	
   

  
	
  Section 4.08

  	
  Credit
  Bid Rights.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  CERTAIN OBLIGATIONS ENFORCEABLE BY THE LOAN
  PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Release
  of Liens

  	
   

  

 

*                                         The
Table of Contents is not a part of the Intercreditor and Collateral Agency
Agreement.

 

 

	
  Section 5.02

  	
  Delivery
  of Copies to the Trustee, a Term Loan Agent and Swap Representative

  	
   

  
	
  Section 5.03

  	
  Collateral
  Agent Not required to Make Filings or Recordations

  	
   

  
	
  Section 5.04

  	
  No
  Actions to Address Exceptions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  THE COLLATERAL AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  No
  Implied Duty

  	
   

  
	
  Section 6.02

  	
  Appointment
  of Co-Agents and Sub-Agents

  	
   

  
	
  Section 6.03

  	
  Other
  Agreements

  	
   

  
	
  Section 6.04

  	
  Solicitation
  of Instructions

  	
   

  
	
  Section 6.05

  	
  Limitation
  of Liability

  	
   

  
	
  Section 6.06

  	
  Documents
  in Satisfactory Form

  	
   

  
	
  Section 6.07

  	
  Entitled
  to Rely

  	
   

  
	
  Section 6.08

  	
  Events
  of Default

  	
   

  
	
  Section 6.09

  	
  Actions
  by Collateral Agent

  	
   

  
	
  Section 6.10

  	
  Security
  or Indemnity in Favor of the Collateral Agent

  	
   

  
	
  Section 6.11

  	
  Resignation
  or Removal of the Collateral Agent

  	
   

  
	
  Section 6.12

  	
  Appointment
  of Successor Collateral Agent

  	
   

  
	
  Section 6.13

  	
  Succession

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Amendment.

  	
   

  
	
  Section 7.02

  	
  Further
  Assurances.

  	
   

  
	
  Section 7.03

  	
  Successors
  and Assigns; Term Loan Agent Joinder.

  	
   

  
	
  Section 7.04

  	
  Delay
  and Waiver

  	
   

  
	
  Section 7.05

  	
  Notices

  	
   

  
	
  Section 7.06

  	
  Entire
  Agreement

  	
   

  
	
  Section 7.07

  	
  Compensation
  and Expenses

  	
   

  
	
  Section 7.08

  	
  Indemnity.

  	
   

  
	
  Section 7.09

  	
  Obligations
  Secured

  	
   

  
	
  Section 7.10

  	
  Severability

  	
   

  
	
  Section 7.11

  	
  Governing
  Law; Submission to Jurisdiction.

  	
   

  
	
  Section 7.12

  	
  Waiver
  of Right to Trial by Jury

  	
   

  
	
  Section 7.13

  	
  Section Titles

  	
   

  
	
  Section 7.14

  	
  Counterparts;
  Effectiveness

  	
   

  

 

	
  Schedules:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 2.02

  	
  -

  	
  Issue Date Collateral Documents

  
	
   

  	
   

  	
   

  
	
  Exhibits:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form of Security Agreement

  
	
  Exhibit B

  	
  -

  	
  Form of Pledge Agreement

  
	
  Exhibit C

  	
  -

  	
  Intercreditor Agreement

  

 

ii

 

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

 

This
Intercreditor and Collateral Agency Agreement (this “Agreement”) is
entered into as of December 20, 2004 among DUANE READE HOLDINGS, INC., a
Delaware corporation (“Holdings”), DUANE READE INC., a Delaware
corporation (“DRI”), DUANE READE, a New York general partnership (“Duane
Reade”), DRI I, Inc., a Delaware corporation (“DRI I”), DUANE READE INTERNATIONAL,
INC., a Delaware corporation (“DR International”), DUANE READE REALTY,
INC., a Delaware corporation (“DR Realty”), US BANK NATIONAL
ASSOCIATION, as Trustee for the Noteholders under the Indenture (as defined
below) (together with its successor or successors in such capacity, the “Trustee”),
and US BANK NATIONAL ASSOCIATION, as Collateral Agent (together with its
successor or successors in such capacity, the “Collateral Agent”).

 

DRI and Duane
Reade are parties to a Senior Secured Credit Agreement dated as of July 30,
2004 (as amended, restated, supplemented or modified from time to time, the “Existing
Term Credit Agreement”) among DRI and Duane Reade, as the Borrowers
thereunder (collectively, the “Term Loan Borrowers”), Holdings, the
co-borrowers from time to time party thereto (the “Term Loan Co-Borrowers”),
the lenders from time to time party thereto, Bank of America, N.A., as
Administrative Agent (the “Term Loan Administrative Agent”), Credit
Suisse First Boston, Cayman Islands Branch, as Syndication Agent, and Citicorp
North America Inc. and Wells Fargo Bank, National Association, as
Co-Documentation Agents.  Term loans
(collectively, the “Existing Term Loans”) in an aggregate principal
amount of $155,000,000 are currently outstanding under the Existing Term Credit
Agreement.

 

Certain Swap
Creditors (as defined below) may from time to time provide forward rate
agreements, options, swaps, caps, floors, other financial derivatives
agreements and other combinations or hybrids of any of the foregoing.  The obligations of the Term Loan Borrowers
and the Term Loan Co-Borrowers under the Existing Term Credit Agreement and
under all Swap Agreements (as defined below) permitted under the Existing Term
Credit Agreement are guaranteed by Holdings and by DRI I, DR International and
DR Realty.  Holdings, DRI, Duane Reade,
DRI I, DR International and DR Realty are herein collectively referred to as
the “Term Loan Parties.”  The
payment of the principal of and interest on the Existing Term Loans and all
other Term Loan Obligations (as defined in the Existing Term Credit Agreement,
the “Existing Term Loan Obligations”) and all Swap Obligations (as
defined below) of all Term Loan Parties permitted under the Existing Term
Credit Agreement owing to one or more Swap Creditors are secured by security
interests and other liens held by Bank of America, N.A., as Collateral Agent
(the “Term Loan Collateral Agent”), in substantially all of the Term
Loan Parties’ personal property and all proceeds thereof (collectively, the “Term
Loan Collateral”), all pursuant to (i) the Security Agreement dated as of July 30,
2004 (the “Term Security Agreement”) among the Term Loan Parties and the
Term Loan Collateral Agent, (ii) a Pledge Agreement dated as of July 30,
2004 among the Term Loan Parties and the Term Loan Collateral Agent (the “Term
Pledge Agreement”) and (iii) certain other ancillary Collateral Documents
(as defined and referred to in the Existing Term Credit Agreement).

 

Duane Reade,
DRI, DRI I, DR International and DR Realty are also parties to (i) a Credit
Agreement dated as of July 21, 2003 (as amended by a First Amendment to
Credit Agreement dated as of July 22, 2004 and as the same may be further
amended, modified, supplemented, extended, restated, renewed or replaced from
time to time in accordance with the terms thereof, the “Revolving Credit
Agreement”) with the lenders from time to time party thereto (the “Revolving
Lenders”), Fleet National Bank, as issuing bank for certain letters of
credit, Fleet National Bank, as Administrative Agent for the Revolving Lenders
(together with its successor or successors in such capacity, the “Revolving
Credit Administrative Agent”), Fleet Retail Group, Inc., as Collateral
Agent (together with its successor or successors in such capacity, the “Revolving
Credit Collateral Agent”), Congress Financial Corporation, as

 

 

Documentation Agent, General Electric Capital Corporation, as
Syndication Agent, and Wells Fargo Retail Finance, LLC, as Syndication Agent
and Co-Lead Arranger, and (ii) a Security Agreement dated as of July 21,
2003 (as amended by the Collateral Release Agreement dated as of July 30,
2004 and the First Amendment to Security Agreement dated as of July 30,
2004 and as the same may be further amended, modified, supplemented, extended,
restated, renewed or replaced from time to time in accordance with the terms
thereof, the “Revolving Security Agreement”).  Duane Reade, DRI, DRI I, DR International, DR
Realty and each other Person now or hereafter becoming a guarantor of the
obligations under the Revolving Credit Agreement are herein collectively
referred to as the “Revolving Loan Parties.”  Revolving loans (collectively, “Revolving
Loans”) are now and may hereafter be outstanding under the Revolving Credit
Agreement.  The payment of the principal
of and interest on the Revolving Loans and all other Obligations (as defined in
the Revolving Credit Agreement and the Revolving Security Agreement, the “Revolving
Loan Obligations”) are secured pursuant to the Revolving Security Agreement
and various other security documents by security interests and other liens held
by the Revolving Credit Collateral Agent in the Revolving Loan Parties’ right,
title and interest in all present and future (i) accounts, inventory, chattel
paper, instruments, documents, prescription files, tax refunds and abatements
and deposit accounts, (ii) all letter of credit rights and supporting
obligations related to the items referred to in the foregoing clause (i),
(iii) all books and records relating to any of the foregoing, (iv) all payment
intangibles constituting proceeds of the foregoing and (v) all other products
and proceeds of the foregoing (including insurance proceeds related thereto)
(collectively, the “Revolving Lender Priority Collateral”).

 

The Revolving
Credit Collateral Agent and the Term Loan Collateral Agent are parties to an
Intercreditor Agreement dated as of July 30, 2004 (as amended, restated,
supplemented or modified from time to time, the “Intercreditor Agreement”)
which provides among other things that: (i) the Revolving Loan Obligations (up
to an amount (the “Maximum Revolving Debt Amount”) equal to the greater
of (A) $275,000,000 and (B) the sum of the Borrowing Base, exclusive of
Reserves, plus Permitted Overadvances (as such terms are defined in the
Revolving Credit Agreement as in effect as of the date hereof) plus in each
case all accrued and unpaid interest, fees, expense reimbursements and other
charges then due to the Revolving Lenders) are secured on a first priority
basis by all Revolving Lender Priority Collateral; (ii) the Existing Term Loan
Obligations are secured by all Term Loan Collateral (which includes all
Revolving Loan Priority Collateral); (iii) the Revolving Loan Obligations are
not secured by any Term Loan Collateral except that portion of the Term Loan
Collateral which constitutes Revolving Lender Priority Collateral; (iv) the
portion of the Term Loan Collateral that does not constitute Revolving Lender
Priority Collateral constitutes “Term Loan Priority Collateral”; and (v)
the security interest securing the Existing Term Loan Obligations: (A) in the
Term Loan Priority Collateral is of a first priority; and (B) in that portion
of the Term Loan Collateral which is Revolving Lender Priority Collateral is
(x) of a second priority subject only to a first priority security interest
securing an amount of the Revolving Loan Obligations that does not exceed the
Maximum Revolving Debt Amount and (y) is of a first priority with respect to
that portion of the Revolving Loan Obligations which exceeds the Maximum
Revolving Debt Amount.

 

DRI and Duane
Reade intend to issue Senior Secured Floating Rate Notes due 2010 (together
with any Additional Notes referred to below and any Exchange Notes (as defined
in the Indenture), and as amended, restated, supplemented or modified from time
to time, the “Senior Secured Notes”) pursuant to an Indenture dated as
of the date hereof (as amended, restated, supplemented or modified from time to
time and including any agreement extending the maturity of, refinancing or
otherwise restructuring all or any portion of the obligations of DRI and Duane
Reade under such Indenture or any successor agreement, the “Indenture”)
among DRI, Duane Reade and US Bank National Association, as Trustee (together
with its successor or successors in such capacity, the “Trustee”).  The obligations of DRI and Duane Reade under
and in respect of the Senior Secured Notes will be guaranteed by Holdings and
by DRI I, DR International, DR Realty and all other direct and indirect domestic

 

2

 

subsidiaries of Holdings (collectively with DRI I, DR International and
DR Realty, the “Subsidiary Guarantors” and, together with Holdings, “Guarantors”).  Holdings, DRI, Duane Reade, and the Subsidiary
Guarantors are herein referred to individually as a “Loan Party” and,
collectively, as the “Loan Parties.” 
The proceeds of the Senior Secured Notes will be used to refinance the
Existing Term Loans and to pay accrued interest and the prepayment premium on
the Existing Term Loans and related transaction fees and expenses.  For the avoidance of doubt, it is the
intention of the parties to the Collateral Documents that the security
interests in the Term Loan Collateral created by the Collateral Documents in
connection with the Existing Term Credit Agreement shall be assigned to the
Collateral Agent and continue to secure the Finance Obligations as such term is
amended by this Intercreditor and Collateral Agency Agreement.

 

Without
providing any commitments to any Loan Party as to the funding of future
indebtedness, the Indenture permits, and a Term Credit Agreement (as defined
below) may permit, DRI, Duane Reade and other Loan Parties from time to time to incur Indebtedness which it is otherwise
permitted to incur under the Indenture and a Term Credit Agreement (as defined
below) in the form of additional loans or other debt financing (“Additional
Term Loans”) pursuant to a Term Credit Agreement or additional senior
secured notes issued under the Indenture (such notes being herein
collectively referred to herein as the “Additional Notes”) (or both) and to secure such additional
Note/Term Obligations (as defined below) equally and ratably with the other Finance Obligations; provided
that the borrowing of any Additional Term Loans and the issuance of any
Additional Notes is subject to the limitations set forth in the Indenture and
any Term Credit Agreement, respectively.

 

Holdings, DRI
and Duane Reade may, from time to time, borrow Additional Term Loans or
refinance all or a portion of the Note/Term Obligations by borrowing revolving
credit loans, term loans, receivables financing or letters of credit, including
arrangements and agreements relating to the sale of debt securities or other
forms of debt financing (and together with any Additional Term Loans, “Term
Loans”) from one or more banks or other institutional lenders (together
with the lenders of any Additional Term Loans, each a “Term Lender” and,
collectively, “Term Lenders”) in each case pursuant to a Term Credit
Agreement (as defined below) designated as such by the Secured Debt Designation
(as defined below) and with respect to which a Term Loan Agent (as defined
below) thereunder has delivered the Joinder (as defined below).

 

The Indenture
requires the Loan Parties to secure their obligations under the Senior Secured
Notes and under a Term Credit Agreement equally and ratably together with all
Swap Obligations in all Term Loan Collateral with a lien priority as against
the Revolving Loan Obligations substantially comparable to that heretofore
afforded to the Existing Term Loan Obligations and the Swap Obligations.  The Indenture further requires that such
security interests in the Term Loan Collateral be granted pursuant to security
documents to a collateral agent acting for the benefit of the holders from time
to time of the Senior Secured Notes, any Term Lenders and the Swap Creditors.

 

The Loan
Parties and the Collateral Agent will enter into an Amended and Restated
Security Agreement, an Amended and Restated Pledge Agreement and certain other
Collateral Documents referred to therein equally and ratably securing the
Senior Secured Notes, any Term Loans and certain Swap Obligations and all
related obligations with security interests and other liens in the Term Loan
Collateral.  This Agreement sets forth
the terms on which the Collateral Agent has undertaken to accept, hold and
enforce such security interests and all related rights, interests and powers as
agent for, and for the benefit exclusively of, the present and future holders
of the Senior Secured Notes, any Term Lenders and Swap Creditors and describes
the relative rights and obligations of the Trustee on behalf of the holders of
the Senior Secured Notes, a Term Loan Agent on behalf of Term Lenders and the
representatives of one or more Swap Creditors with respect to the Term Loan
Collateral.

 

3

 

Accordingly,
in consideration of the mutual agreements set forth herein, the Trustee and the
Collateral Agent hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01  Definitions.  Capitalized terms defined in the introductory
paragraphs hereof have the respective meanings provided for therein.  In addition, as used in this Agreement, the
following terms have the following meanings:

 

“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 Person specified.

 

“Aggregate
Voting Credit” means at any date the sum of:

 

(i)                                     the
aggregate outstanding principal amount of the Senior Secured Notes; plus

 

(ii)                                  the
aggregate outstanding principal amount of any Term Loans;

 

outstanding at such time; provided that after the date on which
all Note/Term Obligations have been paid in full and all commitments (if any)
with respect thereto have been terminated, the “Aggregate Voting Credit”
means the aggregate amount of all Swap Obligations (valued at their then Swap
Termination Value) of all Loan Parties permitted under the Indenture and all
Term Credit Agreements, if any, owed or owing to one or more Swap
Creditors.  Noteholders, Term Lenders or
Swap Creditors that are Affiliates of Holdings and any of its Subsidiaries and
any Senior Secured Notes, Term Loans or Swap Obligations held by any such
Noteholder, Term Lender or Swap Creditor shall not be included in the
determination of the Aggregate Voting Credit.

 

“Agreement”
means this Intercreditor and Collateral Agency Agreement, as amended, modified
or supplemented from time to time.

 

“Business
Day” means any day other than a Saturday, a Sunday or a day which banking
institutions in New York, New York or San Francisco, California or at a place
of payment are authorized by law, regulation or executive order to remain
closed.

 

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

 

“Collateral
Agent” means US Bank National Association, as collateral agent, and its
successor or successors in such capacity.

 

“Collateral
Documents” means, collectively, this Agreement, the Security Agreement, the
Pledge Agreement, the Depositary Bank Agreements, each Perfection Certificate
(as defined in the Security Agreement), any mortgage or deed of trust and all other
pledges, agreements, financing statements, filings or other documents that
grant or evidence the Lien in the Collateral in favor of the Collateral Agent
for the benefit of the Finance Parties, as they may be amended from time to
time.

 

4

 

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

 

“Credit
Class” means (i) the Noteholders, (ii) any Term Lenders or (iii) the Swap
Creditors, as the context may require.

 

“Creditor”
means any Noteholder, any Term Lender and any Swap Creditor, and “Creditors”
means two or more of them, collectively.

 

“Debtor
Relief Laws” means Title 11, United States Bankruptcy Code of 1978,
as amended, or any similar United States federal or state law or foreign law
relating to bankruptcy, insolvency, receivership, winding up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or
change in any such law.

 

“Depositary
Bank Agreement” means, with respect to any deposit account, an agreement
between a Loan Party and any bank or other depositary institution,
substantially in the form of Exhibit C-1 or Exhibit C-2, as
applicable, to the Security Agreement or such other form as to which an opinion
of counsel is delivered to the Collateral Agent opining that such agreement is
sufficient to grant the Collateral Agent a perfected security interest by
control under the UCC in the deposit account named therein, as the same may be
amended, modified or supplemented from time to time.

 

“Directing
Creditors” means at any time Creditors holding more than 50% of the then
Aggregate Voting Credit (including, without limitation, Noteholders providing
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, Senior Secured Notes); provided that, solely for purposes
of directing a release of Collateral pursuant to Section 7.11(c)(x)(A)
of the Security Agreement and Section 8.11(c)(x)(A) of the Pledge
Agreement, the “Directing Creditors” means at any time Creditors holding
at least 75% of the then Aggregate Voting Credit (including, without
limitation, Noteholders providing consents obtained in connection with a tender
offer or exchange offer for, or purchase of, Senior Secured Notes).

 

“equally
and ratably” means, in reference to sharing of any Liens or proceeds
thereof as among the Credit Classes, that such Liens or proceeds shall be
allocated and distributed to the Trustee for the account of the Noteholders, to
a Term Loan Agent for the account of Term Lenders and to the Swap Representative
for the account of the Swap Creditors on a pro-rata basis, as provided in the
definition of “pro-rata basis” and in Section 4.07.

 

“Event of
Default” means (i) an “Event of Default” as defined in the Indenture or
(ii) an “Event of Default” as defined in any Term Credit Agreement.

 

“Exceptional
Decisions” has the meaning set forth in Section 3.02.

 

“Finance
Document” means each Note Document, each Swap Agreement between one or more
Loan Parties and a Swap Creditor evidencing Swap Obligations permitted under
the Indenture and all Term Credit Agreements, if any, each Term Loan Document
and this Agreement, and “Finance Documents” means any two or more of
them, collectively.

 

“Finance
Obligations” means:

 

(i)                                     all
Note/Term Obligations; and

 

5

 

(ii)                                  all
Swap Obligations of all Loan Parties permitted under the Indenture and all Term
Credit Agreements, if any, owed or owing to one or more Swap Creditors;

 

in each case whether now or hereafter due, owing or incurred in any
manner, whether actual or contingent, whether incurred solely or jointly with
any other person and whether as principal or surety, together in each case with
all renewals, modifications, refinancings, replacements, consolidations or extensions
thereof.

 

“Finance
Party” means any of the Collateral Agent, the Trustee, any Noteholder, any
Term Loan Agent, any Term Lender, any Swap Creditor and any Indemnitee (as
defined in the Security Agreement) and “Finance Parties” means two or
more of them collectively.

 

“Insolvency
Proceeding” means (i) any voluntary or involuntary case or proceeding under
any Debtor Relief Law with respect to any Loan Party, (ii) any other voluntary
or involuntary insolvency, reorganization or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding, with respect to any Loan Party or with respect to any of their
respective assets, (iii) any liquidation, dissolution, reorganization or
winding up of any Loan Party, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy and (iv) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of any Loan
Party.

 

“Joinder”
has the meaning set forth in Section 7.03(d).

 

“Lien”
means, with respect to any asset, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
charge, or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable laws of any
jurisdiction for the purpose of evidencing a Lien), including the interest of a
purchaser of accounts receivable, chattel paper, payment intangibles or
promissory notes.

 

“Note
Documents” means the Indenture, the Senior Secured Notes and the
Registration Rights Agreement related thereto and the Collateral Documents, in
each case including all exhibits and schedules thereto, and all other
agreements, documents and instruments relating to the Senior Secured Notes, in
each case as the same may be amended, modified or supplemented from time to
time in accordance with the provisions thereof.

 

“Noteholders”
means the holders from time to time of the Senior Secured Notes.

 

“Note/Term
Obligations” means, without duplication:

 

(i)                                     all
principal of and interest (including, without limitation, any interest which
accrues after the commencement of any proceeding under any Insolvency
Proceeding with respect to any Loan Party, whether or not allowed or allowable
as a claim in any such proceeding) on any Senior Secured Note or Term Loan;

 

(ii)                                  all
fees, expenses, indemnification obligations and other amounts of whatever
nature now or hereafter payable by any Loan Party (including, without
limitation, any amounts which accrue after the commencement of any proceeding
under any Insolvency Proceeding with respect to any Loan Party, whether or not
allowed or allowable as a claim in any

 

6

 

such
proceeding) pursuant to the Indenture, the Senior Secured Notes, any Term
Credit Agreement, the Intercreditor Agreement or any Collateral Document;

 

(iii)                               all
expenses of the Trustee, the Collateral Agent or any Term Loan Agent as to
which one or more of such agents has a right to reimbursement under the
Indenture, any Term Credit Agreement or under any other similar provision of
any Collateral Document or the Intercreditor Agreement, including, without
limitation, any and all sums advanced by the Collateral Agent to preserve the
Collateral or its security interest in the Collateral; and

 

(iv)                              in
the case of Holdings and each Subsidiary Guarantor, all amounts now or
hereafter payable by Holdings or such Subsidiary Guarantor and all other
obligations or liabilities now existing or hereafter arising or incurred
(including, without limitation, any amounts which accrue after the commencement
of any Insolvency Proceeding with respect to DRI, Duane Reade, Holdings or such
Subsidiary Guarantor, whether or not allowed or allowable as a claim in any
such proceeding) on the part of Holdings or such Subsidiary Guarantor pursuant
to the Indenture, the Senior Secured Notes, the Guarantees, any Term Credit
Agreement, the Intercreditor Agreement or any Collateral Document;

 

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

 

“Officer’s
Certificate” has the meaning set forth in Section 5.01.

 

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

 

“Pledge
Agreement” means the Amended and Restated Pledge Agreement, substantially
in the form of Exhibit B hereto, dated as of the date hereof among the
Loan Parties, the Term Collateral Agent and the Collateral Agent, as the same
may be amended, modified or supplemented from time to time

 

“Proceeds”
has the meaning specified for such term in the Uniform Commercial Code as in
effect from time to time in the State of New York.

 

“pro-rata”
means at any date, as among the Noteholders, any Term Lenders and the Swap
Creditors, in proportion to the then aggregate outstanding amounts of (i) the
principal outstanding under the Senior Secured Notes, (ii) principal
outstanding under any Term Loans and (iii) Swap Obligations (valued at the then
Swap Termination Value of all related Swap Agreements).

 

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

 

“Secured
Debt Designation” means, as to any Term Credit Agreement, a written
certification signed by a Responsible Officer of DRI to the effect that such
Term Credit Agreement (a) constitutes “Term Credit Agreement” within the
meaning of this Agreement and (b) is intended to be secured equally and ratably
with all other then outstanding Finance Obligations with security interests and
other liens in the Collateral granted pursuant to the Collateral Documents.

 

7

 

“Security
Agreement” means the Amended and Restated Security Agreement, substantially
in the form of Exhibit A hereto, dated as of the date hereof among the
Loan Parties, the Term Collateral Agent and the Collateral Agent, as the same
may be amended, modified or supplemented from time to time.

 

“Sharing
Confirmation” means, as to any Swap Agreement, the written agreement of the
related Swap Creditor as set forth in such Swap Agreement, for the enforceable
benefit of the Collateral Agent, the Trustee and a Term Loan Agent, that: (i)
all Finance Obligations shall be and are secured equally and ratably by all
Liens at any time granted by the Loan Parties to secure any Finance Obligations,
whether or not upon property otherwise constituting Collateral; (ii) all such
Liens shall be enforceable by the Collateral Agent for all holders of Finance
Obligations equally and ratably; (iii) such Swap Creditor consents to and will
be bound by the provisions of this Agreement relating to the order of
application of proceeds from enforcement of the Collateral Agent’s Liens upon
the Collateral; (iv) such Swap Creditor consents to and directs the Collateral
Agent to perform its obligations under this Agreement; (v) such Swap Creditor
agrees to appoint or consent to the appointment of a single Swap Representative
for all Swap Creditors from time to time outstanding selected by the holders of
more than 50% of the aggregate Swap Obligations (valued at their then Swap
Termination Values) at the time such Swap Representative is selected and (vi)
such Swap Creditor will notify the Swap Representative if an Early Termination
Date (a “Swap Termination Date”) occurs under one or more of its Swap
Agreement or Swap Obligation resulting from (i) any event of default under such
Swap Agreement or Swap Obligation as to which any Loan Party is the Defaulting
Party (as defined in such Swap Agreement or Swap Obligation) or (ii) any
Termination Event (as so defined) as to which any Loan Party is the Affected
Party (as so defined).

 

“Subsidiary”
has the meaning set forth in the Indenture.

 

“Swap
Agreement” means an agreement between a Loan Party and any Swap Creditor
with respect to one or more Swap Obligations.

 

“Swap Creditor” means any Person from time to time party to one
or more Swap Agreements with a Loan Party permitted by the Indenture and all
Term Credit Agreements, if any, and that has also executed a Sharing
Confirmation, and its successors and assigns, and “Swap Creditors” means
any two or more of such Swap Creditors, collectively.

 

“Swap
Obligations” of any Person means all obligations (including, without
limitation, any amounts which accrue after the commencement of any Insolvency
Proceeding) of such Person in respect of any rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions) or any combination of the
foregoing transactions, excluding any amounts which such Person is entitled to
set-off against its obligations under applicable Law.

 

“Swap
Representative” means, with respect to one or more Swap Creditors, it or
its or their trustee, paying agent or other similar representative.

 

“Swap
Termination Date” has the meaning set forth in the definition of “Sharing
Confirmation” in this Section 1.01.

 

8

 

“Swap
Termination Value” means, at any date and in respect of any one or more
Swap Agreements, after taking into account the effect of any legally
enforceable netting agreements relating to such Swap Agreements, (i) for any
date on or after the date such Swap Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (ii) for any date prior to the date referenced in clause (i), the
amount(s) determined as the mark-to-market value(s) for such Swap Agreements,
as determined by the applicable Swap Creditor based upon one or more mid-market
or other readily available quotations provided by any recognized dealer in such
Swap Agreements (which may include the Collateral Agent).

 

“Term
Credit Agreement” means one or more debt facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing or letters of credit, including arrangements and
agreements relating to the sale of debt securities or other forms of debt
financing, in each case, as any of the foregoing, in whole or in part, in one
or more instances, may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including, without limitation, any successive renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplementations or other
modifications of the foregoing and including, without limitation, any amendment
increasing the amount of Indebtedness incurred or available to be borrowed
thereunder, extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby or deleting, adding or substituting one or more parties
thereto (whether or not such added or substituted parties are banks or other
institutional lenders)), including into one or more debt facilities, commercial
paper facilities or other debt instruments, indentures or agreements, providing
for revolving credit loans, term loans, letters of credit or other debt
obligations, whether any such extension, replacement or refinancing (1) occurs
simultaneously or not with the termination or repayment of a prior Term Credit
Agreement or (2) occurs on one or more separate occasions, in each case, which
was or were designated as such by DRI pursuant to the Secured Debt Designation
and with respect to which a Term Loan Agent thereunder has delivered the
Joinder.

 

“Term Loan
Agent” mean an administrative agent (or an agent, trustee or other
representative acting in similar capacity) under a Term Credit Agreement that
has executed and delivered a Joinder, and its successor or successors in such
capacity.

 

“Term Loan
Document” means any Term Credit Agreement, any promissory notes,
guaranties, the Collateral Documents and other documents entered into in
connection therewith and as may be designated “Term Loan Documents” in any such
Term Credit Agreement, in each case as the same may be amended, modified or
supplemented from time to time in accordance with the provisions thereof.

 

“Threshold
Amount” means the lower of the Dollar amounts set forth in Section 6.01(4)
of the Indenture and any similar provision in any Term Credit Agreement.

 

“Trust
Indenture Act” means Trust Indenture Act of 1939, as amended, and rules and
regulations promulgated thereunder and interpretations thereof.

 

“Uniform
Commercial Code” or “UCC” mean the Uniform Commercial Code as in
effect from time to time in the State of New York; provided that if by
reason of mandatory provisions of law, the perfection, the effect of perfection
or non-perfection or the priority of a Lien in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than New York,
“UCC” means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

 

9

 

Section 1.02  Rules of Interpretation.  Terms defined in the introductory paragraphs
hereof and the definitions in Section 1.01 shall apply equally to
both the singular and plural forms of the terms defined.  Wherever the context may require, any
pronouns shall include the corresponding masculine, feminine and neuter
forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
otherwise stated herein or the context shall otherwise require.  Unless otherwise expressly provided herein,
the word “day” means a calendar day.

 

ARTICLE II

OBLIGATIONS AND POWERS OF THE COLLATERAL
AGENT

 

Section 2.01  Appointment of the Collateral Agent.  The Collateral Agent is hereby appointed by
the Trustee as collateral agent hereunder (and upon execution and delivery of a
Joinder by a Term Loan Agent, such Term Loan Agent shall confirm and
acknowledge such appointment pursuant to the Joinder), and the Collateral Agent
hereby agrees to act as Collateral Agent pursuant to the terms of this
Agreement.  The Trustee on behalf of
itself and on behalf of the Noteholders directs the Collateral Agent to enter
into the Collateral Documents listed on Schedule 2.02.

 

Section 2.02  Actions under Collateral Documents.  The Collateral Agent hereby irrevocably
undertakes and agrees, on the terms and conditions set forth in this Agreement,
to act as agent for the benefit exclusively of the present and future
Noteholders, Term Lenders, Swap Creditors and any other holders from time to
time of the Finance Obligations and in such capacity to accept, hold,
administer and enforce all collateral security at any time delivered to it by
any Loan Party as security for the Finance Obligations and all rights,
interests and powers at any time granted or enforceable in respect of such
collateral security under the Collateral Documents listed on Schedule 2.02
and, subject to Section 7.01(b), all other Collateral Documents, or
applicable law.  Without limiting the
generality of the foregoing, the Collateral Agent agrees that it will, as agent
for the benefit exclusively of the present and future Noteholders, Term
Lenders, Swap Creditors and the other holders from time to time of the Finance
Obligations, but subject to the terms and conditions hereof:

 

(i)                                     enter
into the Collateral Documents, receive, hold, administer and enforce the
security interests granted to it thereunder, perform its obligations thereunder
and protect, exercise and enforce the interests, rights, powers and remedies
granted or available to it thereunder or pursuant thereto or in connection
therewith;

 

(ii)                                  comply
with the obligations of the “Term Loan Agent” under the Intercreditor
Agreement;

 

(iii)                               take
all lawful and commercially reasonable actions that it may deem necessary or
advisable to protect or preserve its interest in the Collateral;

 

(iv)                              establish
the Cash Proceeds Account, the Reinvestment Funds Account and the Prepayment
Account as contemplated by the Security Agreement, and maintain sole dominion
and control over such accounts and all deposits therein and investments
thereof;

 

(v)                                 deliver
and receive notices pursuant to the Collateral Documents and the Intercreditor
Agreement;

 

(vi)                              sell,
assign, collect, assemble, foreclose on, institute legal proceedings with
respect to, or otherwise exercise or enforce the rights and remedies of a
secured party

 

10

 

(including a
mortgagee, trust deed beneficiary and insurance beneficiary or loss payee) with
respect to the Collateral and its other interests, rights, powers and remedies;

 

(vii)                           remit
to the Trustee, any Term Loan Agent and one or more Swap Representative as
required by Section 4.07 all cash proceeds received by the
Collateral Agent from the collection, foreclosure or enforcement of its
interest in the Collateral or any of its other interests, rights, powers or
remedies;

 

(viii)                        subject
to Section 3.02 and Section 7.01(b), amend the
Collateral Documents as from time to time authorized and directed by the Directing
Creditors, and amend the Collateral Documents as required by Section 3.02(d);
and

 

(ix)                                release
any Lien granted to it by any Collateral Document upon any Collateral if and as
required by Section 2.04 and Section 5.01.

 

The Collateral
Agent is irrevocably authorized and empowered to enter into and perform its
obligations under, and to protect, perfect, exercise and enforce its interest,
rights, powers and remedies, in each case under and pursuant to the Collateral
Documents and applicable law and to act as set forth in this Article II
or as requested in any lawful directions given to it from time to time in
respect of any matter by the Directing Creditors.

 

The Loan
Parties acknowledge and consent to the undertakings of the Collateral Agent set
forth in this Article II, and agree to each of the other provisions
of this Agreement applicable to them.

 

Section 2.03  Instructions of Directing Creditors.  Subject to the terms and conditions of this
Agreement, the Collateral Agent shall follow the instructions of the Directing
Creditors from time to time conveyed to it by the representative or
representatives of one or more Credit Classes pursuant to this Agreement,
subject to and consistent with the Collateral Agent’s rights and obligations
expressed in the Collateral Documents and in accordance with applicable
law.  The Noteholders’ representative for
purposes of delivering notices and instructions to the Collateral Agent shall
be the Trustee, the Term Lenders’ representative for purposes of delivering
notices and instructions to the Collateral Agent shall be a Term Loan Agent and
each Swap Creditor’s representative for purposes of delivering notices and
instructions to the Collateral Agent shall be its applicable Swap
Representative.  The Collateral Agent shall
disregard notices and instructions from any other Person in respect of the
applicable Credit Class.  No direction
given to the Collateral Agent (whether given by the Directing Creditors through
the representative or representatives of the applicable Credit Classes or by
the Trustee, a Term Loan Agent or any Swap Representative or otherwise by any
Person) which imposes, or purports to impose, upon the Collateral Agent any
obligation not set forth in this Agreement or any other Collateral Document
shall be binding upon the Collateral Agent unless the Collateral Agent elects,
at its sole option, to accept direction (i) pursuant to the instructions of the
Directing Creditors or (ii) from the Trustee or a Term Loan Agent and, after
the date on which all Note/Term Obligations have been paid in full and all
commitments (if any) with respect thereto have been terminated, the Swap
Representative, as required or permitted by the Indenture, a Term Credit
Agreement and the Swap Agreements.  No
instruction of the Directing Creditors shall be effective to impose any
obligation or liability upon the Trustee, a Term Loan Agent or any Swap
Representative, as applicable, unless it is a signatory party thereto.

 

Section 2.04  Certain Actions under the Collateral
Documents and Intercreditor Agreement.  Without limiting the provisions of Section 2.02,
the Collateral Agent is hereby authorized and directed, and agrees for the
benefit of the Loan Parties, without notice to or consent from any Creditor:
(i) to release (upon receipt of a written certification of a responsible
officer of DRI and Duane Reade that the Trustee has received all documents, if
any, required by the Trust Indenture Act and the

 

11

 

Indenture) one
or more Loan Parties from their obligations under, and the Liens of, the
Collateral Documents, and to release the Collateral or any portion thereof, as
required by Section 7.11 of the Security Agreement, Section 8.11
of the Pledge Agreement and Section 2.8 of the Intercreditor
Agreement or any other pertinent provision of any Finance Document; (ii) to
comply with the obligations imposed on the Term Loan Lenders (as defined and
specified in Sections 2.10 and 2.11 of the Intercreditor
Agreement); (iii) to receive or execute perfection certificates, control
agreements and other Loan Party deliverables as contemplated by the Collateral
Documents; (iv) to release funds deposited in the Cash Proceeds Account, the
Reinvestment Funds Account and the Prepayment Account established and
maintained under the Security Agreement as required by Sections 2.04(b),
2.05(b) and 2.06 of the Security Agreement (upon receipt of an
Officer’s Certificate); (v) to make available to each Loan Party any Instrument
or Certificated Security pledged by such Loan Party for the purposes set forth
in, and as required by, Section 4.01 of the Pledge Agreement; and
(vi) to deliver such instruments as may be required from time to time to enable
each Loan Party to exercise the voting and other rights which it is entitled to
exercise under Section 5.01(a)(i) of the Pledge Agreement.

 

Section 2.05  Other Actions by the Collateral Agent.  The Collateral Agent shall provide the
Trustee, any Term Loan Agent and each Swap Representative requesting the same
with a copy of all notices received from the Loan Parties under the Collateral
Documents and from the Revolving Credit Collateral Agent under the
Intercreditor Agreement.  The Collateral
Agent shall timely file Uniform Commercial Code continuation statements to
continue the perfection of the security interests under the Collateral
Documents.  During any period when the
Collateral Agent is exercising remedies against any Loan Party or the
Collateral, the Collateral Agent shall furnish the Trustee, a Term Loan Agent
and any Swap Representative requesting the same with reports of its activities
in connection therewith upon the occurrence of significant events and upon the
request of the Trustee or a Term Loan Agent.

 

Section 2.06  Nature of Duties.  Except to the extent otherwise provided in Section 2.05,
the duties of the Collateral Agent hereunder and under the Collateral Documents
shall be ministerial and administrative in nature.  The Collateral Agent shall not have by reason
of this Agreement or the Collateral Documents a fiduciary or trust relationship
with respect to the Trustee, any Noteholder, a Term Loan Agent, any Term
Lender, any Swap Representative, any Swap Creditor or any other holder from
time to time of Finance Obligations, and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to imply such
obligations or impose, upon the Collateral Agent, any obligations whatsoever
arising under this Agreement, the Indenture, a Term Credit Agreement, any Swap
Agreement, any Collateral Document or the Intercreditor Agreement, except as
expressly set forth herein or in the Collateral Documents.  For the limited purpose of holding and
distributing or applying Proceeds of Collateral and Cash Equivalents, the
Collateral Agent shall hold such Proceeds and Cash Equivalents in trust for the
benefit of the Trustee, a Term Loan Agent and the Swap Representative in
accordance with their rights and priorities provided for herein.

 

Section 2.07  No Obligations Imposed.  None of the Trustee, a Term Loan Agent, any
Swap Representative, any Creditor or any other holder of Finance Obligations
shall have: (i) except in connection with the instructions of the Directing
Creditors to which it is a signatory party, any responsibility or duty
whatsoever in respect of the Collateral or the Collateral Documents or any
other interest, right, power or remedy granted to or enforceable by the
Collateral Agent, it being understood and agreed by the Collateral Agent and by
each Loan Party that, except in connection with the instructions of the Directing
Creditors to which it is a signatory party, only the Collateral Agent shall be
bound by, or liable for breach of, the obligations of the Collateral Agent set
forth in or arising under the Collateral Documents, including all obligations
imposed by law upon a secured party relating the protection, maintenance,
release or enforcement of any security interest in any Collateral or any other
interest, right, power or remedy of the Collateral Agent; or (ii) except in
connection with the instructions of the 

 

12

 

Directing
Creditors to which it is a signatory party, any liability whatsoever for any
act or omission of the Collateral Agent, whether or not constituting a breach
of its undertaking and obligations under this Agreement or otherwise
constituting wrongful conduct.

 

Section 2.08  Inspection.  The Collateral Agent will permit the Trustee,
a Term Loan Agent, any Swap Representative or any Noteholder, Term Lender or
Swap Creditor at any time or from time to time, during normal business hours,
to inspect and copy any and all Collateral Documents and other documents,
notices, certificates, instructions or communications received by the
Collateral Agent in its capacity as such.

 

ARTICLE III

ACTIONS BY CREDITORS; VOTING

 

Section 3.01  Directing Creditors Defined.  Except with respect to Exceptional Decisions
as defined in Section 3.02, all instructions to the Collateral
Agent (including, without limitation, delivery of a notice of foreclosure,
foreclosure and appointment of a receiver), shall be given by the Directing
Creditors to the Collateral Agent through their applicable
representatives.  For purposes of
calculation of the Directing Creditors, any Credit Class at the time comprising
part of the Aggregate Voting Credit may, by the requisite vote of its Credit
Class, delegate instructional authority to any subset of such Credit Class, in
which event the Persons having been granted such instructional authority shall
be deemed to represent 100% of the members of their respective Credit
Class.  Any such delegation of authority
may be rescinded at any time by the requisite vote of the applicable Credit
Class.

 

Section 3.02  Exceptional Decisions.  Certain of circumstances set forth in Section 3.02(b)
and (c) shall call for “Exceptional Decisions”, as such term is used
herein, and instruction to the Collateral Agent in connection with such
circumstances shall be effected as provided below:

 

(a)                                  Amendment of Collateral Documents.  The Collateral Agent shall not agree to any
amendment of the Collateral Documents except upon instructions given by the
Directing Creditors in accordance with Section 3.01; provided
that no agreement of any Creditor or notice of the concurrence of any Credit
Class shall be required for (A) any amendment, modification or supplement to
the Collateral Documents (1) to cure any ambiguity, typographical error, defect
or inconsistency if such amendment, modification or supplement does not
adversely affect the rights of any Credit Class or (2) pursuant to Section 9.01
of the Indenture and the equivalent provision of any Term Credit Agreement or
(B) such amendments to financing statements or other Collateral Documents as
stated in the opinion provided in Section 2.02(iii); and, provided,
further, that any amendment to the provisions of the Collateral
Documents that releases any Collateral shall be governed by Section 3.02(c).

 

(b)                                 Amendment of this Agreement.  The Collateral Agent shall not agree to any
amendment of this Agreement except upon instructions given by the Directing
Creditors in accordance with Section 3.01; provided that no
agreement of any Creditor nor notice of the concurrence of any Credit Class
shall be required for any amendment, modification or supplement to this
Agreement (x) to cure any ambiguity, typographical error, defect or
inconsistency if such amendment, modification or supplement does not adversely
affect the rights of any Credit Class or (y) pursuant to Section 9.01
of the Indenture or the equivalent provision of any Term Credit Agreement; and,
provided, further, that any amendment to the definitions of “Aggregate
Voting Credit” and “Directing Creditors” and any amendment to Sections
3.01, 3.02, 4.06, 4.07 and 7.01 will require
notice to the Collateral Agent by the representative of each Credit Class at
the time comprising part of the Aggregate Voting Credit of the concurrence of
such Credit Class, determined by the applicable vote solely within such class.

 

13

 

(c)                                  Release of All or Substantially All Collateral.  The Collateral Agent shall not release all or
substantially all Collateral from the lien and security interests created by
the Collateral Documents except as expressly provided therein (including,
without limitation, Section 7.11(c)(x)(A) of the Security Agreement
and Section 8.11(c)(x)(A) of the Pledge Agreement) or in Article V
hereof or except upon notice to the Collateral Agent by the representative of
each Credit Class at the time comprising part of the Aggregate Voting Credit of
the concurrence of such Credit Class, determined by the applicable vote solely
within such class.

 

(d)                                 Amendments to Other Collateral Documents.  Subject to Section 7.01(b), The
Collateral Agent agrees for the benefit of the Loan Parties that it shall
execute any amendment, modification or supplement to any Collateral Document
approved in accordance with Article IX of the Indenture and in
accordance with any equivalent provision of all Term Credit Agreements, if any.

 

Section 3.03  Certificates of the Trustee, a Term Loan
Agent and Swap Representative. 
Concurrently with any calculation of Directing Creditors or any
Exceptional Decision requiring the concurrence of all Credit Classes then
comprising part of the Aggregate Voting Credit, the Trustee, a Term Loan Agent,
and, following the payment in full of all Note/Term Obligations, the Swap
Representative shall certify to the Collateral Agent (i) the aggregate
principal amount of the Aggregate Voting Credit held by the Noteholders, any
Term Lenders, or the Swap Creditors, as the case may be, and (ii) the votes
cast by the members of the applicable Credit Class.

 

Section 3.04  Calculations Binding.  All calculations regarding satisfaction of
compliance with the definition of the Directing Creditors shall be made by the
Collateral Agent upon receipt of and in exclusive reliance upon the
certificates described in Section 3.03, and shall be binding upon
each Credit Class.

 

Section 3.05  Directing Creditors Held Harmless.  In considering how to pursue creditor
remedies against any Loan Party or against the Collateral and before initiating
any such creditor remedies, the Directing Creditors shall first determine
whether any proposed creditor remedies or other actions create a risk that the
remaining interests of the Noteholders, any Term Lenders or the Swap Creditors
(including, without limitation, the right to seek a deficiency judgment against
the Loan Parties or the right to pursue other collateral) will be impaired or
prejudiced.  To the greatest extent
possible, all instructions given or actions taken concerning the exercise of
creditor remedies or other actions under this Agreement shall attempt to
maximize the return for all Creditors and attempt to minimize (to the greatest
extent possible) the risk that the rights and interests of some of the
Creditors (including, without limitation, the ability to seek and enforce a
deficiency judgment against any Loan Party or the right to pursue other
collateral) may be diminished or impaired following the exercise of such
creditor remedies or actions.  Each
Creditor agrees that it shall not provide or cause or vote to be provided any
instruction to the Collateral Agent which would cause or result in
disproportionate prejudice or impairment to the other Creditors hereunder.  However, subject to the previous sentence,
the Directing Creditors shall be entitled to provide any instruction and take
any action which they in good faith believe is in the interest of the
Noteholders and any Term Lenders.

 

ARTICLE IV

EXERCISE OF REMEDIES; APPLICATION OF
COLLATERAL PROCEEDS

 

Section 4.01  General Limitation on Exercise of Remedies.  None of the Trustee, a Term Loan Agent nor
the Swap Representative shall be entitled to exercise any remedies directly under
the Collateral Documents, but only by providing instructions to the Collateral
Agent in accordance with this Agreement.

 

14

 

Section 4.02  Notices of Events of Default.  The Trustee shall notify the Collateral Agent
(with a copy to a Term Loan Agent) if an Event of Default has occurred under
(and as defined in) the Indenture of which it has actual knowledge and of the
forbearance, waiver or other termination, if any, of such Event of Default.  A Term Loan Agent shall notify the Collateral
Agent (with a copy to the Trustee) if an Event of Default has occurred under
(and as defined in) a Term Credit Agreement and of the forbearance, waiver or
other termination, if any, of such Event of Default.  The Swap Representative shall notify the
Collateral Agent (with a copy to the Trustee and a Term Loan Agent) if it
receives notice from one or more Swap Creditors that one or more Swap
Termination Dates or Termination Events have occurred and of the forbearance,
waiver or other termination, if any, of such Swap Termination Date or
Termination Event.

 

Section 4.03  Notices of Acceleration.  If (i) an Event of Default occurs and any
Note/Term Obligations are accelerated or (ii) one or more Swap Termination
Dates occur and the aggregate Swap Termination Value under the applicable Swap
Agreement as to which such Swap Termination Dates have occurred owed by one or
more Loan Parties as a result thereof is greater than the Threshold Amount, the
Trustee, a Term Loan Agent and/or the Swap Representative, as the case may be,
shall notify the others and the Collateral Agent of such acceleration or the
occurrence of such Swap Termination Dates, as applicable, certifying: (i) that
such acceleration or Swap Termination Dates has or have occurred and (ii) the
principal, interest, fees and other amounts owed by the Loan Parties (such
certification being herein referred to as a “Notice of Acceleration”).

 

Section 4.04  Remedies.  Upon receipt by the Collateral Agent of a
Notice of Acceleration from or on behalf of one or more Credit Classes, or upon
receipt by the Collateral Agent of notice of the commencement by or against one
or more Loan Parties of an Insolvency Proceeding and subject to the provisions
of this Agreement, including Section 6.10, the Collateral Agent
shall retain legal counsel acceptable to the Trustee, a Term Loan Agent and the
Swap Representative, and shall exercise such remedies under the Collateral
Documents as it shall be instructed by the Directing Creditors.

 

Section 4.05  No Inconsistent Actions.  Each of the Trustee, a Term Loan Agent and
the Swap Representative agree to take no action in an Insolvency Proceeding
with respect to any Loan Party or the Collateral which is inconsistent with the
terms of this Agreement.

 

Section 4.06  Application of Proceeds.  In the event of the realization of Proceeds
of any collection or disposition of Collateral pursuant to the exercise of
remedies under the Collateral Documents, the Collateral Agent shall distribute
such Proceeds to the specified Persons in the following order of priority:

 

FIRST, to the payment of advances made and liabilities
incurred by the Collateral Agent in order to protect the Liens granted by the
Collateral Documents or the Collateral, with interest thereon at the rate that
would then be applicable to the Senior Secured Notes, and the payment of all
reasonable costs and expenses incurred by the Collateral Agent, the Trustee or
a Term Loan Agent in connection with the preservation, collection, foreclosure
or enforcement of the Liens granted by the Collateral Documents or any
interest, right, power or remedy of the Collateral Agent or in connection with
the collection or enforcement of any of the Finance Obligations in any
Insolvency Proceeding, including all reasonable fees and disbursements of
attorneys, accountants, consultants, appraisers and other professionals engaged
by the Collateral Agent, the Trustee or a Term Loan Agent and reasonable
compensation of the Collateral Agent, the Trustee or a Term Loan Agent for
services rendered in connection therewith;

 

15

 

SECOND, to the payment of accrued and unpaid interest
on the Senior Secured Notes on any applicable Term Loans and on any applicable
Swap Obligations; on a pro-rata basis (to the extent the remaining Proceeds are
not sufficient to make the distribution referred to in this clause in full);

 

THIRD, to the payment of any due and unpaid premium,
if any, in respect of the prepayment or payment of the Senior Secured Notes and
any Term Loans, on a pro-rata basis (to the extent the remaining Proceeds are
not sufficient to make the distribution referred to in this clause in full);

 

FOURTH, to the payment of the due and unpaid principal
of the Senior Secured Notes and any Term Loans and the then unpaid amount of
the Swap Obligations, on a pro-rata basis (to the extent the remaining Proceeds
are not sufficient to make the distribution referred to in this clause in
full);

 

FIFTH, to any remaining unpaid amounts of the Note/Term
Obligations (other than amounts described in clause SIXTH below) and of the
Swap Obligations, on a pro-rata basis (to the extent the remaining Proceeds are
not sufficient to make the distribution referred to in this clause in full);

 

SIXTH, to the payment of the fees of legal counsel for
each Term Lender, if applicable, on a pari passu basis in accordance with the
terms of a Term Credit Agreement and any Term Loan Documents; and

 

SEVENTH, to other Persons as their interests may
appear or as instructed by a court of competent jurisdiction.

 

No party
hereto shall be entitled to a distribution on any lower priority pursuant to
clauses FIRST through SEVENTH above unless and until all higher priorities have
been paid in full.

 

Section 4.07  Sharing of Asset Sale Proceeds and Event of
Loss Proceeds.  In any
circumstance when the Collateral Agent receives Excess Proceeds or Excess Loss
Proceeds (as such terms or any substantially similar terms are defined in the
Indenture and a Term Credit Agreement) pursuant to any Note Document or Term
Loan Document and the Indenture and a Term Credit Agreement each specifies that
all or a portion of such proceeds are to be applied to an “Asset Sale Proceeds
Offer” or “Loss Proceeds Offer” (as such terms or any substantially similar
terms are defined in the Indenture and a Term Credit Agreement), as the case
may be, the Collateral Agent shall divide such proceeds between the Noteholders
and any Term Lenders entitled to such right in proportion to the principal
amounts of the Senior Secured Notes and Term Loans tendered.  The parties acknowledge that the Indenture
provides, and a Term Credit Agreement may provide that if the Noteholders
and/or Term Lenders do not accept Excess Proceeds or Excess Loss Proceeds (as
such terms or any substantially similar terms are defined in the Indenture and
a Term Credit Agreement), as the case may be, or Net Cash Proceeds of an Asset
Sale or Net Loss Proceeds of an Event of Loss (as such terms or any
substantially similar terms are defined in the Indenture and a Term Credit
Agreement) in the full amount to which they are entitled, the portion thereof
which would otherwise have been applied to the redemption of Senior Secured
Notes or to the prepayment of any Term Loans in accordance herewith will be
paid to DRI.

 

Section 4.08  Credit Bid Rights.

 

(a)                                  If, during the
continuance of an Event of Default, the Collateral Agent forecloses any of its
Liens upon any Collateral, whether by public sale or private sale or judicial
foreclosure or

 

16

 

otherwise, and if directed by the Directing Creditors to exercise its
credit bid rights as provided in this Section 4.08, the Collateral
Agent, acting for and on behalf of the holders of Finance Obligations, shall be
entitled (to the fullest extent it may lawfully do so) to use and apply then
due and payable Finance Obligations as a credit on account of the purchase
price payable by the Collateral Agent for any Collateral sold to the Collateral
Agent at the corresponding foreclosure sale for all purposes related to bidding
and making settlement or payment of the purchase price at such foreclosure
sale.

 

(b)                                 If, in connection with
or, during the continuance of an Event of Default, in anticipation of any
foreclosure of any of the Collateral Agent’s Liens upon any Collateral, Term
Loans, Swap Obligations and Senior Secured Notes representing at least a
majority in outstanding principal amount of Term Loans, Swap Obligations and
Senior Secured Notes then outstanding are transferred to and registered in the
name of a single transferee for purposes of facilitating or executing a bid for
such Collateral at the corresponding foreclosure sale, such transferee shall be
entitled (to the fullest extent it may lawfully do so) to use and apply all
then due and payable Finance Obligations outstanding to such transferee as a
credit on account of the purchase price payable by such transferee for any
Collateral sold to such transferee at such foreclosure sale, for all purposes
related to bidding and making settlement or payment of the purchase price at
such foreclosure sale, but only if all Noteholders, Term Lenders and Swap
Creditors consent thereto or if:

 

(i)                                     each
Creditor has been offered the opportunity to transfer to such transferee any or
all of the Senior Secured Notes, any Term Loans and any Swap Obligations
outstanding held by such Creditor on terms equivalent to the most favorable
terms offered by such transferee to any Creditor for or in connection with any
transfer of Term Loans, Swap Obligations or Senior Secured Notes to such
transferee; and

 

(ii)                                  effective
provision is made (or found by order of a court of competent jurisdiction to
have been made) for the pro-rata sharing among the Credit Classes of proceeds
of the Collateral, even if the proceeds received by Creditors other than such
transferee are different in kind (if reasonably equivalent in value with at
least equivalent liquidity) from the proceeds to be realized by such transferee
if it is the successful bidder at the foreclosure sale.

 

(c)                                  Each of the Loan
Parties hereby grants, confirms and agrees to cooperate with and permit the
exercise and enforcement of the rights set forth in this Section 4.08.

 

ARTICLE V

CERTAIN OBLIGATIONS ENFORCEABLE BY THE LOAN
PARTIES

 

Section 5.01  Release of Liens.

 

(a)                                  The Collateral Agent
agrees for the benefit of the Loan Parties that if the Collateral Agent at any
time receives a written certification signed by a Responsible Officer (an “Officer’s
Certificate”) stating that the Collateral Agent is permitted or required
(x) by the Indenture and each Term Credit Agreement, if any, (y) by Section 7.11
of the Security Agreement or Section 8.11 of the Pledge Agreement
or (z) pursuant to the instructions of the Directing Creditors, to release any
property of any Loan Party described in such Officer’s Certificate from any
Lien granted by a Collateral Document specified in such Officer’s Certificate,
accompanied by the proposed instrument releasing such Lien as to such property,
then, subject to Article VI, the Collateral Agent will (upon
receipt of a written certification of a Responsible Officer of DRI and Duane
Reade that the Trustee has received all documents, if any, required by the
Trust Indenture Act and the Indenture) within three Business Days thereafter,
release such Lien upon such property by executing (and if necessary
acknowledging in recordable form) such proposed instrument reasonably requested
by the Loan Parties and delivering it to the applicable Loan

 

17

 

Party requesting the same.  Any
such document shall be without recourse to or warranty by the Collateral Agent
or the other Finance Parties.

 

(b)                                 Any Collateral that is
released automatically pursuant to Section 7.11 of the Security
Agreement, Section 8.11 of the Pledge Agreement or any other
Collateral Document shall be deemed to be automatically released under this
Agreement without any action on the part of the Collateral Agent.

 

Section 5.02  Delivery of Copies to the Trustee, a Term
Loan Agent and Swap Representative.  The applicable Loan Party shall deliver to
the Trustee, a Term Loan Agent and any Swap Representative requesting the same
a copy of each Officer’s Certificate delivered to the Collateral Agent pursuant
to Section 5.01, together with copies of all documents delivered to
the Collateral Agent with such Officer’s Certificate.  The Trustee, a Term Loan Agent and the Swap
Representative shall not be obligated to take notice thereof or to act thereon.

 

Section 5.03  Collateral Agent Not required to Make Filings
or Recordations.  The
Collateral Agent is not required to file, register or record any instrument
releasing or subordinating its security interest in any Collateral.

 

Section 5.04  No Actions to Address Exceptions.
 Each Creditor acknowledges that actions
will not be taken to address the exceptions noted in Section 3.04
of the Security Agreement and that the Collateral Agent may not have a
perfected security interest with respect to the matters specified therein.

 

ARTICLE VI

THE COLLATERAL AGENT

 

Section 6.01  No Implied Duty.  The Collateral Agent shall not have any
duties or responsibilities except those expressly assumed by it in this
Agreement and the other Collateral Documents and shall not be required to take
any action which is contrary to applicable law or any provision of this
Agreement or the other Collateral Documents. 
Where the Collateral Agent is permitted but not required to take any
action pursuant to any Collateral Document, the Collateral Agent may take any
such action but shall have no obligation to take any such action without the
direction of the Directing Creditors and the Collateral Agent shall not be
liable to any party for not taking such action if the Directing Creditors have
not directed the Collateral Agent to take such action.  The Collateral Agent makes no representation
as to the existence, validity, value, genuineness, perfection, priority or the
collectibility of any security or other document or other instrument held by or
delivered to the Collateral Agent.  The
Collateral Agent shall not be called upon to advise any party as to the wisdom
in taking or refraining to take any action with respect to the Collateral.

 

Section 6.02  Appointment of Co-Agents and Sub-Agents.  The Collateral Agent may employ agents and
appoint sub-agents or co-collateral agents as it determines appropriate in the
performance of its duties hereunder.  The
Collateral Agent will exercise reasonable care in selecting any such agent,
sub-agent or co-collateral agent but shall not otherwise be responsible or
liable for any act or omission of any such agent, sub-agent or co-collateral
agent.

 

Section 6.03  Other Agreements.  The Collateral Agent has accepted and is
bound by the Collateral Documents delivered to it as of the date of this
Agreement and listed on Schedule 2.02 and, subject to Section 7.01(b)
and this Article VI, shall accept and be bound by all Collateral
Documents delivered to it at any time after the date of this Agreement.  The Collateral Agent shall not otherwise be
bound by, or obligated to take cognizance of the provisions of, any agreement
to which it is not a party,

 

18

 

including a
Term Credit Agreement, any Swap Agreements and the Indenture.  The Collateral Agent shall not be responsible
for compliance with the terms of any Finance Document by any Loan Party and
shall have no duty to monitor any such compliance.

 

Section 6.04  Solicitation of Instructions.  The Collateral Agent may at any time solicit
confirmatory instructions, including from the Directing Creditors or an order
of a court of competent jurisdiction, as to any action which it may be
requested or required to take, or which it may propose to take, in the
performance of any of its obligations under this Agreement.

 

Section 6.05  Limitation of Liability.  The Collateral Agent shall not be responsible
or liable for any action taken or omitted to be taken by it hereunder or under
any Collateral Document, except for its own gross negligence or willful
misconduct.

 

Section 6.06  Documents in Satisfactory Form.  The Collateral Agent shall be entitled to
require that all agreements, certificates, opinions, instruments and other
documents at any time submitted to it, including those expressly provided for
in this Agreement, be delivered to it in a form and upon substantive provisions
reasonably satisfactory to it.

 

Section 6.07  Entitled to Rely.  The Collateral Agent may rely conclusively
upon any certificate, notice or other document (including any electronic
transmission) reasonably believed by it to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons and need
not investigate any fact or matter stated in any such document.  The Collateral Agent may seek and rely upon
any judicial order or judgment, upon any advice, opinion or statement of legal
counsel, independent consultants and other experts selected by it in good faith
and upon any certification, instruction, notice or other writing delivered to it
by any Loan Party in compliance with the provisions of this Agreement or
delivered to it by the Trustee, a Term Loan Agent or the Swap Representative as
to the Creditors whose action or consent is required for an instruction of
Directing Creditors, without being required to determine the authenticity
thereof or the correctness of any fact stated therein or the propriety or
validity of service thereof.  The
Collateral Agent may act in reliance upon any instrument comporting with the
provisions of this Agreement or any signature reasonably believed by it to be
genuine and may assume that any Person purporting to give notice or receipt or
advice or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.  To the extent an officers’ certificate or an
opinion of counsel is required or permitted under this Agreement to be
delivered to the Collateral Agent in respect of any matter, the Collateral
Agent may rely conclusively on such officers’ certificate or opinion of counsel
as to such matter.  The Collateral Agent
may request an opinion of counsel, a certificate of a Responsible Officer, or
both, at any time when it is required or requested to take any action (other
than pursuant to Sections 2.04, 3,02, 5.01, 6.03
and 7.03(d) hereof or any similar provision of any Collateral Document)
hereunder or under any Collateral Document stating the such action is permitted
or authorized pursuant to the terms hereof and of the Finance Documents and
that all conditions precedent to the taking of such action have been complied
with and the Collateral Agent may rely conclusively on such officer’s
certificate or opinion of counsel with respect thereto.

 

Section 6.08  Events of Default.  The Collateral Agent shall not be required to
inquire as to the occurrence or absence of any Event of Default under the
Indenture, a Term Credit Agreement, the Swap Agreements or any other Finance
Document and shall not be affected by or required to act upon any notice or
knowledge as to the occurrence of any Event of Default unless and until it
receives a notice pursuant to Section 4.02.

 

Section 6.09  Actions by Collateral Agent.  As to any matter not expressly provided for
by this Agreement, the Collateral Agent shall act or refrain from acting as
directed by the Directing Creditors and shall be fully protected in doing so.

 

19

 

Section 6.10  Security or Indemnity in Favor of the
Collateral Agent.  The
Collateral Agent shall not be required to advance or expend any funds or
otherwise incur any financial liability in the performance of its duties or the
exercise of its powers or rights hereunder unless it has been provided with
security or indemnity which it, in its discretion, deems sufficient against any
and all liability or expense which may be incurred by it by reason of taking or
continuing to take such action.  The Loan
Parties hereby jointly and severally agree to provide such security or
indemnity to the Collateral Agent promptly upon request by the Collateral Agent
therefor.

 

Section 6.11  Resignation or Removal of the Collateral
Agent.  Subject to the
appointment of a successor Collateral Agent as provided in Section 6.12
and the acceptance of such appointment by the successor Collateral Agent, (i)
the Collateral Agent may resign at any time by giving not less than 45 days’
notice of resignation to the Trustee, a Term Loan Agent, the Swap
Representative known to it, and DRI, and (ii) the Collateral Agent may be
removed at any time, with or without cause, pursuant to the instructions of the
Directing Creditors.

 

Section 6.12  Appointment of Successor Collateral Agent.  Upon any such resignation or removal, a
successor Collateral Agent may be appointed by the Trustee, a Term Loan Agent
and the Swap Representative, acting jointly, or by the instructions of the
Directing Creditors, in each case with the consent of DRI.  If no successor Collateral Agent shall have
been so appointed and shall have accepted such appointment within 45 days after
the predecessor Collateral Agent gave notice of resignation or was removed, the
retiring Collateral Agent may appoint a successor Collateral Agent, or petition
a court of competent jurisdiction for appointment of a successor Collateral
Agent, which shall be a bank or trust company (i) authorized to exercise
corporate trust powers, (ii) acceptable to the Trustee and a Term Loan Agent
(or, if the Note/Term Obligations have been repaid in full, the Swap
Representative), (iii) having a combined capital and surplus of at least
$50,000,000 and (iv) maintaining an office in New York, New York.

 

Section 6.13  Succession.  When the Person so appointed as successor
Collateral Agent accepts such appointment:

 

(i)                                     such
Person shall succeed to and become vested with all the rights, powers,
privileges and duties of the predecessor Collateral Agent, and the predecessor
Collateral Agent shall be discharged from its duties and obligations hereunder,
and

 

(ii)                                  the
predecessor Collateral Agent, upon payment of all amounts owed to it, shall
promptly transfer all Collateral within its possession or control to the
possession or control of the successor Collateral Agent and shall execute and
deliver such notices, instructions and assignments as may be necessary or
desirable or reasonably requested by the successor Collateral Agent to transfer
to the successor Collateral Agent all Liens, interests, rights, powers and
remedies of the predecessor Collateral Agent in respect of the Collateral or
under the Collateral Documents.

 

Thereafter the
predecessor Collateral Agent shall remain entitled to enforce the immunities
granted to it in this Article VI.

 

20

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.01  Amendment.

 

(a)                                  This Agreement may be
amended or supplemented from time to time by the written agreement of the Loan
Parties and the Collateral Agent, acting pursuant to the instructions of the
Directing Creditors if so required pursuant to Article III and in
compliance with Section 3.02.

 

(b)                                 Notwithstanding
anything contained herein or in any Collateral Document, any (x) Collateral
Document entered into after the Issue Date that is not in the form attached to
any Collateral Document entered into on the Issue Date or (y) amendment or
supplement to any Collateral Document that, in each case, imposes any
obligation upon the Collateral Agent not contemplated by this Agreement or the
other Collateral Documents in effect on the Issue Date or adversely affects the
rights of the Collateral Agent in its individual capacity will become effective
only with the consent of the Collateral Agent in its individual capacity.  The Collateral Agent shall promptly receive
copies of all Collateral Documents executed after the Issue Date.

 

Section 7.02  Further Assurances.

 

(a)                                  At any time or from
time to time, each Loan Party will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and
things as may be necessary or appropriate, and such other instruments, acts or
things as the Collateral Agent may reasonably request, in order to assure and
confirm that each Subsidiary required by the Indenture or a Term Credit
Agreement to guarantee payment of the Finance Obligations has duly guaranteed
payment of all the Finance Obligations and that the Collateral Agent holds, for
the exclusive benefit of all present and future holders of Finance Obligations,
duly created, enforceable and perfected first priority Liens (subject only to
Permitted Liens (as defined in the Security Agreement)) upon all interests in
Collateral at any time owned or acquired by the Loan Parties or any of such
Subsidiary or as the Collateral Agent, the Trustee, a Term Loan Agent or any
Swap Representative otherwise may reasonably request in order to carry out and give
full effect to the intents and purposes of the Term Loan Documents and the Note
Documents.

 

(b)                                 Upon request of the
Collateral Agent at any time and from time to time, each of the Loan Parties
will, and will cause each of its Subsidiaries to, promptly execute, acknowledge
and deliver such security documents, instruments, certificates, notices and
other documents and take such other actions as shall be required or which the
Collateral Agent may reasonably request to create, perfect, protect, assure or
enforce the Liens and benefits intended to be conferred, as contemplated by the
Indenture, a Term Credit Agreement and the Collateral Documents, upon the
Collateral Agent for the exclusive benefit of the holders of the Finance
Obligations.  If any Loan Party or such
Subsidiary fails to do so, the Collateral Agent is hereby irrevocably
authorized and empowered, with full power of substitution, to execute,
acknowledge and deliver such security documents, instruments, certificates,
notices and other documents and, subject to the provisions of the Collateral
Documents, take such other actions in the name, place and stead of the Loan
Parties or such Subsidiary, but the Collateral Agent will have no obligation to
do so and no liability for any action taken or omitted by it in good faith in
connection therewith.

 

Section 7.03  Successors and Assigns; Term Loan Agent
Joinder.

 

(a)                                  This Agreement is
legally binding upon and enforceable against the Collateral Agent.  Except as provided in Section 6.02
or in any Collateral Document, the Person acting as Collateral Agent may not,
in its individual capacity, delegate any of its duties or assign any of its
rights hereunder, and any attempted delegation or assignment of any such duties
or rights shall be void.  All obligations
of the Collateral Agent hereunder shall inure to the benefit of, and be
enforceable by, the Trustee, a Term Loan Agent, the Swap Representative and
each present and future holder of Finance Obligations, each of whom shall be
entitled to enforce this Agreement as a third party beneficiary hereof, and all
of their respective successors and assigns.

 

21

 

(b)                                 This Agreement is
further binding upon each of the Loan Parties and their respective
successors.  No Loan Party may delegate
any of its duties or assign any of its rights hereunder, and any attempted
delegation or assignment of any such duties or rights shall be void.

 

(c)                                  The obligations of
the Collateral Agent set forth in Sections 5.01 and 5.02 of this
Agreement shall also be enforceable by the Loan Parties directly affected by
any breach thereof and their respective successors and assigns.

 

(d)                                 Upon the Loan Parties’
entering into a Term Credit Agreement, a Term Loan Agent shall become a party
to this Agreement by executing and delivering its written agreement (the “Joinder”),
for the enforceable benefit of the Collateral Agent, the Swap Creditors and the
Trustee, that: (i) all Finance Obligations shall be and are secured equally and
ratably by all Liens at any time granted by the Loan Parties to secure any
Finance Obligations, whether or not upon property otherwise constituting
Collateral; (ii) all such Liens shall be enforceable by the Collateral Agent
for all holders of Finance Obligations equally and ratably; (iii) such Term
Loan Agent on behalf of the applicable Term Lenders consents to and will be
bound by the provisions of this Agreement including those relating to the order
of application of proceeds from enforcement of the Collateral Agent’s Liens upon
the Collateral; (iv) a Term Loan Agent consents to and directs the Collateral
Agent to perform its obligations under this Agreement and (v) such Term Loan
Agent is authorized by the requisite Term Lenders (which authorization may be
set forth in a Term Credit Agreement) to execute the Joinder.  Upon execution of the Joinder, a Term Loan
Agent shall automatically become a party to this Agreement with the same force
and effect as if an original party hereunder. 
The execution and delivery of such Joinder shall not require the consent
of any other Finance Party hereunder.

 

Section 7.04  Delay and Waiver.  No failure to exercise, no course of dealing
with respect to the exercise of, and no delay in exercising, any right, power
or remedy arising under this Agreement or any of the other Collateral Documents
shall impair any such right, power or remedy or operate as a waiver
thereof.  No single or partial exercise
of any such right, power or remedy shall preclude any other or future exercise
thereof or the exercise of any other right, power or remedy.  The remedies herein are cumulative and are
not exclusive of any remedies provided by law.

 

Section 7.05  Notices.  Any communications, including notices and
instructions, between the parties hereto or notices provided herein to be given
may be given to the following addresses:

 

 

	
  If to the
  Collateral Agent:

  	
  US Bank National Association

  
	
   

  	
  225 Asylum
  Street

  
	
   

  	
  23rd
  Floor

  
	
   

  	
  Hartford, CT
  06103

  
	
   

  	
  Attn: Susan
  C. Merker

  
	
   

  	
  Telephone: 860-241-6815

  
	
   

  	
  Facsimile: 860- 241-6897

  
	
   

  	
   

  
	
  If to a Term
  Loan Agent:

  	
  At its address in the Joinder

  
	
   

  	
   

  
	
  If to the
  Trustee:

  	
  US Bank National Association

  
	
   

  	
  225 Asylum
  Street

  
	
   

  	
  23rd
  Floor

  
	
   

  	
  Hartford, CT
  06103

  
	
   

  	
  Attn: Susan
  C. Merker

  
	
   

  	
  Telephone: 860-241-6815

  

 

22

 

	
   

  	
  Facsimile: 860- 241-6897

  
	
   

  	
   

  
	
  If to the
  Swap Representative:

  	
  At is address in the Sharing Confirmation

  
	
   

  	
   

  
	
  If to any
  Loan Party:

  	
  Duane Reade Inc.

  
	
   

  	
  440 Ninth Avenue, 6th Floor

  
	
   

  	
  New York, NY 10001

  
	
   

  	
  Attn: John K. Henry

  
	
   

  	
  Telephone: 212-273-5700

  
	
   

  	
  Facsimile: 212-244-6525

  

 

Unless it has received a signed Joinder from a Term Loan Agent, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no Term
Loan Agreements are in existence.  Unless
it has actual knowledge (including by way of written notice from a Swap
Creditor or any Swap Representative) to the contrary, the Collateral Agent, in
acting hereunder, shall be entitled to assume that no Swap Agreements are in
existence.  Each notice hereunder shall
be in writing and may be personally served, telexed or sent by facsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service and signed for against receipt
thereof, upon receipt of facsimile or telex, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided, no notice to the Collateral Agent, the Trustee or a
Term Loan Agent shall be effective unless and until received by its officer
responsible for the administration of the transaction contemplated hereby.  Each party may change its address for notice
hereunder to any other location within the continental United States by giving
written notice thereof to the other parties as set forth in this Section 7.05.

 

Section 7.06  Entire Agreement.  This Agreement states the complete agreement
of the parties relating to the undertaking of the Collateral Agent set forth
herein and supersedes all oral negotiations and prior writings in respect of
such undertaking.

 

Section 7.07  Compensation and Expenses.  Whether or not the transactions contemplated
hereby shall be consummated, each of the Loan Parties jointly and severally
agrees to pay, promptly within 30 days following demand:

 

(i)                                     reasonable
compensation to the Collateral Agent and its agents, co-agents and sub-agents;

 

(ii)                                  all
reasonable costs and expenses incurred in the preparation, execution, delivery,
filing, recordation, administration or enforcement of this Agreement or any
other Collateral Document or any consent, amendment, waiver or other
modification relating thereto;

 

(iii)                               all
reasonable fees, expenses and disbursements of legal counsel and any auditors,
accountants, consultants or appraisers or other professional advisors and
agents engaged by the Collateral Agent in connection with the negotiation,
preparation, closing, administration, performance or enforcement of this
Agreement and the other Collateral Documents or any consent, amendment waiver
or other modification relating thereto and any other document or matter
requested by one or more Loan Parties;

 

(iv)                              all
reasonable costs and expenses of creating, perfecting, releasing or enforcing
the Collateral Agent’s security interests in the Collateral, including filing
and recording fees, expenses and taxes, stamp or documentary taxes, search
fees, title insurance premiums;

 

23

 

(v)                                 all
reasonable costs of any opinion of counsel required hereby to be delivered to
the Collateral Agent or requested by the Collateral Agent in connection
herewith;

 

(vi)                              all
other reasonable costs and expenses incurred by the Collateral Agent in
connection with the negotiation, preparation and execution of the Collateral
Documents and any consents, amendments, waivers or other modifications thereto
and the transactions contemplated thereby or the exercise of its rights or
performance of its obligations by the Collateral Agent thereunder; and

 

(vii)                           all
reasonable costs and expenses incurred by the Collateral Agent in connection
with the preservation, collection, foreclosure or enforcement of the Liens
granted by the Collateral Documents or any interest, right, power or remedy of
the Collateral Agent or in connection with the collection or enforcement of any
of the Finance Obligations or the proof, protection, administration or
resolution of any claim based upon the Finance Obligations in any Insolvency
Proceeding, including all reasonable fees and disbursements of attorneys,
accountants, auditors, consultants, appraisers and other professionals engaged
by the Collateral Agent, the Trustee, a Term Loan Agent or the Swap
Representative.

 

The agreements in this Section 7.07 shall survive repayment
of the Senior Secured Notes, any Term Loans and the Swap Obligations and all other
amounts payable hereunder.

 

Section 7.08  Indemnity.

 

(a)                                  In addition to the
payment of costs and expenses pursuant to Section 7.07, whether or
not the transactions contemplated hereby shall be consummated, each of the Loan
Parties jointly and severally agrees to defend (subject to the Indemnitees’
selection of counsel), indemnify, pay and hold harmless, the Collateral Agent,
the Trustee, a Term Loan Agent and the Swap Representative and each of their
respective Affiliates and each and all of the directors, officers, partners,
trustees, employees, attorneys and agents, and in each case their respective
heirs, representatives, successors and assigns (each of the foregoing, an “Indemnitee”)
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, suits, judgments, costs and expenses of
any kind, including, without limitation, the reasonable fees and disbursements
of counsel, which may be incurred by, imposed on or asserted against such
Indemnitee in connection with any investigation or administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of this Agreement or in any
other way connected with the enforcement of any of the terms of, or the
preservation of any rights hereunder (“Indemnified Liabilities”); provided,
no Indemnitee shall be entitled to indemnification hereunder with respect to
any Indemnified Liability to the extent such Indemnified Liability is found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted directly and primarily from the gross negligence or willful misconduct
of such Indemnitee.

 

(b)                                 All amounts due under Section 7.08(a)
shall be payable not later than 10 days after written demand therefor.

 

(c)                                  To the extent that
the undertakings to defend, indemnify, pay and hold harmless set forth in Section 7.08(a)
may be unenforceable in whole or in part because they are violative of any law
or public policy, each of the Loan Parties shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.

 

24

 

(d)                                 No Loan Party shall
ever assert any claim against any Indemnitee, on any theory of liability, for
any lost profits or special, indirect or consequential damages or (to the
fullest extent lawful) any punitive damages arising out of, in connection with,
or as a result of, this Agreement or any other Term Loan Document or Note
Document or any agreement or instrument or transaction contemplated hereby or
relating in any respect to any Indemnified Liability, and each Loan Party hereby
forever waives, releases and agrees not to sue upon any claim for any such lost
profits or special, indirect, consequential or (to the fullest extent lawful)
punitive damages, whether or not accrued and whether or not known or suspected
to exist in its favor.

 

(e)                                  No Finance Party
shall ever assert any claim against the Collateral Agent each of its Affiliates
and each and all of the directors, officers, partners, trustees, employees,
attorneys and agents, and in each case their respective heirs, representatives,
successors and assigns, on any theory of liability, for any lost profits or
special, indirect or consequential damages or (to the fullest extent lawful)
any punitive damages arising out of, in connection with, or as a result of,
this Agreement or any other Term Loan Document or Note Document or any
agreement or instrument or transaction contemplated hereby or relating in any
respect to any Indemnified Liability, and each Finance Party hereby forever
waives, releases and agrees not to sue upon any claim for any such lost profits
or special, indirect, consequential or (to the fullest extent lawful) punitive
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.

 

(f)                                    The agreements in
this Section 7.08 shall survive repayment of the Term Loan and the
Senior Secured Notes and all other amounts payable hereunder.

 

Section 7.09  Obligations Secured.  All obligations of the Loan Parties set forth
in or arising under this Agreement shall be Finance Obligations and are secured
by all Liens granted by the Collateral Documents.

 

Section 7.10  Severability.  If any provision of this Agreement is
invalid, illegal or unenforceable in any respect or in any jurisdiction, the
validity, legality and enforceability of such provision in all other respects
and of all remaining provisions, and of such provision in all other
jurisdictions, shall not in any way be affected or impaired thereby.

 

Section 7.11  Governing Law; Submission to Jurisdiction.

 

(a)                                  THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

 

(b)                                 Any legal action or
proceeding with respect to this Agreement or any other Collateral Document may
be brought in the courts of the State of New York in New York County, or of the
United States for the Southern District of New York, and, by execution and
delivery of this Agreement, each Loan Party hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
nonexclusive jurisdiction of such courts. 
Each Loan Party irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such court and any claim that any such
proceeding brought in any such court has been brought in an inconvenient forum.

 

(c)                                  Each Loan Party
hereby consents to process being served in any such suit, action or proceeding
by the mailing of a copy thereof by registered or certified mail, postage
prepaid, return

 

25

 

receipt requested, to Holdings’ or such Borrower’s address referred to
in Section 7.05, as the case may be.  Each Loan Party agrees that such service (i)
shall be deemed in every respect effective 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 be valid personal service upon and personal
delivery to it.  Nothing in this Section 7.11
shall affect the right of the Collateral Agent, the Trustee, a Term Loan Agent
or the Swap Representative to serve process in any manner permitted by law or
limit the right of any of them to bring proceedings against one or more Loan
Parties in the courts of any jurisdiction or jurisdictions.

 

Section 7.12  Waiver of Right to Trial by Jury.  EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY TERM LOAN
DOCUMENT OR ANY NOTE DOCUMENT IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY TERM
LOAN DOCUMENT OR NOTE DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.

 

Section 7.13  Section Titles.  The section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of this Agreement, except when used to reference
such sections.

 

Section 7.14  Counterparts; Effectiveness.  This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
together constitute one and the same document. 
Signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are attached to
the same document.  Delivery of an
executed signature page of this Agreement by facsimile or other electronic
transmission shall be as effective as delivery of a manually executed
counterpart thereof.  This Agreement
shall become effective upon the execution of a counterpart hereof by each of
the parties hereto and receipt by each party of written or telephonic
notification of such execution and authorization of delivery thereof.

 

[Signature Pages Follow]

 

26

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first written
above.

 

	
   

  	
  DUANE READE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE,
  a New York General

  Partnership

  
	
   

  	
   

  
	
   

  	
  By: Duane Reade Inc., a General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: DRI I Inc., a General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DRI I INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Chief
  Financial Officer

  

 

 

 

S-1

 

	
   

  	
  DUANE READE INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE REALTY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John
  K. Henry

  
	
   

  	
   

  	
  Title:       Chief
  Financial Officer

  

 

 

S-2

 

	
   

  	
  US BANK NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Hopkins

  	
   

  
	
   

  	
   

  	
  Name:     Michael
  Hopkins

  
	
   

  	
   

  	
  Title:

  

 

S-3

 

	
   

  	
  US BANK NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Hopkins

  	
   

  
	
   

  	
   

  	
  Name:     Michael
  Hopkins

  
	
   

  	
   

  	
  Title:

  

 

S-4

 

Schedule 2.02 to the Intercreditor and Collateral Agency Agreement

 

ISSUE DATE COLLATERAL DOCUMENTS

 

[PW to provide]Exhibit 10.27

 

Execution Copy

 

 

AMENDED AND
RESTATED PLEDGE AGREEMENT

 

 

dated as of
December 20, 2004

 

 

among

 

 

THE LOAN
PARTIES FROM TIME TO TIME PARTY HERETO

 

 

and

 

 

US BANK
NATIONAL ASSOCIATION,

as Collateral Agent

 

 

TABLE OF
CONTENTS*

 

	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Defined Terms

  	
   

  
	
  Section 1.02

  	
  Terms Defined in the UCC

  	
   

  
	
  Section 1.03

  	
  Additional Definitions

  	
   

  
	
  Section 1.04

  	
  Terms Generally

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  THE
  SECURITY INTERESTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Grant of Security Interests

  	
   

  
	
  Section 2.02

  	
  Security Interests Absolute

  	
   

  
	
  Section 2.03

  	
  Continuing
  Liability of the Loan Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Title to Collateral

  	
   

  
	
  Section 3.02

  	
  Validity,
  Perfection and Priority of Security Interests

  	
   

  
	
  Section 3.03

  	
  Collateral.

  	
   

  
	
  Section 3.04

  	
  No Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Delivery of Collateral

  	
   

  
	
  Section 4.02

  	
  Delivery
  of Perfection Certificate; Filing of Financing Statements and Delivery of
  Search Reports

  	
   

  
	
  Section 4.03

  	
  Change
  of Name, Identity, Structure or Location; Subjection to Other Security
  Agreements; Locations of Places of Business and Chief Executive Office

  	
   

  
	
  Section 4.04

  	
  Further Assurances

  	
   

  
	
  Section 4.05

  	
  Disposition of Collateral

  	
   

  
	
  Section 4.06

  	
  Additional Collateral

  	
   

  
	
  Section 4.07

  	
  Information Regarding
  Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  DISTRIBUTIONS ON
  COLLATERAL; VOTING

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Right
  to Receive Distributions on Collateral; Voting.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  GENERAL AUTHORITY; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  General Authority

  	
   

  

 

*                                         The Table of Contents is not a part of the
Pledge Agreement.

 

 

	
  Section 6.02

  	
  Remedies upon Event of
  Default.

  	
   

  
	
  Section 6.03

  	
  Securities Act;
  Registration Rights.

  	
   

  
	
  Section 6.04

  	
  Other Rights of
  the Collateral Agent.

  	
   

  
	
  Section 6.05

  	
  Limitation
  on Duty of Collateral Agent in Respect of Collateral

  	
   

  
	
  Section 6.06

  	
  Waiver and Estoppel.

  	
   

  
	
  Section 6.07

  	
  Application of Proceeds.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  THE
  COLLATERAL AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Resignation of the Term Loan
  Collateral Agent and Appointment of the Collateral Agent

  	
   

  
	
  Section 7.02

  	
  Concerning the Collateral Agent

  	
   

  
	
  Section 7.03

  	
  Appointment of Co-Collateral Agent

  	
   

  
	
  Section 7.04

  	
  Appointment of Sub-Agents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Notices.

  	
   

  
	
  Section 8.02

  	
  No Waivers; Non-Exclusive Remedies

  	
   

  
	
  Section 8.03

  	
  Compensation and Expenses of the
  Collateral Agent; Indemnification.

  	
   

  
	
  Section 8.04

  	
  Enforcement

  	
   

  
	
  Section 8.05

  	
  Amendments and Waivers

  	
   

  
	
  Section 8.06

  	
  Successors and Assigns

  	
   

  
	
  Section 8.07

  	
  Governing Law

  	
   

  
	
  Section 8.08

  	
  Limitation of Law; Severability.

  	
   

  
	
  Section 8.09

  	
  Counterparts; Effectiveness

  	
   

  
	
  Section 8.10

  	
  Additional Loan Parties

  	
   

  
	
  Section 8.11

  	
  Termination; Release of Loan Parties.

  	
   

  
	
  Section 8.12

  	
  Entire Agreement

  	
   

  

 

	
  Schedules:

  	
   

  	
   

  
	
  Schedule I

  	
  -

  	
  List of
  Pledged Shares

  
	
  Schedule II

  	
  -

  	
  List of
  Pledged Notes

  
	
  Schedule III

  	
  -

  	
  List
  of Pledged LLC Interests

  
	
  Schedule IV

  	
  -

  	
  List of
  Pledged Partnership Interests

  
	
  Schedule 3.04

  	
  -

  	
  Consents

  
	
   

  	
   

  	
   

  
	
  Exhibits:

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form of Issuer Control
  Agreement

  
	
  Exhibit B

  	
  -

  	
  Form of Securities Account
  Control Agreement

  

 

ii

 

AMENDED AND
RESTATED PLEDGE AGREEMENT dated as of December 20, 2004 (as amended, modified or supplemented
from time to time, this “Amended Agreement”) among the LOAN PARTIES from
time to time party hereto and US BANK NATIONAL ASSOCIATION, as successor to
Bank of America, N.A., as Collateral Agent for the benefit of the Finance
Parties referred to herein (together with its successor or successors in such
capacity, the “Collateral Agent”) and, solely for purposes of Section 7.01,
BANK OF AMERICA, N.A., (the “Term Loan Collateral Agent”).

 

Duane Reade Holdings, Inc., a Delaware corporation (“Holdings”),
Duane Reade Inc., a Delaware corporation (“DRI”), and Duane Reade, a New
York general partnership (“Duane Reade”), are parties to a Senior
Secured Term Credit Agreement dated as of July 30, 2004 (the “Existing
Term Credit Agreement”) among DRI and Duane Reade, as the Borrowers
thereunder (collectively, the “Term Loan Borrowers”), Holdings, the
co-borrowers from time to time party thereto (the “Term Loan Co-Borrowers”),
the lenders from time to time party thereto, Bank of America, N.A., as
Administrative Agent (the “Term Loan Administrative Agent”), Credit
Suisse First Boston, Cayman Islands Branch, as Syndication Agent, and Citicorp
North America Inc. and Wells Fargo Bank, National Association, as
Co-Documentation Agents.  Term loans
(collectively, the “Existing Term Loans”) in an aggregate principal
amount of $155,000,000 are currently outstanding under the Existing Term Credit
Agreement.

 

Certain Swap Creditors (as defined below) may from
time to time provide forward rate agreements, options, swaps, caps, floors,
other financial derivatives agreements and other combinations or hybrids of any
of the foregoing.  The obligations of the
Term Loan Borrowers and the Term Loan Co-Borrowers under the Existing Term
Credit Agreement and under all Swap Agreements (as defined below) permitted
under the Existing Term Credit Agreement are guaranteed by Holdings and by DRI
I, Inc., a Delaware corporation (“DRI I”), Duane Reade International,
Inc., a Delaware corporation (“DR International”), and Duane Reade
Realty, Inc., a Delaware corporation (“DR Realty”).  Holdings, DRI, Duane Reade, DRI I, DR
International and DR Realty are herein collectively referred to as the “Term
Loan Parties.”  The payment of the
principal of and interest on the Existing Term Loans and all other Term Loan
Obligations (as defined in the Existing Term Credit Agreement, the “Existing
Term Loan Obligations”) and all Swap Obligations (as defined below) of all
Term Loan Parties permitted under the Existing Term Credit Agreement owing to
one or more Swap Creditors are secured by security interests and other liens
held by the Term Loan Collateral Agent, as collateral agent under the Existing
Term Credit Agreement, in substantially all of the Term Loan Parties’ personal
property and all proceeds thereof (collectively, the “Term Loan Collateral”),
all pursuant to (i) the Security Agreement dated as of July 30, 2004 (the “Term
Security Agreement”) among the Term Loan Parties and the Term Loan
Collateral Agent, (ii) a Pledge Agreement dated as of July 30, 2004 among
the Term Loan Parties and the Term Loan Collateral Agent (the “Term Pledge
Agreement”) and (iii) certain other ancillary Collateral Documents (as
defined and referred to in the Existing Term Credit Agreement).

 

Duane Reade, DRI, DRI I, DR International and DR
Realty are also parties to (i) a Credit Agreement dated as of July 21,
2003 (as amended by a First Amendment to Credit Agreement dated as of July 22,
2004 and as the same may be further amended, modified, supplemented, extended,
restated, renewed or replaced from time to time in accordance with the terms
thereof, the “Revolving Credit Agreement”) with the lenders from time to
time party thereto (the “Revolving Lenders”), Fleet National Bank, as
issuing bank for certain letters of credit, Fleet National Bank, as
Administrative Agent for the Revolving Lenders (together with its successor or
successors in such capacity, the “Revolving Credit Administrative Agent”),
Fleet Retail Group, Inc., as Collateral Agent (together with its successor or
successors in such capacity, the “Revolving Credit Collateral Agent”),
Congress Financial Corporation, as Documentation Agent, General Electric
Capital Corporation, as Syndication Agent, and Wells Fargo Retail Finance, LLC,
as Syndication Agent and Co-Lead Arranger, and (ii) a Security Agreement dated
as of July 21, 2003 (as amended by the Collateral Release Agreement dated
as of July 30, 2004 and the First

 

 

Amendment
to Security Agreement dated as of July 30, 2004 and as the same may be
further amended, modified, supplemented, extended, restated, renewed or
replaced from time to time in accordance with the terms thereof, the “Revolving
Security Agreement”).  Duane Reade,
DRI, DRI I, DR International, DR Realty and each other Person now or hereafter
becoming a guarantor of the obligations under the Revolving Credit Agreement
are herein collectively referred to as the “Revolving Loan Parties.”  Revolving loans (collectively, “Revolving
Loans”) are now and may hereafter be outstanding under the Revolving Credit
Agreement.  The payment of the principal
of and interest on the Revolving Loans and all other Obligations (as defined in
the Revolving Credit Agreement and the Revolving Security Agreement, the “Revolving
Loan Obligations”) are secured pursuant to the Revolving Security Agreement
and various other security documents by security interests and other liens held
by the Revolving Credit Collateral Agent in the Revolving Loan Parties’ right,
title and interest in all present and future (i) accounts, inventory, chattel
paper, instruments, documents, prescription files, tax refunds and abatements
and deposit accounts, (ii) all letter of credit rights and supporting
obligations related to the items referred to in the foregoing clause (i),
(iii) all books and records relating to any of the foregoing, (iv) all payment
intangibles constituting proceeds of the foregoing and (v) all other products
and proceeds of the foregoing (including insurance proceeds related thereto)
(collectively, the “Revolving Lender Priority Collateral”).

 

The Revolving Credit Collateral Agent and the Term
Loan Collateral Agent are parties to an Intercreditor Agreement dated as of July 30,
2004 (as amended, restated, supplemented or modified from time to time, the “Intercreditor
Agreement”) which provides among other things that: (i) the Revolving Loan
Obligations (up to an amount (the “Maximum Revolving Debt Amount”) equal
to the greater of (A) $275,000,000 and (B) the sum of the Borrowing Base,
exclusive of Reserves, plus Permitted Overadvances (as such terms are defined
in the Revolving Credit Agreement as in effect as of the date hereof) plus in
each case all accrued and unpaid interest, fees, expense reimbursements and
other charges then due to the Revolving Lenders) are secured on a first priority
basis by all Revolving Lender Priority Collateral; (ii) the Existing Term Loan
Obligations are secured by all Term Loan Collateral (which includes all
Revolving Loan Priority Collateral); (iii) the Revolving Loan Obligations are
not secured by any Term Loan Collateral except that portion of the Term Loan
Collateral which constitutes Revolving Lender Priority Collateral; (iv) the
portion of the Term Loan Collateral that does not constitute Revolving Lender
Priority Collateral constitutes “Term Loan Priority Collateral”; and (v)
the security interest securing the Existing Term Loan Obligations: (A) in the
Term Loan Priority Collateral is of a first priority; and (B) in that portion
of the Term Loan Collateral which is Revolving Lender Priority Collateral is (x)
of a second priority subject only to a first priority security interest
securing an amount of the Revolving Loan Obligations that does not exceed the
Maximum Revolving Debt Amount and (y) is of a first priority with respect to
that portion of the Revolving Loan Obligations which exceeds the Maximum
Revolving Debt Amount.

 

DRI and Duane Reade intend to issue Senior Secured
Floating Rate Notes due 2010 (together with any Additional Notes referred to
below and any Exchange Notes (as defined in the Indenture), and as amended,
restated, supplemented or modified from time to time, the “Senior Secured
Notes”) pursuant to an Indenture dated as of the date hereof (as amended,
restated, supplemented or modified from time to time and including any
agreement extending the maturity of, refinancing or otherwise restructuring all
or any portion of the obligations of DRI and Duane Reade under such Indenture
or any successor agreement,, the “Indenture”) among DRI, Duane Reade and
US Bank National Association, as Trustee (together with its successor or
successors in such capacity, the “Trustee”).  The obligations of DRI and Duane Reade under
and in respect of the Senior Secured Notes will be guaranteed by Holdings and
by DRI I, DR International, DR Realty and all other direct and indirect
domestic subsidiaries of Holdings that become a party hereto pursuant to Section 8.10
hereof (collectively with DRI I, DR International and DR Realty, the “Subsidiary
Guarantors” and, together with Holdings, “Guarantors”).  Holdings, DRI, Duane Reade, and the
Subsidiary Guarantors are herein referred to

 

2

 

individually
as a “Loan Party” and, collectively, as the “Loan Parties”.  The proceeds of the Senior Secured Notes will
be used to refinance the Existing Term Loans and to pay accrued interest and
the prepayment premium on the Existing Term Loans and related transaction fees
and expenses.  For the avoidance of
doubt, it is the intention of the parties to this Amended and Restated Pledge
Agreement that the security interests in the Term Loan Collateral created by
the Pledge Agreement in connection with the Existing Term Credit Agreement
shall be assigned to the Collateral Agent and continue to secure the Finance
Obligations as such term is amended by this Amended and Restated Pledge
Agreement.

 

Without providing any commitments to any Loan Party
as to the funding of future indebtedness, the Indenture permits, and a Term
Credit Agreement (as defined below) may permit, DRI, Duane Reade and other Loan
Parties from time to time to incur Indebtedness which it is otherwise permitted
to incur under the Indenture and a Term Credit Agreement (as defined below) in
the form of additional loans or other debt financing (“Additional Term Loans”)
pursuant to a Term Credit Agreement or additional senior secured notes issued
under the Indenture (such notes being herein collectively referred to herein as
the “Additional Notes”) (or both) and to secure such additional
Note/Term Obligations (as defined below) equally and ratably with the other
Finance Obligations; provided that the borrowing of any Additional Term
Loans and the issuance of any Additional Notes is subject to the limitations
set forth in the Indenture and any Term Credit Agreement, respectively.

 

Holdings, DRI and Duane Reade may, from time to
time, borrow Additional Term Loans or refinance all or a portion of the
Note/Term Obligations by borrowing revolving credit loans, term loans,
receivables financing or letters of credit, including arrangements and
agreements relating to the sale of debt securities or other forms of debt
financing (and together with any Additional Term Loans, “Term Loans”)
from one or more banks or other institutional lenders (together with the
lenders of any Additional Term Loans, each a “Term Lender” and,
collectively, “Term Lenders”) in each case pursuant to a Term Credit
Agreement (as defined below) designated as such by the Secured Debt Designation
(as defined in the Collateral Agency Agreement referred to below) and with
respect to which a Term Loan Agent (as defined in the Collateral Agency
Agreement referred to below) thereunder has delivered the Joinder (as defined
in the Collateral Agency Agreement referred to below).

 

The Indenture requires the Loan Parties to secure
their obligations under the Senior Secured Notes together with all Swap
Obligations and their obligations under any guaranties thereof, equally and
ratably, with security interests or other liens on the Term Loan
Collateral.  The Indenture further
requires that such security interests in the Term Loan Collateral be granted
pursuant to security documents to a collateral agent acting for the benefit of
the Swap Creditors, the holders from time to time of the Senior Secured Notes
and any Term Lenders.  Consequently, in
contemplation of the incurrence of any Term Loans, the Trustee and the
Collateral Agent have entered into an Intercreditor and Collateral Agency
Agreement dated as of the date hereof (as amended, modified or supplemented
from time to time, the “Collateral Agency Agreement”) which, among other
things, governs certain actions of the Trustee, any Term Loan Agent, the Swap
Representative and the Collateral Agent in connection with the Senior Secured
Notes, any Term Loans, Swap Obligations and the Term Loan Collateral,
respectively.  In addition, concurrently
herewith and as provided for in Section 7.01, the Term Loan
Collateral Agent will resign, the Collateral Agent will succeed to all rights
and benefits of the Term Loan Collateral Agent under the Collateral Documents
and the Term Pledge Agreement will be amended and restated to read in full as
set forth herein

 

Accordingly, the parties hereto amend and restate
the Term Pledge Agreement to read in full as follows:

 

3

 

ARTICLE I

DEFINITIONS

 

Section 1.01                            Defined Terms.  Terms defined in the introductory section hereof
have the respective meanings set forth therein. 
Capitalized terms defined in the Collateral Agency Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.

 

Section 1.02                            Terms Defined in the UCC.  Unless otherwise defined herein or the
context otherwise requires, the following terms, together with any
uncapitalized terms used herein which are defined in the UCC have the
respective meanings provided for in the UCC: (i) Certificated Security; (ii)
Financial Asset; (iii) Investment Property; (iv) Payment Intangibles; (v)
Proceeds; (vi) Securities Account; (vii) Securities Intermediary; (viii) Security;
(ix) Security Certificate; and (x) Uncertificated Security.

 

Section 1.03                            Additional Definitions.  The following additional terms, as used
herein, have the following respective meanings:

 

“Capital Stock” has the meaning given to it
in the Indenture.

 

“Collateral” has the meaning set forth in Section 2.01.

 

“Collateral Agent” means US Bank National
Association, as successor to the Term Loan Collateral Agent, in its capacity as
collateral agent for the Finance Parties, and its successor or successors in such
capacity.

 

“Default” means any event which is, or after
notice or passage of time or both would be, an Event of Default.

 

“Delivery” when used with respect to
Collateral means:

 

(i)                                     in the case of Collateral constituting
Certificated Securities, transfer thereof to the Collateral Agent or its
nominee or custodian by physical delivery to the Collateral Agent or its
nominee or custodian, such Collateral to be in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank;

 

(ii)                                  in the case of Collateral constituting
Uncertificated Securities, (A) registration thereof on the books and
records of the issuer thereof in the name of the Collateral Agent or its
nominee or custodian (who may not be a Securities Intermediary) or (B) the
execution and delivery by the issuer thereof of an effective agreement,
substantially in the form of Exhibit A hereto, pursuant to which such
issuer agrees that it will comply with instructions originated by the
Collateral Agent or such nominee or custodian without further consent of the
registered owner of such Collateral or any other Person;

 

(iii)                               in the case of Collateral constituting
Security Entitlements or other Financial Assets deposited in or credited to a
Securities Account, (A) completion of all actions necessary to constitute the
Collateral Agent or its nominee or custodian the entitlement holder with
respect to each such Security Entitlement or (B) the execution and delivery by
the relevant Securities Intermediary of an effective agreement, substantially
in the form of Exhibit B hereto, pursuant to which such Securities
Intermediary agrees to comply with all entitlement orders originated by the
Collateral Agent or such nominee or custodian without further consent by the
relevant entitlement holder or any other Person;

 

4

 

(iv)                              in the case of LLC Interests and Partnership
Interests issued by one or more Loan Parties which do not constitute
Securities, (A) compliance with the provisions of clause (i) above for
each such item of Collateral which is represented by a certificate and (B)
compliance with the provisions of clause (ii) above for each such item
of Collateral which is not evidenced by a certificate;

 

(v)                                 in the case of Collateral which constitute
Instruments, transfer thereof to the Collateral Agent or its nominee or
custodian by physical delivery to the Collateral Agent or its nominee or
custodian indorsed to, or registered in the name of, the Collateral Agent or its
nominee or custodian or indorsed in blank;

 

(vi)                              in the case of cash, transfer thereof to the
Collateral Agent or its nominee or custodian by physical delivery to the
Collateral Agent or its nominee or custodian; and

 

(vii)                           in each case such additional or alternative
procedures as may hereafter become appropriate to grant control of, or
otherwise perfect a security interest in, any Collateral in favor of the
Collateral Agent or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof.

 

“Event of Default” means an “Event of Default”
as defined in the Indenture and any Term Credit Agreement.

 

“Fair Market Value” has the meaning given to
it in the Indenture.

 

“Federal Securities Laws” has the meaning set
forth in Section 6.03(a) of this Amended Agreement.

 

“Finance Document” means each Term Loan
Document, each Swap Agreement evidencing Swap Obligations of a Loan Party
permitted under all Term Credit Agreements, if any, and the Indenture, each
Note Document between one or more Loan Parties and a Finance Party and the
Collateral Agency Agreement, and “Finance Documents” means any two or
more of them, collectively.

 

“Finance Obligations” means:

 

(i)                                     all Note/Term Obligations; and

 

(ii)                                  all Swap Obligations of all Loan Parties
permitted under the Indenture and all Term Credit Agreements, if any, owed or
owing to one or more Swap Creditors;

 

in
each case whether now or hereafter due, owing or incurred in any manner,
whether actual or contingent, whether incurred solely or jointly with any other
person and whether as principal or surety, together in each case with all
renewals, modifications, refinancings, replacements, consolidations or
extensions thereof.

 

“Finance Party” means each Noteholder, the
Trustee, each Term Lender, a Term Loan Agent, each Swap Creditor, each Swap
Representative, the Collateral Agent, each Indemnitee and their respective
successors and assigns, and “Finance Parties” means any two or more of
them, collectively.

 

“Foreign Subsidiary” means, with respect to
any Person at any date, any Subsidiary of such Person which is not a US
Subsidiary of such Person.

 

5

 

“General Intangibles” means all “general
intangibles” (as defined in the UCC), including, without limitation, (i) all
Payment Intangibles and other obligations and indebtedness owing to any Loan
Party in respect of Collateral and (ii) all interests in limited liability
companies and/or partnerships which interests do not constitute Securities.

 

“Governmental Authority” means any nation or
government, 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 to
government.

 

“Guarantee” means the guarantee by any
Guarantor of the Note/Term Obligations.

 

“Indemnitee” has the meaning set forth in Section 8.03(c)
of this Amended Agreement.

 

“Instruments” means:

 

(i)                                     the promissory notes described on Schedule II
hereto, as such Schedule may be amended, supplemented or modified from
time to time (the “Pledged Notes”), and all interest, distributions,
cash, instruments and other property, income, profits and proceeds from time to
time received or receivable or otherwise made upon or distributed in respect of
or in exchange for any or all of the Pledged Notes;

 

(ii)                                  all additional or substitute promissory notes
from time to time issued to or otherwise acquired by any Loan Party in any
manner in respect of Pledged Notes, and all interest, distributions, cash,
instruments and other property, income, profits and proceeds from time to time
received or receivable or otherwise made upon or distributed in respect of such
additional or substitute notes;

 

(iii)                               all promissory notes, bankers’ acceptances,
commercial paper, negotiable certificates of deposit and other obligations
constituting “instruments” within the meaning of the UCC; and

 

(iv)                              to the extent not otherwise included in the
foregoing, all cash and non-cash Proceeds thereof.

 

“Issue Date” means December 20, 2004.

 

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

 

“Lien” means, with respect to any asset, any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), charge, or preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable Laws of any jurisdiction for the purpose of
evidencing a Lien),

 

6

 

including
the interest of a purchaser of accounts receivable, chattel paper, payment
intangibles or promissory notes.

 

“LLC Interests” means:

 

(i)                                     the limited liability company membership
interests described on Schedule III hereto, as such Schedule may
be amended, supplemented or modified from time to time (the “Pledged LLC
Interests”), and all dividends, distributions, cash, instruments and other
property, income, profits and proceeds from time to time received or receivable
or otherwise made upon or distributed in respect of or in exchange for any or
all of the Pledged LLC Interests;

 

(ii)                                  all additional or substitute limited
liability company membership interests from time to time issued to or otherwise
acquired by any Loan Party in any manner in respect of Pledged LLC Interests,
and all dividends, distributions, cash, instruments and other property, income,
profits and proceeds from time to time received or receivable or otherwise made
upon or distributed in respect of such additional or substitute membership
interests;

 

(iii)                               all right, title and interest of any Loan
Party in each limited liability company to which any Pledged LLC Interest
relates, including, without limitation:

 

(A)                              all
interests of such Loan Party in the capital of such limited liability company
and in all profits, losses and assets, whether tangible or intangible and
whether real, personal or mixed, of such limited liability company, and all
other distributions to which such Loan Party shall at any time be entitled in
respect of such Pledged LLC Interests;

 

(B)                                all
other payments due or to become due to such Loan Party in respect of Pledged
LLC Interests, whether under any limited liability company agreement or operating
agreement or otherwise and whether as contractual obligations, damages,
insurance proceeds or otherwise;

 

(C)                                all
of such Loan Party’s claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under any limited liability
company agreement or operating agreement, or at law or otherwise in respect of
such Pledged LLC Interests;

 

(D)                               all
present and future claims, if any, of such Loan Party against any such limited
liability company for moneys loaned or advanced, for services rendered or
otherwise (exclusive of claims for salary and other employee compensation); and

 

(E)                                 all
of such Loan Party’s rights under any limited liability company agreement or
operating agreement or at law to exercise and enforce every right, power,
remedy, authority, option and privilege of such Loan Party relating to such
Pledged LLC Interests, including any power to terminate, cancel or modify any
limited liability company agreement or operating agreement, to execute any
instruments and to take any and all other action on behalf of and in the name
of such Loan Party in respect of such Pledged LLC Interests and any such
limited liability company, to make determinations, to exercise any election
(including, without limitation, election of remedies) or option to give or
receive any notice, consent, amendment, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or give receipt for
any of the foregoing or for any assets of any such limited liability

 

7

 

company, to enforce or execute any checks or other instruments or
orders, to file any claims and to take any other action in connection with any
of the foregoing; and

 

(iv)                              to the extent not otherwise included in the
foregoing, all cash and non-cash Proceeds thereof.

 

“Loan Party” had the meaning set forth in the
introductory paragraphs hereof.

 

“Note Documents” means the Indenture, the
Senior Secured Notes and the Registration Rights Agreement related thereto and
the Collateral Documents, in each case including all exhibits and schedules
thereto, and all other agreements, documents and instruments relating to the
Senior Secured Notes, in each case as the same may be amended, modified or
supplemented from time to time in accordance with the provisions thereof.

 

“Noteholders” means the holders from time to
time of the Senior Secured Notes.

 

“Note/Term Obligations” means, without
duplication:

 

(i)                                     all principal of and interest (including,
without limitation, any interest which accrues after the commencement of any
proceeding under any Insolvency Proceeding with respect to any Loan Party,
whether or not allowed or allowable as a claim in any such proceeding) on any
Senior Secured Note or Term Loan;

 

(ii)                                  all fees, expenses, indemnification
obligations and other amounts of whatever nature now or hereafter payable by
any Loan Party (including, without limitation, any amounts which accrue after
the commencement of any proceeding under any Insolvency Proceeding with respect
to any Loan Party, whether or not allowed or allowable as a claim in any such
proceeding) pursuant to the Indenture, the Senior Secured Notes, any Term
Credit Agreement, the Intercreditor Agreement or any Collateral Document;

 

(iii)                               all expenses of the Trustee, the Collateral
Agent or any Term Loan Agent as to which one or more of such agents has a right
to reimbursement under the Indenture, any Term Credit Agreement or under any
other similar provision of any Collateral Document or the Intercreditor
Agreement, including, without limitation, any and all sums advanced by the
Collateral Agent to preserve the Collateral or its security interest in the
Collateral; and

 

(iv)                              in the case of Holdings and each Subsidiary
Guarantor, all amounts now or hereafter payable by Holdings or such Subsidiary
Guarantor and all other obligations or liabilities now existing or hereafter
arising or incurred (including, without limitation, any amounts which accrue
after the commencement of any Insolvency Proceeding with respect to DRI, Duane
Reade, Holdings or such Subsidiary Guarantor, whether or not allowed or
allowable as a claim in any such proceeding) on the part of Holdings or such
Subsidiary Guarantor pursuant to the Indenture, the Senior Secured Notes, the
Guarantees, any Term Credit Agreement, the Intercreditor Agreement or any
Collateral Document;

 

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

 

“Partnership Interests” means:

 

(i)                                     the partnership interests described on Schedule IV
hereto, as such Schedule may be amended, supplemented or modified from
time to time (the “Pledged

 

8

 

Partnership Interests”), and all dividends, distributions, cash,
instruments and other property, income, profits and proceeds from time to time
received or receivable or otherwise made upon or distributed in respect of or
in exchange for any or all of the Pledged Partnership Interests;

 

(ii)                                  all additional or substitute partnership
interests from time to time issued to or otherwise acquired by any Loan Party
in any manner in respect of Pledged Partnership Interests, and all dividends,
distributions, cash, instruments and other property, income, profits and
proceeds from time to time received or receivable or otherwise made upon or
distributed in respect of such additional or substitute partnership interests;

 

(iii)                               all right, title and interest of any Loan
Party in each partnership to which any Pledged Partnership Interest relates, including,
without limitation:

 

(A)                              all
interests of such Loan Party in the capital of such partnership and in all
profits, losses and assets, whether tangible or intangible and whether real,
personal or mixed, of such partnership, and all other distributions to which
such Loan Party shall at any time be entitled in respect of such Pledged
Partnership Interests;

 

(B)                                all
other payments due or to become due to such Loan Party in respect of Pledged
Partnership Interests, whether under any partnership agreement or otherwise and
whether as contractual obligations, damages, insurance proceeds or otherwise;

 

(C)                                all
of such Loan Party’s claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under any partnership agreement,
or at law or otherwise in respect of such Pledged Partnership Interests;

 

(D)                               all
present and future claims, if any, of such Loan Party against any such
partnership for moneys loaned or advanced, for services rendered or otherwise
(exclusive of claims for salary and other employee compensation); and

 

(E)                                 all
of such Loan Party’s rights under any partnership agreement or at law to
exercise and enforce every right, power, remedy, authority, option and
privilege of such Loan Party relating to such Pledged Partnership Interests,
including any power to terminate, cancel or modify any partnership agreement,
to execute any instruments and to take any and all other action on behalf of
and in the name of such Loan Party in respect of such Pledged Partnership Interests
and any such partnership, to make determinations, to exercise any election
(including, without limitation, election of remedies) or option to give or
receive any notice, consent, amendment, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or give receipt for
any of the foregoing or for any assets of any such partnership, to enforce or
execute any checks or other instruments or orders, to file any claims and to
take any other action in connection with any of the foregoing; and

 

(iv)                              to the extent not otherwise included in the
foregoing, all cash and non-cash Proceeds thereof.

 

“Perfection Certificate” means with respect
to each Loan Party a certificate, substantially in the form of Exhibit F
to the Security Agreement, completed and supplemented with the schedules and
attachments contemplated thereby.

 

9

 

“Permitted Lien” means any Lien permitted by
both (a) the Indenture and (b) all Term Credit Agreements, if any.

 

“Pledge Agreement” means this Amended
Agreement, as the same may be amended, supplemented or modified from time to
time.

 

“Pledged LLC Interests” has the meaning set
forth in clause (i) of the definition of “LLC Interests”.

 

“Pledged Notes” has the meaning set forth in clause
(i) of the definition of “Instruments”.

 

“Pledged Partnership Interests” has the
meaning set forth in clause (i) of the definition of “Partnership
Interests”.

 

“Pledged Shares” has the meaning set forth in
clause (i) of the definition of “Stock”.

 

“Security Entitlements” means all “security
entitlements” (as defined in the UCC), including all rights and property
interests with respect to Financial Assets deposited in or credited to
Securities Accounts.

 

“Security Interests” means the security
interests in the Collateral granted under this Amended Agreement securing the
Finance Obligations.

 

“Stock” means:

 

(i)                                     the shares of stock and other Securities
described on Schedule I hereto, as such Schedule may be
amended, supplemented or modified from time to time (the “Pledged Shares”),
and all dividends, interest, distributions, cash, instruments and other
property, income, profits and proceeds from time to time received, receivable
or otherwise made upon or distributed in respect of or in exchange for any or
all of the Pledged Shares;

 

(ii)                                  all additional or substitute shares of
capital stock or other equity interests of any class of any issuer from time to
time issued to or otherwise acquired by any Loan Party in any manner in respect
of Pledged Shares, the certificates representing such additional or substitute
shares, and all dividends, interest, distributions, cash, instruments and other
property, income, profits and proceeds from time to time received, receivable
or otherwise made upon or distributed in respect of or in exchange for any or
all of such additional or substitute shares; and

 

(iii)                               to the extent not otherwise included in the
foregoing, all cash and non-cash proceeds thereof.

 

“Supporting Obligation” means a guaranty or other
secondary obligation supporting, or any Lien securing, the payment or
performance of one or more Instruments, Investment Property or other item of
Collateral.

 

“Swap Agreement” means an agreement between a
Loan Party and any Swap Creditor with respect to one or more Swap Obligations.

 

“Swap Creditor” means any Person from time to
time party to one or more Swap Agreements with a Loan Party permitted by the
Indenture and all Term Credit Agreements, if any, and

 

10

 

that
has also executed a Sharing Confirmation, and its successors and assigns, and “Swap
Creditors” means any two or more of such Swap Creditors, collectively.

 

“Swap Obligations” of any Person means all
obligations (including, without limitation, any amounts which accrue after the
commencement of any Insolvency Proceeding) of such Person in respect of any
rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions, excluding any
amounts which such Person is entitled to set-off against its obligations under
applicable Law.

 

“Term Loan Documents” means any Term Credit
Agreement, any promissory notes, guaranties, the Collateral Documents and other
documents entered into in connection therewith and as may be designated “Term
Loan Documents” in any such Term Credit Agreement, in each case as the same may
be amended, modified or supplemented from time to time in accordance with the
provisions thereof.

 

“UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided that if by
reason of mandatory provisions of law, the perfection, the effect of perfection
or non-perfection or the priority of the Security Interests in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection, effect of perfection or non-perfection or priority.

 

“US Subsidiary” means with respect to any
Person each Subsidiary of such Person which, at the time of determination, is
incorporated in or organized under the law of the United States of America, any
State thereof or the District of Columbia, and “US Subsidiaries” means
all of them, collectively.

 

“US Subsidiary Guarantor” means each
Subsidiary Guarantor which, at the time of determination, is incorporated in or
organized under the laws of the United States of America, any State thereof or
the District of Columbia, and “US Subsidiary Guarantors” means all of
them, collectively.

 

Section 1.04                            Terms Generally.  Terms defined in the introductory paragraphs
hereof and the definitions in Section 1.03 shall apply equally to
both the singular and plural forms of the terms defined.  Wherever the context may require, any
pronouns shall include the corresponding masculine, feminine and neuter
forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Amended Agreement
unless otherwise stated herein or the context shall otherwise require.  Unless otherwise expressly provided herein,
the word “day” means a calendar day.

 

ARTICLE II

THE SECURITY INTERESTS

 

Section 2.01                            Grant of Security Interests.  To secure the due and punctual payment of all
Finance Obligations, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing or due or to become
due, in accordance with the terms thereof and to secure the performance of all
of the obligations of each Loan Party and the other Loan Parties hereunder

 

11

 

and under the other Finance Documents, each Loan Party
hereby grants to the Collateral Agent for the benefit of the Finance Parties a
security interest in, and each Loan Party hereby pledges and collaterally
assigns to the Collateral Agent for the benefit of the Finance Parties, all of
such Loan Party’s right, title and interest in, to and under the following,
whether now owned or existing or hereafter acquired, created or arising,
whether tangible or intangible, and regardless of where located (all of which
are herein collectively called the “Collateral”):

 

(i)                                     Stock;

 

(ii)                                  Instruments;

 

(iii)                               LLC Interests;

 

(iv)                              Partnership Interests;

 

(v)                                 Investment Property;

 

(vi)                              Financial Assets; and

 

(vii)                           all Proceeds of all or any of the Collateral
described in clauses (i) through (vi) hereof;

 

provided, however,
that the Collateral shall not include (u) any property or assets owned by any
Loan Party that is a Foreign Subsidiary, (v) cash or other distributions in
respect of federal, state and/or local income taxes payable by any Loan Party
or any direct or indirect equity holder of any Loan Party in respect of the
income and profits of any limited liability company, partnership or other
entity which is not a corporation for United States federal income tax
purposes, (w) any Security owned by any Loan Party which constitutes a voting
equity Security issued by a Foreign Subsidiary of such Loan Party that is a
corporation for United States Federal Income tax purposes, in each case if and
to the extent that the inclusion of such Security in the Collateral would cause
the Collateral pledged by such Loan Party hereunder or under any other Finance
Document to include in the aggregate more than 65% of the total combined voting
power of all classes of voting securities of such Foreign Subsidiary, (x) any
Capital Stock and other securities of DR International, Duane Reade or DRI I to
the extent that the pledge of such Capital Stock or other securities to secure
the Finance Obligations would cause such Subsidiary to be required to file
separate financial statements with the Securities and Exchange Commission
pursuant to Rule 3-16 of Regulation S-X (as in effect from time to time) of the
Securities and Exchange Commission, (y) any Capital Stock or other securities
of any Person that becomes a Guarantor after the Issue Date that, together with
all other such Guarantors, created, acquired or invested in after the Issue
Date, have a collective Fair Market Value of less than $30,000,000 and (z) any
proceeds or products from any and all of the foregoing unless such proceeds or
products would otherwise constitute Collateral.

 

Notwithstanding
the foregoing, if granting or perfecting any Lien to secure the Finance
Obligations on any Collateral (i) cannot be granted or perfected under
applicable law, none of DRI, Duane Reade or the Guarantors will be required to
grant or perfect, as applicable, such Lien and (ii) that consists of personal
property rights that are licensed or leased from a third-party requires the
consent of such third party pursuant to the terms of an applicable license or
lease agreement, and such terms are enforceable under applicable law, DRI,
Duane Reade or the Guarantors, as the case may be, will use all commercially
reasonable efforts to obtain such consent with respect to the granting or
perfecting of such Lien, but if the third party does not consent to the
granting or perfecting of such Lien after the use of commercially reasonable
efforts, none of DRI, Duane Reade or the Guarantors will be required to do so.

 

12

 

Section 2.02                            Security Interests Absolute.  All rights of the Collateral Agent, all
security interests hereunder and all obligations of each Loan Party hereunder
are unconditional and absolute and independent and separate from any other
security for or guaranty of the Finance Obligations, whether executed by such
Loan Party, any other Loan Party or any other Person.  Without limiting the generality of the
foregoing, the obligations of each Loan Party hereunder shall not be released,
discharged or otherwise affected or impaired by:

 

(i)                                     any extension, renewal, settlement,
compromise, acceleration, waiver or release in respect of any obligation of any
Loan Party under any Finance Document or any other agreement or instrument
evidencing or securing any Finance Obligation, by operation of law or
otherwise;

 

(ii)                                  any change in the manner, place, time or
terms of payment of any Finance Obligation or any other amendment, supplement
or modification to any Finance Document or any other agreement or instrument
evidencing or securing any Finance Obligation;

 

(iii)                               any release, non-perfection or invalidity of
any direct or indirect security for any Finance Obligation, any sale, exchange,
surrender, realization upon, offset against or other action in respect of any
direct or indirect security for any Finance Obligation or any release of any
other obligor in respect of any Finance Obligation;

 

(iv)                              any change in the existence, structure or
ownership of any Loan Party, or any insolvency, bankruptcy, reorganization,
arrangement, readjustment, composition, liquidation or other similar proceeding
affecting any Loan Party or its assets or any resulting disallowance, release
or discharge of all or any portion of any Finance Obligation;

 

(v)                                 the existence of any claim, set-off or other
right which any Loan Party may have at any time against any other Loan Party or
any Finance Party or any other Person, whether in connection herewith or any
unrelated transaction; provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;

 

(vi)                              any invalidity or unenforceability relating
to or against any Loan Party for any reason of any Finance Document or any
other agreement or instrument evidencing or securing any Finance Obligation or
any provision of applicable law or regulation purporting to prohibit the
payment by any Loan Party of any Finance Obligation;

 

(vii)                           any failure by any Finance Party:  (A) to file or enforce a claim against any
Loan Party or its estate (in a bankruptcy or other proceeding); (B) to give
notice of the existence, creation or incurrence by any Loan Party of any new or
additional indebtedness or obligation under or with respect to the Finance
Obligations; (C) to commence any action against any Loan Party; (D) to disclose
to any Loan Party any facts which such Finance Party may now or hereafter know
with regard to any Loan Party; or (E) to proceed with due diligence in the
collection, protection or realization upon any collateral securing the Finance
Obligations;

 

(viii)                        any direction as to application of payment by
any Loan Party or any other Person;

 

(ix)                                any subordination by any Finance Party of the
payment of any Finance Obligation to the payment of any other liability
(whether matured or unmatured) of any Loan Party to its creditors;

 

13

 

(x)                                   any act or failure to act by the Collateral
Agent or any other Finance Party under this Amended Agreement or otherwise
which may deprive any Loan Party of any right to subrogation, contribution or
reimbursement against any other Loan Party or any right to recover full
indemnity for any payments made by such Loan Party in respect of the Finance
Obligations; or

 

(xi)                                any other act or omission to act or delay of
any kind by any Loan Party or any Finance Party or any other Person or any
other circumstance whatsoever which might, but for the provisions of this
clause, constitute a legal or equitable discharge of any Loan Party’s
obligations hereunder (other than final payment in full of the Finance
Obligations).

 

Each Loan Party has irrevocably and unconditionally
delivered this Amended Agreement to the Collateral Agent, for the benefit of
the Finance Parties, and the failure by any other Person to sign this Amended
Agreement or a pledge agreement similar to this Amended Agreement or otherwise
shall not discharge the obligations of any Loan Party hereunder.

 

This Amended Agreement shall remain fully
enforceable against each Loan Party irrespective of any defenses that any other
Loan Party may have or assert in respect of the Finance Obligations, including,
without limitation, failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and usury,
except that a Loan Party may assert the defense of final payment in full of the
Finance Obligations.

 

Section 2.03                            Continuing Liability of the Loan Parties.  The Security Interests are granted as
security only and shall not subject the Collateral Agent or any Finance Party
to, or transfer or in any way affect or modify, any obligation or liability of
any Loan Party with respect to any of the Collateral or any transaction in
connection therewith.

 

ARTICLE III

REPRESENTATIONS
AND WARRANTIES

 

Each Loan Party represents and warrants that:

 

Section 3.01                            Title to Collateral.  Such Loan Party is the legal, record and
beneficial owner of, and has good and marketable title to, all of the
Collateral pledged by it hereunder, free and clear of any Liens other than
Permitted Liens.  Other than financing
statements or other similar or equivalent documents or instruments with respect
to the security interests of the Term Loan Collateral Agent, the Security
Interests and Permitted Liens, no financing statement, mortgage, security
agreement or similar or equivalent document or instrument covering all or any
part of the Collateral is on file or of record in any jurisdiction in which
such filing or recording would be effective to perfect a Lien on such
Collateral.  No Collateral is in the
possession or control of any Person asserting any claim thereto or security
interest therein, except that the Collateral Agent or its nominee, custodian or
a Securities Intermediary acting on its behalf may have possession and/or
control of Collateral as contemplated hereby and by the other Finance
Documents.

 

Section 3.02                            Validity, Perfection and Priority of Security
Interests.  The Security
Interests constitute valid security interests under the UCC securing the
Finance Obligations.  Upon Delivery of
all Collateral to the Collateral Agent in accordance with the provisions hereof
and when (i) UCC-3 financing statement amendments naming the Collateral Agent
as the secured party of record with respect to the UCC-1 financing statements
listed on Schedule 4.01 to the Security Agreement and (ii) UCC-1
financing statements naming the Collateral Agent as secured party and
containing a description of the Collateral in the form specified in Exhibit
E to the Security Agreement shall have been filed in the

 

14

 

respective offices specified in Schedule 4.01
to the Security Agreement, the Security Interests shall constitute perfected
security interests in all right, title and interest of such Loan Party in the
Collateral (subject to the requirements of Section 9-315 of the UCC with
respect to any proceeds of Collateral and to the further requirement that
additional steps may be necessary to perfect the Security Interests in
dividends or other distributions in kind), in each case prior to all other
Liens and rights of others therein except for Permitted Liens, and, to the
extent control of such Collateral may be obtained pursuant to Article 8
and/or 9 of the UCC, the Collateral Agent will have control of the Collateral
subject to no adverse claims of any other Person.

 

Section 3.03                            Collateral.

 

(a)                                  Schedules
I, II, III and IV hereto (as such schedules may be amended, supplemented or
modified from time to time by delivery of such amended, supplemented or
modified Schedules to the Collateral Agent in compliance with this Amended
Agreement) set forth (i) the name and jurisdiction of organization of, and the
ownership interest (including percentage owned and number of shares, units or
other equity interests) of such Loan Party in the Stock, LLC Interests and
Partnership Interests issued by each of such Loan Party’s direct Subsidiaries
which are required to be included in the Collateral and pledged hereunder, (ii)
all other Stock, LLC Interests and Partnership Interests directly owned by such
Loan Party that are required to be included in the Collateral and pledged
hereunder and (iii) the issuer, date and amount of all notes having a face
value in excess of $500,000 directly owned or held by such Loan Party that are
required to be included in the Collateral and pledged hereunder.  Such Loan Party holds all such Collateral
directly unless otherwise indicated on such Schedule (i.e., not through a
Subsidiary, Securities Intermediary or any other Person).

 

(b)                                 All
Collateral consisting of Pledged Shares, Pledged LLC Interests and Pledged
Partnership Interests has been duly authorized and validly issued, is fully
paid and non-assessable and is subject to no options to purchase or similar
rights of any Person.  Except as set
forth on Schedules I, III and IV hereto, and, in the case of clause (i)
below, except as excluded from the Collateral by the proviso to Section 2.01,
(i) such Collateral constitutes 100% of the issued and outstanding shares of
capital stock or other equity interests of the respective issuers thereof, (ii)
no issuer of Collateral has outstanding any security convertible into or
exchangeable for any shares of its capital stock or other equity interests or
any warrant, option, convertible security, instrument or other interest
entitling the holder thereof to acquire any such shares or any security
convertible into or exchangeable for such shares, (iii) there are no voting
trusts, stockholder agreements, proxies or other agreements in effect with
respect to the voting or transfer of such shares of its capital stock and (iv)
there are no Liens or agreements, arrangements or obligations to create or give
any Lien relating to any such shares of capital stock.  Except as otherwise permitted by the Finance
Documents, no Loan Party is now and or will become a party to or otherwise
bound by any agreement, other than this Amended Agreement, the Finance
Documents and the documents evidencing the security interest of the Revolving
Credit Collateral Agent which restricts in any manner the rights of the
Collateral Agent or any other present or future holder of any Collateral to
transfer or otherwise dispose of Pledged Shares.

 

Section 3.04                            No Consents.  No consent of any other Person (including,
without limitation, any stockholder or creditor of such Loan Party or any of
its Subsidiaries) and no order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by any
Governmental Authority is required to be obtained by the Loan Party in
connection with the execution, delivery or performance of this Amended
Agreement, or in connection with the exercise of the rights and remedies of the
Collateral Agent pursuant to this Amended Agreement, except as may be required
under the Collateral Agency Agreement or in connection with the disposition of
the Collateral by laws affecting the offering and sale of securities generally
or as described in Schedule 3.04 hereto.

 

15

 

ARTICLE IV

COVENANTS

 

Each Loan Party covenants and agrees that until the
payment in full of all Finance Obligations and until there is no commitment by
any Finance Party to make further advances, incur obligations or otherwise give value, such Loan Party
will comply with the following:

 

Section 4.01                            Delivery of Collateral.  All Collateral (other than Revolving Lender
Priority Collateral) shall be Delivered to and held by or on behalf of the
Collateral Agent pursuant hereto; provided that so long as no Event of
Default shall have occurred and be continuing, and except as required by any
other Finance Document, each Loan Party may retain any Collateral (i)
consisting of checks, drafts and other Instruments (other than Pledged Notes
and any additional or substitute promissory notes issued to or otherwise
acquired by such Loan Party in respect of Pledged Notes) received by it in the
ordinary course of business or (ii) which it is otherwise entitled to receive
and retain pursuant to Section 5.01 hereof, and the Collateral
Agent shall, promptly upon request of any Loan Party, make appropriate
arrangements for making any Collateral consisting of an Instrument or a
Certificated Security pledged by such Loan Party available to it for purposes
of presentation, collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate to the Collateral Agent, against a trust receipt
or like document).  All Collateral
Delivered hereunder and shall be accompanied by any required transfer tax
stamps.  The Collateral Agent shall have
the right at any time upon the request of the Directing Creditors, and upon
notice to any Loan Party, to cause any or all of the Collateral (other than
Revolving Lender Priority Collateral) to be transferred of record into the name
of the Collateral Agent or its nominee. 
Each Loan Party will promptly give the Collateral Agent copies of any
notices or other communications received by it with respect to Collateral
registered in the name of such Loan Party, and the Collateral Agent will
promptly give each Loan Party copies of any notices and communications received
by the Collateral Agent with respect to Collateral registered in the name of
the Collateral Agent or its nominee or custodian.

 

Section 4.02                            Delivery of Perfection Certificate; Filing of
Financing Statements and Delivery of Search Reports.  On or prior to the Issue Date, such Loan
Party shall deliver its Perfection Certificate to the Collateral Agent and
shall cause all filings and recordings and other actions specified in Schedule 4.01
to the Security Agreement to have been completed as required by the Security
Agreement.  The information set forth in
the Perfection Certificate shall be correct and complete.

 

Section 4.03                            Change of Name, Identity, Structure or
Location; Subjection to Other Security Agreements; Locations of Places of Business
and Chief Executive Office. 
Such Loan Party will not change its name, identity, structure or
location (determined as provided in Section 9-307 of the UCC) in any
manner, and shall not become bound, as provided in Section 9-203(d) of the
UCC, by a security agreement entered into by another Person, in each case
unless it shall have given the Collateral Agent not less than 20 days’ prior
notice thereof.  Such Loan Party shall
not in any event change the location of its place or places of business, its
chief executive office or any Collateral or its name, identity, structure or
location (determined as provided in Section 9-307 of the UCC), or become
bound, as provided in Section 9-307 of the UCC, by a security agreement
entered into by another Person, if such change would cause the Security
Interests in any Collateral to lapse or cease to be perfected unless such Loan
Party has taken on or before the date of lapse all actions necessary to ensure
that the Security Interests in all Collateral do not lapse or cease to be
perfected.

 

Section 4.04                            Further Assurances.  Such Loan Party will, from time to time at
its expense at the request of the Collateral Agent and in such manner and form
as the Collateral Agent may require, execute, deliver, file and record any financing
statement, specific assignment, instrument, document, agreement or other paper
and take any other action (including, without limitation, any filings

 

16

 

of financing or continuation statements under the UCC)
that from time to time may be reasonably necessary or desirable, or that the
Collateral Agent may reasonably request, in order to create, preserve, perfect,
confirm or validate the Security Interests or to enable the Collateral Agent
and the Finance Parties to obtain the full benefit of this Amended Agreement or
to exercise and enforce any of its rights, powers and remedies created
hereunder or under applicable law with respect to any of the Collateral.  To the extent permitted by applicable law but
without limiting such Loan Party’s obligations to itself comply with the first
sentence of this Section 4.04, such Loan Party hereby authorizes
the Collateral Agent to execute and file, in the name of such Loan Party or
otherwise and without the signature or other separate authorization or
authentication of such Loan Party appearing thereon, such UCC financing
statements or continuation statements as the Collateral Agent in its reasonably
discretion may deem necessary or appropriate to further perfect or maintain the
perfection of the Security Interests. 
Such Loan Party agrees that a carbon, photographic, photostatic or other
reproduction of this Amended Agreement or of a financing statement is
sufficient as a financing statement.  The
Loan Parties shall pay the costs of, or incidental to, any recording or filing
of any financing or continuation statements concerning the Collateral.

 

Section 4.05                            Disposition of Collateral.  Such Loan Party will not sell, exchange,
assign or otherwise dispose of, or grant any option with respect to, any
Collateral or create or suffer to exist any Lien (other than the Security
Interests and Permitted Liens) on any Collateral except that, subject to the
rights of the Collateral Agent and the Finance Parties hereunder if a Default
or an Event of Default shall have occurred and be continuing, such Loan Party
may sell, exchange, assign or otherwise dispose of, or grant options with
respect to, Collateral to the extent permitted by the Indenture and all Term
Credit Agreements, if any, whereupon, in the case of any such disposition, the
Security Interests created hereby in such item (but not in any Proceeds arising
from such disposition) shall cease immediately without any further action on
the part of the Collateral Agent.

 

Section 4.06                            Additional Collateral.  Except as otherwise permitted by any Finance
Document, such Loan Party will cause each issuer of the Collateral that is a
Subsidiary of such Loan Party not to issue any stock, other securities, limited
liability company membership interests, partnership interests, promissory notes
or other instruments in addition to or in substitution for the Pledged Shares,
Pledged LLC Interests, Pledged Partnership Interests and Pledged Notes issued
by such issuer, except to a Loan Party, and, in the event that any issuer of
Collateral at any time issues any additional or substitute stock, other
securities, limited liability company membership interests, partnership
interests, promissory notes or other instruments to a Loan Party, such Loan Party
will (subject to the proviso to Section 2.01) immediately Deliver
all such items to the Collateral Agent to hold as Collateral hereunder and will
promptly thereafter deliver to the Collateral Agent a certificate executed by
an authorized officer of such Loan Party describing such Pledged Shares,
Pledged LLC Interests, Pledged Partnership Interests and/or Pledged Notes,
attaching such supplements to Schedules I through IV hereto as are
necessary to cause such Schedules to be complete and accurate at such time and
certifying that such Pledged Shares, Pledged LLC Interests, Pledged Partnership
Interests and/or Pledged Notes have been duly pledged with the Collateral Agent
hereunder.

 

Section 4.07                            Information Regarding Collateral.  Such Loan Party will, promptly upon request,
provide to the Collateral Agent all information and evidence it may reasonably
request concerning the Collateral to enable the Collateral Agent to enforce the
provisions of this Amended Agreement.

 

17

 

ARTICLE V

DISTRIBUTIONS ON COLLATERAL; VOTING

 

Section 5.01                            Right to Receive Distributions on Collateral;
Voting.

 

(a)                                  Unless
and until (i) an Event of Default shall have occurred and be continuing and
(ii) written notice thereof shall have been given by the Collateral Agent to
the relevant Loan Party (provided that if an Event of Default specified
in Section 6.01(7) or Section 6.01(8) of the Indenture,
or an Event of Default under any Term Credit Agreement in connection with an
Insolvency Event (as such term may be defined or further described therein),
shall occur, no such notice shall be required):

 

(i)                                     Each Loan Party shall be entitled to exercise
any and all voting, management, administration and other consensual rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Amended Agreement and the other Finance
Documents; provided, however, that (A) each Loan Party shall give
the Collateral Agent prior written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any such right to the
extent that the exercise of such right or the refraining from exercising such
right could reasonably be expected to materially effect the position or
interests of the Collateral Agent or any other Finance Party hereunder or
thereunder, and (B) no Loan Party shall exercise or refrain from exercising any
such right if such action would violate or be inconsistent with any of the
terms of this Amended Agreement or any other Finance Document, or would have
the effect of impairing the position or interests of the Collateral Agent or
any other Finance Party hereunder or thereunder.

 

(ii)                                  Each Loan Party shall be entitled to receive
and retain any and all dividends, interest, distributions, cash, instruments
and other payments and distributions made upon or in respect of the Collateral;
provided, however, that any and all:

 

(A)                              dividends,
interest and other payments and distributions paid or payable other than in
cash in respect of, and instruments and other property other than in cash
received, receivable or otherwise distributed in respect of, or in exchange
for, any Collateral;

 

(B)                                dividends
and other payments and distributions paid or payable in cash in respect of any
Collateral in connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or paid-in-surplus;

 

(C)                                additional
stock, other securities, limited liability company membership interests,
partnership interests, promissory notes or other instruments or property paid
or distributed in respect of any Pledged Shares, Pledged LLC Interests or
Pledged Partnership Interests by way of share-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement;

 

(D)                               all
other or additional stock, other securities, limited liability company
membership interests, partnership interests, promissory notes or other
instruments or property which may be paid in respect of the Collateral by
reason of any consolidation, merger, exchange of shares, conveyance of assets,
liquidation or similar reorganization; and

 

(E)                                 cash
paid, payable or otherwise distributed in respect of principal of, in
redemption of, or in exchange for, any Collateral;

 

shall, except for the Revolving Lender Priority
Collateral, be forthwith (i) Delivered to the Collateral Agent or its nominee
or custodian to hold as Collateral hereunder or (ii) in the case of any amount
referred to in the proviso of this Section 5.01(a)(ii) paid or
distributed in cash, forthwith deposited in a Deposit Account maintained with
the Collateral Agent or with respect to

 

18

 

which an effective Account Control Agreement as
contemplated by Section 4.13 of the Security Agreement has been
delivered to the Collateral Agent and shall, if received by any Loan Party, be
received in trust for the benefit of the Collateral Agent and the Finance
Parties, be segregated from the other property or funds of such Loan Party and
be forthwith Delivered, in the same form as so received, to the Collateral
Agent or its nominee or custodian to hold as Collateral or deposited in a
Deposit Account as contemplated by clause (ii) above.

 

(iii)                               The Collateral Agent shall, upon receiving a
written request from any Loan Party accompanied by a certificate signed by an
authorized officer of such Loan Party stating that no Event of Default has
occurred and is continuing, execute and deliver (or cause to be executed and
delivered) to such Loan Party or as specified in such request all proxies,
powers of attorney, consents, ratifications and waivers and other instruments
as such Loan Party may reasonably request for the purpose of enabling such Loan
Party to exercise the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends, interest,
distributions, cash, instruments or other payments or distributions which it is
authorized to receive and retain pursuant to paragraph (ii) above in respect
of any of the Collateral which is registered in the name of the Collateral
Agent or its nominee.

 

(b)                                 Upon
the occurrence and during the continuance of an Event of Default and written
notice thereof shall have been given by the Collateral Agent to the relevant
Loan Party (provided that if an Event of Default specified in Section 6.01(7)
or Section 6.01(8) of the Indenture, or an Event of Default under
any Term Credit Agreement in connection with an Insolvency Event (as such term
may be defined or further described therein), shall occur, no such notice shall
be required):

 

(i)                                     All rights of each Loan Party to receive the
dividends, interest, distributions, cash, instruments and other payments and
distributions which it would otherwise be authorized to receive and retain
pursuant to Section 5.01(a)(ii) above shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall
thereupon have the sole right to receive and hold as Collateral such dividends,
interest, distributions, cash, instruments and other payments and
distributions; provided that all cash dividends and other cash
distributions in respect of federal, state and/or local income taxes payable by
any Loan Party or any direct or indirect equity holder of any Loan Party in
respect of income and profits of any limited liability company, partnership or
other entity which is not a corporation for United States federal income tax
purposes shall be paid to the respective Loan Party free and clear of any Liens
created hereby regardless of whether an Event of Default shall have occurred
and be continuing.

 

(ii)                                  All dividends, interest, distributions, cash,
instruments and other payments and distributions which are received by any Loan
Party contrary to the provisions of paragraph (i) of this Section 5.01(b)
shall be received in trust for the benefit of the Collateral Agent and the
Finance Parties, shall be segregated from other property or funds of such Loan
Party and shall be forthwith Delivered, in the same form as so received to the
Collateral Agent or its nominee or custodian to hold as Collateral.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default and upon
notice by the Collateral Agent to a Loan Party, all rights of such Loan Party
to exercise the voting, management, administration and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 5.01(a)(i)
above shall cease, all such rights shall thereupon become vested in the
Collateral Agent, who shall thereupon have the sole right to exercise such
voting and other consensual rights, and such Loan Party shall take all actions
as may be necessary or appropriate to effect such right of the Collateral
Agent.

 

19

 

ARTICLE VI

GENERAL AUTHORITY; REMEDIES

 

Section 6.01                            General Authority.  Each Loan Party hereby irrevocably appoints
the Collateral Agent and any officer or agent thereof as its true and lawful
attorney-in-fact, with full power of substitution, in the name of such Loan
Party, the Collateral Agent, the Finance Parties or otherwise, for the sole use
and benefit of the Collateral Agent and the Finance Parties, but at such Loan
Party’s expense, to the extent permitted by law, to exercise at any time and
from time to time while an Event of Default has occurred and is continuing, all
or any of the following powers with respect to all or any of the Collateral,
all acts of such attorney being hereby ratified and confirmed; such power,
being coupled with an interest, is irrevocable until the Finance Obligations
(excluding contingent indemnification obligations) are paid in full and until
there is no commitment by any Finance Party to make further advances, incur
obligations or otherwise give value:

 

(i)                                     to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to carry out the terms of this Amended Agreement;

 

(ii)                                  to receive, take, endorse, assign and deliver
any and all checks, notes, drafts, acceptances, documents and other negotiable
and non-negotiable instruments taken or received by such Loan Party as, or in
connection with, the Collateral;

 

(iii)                               to accelerate any Pledged Note which may be
accelerated in accordance with its terms, and to otherwise demand, sue for,
collect, receive and give acquittance for any and all monies due on or by
virtue of any Collateral;

 

(iv)                              to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral;

 

(v)                                 to sell, transfer, assign or otherwise deal
in or with the Collateral or the proceeds or avails thereof, as fully and
effectually as if the Collateral Agent were the absolute owner thereof;

 

(vi)                              to extend the time of payment of any or all
of the Collateral and to make any allowance and other adjustments with respect
thereto;

 

(vii)                           subject to the giving of notice to the
relevant Loan Party in accordance with Section 5.01(a) hereof, to
vote all or any part of the Pledged Shares, Pledged LLC Interests, Pledged
Partnership Interests and/or Pledged Notes (whether or not transferred into the
name of the Collateral Agent) and give all consents, waivers and ratifications
in respect of the Collateral; and

 

(viii)                        to do, at its option, but at the expense of
such Loan Party, at any time or from time to time, all acts and things which
the Collateral Agent deems necessary to protect or preserve the Collateral and
to realize upon the Collateral.

 

Section 6.02                            Remedies upon Event of Default.

 

(a)                                  If
an Event of Default shall have occurred and be continuing, the Collateral Agent
may, in addition to all other rights and remedies granted to it in this Amended
Agreement and in any other agreement securing, evidencing or relating to the
Finance Obligations:  (i) exercise on
behalf of

 

20

 

the Finance Parties all
rights and remedies of a secured party under the UCC (whether or not in effect
in the jurisdiction where such rights are exercised) and, in addition, (ii)
without demand of performance or other demand or notice of any kind (except as
herein provided or as may be required by mandatory provisions of law) to or
upon any Loan Party or any other Person (all of which demands and/or notices
are hereby waived by each Loan Party), (A) apply all cash, if any, then held by
it as Collateral as specified in Section 6.07 hereof and (B) if
there shall be no such cash or if such cash shall be insufficient to pay all
the Finance Obligations in full or cannot be so applied for any reason or if
the Collateral Agent determines to do so, collect, receive, appropriate and
realize upon the Collateral and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round
lots) at public or private sale or at broker’s board or on any securities
exchange, at any office of the Collateral Agent or elsewhere in such manner as
is commercially reasonable and as the Collateral Agent may deem best, for cash,
on credit or for future delivery without assumption of any credit risk and at
such price or prices as the Collateral Agent may deem satisfactory.

 

(b)                                 The
Collateral Agent shall give each Loan Party not less than 10 days’ prior notice
of the time and place of any sale or other intended disposition of any of the
Collateral, except any Collateral which threatens to decline speedily in value
or is of a type customarily sold on a recognized market.  Any such notice shall (i) in the case of a
public sale, state the time and place fixed for such sale, (ii) in the case of
a sale at a broker’s board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or the portion thereof being sold, will first be offered for sale, (iii) in the
case of a private sale, state the day after which such sale may be consummated,
(iv) contain the information specified in Section 9-613 of the UCC, (v) be
authenticated and (vi) be sent to the parties required to be notified pursuant
to Section 9-611(c) of the UCC; provided that, if the Collateral
Agent fails to comply with this sentence in any respect, its liability for such
failure shall be limited to the liability (if any) imposed on it as a matter of
law under the UCC.  The Collateral Agent
and each Loan Party agree that such notice constitutes reasonable notification
within the meaning of Section 9-611 of the UCC.  Except as otherwise provided herein, each
Loan Party hereby waives, to the extent permitted by applicable law, notice and
judicial hearing in connection with the Collateral Agent’s taking possession or
disposition of any of the Collateral.

 

(c)                                  The
Collateral Agent or any Finance Party may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale).  Each Loan Party will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law.  Upon any such sale, the Collateral Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold.  Each purchaser
at any such sale shall hold the Collateral so sold to it absolutely and free
from any claim or right of whatsoever kind. 
Any such public sale shall be held at such time or times within ordinary
bankers hours and at such place or places as the Collateral Agent may fix in
the notice of such sale.  At any such
sale, the Collateral may be sold in one lot as an entirety or in such parcels,
as the Collateral Agent may determine. 
The Collateral Agent shall not be obligated to make any such sale
pursuant to any such notice.  The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned without further
notice.  In the case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the selling price is paid
by the purchaser thereof, but the Collateral Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of such failure, such Collateral may again
be sold upon like notice.

 

21

 

Section 6.03                            Securities Act; Registration Rights.

 

(a)                                  Securities Act.  In view of the position of the Loan Parties
in relation to the Collateral, or because of other present or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time
in effect being herein called the “Federal Securities Laws”) with
respect to any disposition of the Collateral permitted hereunder.  Each Loan Party understands that compliance
with the Federal Securities Laws might very strictly limit the course of
conduct of the Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Collateral, and might also limit the extent
to which or the manner in which any subsequent transferee of any Collateral
could dispose of the same.  Similarly,
there may be other legal restrictions or limitations affecting the Collateral
Agent in any attempt to dispose of all or part of the Collateral under
applicable Blue Sky or other state securities laws or similar laws analogous in
purpose or effect.  Without limiting the
generality of the foregoing, the provisions of this Section 6.03
would apply if, for example, the Collateral Agent were to place all or any part
of the Collateral for private placement by an investment banking firm, or if
such investment banking firm purchased all or any part of the Collateral for
its own account, or if the Collateral Agent placed all or any part of the
Collateral privately with a purchaser or purchasers.

 

Accordingly, each Loan Party expressly agrees that
the Collateral Agent is authorized, in connection with any sale of any
Collateral, if it deems it advisable so to do, (i) to restrict the prospective
bidders on or purchasers of any of the Collateral to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such Collateral, (ii) to cause to be placed on certificates for any
or all of the Collateral or on any other securities pledged hereunder a legend
to the effect that such security has not been registered under the Securities
Act of 1933 and may not be disposed of in violation of the provision of said
Act and (iii) to impose such other limitations or conditions in connection with
any such sale as the Collateral Agent deems necessary or advisable in order to
comply with said Act or any other law. 
Each Loan Party covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent deems
reasonably necessary or advisable in order that any such sale may be made in
compliance with the Securities Act of 1933 and all other applicable laws.  Each Loan Party acknowledges and agrees that
such limitations may result in prices and other terms less favorable to the
seller than if such limitations were not imposed, and, notwithstanding such
limitations, agrees that any such sale shall be deemed to have been made in a
commercially reasonable manner, it being the agreement of the Loan Parties and
the Collateral Agent that the provisions of this Section 6.03 will
apply notwithstanding the existence of a public or private market upon which
the quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells the Collateral. 
The Collateral Agent shall be under no obligation to delay a sale of any
Collateral for a period of time necessary to permit the issuer of any securities
contained therein to register such securities under the Federal Securities
Laws, or under applicable state securities laws, even if the issuer would agree
to do so.  Furthermore, each Loan Party
acknowledges that it is aware that Section 9-610 of the UCC provides that
the Collateral Agent or a Finance Party may purchase Collateral if it is sold
at a public sale.

 

(b)                                 Registration Rights.  If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral and if in the opinion
of counsel for the Collateral Agent it is necessary, or if in the opinion of
the Collateral Agent it is advisable, to have all or any of the securities
included in the Collateral or the portion thereof to be sold registered under
the provisions of the Federal Securities Laws, each Loan Party agrees, at its
own expense (including, without limitation, expenses relating to brokers
commissions), (i) to execute and deliver, and to use its commercially
reasonable efforts to cause each corporation whose securities are to be sold
and their respective directors and officers to execute and deliver, all such
instruments and documents, and to do or cause to be done all other such acts
and things,

 

22

 

as may be necessary or,
in the opinion of the Collateral Agent, advisable to register such securities
under the provisions of the Federal Securities Laws and to cause the
registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be furnished,
and to make or cause to be made all amendments and supplements thereto and to
the related prospectus which, in the opinion of the Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission thereunder, (ii) to use its best efforts to cause the
corporation whose securities are to be sold to agree to prepare, and to make
available to its security holders as soon as practicable, an earnings statement
(which need not be audited) covering the period of at least 12 months beginning
with the first month after the effective date of any such registration
statement, which earning statement will satisfy the provisions of Section 11(a)
of the Securities Act of 1933, (iii) to use its commercially reasonable efforts
to qualify such securities under state Blue Sky or securities laws and to
obtain the approval of any Governmental Authorities for the sale of such
securities as requested by the Collateral Agent and (iv) at the request of the
Collateral Agent, to indemnify and hold harmless the Collateral Agent and any
underwriters (and any person controlling any of the foregoing) from and against
any loss, liability, claim, damage and expense (and reasonable counsel fees
incurred in connection therewith) under the Securities Act of 1933 or otherwise
insofar as such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
contained in such registration statement or prospectus or in any preliminary
prospectus or any amendment or supplement thereto, or arises out of or is based
upon any omission or alleged omission to state therein a material fact required
to be stated or necessary to make the statements therein not misleading, such
indemnification to remain operative regardless of any investigation made by or
on behalf of the Collateral Agent or any underwriters (or any person
controlling any of the foregoing); provided that no Loan Party shall be
liable in any case to the extent that any such loss, liability, claim, damage
or expense arises out of or is based on an untrue statement or alleged untrue
statement or an omission or an alleged omission made in reliance upon and in
conformity with written information furnished to such Loan Party by the
Collateral Agent or any underwriter expressly for use in such registration
statement or prospectus.

 

Section 6.04                            Other Rights of the Collateral Agent.

 

(a)                                  The
Collateral Agent, instead of exercising the power of sale conferred upon it
pursuant to Section 6.02, may proceed by a suit or suits at law or
in equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction, and may in addition institute and maintain such suits and
proceedings as the Collateral Agent may deem appropriate to protect and enforce
the rights vested in the Collateral Agent by this Amended Agreement.

 

(b)                                 The
Collateral Agent shall, to the extent permitted by applicable law, without
notice to any Loan Party or any party claiming through any Loan Party, without
regard to the solvency or insolvency at such time of any Person then liable for
the payment of any of the Finance Obligations, without regard to the then value
of the Collateral and without requiring any bond from any complainant in such
proceedings, be entitled as a matter of right to the appointment of a receiver
or receivers (who may be the Collateral Agent) of the Collateral or any part
thereof, and of the profits, revenues and other income thereof, pending such
proceedings, with such powers as the court making such appointment shall
confer, and to the entry of an order directing that the profits, revenues and
other income of the property constituting the whole or any part of the
Collateral be segregated, sequestered and impounded for the benefit of the
Collateral Agent and the Finance Parties, and each Loan Party irrevocably
consents to the appointment of such receiver or receivers and to the entry of
such order.

 

Section 6.05                            Limitation on Duty of Collateral Agent in
Respect of Collateral. 
Beyond the exercise of reasonable care in the custody thereof, neither
the Collateral Agent nor any

 

23

 

Finance Party shall have any duty to exercise any
rights or take any steps to preserve the rights of any Loan Party in the
Collateral in its or their possession or control or in the possession or
control of any agent or bailee or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto.  Each Loan Party agrees that the Collateral
Agent shall at no time be required to, nor shall the Collateral Agent be liable
to any Loan Party for any failure to, account separately to any Loan Party for
amounts received or applied by the Collateral Agent from time to time in
respect of the Collateral pursuant to the terms of this Amended Agreement.  Without limiting the foregoing, the
Collateral Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the UCC or otherwise, shall be (and in so doing shall be deemed to have
exercised reasonable care in respect thereof) to accord the Collateral
treatment substantially equal to that which the Collateral Agent accords its
own property, and (i) shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Collateral Agent
in good faith or (ii) shall not have any duty or responsibility for
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Collateral Agent has or is deemed to have knowledge of such matters.

 

Section 6.06                            Waiver and Estoppel.

 

(a)                                  Each
Loan Party agrees, to the extent it may lawfully do so, that it will not at any
time in any manner whatsoever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, moratorium, turnover or redemption law,
or any law permitting it to direct the order in which the Collateral shall be
sold, now or at any time hereafter in force which may delay, prevent or
otherwise affect the performance or enforcement of this Amended Agreement, and
each Loan Party hereby waives all benefit or advantage of all such laws.  Each Loan Party covenants that it will not
hinder, delay or impede the execution of any power granted to the Collateral
Agent or any other Finance Party in any Finance Document.

 

(b)                                 Each
Loan Party, to the extent it may lawfully do so, on behalf of itself and all
who claim through or under it, including without limitation any and all
subsequent creditors, vendees, assignees and lienors, waives and releases all
rights to demand or to have any marshalling of the Collateral upon any sale,
whether made under any power of sale granted herein or pursuant to judicial
proceedings or under any foreclosure or any enforcement of this Amended
Agreement, and consents and agrees that all of the Collateral may at any such
sale be offered and sold as an entirety.

 

(c)                                  Each
Loan Party waives, to the extent permitted by law, presentment, demand, protest
and any notice of any kind (except the notices expressly required hereunder) in
connection with this Amended Agreement and any action taken by the Collateral
Agent with respect to the Collateral.

 

Section 6.07                            Application of Proceeds.

 

(a)                                  Priority of Distributions.  The proceeds of any sale of, or other
realization upon, all or any part of the Collateral (including any proceeds
received and held pursuant to Section 5.01) and any cash held by
the Collateral Agent or its nominee or custodian hereunder shall be applied as
provided in Section 4.06 of the Collateral Agency Agreement,
subject in all cases to the priorities set forth in the Intercreditor
Agreement.  The Collateral Agent may make
distributions hereunder in cash or in kind or, on a ratable basis, in any
combination thereof.

 

(b)                                 Deficiencies.  It is understood that the Loan Parties shall
remain jointly and severally liable to the extent of any deficiency between the
amount of the proceeds of the Collateral and the amount of the Finance
Obligations.

 

24

 

ARTICLE VII

THE COLLATERAL AGENT

 

Section 7.01                            Resignation of the Term Loan Collateral Agent
and Appointment of the Collateral Agent.  In accordance with the provisions of Section 7.02
below, with effect from the date of this Amended Agreement (i) the Term Loan
Collateral Agent hereby resigns (the “Resignation”) as collateral agent for the
Finance Parties, and (ii) DRI appoints (the “Appointment”) US Bank National
Association as the Collateral Agent, and the Collateral Agent accepts the
Appointment, to act as Collateral Agent for the Finance Parties, such
Appointment to take effect immediately following the Resignation.  Upon effect of the Resignation, all rights,
powers, duties and other interests of the Term Loan Collateral Agent under this
Amended Agreement, the Intercreditor Agreement and in and to the Collateral
shall be transferred to, and become vested in, US Bank National Association as
Collateral Agent for itself and on behalf of the Finance Parties, without any
further act, deed or conveyance required (the “Assignment”).  Each of the parties hereto hereby confirms
that this Section 7.01 shall constitute notice of the Assignment to
such party in connection with any other Collateral Document where such notice
may be required.

 

Section 7.02                            Concerning the Collateral Agent.  The provisions of Article VI of
the Collateral Agency Agreement shall inure to the benefit of the Collateral
Agent in respect of this Amended Agreement and shall be binding upon all Loan
Parties and all Finance Parties and upon the parties hereto in such
respect.  In furtherance and not in
derogation of the rights, privileges and immunities of the Collateral Agent
therein set forth:

 

(i)                                     The Collateral Agent is authorized to take
all such actions as are provided to be taken by it as Collateral Agent
hereunder and all other action reasonably incidental thereto.  As to any matters not expressly provided for
herein or as to any matters which permit but do not require action by the
Collateral Agent (including, without limitation, the timing and methods of
realization upon the Collateral) the Collateral Agent shall act or refrain from
acting in accordance with written instructions from the Directing Creditors as
contemplated by the Collateral Agency Agreement or, in the absence of such
instructions, subject to the terms of the Collateral Agency Agreement, in
accordance with its discretion.

 

(ii)                                  The Collateral Agent shall not be responsible
for the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security Interests in
any of the Collateral, whether impaired by operation of law or by reason of any
action or omission to act on its part hereunder unless such action or omission
constitutes gross negligence or willful misconduct.  The Collateral Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Amended Agreement or any Finance Document by any Loan Party.

 

Section 7.03                            Appointment of Co-Collateral Agent.  At any time or times, in order to comply with
any legal requirement in any jurisdiction, the Collateral Agent may, in
consultation with DRI and, unless an Event of Default shall have occurred and
be continuing, with its consent (not to be unreasonably withheld or delayed),
appoint another bank or trust company or one or more other persons, either to
act as co-agent or co-agents, jointly with the Collateral Agent, or to act as
separate agent or agents on behalf of the Finance Parties with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Collateral Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 7.01
above).  Notwithstanding any such
appointment but only to the extent not inconsistent with such legal requirements
or, in the reasonable judgment of the Collateral Agent, not unduly burdensome
to it or any such co-agent, each Loan Party shall, so long as no

 

25

 

Event of Default shall have occurred and be continuing,
be entitled to deal solely and directly with the Collateral Agent rather than
any such co-agent in connection with the Collateral Agent’s rights and
obligations under this Amended Agreement.

 

Section 7.04                            Appointment of Sub-Agents.  The Collateral Agent shall have the right to
appoint one or more sub-agents for the purpose of retaining physical possession
of the Pledged Shares, Pledged LLC Interests, Pledged Partnership Interests and
Pledged Notes, which may be held (in the discretion of the Collateral Agent) in
the name of the relevant Loan Party, endorsed or assigned in blank or in favor
of the Collateral Agent or any nominee or custodian of the Collateral Agent or
a sub-agent appointed by the Collateral Agent.

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.01                            Notices.

 

(a)                                  Unless
otherwise specified herein, all notices, requests or other communications to
any party hereunder shall be in writing (including by facsimile transmission)
and mailed, faxed or delivered to the address or facsimile number: (i) in the
case of Holdings, DRI, Duane Reade, any Subsidiary Guarantor or any Noteholder
or the Trustee, as set forth in Section 13.02 of the Indenture,
(ii) in the case of any Term Loan Agent or Term Lender named in any Term Credit
Agreement, as set forth in the relevant notice provision of any such Term
Credit Agreement, (iii) in the case of the Collateral Agent, as set forth on
the signature pages hereof, (iv) in the case of any Swap Creditor, as set forth
in the applicable Swap Agreement or (v) in the case of any party, to such other
address, facsimile number or electronic mail address as such party shall
hereafter specify for the purpose of communications hereunder by notice to the
other parties hereto.  Each such notice, request
or other communication shall be effective upon the earlier to occur of (i)
actual receipt by the intended recipient and (ii) (A) if delivered by hand or
by courier, when signed for by or on behalf of the intended recipient, (B) if
delivered by mail, four Business Days after deposit in the mails, postage
prepaid and (C) if delivered by facsimile, when sent and receipt has been
confirmed electronically.  Rejection or
refusal to accept, or the inability to deliver because of a changed address of
which no notice was given shall not affect the validity of notice given in
accordance with this Section.

 

(b)                                 This
Amended Agreement may be transmitted and/or signed by facsimile and, if so
transmitted or signed shall, subject to requirements of Law, have the same
force and effect as a manually-signed original and shall be binding on all Loan
Parties, the Collateral Agent and the Finance Parties.  The Collateral Agent may also require that
this Amended Agreement be confirmed by a manually-signed original hereof; provided,
however, that the failure to request or deliver the same shall not limit
the effectiveness of any facsimile document or signature.

 

Section 8.02                            No Waivers; Non-Exclusive Remedies.  No failure or delay on the part of the
Collateral Agent or any Finance Party to exercise, no course of dealing with
respect to, and no delay in exercising, any right, power or privilege under
this Amended Agreement or any other Finance Document or any other document or
agreement contemplated hereby or thereby shall operate as a waiver thereof nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights
and remedies provided herein and in the other Finance Documents are cumulative
and are not exclusive of any other remedies provided by law.  Without limiting the foregoing, nothing in
this Amended Agreement shall impair the right of any Finance Party to exercise
any right of set-off or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of any Loan Party other
than its indebtedness under the Finance Documents.  Each Loan Party agrees, to the fullest extent
it may

 

26

 

effectively do so under applicable law, that any
holder of a participation in a Finance Obligation, whether or not acquired
pursuant to the terms of any applicable Finance Document, may exercise rights
of set-off or counterclaim or other rights with respect to such participation
as fully as if such holder of a participation were a direct creditor of the
Loan Party in the amount of such participation.

 

Section 8.03                            Compensation and Expenses of the Collateral
Agent; Indemnification.

 

(a)                                  Expenses.  The Loan Parties, jointly and severally,
agree to pay (i) all reasonable out-of-pocket expenses of the Collateral Agent,
including fees and disbursements of special and local counsel for the
Collateral Agent, in connection with the preparation and administration of this
Amended Agreement or any document or agreement contemplated hereby, any waiver
or consent hereunder or any amendment hereof or any Default or alleged Default,
(ii) all taxes which the Collateral Agent or any other Finance Party may be
required to pay by reason of the security interests granted in the Collateral
(including any applicable transfer taxes) or to free any of the Collateral from
the lien thereof, and (iii) if an Event of Default or any payment default
(after the expiration of any applicable grace period) under any Swap Agreement
occurs, all out-of-pocket expenses incurred by the Trustee with respect to the
Indenture, a Term Loan Agent with respect to any Term Credit Agreement, in the
case of a Swap Agreement, the relevant Finance Party, including (without duplication)
the fees and disbursements of counsel, in connection with such Event of Default
and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.

 

(b)                                 Protection of Collateral.  If any Loan Party fails to comply with the
provisions of any Finance Document, such that the value of any Collateral or
the validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, after notice to such Loan
Party (unless in the reasonable judgment of the Collateral Agent, notice is
impractical) the Collateral Agent if requested by the Directing Creditors may,
but shall not be required to, effect such compliance on behalf of such Loan
Party, and the Loan Parties shall reimburse the Collateral Agent for the costs
thereof on demand.  Any and all excise,
property, sales and use taxes imposed by any state, federal or local authority
on any of the Collateral, or in respect of periodic appraisals of the
Collateral, or in respect of the sale or other disposition thereof shall be
borne and paid by the Loan Parties.  If
any Loan Party fails to promptly pay any portion thereof when due, the
Collateral Agent may, at its option, but shall not be required to, pay the same
and charge the Loan Parties’ account therefor, and the Loan Parties agree to
reimburse the Collateral Agent therefor on demand.  All sums so paid or incurred by the
Collateral Agent for any of the foregoing and any and all other sums for which
any Loan Party may become liable hereunder and all costs and expenses
(including attorneys’ fees, legal expenses and court costs) reasonably incurred
by the Collateral Agent or any Noteholder or Term Lender in enforcing or
protecting the Security Interests or any of their rights or remedies under this
Amended Agreement, shall, together with interest thereon from demand and until
paid at the rate applicable to interest at the highest rate applicable under
the Finance Documents in respect of overdue obligations, be additional Finance
Obligations hereunder.

 

(c)                                  Indemnification.  Each Loan Party agrees to indemnify the
Collateral Agent, each other Finance Party and their respective Affiliates,
directors, officers, employees, counsel, agents and attorneys-in-fact and their
respective successors and assigns (each, an “Indemnitee” and,
collectively, “Indemnitees”) and hold each Indemnitee harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, demands, actions, suits, judgments, costs and expenses of any kind,
including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by, imposed on or asserted against such
Indemnitee in connection with any investigation or administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of this Amended Agreement or
any other Collateral Document or in

 

27

 

any other way connected
with the enforcement of any of the terms of, or the preservation of any rights
hereunder, or in any way relating to or arising out of the ownership,
purchasing, delivery, control, acceptance, financing, possession, sale, return
or other disposition of the Collateral, the violation of the laws of any
country, state or other governmental body or unit, or any tort or contract
claim; provided that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee’s own gross negligence or willful misconduct as
determined by a court of competent jurisdiction in a final, non-appealable
judgment or order.  Each Loan Party
agrees that upon written notice by any Indemnitee of the assertion of such a
liability, obligation, loss, damage, penalty, claim, demand, action, judgment
or suit, such Loan Party shall assume full responsibility for the defense
thereof.  Each Indemnitee agrees to use
its best efforts to notify the Loan Parties of any such assertion of which such
Indemnitee has knowledge.

 

(d)                                 Contribution.  If and to the extent that the obligations of
any Loan Party under this Section 8.03 are unenforceable for any
reason, each Loan Party hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.

 

(e)                                  Obligations; Survival.  Any amounts paid by any Indemnitee as to
which such Indemnitee has the right to reimbursement shall constitute Finance
Obligations.  The indemnity obligations
of the Loan Parties contained in this Section 8.03 shall continue
in full force and effect notwithstanding the full payment of all Finance
Obligations and notwithstanding the discharge thereof.

 

Section 8.04                            Enforcement.  The Finance Parties agree that this Amended
Agreement may be enforced only by the action of the Collateral Agent, acting
upon the instructions of the Directing Creditors, if so required under the
Collateral Agency Agreement, and that no other Finance Party shall have any
right individually to seek to enforce this Amended Agreement or to realize upon
the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Collateral Agent for the benefit of
the Finance Parties upon the terms of this Amended Agreement and the Collateral
Agency Agreement.

 

Section 8.05                            Amendments and Waivers.  Any provision of this Amended Agreement may
be amended, changed, discharged, terminated or waived if, but only if, such
amendment or waiver is in writing and is signed by each Loan Party affected by
such amendment, change, discharge, termination or waiver (it being understood
that the addition or release of any Loan Party hereunder shall not constitute
an amendment, change, discharge, termination or waiver affecting any Loan Party
other than the Loan Party so added or released and it being further understood
and agreed that any supplement to Schedules I, II, III and
IV hereto shall not require the consent of any Loan Party) and by the
Collateral Agent (with the consent of the Directing Creditors, the applicable
Swap Representative, the Trustee or a Term Loan Agent as the case may be, to
the extent required by the Collateral Agency Agreement).

 

Section 8.06                            Successors and Assigns.  This Amended Agreement shall be binding upon
each of the parties hereto and inure to the benefit of the Collateral Agent and
the Finance Parties and their respective successors and assigns.  In the event of an assignment of all or any
of the Finance Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness.  No Loan Party shall assign or delegate any of
its rights and duties hereunder without the prior written consent of all of the
Finance Parties.

 

Section 8.07                            Governing Law.  THIS AMENDED AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT AS OTHERWISE REQUIRED BY MANDATORY

 

28

 

PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTIONS OTHER THAN NEW YORK ARE
GOVERNED BY THE LAWS OF SUCH JURISDICTIONS.

 

Section 8.08                            Limitation of Law;
Severability.

 

(a)                                  All
rights, remedies and powers provided in this Amended Agreement may be exercised
only to the extent that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Amended Agreement are intended
to be subject to all applicable mandatory provisions of law which may be
controlling and be limited to the extent necessary so that they will not render
this Amended Agreement invalid, unenforceable in whole or in part, or not entitled
to be recorded, registered or filed under the provisions of any applicable law.

 

(b)                                 If
any provision hereof is invalid or unenforceable in any jurisdiction, then, to
the fullest extent permitted by law, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Collateral Agent and the Finance Parties in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provisions
in any other jurisdiction.

 

Section 8.09                            Counterparts; Effectiveness.  This Amended Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.  This Amended Agreement shall
become effective with respect to each Loan Party when the Collateral Agent
shall receive counterparts hereof executed by itself and such Loan Party.

 

Section 8.10                            Additional Loan Parties.  It is understood and agreed that any
Affiliate of DRI that is required by any Finance Document to execute a
counterpart of this Amended Agreement after the date hereof shall automatically
become a Loan Party hereunder with the same force and effect as if originally
named as a Loan Party hereunder by executing an instrument of accession or
joinder substantially in the form of Exhibit G to the Security Agreement
and delivering the same to the Collateral Agent.  Concurrently with the execution and delivery
of such instrument of accession or joinder, such Affiliate shall take all such
actions and deliver to the Collateral Agent all such documents and agreements
as such Affiliate would have been required to deliver to the Collateral Agent
on or prior to the date of this Amended Agreement had such Affiliate been a
party hereto on the date of this Amended Agreement.  Such additional materials shall include,
among other things, an opinion of counsel to the extent required under the
Indenture or any Term Credit Agreement and supplements to Schedules I, II,
III and IV hereto and to Schedule 4.01 of the
Security Agreement (which Schedules shall thereupon automatically be amended
and supplemented to include all information contained in such supplements) such
that, after giving effect to the accession or joinder of such Affiliate, each
of Schedules I, II, III and IV hereto and Schedule 4.01
to the Security Agreement is true, complete and correct with respect to such
Affiliate as of the effective date of such accession or joinder.  The execution and delivery of any such
instrument of accession or joinder, and the amendment and supplementation of
the Schedules hereto as provided in the immediately preceding sentence, shall
not require the consent of any other Loan Party hereunder.  The rights and obligations of each Loan Party
hereunder shall remain in full force and effect notwithstanding the addition of
any new Loan Party as a party to this Amended Agreement.

 

Section 8.11                            Termination; Release of Loan Parties.

 

(a)                                  Termination.  Upon the full payment and performance of all
Finance Obligations (other than contingent indemnification obligations), the
cancellation or expiration of all outstanding Swap

 

29

 

Agreements (or the
provision of cash collateral in an amount equal to 100% of the Swap Termination
Value thereunder) and the termination of all commitments under the Finance
Documents, the Security Interests shall terminate and all rights to the
Collateral shall revert to the Loan Parties. 
In addition, at any time and from time to time prior to such termination
of the Security Interests, the Collateral Agent may release any of the Collateral
or subordinate its Security Interests therein to Liens in favor of certain
third parties with the prior written consent of the Directing Creditors or as
provided in Article V of the Collateral Agency Agreement.  Upon any such termination of the Security
Interests or release of Collateral, the Collateral Agent will, upon request by
and at the expense of any Loan Party (and, in the case of a release of
Collateral, upon receipt of a written certification of a Responsible Officer of
DRI and Duane Reade that the Trustee has received all documents, if any,
required by the Trust Indenture Act and the Indenture) execute and deliver to
such Loan Party such documents as such Loan Party shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.  Any such
documents shall be without recourse to or warranty by the Collateral Agent or
the other Finance Parties.  The Collateral
Agent shall have no liability whatsoever to any other Finance Party as a result
of any release of Collateral by it as permitted by this Section 8.11.  Upon any release of Collateral pursuant to
this Section 8.11, none of the Finance Parties shall have any
continuing right or interest in such Collateral or the Proceeds thereof.  Upon satisfaction and discharge of the
Indenture as provided in Article 12 of the Indenture or any similar
provision of any other Term Credit Agreement, or legal defeasance or covenant
defeasance of the Indenture as provided in Article 8 of the Indenture or
any similar provision of any other Term Credit Agreement, the Note/Term
Obligations under the Note Documents and/or the relevant Term Loan Documents,
as applicable, shall be deemed to be paid in full for purposes of Section 8.04,
8.05 and this Section 8.11(a).

 

(b)                                 Release of Loan Parties.  If any part of the Collateral (x) is taken by
eminent domain, condemnation or other similar circumstances or (y) is sold,
transferred, otherwise disposed of or liquidated in compliance with the
requirements of the Finance Documents (or such sale, transfer, other
disposition or liquidation has been approved in writing by the Directing
Creditors), then in each such case, such Collateral shall be automatically
released from the Security Interests created hereby and the Collateral Agent,
at the request and expense of such Loan Party, will (upon receipt of a written
certification of a Responsible Officer of DRI and Duane Reade that the Trustee
has received all documents, if any, required by the Trust Indenture Act and the
Indenture) assign, transfer and deliver to such Loan Party (without recourse
and without representation or warranty) such of the Collateral as is then being
(or has been) so taken, sold, transferred, disposed of or liquidated as may be
in the possession or control of the Collateral Agent and has not theretofore
been released pursuant to this Amended Agreement.  Further, upon the release of a Guarantor from
its obligations under all guaranties of the Finance Obligations in accordance
with the provisions thereof and the other Finance Documents, such Guarantor
(and the Collateral assigned by such Guarantor pursuant hereto) shall be
automatically released from this Amended Agreement and the Collateral Agent
will, upon request by and at the expense of such Guarantor, execute and deliver
to such Guarantor such documents as such Guarantor shall reasonably request to
evidence the release of such Guarantor and such Collateral.

 

(c)                                  Other Releases.  If property that constitutes either (A) all
or substantially all of the Collateral securing Finance Obligations or (B) less
than all or substantially all of the Collateral securing Finance Obligations is
released with the consent of the Directing Creditors in accordance with the
Collateral Agency Agreement, then in each such case, the Collateral Agent, at
the request and expense of such Loan Party, will (upon receipt of a written
certification of a Responsible Officer of DRI and Duane Reade that the Trustee
has received all documents, if any, required by the Trust Indenture Act and the
Indenture) duly release from the security interest created hereby and assign,
transfer and deliver to such Loan

 

30

 

Party (without recourse
and without representation or warranty) such of the Collateral as is then being
(or has been) so released as may be in the possession or control of the
Collateral Agent and has not theretofore been released pursuant to this Amended
Agreement, and execute and deliver to such Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such Collateral.  If, in the case of any or all of the
Revolving Lender Priority Collateral, a first priority Lien thereon is released
by the Revolving Credit Collateral Agent or as otherwise authorized or directed
by the Revolving Credit Collateral Agent (provided, however, that
if a Lien securing obligations under the Revolving Credit Agreement is
reinstated on any or all of the Revolving Lender Priority Collateral upon which
the Lien securing Finance Obligations has been released pursuant to this
sentence then, the Lien securing the Finance Obligations on such Revolving
Lender Priority Collateral will also be deemed reinstated on a second priority
basis), such Revolving Lender Priority Collateral shall be automatically
released from the Security Interests created hereby and the Collateral Agent,
at the request and expense of such Loan Party, will (upon receipt of a written
certification of a Responsible Officer of DRI and Duane Reade that the Trustee
has received all documents, if any, required by the Trust Indenture Act and the
Indenture) execute and deliver to such Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such Revolving Lender
Priority Collateral.  In addition, if any
Capital Stock or other securities shall, after the Issue Date, meet the
criteria of any of clauses (w), (x) or (y) of the proviso
of Section 2. 01, such Capital Stock or other securities shall
automatically be deemed to be released from the Collateral and the Lien of this
Amended Agreement and the Collateral Agent shall promptly after receipt of an
Officer’s Certificate deliver such Capital Stock or other securities then in
its possession to the applicable Loan Party together with such releases and
other documents as may be reasonably requested by such Loan Party.

 

Section 8.12                            Entire Agreement.  This Amended Agreement and the other
Collateral Documents constitute the entire agreement and understanding among
the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, and any contemporaneous oral agreements and
understandings relating to the subject matter hereof and thereof.

 

[Signature Pages Follow]

 

31

 

IN WITNESS WHEREOF, the parties hereto have caused
this Amended Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

 

 

	
  LOAN PARTIES:

  	
  DUANE READE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John K. Henry

  
	
   

  	
   

  	
  Title: 

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John K. Henry

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE, a New York
  general

  partnership

  
	
   

  	
   

  
	
   

  	
  By: Duane Reade Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John K. Henry

  
	
   

  	
   

  	
  Title

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  By: DRI I Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John K. Henry

  
	
   

  	
   

  	
  Title

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DRI I INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John K. Henry

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
					

 

S-1

 

	
   

  	
  DUANE READE INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John K. Henry

  
	
   

  	
   

  	
  Title:       Senior Vice
  President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE REALTY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Henry

  	
   

  
	
   

  	
   

  	
  Name:     John K. Henry

  
	
   

  	
   

  	
  Title:       Chief Financial
  Officer

  

 

S-2

 

	
  COLLATERAL AGENT:

  	
  US BANK
  NATIONAL ASSOCIATION,

  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Hopkins

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
  Telephone:

  
	
   

  	
  Telecopier:

  

 

S-3

 

	
  TERM LOAN COLLATERAL AGENT:

  	
  BANK OF AMERICA, N.A.,

  as Term Loan Collateral Agent

  (solely for the purposes of Section 7.01)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Rittelmeyer

  	
   

  
	
   

  	
   

  	
  Name:     Robert
  Rittelmeyer

  
	
   

  	
   

  	
  Title:       Vice
  President

  

 

S-4

 

SCHEDULE I

 

LIST OF PLEDGED SHARES

 

HOLDINGS:

 

	
  Issuer

  	
   

  	
  Class of

  Stock

  	
   

  	
  Certificate

  Number, if

  Applicable

  	
   

  	
  Par Value

  	
   

  	
  Number of

  Shares

  	
   

  	
  Percentage of

  Class

  Represented By

  Pledged Shares

  	
   

  	
  Type of

  Investment

  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade,
  Inc.

  	
   

  	
  Common Stock

  	
   

  	
  002

  	
   

  	
  $.01 per
  share

  	
   

  	
  100

  	
   

  	
  100

  	
  %

  	
  Certificated Security

  	
   

  

 

 

DRI:

 

	
  Issuer

  	
   

  	
  Class of

  Stock

  	
   

  	
  Certificate

  Number, if

  Applicable

  	
   

  	
  Par Value

  	
   

  	
  Number of

  Shares

  	
   

  	
  Percentage of

  Class

  Represented By

  Pledged Shares

  	
   

  	
  Type of

  Investment

  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade
  Realty, Inc.

  	
   

  	
  Common Stock

  	
   

  	
  5

  	
   

  	
  $.01 per
  share

  	
   

  	
  1,000

  	
   

  	
  100

  	
  %

  	
  Certificated Security

  	
   

  

 

 

SCHEDULE II

 

LIST OF PLEDGED NOTES

 

DR
INTERNIONAL

 

	
  Issuer

  	
   

  	
  Original Principal Amount

  	
   

  	
  Date

  	
   

  	
  Maturity

  Date

  	
   

  	
  Type of Investment

  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  All Intercompany Advances

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE III

 

LIST OF PLEDGED LLC INTERESTS

 

 

 

SCHEDULE IV

 

LIST OF PLEDGED PARTNERSHIP
INTERESTS

 

DRI

 

	
  Issuer

  	
   

  	
  Class of Interest

  	
   

  	
  Certificate

  Numbers, if

  Applicable

  	
   

  	
  Percentage of Class

  Represented by

  Pledged LLC

  Interests

  	
   

  	
  Type of Investment

  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  partnership

  	
   

  	
  n/a

  	
   

  	
  99

  	
  %

  	
  General Intangible

  	
   

  

 

 

DRI
I

 

	
  Issuer

  	
   

  	
  Class of Interest

  	
   

  	
  Certificate

  Numbers, if

  Applicable

  	
   

  	
  Percentage of Class

  Represented by

  Pledged LLC

  Interests

  	
   

  	
  Type of Investment

  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  partnership

  	
   

  	
  n/a

  	
   

  	
  1

  	
  %

  	
  General Intangible

  	
   

  

 

 

Schedule 3.04 to the Pledge Agreement

 

CONSENTS

 

[PW
to provide]

 

 

	
   

  	
  EXHIBIT A

  
	
   

  	
  to

  
	
   

  	
  PLEDGE AGREEMENT

  

 

Form of Issuer Control Agreement

 

CONTROL
AGREEMENT dated as of
[As of DATE] among [LOAN PARTY NAME], [COLLATERAL AGENT NAME], as Collateral
Agent, and [ISSUER NAME].

 

[Loan Party Name], [Loan Party Description]
(together with its successors and permitted assigns, the “Loan Party”),
and [Collateral Agent Name], as Collateral Agent (together with its successor
or successors in such capacity, the “Collateral Agent”), propose to
enter into an Amended and Restated Pledge Agreement dated as of December 20,
2004 (as the same may be amended, supplemented or modified from time to time, the
“Pledge Agreement”), under which the Loan Party will pledge to the
Collateral Agent, and will grant a security interest in favor of the Collateral
Agent in, all right, title and interest of the Loan Party in, to and under any
and all (i) Uncertificated Securities (as defined in the Pledge Agreement),
(ii) Partnership Interests (as defined in the Pledge Agreement) and (iii) LLC
Interests (as defined in the Pledge Agreement), in each case issued from time
to time by [Issuer Name], [Issuer Description] (together with its successors,
the “Issuer”), whether now existing or hereafter from time to time
acquired by the Loan Party (all of such Uncertificated Securities, Partnership
Interests and LLC Interests being herein collectively referred to as the “Pledged
Interests”) to secure the payment and performance of the Finance
Obligations (as defined in the Pledge Agreement).  Capitalized terms defined or otherwise used
in the Pledge Agreement and not otherwise defined herein have, as used herein,
the respective meanings provided for therein.

 

The Loan Party desires that the Issuer enter into
this Agreement to perfect the security interest of the Collateral Agent in the
Pledged Interests, to vest in the Collateral Agent control of the Pledged
Interests and to provide for the rights of the parties under this Control
Agreement.

 

Accordingly, the parties hereto agree as follows:

 

1.                                        Control by the Collateral
Agent.  The Loan Party hereby irrevocably agrees
that, for so long as this Control Agreement remains in effect, the Collateral
Agent shall have exclusive control of the Pledged Interests.  In furtherance of such agreement, the Loan
Party hereby irrevocably authorizes and directs the Issuer, and the Issuer
hereby agrees, (i) to comply with any and all instructions (within the meaning
of Section 8-102(a)(12) of the UCC) originated by the Collateral Agent
regarding any or all of the Pledged Interests without further consent by the
Loan Party or any other Person, and (ii) subject to the provisions of Section 2
of this Control Agreement, (A) not to comply with any instructions regarding
any or all of the Pledged Interests originated by any Person other than the
Collateral Agent or a court of competent jurisdiction and (B) to distribute as
instructed by the Collateral Agent all interest, redemptions, distributions,
dividends and other payments from time to time paid with respect to any Pledged
Interests.  In the case of any conflict
between any instruction originated by the Collateral Agent and any instruction
originated by any other Person, the Issuer shall comply only with the
instruction originated by the Collateral Agent.

 

2.                                        Maintenance of Pledged
Interests.  In addition to, and not in lieu of, the
obligation of the Issuer to honor instructions and entitlement orders as agreed
in Section 1 hereof, the Issuer agrees follows:

 

(a)                                  Subject to the rights of the Loan Party
described herein, the Issuer agrees that, from and after the date hereof, the
Pledged Interests shall be under the exclusive dominion and control of the
Collateral Agent.

 

 

(b)                                 Upon notice by the Collateral Agent, the
Issuer shall notify the Loan Party that the Pledged Interests are subject to
the sole control of the Collateral Agent and, thereafter, the Issuer will not
accept any direction or instructions with respect to the Pledged Interests from
any Person other than the Collateral Agent, unless otherwise ordered by a court
of competent jurisdiction.

 

(c)                                  Until such time as the Issuer receives a
notice of sole control delivered by the Collateral Agent in accordance with Section 2(b)
above, the Loan Party may exercise all voting rights pertaining to the Pledged
Interests.

 

(d)                                 Until such time as the Issuer receives a
notice of sole control delivered by the Collateral Agent in accordance with Section 2(b)
above, the Loan Party may direct the Issuer with respect to the distribution of
interest, redemptions, distributions, dividends and other payments on Pledged
Interests.

 

(e)                                  All material notices, statements of accounts,
reports, prospectuses, financial statements and other communications to be sent
to the Loan Party by the Issuer in respect of the Issuer will also be sent to
the Collateral Agent at the following address:

 

[COLLATERAL AGENT NOTICE ADDRESS]

 

3.                                        No Liability of Issuer.  This
Control Agreement shall not subject the Issuer to any obligation or liability
except as expressly set forth herein.  In
particular, the Issuer need not investigate whether the Collateral Agent is
entitled under the Pledge Agreement or otherwise to give an instruction or
notice of sole control.

 

4.                                        Representations and
Warranties of the Issuer.  The Issuer hereby represents and warrants
that:

 

(a)                                  Except for the claims and interests of the
Collateral Agent and the Loan Party in the Pledged Interests, the Issuer does
not know of any claim to, or interest in, any Pledged Interests.  If any Person asserts any Lien, encumbrance
or adverse claim (including any writ, garnishment, judgment, warrant of
attachment, execution or similar process) against any Pledged Interest, the
Issuer will promptly notify the Collateral Agent and the Loan Party thereof.

 

(b)                                 The security interest of the Collateral Agent
in the Pledged Interests has been registered on the books and records of the
Issuer.

 

(c)                                  There are no other agreements entered into
between the Issuer and the Loan Party with respect to the Pledged Interests,
and the Issuer has not entered into, and until the termination of this Control
Agreement will not enter into, any agreement with any other Person relating to
the Pledged Interests pursuant to which it has agreed or will agree to comply
with instructions originated by such other Person.

 

(d)                                 This Control Agreement constitutes a valid
and binding agreement of the Issuer, enforceable against the Issuer in
accordance with its terms.

 

(e)                                  The pledge by the Loan Party of, and the
granting by the Loan Party of a security interest in, the Pledged Interests to
the Collateral Agent does not violate the charter, by-laws, partnership
agreement, operating agreement or any other agreement governing the Issuer or
the Pledged Interests.

 

(f)                                    The Pledged Interests are fully-paid and
nonassessable.

 

2

 

5.                                        Notices.  All
notices, requests or other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party:

 

(i)                                     in the case of the Collateral Agent, at:

 

[Collateral Agent Notice Address];

 

(ii)                                  in the case of the Loan Party, at:

 

[Loan Party Notice Address]; and

 

(iii)                               in the case of the Issuer, at:

 

[Issuer Notice Address].

 

Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
paragraph and the appropriate answerback is received, (ii) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this paragraph and confirmation of receipt is received, (iii) if given by mail,
48 hours after such communication is deposited, certified mail, return receipt
requested, in the mails with appropriate first class postage prepaid, addressed
as aforesaid or (iv) if given by other means, when delivered at the address
specified in this paragraph.  Rejection
or refusal to accept, or the inability to deliver because of a changed address
of which no notice was given shall not affect the validity of notice given in
accordance with this paragraph.

 

6.                                        Conflict with Other
Agreements.  In the event of any conflict between this
Control Agreement (or any portion hereof) and any other agreement now existing
or hereafter entered into, the terms of this Control Agreement shall prevail.

 

7.                                        Amendments and Waivers.  Any
provision of this Control Agreement may be amended, changed, discharged,
terminated or waived if, but only if, such amendment, change, discharge,
termination or waiver is in writing and is signed by the Collateral Agent, the
Issuer and the Loan Party.

 

8.                                        Successors and Assigns.  This
Control Agreement shall be binding upon each of the parties hereto and inure to
the benefit of the Collateral Agent and the other Finance Parties and their
respective successors and assigns.  In
the event of an assignment of all or any of the Finance Obligations, the rights
hereunder, to the extent applicable to the Indebtedness so assigned, may be
transferred with such indebtedness.

 

9.                                        Governing Law.  This
Control Agreement shall be governed by and construed in accordance with the
Laws of the State of New York, except as otherwise required by mandatory
provisions of Law.

 

10.                                  Severability.

 

(a)                                  All rights, remedies and powers provided in
this Control Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the
provisions of this Control Agreement are intended to be subject to all
applicable mandatory provisions of law which may be controlling and be limited
to the extent necessary so that they will not

 

3

 

render
this Control Agreement invalid, unenforceable in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.

 

(b)                                 If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent and the Finance Parties in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provisions in any other jurisdiction.

 

11.                                  Counterparts; Effectiveness.  This
Control Agreement may be executed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. 
This Control Agreement shall become effective when the Collateral Agent
shall have received counterparts hereof executed by itself, the Issuer and the
Loan Parties.

 

[Signature Pages Follow]

 

4

 

IN WITNESS WHEREOF, the parties hereto have caused
this Control Agreement to
be duly executed by their respective authorized officers as of the day and year
first written above.

 

 

	
  LOAN PARTY:

  	
  [LOAN PARTY NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  ISSUER:

  	
  [ISSUER NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [COLLATERAL AGENT NAME], 

  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  EXHIBIT B

  
	
   

  	
  to

  
	
   

  	
  PLEDGE AGREEMENT

  

 

Account Control Agreement

 

ACCOUNT
CONTROL AGREEMENT
dated as of [As of Date] among [LOAN PARTY NAME], [COLLATERAL AGENT NAME], as
Collateral Agent, and [SECURITIES INTERMEDIARY NAME].

 

[Loan Party Name], [Loan Party Description]
(together with its successors and permitted assigns, the “Loan Party”),
and [Collateral Agent Name], as Collateral Agent (together with its successor
or successors in such capacity, the “Collateral Agent”), propose to
enter into an Amended and Restated Pledge Agreement dated as of December 20,
2004 (as the same may be amended, supplemented or modified from time to time,
the “Pledge Agreement”), under which the Loan Party will pledge to the
Collateral Agent, and will grant a security interest in favor of the Collateral
Agent in, all right, title and interest of the Loan Party in, to and under (i)
securities account number [Account Number] (the “Account”) maintained by
[Securities Intermediary Name], [Securities Intermediary Description] (together
with its successors and assigns, the “Securities Intermediary”), for the
Loan Party, together with (ii) any and all (A) Security Entitlements (as
defined in the Pledge Agreement), (B) Investment Property (as defined in the
Pledge Agreement) and (C) other Financial Assets (as defined in the Pledge
Agreement), in each case from time to time deposited in or credited to the
Account (the Account and all of such Security Entitlements, Investment Property
and Financial Assets being herein collectively referred to as the “Pledged
Interests”) to secure the payment and performance of the Finance
Obligations (as defined in the Pledge Agreement).  Capitalized terms defined or otherwise used
in the Pledge Agreement and not otherwise defined herein have, as used herein,
the respective meanings provided for therein.

 

The Loan Party desires that the Securities
Intermediary enter into this Account Control Agreement to perfect the security
interest of the Collateral Agent in the Pledged Interests, to vest in the
Collateral Agent control of the Pledged Interests and to provide for the rights
of the parties under this Account Control Agreement.

 

Accordingly, the parties hereto agree as follows:

 

1.                                        Control by the Collateral
Agent.  The Loan Party hereby irrevocably agrees
that, for so long as this Account Control Agreement remains in effect, the
Collateral Agent shall have exclusive control of the Account and all Pledged
Interests deposited therein or credited thereto.  In furtherance of such agreement, the Loan
Party hereby irrevocably authorizes and directs the Securities Intermediary,
and the Securities Intermediary hereby agrees, (i) to comply with any and all
instructions (within the meaning of Section 8-102(a)(12) of the UCC) and
entitlement orders (within the meaning of Section 8-102(a)(8) of the UCC)
originated by the Collateral Agent regarding any or all of the Pledged
Interests without further consent by the Loan Party or any other Person, and
(ii) subject to the provisions of Section 2 of this Account Control
Agreement, (A) not to comply with any instructions or entitlement orders
regarding any or all of the Pledged Interests originated by any Person other
than the Collateral Agent or a court of competent jurisdiction and (B) to deposit
or retain in the Account, or to distribute as otherwise instructed by the
Collateral Agent, all interest, redemptions, distributions, dividends and other
payments from time to time received or paid with respect to any Pledged
Interests deposited in or credited to the Account.  In the case of any conflict between any
instruction or entitlement order originated by the Collateral Agent and any
instruction or entitlement order originated by any other Person, the Securities
Intermediary shall comply only with the instruction or entitlement order
originated by the Collateral Agent.

 

 

2.                                        Maintenance of Account.  In
addition to, and not in lieu of, the obligation of the Securities Intermediary
to honor instructions and entitlement orders as agreed in Section 1
hereof, the Securities Intermediary agrees to maintain the Account as follows:

 

(a)                                  Maintenance of Account
Generally.  Subject to the rights of the Loan Party
described herein, the Securities Intermediary agrees that, from and after the
date hereof, the Account shall be under the exclusive dominion and control of
the Collateral Agent and all Financial Assets of the Loan Party, whether or not
deposited in or credited to the Account, shall be held by the Securities
Intermediary solely for the benefit of the Collateral Agent.  The Securities Intermediary shall follow its
usual operational procedures for the handling of any Financial Assets or other
property of the Loan Party received in the Account and shall maintain a record
of all Financial Assets or other property received in the Account.

 

(b)                                 Notice of Sole Control.  Upon
notice by the Collateral Agent, the Securities Intermediary shall notify the
Loan Party that the Account is subject to the sole control of the Collateral
Agent and, thereafter, the Securities Intermediary will not accept any
direction, instructions or entitlement orders with respect to the Account or
the Pledged Interests on deposit therein or credited thereto from any Person
other than the Collateral Agent, unless otherwise ordered by a court of
competent jurisdiction.

 

(c)                                  Registration of Securities,
Etc.  All Securities or other property underlying
any Financial Assets deposited in or credited to the Account shall be
registered in the name of the Securities Intermediary, endorsed to the Securities
Intermediary or in blank or credited to another Securities Account or
Securities Accounts maintained in the name of the Securities Intermediary, and
in no case will any Financial Asset deposited in or credited to the Account be
registered in the name of the Loan Party, payable to the order of the Loan
Party or specially indorsed to the Loan Party, except to the extent the
foregoing have been specially indorsed by the Loan Party to the Securities
Intermediary or in blank.

 

(d)                                 Voting Rights.  Until
such time as the Securities Intermediary receives a notice of sole control
delivered by the Collateral Agent in accordance with Section 2(b)
above, the Loan Party may direct the Securities Intermediary with respect to
the voting of any Pledged Interests deposited in or credited to the Account.

 

(e)                                  Permitted Investments. 
Until such time as the Securities Intermediary receives a notice of sole
control delivered by the Collateral Agent in accordance with Section 2(b)
above, the Loan Party may direct the Securities Intermediary with respect to
the selection of Investments to be made in the Account ; provided, however,
that the Securities Intermediary shall not honor any instruction to purchase
any Investments other than those permitted pursuant to the Indenture and all
Term Credit Agreements, if any.

 

(f)                                    Interest and Dividends. 
Until such time as the Securities Intermediary receives a notice of sole
control delivered by the Collateral Agent in accordance with Section 2(b)
above, the Loan Party may direct the Securities Intermediary with respect to
the retention and/or distribution of interest, redemptions, distributions,
dividends and other payments on Pledged Interests deposited in or credited to
the Account.

 

(g)                                 Statements and
Confirmations.  Copies of all notices, statements of
accounts, reports, confirmations, prospectuses, financial statements and other
communications concerning the Account and/or any Pledged Interests deposited
therein or credited thereto shall be sent by the Securities Intermediary to
each of the Loan Party and the Collateral Agent at their respective addresses
referred to in Section 7 below.

 

2

 

(h)                                 Tax Reporting.  All
items of income, gain, expense and loss recognized in the Account shall be
reported to the Internal Revenue Service and all state and local taxation
authorities under the name and taxpayer identification number of the Loan
Party.

 

3.                                        Financial Assets Election.  The
Securities Intermediary and each other party hereto hereby agrees that each
item of property (whether Investment Property, Financial Asset, Security,
Instrument or cash) deposited in or credited to the Account shall constitute a
“financial asset” within the meaning of Section 8-102(a)(9) of the UCC.

 

4.                                        No Liability of Securities
Intermediary.  This Account Control Agreement shall not
subject the Securities Intermediary to any obligation or liability except as
expressly set forth herein.  In
particular, the Securities Intermediary need not investigate whether the
Collateral Agent is entitled under the Pledge Agreement or otherwise to give an
entitlement order, instructions or notice of sole control.

 

5.                                        Subordination of Lien;
Waiver of Set-Off.  If the Securities Intermediary has or
subsequently obtains by agreement, operation of law or otherwise a security
interest in the Account or any Pledged Interest deposited therein or credited
thereto, the Securities Intermediary hereby agrees that such security interest
shall be subordinate to the Security Interest of the Collateral Agent.  The Pledged Interests and other items
deposited in or credited to the Account will not be subject to deduction,
set-off, banker’s lien or any other right in favor of any other Person other
than the Collateral Agent (except that the Securities Intermediary may set off
(i) all amounts due to the Securities Intermediary in respect of customary fees
and expenses for the routine maintenance and operation of the Account, (ii) the
face amount of any checks which have been credited to the Account but are
subsequently returned unpaid because of uncollected or insufficient funds and
(iii) the purchase price of any property purchased for the Account).

 

6.                                        Representations and
Warranties of the Securities Intermediary.  The Securities Intermediary
hereby represents and warrants that:

 

(a)                                  The Securities Intermediary has established
the Account in the name of “[Collateral Agent Name], as Collateral Agent”, and
the Securities Intermediary shall not change the name or account number of the
Account without the prior written consent of the Collateral Agent.

 

(b)                                 The Account is a “securities account” as
defined in Section 8-501(a) of the UCC, and the Securities Intermediary is
a “securities intermediary” as defined in Section 8-102(a)(14) of the UCC
and is acting in such capacity in connection with the Account and this Account
Control Agreement.

 

(c)                                  Except for the claims and interest of the
Collateral Agent and of the Loan Party in the Pledged Interests, the Securities
Intermediary does not know of any claim to, or interest in, the Account or in
any Pledged Interest deposited therein or credited thereto.  If any Person asserts any Lien, encumbrance
or adverse claim (including any writ, garnishment, judgment, warrant of attachment,
execution or similar process) against the Account or any Pledged Interest
deposited therein or credited thereto, the Securities Intermediary will
promptly notify the Collateral Agent and the Loan Party thereof.

 

(d)                                 There are no other agreements entered into
between the Securities Intermediary and the Loan Party with respect to the
Account or any Pledged Interest deposited therein or credited thereto, and the
Securities Intermediary has not entered into, and until the termination of this
Account Control Agreement will not enter into, any agreement with any other
Person relating to the Account and/or any Pledged Interests deposited therein
or credited thereto pursuant to which it has agreed or will agree to comply
with instructions or entitlement orders originated by such other Person.

 

3

 

(e)                                  This Account Control Agreement constitutes a
valid and binding agreement of the Securities Intermediary, enforceable against
the Securities Intermediary in accordance with its terms.

 

7.                                        Notices.  All
notices, requests or other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party:

 

(i)                                     in the case of the Collateral Agent, at:

 

[Collateral Agent Notice Address];

 

(ii)                                  in the case of the Loan Party, at:

 

[Loan Party Notice Address]; and

 

(iii)                               in the case of the Securities Intermediary,
at:

 

[Securities Intermediary Notice Address].

 

Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
paragraph and the appropriate answerback is received, (ii) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this paragraph and confirmation of receipt is received, (iii) if given by mail,
48 hours after such communication is deposited, certified mail, return receipt
requested, in the mails with appropriate first class postage prepaid, addressed
as aforesaid or (iv) if given by other means, when delivered at the address
specified in this paragraph.  Rejection
or refusal to accept, or the inability to deliver because of a changed address
of which no notice was given shall not affect the validity of notice given in
accordance with this paragraph.

 

8.                                        Indemnification of
Securities Intermediary.  The Loan Party agrees that (i) the Securities
Intermediary is released from any and all liabilities to the Loan Party arising
from the terms of this Account Control Agreement and the compliance by the
Securities Intermediary with the terms hereof, except to the extent that such
liabilities arise from the Securities Intermediary’s bad faith, willful
misconduct or gross negligence and (ii) the Loan Party, its successors and
permitted assigns shall at all times indemnify the Securities Intermediary, its
affiliates and the respective directors, officers, trustees, agents and
employees of the foregoing (each an “Indemnitee”) and hold each
Indemnitee harmless from and against any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, suits, judgments, costs
and expenses of any kind, including, without limitation, the reasonable fees
and disbursements of counsel, which may be incurred by, imposed on or asserted
against such Indemnitee in connection with any investigation or administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this Account
Control Agreement or in any other way connected with the enforcement of any of
the terms of, or the preservation of any rights hereunder, or in any way
relating to or arising out of the maintenance, delivery, control, acceptance,
possession, return or other disposition of the Account or any Pledged Interests
on deposit therein or credited thereto, the violation of the laws of any
country, state or other governmental body or unit, or any tort or contract
claim; provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee’s own gross negligence or willful misconduct as determined
by a court of competent jurisdiction in a final, non-appealable judgment or
order.  In performing its duties
hereunder, the Securities Intermediary shall be entitled to rely upon notices
and other communications it believes in good faith to have been originated by
the appropriate party.

 

4

 

9.                                        Conflicts with Other
Agreements.  In the event of any conflict between this
Account Control Agreement (or any portion hereof) and any other agreement now
existing or hereafter entered into, the terms of this Account Control Agreement
shall prevail.

 

10.                                  Amendments and Waivers.  Any
provision of this Account Control Agreement may be amended, modified or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Loan Party, the Collateral Agent and the Securities Intermediary.

 

11.                                  Successors and Assigns.  This
Account Control Agreement shall be binding upon each of the parties hereto and
inure to the benefit of the Collateral Agent and the Finance Parties and their
respective successors and permitted assigns. 
In the event of an assignment of all or any of the Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness.

 

12.                                  Governing Law.  This
Account Control Agreement shall be governed by and construed in accordance with
the laws of the State of New York, except as otherwise required by mandatory
provisions of law.  Notwithstanding any
provision in any other agreement, for purposes of the UCC, New York shall be
deemed to be the Securities Intermediary’s jurisdiction and the Account (as
well as the Security Entitlements related thereto) shall be governed by the
laws of the State of New York.

 

13.                                  Severability.

 

(a)                                  All rights, remedies and powers provided in
this Account Control Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Account Control Agreement are intended to be subject to all
applicable mandatory provisions of law which may be controlling and be limited
to the extent necessary so that they will not render this Account Control
Agreement invalid, unenforceable in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.

 

(b)                                 If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent and the Finance Parties in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provisions in any other jurisdiction.

 

14.                                  Counterparts; Effectiveness.  This
Account Control Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. 
This Account Control Agreement shall become effective when the Collateral
Agent shall receive counterparts hereof executed by itself, the Securities
Intermediary and the Loan Party.

 

15.                                  Termination. 
Except as hereinafter set forth, the obligations of the Securities
Intermediary to the Collateral Agent pursuant to this Account Control Agreement
shall continue in effect until the Security Interests of the Collateral Agent
in the Account have been terminated pursuant to the terms of the Pledge
Agreement and the Collateral Agent has notified the Securities intermediary of
such termination in writing.  The
Collateral Agent agrees to provide such notice of termination upon the request
of the Loan Party on or after the termination of the Collateral Agent’s
Security Interest in the Account pursuant to the terms of the Pledge Agreement.  The Securities Intermediary may terminate
this Account Control Agreement only upon 30 days’ notice to the Collateral
Agent, by canceling the Account and transferring all funds, if any, deposited
in or credited to the Account to another Securities Account

 

5

 

with
another securities intermediary to be designated by the Collateral Agent.  After any such termination, the Securities
Intermediary shall nonetheless be obligated promptly to transfer to such other
securities intermediary anything from time to time received in the
Account.  The termination of this Account
Control Agreement shall not terminate the Account or alter the obligations of
the Securities Intermediary to the Loan Party pursuant to any other agreement
with respect to the Account.

 

[Signature Pages Follow]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused
this Control Agreement to
be duly executed by their respective authorized officers as of the day and year
first written above.

 

 

	
  LOAN PARTY:

  	
  [LOAN PARTY NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  SECURITIES INTERMEDIARY:

  	
  [SECURITIES INTERMEDIARY
  NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  COLLATERAL AGENT:

  	
  [COLLATERAL AGENT NAME], 

  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

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