Document:

Exhibit 10.5

 

EXECUTION COPY

 

SERVICES AGREEMENT

 

SERVICES AGREEMENT (this “Agreement”), dated as of July 30,
2004, by and between Oak Hill Capital Management, Inc., a Delaware corporation
(“OHCMI”), and Duane Reade Acquisition Corp. (formerly known as Rex
Corner Acquisition Corp.), a Delaware corporation (the “Company”).

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS, the Company has entered into the Agreement and Plan of Merger,
dated as of December 22, 2003, by and among the Company, Duane Reade
Shareholders, LLC (formerly known as Rex Corner Holdings, LLC) and Duane Reade
Inc. (“Duane Reade”), as amended by Amendment No. 1 on June 10,
2004, Amendment No. 2 on June 13, 2004 and Amendment No. 3 on
June 18, 2004 (as amended, the “Merger Agreement”), pursuant to
which the Company will merge with and into Duane Reade, and Duane Reade will
continue as the surviving corporation;

 

WHEREAS, OHCMI provides certain management services to Oak Hill Capital
Partners, L.P. (“OHCP”), Oak Hill Capital Management Partners, L.P. (“OHCMP”)
and OHCP DR Co-Investors, LLC (“OHCP DR”), including, without
limitation, procuring the Duane Reade investment opportunity, analyzing and
evaluating the business, operations and financial position of Duane Reade,
negotiating the Merger Agreement, obtaining the debt and equity financing and
consummating the transactions contemplated by the Merger Agreement
(collectively, the “Transaction Services”);

 

WHEREAS, in connection with the Closing (as defined in the Merger
Agreement), OHCP, OHCMP and OHCP DR will provide the equity financing necessary
in connection with the Merger; and

 

WHEREAS, following the Closing, the Company wishes that OHCMI provide
it with certain ongoing advisory and management services, and OHCMI wishes to
render such services to the Company, on the terms and conditions set forth in
this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:

 

SECTION 1.        Transaction Services.

 

In consideration of the Transaction Services provided by OHCMI, the
Company shall pay, or cause to be paid, to OHCMI a Transaction Services fee of
$8,000,000 (eight million dollars), to be paid by wire transfer of immediately
available funds upon the Closing.  The
Transaction Services fee represents (i) an amount equal to $4,008,000
(four million eight thousand dollars) with respect to OHCP’s indirect equity
investment in the Company (the “OHCP Equity Portion”), (ii) an
amount equal to

 

 

$104,000 (one hundred and four thousand dollars) with respect to
OHCMP’s indirect equity investment in the Company (the “OHCMP Equity Portion”)
and (iii) an amount equal to $3,888,000 (three million eight hundred and
eighty-eight thousand dollars) with respect to OHCP DR’s indirect equity
investment in the Company (the “OHCP DR Equity Portion”).

 

SECTION 2.        Management Services.

 

(a)                                  During
the term of this Agreement, OHCMI shall provide such advisory and management
services to the Company and its subsidiaries as the Board of Directors of the
Company shall reasonably request.  Such
services may be performed at OHCMI’s offices or at such other location as
determined by OHCMI.

 

(b)                                 In
consideration of the services to be provided in accordance with clause (a)
above, the Company shall pay, or cause to be paid, to OHCMI an annual
management fee of $1,250,000 (one million two hundred fifty thousand dollars),
to be paid in equal quarterly installments in arrears, by wire transfer of
immediately available funds within 30 days after the end of each fiscal quarter
of the Company.  The annual management
fee represents (i) an amount equal to $626,250 (six hundred and twenty-six
thousand two hundred and fifty dollars) with respect to the OHCP Equity
Portion, (ii) an amount equal to $16,250 (sixteen thousand two hundred and
fifty dollars) with respect to the OHCMP Equity Portion and (iii) an
amount equal to $607,500 (six hundred and seven thousand five hundred dollars)
with respect to the OHCP DR Equity Portion.

 

SECTION 3.        Indemnification.

 

(a)                                  None
of OHCMI, any of its affiliates or any of their respective partners, officers,
directors, stockholders, agents or employees (an “Indemnified Party”)
shall have any liability to the Company for any services provided pursuant to
this Agreement, except as may result from such Indemnified Party’s gross
negligence or willful misconduct.

 

(b)                                 To
the fullest extent permitted by law, the Company shall indemnify and hold
harmless each Indemnified Party from and against any losses, claims, damages,
actions, demands, deficiencies, judgments or causes of action or liabilities,
including, without limitation, reasonable legal fees or other expenses incurred
in investigating or defending against any such losses, claims, damages or
liabilities based upon, arising out of or otherwise in respect of the services
provided pursuant to this Agreement, except as may result from such Indemnified
Party’s gross negligence or willful misconduct. 
The provisions of this Section 3 shall survive the termination of
this Agreement.

 

SECTION 4.        Reimbursement.

 

The Company shall promptly upon request, reimburse OHCMI and its
affiliates for all out-of-pocket costs and expenses (including, without
limitation, travel and reasonable attorney’s fees and expenses) incurred in
connection with the performance of the services contemplated by this Agreement.

 

2

 

SECTION 5.        Termination.

 

(a)                                  This
Agreement (i) shall terminate upon a Change in Control or (ii) may be
terminated by OHCMI at any time upon written notice to the Company.  The provisions of Section 3 shall
survive the termination of this Agreement.

 

(b)                                 As
used in this Section 5, the following term has the meaning specified
below.

 

“Change in Control” means the
occurrence of any one of the following events: 
(i) any person, as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the “1934 Act”), other
than OHCMI or its affiliates, is or becomes the beneficial owner, as defined in
1934 Act Rules 13d-3 and 13d-5 (except that for purposes of this clause (i)
such person shall be deemed to have beneficial ownership of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) directly or indirectly, of a majority
of the total voting power of the Company’s voting stock; (ii) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Company’s board of directors, together with any new directors
whose election by the Company’s board of directors or whose nomination for
election by the Company’s stockholders was approved by a vote of a majority of
the Company’s directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Company’s board of directors then in office; (iii) the merger or consolidation
of the Company with or into another person or the merger of another person with
or into the Company, other than the transactions contemplated by the Merger
Agreement or a transaction following which the holders of securities that
represented 100% of the aggregate voting power of the voting stock of the
Company immediately prior to such transaction own, directly or indirectly, at
least a majority of the aggregate voting power of the voting stock of the
surviving person immediately after such transaction in substantially the same
proportion that such holders held the aggregate voting power of the voting
stock of the Company immediately prior to such transaction; or (iv) the sale of
all or substantially all of the Company’s assets to another person.

 

SECTION 6.        Assignment.

 

This Agreement may not be assigned by any party hereto without the
written consent of the other party; provided, however, that OHCMI
shall be entitled to assign this Agreement to any person that is an affiliate
of OHCMI or that otherwise assumes or is a successor to substantially all of
the assets and liabilities of OHCMI.

 

3

 

SECTION 7.        Notices.

 

All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be deemed to have been given three
business days after mailed when mailed by registered or certified mail, return
receipt requested, or given by facsimile or other electronic means, or when
delivered if given in person, to the following addresses of the parties hereto
or to such other address as such party may have specified for notice pursuant
to this Section 7:

 

(a)                                  if
to OHCMI:

 

Oak Hill Capital Management, Inc.

65 E. 55th Street, 36th Floor

New York, NY 10022

Attn:     John R. Monsky, Esq.

Facsimile: (212) 758-3572

 

(b)                                 if
to the Company:

 

Duane Reade Acquisition Corp.

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

201 Main Street, Suite 3100

Fort Worth, TX 76102

Attn:     Ray Pinson

Facsimile: (817) 338-2067

 

or to such other persons, addresses or facsimile numbers as may be
designated in writing by the person entitled to receive such communication as
provided above.

 

SECTION 8.        Modification.

 

This Agreement may not be modified or amended in any manner other than
by a written instrument signed by both parties hereto, or their respective
successors or assigns.

 

SECTION 9.        Entire Agreement.

 

This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding among them with respect to such subject matter.

 

SECTION 10.  Severability.

 

If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid, the remainder
of this Agreement or the application of such provision to other persons or
circumstances shall not be affected thereby.

 

4

 

SECTION 11.  Governing Law; Submission to Jurisdiction.

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES OR RULES OF SUCH STATE.  THE PARTIES TO THIS AGREEMENT (A) IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS OF THE
UNITED STATES OF AMERICA LOCATED IN THE STATE OF NEW YORK AND (B) WAIVE ANY
CLAIM OF IMPROPER VENUE OR ANY CLAIM THAT THOSE COURTS ARE AN INCONVENIENT
FORUM.  THE PARTIES TO THIS AGREEMENT
AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 7 OR IN SUCH OTHER
MANNER AS MAY BE PERMITTED BY APPLICABLE LAWS, SHALL BE VALID AND SUFFICIENT
SERVICE THEREOF.

 

SECTION 12.  Successors and Assigns.

 

Except as herein otherwise specifically provided, this Agreement shall
be binding upon and inure to the benefit of the parties and their successors
and assigns.

 

SECTION 13.  Counterparts.

 

This Agreement may be executed in several counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.  It shall not be necessary
for all parties to execute the same counterpart hereof.

 

SECTION 14.  Headings.

 

Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit or extend the scope or intent of this
Agreement or any provision hereof.

 

SECTION 15.  Interpretation.

 

Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural,
and pronouns stated in the masculine, the feminine or neuter gender shall
include the masculine, the feminine and the neuter.

 

SECTION 16.  Waivers.

 

No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing and signed by or on behalf of the party
granting the waiver.  No failure or delay
in exercising any right, power, or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power, or
privilege under this Agreement.  Neither
shall the waiver, invalidity or

 

5

 

unenforceability of any provision of this Agreement affect the validity
or enforceability of any other provision of this Agreement, all of which shall
remain in full force and effect.

 

 

[Remainder of Page
Intentionally Left Blank]

 

6

 

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

 

 

	
   

  	
  OAK HILL CAPITAL MANAGEMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew J. Nathanson

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew J. Nathanson

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

7Exhibit 10.6

 

CONFORMED COPY

 

 

Published
CUSIP Number: 26358GAA5

 

$155,000,000 SENIOR
SECURED TERM CREDIT AGREEMENT

 

dated as of July 30, 2004

 

among

 

DUANE READE HOLDINGS,
INC.,

 

DUANE READE, INC.,

 

DUANE READE

(a New York general partnership),

 

THE CO-BORROWERS FROM
TIME TO TIME PARTY HERETO,

 

THE LENDERS FROM TIME TO
TIME PARTY HERETO,

 

BANK OF AMERICA, N.A., 

as Administrative Agent,

 

CREDIT SUISSE FIRST
BOSTON, CAYMAN ISLANDS BRANCH,

as Syndication Agent,

 

and

 

CITICORP NORTH AMERICA
INC.

WELLS FARGO BANK,
NATIONAL ASSOCIATION,

as Co-Documentation Agents

 

 

BANC OF AMERICA
SECURITIES LLC

CREDIT SUISSE FIRST
BOSTON, CAYMAN ISLANDS BRANCH,

as Joint Lead Arrangers

 

BANC
OF AMERICA SECURITIES LLC

CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH

CITIGROUP GLOBAL MARKETS INC.,

as Joint Book Managers

 

 

 

 

Table of Contents*

 

	
  ARTICLE I

  DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Defined Terms

  	
   

  
	
  Section 1.02

  	
   

  	
  Other Interpretative Provisions

  	
   

  
	
  Section 1.03

  	
   

  	
  Accounting Terms and Determinations

  	
   

  
	
  Section 1.04

  	
   

  	
  Annualization; Rounding

  	
   

  
	
  Section 1.05

  	
   

  	
  References to Agreements and Laws

  	
   

  
	
  Section 1.06

  	
   

  	
  Times of Day

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  THE CREDIT FACILITY

  	
   

  
	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Commitments to Lend

  	
   

  
	
  Section 2.02

  	
   

  	
  Notice of Borrowing

  	
   

  
	
  Section 2.03

  	
   

  	
  Funding of Loans.

  	
   

  
	
  Section 2.04

  	
   

  	
  Evidence of Loans.

  	
   

  
	
  Section 2.05

  	
   

  	
  Interest.

  	
   

  
	
  Section 2.06

  	
   

  	
  Extension and Conversion.

  	
   

  
	
  Section 2.07

  	
   

  	
  Maturity of Loans

  	
   

  
	
  Section 2.08

  	
   

  	
  Prepayments; Change of Control.

  	
   

  
	
  Section 2.09

  	
   

  	
  Replacement of Lenders

  	
   

  
	
  Section 2.10

  	
   

  	
  Fees

  	
   

  
	
  Section 2.11

  	
   

  	
  Pro-rata Treatment

  	
   

  
	
  Section 2.12

  	
   

  	
  Sharing of Payments

  	
   

  
	
  Section 2.13

  	
   

  	
  Payments; Computations.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  TAXES, YIELD PROTECTION AND ILLEGALITY

  	
   

  
	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Taxes.

  	
   

  
	
  Section 3.02

  	
   

  	
  Illegality

  	
   

  
	
  Section 3.03

  	
   

  	
  Inability to Determine Rates

  	
   

  
	
  Section 3.04

  	
   

  	
  Increased Costs and Reduced Return;
  Capital Adequacy.

  	
   

  
	
  Section 3.05

  	
   

  	
  Funding Losses

  	
   

  
	
  Section 3.06

  	
   

  	
  Base Rate Loans Substituted for Affected
  Eurodollar Loans

  	
   

  
	
  Section 3.07

  	
   

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  CONDITIONS PRECEDENT TO LOANS

  	
   

  
	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Conditions to Closing

  	
   

  

 

*                 The
Table of Contents is not part of the Credit Agreement.

 

 

	
  ARTICLE V

  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Existence, Qualification and Power;
  Compliance with Laws

  	
   

  
	
  Section 5.02

  	
   

  	
  Authorization; No Contravention

  	
   

  
	
  Section 5.03

  	
   

  	
  Governmental Authorization; Other Consents

  	
   

  
	
  Section 5.04

  	
   

  	
  Binding Effect

  	
   

  
	
  Section 5.05

  	
   

  	
  Financial Condition; No Material Adverse
  Effect.

  	
   

  
	
  Section 5.06

  	
   

  	
  Litigation

  	
   

  
	
  Section 5.07

  	
   

  	
  No Default

  	
   

  
	
  Section 5.08

  	
   

  	
  Ownership of Property; Liens

  	
   

  
	
  Section
  5.09

  	
   

  	
  Environmental
  Compliance

  	
   

  
	
  Section
  5.10

  	
   

  	
  Insurance

  	
   

  
	
  Section
  5.11

  	
   

  	
  Taxes

  	
   

  
	
  Section
  5.12

  	
   

  	
  ERISA
  Compliance.

  	
   

  
	
  Section 5.13

  	
   

  	
  Subsidiaries

  	
   

  
	
  Section 5.14

  	
   

  	
  Margin Regulations; Investment Company
  Act; Public Utility Holding Company Act.

  	
   

  
	
  Section 5.15

  	
   

  	
  Disclosure

  	
   

  
	
  Section 5.16

  	
   

  	
  Compliance with Law

  	
   

  
	
  Section 5.17

  	
   

  	
  Intellectual Property

  	
   

  
	
  Section 5.18

  	
   

  	
  Purpose of Loans

  	
   

  
	
  Section 5.19

  	
   

  	
  Labor Matters

  	
   

  
	
  Section 5.20

  	
   

  	
  Solvency

  	
   

  
	
  Section 5.21

  	
   

  	
  Collateral Documents.

  	
   

  
	
  Section 5.22

  	
   

  	
  Securities of the Company

  	
   

  
	
  Section
  5.23

  	
   

  	
  Certain
  Transactions.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section
  6.01

  	
   

  	
  Financial
  Statements

  	
   

  
	
  Section
  6.02

  	
   

  	
  Certificates;
  Other Information

  	
   

  
	
  Section
  6.03

  	
   

  	
  Notices

  	
   

  
	
  Section
  6.04

  	
   

  	
  Payment
  of Obligations

  	
   

  
	
  Section
  6.05

  	
   

  	
  Preservation
  of Existence Etc

  	
   

  
	
  Section
  6.06

  	
   

  	
  Maintenance
  of Properties

  	
   

  
	
  Section 6.07

  	
   

  	
  Insurance; Certain Proceeds.

  	
   

  
	
  Section 6.08

  	
   

  	
  Compliance with Law

  	
   

  
	
  Section 6.09

  	
   

  	
  Books and Records; Lender Meeting

  	
   

  
	
  Section 6.10

  	
   

  	
  Inspection Rights

  	
   

  
	
  Section 6.11

  	
   

  	
  Use of Proceeds

  	
   

  
	
  Section 6.12

  	
   

  	
  Additional Loan Parties; Additional
  Security.

  	
   

  
	
  Section 6.13

  	
   

  	
  Interest Rate Protection Agreements

  	
   

  
	
  Section 6.14

  	
   

  	
  Contributions

  	
   

  
	
  Section 6.15

  	
   

  	
  Repurchase of Existing Convertible Notes;
  Maintenance of Minimum Availability Under ABL Credit Agreement

  	
   

  
	
  Section 6.16

  	
   

  	
  Co-Borrowers

  	
   

  

 

ii

 

	
  ARTICLE VII

  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Incurrence of Indebtedness

  	
   

  
	
  Section
  7.02

  	
   

  	
  Restriction
  on Liens

  	
   

  
	
  Section 7.03

  	
   

  	
  Nature of Business

  	
   

  
	
  Section
  7.04

  	
   

  	
  Consolidation,
  Merger and Dissolution

  	
   

  
	
  Section
  7.05

  	
   

  	
  Asset
  Dispositions

  	
   

  
	
  Section 7.06

  	
   

  	
  Investments.

  	
   

  
	
  Section 7.07

  	
   

  	
  Restricted Payments, etc

  	
   

  
	
  Section 7.08

  	
   

  	
  Prepayments of Indebtedness, etc.

  	
   

  
	
  Section 7.09

  	
   

  	
  Transactions with Affiliates

  	
   

  
	
  Section 7.10

  	
   

  	
  Fiscal Year; Organizational and Other
  Documents

  	
   

  
	
  Section 7.11

  	
   

  	
  Restrictions with Respect to
  Intercorporate Transfers

  	
   

  
	
  Section 7.12

  	
   

  	
  Ownership of Subsidiaries; Limitations on
  Holdings and the Borrower.

  	
   

  
	
  Section 7.13

  	
   

  	
  Sale and Leaseback Transactions

  	
   

  
	
  Section 7.14

  	
   

  	
  Impairment of Security Interests

  	
   

  
	
  Section 7.15

  	
   

  	
  No Other “Designated Senior Indebtedness”

  	
   

  
	
  Section 7.16

  	
   

  	
  Financial Covenants.

  	
   

  
	
  Section 7.17

  	
   

  	
  Independence of Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  DEFAULTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Events of Default

  	
   

  
	
  Section 8.02

  	
   

  	
  Acceleration; Remedies

  	
   

  
	
  Section 8.03

  	
   

  	
  Allocation of Payments After Event of
  Default.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  AGENCY PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Appointment and Authorization of the
  Administrative Agent.

  	
   

  
	
  Section 9.02

  	
   

  	
  Delegation of Duties

  	
   

  
	
  Section 9.03

  	
   

  	
  Exculpatory Provisions

  	
   

  
	
  Section 9.04

  	
   

  	
  Reliance on Communications.

  	
   

  
	
  Section 9.05

  	
   

  	
  Notice of Default

  	
   

  
	
  Section 9.06

  	
   

  	
  Credit Decision; Disclosure of Information
  by Administrative Agent; No Reliance on Arranger’s or Agents’ Customer
  Identification Program.

  	
   

  
	
  Section 9.07

  	
   

  	
  Indemnification

  	
   

  
	
  Section 9.08

  	
   

  	
  Administrative Agent in Its Individual
  Capacity

  	
   

  
	
  Section 9.09

  	
   

  	
  Successor Agents

  	
   

  
	
  Section 9.10

  	
   

  	
  Administrative Agent May File Proofs of
  Claim

  	
   

  
	
  Section 9.11

  	
   

  	
  Collateral and Guaranty Matters

  	
   

  
	
  Section 9.12

  	
   

  	
  Other Agents; Arrangers and Managers

  	
   

  
	
  Section 9.13

  	
   

  	
  Agents’ Fees; Joint Lead Arranger Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  10.01

  	
   

  	
  Amendments,
  Etc.

  	
   

  
	
  Section 10.02

  	
   

  	
  Notices and Other Communications;
  Facsimile Copies.

  	
   

  

 

iii

 

	
  Section 10.03

  	
   

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
  Section 10.04

  	
   

  	
  Attorney Costs, Expenses and Taxes

  	
   

  
	
  Section 10.05

  	
   

  	
  Indemnification

  	
   

  
	
  Section 10.06

  	
   

  	
  Payments Set Aside

  	
   

  
	
  Section 10.07

  	
   

  	
  Successors and Assigns.

  	
   

  
	
  Section 10.08

  	
   

  	
  Confidentiality and Disclosure

  	
   

  
	
  Section 10.09

  	
   

  	
  Set-off

  	
   

  
	
  Section 10.10

  	
   

  	
  Interest Rate Limitation

  	
   

  
	
  Section 10.11

  	
   

  	
  Counterparts

  	
   

  
	
  Section 10.12

  	
   

  	
  Integration

  	
   

  
	
  Section 10.13

  	
   

  	
  Survival of Representations and
  Warranties

  	
   

  
	
  Section 10.14

  	
   

  	
  Severability

  	
   

  
	
  Section 10.15

  	
   

  	
  Tax Forms.

  	
   

  
	
  Section 10.16

  	
   

  	
  Headings

  	
   

  
	
  Section 10.17

  	
   

  	
  Governing Law; Submission to
  Jurisdiction.

  	
   

  
	
  Section 10.18

  	
   

  	
  Waiver of Right to Trial by Jury

  	
   

  
	
  Section 10.19

  	
   

  	
  USA Patriot Act Notice; Lenders’
  Compliance Certification.

  	
   

  
	
  Section 10.20

  	
   

  	
  Defaulting Lenders

  	
   

  
	
  Section 10.21

  	
   

  	
  Binding Effect

  	
   

  
	
  Section 10.22

  	
   

  	
  Conflict

  	
   

  

 

	
  Schedules:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.01A

  	
  -

  	
  Consolidated EBITDA

  
	
  Schedule 1.01B

  	
  -

  	
  Management Group

  
	
  Schedule 1.01C

  	
  -

  	
  Fixed Charge Coverage Ratio

  
	
  Schedule 1.01D

  	
  -

  	
  ABL Priority Collateral

  
	
  Schedule 2.01

  	
  -

  	
  Lenders and Commitments

  
	
  Schedule 5.03

  	
  -

  	
  Required Consents, Authorizations, Notices and
  Filings

  
	
  Schedule 5.06

  	
  -

  	
  Litigation

  
	
  Schedule 5.12

  	
  -

  	
  ERISA Matters

  
	
  Schedule 5.13

  	
  -

  	
  Subsidiaries

  
	
  Schedule 5.17

  	
  -

  	
  Intellectual Property

  
	
  Schedule 5.22

  	
  -

  	
  Ownership of the Company

  
	
  Schedule 7.01

  	
  -

  	
  Existing Indebtedness

  
	
  Schedule 7.02

  	
  -

  	
  Existing Liens

  
	
  Schedule 7.06

  	
  -

  	
  Investments

  
	
  Schedule 7.07(iii)

  	
  -

  	
  Redemption/repurchase of Equity Interests:  Employment Agreements

  
	
  Schedule 7.07(vii)

  	
  -

  	
  Restricted Payments to be made on the Closing Date

  
	
  Schedule 7.09

  	
  -

  	
  Transactions with Affiliates

  
	
  Schedule 10.02

  	
  -

  	
  Administrative Agent’s Office, Certain Addresses for
  Notices

  
	
   

  	
   

  	
   

  
	
  Exhibits:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
  -

  	
  Form of Notice of Borrowing

  
	
  Exhibit A-2

  	
  -

  	
  Form of Notice of Extension/Conversion

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  -

  	
  Form of Note

  

 

iv

 

	
  Exhibit C

  	
  -

  	
  Form of Assignment and Assumption

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  -

  	
  Form of Compliance Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
  -

  	
  Form of Opinion of Counsel for the Borrower and the
  Other Loan Parties

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
  -

  	
  Form of Guaranty

  
	
   

  	
   

  	
   

  
	
  Exhibit G-1

  	
  -

  	
  Form of Security Agreement

  
	
  Exhibit G-2

  	
  -

  	
  Form of Pledge Agreement

  
	
  Exhibit G-3

  	
  -

  	
  Form of Perfection Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit H

  	
  -

  	
  Form of Intercompany Note

  
	
   

  	
   

  	
   

  
	
  Exhibit I

  	
  -

  	
  Form of Intercompany Note Subordination Provisions

  
	
   

  	
   

  	
   

  
	
  Exhibit J

  	
  -

  	
  Form of Loan Party Accession Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit K

  	
  -

  	
  Form of OFAC/Anti-Terrorism Compliance Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit L

  	
  -

  	
  [Reserved]

  
	
   

  	
   

  	
   

  
	
  Exhibit M

  	
  -

  	
  Form of Co-Borrower Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit N

  	
  -

  	
  Form of Solvency Certificate

  

 

v

 

CREDIT AGREEMENT

 

This Credit Agreement is entered into as of July 30,
2004 among DUANE READE HOLDINGS, INC., a Delaware corporation (“Holdings”),
DUANE READE, INC., a Delaware corporation (“the “Company”), DUANE READE,
a New York general partnership (“Duane Reade”), the other Co-Borrowers
from time to time party hereto, each lender from time to time party hereto
(collectively, the “Lenders” and, individually, a “Lender”), BANK
OF AMERICA, N.A., as 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.

 

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

 

ARTICLE
I

DEFINITIONS AND ACCOUNTING TERMS

 

Section
1.01  Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth below:

 

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

 

“ABL Credit Agreement” means the Credit
Agreement dated as of July 21, 2003 among Duane Reade, as borrower, the
Company, DRI I, DR International and DR Realty, as facility guarantors, the
banks and other lending institutions party thereto from time to time, Fleet
National Bank, as administrative agent and issuing bank, Fleet Retail Finance
Inc., as collateral agent, Congress Financial Corporation, as documentation
agent, General Electric Capital Corporation, as syndication agent, and Fleet
Securities Inc., as arranger, as amended by Amendment No. 1 thereto dated as of
the date hereof and as the same may be further amended, modified or
supplemented from time to time in accordance with the provisions thereof and of
this Agreement.

 

“ABL Documents” means, collectively, the ABL
Credit Agreement, together with any notes, guaranties, pledge agreements,
security agreements, assignments, control agreements, lockbox letters or other
instruments and agreements executed pursuant thereto, and the Collateral
Release Agreement, in each case together with all schedules and exhibits
thereto and as the same may be amended, modified or supplemented from time to
time.

 

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

 

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

 

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

 

 

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

 

“Acquisition” means the transactions
contemplated by the DRI Merger Agreement.

 

“Acquisition Documents” means the DRI Merger
Agreement, including all schedules and exhibits thereto, and all other
documents, agreements and instruments relating to the Acquisition, in each case
as the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof and of this Agreement.

 

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

 

“Additional Subsidiary Guarantor” means each
Person that becomes a Subsidiary Guarantor after the Closing Date by execution
of an Accession Agreement as provided in Section 6.12.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

modified or supplemented from time to time.

 

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

 

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

 

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

 

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

 

“Asset Disposition” means any sale, lease,
transfer or other disposition (including any such transaction effected by way
of merger or consolidation and including any sale or other disposition of
Equity Interests of a Subsidiary, but excluding any Equity Issuance or any sale
or other disposition by way of Casualty or Condemnation) by any Group Company
of any asset; provided, however, that the following shall not
constitute Asset Dispositions:

 

(i)            sales
of inventory and/or pharmacy files in the ordinary course of business for fair
value;

 

(ii)           any
sale, lease, transfer or other disposition of any asset by a Borrower to
another Borrower or to any Subsidiary Guarantor if the Loan Parties shall be in
compliance with the terms of Section 6.12 after giving effect to such
disposition;

 

(iii)          liquidations or sales of Cash Equivalents and
Foreign Cash Equivalents;

 

(iv)          any
single transaction or series of related transactions that involves assets
having a fair market value of less than $1,000,000;

 

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

 

(vi)          any
sale, lease or other transfer by a Subsidiary of the Company of all or
substantially all or any part of its assets (including any such transaction
effected by way of merger or consolidation) to the Company or any Wholly-Owned
Domestic Subsidiary of the Company, so long as the security interests granted
to the Collateral Agent for the benefit of the Finance Parties pursuant to the
Collateral Documents in such assets shall remain in full force and

 

3

 

effect and
perfected (to at least the same extent as in effect immediately prior to such
sale, lease or other transfer);

 

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

 

(viii)        sales or dispositions by Holdings or any
Subsidiary of the Company of Equity Interests in Holdings or such Subsidiary to
qualify directors where required by applicable Law or to satisfy other
requirements of applicable Law with respect to the ownership of Equity
Interests in Foreign Subsidiaries;

 

(ix)           any
lease, as lessor or sublessor, or license, as licensor or sublicensor, by any
Group Company of real or personal property in the ordinary course of business;

 

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

 

(xi)           assignments
of store leases in the ordinary course of business; provided that no
more than 20 store leases are assigned per year pursuant to this clause (xi).

 

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

 

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

 

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

 

“Audited Financial Statements” means the audited
consolidated balance sheet of the Company and its Consolidated Subsidiaries for
each of the fiscal years ended December 29, 2001, December 28, 2002 and
December 27, 2003, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for the fiscal year of the
Company and its Consolidated Subsidiaries then ended, including the notes
thereto.

 

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

 

4

 

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

 

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

 

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

 

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

 

“Borrower Materials” has the meaning set forth
in Section 6.02.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Cash Equivalents” means:

 

(i)            securities
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full
faith and credit

 

5

 

of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition;

 

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

 

(iii)          commercial paper and variable or fixed rate
notes issued by any Approved Lender (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation not
an Affiliate of the Company rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing
within 270 days of the date of acquisition;

 

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

 

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

 

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

 

“Casualty Insurance Policy” means any insurance
policy maintained by any Group Company covering losses with respect to
Casualties.

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

“Co-Documentation Agents” means Citicorp North
America Inc. and Wells Fargo Bank, National Association, in each case in their
capacity as co-documentation agent for the Lenders under the Term Loan
Documents.

 

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

 

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

 

“Collateral Documents” means, collectively, the
Security Agreement, the Pledge Agreement, the Depositary Bank Agreements, any
Additional Collateral Documents, any additional pledges, security agreements,
patent, trademark or copyright filings or mortgages required to be delivered
pursuant to the Term Loan Documents and any instruments of assignment, control
agreements, lockbox letters or other instruments or agreements executed
pursuant to the foregoing.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

“Consolidated EBITDA” means for any period the
sum of:

 

(i)            Consolidated
Net Income for such period (excluding therefrom (x) any extraordinary item of
gain or loss and (y) any gain or loss from discontinued operations); plus

 

(ii)           an
amount, without duplication, which, in the determination of Consolidated Net
Income for such period, has been deducted for (A) Consolidated Interest
Expense, (B) lease expense in respect of Synthetic Lease Obligations and
Sale/Leaseback Transactions accounted for as Operating Leases under GAAP, (C)
provisions for Federal, state and local income and similar taxes, (D) depreciation,
amortization (including, without limitation, amortization of goodwill and other
intangible assets), impairment of goodwill and other non-recurring, non-cash
charges (including deferred rent expense, but excluding any such non-cash
charge to the extent that it represents (x) amortization of a prepaid cash
expense that was paid in a prior period or (y) other than any NLRB Accrual for
such period, an accrual of, or a reserve for, cash charges or expenses in any
future period), (E) any losses (or minus any gains) realized upon the
disposition of property outside the ordinary course of business, (F)
adjustments in respect of the items, for the periods, and in amounts not
exceeding the respective amounts therefor, set forth on Schedule 1.01A
hereto, (G) any financial advisory fees, accounting fees, legal fees and other
similar advisory and consulting fees and related out-of-pocket expenses
incurred as a result of the Acquisition or in connection with the early
redemption of the Existing Convertible Notes and deducted from net income
during the period ending December 31, 2004, (H) any underwriting fees,
amendment fees, closing fees, out-of-pocket fees and other fees incurred in
connection with the Loans and the other financings contemplated by this Agreement,
(I) Permitted Management Fees paid in accordance with Section 7.09(i)
hereof, (J) Executive Compensation Payments, (K) non-recurring cash charges set
forth on Schedule 1.01A and (L) non-cash compensation charges and other
non-cash expenses or charges arising from the grant of or issuance or repricing
of

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

“Consolidated Net Income” means, for any
period, the net income (or net loss) after taxes of the Company and its
Consolidated Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP; provided that, without duplication, (i) there
shall be excluded from the calculation of Consolidated Net Income for any
period (A) the income (or loss) of any Person in which any other Person (other
than the Company or any of its Wholly-Owned Consolidated Subsidiaries) has an
ownership interest, except to the extent that any such income is actually
distributed in cash to the Company or such Wholly-Owned Consolidated Subsidiary
during such period, (B) the income (or loss) of any Person accrued prior to the
date it becomes a Consolidated Subsidiary of the Company or is merged with or
into or consolidated with the Company or any of its Consolidated Subsidiaries
or that Person’s assets are acquired by the Company or any of its Consolidated
Subsidiaries, except as provided in the

 

9

 

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

 

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

 

“Consolidated Subsidiary” means with respect to
any Person at any date any Subsidiary of such Person or other entity the
accounts of which would be consolidated with those of such Person in its
consolidated financial statements if such statements were prepared as of such
date in accordance with GAAP.

 

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

 

“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.

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

“Equity Interests” means all shares of capital
stock, partnership interests (whether general or limited), limited liability
company membership interests, beneficial interests in a trust and any other
interest or participation that confers on a Person the right to receive a share
of profits or losses, or distributions of assets, of an issuing Person, but
excluding any debt securities convertible into such Equity Interests.

 

“Equity Issuance” means (i) any sale or
issuance by any Group Company to any Person other than Holdings or a
Wholly-Owned Subsidiary of Holdings of any Equity Interests or any Equity
Equivalents (other than any such Equity Equivalents that constitute
Indebtedness) and (ii) the receipt by any Group Company of any cash capital
contributions, whether or not paid in connection with any issuance of Equity
Interests of any Group Company, from any Person other than Holdings or a
Wholly-Owned Subsidiary of Holdings.

 

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

 

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

 

“ERISA Event” means:

 

(i)            a
reportable event as defined in Section 4043 of ERISA and the regulations
issued under such Section with respect to a Plan, excluding, however, such
events as to which the PBGC by regulation has waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event;

 

(ii)           the
requirements of Section 4043(b) of ERISA apply with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of any
Plan, and an event

 

12

 

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

 

(iii)          the failure to meet the minimum funding
standard of Section 412 of the Code with respect to any Plan other than a
Multiemployer Plan (whether or not waived in accordance with
Section 412(d) of the Code), the application for a minimum funding waiver
under Section 303 of ERISA with respect to any Plan other than a
Multiemployer Plan, the failure to make by its due date a required installment
under Section 412(m) of the Code with respect to any Plan or the failure
to make any required contribution to a Multiemployer Plan;

 

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

 

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

 

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

 

(vii)         the imposition of liability (or the reasonable
expectation thereof) on a Group Company or ERISA Affiliate pursuant to
Section 4062, 4063, 4064 or 4069 of ERISA or by reason of the application
of Section 4212(c) of ERISA;

 

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

 

(ix)           the
receipt from the United States Internal Revenue Service of notice of the
failure of any Plan (or any other Employee Benefit Arrangement intended to be
qualified under Section 401(a) of the Code) to qualify under
Section 401(a) of the Code, or the failure of any trust forming part of
any Plan to qualify for exemption from taxation under Section 501(a) of
the Code; or

 

(x)            the
establishment or amendment by a Group Company or ERISA Affiliate of any Welfare
Plan that provides post-employment welfare benefits in a manner that would
increase the liability of a Group Company.

 

13

 

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

 

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

 

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

 

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

 

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

 

“Eurodollar Reserve Percentage” for any day
during any Interest Period, the reserve percentage (expressed as a decimal,
carried out to five decimal places) in effect on such day, whether or not
applicable to any Lender, under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any other entity succeeding
to the functions currently performed thereby) for determining the maximum
reserve requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently referred
to as “Eurocurrency liabilities”).  The
Adjusted Eurodollar Rate for each outstanding Eurodollar Loan shall be adjusted
automatically as of the effective date of any change in the Eurodollar Reserve
Percentage.

 

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

 

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

 

14

 

during such period, minus (viii) Consolidated
Scheduled Debt Payments actually paid by the Company and its Consolidated
Subsidiaries during such period, minus (ix) optional prepayments of the Loans
during such period minus (x) (x) the increase, if any, in Consolidated Adjusted
Working Capital less (y) the increase (other than as necessary to fund the
purchase of the Existing Convertible Notes in accordance with the Existing
Convertible Notes Tender Documents), if any, in the principal amount of all
loans and other obligations outstanding under the ABL Credit Agreement, in each
case from the first day to the last day of such period, minus (xi) the
aggregate amount of all Restricted Payments actually paid in cash by the
Company and its Consolidated Subsidiaries during such period in accordance with
Section 7.07(iv) and up to $300,000 of Restricted Payments actually paid
in cash by the Company and its Consolidated Subsidiaries during such period in
accordance with Section 7.07(v), in each case other than with the
proceeds of any Equity Issuance, minus (xii) to the extent not financed with
the proceeds of any Debt Issuance or Equity Issuance, the aggregate amount of
cash payments during such period in respect of (A) Permitted Business
Acquisitions allowed pursuant to Section 7.06(b), (B) Permitted
Management Fees and (C) Executive Compensation Payments (reduced for purposes
of this clause (C) by up to $13,100,000 of amounts received by the
Company in respect of the 1998 SERP/split dollar life insurance policy referred
to in the clause (iii) of the definition of “Executive Compensation
Payments”) minus (xiii) the aggregate amount of cash payments made during such
period in respect of any NLRB Accrual accounted for in such period, plus (xiv)
the WTC Net Insurance Amount for such period and minus (xv) payments in respect
of the litigation relating to the collective bargaining agreement with the
Allied Trade Council and with Cardinal Health other than (A) amounts taken into
account in computing the NLRB Accrual for such period and (B) amounts deducted
to determine the WTC Net Insurance Amount for such period.

 

“Excess Proceeds” has the meaning specified in Section
7.05.

 

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

 

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

 

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

 

“Excluded Taxes” has the meaning specified in Section
3.01(a).

 

“Executive Compensation Payments” means any and
all of the following: (i) a payment or payments not to exceed $24.5 million in
respect of the cancellation of the Company’s obligations to its President under
a 2002 split dollar life insurance and related supplemental pension
arrangement; (ii) a settlement payment or payments not to exceed $5 million in
respect of, among other things, the President’s outstanding options; (iii) a
payment or payments not to exceed $3.1 million in respect of the cash surrender
value of the 1998 SERP/split dollar life insurance policy to be transferred to
the President following the consummation of the DRI Merger; (iv) bonuses paid
in such period by the Company to certain senior managers of the Company in
connection with the collection of the WTC Business Interruption Insurance
Policy, provided that the aggregate amount of such bonuses does not
exceed $5,000,000; (v) annual retention payments not to exceed $4.5 million in respect
of annual retention

 

15

 

payments to be paid to the President and (vi) any
severance payments required to be paid to the President pursuant to his
employment agreement with the Company as in effect on the Closing Date.

 

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

 

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

 

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

 

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

 

“Failed Loans” has the meaning set forth in Section
2.03(d).

 

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

 

“Fee Letter” means one or more letter
agreements dated as of June 18, 2004 from Bank of America, Banc of America
Bridge, Banc of America Securities LLC, Credit Suisse First Boston LLC, Credit
Suisse First Boston, Cayman Islands Branch, Wells Fargo Bank, National
Association, Citigroup World Markets Inc., Citicorp North America Inc., UBS
Securities LLC and/or UBS Loan Finance LLC to Holdings, as the same may be
amended, supplemented or modified from time to time.

 

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

 

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

 

16

 

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

 

“Fixed Charge Coverage Ratio” means, for any
period, the ratio determined for such period in accordance with Schedule
1.01C.

 

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

 

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

 

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

 

“Funded Indebtedness” means, with respect to
any Person and without duplication, (i) all Indebtedness of such Person of the
types referred to in clauses (i), (ii), (iii), (iv),
(v), (vi) and (vii) and of the definition of
“Indebtedness” in this Section 1.01, (ii) all Indebtedness of
others of the type referred to in clause (i) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) a Lien on, or payable out of the proceeds of
production from, any property or asset of such Person, whether or not the
obligations secured thereby have been assumed by such Person, (iii) all
Guaranty Obligations of such Person with respect to Indebtedness of others of
the type referred to in clause (i) above and (iv) all Indebtedness of
the type referred to in clause (i) above of any other Person (including
any Partnership in which such Person is a general partner and any
unincorporated joint venture in which such Person is a joint venturer) to the
extent such Person would be liable therefor under any applicable law or any
agreement or instrument by virtue of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person shall not be liable therefor.

 

“GAAP” means generally accepted accounting
principles in the United States set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant
segment of the accounting profession in the United States, that are applicable
to the circumstances as of the date of determination, consistently applied.

 

“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.

 

“Group” means at any time a group of Loans
consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all
Loans which are Eurodollar Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Lender is converted to or made as a Base Rate
Loan pursuant to Article III, such Loan shall be included in the
same Group or Group of Loans from time to time as it would have been had it not
been so converted or made.

 

17

 

“Group Company” means any of Holdings, the
Company or their respective Subsidiaries (regardless of whether or not
consolidated with Holdings or the Company for purposes of GAAP), and “Group
Companies” means all of them, collectively.

 

“Guarantor” means each of Holdings and the
Subsidiary Guarantors.

 

“Guaranty” means the Guaranty, substantially in
the form of Exhibit F hereto, dated as of the Closing Date among
Holdings, the Subsidiary Guarantors and the Administrative Agent, as the same
may be amended, modified or supplemented from time to time.

 

“Guaranty Obligation” means, with respect to
any Person, without duplication, any obligation (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guarantying, intended to guaranty, or having the economic effect of
guarantying, any Indebtedness or other obligation of any other Person in any
manner, whether direct or indirect, and including, without limitation, any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
other obligation or any property constituting security therefor, (ii) to
advance or provide funds or other support for the payment or purchase of such
Indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including, without limitation,
maintenance agreements, support agreements, comfort letters, take or pay
arrangements, put agreements or similar agreements or arrangements) for the
benefit of the holder of Indebtedness or other obligation of such other Person,
(iii) to lease or purchase property, securities or services primarily for the
purpose of assuring the owner of such Indebtedness or other obligation or (iv)
to otherwise assure or hold harmless the owner of such Indebtedness or
obligation against loss in respect thereof. 
The amount of any Guaranty Obligation hereunder shall (subject to any
limitations set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the Indebtedness
or other obligation in respect of which such Guaranty Obligation is made.

 

“Hazardous Materials” means all explosive or
radioactive substances or wastes and all hazardous or toxic substances, wastes
or other pollutants, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environment Law.

 

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

 

“incur” has the meaning set forth in Section
7.01(a).

 

“Indebtedness” means, as to any Person at a
particular time, without duplication, all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP:  (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person to the extent of the value of such property
(other than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all
obligations, other than intercompany items, of such Person to pay the deferred
purchase price of property or services (other than trade accounts payable
arising in the ordinary course of business and due within six months of the
incurrence thereof), (v) the Attributable Indebtedness of such Person in
respect of Capital Lease Obligations, Sale/Leaseback Transactions and Synthetic
Lease Obligations (regardless of whether accounted for as indebtedness under
GAAP), (vi) all obligations of such Person to purchase securities or other
property which arise out of or in connection with the sale of the same or
substantially similar securities or property, (vii) all non-contingent
obligations (and, for purposes of Section 7.01 and Section 8.01(c),
all contingent obligations), of such

 

18

 

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

 

“Indemnified Liabilities” has the meaning set
forth in Section 10.05.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Interest Period” means with respect to each
Eurodollar Loan, a period commencing on the date of borrowing specified in the
applicable Notice of Borrowing or on the date specified in the applicable
Notice of Extension/Conversion and ending one, two, three or six months
thereafter, as the applicable Borrower may elect in the applicable notice; provided
that:

 

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

 

19

 

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

 

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

 

(iv)          no
Interest Period may be selected which would end after the Maturity Date.

 

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

 

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

 

“Joint Lead Arrangers” means Banc of America
Securities LLC and Credit Suisse First Boston, Cayman Islands Branch, in their
respective capacities as joint lead arranger for the credit facility provided
herein.

 

“Joint Book Managers” means Banc of America
Securities LLC, Credit Suisse First Boston, Cayman Islands Branch and Citicorp
Global Markets Inc., in their respective capacities as joint book managers for
the credit facility provided herein.

 

“Law” means, collectively, all international,
foreign, Federal, state and local statutes, treaties, rules, guidelines,
regulations, ordinances, codes and administrative or judicial precedents 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.

 

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

 

“Lender” means each bank or other lending
institution listed on Schedule 2.01 and each Eligible Assignee that
becomes a Lender pursuant to Section 10.07(b) and their respective
successors.

 

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

 

20

 

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

 

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

 

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

 

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

 

“Management Agreement” means the Management
Services Agreement, dated as of the date hereof between Oak Hill Capital
Management, Inc. and DR Acquisition, as the same may be amended, modified or
supplemented from time to time in accordance with the provisions thereof and of
this Agreement.

 

“Management Group” means the Persons identified
on Schedule 1.01B.

 

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

 

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

 

“Maturity Date” means July 30, 2010.

 

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

 

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

 

21

 

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

 

“NLRB Reserve” means, at any date, the amount
reserved on the balance sheet of the Company for estimated losses in litigation
relating to the Company’s collective bargaining agreement with the Allied Trade
Council.

 

“Net Cash Proceeds” means:

 

(i)            with
respect to any Asset Disposition, Casualty or Condemnation, (A) the gross
amount of cash proceeds (or Insurance Proceeds and Condemnation Awards, in the
case of any Casualty or Condemnation, except to the extent and for so long as
such Insurance Proceeds or Condemnation Awards constitute Reinvestment Funds)
actually paid to or actually received by any Group Company in respect of such
Asset Disposition, Casualty or Condemnation (including any cash proceeds
received as income or other proceeds of any noncash proceeds of any Asset
Disposition, Casualty or Condemnation as and when received), less (B) the
amount, if any, of all taxes (other than income taxes) and all income taxes (as
estimated in good faith by a senior financial or senior accounting officer of
the Company giving effect to the overall tax position of Holdings and its
Subsidiaries) (to the extent that the amount of such taxes shall have been set
aside for the purpose of paying such taxes when due), and customary fees,
brokerage fees, commissions, costs and other expenses (other than those payable
to any Group Company or Affiliates, other than pursuant to the Management
Agreement as in effect on the Closing Date) that are incurred in connection
with such Asset Disposition, Casualty or Condemnation and are payable by the
seller or the transferor of the assets or property to which such Asset
Disposition, Casualty or Condemnation relates, but only to the extent not
already deducted in arriving at the amount referred to in clause (i)(A)
above; less (C) appropriate amounts that must be set aside as a reserve in
accordance with GAAP against any liabilities associated with such Asset
Disposition, Casualty or Condemnation; less (D) if applicable, the amount of
any Indebtedness secured by a Permitted Lien that has been repaid or refinanced
in accordance with the terms of such Indebtedness with the proceeds of such
Asset Disposition, Casualty or Condemnation, including, without limitation, the
amount of any Indebtedness required to be repaid or prepaid with the proceeds
of such Asset Disposition, Casualty or Condemnation pursuant to the terms of
the ABL Credit Agreement and the Intercreditor Agreement; and less (E) any
payments to be made by any Group Company as agreed between such Group Company
and the purchaser of any assets subject to an Asset Disposition, Casualty or
Condemnation in connection therewith; and

 

(ii)           with
respect to any Equity Issuance or Debt Issuance, the gross amount of cash
proceeds paid to or received by any Group Company in respect of such Equity
Issuance or Debt Issuance as the case may be (including cash proceeds
subsequently as and when received at any time in respect of such Equity
Issuance or Debt Issuance from non-cash consideration initially received or
otherwise), net of underwriting discounts and commissions or placement fees,
investment banking fees, legal fees, consulting fees, accounting fees and other
customary fees and expenses directly incurred by any Group Company in
connection therewith (other than those payable to any Group Company or any Affiliate
of any Group Company other than pursuant to the Management Agreement as in
effect on the Closing Date).

 

22

 

“Note” means a promissory note, substantially
in the form of Exhibit B hereto, evidencing the joint and several
obligations of the Borrowers to repay outstanding Loans, as such note may be
amended, modified or supplemented from time to time.

 

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

 

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

 

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

 

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

 

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

 

“PBGC” means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any entity
succeeding to any or all of its functions under ERISA.

 

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

 

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

 

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

 

(i)            the
Equity Interests or property or assets acquired in such acquisition relate to a
line of business similar to the business of the Company or any of its
Subsidiaries engaged in on the Closing Date or reasonably related, ancillary or
complementary thereto;

 

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

 

23

 

(iii)          the Administrative Agent or the Collateral
Agent, as applicable, shall have received all items in respect of the Equity
Interests or property or assets acquired in such acquisition required to be
delivered by Section 6.12;

 

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

 

(v)           no
Default or Event of Default shall have occurred and be continuing immediately
before or immediately after giving effect to such acquisition, and the Borrower
shall have delivered to the Administrative Agent a Pro-Forma Compliance
Certificate demonstrating that, upon giving effect to such acquisition on a Pro-Forma
Basis (with pro-forma adjustments reasonably satisfactory to the Administrative
Agent), the Company shall be in compliance with all of the financial covenants
specified in Section 7.16 hereof as of the last day of the most recent
period of four consecutive fiscal quarters of the Company which precedes or
ends on the date of such acquisition and with respect to which the
Administrative Agent has received the consolidated financial information
required under Section 6.01(a) and (b) and the Compliance Certificate
required by Section 6.02(b); and

 

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

 

“Permitted Indebtedness” means:

 

(a)           in
the case of the Company and its Subsidiaries:

 

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

 

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

 

24

 

(iii)          Indebtedness of the Loan Parties under this
Agreement and the other Term Loan Documents;

 

(iv)          Indebtedness
arising under the Senior Subordinated Note Indenture, the Senior Subordinated
Notes, the Exchange Notes and any Permitted Refinancing thereof;

 

(v)           Attributable
Indebtedness and Purchase Money Indebtedness of the Company and its
Subsidiaries incurred after the Closing Date to finance Capital Expenditures; provided
that (A) the aggregate amount of all such Debt does not exceed $15,000,000 at
any time outstanding, (B) the Debt when incurred shall not be more than 105% of
the lesser of the cost or fair market value as of the time of acquisition of
the asset financed, (C) such Debt is issued and any Liens securing such Debt
are created concurrently with, or within 180 days after, the acquisition of the
asset financed and (D) no Lien securing such Debt shall extend to or cover any
property or asset of any Group Company other than the asset so financed and
attachments thereto and the proceeds thereof;

 

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

 

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

 

(viii)        contingent liabilities in respect of any
indemnification, adjustment of purchase price, earn-out, non-compete,
consulting, deferred compensation and similar obligations of the Company and
its Subsidiaries incurred in connection with the Acquisition, Permitted Business
Acquisitions and Asset Dispositions;

 

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

 

(x)            Indebtedness
owed to any Person providing property, casualty or liability insurance to the
Company or any Subsidiary of the Company, so long as such Indebtedness shall
not be in excess of the amount of the unpaid cost of, and shall be incurred
only to defer the cost of, such insurance for the year in which such
Indebtedness is incurred and such Indebtedness shall be outstanding only during
such year;

 

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

 

25

 

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

 

(xii)          inter-company Indebtedness owing to the
Company or a Subsidiary of the Company to the extent permitted by Section
7.06(a)(xiii) or (xiv);

 

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

 

(xiv)        Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business; provided
that (A) such Indebtedness (other than credit or purchase cards) is
extinguished within three Business Days of its incurrence and (B) such
Indebtedness in respect of credit or purchase cards in extinguished within 60
days from its incurrence;

 

(xv)         Indebtedness
representing deferred compensation to employees of the Company and its
Subsidiaries;

 

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

 

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

 

(b)           in
the case of Holdings:

 

(i)            Indebtedness
of Holdings under this Agreement and the other Term Loan Documents;

 

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

 

(iii)          Indebtedness of Holdings to the Company and
its Subsidiaries to the extent otherwise permitted under this Agreement provided
that any Indebtedness of Holdings owing to a Subsidiary that is not a Borrower
or a Subsidiary Guarantor is made pursuant to an intercompany note in the form
attached hereto as Exhibit H, is unsecured and is subordinated in right
of payment (whether at stated maturity, acceleration or otherwise) to the
payment and performance of the Borrowers’ obligations under the Term Loan
Documents pursuant to subordination provisions in the form of Exhibit I
hereto;

 

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

 

26

 

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

 

(vi)          Indebtedness
of Holdings representing the obligation of Holdings to make payments with
respect to the cancellation or repurchase of certain Equity Interests of
officers, employees or directors (or their estates) of Holdings and its
Subsidiaries, to the extent permitted by Section 7.07(iii).

 

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

 

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

 

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

 

“Permitted Subordinated Indebtedness” means any
unsecured Indebtedness that (i) is expressly subordinated to the prior payment
in full in cash of the Term Loan Obligations on terms and conditions no less
favorable to the Lenders than the terms and conditions of the Senior
Subordinated Notes, (ii) by its terms is not required to be repaid, in whole or
in part, before the first anniversary of the Maturity Date (other than at the
option of the holder thereof as a result of a Change of Control or Asset
Disposition, but in no event prior to the earlier of the Maturity Date or the
payment in full of all Term Loan Obligations) and (iii) is issued pursuant to
credit documents having covenants, subordination provisions and events of
default that are reasonably satisfactory in form and substance to the
Administrative Agent but that in no event are less favorable, including with
respect to rights of acceleration, to the issuer thereof than the terms hereof,
or of the Senior Subordinated Notes (in the case of Permitted Subordinated
Indebtedness of the Company, any Co-Borrower or any Subsidiary Guarantor),

 

27

 

taken as a whole; provided that any such
indebtedness shall constitute Permitted Subordinated Indebtedness only if both
before and after giving effect to the issuance or incurrence thereof, no
Default or Event of Default shall have occurred and be continuing.

 

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

 

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

 

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

 

“Pledged Collateral” has the meaning set forth
in the Pledge Agreement.

 

“Pre-Commitment Information” means, taken as an
entirety, (i) information contained in the Confidential Information Memorandum
dated June 2004 and (ii) any other written information in respect of Holdings,
the Company, any Subsidiary of Holdings or the Company or the Acquisition
provided to any Joint Lead Arranger, any Joint Book Manager or any Agent or
Lender by or on behalf of the Sponsor or any Loan Party prior to the Closing
Date.

 

“Preferred Stock” means, as applied to the
Equity Interests of a Person, Equity Interests of any class or classes (however
designated) which is preferred as to the payment of dividends or distributions,
or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over the Equity Interests of any
other class of such Person.

 

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

 

28

 

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

 

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

 

“Qualifying Equity Issuance” means the issuance
by Holdings for cash of its common stock to any Person in the Sponsor Group or
the Management Group or of any stock options to any Person pursuant to
Holding’s or the Company’s stock option plans or any employment agreement with
such Person if:  (i) 100% of the Net Cash
Proceeds of such issuance shall be promptly contributed by Holdings to the
Company; (ii) no Default or Event of Default shall have occurred or be
continuing on the date of issuance, both before and after giving effect
thereto; (iii) after giving effect thereto, no Change of Control shall have
occurred; (iv) such stock shall be issued in a private placement exempt from
registration under the Securities Act; and (v) within five Business Days after
such issuance, the Company shall have delivered to the Administrative Agent a
certificate of the chief financial officer or chief accounting officer of the
Company attesting to the satisfaction of the foregoing conditions, describing
the uses of the proceeds of such issuance and attesting that such use shall not
constitute a Default or an Event of Default.

 

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

 

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

 

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

 

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

 

“Reinvestment Funds” means, with respect to any
Insurance Proceeds or any Condemnation Award, that portion of such funds as
shall, according to a certificate of the senior financial officer of the
Company delivered to the Administrative Agent within 15 Business Days after the
occurrence of the Casualty or Condemnation giving rise thereto (and in any case
prior to the receipt thereof by any Group Company), be reinvested in the
repair, restoration or replacement of the properties that were the subject of
such Casualty or Condemnation; provided that (i) such certificate shall
be accompanied by evidence reasonably satisfactory to the Administrative Agent
that any property subject to such Casualty or Condemnation has been or will be
repaired, restored or replaced to a condition that is substantially similar to
that immediately prior to such Casualty or Condemnation (with such change as
are reasonably approved by the Company), (ii) pending such reinvestment, the
entire amount of such

 

29

 

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

 

“Replacement Assets” means (i) non-current
tangible assets that will be used or useful in a business permitted by Section
7.03 or (ii) those assets or Equity Interests that are the subject of a
Permitted Business Acquisition.

 

“Replacement Date” has the meaning set forth in
Section 2.09.

 

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

 

“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.

 

“Restricted Payment” means (i) any dividend or
other distribution (whether in cash, securities or other property but excluding
any such dividend or other distribution payable solely in Equity Interests
(exclusive of Debt Equivalents) of the Company), direct or indirect, on account
of any class of Equity Interests or Equity Equivalents of the Company, now or
hereafter outstanding, (ii) any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation, termination or
similar payment, purchase or other acquisition for value, direct or indirect,
of any class of Equity Interests or Equity Equivalents of the Company or any
Affiliate of Holdings or the Company including any Subsidiary of Holdings or
the Company, now or hereafter outstanding (other then Equity Interests or
Equity Equivalents of any Wholly-Owned Subsidiary of the Company), (iii) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire any class of Equity Interests or Equity
Equivalents of the Company or any Affiliate of Holdings or the Company
including any Subsidiary of Holdings or the Company, now or hereafter
outstanding (other than Equity Interests or Equity Equivalents of any
Wholly-Owned Subsidiary of the Company) and (iv) any payment or prepayment of
principal of, premium, if any, or interest on, redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Subordinated Indebtedness.

 

“Sale/Leaseback Transaction” means any direct
or indirect arrangement with any Person or to which any such Person is a party
providing for the leasing to Holdings or any of its Subsidiaries of any
property, whether owned by Holdings or any of its Subsidiaries as of the
Closing Date or later acquired, which has been or is to be sold or transferred
by Holdings or any of its Subsidiaries to such

 

30

 

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

 

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

 

“SEC” means the Securities and Exchange
Commission, or any Governmental Authority succeeding to any of its principal
functions.

 

“SEC Filings” has the meaning specified in Section
4.01(j).

 

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

 

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

 

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

 

“Senior Subordinated Note” means any one of the
9.75% Senior Subordinated Notes due 2011 issued by DR Acquisition and Duane
Reade, as co-issuers, in favor of the Senior Noteholders pursuant to the Senior
Subordinated Note Indenture, as such Senior Subordinated Notes may be amended,
modified or supplemented from time to time in accordance with the limitations set
forth herein, and “Senior Subordinated Notes” means any two or more of
them, collectively.

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

“Solvent” means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (ii) such Person does not intend
to, and does not believe that it will, incur debts beyond such Person’s ability
to pay as such debts mature, (iii) such Person is not engaged in a business or
a transaction, and is not about to engage in a business or a transaction, for
which such Person’s assets would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged or is to engage, (iv) the fair value of the assets of
such Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (v) the present fair
value (i.e., the amount that may be realized within a reasonable time,
considered to be six months to one year, either through collection or sale at
the regular market value, conceiving the latter as the amount that could be
obtained for the assets in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase under
ordinary selling conditions) of the assets of such Person will exceed the
amount that will be required to pay the probable liability on such Person’s
existing debts as they become absolute and matured its debts and other
liabilities (including contingent, subordinated, unmatured and unliquidated
debts and liabilities).  For purposes of
this definition, “debt” means any legal liability, whether matured, unmatured,
liquidated or unliquidated, absolute, fixed or contingent, or (ii) a right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right is an equitable remedy, is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.

 

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

 

“Sponsor Group” means the Sponsor and any of
its Subsidiaries or Affiliates and certain co-investors; provided that
each such Subsidiary, Affiliate or co-investor is reasonably acceptable to the
Administrative Agent.

 

“Stockholders’ Agreement” means the
Shareholders’ Agreement dated as of the date hereof among Holdings, DR
Shareholders, LLC, the Sponsor and certain other indirect stockholders of the
Company named therein, as the same may be amended, modified or supplemented
from time to time in accordance with the provisions thereof and of this
Agreement.

 

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

 

32

 

“Subsidiary” means with respect to any Person
any corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, more than 50% of the total
voting power of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a partnership, limited liability company, association or business
entity other than a corporation, more than 50% of the partnership or other
similar ownership interests thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof.  For
purposes hereof, a Person or Persons shall be deemed to have more than 50%
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated more than
50% of partnership, association or other business entity gains or losses or
shall be or control the managing director, manager or a general partner of such
partnership, association or other business entity.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of the Company.

 

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

 

“Swap Agreement” means (i) any and all rate
swap transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether
or not any such transaction is governed by or subject to any master agreement
and (ii) any and all transactions of any kind, and the related confirmations,
which are subject to the terms and conditions of, or governed by, any form of
master agreement published by the International Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master Agreement or any
other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or
liabilities under any Master Agreement.

 

“Swap Creditor” means any Lender or any
Affiliate of any Lender from time to time party to one or more Swap Agreements
with a Loan Party (even if any such Lender for any reason ceases after the
execution of such agreement to be a Lender hereunder), and its successors and
assigns, and “Swap Creditors” means any two or more of them,
collectively.

 

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

 

“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

 

33

 

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 based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Agreements
(which may include any Lender).

 

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

 

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

 

“Synthetic Lease Obligation” means the monetary
obligation of a Person under (i) a so-called synthetic, off-balance sheet or
tax retention lease or (ii) an agreement for the use or possession of property
creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized
as the indebtedness of such person (without regard to accounting treatment).

 

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

 

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

 

“Term Loan 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 Debtor Relief Law
with respect to any Loan Party, whether or not allowed or allowable as a claim
in any such proceeding) on any Loan under, or any Note issued pursuant to, this
Agreement or any other Term Loan Document;

 

(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 Debtor Relief Law with respect to any Loan Party, whether or not
allowed or allowable as a claim in any such proceeding) pursuant to this
Agreement or any other Term Loan Document;

 

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

 

(iv)          all
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Section 10.05 of this Agreement or under any
Term Loan Document; and

 

34

 

(v)           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 proceeding under any Debtor Relief Law with respect to any Borrower,
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 this Agreement, the Guaranty or any other Term Loan
Document;

 

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

 

“Threshold Amount” means $10,000,000.

 

“Transaction” means the events contemplated by
the Transaction Documents.

 

“Transaction Documents” means the Acquisition
Documents, the Capitalization Documents, the Senior Subordinated Note
Documents, the ABL Documents, the Intercreditor Agreement and the Term Loan
Documents, collectively, and “Transaction Document” means any one of
them.

 

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

 

“UMFPP” means the Union Mutual Fund Pension
Plan.

 

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

 

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

 

“United States” means the United States of
America, including each of the States and the District of Columbia, but
excluding its territories and possessions.

 

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

 

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

 

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

 

35

 

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

 

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

 

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

 

Section
1.02  Other Interpretative Provisions.  With reference to
this Agreement and each other Term Loan Document, unless otherwise specified
herein or in such other Term Loan Document:

 

(a)           The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.

 

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

 

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

 

(d)           Section headings
herein and in the other Term Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Term Loan Document.

 

Section 1.03  Accounting Terms and Determinations.  Except as otherwise expressly provided herein,
all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lenders hereunder shall be prepared, in accordance with GAAP
applied on a consistent basis.  All
financial statements delivered to the Lenders hereunder shall be accompanied by
a statement from the Company that GAAP has not changed since the most recent
financial statements delivered by the Company to the Lenders or if GAAP has
changed describing such changes in detail and explaining how such changes
affect the financial statements.  All
calculations made for the purposes of determining compliance with this
Agreement shall (except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with the most recent annual
or quarterly financial statements delivered pursuant to Section 6.01
(or, prior to the delivery of the first financial statements pursuant to Section 6.01,
consistent with the financial statements described in Section 5.05(a));
provided, however, if (i) the Company shall object to determining
such compliance on such basis at the time of delivery of such financial
statements due to any

 

36

 

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

 

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

 

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

 

Section 1.06  Times of Day.  Unless otherwise specified, all
references herein to times of day shall be references to Eastern time (daylight
or standard, as applicable).

 

ARTICLE
II

THE CREDIT FACILITY

 

Section 2.01  Commitments to Lend.  Each
Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make a single Loan to the Company and Duane Reade, jointly and
severally, on the Closing Date in a principal amount not exceeding its
Commitment.  The borrowing of the Loans
hereunder on the Closing Date shall be made from the several Lenders ratably in
proportion to their respective Commitments. 
The Commitments are not revolving in nature, and amounts repaid or prepaid
prior to the Maturity Date may not be reborrowed.  The Commitments of the Lenders shall
terminate automatically immediately after the making of the Loans on the
Closing Date.

 

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

 

(i)            the
proposed Closing Date, which shall be a Business Day; and

 

(ii)           the
aggregate amount of Loans of each Type to be included in the borrowing of Loans
on the Closing Date.

 

37

 

Upon receipt of the Notice of Borrowing, the
Administrative Agent shall promptly notify each Lender of such Lender’s ratable
share of the Loans referred to therein, and such Notice of Borrowing shall not
thereafter be revocable by the Borrowers.

 

Section
2.03  Funding of Loans.

 

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

 

(b)           Funding by the Administrative Agent in Anticipation
of Amounts Due from the Lenders. 
Unless the Administrative Agent shall have received notice from a Lender
prior to the making of the Loans on the Closing Date that such Lender will not
make its Loans available to the Administrative Agent, the Administrative Agent
may assume that such Lender has made such Loans available to the Administrative
Agent on the Closing Date in accordance with subsection (a) of this
Section 2.03, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrowers by crediting accounts of the
Company and Duane Reade maintained with Bank of America on such date a
corresponding amount.  If and to the
extent that such Lender shall not have so made its Loans available to the
Administrative Agent, such Lender, severally with the Borrowers, and the
Borrowers, jointly and severally, agree to repay to the Administrative Agent
forthwith on demand such corresponding amount in immediately available funds
with interest thereon, for each day from and including the date such amount is
made available to the Borrowers to but excluding the date of payment to the
Administrative Agent, at (i) in the case of a payment to be made by such
Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation and (ii) in the case of a payment to be made by the Borrower, the
interest rate applicable to Base Rate Loans. 
If the Borrowers and such Lender shall pay such interest to the
Administrative Agent for the same or an overlapping period, the Administrative
Agent shall promptly remit to the Borrowers, collectively, the amount of such
interest paid by the Borrowers for such period. 
If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender’s Loan
for purposes of this Agreement.  Any
payment by the Borrowers shall be without prejudice to any claim the Borrowers
may have against a Lender that shall have failed to make such payment to the
Administrative Agent.

 

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

 

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

 

38

 

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

 

Section
2.04  Evidence of Loans.

 

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

 

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

 

(c)           Evidence of Indebtedness.  The entries made in the accounts maintained
pursuant to subsections (a) and (b) of this Section 2.04
shall be prima facie evidence of the existence and amounts of the obligations
therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrowers to
repay the Loans in accordance with their terms.

 

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

 

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

 

39

 

shall not affect
the obligations of the Borrowers hereunder or under any such Note.  Each Lender is hereby irrevocably authorized
by the Borrowers so to endorse each of its Notes and to attach to and make a
part of each of its Notes a continuation of any such schedule as and when
required.

 

Section
2.05  Interest.

 

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

 

(b)           Base Rate Loans.  Each Loan which is made as, or converted
into, a Base Rate Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made as, or converted into, a
Base Rate Loan until it becomes due or is converted into a Eurodollar Loan, at
a rate per annum equal to the Base Rate for such day plus the then Applicable
Margin.  Such interest shall be joint and
several obligations of the Borrowers payable in arrears on each Interest
Payment Date and, with respect to the principal amount of any Base Rate Loan
converted to a Eurodollar Loan, on the date such Base Rate Loan is so
converted.  Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the Base Rate
for such day plus the Applicable Margin for Base Rate Loans for such day.

 

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

 

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

 

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

 

40

 

Section
2.06  Extension and Conversion.

 

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

 

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

 

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

 

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

 

(b)           Contents of Notice of Extension/Conversion.  Each Notice of Extension/Conversion shall
specify:

 

(i)            the
Group of Loans (or portion thereof) to which such notice applies;

 

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

 

(iii)          if the Loans comprising such Group are to be
converted, the new Type of Loans and, if the Loans being converted are to be
Eurodollar Loans, the duration of the next succeeding Interest Period
applicable thereto; and

 

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

 

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

 

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

 

(d)         Limitation on
Conversion/Continuation Options.  The Borrowers shall not be
entitled to elect to convert any Loans to, or continue any Loans for an
additional Interest Period as,

 

41

 

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

 

(e)           Accrued Interest.  Accrued interest on a Loan (or portion
thereof) being extended or converted shall be paid by the Borrowers (i) with
respect to any Base Rate Loan being converted to a Eurodollar Loan, on the last
Business Day of the first fiscal quarter of the Company ending on or after the
date of conversion and (ii) otherwise, on the date of extension or conversion.

 

Section
2.07  Maturity of Loans.  The Loans shall mature on the
Maturity Date and all Loans then outstanding (together with accrued interest
thereon and fees in respect thereof) shall be joint and several obligations of
the Borrowers due and payable on such date.

 

Section
2.08  Prepayments; Change of Control.

 

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

 

(b)           Mandatory Prepayments.

 

(i)            Excess Cash Flow.  Within 100 days after the end of each fiscal
year of Holdings (commencing with the fiscal year ending on or about December
31, 2005), the Borrowers, jointly and severally, shall prepay the Loans in an
amount equal to 50% of the Excess Cash Flow for such prior fiscal year.

 

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

 

42

 

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

 

(iii)          Debt
Issuances.  Immediately
upon receipt by any Group Company of proceeds from any Debt Issuance (other
than any Permitted Indebtedness or other Indebtedness permitted to be incurred
under Section 7.01), the Borrowers shall, jointly and severally, prepay
the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such
Debt Issuance.

 

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

 

(v)            Payments in Respect of Subordinated Indebtedness.  Immediately upon receipt by the
Administrative Agent or any Lender of any amount so payable pursuant to the
subordination provision of any Indebtedness of Holdings or any of its
Subsidiaries that is subordinate to the Term Loan Obligations, all proceeds
thereof shall be applied as set forth in subsection (vi) below.

 

(vi)          Application of Mandatory Prepayments.  All amounts required to be paid pursuant to
this Section 2.08(b) shall be applied first to Base Rate Loans and
then to Eurodollar Loans in direct order of Interest Period maturities, in each
case ratably among the Loans.  All
prepayments under this Section 2.08(b) shall be subject to Section
3.05.  All prepayments of Eurodollar
Loans under this Section 2.08(b) shall be accompanied by accrued
interest on the principal amount being prepaid to the date of payment.

 

(vii)         Prepayment
Account.  Amounts to be
applied as provided in subsection (vi) above to the prepayment of Loans
shall be applied first to reduce outstanding Base Rate Loans.  Any amounts remaining after each such application
shall, at the option of the Borrowers, be applied to prepay Eurodollar Loans
immediately and/or shall be deposited in a separate Prepayment Account (as
defined below) for the Loans.  The
Administrative Agent shall apply any cash deposited in the Prepayment Account,
upon withdrawal by the Collateral Agent, to prepay Eurodollar Loans on the last
day of their respective Interest Periods (or, at the direction of the
Borrowers, on any earlier date) until all outstanding Loans have been prepaid
or until all the allocable cash on deposit in the Prepayment Account has been
exhausted.  For purposes of this
Agreement, the term “Prepayment Account” shall mean an account (which may
include the Prepayment Account established under the Security Agreement) established
by the Borrowers with the Collateral Agent and over which the Collateral Agent
shall have exclusive dominion and control, including the exclusive right of
withdrawal for application in accordance with this subsection (vii).  The Collateral Agent will, at the request of
the Borrowers, invest amounts on deposit in the Prepayment Account in Cash
Equivalents that mature prior to the last day of the applicable Interest
Periods of the Eurodollar Loans to be prepaid; provided, however,
that (i) the Collateral Agent shall not be required to make any investment
that, in its sole judgment, would require or cause the Collateral Agent to be
in, or would result in any, violation of any Law, (ii) such Cash Equivalents
shall be subjected to a first priority perfected security interest in favor of
the Collateral Agent and (iii) if any Event of Default shall have occurred and
be continuing, the selection of such Cash Equivalents shall be in the sole
discretion of the Collateral Agent.  The

 

43

 

Borrowers shall
indemnify the Collateral Agent for any losses relating to such investments in
Cash Equivalents so that the amount available to prepay Eurodollar Loans on the
last day of the applicable Interest Periods is not less than the amount that
would have been available had no investments been made pursuant thereto.  Other than any interest or profits earned on
such investments, the Prepayment Accounts shall not bear interest.  Interest or profits, if any, on the
investments in any Prepayment Account shall accumulate in such Prepayment
Account until all outstanding Loans of any applicable Class with respect to
which amounts have been deposited in the Prepayment Accounts have been prepaid
in full, at which time so much thereof as is not required to make payment of
the Term Loan Obligations which have become due and payable (whether by
scheduled maturity, acceleration or otherwise) shall be withdrawn by the
Collateral Agent on the next Business Day following the day on which the Collateral
Agent considers the funds deposited therein to be collected funds and disbursed
to the Borrowers or their order. If the maturity of the Loans has been
accelerated pursuant to Section 8.02, the Administrative Agent may, in
its sole discretion, cause the Collateral Agent to withdraw amounts on deposit
in the Prepayment Account and apply such funds to satisfy any of the Term Loan
Obligations in the order set forth in Section 8.03.

 

(viii)        Payments
Cumulative.  Except or
otherwise expressly provided in this Section 2.08, payments
required under any subsection or clause of this Section 2.08
are in addition to payments made or required under any other subsection or
clause of this Section 2.08.

 

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

 

(c)           Change of Control Offer.  If a Change of Control occurs, each Lender
will have the right to require that the Borrowers prepay all or any part of
such Lender’s Loans pursuant to an offer to prepay (each such offer being herein
referred to as a “Change of  Control Offer”) as set forth below
and in accordance with the procedures set forth in this Section 2.08(c).  In the Change of Control Offer, the
Borrowers, jointly and severally, will offer to prepay all of the Loans at par
plus, if such Change of Control Offer is made at any time on or before the
third anniversary of the Closing Date, a prepayment premium (the “Change of
Control Prepayment Premium”) equal to 1.00% of the aggregate principal
amount of the Loans being prepaid, in cash, together with accrued and unpaid
interest thereon to the date of prepayment (the “Change of Control
Prepayment Date”).  Within 30 days
after any Change of Control or, at the Borrowers’ option, prior to such Change
of Control but after it is publicly announced, the Borrowers shall notify the
Administrative Agent and give written notice of the Change of Control to each
Lender specifying:

 

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

 

(ii)           that
the Change of Control Offer is being made pursuant to this Section  2.08(c)
and that all Loans properly tendered pursuant to the Change of Control Offer
will be accepted for prepayment at par plus any applicable Change of Control
Prepayment Premium;

 

44

 

(iii)          the Change of Control Prepayment Date, which
shall be fixed by the Company on a Business Day no earlier than 30 days nor
later than 60 days from the date the notice is mailed; provided that the
Change of Control Prepayment Date may not occur prior to the Change of Control;

 

(iv)          that
notice of acceptance of the Change of Control Offer must be received by the
Administrative Agent and the Company at least three Business Days prior to the
Change of Control Prepayment Date;

 

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

 

(vi)          that
any Loans not tendered for prepayment will continue to accrue interest in
accordance with Section 2.05 hereof;

 

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

 

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

 

Upon receipt by the Company of the proper notice of
acceptance of the Change of Control Offer, the Lender in respect of which such
acceptance was made shall (unless such acceptance is properly withdrawn) thereafter
be entitled to receive solely the principal amount of such Loan together with
any applicable Change of Control Prepayment Premium and accrued and unpaid
interest thereon to the Change of Control Prepayment Date.  Upon acceptance of the Change of Control
Offer with respect to any Loan in accordance with the foregoing provisions,
such Loan shall be paid by the Borrowers at par plus any applicable Change of
Control Prepayment Premium and accrued and unpaid interest thereon to the
Change of Control Prepayment Date.  If
any Loan with respect to which the Change of Control Offer was accepted in
accordance with the provisions of this Section 2.08(c) shall not be so
prepaid on the Change of Control Prepayment Date, the principal thereof (and
Change of Control Prepayment Premium, if any, thereon) shall, until paid, bear
interest from the Change of Control Prepayment Date at the rate specified in Section
2.05(e)(ii) borne by such Loan in accordance with Section 2.05.  Lenders electing to have Loans prepaid will
be required to provide notice to the Administrative Agent and the Company of
their acceptance of the Change of Control Offer at least three Business Days
prior to the Change of Control Prepayment Date.

 

The Borrowers shall, not later than 10:00 a.m. (New
York time) on the Change of Control Prepayment Date, deposit with the
Administrative Agent an amount of cash sufficient to pay the aggregate
principal amount of Loans which are to be prepaid, together with the aggregate
amount of the Change of Control Prepayment Premium, if any, applicable thereto
and all accrued and unpaid interest thereon to the Change of Control Purchase
Date.

 

For the avoidance of doubt, the Borrowers hereby
acknowledge and agree that no prepayment or other early redemption or retirement
of any Senior Subordinated Notes required as a result of a Change of Control
may be made prior to the making of all prepayments of the Loans required under
this Section 2.08(c).

 

45

 

An acceptance of a Change of Control Offer made in
accordance with the foregoing provisions may be withdrawn by means of a written
notice of withdrawal delivered no later than 1 full Business Day prior to the
Change of Control Payment Date by the applicable Lender to the Administrative
Agent specifying, as applicable:

 

(i)            the
name of the Lender;

 

(ii)           the
principal amount of the Loans to which such notice of withdrawal is being
submitted; and

 

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

 

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

 

Section
2.09  Replacement of Lenders.  If (i) any Lender has demanded
compensation or indemnification pursuant to Section 3.01 or Section 3.04,
(ii) the obligation of any Lender to maintain Eurodollar Loans has been
suspended pursuant to Section 3.02 or 3.03(ii) or (iii) any
Lender has failed to consent to a proposed amendment, waiver, discharge or
termination which pursuant to the terms of Section 10.01 or any
other provision of any Term Loan Document requires the consent of a greater
percentage of Lenders than Required Lenders and with respect to which the
Required Lenders shall have granted their consent, the Borrowers shall have the
right, if no Default or Event of Default then exists and at their sole effort
and expense, to replace such Lender by causing such Lender to assign its Loans
to one or more existing Lenders or Eligible Assignees pursuant to Section 10.07;
provided, however, that (x) if the Borrowers elect to exercise
such right with respect to any Lender pursuant to clause (i) or (ii)
above, it shall be obligated to replace all Lenders that have made similar
requests for compensation pursuant to Section 3.01 or 3.04
or whose obligations to maintain Eurodollar Loans have been similarly suspended
and (y) in the case of any replacement of a Lender under the circumstances
described in clause (iii) above, the applicable amendment, waiver,
discharge or termination that the Borrowers have requested shall become
effective upon giving effect to such replacement (and any related Assignment
and Assumption required to be effected in connection therewith under this Section
2.09).  The replacement of a Lender
pursuant to this Section 2.09 shall be effective on the fifth
Business Day (the “Replacement Date”) following the date of notice of
such replacement to the Lenders through the Administrative Agent, subject to
the satisfaction of the following conditions:

 

(i)            the
Borrowers shall have paid to the Administrative Agent the assignment fee
specified in Section 10.07(b)(iv);

 

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

 

46

 

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

 

(iv)          in
the case of any such assignment resulting from a claim for compensation under Section
3.04 or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and

 

(v)           such
assignment does not conflict with applicable Law.

 

A Lender shall not be required to make any such
assignment if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrowers to require such assignment
cease to apply.

 

Section
2.10  Fees.  The Borrowers, jointly and
severally, hereby agree to pay to each of the Agents, for their own respective
accounts, fees in the amounts and at the times specified in the Fee
Letter.  Such fees shall be fully earned
when paid and shall not be refundable for any reason whatsoever.  The Borrowers, jointly and severally, hereby
agree to pay to the Lenders such fees as shall have been separately agreed upon
in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and
shall not be refundable for any reason whatsoever.

 

Section
2.11  Pro-rata Treatment.  Except to the extent otherwise
provided herein, each Loan, each payment or prepayment of principal of or
interest on any Loan, each payment of fees and each conversion or continuation
of any Loan, shall be allocated pro-rata among the relevant Lenders in accordance
with their respective Commitment Percentages (or, if the Commitments have
expired or been terminated, in accordance with the respective principal amounts
of the outstanding Loans); provided that, in the event any amount paid
to any Lender pursuant to this Section 2.11 is rescinded or must
otherwise be returned by the Administrative Agent, each Lender shall, upon the
request of the Administrative Agent, repay to the Administrative Agent the
amount so paid to such Lender, with interest for the period commencing on the
date such payment is returned by the Administrative Agent until the date the
Administrative Agent receives such repayment at a rate per annum equal to,
during the period to but excluding the date two Business Days after such
request, the Federal Funds Rate, and thereafter, the Base Rate plus 2.00% per
annum.

 

Section
2.12  Sharing of Payments.  The Lenders agree among themselves
that, except to the extent otherwise provided herein, if any Lender shall
obtain payment in respect of any Loan or any other obligation owing to such
Lender under this Agreement through the exercise of a right of setoff, banker’s
lien or counterclaim, or pursuant to a secured claim under Section 506 of
the Bankruptcy Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable Debtor Relief
Laws or otherwise, or by any other means, in excess of its pro-rata share of
such payment as provided for in this Agreement, such Lender shall promptly pay
in cash or purchase from the other Lenders a participation in such Loans and
other obligations in such amounts and make such other adjustments from time to
time as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this
Agreement; provided that nothing in this Section 2.12 shall
impair the right of any Lender to exercise any right of set-off or counterclaim
it may have for payment of indebtedness of any Borrower other than its indebtedness
hereunder.  The Lenders further agree
among themselves that if payment to a Lender obtained by such Lender through
the exercise of a right of setoff, banker’s lien, counterclaim or other event
as aforesaid shall be rescinded or must otherwise be restored, each Lender
which shall have shared the benefit of such payment shall, by payment in cash
or a repurchase of a participation theretofore sold, return its share of that
benefit

 

47

 

(together with its
share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored.  Holdings and the Borrowers agree that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker’s lien or
counterclaim, with respect to such participation as fully as if such Lender
were a holder of such Loan or other obligation in the amount of such
participation.  The Administrative Agent
will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in
each case notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participation
pursuant to this Section shall from and after such purchase have the right to
give all notices, requests, demands, directions and other communications under
this Agreement with respect to the portion of the Loan or other obligation purchased
to the same extent as though the purchasing Lender were the original owner of
the obligations purchased.  If under any
applicable Debtor Relief Law, any Lender receives a secured claim in lieu of a
setoff to which this Section 2.12 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 2.12
to share in the benefits of any recovery on such secured claim.

 

Section
2.13  Payments; Computations.

 

(a)           Payments by the Borrowers.  Each payment of principal of and interest on
Loans and fees hereunder shall be paid not later than 2:00 P.M. on the date
when due, in Federal or other funds immediately available to the Administrative
Agent at the Administrative Agent’s Office. 
Each such payment shall be made without condition or deduction for any
counterclaim, defense, recoupment or setoff and irrespective of any claim or
defense to payment which might in the absence of this provision be asserted by
any Loan Party against the Administrative Agent or any Lender.  Payments received after 2:00 P.M. shall be
deemed to have been received on the next Business Day, and any applicable
interest or fee shall continue to accrue. 
Each Borrower shall, at the time it makes any payments under this
Agreement, specify to the Administrative Agent the Group of Loans, fees or
other amounts payable by the Borrowers hereunder to which such payment is to be
applied (and if it fails to specify or if such application would be
inconsistent with the terms hereof, the Administrative Agent shall, subject to Section 2.11,
distribute such payment to the Lenders in such manner as the Administrative
Agent may deem appropriate).  The
Administrative Agent will distribute such payments to the applicable Lenders on
the date of receipt thereof, if such payment is received prior to 2:00 P.M.;
otherwise the Administrative Agent will distribute such payment to the
applicable Lenders on the next succeeding Business Day.  Whenever any payment hereunder shall be due
on a day which is not a Business Day, the date for payment thereof shall be
extended to the next succeeding Business Day unless (in the case of Eurodollar
Loans) such Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Business Day.  If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.  Each Borrower
hereby authorizes and directs the Administrative Agent to debit any account
maintained by such Borrower with the Administrative Agent to pay when due any
amounts required to be paid from time to time under this Agreement.

 

(b)           Distributions by the Administrative Agent.  Unless the Administrative Agent shall have
received notice from the Borrowers prior to the date on which any payment is
due to the Lenders hereunder that the Borrowers will not make such payment in
full, the Administrative Agent may assume that the Borrowers have made such
payment in full to the Administrative Agent on such date, and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender.  If and to the extent
that the Borrowers shall not have so made such payment, each Lender shall repay
to the Administrative Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day

 

48

 

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

 

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

 

ARTICLE
III

TAXES, YIELD PROTECTION AND ILLEGALITY

 

Section
3.01  Taxes.

 

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

 

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

 

(c)           Borrowers’ Indemnification.  The Borrowers, jointly and severally, agree
to indemnify the Administrative Agent and each Lender for (i) the full amount
of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section) paid by the
Administrative Agent and such Lender and (ii) any liability (including
additions to tax, penalties, interest and expenses) arising therefrom or with
respect thereto, in each case whether or not such Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  Payment under this subsection (c)
shall be made within 30 days after the date the Lender or the Administrative
Agent makes a demand therefor.

 

49

 

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

 

Section
3.02  Illegality.  If, on or after the date of this
Agreement, the adoption of any applicable Law, or any change in any applicable
Law, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of Law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Lender (or its Applicable Lending
Office) to make, maintain or fund any of its Eurodollar Loans and such Lender
shall so notify the Administrative Agent, the Administrative Agent shall
forthwith give notice thereof to the other Lenders and the Company, whereupon,
until such Lender notifies the Company and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Lender to make Eurodollar Loans, or to convert outstanding Loans into
Eurodollar Loans, shall be suspended. 
Before giving any notice to the Administrative Agent pursuant to this Section 3.02,
such Lender shall designate a different Applicable Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender.  If such notice is given, each Eurodollar Loan
of such Lender then outstanding shall be converted to a Base Rate Loan either
(i) on the last day of the then current Interest Period applicable to such
Eurodollar Loan, if such Lender may lawfully continue to maintain and fund such
Loan to such day or (ii) immediately, if such Lender shall determine that it
may not lawfully continue to maintain and fund such Loan to such day.

 

Section
3.03  Inability to Determine Rates.  If on or prior to the
first day of any Interest Period for any Eurodollar Loan:

 

(i)            the
Administrative Agent determines (which determination shall be conclusive) that
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the applicable Eurodollar Rate
for such Interest Period; or

 

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

 

the Administrative Agent shall forthwith give notice
thereof to the Company and the Lenders, whereupon, until the Administrative
Agent notifies the Company that the circumstances giving rise to such
suspension no longer exist, (i) the obligations of the Lenders to make
Eurodollar Loans, or to continue or convert outstanding Loans as or into
Eurodollar Loans shall be suspended and (ii) each outstanding Eurodollar

50

 

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

 

Section
3.04  Increased Costs and Reduced Return;
Capital Adequacy.

 

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

 

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

 

(ii)           shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender (or its Applicable
Lending Office) which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or

 

(iii)          shall impose on such Lender (or its
Applicable Lending Office) any other condition (excluding any tax of any kind
whatsoever);

 

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

 

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

 

51

 

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

 

(c)           A
certificate of each Lender setting forth in sufficient detail the calculation
of such amount or amounts as shall be necessary to compensate such Lender or
its holding company as specified in subsection (a) or (b)
above, as the case may be, shall be delivered to the Company and shall be conclusive
absent manifest error.  The Borrowers
shall pay each Lender the amount shown as due on any such certificate delivered
by it within 10 Business Days after receipt of the same.

 

(d)           Promptly
after any Lender becomes aware of any circumstance that will, in its sole
judgment, result in a request for increased compensation pursuant to this Section 3.04,
such Lender shall notify the Company thereof. 
Failure on the part of any Lender so to notify the Company or to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender’s right to demand compensation with
respect to such period or any other period, except as expressly provided
otherwise above.  The protection of this Section 3.04
shall be available to each Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed.

 

Section
3.05  Funding Losses.  The Borrowers shall indemnify each
Lender against any loss or expense excluding any loss of anticipated profits
which such Lender may sustain or incur as a consequence of (i) any failure by
any Borrower to fulfill on the Closing Date the conditions set forth in Article IV,
(ii) any failure by any Borrower to borrow or to refinance, convert or continue
any Loan hereunder after irrevocable notice of such Loan, refinancing,
conversion or continuation has been given pursuant to Section 2.02
or 2.06, (iii) any payment, prepayment or conversion of a Eurodollar
Loan, whether voluntary or involuntary, pursuant to any other provision of this
Agreement or otherwise made on a date other than the last day of the Interest
Period applicable thereto, (iv) any default in payment or prepayment of the
principal amount of any Loan or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by irrevocable notice of
prepayment or otherwise), (v) the occurrence of any Event of Default or (vi)
the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrowers
pursuant to Section 2.09, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan.  Such loss or expense shall be the amount as
reasonably determined by such Lender as the excess, if any, of (i) the amount
of interest which would have accrued to such Lender on the amount so paid,
prepaid, converted, not borrowed or assigned at a rate of interest equal to the
Adjusted Eurodollar Rate for such Loan, for the period from the date of such
payment, prepayment, conversion, failure to borrow or assignment to the last
day (x) in the case of a payment, prepayment, conversion or assignment other
than on the last day of the Interest Period for such Loan, of the then current
Interest Period for such Loan, or (y) in the case of such failure to borrow, of
the Interest Period for such Loan which would have commenced on the date of
such failure to borrow, over (ii) the amount of interest which would have
accrued to such Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the London interbank market.  A certificate of any Lender setting forth in
sufficient detail the calculation of any amount or amounts which such Lender is
entitled to receive pursuant to this Section 3.05 shall be
delivered to the Company and shall be conclusive absent manifest error.

 

52

 

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

 

Section
3.07  Survival.  All of the Borrowers’ obligations under this Article III
shall survive termination of the Commitments and repayment of all other Term
Loan Obligations hereunder.

 

ARTICLE
IV

CONDITIONS PRECEDENT TO LOANS

 

Section
4.01  Conditions to Closing.  The obligation of each Lender to
make a Loan on the Closing Date is subject to the satisfaction of the following
conditions:

 

(a)           Executed Term Loan Documents.  Receipt by the Administrative Agent of duly
executed copies of:  (i) this Agreement;
(ii) the Notes; (iii) the Guaranty; (iv) the Collateral Documents; (v) the
Intercreditor Agreement and (vi) all other Term Loan Documents, each in form
and substance satisfactory to the Joint Lead Arrangers and the Lenders in their
sole discretion.

 

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

 

(c)           Organization Documents.  The Administrative Agent shall have
received:  (i) a copy of the Organization
Documents, including all amendments thereto, of each Loan Party, certified as
of a recent date by the Secretary of State of its respective state of
organization, and a certificate as to the good standing of each Loan Party from
such Secretary of State, as of a recent date; (ii) a certificate as to the good
standing of each Loan Party, as of a recent date, from the Secretary of State
or other applicable authority of its respective jurisdiction of organization
and from each other state in which such Loan Party is qualified or is required
to be qualified to do business, together in each case, to the extent generally
available, with a certificate or other evidence of good standing as to payment
of any applicable franchise or similar taxes from the appropriate taxing
authority of each such jurisdiction; (iii) a certificate of the Secretary or
Assistant Secretary of each Loan Party dated the Closing Date and certifying
(A) that the Organization Documents of such Loan Party have not been amended
since the date of the last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above; (B) that attached
thereto is a true and complete copy of the agreement of limited partnership,
operating agreement or by-laws of such Loan Party, as applicable, as in effect
on the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (C) below, (C) that attached thereto is
a true and complete copy of resolutions duly adopted by the board of directors
or other governing body of such Loan Party authorizing the execution, delivery
and performance of the Term Loan Documents to which it is to be a party and, in
the case of the Borrowers, the borrowings hereunder, and that such resolutions
have not

 

53

 

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

 

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

 

(e)           Opinions of Counsel.  On the Closing Date, the Administrative Agent
shall have received:

 

(i)            a
favorable written opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP,
special counsel to the Loan Parties, addressed to the Agents, and each Lender,
dated the Closing Date, substantially in the form of Exhibit E
hereto and covering such additional matters incident to the transactions
contemplated hereby as the Joint Lead Arrangers or the Required Lenders may
reasonably request;

 

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

 

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

 

(f)            Capitalization.  On or prior to the Closing Date, (i) Holdings
shall have received gross cash proceeds of not less than $234,000,000 (of which
not less than $120,000,000 shall have been provided, directly or indirectly, by
the Sponsor Group) in connection with the purchase by the Investor Group of
common equity of Holdings (the “Closing Date Equity Issuance”), (ii)
Holdings shall have contributed the aggregate gross cash proceeds of the
Closing Date Equity Issuance to the common equity of the Company, (iii) when
aggregated with the gross cash proceeds of the Senior Subordinated Notes, the
cash proceeds of the Closing Date Equity Issuance shall be sufficient, and
shall be used by the Borrowers, to pay the cash consideration payable under the
DRI Merger Agreement, to consummate the Acquisition and to pay all fees and
expenses owing in connection therewith and (iv) the Administrative Agent shall
have received true and correct copies, certified as such by an appropriate
officer of Holdings, of all subscription agreements, registration rights
agreements, shareholder agreements and other documents and instruments
delivered in connection with the Closing Date Equity Issuance (collectively,
the “Capitalization Documents”), each of which shall be in full force
and effect and shall be in form and substance reasonably satisfactory to the
Joint Lead Arrangers.

 

(g)           ABL Credit Agreement and Related Agreements.  On or prior to the Closing Date, (i) Duane
Reade, the Company, DRI I, DR International and DR Realty shall have entered
into Amendment No. 1 to the ABL Credit Agreement, the ABL Collateral Release
Agreement and the ABL Security Agreement Amendment on terms that are reasonably
satisfactory to the Joint Lead Arrangers, (ii)

 

54

 

the Administrative
Agent shall have received true and correct copies of the ABL Documents,
certified as such by an appropriate officer of Duane Reade, (iii) the ABL
Facility Agent shall have executed and delivered each of the ABL Collateral
Release Agreement, the ABL Security Agreement Amendment and the Intercreditor
Agreement, in each case on terms reasonably satisfactory to the Joint Lead
Arrangers and (iv) the aggregate undrawn committed amount available to be drawn
under the ABL Credit Agreement, giving effect to all borrowings and payments
thereunder on the Closing Date and calculated after giving pro-forma effect to
the repayments on all Existing Convertible Notes (assuming that such repayment
was financed dollar-for dollar using amounts on deposit in the Existing
Convertible Notes Escrow Account and the proceeds of Loans under the ABL Credit
Agreement) shall not be less than $80,000,000.

 

(h)           Issuance of the Senior Subordinated Notes.  On or prior to the Closing Date, the Company
and Duane Reade shall have (A) entered into the Senior Subordinated Note
Indenture on terms that are reasonably satisfactory to the Joint Lead
Arrangers, (B) the Company and Duane Reade shall have executed and delivered
the Senior Subordinated Notes, (C) the Administrative Agent shall have received
true and correct copies, certified as such by an appropriate officer of the
Company, of the Senior Subordinated Note Indenture and each of the Senior
Subordinated Notes as originally executed and delivered, each of which shall be
in full force and effect, (D) the Company shall have received gross cash
proceeds of at least $195,000,000 from the issuance of the Senior Subordinated
Notes (it being understood that such cash proceeds shall include all amounts
directly applied to pay underwriting and placement commissions and discounts
and related fees), (E) such proceeds shall have been released to the
Company from any applicable escrow arrangement and (F) the Company shall have
utilized the full amount of such cash proceeds to make payments owing in
connection with the Transaction prior to or concurrently with the utilization
of any proceeds of the Loans for such purpose.

 

(i)            Consummation of the Acquisition.  On or prior to the Closing Date, there shall
have been delivered to the Administrative Agent true and correct copies of the
final Acquisition Documents, certified as such by an appropriate officer of the
Company, and all terms and conditions of the Acquisition Documents shall not
have been altered, amended or otherwise changed or supplemented or any
condition therein waived in any material respect from those in effect on July
22, 2004 without the prior written consent of the Joint Lead Arrangers.  The DRI Merger, including all of the terms
and conditions thereof, shall have been duly approved by the board of directors
and the shareholders of each of DR Acquisition and the Company, and all
Acquisition Documents shall have been duly executed and delivered by the
parties thereto and shall be in full force and effect.  The representations and warranties set forth
in the Acquisition Documents shall be true and correct in all material respects
as if made on and as of the Closing Date. 
Each of the conditions precedent to the Group Companies’ obligations to
consummate the Acquisition as set forth in the Acquisition Documents shall have
been satisfied to the reasonable satisfaction of the Joint Lead Arrangers or
waived with the consent of the Joint Lead Arrangers.  On the Closing Date, prior to the funding of
the Loans, the DRI Merger shall have been consummated in accordance with all
applicable laws and the DRI Merger Agreement (without giving effect to any
material amendment or modification thereof or waiver with respect thereto,
including, but not limited to, any modification, amendment, supplement or material
waiver relating to any disclosure schedule or exhibit, unless consented to
by the Joint Lead Arrangers). 
Simultaneously with the DRI Merger, all shares of capital stock of the
Company, as the surviving entity in the DRI Merger, shall be pledged pursuant
to the Pledge Agreement, and all stock certificates evidencing such shares of
capital stock after giving effect to the DRI Merger shall have been delivered
to the Collateral Agent.  On the Closing
Date, the certificate of merger with respect to the DRI Merger shall have been
filed with the appropriate Governmental Authority having primary jurisdiction
over affairs of corporations in Delaware.

 

(j)            Other Indebtedness.  After the consummation of the transactions
contemplated by the Transaction Documents on the Closing Date, the Group
Companies shall have no material liabilities (actual or contingent) or
Preferred Stock, except (i) as disclosed in (A) the most recent interim

 

55

 

balance sheet
included in the financial statements delivered pursuant to subsection (p)
below or (B) in the Company’s Form 10-K/A for the fiscal year ended December
27, 2003, the Company’s Proxy Statement on Schedule 14A filed with the SEC on
June 30, 2004 and the Company’s Form 10-Q for the fiscal quarter ended March
31, 2004 (collectively, the “SEC Filings”), (ii) for accounts payable
incurred in the ordinary course of business consistent with past practice since
the date of the most recent interim balance sheet included in the financial
statements delivered pursuant to subsection (p) below and not in
violation of the DRI Merger Agreement, (iii) Indebtedness under the Term Loan
Documents, the Senior Subordinated Notes and/or the ABL Documents and (iv) the
Existing Convertible Notes.

 

(k)           Perfection of Personal Property Security Interests
and Pledges;  Search Reports.  On or prior to the Closing Date, the
Collateral Agent shall have received:

 

(i)            a
Perfection Certificate from each Loan Party;

 

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

 

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

 

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

 

(v)           all
of the Pledged Collateral, which Pledged Collateral shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, accompanied in each case by any required
transfer tax stamps, all in form and substance satisfactory to the Collateral
Agent; and

 

(vi)          evidence
of the completion of all other filings and recordings of or with respect to the
Collateral Documents and of all other actions as may be necessary or, in the
opinion of the Collateral Agent, desirable to perfect the security interests
intended to be created by the Collateral Documents.

 

(l)            Evidence of Insurance.  Receipt by the Collateral Agent of copies of
insurance policies or certificates of insurance of the Loan Parties and their
Subsidiaries evidencing liability and casualty insurance meeting the
requirements set forth in the Term Loan Documents, including, but not limited
to, naming the Collateral Agent as additional insured and loss payee on behalf
of the Lenders.

 

56

 

(m)          Consents and Approvals.  On the Closing Date, all necessary
governmental (domestic or foreign), regulatory and third party approvals
(including, without limitation, those with respect to real property leases and
license agreements relating to intellectual property but excluding with respect
to non-governmental and non-regulatory approvals those the failure to obtain
would not reasonably be expected to have a Material Adverse Affect) in
connection with the transactions contemplated by the DRI Merger Agreement and
the other Transaction Documents and otherwise referred to herein or therein
shall have been obtained and remain in full force and effect, and all
applicable waiting periods (including any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976) shall have expired, in
each case without any action being taken by any competent authority which could
restrain or prevent such transactions or impose, in the reasonable judgment of
the Joint Lead Arrangers, materially adverse conditions upon the consummation
of such transactions.

 

(n)           Litigation; Judgments.  On the Closing Date, except as disclosed in
the SEC Filings, there shall be no actions, suits, proceedings or
investigations pending or threatened (i) with respect to this Agreement or any
other Transaction Document or the transactions contemplated hereby or thereby
or (ii) which the Joint Lead Arrangers or the Required Lenders shall determine
could reasonably be expected to have a Material Adverse Effect.  Additionally, there shall not exist any
judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the
transactions contemplated by the Transaction Documents and otherwise referred
to herein or therein.

 

(o)           Solvency Certificate.  On or prior to the Closing Date, each Loan
Party shall have delivered or caused to be delivered to the Administrative
Agent a solvency certificate from the chief financial officer of each of the
Loan Parties, in form and substance reasonably satisfactory to the Joint Lead
Arrangers, setting forth the conclusions that, after giving effect to the
Acquisition and the consummation of all financings contemplated herein,
Holdings and its Subsidiaries (on a consolidated basis), Holdings (on a
stand-alone basis), the Company (on a stand-alone basis), the Company and its Subsidiaries
(on a consolidated basis) and Duane Reade (on a stand-alone basis) is Solvent
and will not be rendered insolvent by the indebtedness incurred in connection
herewith.

 

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

 

57

 

Consolidated
EBITDA of Holdings and its Consolidated Subsidiaries for the twelve-month
period then ended (which pro forma
ratio shall be calculated reflecting the transactions contemplated to occur on
or prior to the Closing Date on a Pro-Forma
Basis) was not greater than 5.8 to 1.0; and (iv) written certifications
from the chief executive officer and chief financial officer of each of
Holdings and the Borrowers that would be required by Section 906 and Section
302 of the Sarbanes-Oxley Act of 2002.

 

(q)           Material Adverse Effect.  Since December 27, 2003, there shall not have
occurred any Material Adverse Effect.

 

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

 

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

 

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

 

(u)           Representations and Warranties.  The representations and warranties made by
the Loan Parties in any Term Loan Document shall be true and correct in all
material respects.

 

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

 

All corporate and legal proceedings and instruments
and agreements relating to the transactions contemplated by this Agreement and
the other Transaction Documents or in any other document delivered in
connection herewith or therewith shall be satisfactory in form and substance to
the Joint Lead Arrangers and their counsel, and the Joint Lead Arrangers shall
have received all information and copies of all documents and papers, including
records of corporate proceedings, governmental approvals, good standing
certificates and bring-down telegrams, if any, which they reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or Governmental Authorities.  The documents referred to in this Section 4.01
shall be delivered to the Administrative Agent no later than the Closing
Date.  The certificates and opinions
referred to in this Section 4.01 shall be dated the Closing Date.

 

The requirement that any document, agreement,
certificate or other writing be satisfactory to the Required Lenders shall be
deemed to be satisfied if (i) such document, agreement, certificate or other
writing was delivered to the Lenders not less than one Business Day prior to
the Closing Date, (ii) such document, agreement, certificate or other writing
is satisfactory to the Joint Lead Arrangers and (iii) Lenders holding at least
50% of the Commitments have not objected in writing to such document,
agreement, certificate or other writing to the Administrative Agent prior to
the Closing Date.

 

Promptly after the Closing Date occurs, the
Administrative Agent shall notify the Company and the Lenders of the Closing
Date, and such notice shall be conclusive and binding on all parties
hereto.  If the Closing Date does not
occur before 5:00 P.M. on August 18, 2004, the

 

58

 

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

 

ARTICLE
V

REPRESENTATIONS AND WARRANTIES

 

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

 

Section
5.01  Existence, Qualification and Power; Compliance with Laws. 
Each Group Company (i) is a corporation, partnership or limited
liability company duly organized or formed, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization, (ii) has all requisite power and authority and all requisite
governmental licenses, authorizations, consents and approvals to (A) own its
assets and carry on its business and (B) execute, deliver and perform its
obligations under the Term Loan Document to which it is a party, (iii) is duly
qualified and is licensed and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license and (iv) is in
compliance with all Laws, except in each case referred to in clause (ii)(A),
(iii) or (iv), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

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

 

Section
5.03  Governmental Authorization; Other Consents.  Except
as set forth on Schedule 5.03 hereto, no approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Transaction Document to
which it is a party.

 

Section
5.04  Binding Effect.  This Agreement has been, and each
other Term Loan Document, when delivered hereunder, will have been, duly
executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other
Term Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and (ii) that rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability (regardless of whether enforcement is sought by
proceedings in equity or at law).

 

59

 

Section
5.05  Financial Condition; No Material Adverse
Effect.

 

(a)           Audited Financial Statements.  The Audited Financial Statements: (i) were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby, except as otherwise expressly noted therein; (ii) fairly
present in all material respects the financial condition of the Company and its
Subsidiaries as of the date thereof and their results of operations for the
respective periods covered thereby in accordance with GAAP consistently applied
throughout the periods covered thereby, except as otherwise expressly noted
therein; and (iii) except as disclosed in the SEC Filings, show all material
indebtedness and other liabilities, direct or contingent, of the Company and
its Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Indebtedness.

 

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

 

(c)           Material Adverse Change.  Since the date of the most recent Audited
Financial Statements, there has been no event or circumstance, either
individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect.

 

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

 

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

 

60

 

viewed as facts
and that actual results during the period or periods covered by such
projections may differ from the projected results and that such differences may
be material.

 

(f)            No Undisclosed Liabilities.  Except as fully reflected in the financial
statements described in subsection (a) and (b) above and in
the SEC Filings, and the Indebtedness incurred under this Agreement and the
other Transaction Documents, (i) there were as of the Closing Date (and after
giving effect to the Loans), no liabilities or obligations (excluding current
obligations incurred in the ordinary course of business) with respect to any
Group Company of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether or not due and including obligations or liabilities
for taxes, long-term leases and unusual forward or other long-term
commitments), and (ii) neither Holdings nor the Company knows of any basis for
the assertion against any Group Company of any such liability or obligation
which, either individually or in the aggregate, are or could reasonably be
expected to have, a Material Adverse Effect.

 

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

 

Section
5.07  No Default.  No Group Company is in default under or with
respect to any Contractual Obligation that could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Transaction Document.

 

Section
5.08  Ownership of Property; Liens.  Each Group Company
has good and marketable title to, or valid leasehold interests in, all its
material properties and assets, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted. All
such material properties and assets are free and clear of Liens other than
Permitted Liens.  Each Group Company has
complied with all obligations under all leases to which it is a party, other
than leases that, individually or in the aggregate, are not material to the
Group Companies, taken as a whole, and the violation of which will not result
in a Material Adverse Effect, and all such leases are in full force and effect,
other than leases that, individually or in the aggregate, are not material to
the Group Companies, taken as a whole, and in respect of which the failure to
be in full force and effect will not result in a Material Adverse Effect. Each
Group Company enjoys peaceful and undisturbed possession under all such leases
with respect to which it is the lessee, other than leases that, individually or
in the aggregate, are not material to the Group Companies, taken as a whole,
and in respect of which the failure to enjoy peaceful and undisturbed
possession will not result in a Material Adverse Effect.

 

Section
5.09  Environmental Compliance.  Except as would not
result in a Material Adverse Effect, no Group Company has failed to comply with
any applicable Environmental Law or to obtain, maintain, or comply with any
permit, license or other approval required under any Environmental Law or is
subject to any Environmental Liability or has received notice of any claim with
respect to any Environmental Liability, and no Group Company knows of any basis
for any Environmental Liability against any Group Company.

 

Section
5.10  Insurance.  The properties of each Group Company are
insured with financially sound and reputable insurance companies not Affiliates
of the Company, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the applicable Group Company
operates.

 

61

 

Section
5.11  Taxes.  Each Group Company has filed, or
caused to be filed, all federal income tax and all material federal, state,
local and foreign tax returns required to be filed and paid (i) all amounts of
taxes shown thereon to be due (including interest and penalties) and (ii) all
other material taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangible
taxes) owing by it, except for such taxes (A) which are not yet delinquent or
(B) that are being contested in good faith and by proper proceedings diligently
pursued, and against which adequate reserves are being maintained in accordance
with GAAP.  As of the Closing Date, no
Loan Party knows of any pending investigation of such party by any taxing
authority or proposed tax assessments against any Group Company that would, if
made, have a Material Adverse Effect.

 

Section
5.12  ERISA Compliance.

 

(a)           There
are no Unfunded Liabilities other than with respect to the UMFPP.  With respect to the UMFPP, to the knowledge
of the Borrowers, there are no Unfunded Liabilities as of the last valuation
date preceding the date hereof.

 

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

 

(c)           No
ERISA Event has occurred or, subject to the passage of time, is reasonably
expected to occur with respect to any Plan other than (i) with respect to the
UMFPP, and only to the extent of $31,000,000 plus quarterly charges recognized
by the Company with respect to such liabilities after the date hereof and
calculated on the same basis as the related charge recorded in the Audited
Financial Statements of the Company for its fiscal year ended December 27, 2003
and only until 30 days after a final determination of such liabilities, the
potential failures by the Parent Borrower to make the appropriate contributions
to the UMFPP between the years 2000 and 2004 as described in Schedule 5.06, and
(ii) as set forth on Schedule 5.12(c) hereto.

 

(d)           No
Group Company:  (i) is or has been within
the last six years a party to any Multiemployer Plan other than with respect to
the UMFPP, the Union Mutual Medical Fund or the Union Mutual Vacation Fund or
(ii) has withdrawn from any Multiemployer Plan, other than as set forth on Schedule
5.12(d) hereto.

 

(e)           The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder will not involve any transaction that is
subject to the prohibitions of Section 406 of ERISA or in connection with
which taxes could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the
Code.

 

(f)            No
Group Company or any ERISA Affiliate has any material contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than (i)
liability for continuation coverage described in Part 6 of Title I of ERISA,
(ii) pursuant to the Union Mutual Medical Fund, but only to the extent of such
amount described in Section 5.12(c) when aggregated with the liability
to the UMFPP, and (iii) as set for on Schedule 5.12(f) hereto.

 

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

 

62

 

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

 

(i)            Each
Group Company is in material compliance with all applicable Laws, trust
documentation and contracts relating to the Employee Benefit Arrangements.

 

Section
5.13  Subsidiaries.  Schedule 5.13 sets
forth a complete and accurate list of all Subsidiaries of Holdings as of the
Closing Date.  Schedule 5.13
sets forth as of the Closing Date the jurisdiction of formation of each such
Subsidiary, the number of authorized shares of each class of Equity Interests
of each such Subsidiary, the number of outstanding shares of each class of
Equity Interests, the number and percentage of outstanding shares of each class
of Equity Interests of each such Subsidiary owned (directly or indirectly) by
any Person and the number and effect, if exercised, of all Equity Equivalents
of each such Subsidiary.  All the
outstanding Equity Interests of each Subsidiary of Holdings are validly issued,
fully paid and non-assessable and were not issued in violation of the
preemptive rights of any shareholder and are owned by Holdings, directly or
indirectly, free and clear of all Liens (other than those arising under the
Collateral Documents).  As of the Closing
Date, other than as set forth on Schedule 5.13, no such Subsidiary
has outstanding any Equity Equivalents nor does any such Person have
outstanding any rights to subscribe for or to purchase or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating
to, its Equity Interests.  Holdings has no
Subsidiaries, other than the Company and its Subsidiaries.

 

Section
5.14  Margin Regulations; Investment Company
Act; Public Utility Holding Company Act. 

 

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

 

(b)           No
Group Company is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each
as amended.  In addition, none of the
Group Companies is (i) an “investment company” registered or required to be
registered under the Investment Company Act of 1940, as amended, (ii) controlled
by such a company, or (iii) a “holding company,” a “subsidiary company” of a
“holding company,” or an “affiliate” of a “holding company” or of a
“subsidiary” of a “holding company,” within the meaning of the Public Utility
Holding Company Act of 1934, as amended.

 

Section
5.15  Disclosure.  No statement, information, report,
representation, or warranty made by any Loan Party in any Term Loan Document or
furnished to the Administrative Agent or any Lender by or on behalf of any Loan
Party in connection with any Term Loan Document, taken as a whole

 

63

 

and as
supplemented from time to time up to and including the Closing Date, contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.

 

Section
5.16  Compliance with Law.  Each Group Company is in
compliance with all requirements of Law (including Environmental Laws)
applicable to it or to its properties, except for any such failure to comply
which could not reasonably be expected to cause a Material Adverse Effect.  To the knowledge of the Loan Parties as of
the Closing Date, none of the Group Companies or any of their respective
material properties or assets is subject to or in default with respect to any
judgment, writ, injunction, decree or order of any court or other Governmental
Authority.  As of the Closing Date, none
of the Group Companies has received any written communication from any
Governmental Authority that alleges that any of the Group Companies is not in
compliance in any material respect with any Law, except for allegations that
have been satisfactorily resolved and are no longer outstanding.

 

Section
5.17  Intellectual Property.  Except as set forth in Schedule 5.17
hereto, the Company and its Subsidiaries own, or possess the right to use, all
of the trademarks, service marks, trade names, copyrights, patents, patent
rights, franchises, licenses and other rights that are reasonably necessary for
the operation of their respective businesses, except for those rights the
failure to own or possess could not reasonably be expected to have a Material
Adverse effect.  To the best knowledge of
the Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Subsidiary infringes upon any intellectual
property rights held by any other Person.

 

Section
5.18  Purpose of Loans.  The proceeds of the Loans will be
used on the Closing Date by Duane Reade and the Company to prepay loans
outstanding under the ABL Credit Agreement, to fund a portion of the Existing
Convertible Notes Escrow Account and to pay Transaction fees and expenses.

 

Section
5.19  Labor Matters.  There are no strikes against
Holdings or any of its Subsidiaries, other than any strikes that, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.  The consummation of the
Transactions will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which Holdings or any of its Subsidiaries is a party or by which
Holdings or any of its Subsidiaries (or any predecessor) is bound, other than
collective bargaining agreements which, individually or in the aggregate, are
not material to Holdings and its Subsidiaries taken as a whole.

 

Section
5.20  Solvency.  Each Loan Party is and, after
consummation of the Transactions, will be Solvent.

 

Section 5.21 
Collateral Documents.

 

(a)           Article 9
Collateral.  Each of the Security Agreement and the
Pledge Agreement is effective to create in favor of the Collateral Agent, for
the ratable benefit of the Finance Parties, a legal, valid and enforceable
security interest in the Collateral described therein and, when financing
statements in appropriate form are filed in the offices specified on Schedule 4.01
to the Security Agreement and the Pledged Collateral is delivered to the
Collateral Agent in accordance with the Pledge Agreement, each of the Security
Agreement and the Pledge Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in such of the Collateral in which a security interest can be
perfected under Article 9 of the Uniform Commercial Code, in each case
prior and superior in right to any other Person other than with respect to
Permitted Liens.

 

64

 

(b)           Intellectual Property.  When the Assignment of Patents and
Trademarks, substantially in the form of Exhibit A to the Security
Agreement, is duly filed in the United States Patent and Trademark Office and
the Assignment of Copyrights, substantially in the form of Exhibit B to
the Security Agreement, is duly filed in the United States Copyright Office,
the Security Agreement shall (assuming that the financing statements referred
to paragraph (a) above have been filed in the appropriate filing
offices) constitute a fully perfected Lien on, and security interest in, all
right, title and interest of the grantors thereunder in the Intellectual
Property covered in such Assignments, in each case prior and superior in right
to any other Person (it being understood that subsequent recordings in the
United States Patent and Trademark Office and the United States Copyright
Office may be necessary to perfect a lien on registered trademarks, trademark
applications and copyrights acquired by the Loan Parties after the Closing
Date).

 

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

 

Section
5.22  Securities of the Company. 
Holdings owns good, valid and marketable title to all the outstanding
common stock of the Company, free and clear of all Liens of every kind, whether
absolute, matured, contingent or otherwise, other than those arising under the
Collateral Documents.  Except as set
forth on Schedule 5.22, there are no shareholder agreements or
other agreements pertaining to Holdings’ beneficial ownership of the common
stock of the Company, including any agreement that would restrict Holdings’
right to dispose of such common stock and/or its right to vote such common
stock.

 

Section
5.23  Certain Transactions.

 

(a)           DRI Merger Agreement.  On the Closing Date, (i) the DRI Merger Agreement
has not been amended or modified, since June 30, 2004 nor has any condition
thereof been waived by Holdings or DR Acquisition, (ii) all conditions to the
obligations of Holdings and DR Acquisition to consummate the transactions
contemplated by the DRI Merger Agreement have been satisfied and (iii) the
transactions contemplated by the DRI Merger Agreement have been consummated in
accordance with the DRI Merger Agreement in all material respects and all
applicable requirements of Law.

 

(b)           Senior Subordinated Notes.  On the Closing Date, (i) the Senior
Subordinated Note Indenture has not been amended or modified, nor has any
condition thereof been waived by the Company in a manner adverse in any
material respect to the rights or interests of the Lenders and (ii) all funds
advanced by the Senior Subordinated Noteholders have been used, together with
the proceeds of the Closing Date Equity Issuance, to consummate the
transactions contemplated by the DRI Merger Agreement.

 

ARTICLE
VI

AFFIRMATIVE COVENANTS

 

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

 

Section
6.01  Financial Statements.  The Company will furnish, or cause
to be furnished, to the Administrative Agent for further distribution to each
of the Lenders:

 

65

 

(a)           Annual Financial Statements.  As soon as available, and in any event within
90 days after the end of each fiscal year of the Company ending after the
Closing Date, a consolidated balance sheet and income statement of the Company
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations and retained earnings and cash
flows for such fiscal year, setting forth in comparative form consolidated
figures for the preceding fiscal year, all such financial statements to be
audited by independent certified public accountants of recognized national
standing reasonably acceptable to the Administrative Agent and accompanied by
an opinion of such accountants (which shall not be qualified or limited in any
material respect) to the effect that such consolidated financial statements
have been prepared in accordance with GAAP and present fairly in all material
respects the consolidated financial position and consolidated results of
operations and cash flows of the Company and its Consolidated Subsidiaries in
accordance with GAAP consistently applied (except for changes with which such
accountants concur).

 

(b)           Quarterly Financial Statements.  As soon as available, and in any event within
45 days after the end of each of the first three fiscal quarters in each fiscal
year of the Company, commencing with the fiscal quarter ending June 30, 2004, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the end of such fiscal quarter, together with related consolidated
statements of operations and retained earnings and cash flows for such fiscal quarter
and the then elapsed portion of such fiscal year, setting forth in comparative
form consolidated figures for the corresponding periods of the preceding fiscal
year, all such financial statements to be in form and detail and reasonably
acceptable to the Administrative Agent, and accompanied by a certificate of the
chief financial officer of the Company to the effect that such quarterly
financial statements have been prepared in accordance with GAAP and present
fairly in all material respects the consolidated financial position and
consolidated results of operations and cash flows of the Company and its
Consolidated Subsidiaries in accordance with GAAP consistently applied, subject
to changes resulting from normal year-end audit adjustments and the absence of
footnotes required by GAAP.

 

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

 

Section
6.02  Certificates; Other Information.  The Company will
furnish, or cause to be furnished, to the Administrative Agent for further
distribution to each of the Lenders, in form and detail reasonably satisfactory
to them:

 

(a)           Auditors’ Certificate.  Concurrently with the delivery of the
financial statements referred to in Section 6.01(a), a certificate
of its independent certified public accountants certifying such financial
statements and stating that in the course of the audit upon which their opinion
on such financial statements was based (but without any special or additional
audit procedures for the purpose), they obtained knowledge of no condition or
event relating to financial matters which constitutes a Default or an Event of
Default or, if such accountants shall have obtained in the course of such audit
knowledge of any such Default or Event of Default, disclosing in such written
statement the nature and period of existence thereof, it being understood that
such accountants shall be under no liability, directly or indirectly, to the
Lenders for failure to obtain knowledge of any such condition or event.

 

(b)           Compliance Certificate.  At the time of delivery of the financial
statements provided for in Sections 6.01(a) and 6.01(b)
above, a Compliance Certificate of the chief financial officer of the Company
(i) demonstrating compliance with the Leverage Ratio and the Interest Coverage
Ratio contained in Section 7.16 by calculation thereof as of the end of
the fiscal period covered by such financial statements, (ii) stating that no
Default or Event of Default exists, or if any Default or Event of

 

66

 

Default does
exist, specifying the nature and extent thereof and what action the Company
proposes to take with respect thereto, (iii) stating whether, since the date of
the most recent financial statements delivered hereunder, there has been any
material change in the GAAP applied in the preparation of the financial
statements of the Company and its Consolidated Subsidiaries, and, if so,
describing such change and (iv) identifying all Asset Dispositions, Casualties,
Condemnations, Debt Issuances (other than Debt Issuances permitted under Section
7.01) and Equity Issuances (other than Excluded Equity Issuances) that were
made or Extraordinary Receipts that were received since the end of the previous
fiscal quarter and setting forth a reasonably detailed calculation of the Net
Cash Proceeds received from all Asset Dispositions, Casualties, Condemnations,
Debt Issuances (other than Debt Issuances permitted under Section 7.01)
and Equity Issuances (other than Excluded Equity Issuances) and Extraordinary
Receipts that were made or received since the end of the previous fiscal
quarter.

 

(c)           Auditor’s Reports.  Promptly upon receipt thereof, a copy of any
final detailed audit reports, management letters or recommendations submitted
to the board of directors (or the audit committee of the board of directors) of
any Group Company by independent accountants in connection with the accounts or
books of any Group Company, or any audit of any of them.

 

(d)           SEC Reports.  Promptly after the same are available, copies
of each annual report, proxy or financial statement or other report or
communication sent to any holder of registered securities of any Group Company,
and copies of all annual, regular, periodic and special reports and
registration statements which any Group Company may file or be required to file
with the SEC under Section 13 or 15(d) of the Exchange Act, and not
otherwise required to be delivered to the Administrative Agent pursuant hereto.

 

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

 

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

 

(g)           ERISA Reports.  Promptly after the same are available, (or,
with respect to Multiemployer Plans, become available to the Company) the most
recently prepared actuarial reports in relation to the Employee Benefit
Arrangements for the time being operated by Group Companies which are prepared
in order to comply with the then current statutory or auditing requirements
within the relevant jurisdiction.  If
requested by the Administrative Agent, the Company will promptly instruct an
actuary to prepare such actuarial reports and deliver those to the
Administrative Agent, if the Administrative Agent has reasonable grounds for
believing that any relevant statutory or auditing requirement within the
relevant jurisdiction is not being complied with.  Promptly upon request, the Company shall also
furnish the Administrative Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested, including
copies of each annual report/return (Form 5500 series), as well as all
schedules and attachments thereto required to be filed with the Department of
Labor and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each “plan year” (within the meaning of Section 3(39) of
ERISA).

 

(h)           Additional Patents, Trademarks and Copyrights.  At the time of delivery of the financial
statements and reports provided for in Section 6.01(a), a report
signed by the chief financial

 

67

 

officer or other
Responsible Officer of the Company setting forth (i) a list of registration
numbers for all patents, trademarks, service marks, tradenames and copyrights
awarded to any Group Company since the last day of the immediately preceding
fiscal year of the Company and (ii) a list of all patent applications, trademark
applications, service mark applications, trade name applications and copyright
applications submitted by any Group Company since the last day of the
immediately preceding fiscal year and the status of each such application, all
in such form as shall be reasonably satisfactory to the Administrative Agent.

 

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

 

(j)            Other Information.  With reasonable promptness upon request
therefor, such other information regarding the business, properties or
financial condition of any Group Company as the Administrative Agent or any
Lender may reasonably request, which may include such information as any Lender
may reasonably determine is necessary or advisable to enable it either (i) to
comply with the policies and procedures adopted by it and its Affiliates to
comply with the Bank Secrecy Act, the U.S. Patriot Act and all applicable
regulations thereunder or (ii) to respond to requests for information
concerning Holdings and its Subsidiaries from any governmental, self-regulatory
organization or financial institution in connection with its anti-money
laundering and anti-terrorism regulatory requirements or its compliance
procedures under the U.S. Patriot Act, including in each case information
concerning the Company’s direct and indirect shareholders and its use of the
proceeds of the Loans hereunder.

 

Documents required to be delivered pursuant to Section 6.01(a)
or (b) or Section 6.02(d) (to the extent any such documents
are included in materials otherwise filed with the SEC) may be delivered
electronically and if so delivered shall be deemed to have been delivered on
the date (i) on which the Company posts such documents, or provides a link
thereto on the Company’s website on the Internet at the website address listed
on Schedule 10.02; or (ii) on which such documents are posted on
the Company’s behalf on IntraLinks/IntraAgency or another relevant website, if
any, to which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative
Agent); provided that:  (i) the
Company shall deliver paper copies of such documents to the Administrative
Agent or any Lender that requests the Company to deliver such paper copies
until a written request to cease delivering paper copies is given by the
Administrative Agent or such Lender and (ii) the Company shall notify (which
may be by facsimile or electronic mail) the Administrative Agent and each
Lender of the posting of any such documents and provide to the Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents.  Notwithstanding anything
contained herein, in every instance the Company shall be required to provide
paper copies of the Compliance Certificates required by Section 6.02(b)
to the Administrative Agent.  Except for
such Compliance Certificates, the Administrative Agent shall have no obligation
to request the delivery or to maintain copies of the documents referred to
above, and in any event shall have no responsibility to monitor compliance by
the Company with any such request for delivery, and each Lender shall be solely
responsible for requesting delivery to it or maintaining its copies of such
documents.

 

The Borrowers hereby agree and acknowledge that the
Administrative Agent and/or the Joint Lead Arrangers will at their option make
available to the Lenders materials and/or information provided by or on behalf
of the Borrowers, hereunder (collectively, “Borrower Materials”) by
posting such Borrower Materials on IntraLinks or another similar electronic
system (the “Platform”).  The
parties hereto further agree and acknowledge that certain of the Lenders may be
“public-side” Lenders (i.e., Lenders that do not wish to receive material
non-public information with respect to a Loan Party or its securities (each, a
“Public Lender”).  The Borrowers
hereby agree that (i) all Borrower Materials to be

 

68

 

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

 

Section
6.03  Notices.  The Company will promptly notify the
Administrative Agent and each Lender:

 

(i)            of
the occurrence of any Default or Event of Default;

 

(ii)           of
any matter that has resulted or may reasonably be expected to result in a
Material Adverse Effect, including: (A) breach or non-performance of, or any
default under, any Contractual Obligation of Holdings or any of its
Subsidiaries; (B) any dispute, litigation, investigation, proceeding or
suspension between Holdings or any of its Subsidiaries and any Governmental
Authority; (C) the commencement of, or any material development in, any
litigation or proceeding affecting Holdings or any of its Subsidiaries,
including pursuant to any applicable Environmental Law; (D) any litigation,
investigation or proceeding affecting any Loan Party in which the amount
involved exceeds $5,000,000, or in which injunctive relief or similar relief is
sought, which relief, if granted, could be reasonably expected to have a
Material Adverse Effect;

 

(iii)          of the occurrence of any ERISA Event;

 

(iv)          of
any material change in accounting policies or financial reporting practice by
Holdings or any of its Subsidiaries; and

 

(v)           of
(A) any event or condition, including any Reportable Event, that is reasonably
likely to lead to, an ERISA Event or (B) any change in the funding status of
any Plan that could have a Material Adverse Effect, together with a description
of any such event or condition or a copy of any such notice and a statement by
the chief financial officer of the Borrower briefly setting forth the details
regarding such event, condition or notice and the action, if any, which has
been or is being taken or is proposed to be taken by the Company with respect
thereto.

 

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

 

Section
6.04  Payment of Obligations.  Each of the Group Companies will
pay and discharge (i) all taxes, assessments and other governmental charges or
levies imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent, (ii) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon any of

 

69

 

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

 

Section
6.05  Preservation of Existence Etc.  Except as a result of
or in connection with a dissolution, merger or disposition of a Subsidiary of
the Company permitted under Section 7.04 or Section 7.05,
each Group Company will:  (i) preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization; (ii) take all
reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, except
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (iii) preserve or renew all of its registered
patents, trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse Effect.

 

Section
6.06  Maintenance of Properties.  Each Group Company
will:  (i) maintain, preserve and protect
all of its material properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted;
(ii) make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (iii) use the standard of care typical in the
industry in the operation and maintenance of its facilities.

 

Section
6.07  Insurance; Certain Proceeds.

 

(a)           Insurance Policies.  Each of the Group Companies will at all times
maintain in full force and effect insurance (including worker’s compensation
insurance, liability insurance, casualty insurance and business interruption
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice (or as are otherwise required by the Collateral Documents).  The Collateral Agent shall be named as loss
payee or mortgagee, as its interest may appear, with respect to all such
property and casualty policies and additional insured with respect to all such
other policies (other than key man life insurance, workers’ compensation and
employee health policies), and each provider of any such insurance shall agree,
by endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Collateral Agent, that the insurance carrier shall
pay all proceeds (other than proceeds in respect of the ABL Priority
Collateral) in excess of $1,000,000 or, if it shall have received notice from
the Collateral Agent that an Event of Default has occurred and is continuing
all proceeds (other than proceeds in respect of the ABL Priority Collateral),
otherwise payable to Holdings or one or more of its Subsidiaries under such
policies directly to the Collateral Agent (which agreement shall be evidenced
by a “standard” or “New York” lender’s loss payable endorsement in the name of
the Collateral Agent on Accord Form 27) and that it will give the Collateral
Agent thirty days’ prior written notice before any such policy or policies
shall be altered or canceled, and that no act or default of any Group Company
or any other Person shall affect the rights of the Collateral Agent or the
Lenders under such policy or policies.

 

(b)           Loss Events.  In case of any Casualty or Condemnation with
respect to any property of any Group Company or any part thereof (other than
property constituting ABL Priority Collateral) having a fair market value in
excess of $1,000,000, the Company shall promptly give written notice thereof to
the Administrative Agent generally describing the nature and extent of such
damage,

 

70

 

destruction or
taking.  In such case, the Company shall,
or shall cause such Group Company to, promptly repair, restore or replace the
property of such Person (or part thereof) which was subject to such Casualty or
Condemnation at such Person’s cost and expense, whether or not the Insurance
Proceeds or Condemnation Award, if any, received on account of such event shall
be sufficient for that purpose (subject in the case of leased property, to the
rights of lessors thereof); provided, however, that such property
need not be repaired, restored or replaced to the extent the failure to make
such repair, restoration or replacement (i)(A) is desirable to the proper
conduct of the business of such Person in the ordinary course and otherwise in
the best interest of such Person and (B) would not materially impair the rights
and benefits of the Collateral Agent or the Finance Parties under the
Collateral Documents or any other Term Loan Document or (ii) the failure to
repair, restore or replace the property is attributable to the application of
the Insurance Proceeds from such Casualty or the Condemnation Award from such
Condemnation to payment of the Term Loan Obligations in accordance with the
following provisions of this Section 6.07(b).  Subject to the Intercreditor Agreement, if
Holdings or any of its Subsidiaries shall receive any Insurance Proceeds from a
Casualty (other than proceeds in respect of ABL Priority Collateral) or
Condemnation Award from a Condemnation with respect to property not
constituting ABL Priority Collateral in excess of $5,000,000, such Person will
immediately pay over such proceeds to the Administrative Agent for payment of
the Term Loan Obligations in accordance with Section 2.08(b), or if
such funds constitute Reinvestment Funds, either (i) immediately pay over such
proceeds to the Collateral Agent to be held by the Collateral Agent in the
Reinvestment Funds Account established under the Security Agreement, or (ii)
pay over such proceeds to the ABL Facility Agent (as such term is defined in
the ABL Credit Agreement) in accordance with the ABL Credit Agreement in
repayment of outstanding loans under the ABL Credit Agreement, provided
that the aggregate amount of all such Reinvestment Funds used to repay amounts
outstanding under the ABL Credit Agreement, net of all amounts subsequently
borrowed under the ABL Credit Agreement and used in the restructuring or
replacement of Collateral in accordance with this Section 6.07(b) shall
not at any time exceed $5,000,000.  The
Administrative Agent agrees to cause the Collateral Agent to release such
Insurance Proceeds or Condemnation Awards to the Borrower upon its request and
as needed from time to time to pay for the repair, restoration or replacement
of the portion of the property subject to such Casualty or Condemnation if, but
only if, the conditions set forth in clauses (iv) and (v) of the
first proviso of the definition of “Reinvestment Funds” are satisfied at
the time of such request.

 

Section
6.08  Compliance with Law.  Each of the Group Companies will
comply with all requirements of Law applicable to it and its properties to the
extent that noncompliance with any such requirement of Law could reasonably be
expected to have a Material Adverse Effect. 
Without limiting the generality of the foregoing, each of the Group
Companies will do, and cause each of its ERISA Affiliates to do, each of the
following:  (i) maintain each Plan
in compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state law; (ii) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such
qualifications; (iii) make all required contributions to any Plan subject
to Section 412 of the Code; (iv) ensure that there are no Unfunded
Liabilities which would have a Material Adverse Effect; (v) ensure that all
liabilities under the Employee Benefit Arrangements are either: (A) funded to
at least the minimum level required by law or, if higher, to the level required
by the terms governing the Employee Benefit Arrangements; (B) insured with a
reputable insurance company; or (C) provided for or recognized in the financial
statements most recently delivered to the Administrative Agent under Section 6.01(a)
or (b); and (vi) ensure that the contributions or premium payments to or
in respect of all Employee Benefit Arrangements are and continue to be promptly
paid at no less than the rates required under the rules of such arrangements
and in accordance with the most recent actuarial advice received in relation to
the Employee Benefit Arrangement and generally in accordance with applicable
Law.

 

Section
6.09  Books and Records; Lender Meeting.  Each of the Group
Companies will keep complete and accurate books and records of its transactions
in accordance with good accounting

 

71

 

practices on the
basis of GAAP (including the establishment and maintenance of appropriate
reserves) and will maintain such books and records and accounts in material
conformity with all applicable requirements of any Governmental Authority
having regulatory jurisdiction over any Group Company.  Unless the Administrative Agent shall notify
the Company that no meeting is required, within 120 days after the end of each
fiscal year of the Company, the Company will conduct a meeting of the Lenders
to discuss such fiscal year’s results and the financial condition of the
Company and its Consolidated Subsidiaries. 
The chief financial officer of the Company and such other officers of
the Company as the Company’s chief financial officer shall designate shall be
present at each such meeting.  Such
meetings shall be held at times and places convenient to the Lenders and to the
Company.

 

Section
6.10  Inspection Rights.  Upon reasonable notice and during normal
business hours but not on more than two occasions in the aggregate in any year
so long as no Default or Event of Default has occurred and is continuing, each
of the Group Companies will permit representatives appointed by the Agents or
the Required Lenders, including independent accountants, agents, employees,
attorneys and appraisers, to visit and inspect its property, including its
books and records, its accounts receivable and inventory, its facilities and
its other business assets, and to make photocopies or photographs thereof and
to write down and record any information such representatives obtain, all at
the expense of the Borrower following the occurrence and during the continuance
of an Event of Default, and shall permit the Agents or such representatives to
investigate and verify the accuracy of information provided to the Lenders and
to discuss all such matters with the officers, employees, independent
accountants, attorneys and representatives of the Group Companies.

 

Section
6.11  Use of Proceeds.  The Company and Duane Reade will
use the proceeds of the Loans solely for the purposes set forth in Section 5.18.

 

Section
6.12  Additional Loan Parties; Additional
Security.

 

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

 

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

 

(ii)           deliver
such proof of organizational authority, incumbency of officers, opinions of
counsel and other documents as is consistent with those delivered by each Loan
Party pursuant to Section 4.01 on the Closing Date or as the
Administrative Agent, the Collateral Agent or the Required Lenders shall have
reasonably requested.

 

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

 

72

 

Agent or the
Required Lenders in its or their sole and reasonable discretion, all of its
other owned Real Properties (other than any Real Property owned as of the
Closing Date) and personal property and (iii) all other assets and properties
of Holdings and its Subsidiaries intended to constitute collateral under the
Term Loan Documents but which are not covered by the original Collateral
Documents and as may be requested by the Collateral Agent or the Required
Lenders in their sole reasonable discretion to be subject at all times to first
priority (subject only to Permitted Liens), perfected and, in the case of Real
Property, title insured Liens in favor of the Collateral Agent pursuant to the
Collateral Documents or such other security agreements, pledge agreements,
mortgages or similar collateral documents as the Collateral Agent shall request
in its sole reasonable discretion (collectively, the “Additional Collateral
Documents”).  In furtherance of the
foregoing terms of this Section 6.12, the Company agrees to
promptly provide the Administrative Agent with written notice of the
acquisition by Holdings or any of its Subsidiaries of any Real Property located
in the United States, setting forth in each case in reasonable detail the
location and a description of the asset(s) so acquired.  Without limiting the generality of the
foregoing, Holdings and the Company will cause, and will cause each of their
respective Subsidiaries to cause, 100% of the Equity Interests of each of their
respective direct and indirect Subsidiaries (but not more than 65% of such
Equity Interests, if such Subsidiary is a direct Foreign Subsidiary, or 0% if a
Foreign Subsidiary that is owned directly or indirectly by a Foreign
Subsidiary) to be subject at all times to a first priority, perfected Lien in
favor of the Collateral Agent pursuant to the terms and conditions of the
Collateral Documents.

 

If, subsequent to the Closing Date, a Loan Party shall
acquire any intellectual property, securities, instruments, chattel paper or
other personal property required to be delivered to the Collateral Agent as
Collateral hereunder or under any of the Collateral Documents, the Company
shall promptly (and in any event within three Business Days after any
Responsible Officer of any Loan Party acquires knowledge of the same) notify
the Collateral Agent of the same.  Each
of the Loan Parties shall adhere to the covenants regarding the location of
personal property as set forth in the Security Agreement.

 

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

 

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

 

Section
6.13  Interest Rate Protection Agreements.  Within 90 days after
the Closing Date, the Company will enter into and thereafter maintain in full
force and effect interest rate swaps, rate caps, collars or other similar
agreements or arrangements designed to hedge the position of the Borrowers with
respect to interest rates at rates and on terms reasonably satisfactory to the
Joint Lead Arrangers, the effect of which shall be to fix or limit the interest
that would be payable in connection with Loans, and the Senior Subordinated
Notes in the principal amount of not less than $140,000,000 for a period
expiring no earlier than 36 months after the Closing Date.  The Company will promptly deliver evidence of
the execution and delivery of such agreements to the Joint Lead Arrangers.

 

73

 

Section
6.14  Contributions.  Upon its receipt thereof, Holdings
will contribute as a common equity contribution to the capital of the Company
any cash proceeds received by Holdings after the Closing Date from any Asset
Disposition, Casualty, Condemnation, Debt Issuance, Equity Issuance,
Extraordinary Receipts or any cash capital contributions received by Holdings
after the Closing Date.

 

Section
6.15  Repurchase of Existing Convertible Notes; Maintenance of Minimum
Availability Under ABL Credit Agreement.  Not later than 5:00PM on the 10th
Business Day following the Closing Date, the Company shall mail for delivery to
each holder of Existing Convertible Notes an offer to repurchase the Existing
Convertible Notes at not more than 101% of the face amount thereof, together
with accrued and unpaid interest thereon, if any, on a date not more than 30
days after the Closing Date.  So long as
more than 10% of the aggregate original face amount of the Existing Convertible
Notes remain outstanding after the Closing Date, the Company shall cause Excess
Availability (as defined in the ABL Credit Agreement as in effect on the date
hereof) less amounts available in the Existing Convertible Notes Escrow Account
to at all times be at least equal to the aggregate face amount of such
outstanding Existing Convertible Notes, together with any accrued but unpaid
interest thereon.

 

Section
6.16  Co-Borrowers.  Substantially concurrently with the
consummation of the DRI Merger, the Company will cause such Subsidiaries of the
Company as the Joint Lead Arrangers reasonably may request to become jointly
and severally liable for all Term Loan Obligations of the Company and Duane
Reade hereunder and under the other Term Loan Documents, in each case pursuant
to a Co-Borrower Agreement.

 

ARTICLE
VII

NEGATIVE COVENANTS

 

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

 

Section
7.01  Incurrence of Indebtedness.  None of the Group
Companies will, directly or indirectly, create, issue, incur, assume, guarantee
or otherwise in any manner become directly or indirectly liable for the payment
of or otherwise incur (collective, “incur”), any Indebtedness or Swap
Obligations, except:

 

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

 

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

 

(iii)          the Company, any Co-Borrower and any
Subsidiary Guarantor may incur Permitted Subordinated Indebtedness if, on a
Pro-Forma Basis for the period of four consecutive fiscal quarters ending on or
most recently preceding the incurrence of such Senior Indebtedness (treated as
a single accounting period), the Fixed Charge Coverage Ratio would have been
equal to or greater than 2.25:1.00.

 

Section
7.02  Restriction on Liens.  None of the Group Companies will
create, incur, assume or permit to exist any Lien on any property or assets
(including Equity Interests or other securities

 

74

 

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

 

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

 

(ii)           Liens
arising under the Collateral Documents;

 

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

 

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

 

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

 

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

 

(vii)         Liens upon specific items or inventory or
other goods and proceeds of the Company or any of its Subsidiaries securing
such Person’s obligations in respect of bankers’ acceptances or documentary
letters of credit issued or created for the account of such Person to
facilitate the shipment or storage of such inventory or other goods;

 

75

 

(viii)        pledges or deposits of cash and Cash
Equivalents securing deductibles, self-insurance, co-payment, co-insurance,
retentions and similar obligations to providers of insurance in the ordinary
cause of business;

 

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

 

(x)            Liens
arising solely by virtue of any statutory or common Law provision relating to
banker’s liens, rights of set-off or similar rights, in each case incurred in
the ordinary course of business;

 

(xi)           licenses,
leases or subleases granted to third Persons in the ordinary course of business
not interfering in any material respect with the business of any Group Company;

 

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

 

(xiii)         Liens arising from precautionary Uniform
Commercial Code financing statements regarding, and any interest or title of a
licensor, lessor or sublessor under, Operating Leases permitted by this
Agreement;

 

(xiv)        Liens arising from judgments, decrees or
attachments (or securing of appeal bonds with respect thereto) in circumstances
not constituting an Event of Default under Section 8.01; provided
that no cash or other property (other than proceeds of insurance payable by
reason of such judgments, decrees or attachments) the fair value of which
exceeds $250,000 is deposited or delivered to secure any such judgment, decree
or award, or any appeal bond in respect thereof;

 

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

 

(xvi)        any Lien existing on any asset of any Person at
the time such Person becomes a Subsidiary of the Company and not created in
contemplation of such event;

 

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

 

(xviii)      any Lien existing on any asset (other than on the
Equity Interests of one or more Subsidiaries) prior to the acquisition thereof
by the Company or a Subsidiary of the Company and not created in contemplation
of such acquisition;

 

76

 

(xix)         Liens solely on any cash earnest money
deposits made by the Company or any of its Subsidiaries in connection with any
letter of intent or purchase agreement with respect to a Permitted Business
Acquisition;

 

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

 

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

 

(xxii)        Liens evidencing the consignment of
pharmaceutical inventory to the Borrowers by Amerisource Bergen pursuant to the
Amerisource Bergen Agreement; and

 

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

 

Section
7.03  Nature of Business.  None of the Group Companies will engage
in any business other than the business conducted by the Company and its
Subsidiaries as of the Closing Date and activities related thereto and similar,
related or complimentary businesses.

 

Section
7.04  Consolidation, Merger and Dissolution.  Except in connection
with an Asset Disposition permitted by the terms of Section 7.05, none
of the Group Companies will enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself or its affairs (or
suffer any liquidations or dissolutions); provided that:

 

(i)            the
DRI Merger shall be permitted;

 

(ii)           any
Domestic Subsidiary of the Company may merge with and into, or be voluntarily
dissolved or liquidated into, the Company, so long as (A) the Company is the
surviving corporation of such merger, dissolution or liquidation, (B) the
security interests granted to the Collateral Agent for the benefit of the
Finance Parties pursuant to the Collateral Documents in the assets of the
Company and such Domestic Subsidiary so merged, dissolved or liquidated shall
remain in full force and effect and perfected (to at least the same extent as
in effect immediately prior to such merger, dissolution or liquidation), (C) no
Default or Event of Default shall have occurred and be continuing immediately
before or immediately after giving effect to such transaction and (D) no
Person other than the Company or a Subsidiary Guarantor receives any
consideration in respect or as a result of such transaction;

 

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

 

77

 

least the same
extent as in effect immediately prior to such merger, dissolution or
liquidation) and (C) no Default or Event of Default shall have occurred and be
continuing immediately before or immediately after giving effect to such
transaction;

 

(iv)          any
Foreign Subsidiary of the Company may be merged with and into, or be
voluntarily dissolved or liquidated into, the Company or any Wholly-Owned
Subsidiary of the Company, so long as (A) in the case of any such merger,
dissolution or liquidation involving one or more Co-Borrowers or Subsidiary
Guarantors, (x)  a Co-Borrower or such Subsidiary Guarantor, as the case
may be, is the surviving corporation of any such merger, dissolution or
liquidation and (y) no Person other than the Company, a Co-Borrower or a
Subsidiary Guarantor receives any consideration in respect of or as a result of
such transaction, (B) the security interests granted to the Collateral
Agent for the benefit of the Finance Parties pursuant to the Collateral
Documents in the assets of such Foreign Subsidiary, if any, and the Company or
such other Subsidiary, as the case may be, and in the Equity Interests of the
surviving entity of such merger, dissolution or liquidation shall remain in
full force and effect and perfected (to at least the same extent as in effect
immediately prior to such merger, dissolution or liquidation) and (C) no
Default or Event of Default shall have occurred and be continuing immediately
before or immediately after giving effect to such transaction; and

 

(v)           the
Company or any Subsidiary of the Company may merge with any Person (other than
Holdings) in connection with a Permitted Business Acquisition if (A) in
the case of any such merger involving the Company, the Company shall be the
continuing or surviving corporation in such merger, (B) in the case of any
such merger involving a Co-Borrower or a Subsidiary Guarantor, such Co-Borrower
or Subsidiary Guarantor shall be the continuing or surviving corporation in
such merger or the continuing or surviving corporation in such merger shall,
simultaneously with the consummation of such merger, become a Co-Borrower or a
Subsidiary Guarantor, as applicable, having all the responsibilities and
obligations of the Co-Borrower or Subsidiary Guarantor so merged, (C) the
Loan Parties shall cause to be executed and delivered such documents,
instruments and certificates as the Administrative Agent may reasonably request
so as to cause the Loan Parties to be in compliance with the terms of Section 6.12
after giving effect to such transactions, (D) no Default or Event of Default
shall have occurred and be continuing immediately before or immediately after
giving effect to such transaction and (E) the Company shall have delivered to
the Administrative Agent a Pro-Forma Compliance Certificate demonstrating that,
upon giving effect on a Pro-Forma Basis to such transaction, the Loan Parties will
be in compliance with all of the financial covenants set forth in Section
7.16 as of the last day of the most recent period of four consecutive
fiscal quarters of Holdings which precedes or ends on the date of such
transaction and with respect to which the Administrative Agent has received the
consolidated financial information required under Section 6.01(a)
or (b) and the Compliance Certificate required by Section 6.02(b).

 

In the case of any merger or consolidation permitted
by this Section 7.04 of any Subsidiary of Holdings which is not a Loan
Party into a Loan Party, the Loan Parties shall cause to be executed and
delivered such documents, instruments and certificates as the Administrative
Agent may reasonably request so as to cause the Loan Parties to be in
compliance with the terms of Section 6.12 after giving effect to such
transaction.  Notwithstanding anything to
the contrary contained above in this Section 7.04, no action shall be
permitted which results in a Change of Control.

 

Section
7.05  Asset Dispositions.  None of the Group Companies will make any
Asset Disposition unless (i) the Company or any Subsidiary of the Company, as
the case may be, receives consideration at the time of such Asset Disposition
at least equal to the fair market value of the assets or Equity Interests
issued or sold or otherwise disposed of, (ii) such fair market value is
determined by the

 

78

 

Company and, if in
excess of $5,000,000, its Board of Directors and evidenced by a resolution of
the Board of Directors set forth in a certificate of a Responsible Officer
delivered to the Administrative Agent and (iii) at least seventy-five percent
(75%) of the consideration therefore received by the Company or such Subsidiary
is in the form of cash, Cash Equivalents or Replacement Assets or a combination
thereof.

 

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

 

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

 

Any Net Cash Proceeds from Asset Dispositions that are
not applied or invested as provided in the preceding paragraph will constitute
“Excess Proceeds.”  When the
aggregate amount of Excess Proceeds exceeds $5,000,000, the Borrowers will
apply to total amount of all Excess Proceeds to prepay the Term Loans in
accordance with Section 2.08(b)(ii). 
Upon completion of each such prepayment of the Term Loans, the amount of
Excess Proceeds shall be reset at zero.

 

Upon consummation of an Asset Disposition permitted
under this Section 7.05, the Lien created thereon under the Collateral
Documents (but not the Lien on any proceeds thereof) shall be automatically
released, and the Administrative Agent shall (or shall cause the Collateral
Agent to) (to the extent applicable) deliver to the Company, upon the Company’s
request and at the Company’s expense, such documentation as is reasonably
necessary to evidence the release of the Collateral Agent’s security interests,
if any, in the assets being disposed of, including amendments or terminations
of Uniform Commercial Code Financing Statements, if any, the return of stock
certificates, if any, and the release of any Subsidiary being disposed of in
its entirety from all of its obligations, if any, under the Term Loan
Documents.

 

Section
7.06  Investments.

 

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

 

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

 

79

 

(ii)           the
Company or any Domestic Subsidiary of the Company may invest in cash and Cash
Equivalents;

 

(iii)          Foreign Subsidiaries of the Company may
invest in Foreign Cash Equivalents;

 

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

 

(v)           the
Company and each Subsidiary of the Company may acquire and own Investments
(including Indebtedness obligations) received in connection with the bankruptcy
or reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;

 

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

 

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

 

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

 

(ix)           Holdings
may make contributions to an employee stock ownership plan sponsored by it; provided
that such contributions are in Qualified Capital Stock, and Holdings may lend
or contribute money to an employee stock ownership plan sponsored by it to
permit such plan to immediately purchase Qualified Capital Stock from Holdings
with the proceeds of such loan or contribution;

 

(x)            Holdings
may acquire and hold obligations of one or more officers or other employees of
Holdings or any of its Subsidiaries in connection with such officers’ or
employees’ acquisition of shares of common stock of Holdings, so long as no
cash is paid by Holdings or any of its Subsidiaries to such officers or
employees in connection with the acquisition of any such obligations;

 

(xi)           Holdings
may repurchase stock to the extent permitted by Section 7.07(iii);

 

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

 

(xiii)         (A) the Company may make Investments in any of
its Wholly-Owned Domestic Subsidiaries and (B) any Subsidiary of the Company
may make Investments in the Company or any Wholly-Owned Domestic Subsidiary of
the Company; provided in each case that (1) each item of intercompany
Indebtedness shall be evidenced by a promissory note in the form of Exhibit
H hereto, (2) each promissory note evidencing intercompany loans and
advances

 

80

 

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

 

(xiv)        the Company and its Subsidiaries may make
Investments in any Foreign Subsidiary or any non-Wholly-Owned Domestic
Subsidiary of the Company (A) in the case of Investments by the Company or any
Wholly-Owned Domestic Subsidiary of the Company, in an aggregate amount
together with any Investments pursuant to clause (xv) below (determined
without regard to any write-downs or write-offs of any such Investments
constituting Indebtedness) at any one time outstanding not exceeding $2,500,000
and (B) to the extent such Investments arise from the sale of inventory in the
ordinary course of business by the Company or such Subsidiary to such Foreign
Subsidiary or non-Wholly-Owned Domestic Subsidiary for resale by such Foreign
Subsidiary or non-Wholly-Owned Domestic Subsidiary (including any such
Investments resulting from the extension of the payment terms with respect to
such sales); provided that (A) each item of intercompany Indebtedness
shall be evidenced by a promissory note in the form of Exhibit H hereto
and (B) each promissory note evidencing intercompany loans and advances (other
than promissory notes (x) issued by Foreign Subsidiaries of the Company to the
Company or any of its Domestic Subsidiaries or (y) held by Foreign
Subsidiaries of the Company, in each case except to the extent provided in Section
6.12(d)) shall be pledged to the Collateral Agent pursuant to the Pledge
Agreement;

 

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

 

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

 

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

 

(xviii)      other Investments not otherwise permitted by this
Section 7.06 in an aggregate amount (determined without regard to any
write-downs or write-offs of any such Investments constituting Indebtedness but
excluding any portion thereof funded with proceeds of a Qualifying Equity
Issuance or with Unapplied Excess Cash Flow) at any time outstanding not
exceeding the sum of $5,000,000;

 

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

 

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

 

81

 

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

 

Section
7.07  Restricted Payments, etc.  None of the Group
Companies will declare or pay any Restricted Payments (other than Restricted
Payments payable solely in Equity Interests (exclusive of Debt Equivalents) of
such Person), except that:

 

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

 

(ii)           any
non-Wholly-Owned Subsidiary of the Company may make Restricted Payments to the
Company or to any Wholly-Owned Subsidiary of the Company or ratably to all
holders of its outstanding Equity Interests;

 

(iii)          Holdings may redeem or repurchase Equity
Interests (or Equity Equivalents) or make Restricted Payments to DR
Shareholders LLC to enable DR Shareholders LLC to redeem or repurchase Equity
Interests (or Equity Equivalents) from (A) officers, employees, directors and
consultants of any Group Company (or their estates, spouses or former spouses)
upon the death, permanent disability, retirement or termination of employment
of any such Person or otherwise in accordance with (x) the Stockholders’
Agreement, (y) any equity or stock based plan or any employee stock ownership
plan maintained by Holdings or DR Shareholders LLC or any of their respective
Subsidiaries, or (z) any employment or consulting agreement set forth on Schedule
7.07(iii) hereto or (B) other holders of Equity Interests or Equity
Equivalents in Holdings or DR Shareholders LLC, so long as the purpose of such
purchase is to acquire common stock for reissuance to new officers, employees
and directors (or their estates) of any Group Company, to the extent so
reissued within 12 months of any such purchase; provided that in all
such cases (A) no Default or Event of Default is then in existence or would
otherwise arise therefrom and (B) the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased does not exceed
$2,500,000 in any fiscal year of Holdings or $10,000,000 in the aggregate from
and after the Closing Date, plus, in each case the aggregate amount of any Net
Cash Proceeds of Equity Issuances are contributed by Holdings as equity capital
to the Company as a result of sales by Holdings of Equity Interests of Holdings
to officers, employees, directors and consultants and provided  further
that Holdings may purchase, redeem or otherwise acquire Equity Interests and
Equity Equivalents of Holdings pursuant to this clause (iii) without
regard to the restrictions set forth in the first proviso above for
consideration consisting of the proceeds of key man life insurance obtained for
the purposes described in this clause (iii);

 

(iv)          so
long as no Default or Event of Default is then in existence or would otherwise
arise therefrom, the Company may make cash Restricted Payments to Holdings, and
Holdings may make Restricted Payments to DR Shareholders LLC, if Holdings or DR
Shareholders, respectively, promptly uses such proceeds for the purposes
described in clause (iii) above;

 

(v)           the
Company may make cash Restricted Payments to (A) Holdings to enable Holdings to
pay, or to enable Holdings to make Restricted Payments to DR Shareholders LLC
to enable DR Shareholders LLC to pay, as the case may be, franchise taxes,
accounting, legal and other fees required to maintain its respective corporate
existence and to provide for other operating costs, in each case related to the
Company, (B) DR Shareholders LLC or Holdings pursuant to the Tax Sharing
Agreement dated as of the date hereof among Holdings and its Subsidiaries, as
amended, restated or modified from time to time, and (C) DR Shareholders LLC or
Holdings in order to enable DR Shareholders LLC or Holdings to pay customary
and

 

82

 

reasonable costs
and expenses of a proposed offering of securities or incurrence of Indebtedness
of DR Shareholders LLC or Holdings that is not consummated;

 

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

 

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

 

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

 

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

 

Section
7.08  Prepayments of Indebtedness, etc.

 

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

 

(b)           Prohibition Against Certain Payments of Principal and
Interest of Other Indebtedness. 
Except as provided in subsection (c) below, none of the Group
Companies will (i) directly or indirectly, redeem, purchase, prepay, retire,
defease or otherwise acquire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Indebtedness, or
set aside any funds for such purpose, whether such redemption, purchase,
prepayment, retirement or acquisition is made at the option of the maker or at
the option of the holder thereof, and whether or not any such redemption,
purchase, prepayment, retirement or acquisition is required under the terms and
conditions applicable to such Indebtedness, (ii) make any interest payment in
respect of any Subordinated Indebtedness or (iii) release, cancel, compromise
or forgive in whole or in part any Indebtedness evidenced by any Intercompany
Note.

 

(c)           Certain Allowed Payments in Respect of Subordinated
Indebtedness.  The Company
may make regularly scheduled interest payments as and when due or penalties, if
any,  in respect of the Senior
Subordinated Notes other than any such payments prohibited by the subordination
provisions thereof.

 

Section
7.09  Transactions with Affiliates.  None of the Group
Companies will engage in any transaction or series of transactions with (i) any
officer, director, holder of any Equity Interest in or other Affiliate of
Holdings, (ii) any Affiliate of any such officer, director, holder or Affiliate
or (iii) the Sponsor or any officer, director, holder of any Equity Interest in
or other Affiliate of the Sponsor, other than:

 

83

 

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

 

(ii)           reimbursement
of reasonable out-of-pocket expenses of the Sponsor Group pursuant to the
Management Agreement in amounts not exceeding $250,000 in any fiscal year or
otherwise as approved by the Administrative Agent in its sole and absolute
discretion;

 

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

 

(iv)          transactions
expressly permitted by Section 7.01, Section 7.04, Section
7.05, Section 7.06 or Section 7.07;

 

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

 

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

 

(vii)         transactions in existence on the Closing Date
to the extent disclosed in Schedule 7.09;

 

(viii)        any transaction entered into among the Company
and its Wholly-Owned Domestic Subsidiaries or among such Wholly-Owned Domestic
Subsidiaries;

 

(ix)           any
transaction on the Closing Date constituting part of the Transaction;

 

(x)            employee
benefit arrangements (including for the payment of reasonable fees and
compensation) with any employee, consultant, officer or director of any Group
Company, including under any stock option or stock incentive plans, and
customary indemnification arrangements with such persons, in each case entered
into in the ordinary course of business or approved by the board of directors
of such Group Company;

 

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

 

84

 

placement services
or any other investment banking, banking or similar services, that are approved
by a majority of the disinterested directors of the board of directors of the
Company;

 

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

 

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

 

(xiv)        other transactions which are entered into in
good faith by the Company or any of its Subsidiaries on terms and conditions at
least as favorable to such Person as would be obtainable by it in a comparable
arms’-length transaction with an independent, unrelated third party.  None of Holdings or any of its Subsidiaries
will enter into any management, consulting or similar agreement or arrangement
with, or otherwise pay any professional, consulting, management or similar fees
to or for the benefit of, the Sponsor, or any successor or transferee of any of
the foregoing, except for payments pursuant to the Management Agreement
permitted under clause (i), (ii) or (ix)above.

 

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

 

Section
7.10  Fiscal Year; Organizational and Other Documents.  None of the Group Companies will (i) change
its fiscal year or (ii) enter into any amendment, modification or waiver that
is adverse in any material respect to the Lenders to its articles or
certificate of incorporation, bylaws (or analogous organizational documents) or
any agreement entered into by it with respect to its Equity Interests
(including the Stockholders’ Agreement), in each case as in effect on the
Closing Date.  The Company will cause the
Group Companies to promptly provide the Lenders with copies of all amendments
to the foregoing documents and instruments as in effect as of the Closing Date.

 

Section
7.11  Restrictions with Respect to Intercorporate Transfers.
 None of the Group Companies will
create or otherwise cause or permit to exist any encumbrance or restriction
which prohibits or otherwise restricts (i) the ability of any Subsidiary of the
Company to (A) make Restricted Payments or pay any Indebtedness owed to the
Company or any Subsidiary of the Company, (B) pay Indebtedness or other
obligations owed to any Loan Party, (C) make loans or advances to the Company
or any Subsidiary of the Company, (D) transfer any of its properties or assets
to the Company or any Subsidiary of the Company or (E) act as a Co-Borrower or
a Subsidiary Guarantor and pledge its assets pursuant to the Term Loan
Documents or any renewals, refinancings, exchanges, refundings or extensions
thereof or (ii) the ability of Holdings or any Subsidiary of Holdings to
create, incur, assume or permit to exist any Lien upon its property or assets
whether now owned or hereafter acquired to secure the Term Loan Obligations,
except in each case for prohibitions or restrictions existing under or by
reason of:

 

(i)            this
Agreement and the other Term Loan Documents;

 

(ii)           applicable
Law;

 

85

 

(iii)          restrictions contained in the (A) the Senior
Subordinated Notes, the Exchange Notes and the Indenture relating thereto and
the Existing Convertible Notes all as in effect on the date of this Agreement,
and (B) the ABL Documents and, if such Indebtedness is renewed, extended or
refinanced, restrictions in the agreements governing any Permitted Refinancing
thereof;

 

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

 

(v)           any
restriction or encumbrance with respect to any asset of the Company or any of
its Subsidiaries or a Subsidiary of the Company imposed pursuant to an
agreement which has been entered into for the sale or disposition of such
assets or all or substantially all of the capital stock or assets of such
Subsidiary, so long as such sale or disposition is permitted under this
Agreement; and

 

(vi)          Liens
permitted under Section 7.02 and any documents or instruments governing
the terms of any Indebtedness or other obligations secured by any such Liens; provided
that such prohibitions or restrictions apply only to the assets subject to such
Liens.

 

Section
7.12  Ownership of Subsidiaries; Limitations on
Holdings and the Borrower.

 

(a)           Holdings
will not (i) hold any assets other than the Equity Interests of the Company,
(ii) have any material liabilities other than (A) liabilities under the Term
Loan Documents, the ABL Credit Agreement, the Senior Subordinated Notes and the
Exchange Notes and other Indebtedness permitted to be incurred under clause
(b) of the definition of “Permitted Indebtedness” and (B) tax liabilities
in the ordinary course of business or (iii) engage in any business or activity
other than (A) owning the common stock of the Company (including purchasing
additional shares of common stock after the Closing Date) and activities
incidental or related thereto or to the maintenance of the corporate existence
of Holdings or compliance with applicable Law, (B) acting as a Guarantor under
the Guaranty and pledging its assets to the Collateral Agent, for the benefit
of the Finance Parties, pursuant to the Collateral Documents to which it is a
party, (C) acting as a guarantor in respect of the Indebtedness arising under
the Senior Subordinated Note Indenture and the Senior Subordinated Notes, (D)
acting as a guarantor in respect of the Indebtedness arising under the ABL
Credit Agreement and the ABL Documents, and (E) issuing its own common stock in
any Qualifying Equity Issuance.

 

(b)           Holdings
and the Company will not (i) permit any Person (other than the Company, any
Co-Borrower or any Wholly-Owned Subsidiary Guarantor) to own any Equity
Interest of any Subsidiary of the Company, (ii) permit any Subsidiary of the
Company to issue Equity Interests to any Person, except (A) the Company, a
Co-Borrower or any Wholly-Owned Subsidiary Guarantor or (B) to qualify
directors where required by applicable Law or to satisfy other requirements of
applicable Law with respect to the ownership of Equity Interests of Foreign
Subsidiaries or (iii) permit the Company or any Subsidiary of the Company to
issue any shares of Preferred Stock.

 

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

 

Section
7.13  Sale and Leaseback Transactions.  No Group Company
will, directly or indirectly become or remain liable as lessee or as guarantor
or other surety with respect to any

 

86

 

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

 

Section
7.14  Impairment of Security Interests.  None of the Group
Companies will (i) take or omit to take any action which action or
omission might or would materially impair the security interests in favor of
the Collateral Agent with respect to the Collateral or (ii) grant to any Person
(other than the Collateral Agent pursuant to the Collateral Documents) any
interest whatsoever in the Collateral, except for Permitted Liens.

 

Section
7.15  No Other “Designated Senior Indebtedness”.  None
of Holdings or any Borrower shall designate, or permit the designation of, any
Indebtedness (other than under this Agreement, the other Finance Documents, or
ABL Documents or the Existing Convertible Notes) as “Designated Senior
Indebtedness” or any other similar term for the purpose of the definition of
the same of the subordination provisions contained in the Senior Subordinated
Note Indenture, or any indenture governing any other Subordination
Indebtedness.

 

Section
7.16  Financial Covenants.

 

(a)           Leverage Ratio.  As of the close of business on any day on and
after the Closing Date, the Leverage Ratio at such date will not be greater
than the ratio set forth below opposite the period during which such date
occurs:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  Closing Date
  through 09/30/2004

  	
   

  	
  6.50 to 1.0

  	
   

  
	
  10/01/2004
  through 12/31/2005

  	
   

  	
  6.25 to 1.0

  	
   

  
	
  01/01/2006
  through 12/31/2006

  	
   

  	
  5.75 to 1.0

  	
   

  
	
  01/01/2007
  through 12/31/2007

  	
   

  	
  5.00 to 1.0

  	
   

  
	
  01/01/2008
  through 12/31/2008

  	
   

  	
  4.50 to 1.0

  	
   

  
	
  Thereafter

  	
   

  	
  4.00 to 1.0

  	
   

  

 

(b)           Interest Coverage Ratio.  The Interest Coverage Ratio for any period of
four consecutive fiscal quarters of Holdings, in each case taken as a single
accounting period, will not be less than (i) 2.00 to 1.00 for each fiscal
quarter in the period commencing with the fiscal quarter ending on or about
September 30, 2004 and ending with the fiscal quarter ending on or about
December 31, 2006 and (ii) 2.25 to 1.00 for each fiscal quarter thereafter.

 

Section
7.17  Independence of Covenants.  All covenants
contained herein shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that
such action or condition would be permitted by an exception to, or otherwise be
within the limitations of, another covenant shall not avoid the occurrence of a
Default if such action is taken or condition exists.

 

87

 

ARTICLE
VIII

DEFAULTS

 

Section
8.01  Events of Default.  An Event of Default shall exist
upon the occurrence of any of the following specified events or conditions
(each an “Event of Default”):

 

(a)           Payment.  Any Loan Party shall:

 

(i)            default
in the payment when due (whether by scheduled maturity, acceleration or
otherwise) of any principal of any of the Loans; or

 

(ii)           default,
and such default shall continue for three or more Business Days, in the payment
when due of any interest on the Loans, or of any fees or other amounts owing
hereunder, under any of the other Term Loan Documents or in connection
herewith.

 

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

 

(c)           Covenants.  Any Loan Party shall:

 

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

 

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

 

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

 

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

 

(e)           Default Under Other Indebtedness.

 

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

 

88

 

in respect of the
ABL Credit Agreement, the Bridge Notes, the Senior Subordinated Notes or any
other Indebtedness or Guaranty Obligation having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing
to all creditors under any combined or syndicated credit arrangement) of more
than the Threshold Amount, (B) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition shall exist, under any
agreement or instrument relating to any such Indebtedness or Guaranty
Obligation, if the effect of such failure, event or condition is to cause, or
to permit the holder or holders or beneficiary or beneficiaries of such
Indebtedness or Guaranty Obligation (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries), without or without the giving
or notice or lapse of time or both, to cause such Indebtedness to be declared
to be due and payable prior to its stated maturity, or such Guaranty Obligation
to become payable, or cash collateral in respect thereof to be demanded or (C)
shall be required by the terms of such Indebtedness or Guaranty Obligation to
offer to prepay or repurchase such Indebtedness or the primary Indebtedness
underlying such Guaranty Obligation (or any portion thereof) prior to the
stated maturity thereof as a result of a breach by such Group Company of, or a
default under, the documents or instruments governing such Indebtedness or
Guaranty Obligation; or

 

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

 

(f)            Insolvency Events.  (i) Any Group Company (other than a
Subsidiary which is not a Significant Subsidiary) shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any Debtor Relief Law now or
hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing or
(ii) an involuntary case or other proceeding shall be commenced against any
Group Company (other than a Subsidiary which is not a Significant Subsidiary)
seeking liquidation, reorganization or other relief with respect to it or its
debts under any Debtor Relief Law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
60 days, or any order for relief shall be entered against any Group Company
(other than a Subsidiary which is not a Significant Subsidiary) under the
federal bankruptcy laws as now or hereafter in effect.

 

(g)           Judgments.  (i) One or more judgments, orders, decrees or
arbitration awards is entered against any Group Company involving in the
aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage), as to any single
or related series of transactions, incidents or conditions, in excess of the
Threshold Amount, and the same shall not have been discharged, vacated or
stayed pending appeal within 30 days after the entry thereof, or (ii) any
non-monetary judgment, order or decree is entered against any Group Company which
has or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.

 

89

 

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

 

(i)            Guaranties.  The Guaranty given by any Loan Parties or any
provision thereof shall, except pursuant to the terms thereof, cease to be in
full force and effect, or any Guarantor thereunder or any Person acting by or
on behalf of such guarantor shall deny or disaffirm such Guarantor’s
obligations under such Guaranty.

 

(j)            Impairment of Collateral.  Any security interest purported to be created
by any Collateral Document shall cease to be, or shall be asserted by any Group
Company not to be, a valid, perfected, first or second priority, as applicable
(except as otherwise expressly provided in such Collateral Document) security
interest in the securities, assets or properties covered thereby, other than in
respect of assets and properties which, individually and in the aggregate, are
not material to the Group Companies taken as a whole or in respect of which the
failure of the security interests in respect thereof to be valid, perfected
first or second priority, as applicable, security interests will not in the
reasonable judgment of the Administrative Agent or the Required Lenders have a
Material Adverse Effect on the rights and benefits of the Lenders under the
Term Loan Documents taken as a whole.

 

(k)           Subordinated Indebtedness.  (i) Any Governmental Authority with
applicable jurisdiction determines that the Lenders are not holders of
Designated Senior Indebtedness (as defined in the Senior Subordinated Note
Indenture) or (ii) the subordination provisions creating the Subordinated
Indebtedness shall, in whole or in part, terminate, cease to be effective or
cease to be legally valid, binding and enforceable as to any holder of the
Subordinated Indebtedness.

 

Section
8.02  Acceleration; Remedies.  Upon the occurrence of an Event of
Default, and at any time thereafter unless and until such Event of Default has
been waived in writing by the Required Lenders (or the Lenders as may be
required pursuant to Section 10.01), the Administrative Agent (or
the Collateral Agent, as applicable) shall, upon the request and direction of
such Lenders, by written notice to the Company, take any of the following
actions without prejudice to the rights of the Agents or any Lender to enforce
its claims against the Loan Parties except as otherwise specifically provided
for herein.

 

(a)           Acceleration of Loans.  Declare the unpaid principal of and any
accrued interest in respect of all Loans and any and all other indebtedness or
obligations of any and every kind owing by a Loan Party to any of the Lenders
hereunder to be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Loan Parties.

 

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

 

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

 

90

 

Administrative Agent or
the Lenders, which notice or other action is expressly waived by the Loan
Parties.

 

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

 

In case any one or more of the covenants and/or
agreements set forth in this Agreement or any other Term Loan Document shall
have been breached by any Loan Party and such breach constitutes an Event of
Default, then the Administrative Agent may, subject to the Intercreditor
Agreement, proceed to protect and enforce the Lenders’ rights either by suit in
equity and/or by action at law, including an action for damages as a result of
any such breach and/or an action for specific performance of any such covenant
or agreement contained in this Agreement or such other Term Loan Document.  Without limitation of the foregoing, the
Borrowers agree that failure to comply with any of the covenants contained
herein will cause irreparable harm and that specific performance shall be
available in the event of any breach thereof. 
The Administrative Agent acting pursuant to this paragraph shall be
indemnified by the Borrowers on a joint and several basis against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees and expenses)
in accordance with Section 10.05.

 

Section
8.03  Allocation of Payments After Event of Default.

 

(a)           Priority of Distributions.  Each Borrower hereby irrevocably waives the
right to direct the application of any and all payments in respect of its
Finance Obligations and any proceeds of Collateral after the occurrence and
during the continuance of an Event of Default and agrees that, notwithstanding
the provisions of Sections 2.08(b) and 2.13, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Administrative Agent, the Collateral Agent or any
Finance Party on account of amounts outstanding under any of the Finance
Documents or in respect of the Collateral shall, subject to the Intercreditor
Agreement, be paid over or delivered as follows:

 

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

 

SECOND, to the payment of all reasonable out-of-pocket
costs and expenses (including reasonable attorneys’ fees) of the Administrative
Agent or the Collateral Agent in its capacity as such in connection with
enforcing the rights of the Finance Parties under the Finance Documents,
including all expenses of sale or other realization of or in respect of the
Collateral, including reasonable compensation to the agents and counsel for the
Collateral Agent, and all expenses, liabilities and advances incurred or made
by the Collateral Agent in connection therewith, and any other obligations
owing to the Collateral Agent in respect of sums advanced by the Collateral
Agent to preserve the Collateral or to preserve its security interest in the
Collateral;

 

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

 

91

 

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

 

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

 

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

 

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

 

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

 

(b)           Pro-Rata Treatment.  For purposes of this Section 8.03,
“Pro-Rata Share” means, when calculating a Finance Party’s portion of
any distribution or amount, that amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Finance
Party’s Term Loan Obligations or Swap Obligations, as the case may be, and the
denominator of which is the then outstanding amount of all Term Loan
Obligations or Swap Obligations, as the case may be.  When payments to the Finance Parties are
based upon their respective Pro-Rata Shares, the amounts received by such
Finance Parties hereunder shall be applied (for purposes of making
determinations under this Section 8.03 only) (i) first, to their
Term Loan Obligations and (ii) second, to their Swap Obligations.  If any payment to any Finance Party of its
Pro-Rata Share of any distribution would result in overpayment to such Finance
Party, such excess amount shall instead be distributed in respect of the unpaid
Term Loan Obligations or Swap Obligations, as the case may be, of the other
Finance Parties, with each Finance Party whose Term Loan Obligations or Swap
Obligations, as the case may be, have not been paid in full to receive an
amount equal to such excess amount multiplied by a fraction the numerator of
which is the unpaid Term Loan Obligations or Swap Obligations, as the case may
be, of such Finance Party and the denominator of which is the unpaid Term Loan
Obligations or Swap Obligations, as the case may be, of all Finance Parties
entitled to such distribution.

 

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

 

92

 

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

 

ARTICLE
IX

AGENCY PROVISIONS

 

Section
9.01  Appointment and Authorization of the Administrative Agent.

 

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

 

(b)           Without
limiting the generality of Section 9.01(a), each Lender hereby
irrevocably appoints, designates and authorizes the Administrative Agent to
sign the Intercreditor Agreement on behalf of such Lender and acknowledges and
agrees that (i) Bank of America or an Affiliate thereof may (but is not
required to) act as “Revolving Credit Agent” and “Term Loan Agent” under (and
as such terms are defined in) the Intercreditor Agreement, (ii) such Lender
will be bound by the terms of the Intercreditor Agreement as a “Term Loan
Lender” and as a “Lender” thereunder, (iii) certain of the Collateral granted
under the Collateral Documents will be subject to the prior Lien in favor of
the “Revolving Credit Agent” as specified in the Intercreditor Agreement, and
(iv) the Administrative Agent may exercise rights to purchase “Revolving Loan
Debt” as contemplated by the Intercreditor Agreement (including, without
limitation, designating “Designated Term Purchaser(s)” to purchase the
“Revolving Loan Debt”) in accordance with a request or consent of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders; provided that no such
request or consent shall require the Administrative Agent, any Lender or any
other Person to purchase any portion of the “Revolving Loan Debt” as
contemplated by the Intercreditor Agreement without the written consent of such
Administrative Agent, Lender or other Person.

 

Section
9.02  Delegation of Duties.  The Administrative Agent may
execute any of its duties hereunder or under the other Term Loan Documents by
or through agents, employees or attorneys-in-fact and shall be entitled to
advice of counsel and other consultants or experts concerning all matters
pertaining to such duties.  The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it in the absence of gross
negligence or willful misconduct.

 

Section
9.03  Exculpatory Provisions.  No Agent-Related Person shall be
(i) liable for any action lawfully taken or omitted to be taken by any of them
under or in connection herewith or in connection with any of the other Term
Loan Documents or the transactions contemplated hereby or

 

93

 

thereby (except
for its own gross negligence or willful misconduct in connection with its
duties expressly set forth herein) or (ii) responsible in any manner to any of
the Lenders or participants for any recitals, statements, representations or
warranties made by any of the Loan Parties contained herein or in any of the
other Term Loan Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by an Agent under or in connection herewith or in connection with the
other Term Loan Documents, or enforceability or sufficiency therefor of any of
the other Term Loan Documents, or for any failure of any Loan Party to perform
its obligations hereunder or thereunder. 
No Agent-Related Person shall be under any obligation to any Lender or
participant or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default or to
inspect the properties, books or records of the Loan Parties or any Affiliate
thereof.

 

Section
9.04  Reliance on Communications.

 

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

 

(b)           For
purposes of determining compliance with the conditions specified in Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

 

Section
9.05  Notice of Default.  The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default, except
with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Lenders,
unless the Administrative Agent shall have received written notice from a
Lender or the Company referring to this Agreement, describing such Default and
stating that such notice is a “notice of default.”  The Administrative Agent will notify the
Lenders of its receipt of any such notice. 
The Administrative Agent shall take such action with respect to such Default
as may be directed by the Required Lenders in accordance with Article VIII;
provided, however, that unless and until the Administrative Agent
has received any such direction, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable or in the best interest of
the Lenders.

 

94

 

Section
9.06  Credit Decision; Disclosure of Information by Administrative Agent; No
Reliance on Arranger’s or Agents’ Customer Identification Program.

 

(a)           Independent Credit Decision.  Each Lender acknowledges that no
Agent-Related Person has made any representation or warranty to it, and that no
act by the Administrative Agent hereafter taken, including any consent to and
acceptance of any assignment or review of the affairs of any Loan Party or any
Affiliate thereof, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Lender as to any matter, including whether
Agent-Related Persons have disclosed material information in their
possession.  Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their respective Subsidiaries, and all
applicable bank or other regulatory Laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Company and the other Loan Parties hereunder.  Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Term Loan Documents, and
to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and the other Loan Parties.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent herein, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Loan Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.

 

(b)           US Patriot Act Customer Identification Programs.  Each Lender acknowledges and agrees that
neither such Lender nor any of its Affiliates, participants or assignees may
rely on any Joint Lead Arranger or any Agent to carry out such Lender’s,
Affiliate’s, participant’s or assignee’s customer identification program or
other obligations required or imposed under or pursuant to the U.S. Patriot Act
or the regulations thereunder, including the regulations contained in 31 C.F.R.
103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of the Loan Parties,
their Affiliates or agents, the Term Loan Documents or the transactions
hereunder or contemplated hereby:  (i)
any identification procedures; (ii) and recordkeeping; (iii) comparisons with
government lists, (iv) customer notices; or (v) other procedures required under
the CIP regulations or such other Laws.

 

Section
9.07  Indemnification.  Whether or not the transactions
contemplated hereby are consummated, the Lenders agree to indemnify each
Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan
Party and without limiting the obligation of the Borrowers and the other Loan
Parties to do so), ratably according to their respective Commitments (or if the
Commitments have expired or been terminated, in accordance with the respective
principal amounts of outstanding Loans of the Lenders), from and against any
and all Indemnified Liabilities which may at any time (including without
limitation at any time following payment in full of the Term Loan Obligations)
be imposed on, incurred by or asserted against any Agent-Related Person; provided
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities resulting from such Person’s gross
negligence or willful misconduct; provided, however, that no
action taken in accordance with the directions of the Required Lenders shall be
deemed to constitute gross negligence or willful misconduct for purposes of
this Section 9.07.  Without
limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including

 

95

 

reasonable
Attorney Costs) incurred by the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Term Loan Document, or any document contemplated by or referred to
herein, to the extent that the Administrative Agent is not reimbursed for such
expenses by or on behalf of the Borrowers. 
The agreements in this Section 9.07 shall survive the
payment of the Term Loan Obligations and all other obligations and amounts payable
hereunder and under the other Term Loan Documents and the resignation of the
Administrative Agent.

 

Section
9.08  Administrative Agent in Its Individual Capacity.  Bank
of America and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with each of the Loan Parties and their respective Affiliates as
though Bank of America were not the Administrative Agent hereunder and without
notice to or consent of the Lenders.  The
Lenders acknowledge that, pursuant to such activities, Bank of America or its
Affiliates may receive information regarding any Loan Party or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of such Loan Party or such Affiliate) and acknowledge that the
Administrative Agent shall be under no obligation to provide such information
to them.  With respect to its Loans, Bank
of America shall have the same rights and powers under this Agreement as any
other Lender and may exercise such rights and powers as though it were not the
Administrative Agent and the terms “Lender” and “Lenders” include Bank of
America in its individual capacity.

 

Section
9.09  Successor Agents.  The Administrative Agent may at
any time give notice of its resignation to the Lenders and the Borrowers.  Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, with the consent of the
Borrowers at all times other than during the existence of an Event of Default
(which consent shall not be unreasonably withheld or delayed), to appoint a
successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the
Lenders, with the consent of the Borrowers at all times other than during the
existence of an Event of Default (which consent shall not be unreasonably
withheld or delayed), appoint a successor Administrative Agent meeting the
qualifications set forth above.  Upon the
acceptance of its appointment as successor Administrative Agent hereunder, the
Person acting as such successor Administrative Agent shall succeed to all the
rights, powers and duties of the retiring Administrative Agent and the term “Administrative
Agent” shall mean such successor Administrative Agent, and the retiring
Administrative Agent’s appointment, powers and duties as Administrative Agent
shall be terminated without any other or further act or deed on the part of any
other Lender.  After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Article IX and Sections 10.04 and 10.05
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.

 

Section
9.10  Administrative Agent May File Proofs of Claim.  In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Loan Party, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
any Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

96

 

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

 

(ii)           to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;

 

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

 

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

 

Section
9.11  Collateral and Guaranty Matters.  The Lenders
irrevocably authorize the Administrative Agent, at its option and in its
discretion:

 

(i)            to
release any Lien on any property granted to or held by the Administrative Agent
under any Term Loan Document (A) upon termination of the Commitments and
payment in full of all Term Loan Obligations (other than contingent
indemnification obligations), (B) that is sold or to be sold as part of or in
connection with any sale permitted hereunder or under any other Term Loan
Document, (C) required to be released pursuant to the Intercreditor Agreement
or (D) subject to Section 10.01, if approved, authorized or
ratified in writing by the Required Lenders;

 

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

 

(iii)          to release any Guarantor from its obligations
under the Guaranty and the applicable Collateral Documents if such Person
ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

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

 

97

 

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

 

Section
9.13  Agents’ Fees; Joint Lead Arranger Fee.  The Borrowers, jointly and severally
shall pay to the Administrative Agent for its own account, to the Collateral
Agent for its own account and to the Joint Lead Arrangers, in their capacity as
Joint Lead Arrangers, for their own account, fees in the amounts and at the
times previously agreed upon between Holdings and the Administrative Agent, the
Collateral Agent and the Joint Lead Arrangers, respectively, in each case with
respect to this Agreement, the other Term Loan Documents and the transactions
contemplated hereby and thereby.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01  Amendments, Etc.  

 

(a)           Amendments Generally.  No amendment or waiver of any provision of
this Agreement or any other Term Loan Document, and no consent to any departure
by any Borrower or any other Loan Party therefrom, shall be effective unless in
writing signed by the Required Lenders and each Borrower or the applicable Loan
Party, as the case may be, and acknowledged by the Administrative Agent, and
each such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided that (x) the
Administrative Agent and the Company may, with the consent of the other (and
without the consent of any Lender), amend, modify or supplement this Agreement
and any other Term Loan Document to cure any ambiguity, typographical error,
defect or inconsistency if such amendment, modification or supplement does not
adversely affect the rights of any Lender and (y) no such amendment, waiver or
consent shall:

 

(i)            waive
any condition set forth in Section 4.01(a) without the written
consent of each Lender;

 

(ii)           extend
or increase the Commitment of any Lender (or reinstate any Commitment
theretofore terminated pursuant here) without the written consent of such
Lender;

 

(iii)          postpone any date fixed by this Agreement or
any other Term Loan Document for any payment (excluding mandatory prepayments)
of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Term Loan Document without the written
consent of each Lender directly affected thereby;

 

(iv)          reduce
or forgive the principal of, or the rate of interest specified herein on or any
prepayment premium under Section 2.08(a) or any Change of Control
Prepayment Premium applicable to, any Loan, or (subject to subsection (b)
below) any fees or other amounts payable hereunder or under any other Term Loan
Document without the written consent of each Lender directly affected thereby; provided,
however, that only the consent of the Required Lenders shall be
necessary to amend any default rate of interest provided for herein or to waive
any obligation of any Borrower to pay interest at a default rate;

 

98

 

(v)           change
Section 2.11, Section 2.12 or Section 8.03 in a
manner that would alter the pro-rata sharing of payments required thereby
without the written consent of each Lender;

 

(vi)          change
any provision of this Section or the definition of “Required Lenders”
or any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender;

 

(vii)         release any Borrower or any Material Loan
Party from its or their obligations under the Term Loan Documents without the
written consent of each Lender (provided that the Administrative Agent may,
without the consent of any other Lender, release any Guarantor that is sold or
transferred in compliance with Section 7.05);

 

(viii)        release all or substantially all of the
Collateral securing the Term Loan Obligations hereunder without the written
consent of each Lender (provided that the Collateral Agent may, without
consent from any other Lender, release any Collateral that is sold or
transferred by a Loan Party in compliance with Section 7.05 or as
provided in the Intercreditor Agreement);

 

(ix)           effect
any waiver, amendment or modification of Section 7.08(a) with
respect to the subordination provisions of any Indebtedness, without the prior
written consent of each Lender; or

 

(x)            require
any Lender to purchase any portion of the loans outstanding under the ABL
Credit Agreement as contemplated by the Intercreditor Agreement without the
written consent of such Lender.

 

(b)           Fee Letter Amendment; Defaulting Lenders.  Notwithstanding anything to the contrary
herein, (i) the Fee Letter may be amended, or rights and privileges thereunder
waived, in a writing executed only by the parties thereto and (ii) no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that the Commitment of such Lender may not
be increased or extended without the consent of such Lender.

 

(c)           Payment Blockage Notices — Senior Subordinated Notes.  Notwithstanding the above, the right to
deliver a Payment Blockage Notice (as defined in the Senior Subordinated Note
Indenture), shall reside solely with the Administrative Agent, and the
Administrative Agent shall deliver such Payment Blockage Notice, only upon the
direction of the Required Lenders.

 

(d)           Proceedings Under Debtor Relief Laws.  Notwithstanding the fact that the consent of
all the Lenders is required in certain circumstances as set forth above, (i)
each Lender is entitled to vote as such Lender sees fit on any bankruptcy
reorganization plan that affects the Loans, and each Lender acknowledges that
the provisions of Section 1126(c) of the Bankruptcy Code supersede the
unanimous consent provisions set forth herein and (ii) the Required Lenders may
consent to allow a Loan Party to use cash collateral in the context of a bankruptcy
or insolvency proceeding.

 

Section
10.02  Notices and Other Communications; Facsimile Copies.

 

(a)           General.  Unless otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). 
All such written notices shall be mailed, faxed or delivered to the
applicable address, facsimile number or

 

99

 

(subject to subsection (c)
below) electronic mail address, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as follows:

 

(i)            if
to the Company or the Administrative Agent, to the address, facsimile number,
electronic mail address or telephone number specified for such Person on Schedule 10.02
or to such other address, facsimile number, electronic mail address or
telephone number as shall be designated by such party in a notice to the other
parties;

 

(ii)           if
to any other Co-Borrower, to the address, facsimile number, electronic mail
address or telephone number specified for such Person in the applicable
Co-Borrower agreement or to such other address, facsimile number, electronic
mail address or telephone number as shall be designated by such party in a
notice to other parties; and

 

(iii)          if to any other Lender, to the address,
facsimile number, electronic mail address or telephone number specified in its
Administrative Questionnaire or to such other address, facsimile number, electronic
mail address or telephone number as shall be designated by such party in a
notice to the Company or the Administrative Agent.

 

All such notices and other communications shall be
deemed to be given or made upon the earlier to occur of (i) actual receipt by
the relevant party hereto and (ii) (A) if delivered by hand or by courier, when
signed for by or on behalf of the relevant party hereto; (B) if delivered by
mail, four Business Days after deposit in the mails, postage prepaid; (C) if
delivered by facsimile, when sent and receipt has been confirmed by telephone;
and (D) if delivered by electronic mail (which form of delivery is subject to
the provisions of subsection (c) below), when delivered; provided,
however, that notices and other communications to the Administrative
Agent pursuant to Article II shall not be effective until actually
received by such Person.  In no event
shall a voicemail message be effective as a notice, communication or
confirmation hereunder.

 

(b)           Effectiveness of Facsimile Documents and Signatures.  Term Loan Documents may be transmitted and/or
signed by facsimile.  The effectiveness
of any such documents and signatures shall, subject to requirements of Law,
have the same force and effect as manually-signed originals and shall be binding
on all Loan Parties, the Administrative Agent and the Lenders.  The Administrative Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request
or deliver the same shall not limit the effectiveness of any facsimile document
or signature.

 

(c)           Limited Use of Electronic Mail.  Electronic mail and Internet and intranet
websites may be used only to distribute routine communications, such as
financial statements and other information as provided in Section 6.01,
and to distribute Term Loan Documents for execution by the parties thereto, and
may not be used for any other purpose.

 

(d)           Reliance by Administrative Agent and Lenders.  The Administrative Agent and the Lenders
shall be entitled to rely and act upon any notices purportedly given by or on
behalf of the Borrowers or any other Loan Party even if (i) such notices
were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein or
(ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof.  The Borrowers
shall, jointly and severally,  indemnify
each Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of a Borrower.  All telephonic notices to and other
communications with the Administrative

 

100

 

Agent may be
recorded by the Administrative Agent, and each of the parties hereto hereby
consents to such recording.

 

Section
10.03  No Waiver; Cumulative Remedies.  No failure by any
Lender or the Administrative Agent to exercise, and no delay by any such Person
in exercising, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by Law.

 

Section
10.04  Attorney Costs, Expenses and Taxes.  The Borrowers, jointly and severally,
agree (i) to pay or reimburse the Joint Lead Arrangers and the Administrative
Agent for all reasonable costs and expenses incurred in connection with the
development, preparation, negotiation and execution of this Agreement and the
other Term Loan Documents and any amendment, waiver, consent or other
modification of the provisions hereof and thereof (whether or not the
transactions contemplated hereby or thereby are consummated), and the consummation
and administration of the transactions contemplated hereby and thereby,
including all Attorney Costs, and (ii) to pay or reimburse the Administrative
Agent and each Lender for all costs and expenses incurred in connection with
the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or the other Term Loan Documents (including all
such costs and expenses incurred during any “workout” or restructuring in
respect of the Term Loan Obligations and during any legal proceeding, including
any proceeding under any Debtor Relief Law), including all Attorney Costs.  The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges
and fees and taxes related thereto, and other reasonable out-of-pocket expenses
incurred by the Administrative Agent and the cost of independent public
accountants and other outside experts retained by the Administrative Agent or
any Lender.  All amounts due under this Section 10.04
shall be payable within ten Business Days after demand therefor.  The agreements in this Section 10.04
shall survive the termination of the Commitments and repayment of all Term Loan
Obligations.

 

Section
10.05  Indemnification.  Whether or not the transactions contemplated
hereby are consummated, the Borrowers, jointly and severally, shall indemnify
and hold harmless each Agent-Related Person, each Lender and their respective
Affiliates, directors, officers, employees, counsel, agents, attorneys-in-fact,
trustees and advisors and their respective successors and assigns (collectively
the “Indemnitees”) from and against any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses and disbursements (including reasonable Attorney Costs)
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against any such Indemnitee in any way relating to or arising
out of or in connection with (i) the execution, delivery, enforcement,
performance or administration of any Term Loan Document or any other agreement,
letter or instrument delivered in connection with the transactions contemplated
thereby or the consummation of the transactions contemplated thereby, (ii) any
Commitment, Loan or the use or proposed use of the proceeds therefrom, (iii)
the Transactions, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, investigation, litigation
or proceeding) and regardless of whether any Indemnitee is a party thereto (all
the foregoing, collectively, the “Indemnified Liabilities”), in all
cases, whether or not caused by or arising, in whole or in part, out of the
negligence of the Indemnitee; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses or disbursements are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee.  No Indemnitee shall be liable for any damages

 

101

 

arising from the
use by others of any information or other materials obtained through IntraLinks
or other similar information transmission systems in connection with this
Agreement, nor shall any Indemnitee have any liability for any indirect or
consequential damages relating to this Agreement or any other Term Loan
Document or arising out of its activities in connection herewith or therewith
(whether before or after the Closing Date). 
All amounts due under this Section 10.05 shall be payable
within ten Business Days after demand therefor. 
The agreements in this Section shall survive the resignation of the
Administrative Agent, the replacement of any Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all the other Term
Loan Obligations.

 

Section
10.06  Payments Set Aside.  To the extent that any payment by or on
behalf of any Borrower is made to the Administrative Agent or any Lender, or
the Administrative Agent or any Lender exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent
or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (i) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (ii) each Lender severally agrees to pay to the
Administrative Agent upon demand its applicable share of any amount so
recovered from or repaid by the Administrative Agent, plus interest thereon
from the date of such demand to the date such payment is made at a rate per
annum equal to the Federal Funds Rate from time to time in effect.

 

Section
10.07  Successors and Assigns.

 

(a)           Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Borrower may
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of
this Section, (ii) by way of participation in accordance with the provisions of
subsection (d) of this Section, or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of subsection (f)
of this Section (and any other attempted assignment or transfer by any party
hereto shall be null and void).  Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (d)
of this Section and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by reason
of this Agreement.

 

(b)           Assignments.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Loans
and its Notes; provided, however, that:

 

(i)            except
in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, the aggregate amount of the Commitment (which for this
purpose includes Loans outstanding thereunder) subject to any such assignment,
determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent or, if the “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $1,000,000 unless each of the Administrative Agent and, so long as no
Event of Default

 

102

 

has occurred and
is continuing, the Company otherwise consents (each such consent not to be
unreasonably withheld, delayed or conditioned);

 

(ii)           each
partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement with
respect to the Loans or the Commitment assigned;

 

(iii)          any assignment of a Commitment must be
approved by the Administrative Agent unless the proposed assignee is itself a
Lender (whether or not the proposed assignee would otherwise qualify as an
Eligible Assignee);

 

(iv)          the
parties to such assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption in the form of Exhibit C (which
shall state that such assignment is subject to the terms of the Intercreditor
Agreement and that the assignee is entitled to all of the benefits of, and is
subject to all of the obligations under, the Intercreditor Agreement), together
with a processing and recordation fee of $3,500 (except, in the case of
contemporaneous assignments by any Lender to one or more Approved Funds, only a
single processing fee shall be payable for such assignments), payable, subject
to Section 2.09, as agreed between the assigning Lender and the
assignee;

 

(v)           if
applicable, the assignee shall deliver to the Administrative Agent the
information referred to in Section 10.19(b); and

 

(vi)          if
applicable, the assignor shall deliver any Note subject to such assignment to
the Borrowers for cancellation.

 

Subject to acceptance and recording thereof by the
Administrative Agent pursuant to subsection (c) of this Section,
from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 3.01, 3.04, 3.05, 10.04
and 10.05 with respect to facts and circumstances occurring prior to the
effective date of such assignment).  Upon
request, the Borrowers (at their expense) shall execute and deliver a Note or
Notes to the assignee Lender.  Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this subsection shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with subsection (d) of this
Section.

 

(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. 
Any assignment of any Loan, whether or not evidenced by a Note, shall be
effective only upon appropriate entries with respect thereto being made in the
Register (and each Note shall expressly so provide).  The Register shall be available for
inspection by the Borrowers, at any

 

103

 

reasonable time
and from time to time upon reasonable prior notice.  In addition, at any time that a request for a
consent or a material or other substantive change to the Term Loan Documents is
pending, (i) any Lender wishing to consult with other Lenders in connection
therewith may request and receive from the Administrative Agent a copy of the
Register and (ii) upon request of the Administrative Agent and receipt of a
list of the names of each Person named as a Lender in the then current
Register, the Borrowers and Holdings will identify to the Administrative Agent each
such Lender which is an Affiliate of either Borrower or Holdings.

 

(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, any Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person or a Borrower or any
Subsidiary of any Borrower) (each, a “Participant”) in all or a portion
of such Lender’s rights and/or obligations under this Agreement (including all
or a portion of its Loans owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrowers, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.01 that
directly affects such Participant. 
Subject to subsection (e) of this Section, the Borrowers
agree that each Participant shall be entitled to the benefits of Sections 3.01,
3.04 and 3.05 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to subsection (b) of
this Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 10.09
as though it were a Lender, provided such Participant agrees to be
subject to Section 2.12 as though it were a Lender.

 

(e)           Limitation on Certain Rights of Participants.  A Participant shall not be entitled to
receive any greater payment under Section 3.01, 3.04 or 3.05
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Company’s prior written
consent.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01
unless the Company is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrowers, to comply with Section 10.15
as though it were a Lender.

 

(f)            Other Assignments.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

(g)           Certain Definitions.  As used herein, the following terms have the
following meanings:

 

“Eligible Assignee” means (i) a Lender, (ii) an
Affiliate of a Lender, (iii) an Approved Fund and (iv) any other Person (other
than a natural Person) approved by (A) the Administrative Agent, (B) unless (x)
such Person is taking delivery of an assignment in connection with physical
settlement of a credit derivatives transaction, (y) the assignment is being
made to such person by an Agent on or prior to the Primary Syndication Date or
(z) an Event of Default has occurred and is continuing at the time any
assignment is effected pursuant to Section 10.07(b), the Company
(each such approval not to be unreasonably withheld or delayed

 

104

 

and any such approval required of the Company to be
deemed given by the Company if no objection from the Company is received by the
assigning Lender and the Administrative Agent within five Business Days after
notice of such proposed assignment has been provided by the assigning Lender to
the Company); provided, however, that none of Holdings and its
Subsidiaries shall qualify as Eligible Assignees; and provided, further,
that no Person shall be an Eligible Assignee if such Person appears on the list
of Specially Designated Nationals and Blocked Persons prepared by the U.S.
Treasury Department’s Office of Foreign Assets Control or the purchase by such
Person of an assignment or the performance by any Agent of its duties under the
Term Loan Documents with respect to such Person violates or would violate any
Anti-Terrorism Law.

 

“Fund” means any Person (other than a natural
person) that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course.

 

“Approved Fund” means any Fund that is
administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii)
an entity or an Affiliate of an entity that administers or manages a Lender.

 

Section
10.08  Confidentiality and Disclosure.  Each of the
Administrative Agent and the Lenders agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed
(i) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential); (ii) to the extent requested by any regulatory authority
(including any self-regulatory authority, such as the National Association of
insurance Commissioners); (iii) to the extent required by applicable Laws or regulations
or by any subpoena or similar legal process; (iv) to any other party to this
Agreement; (v) in connection with the exercise of any remedies hereunder or
under any other Term Loan Document or any action or proceeding relating to this
Agreement or any other Term Loan Document or the enforcement of rights
hereunder or thereunder, (vi) subject to an agreement containing provisions
substantially the same as those of this Section, to (A) any assignee or pledgee
of or Participant in, or any prospective assignee or pledgee of or Participant
in, any of its rights or obligations under this Agreement or (B) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to any Borrower and its obligations, (vii) with the
consent of the Company or (viii) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this Section or
(B) becomes available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than a Borrower.  For purposes of this Section, “Information”
means all information received from any Loan Party relating to any Loan Party
or any of their respective businesses, other than (i) any such information that
is available to the Administrative Agent or any Lender on a nonconfidential
basis prior to disclosure by any Loan Party and (ii) Borrower Materials marked
“PUBLIC” in accordance with Section 6.02.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.  Notwithstanding the foregoing, any Agent and
any Lender may subject to obtaining the prior written consent of the Company,
which consent shall not be unreasonably withheld place advertisements in
financial and other newspapers and periodicals or on a home page or similar
place for dissemination of information on the Internet or worldwide web as it
may choose, and circulate similar promotional materials, after the closing of
the transactions contemplated by this Agreement in the form of a “tombstone” or
otherwise describing the names of the Loan Parties, or any of them, and the
amount, type and closing date of such transactions, all at their sole expense.

 

105

 

Section
10.09  Set-off.  In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of an Event of Default, each Lender (and each of its Affiliates) is authorized
at any time and from time to time, without presentment, demand, protest or
other notice of any kind (all of such rights being hereby expressly waived), to
set-off and to appropriate and apply any and all deposits (general or specific)
and any other indebtedness at any time held or owing by such Lender (including,
without limitation, branches, agencies or Affiliates of such Lender wherever
located) to or for the credit or the account of any Loan Party against
obligations and liabilities of such Loan Party to the Lenders hereunder, under
the Notes, under the other Term Loan Documents or otherwise, irrespective of
whether the Administrative Agent or the Lenders shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured or denominated in a currency different from that
of the applicable deposit or indebtedness, and any such set-off shall be deemed
to have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto.  The Loan Parties hereby agree
that to the extent permitted by law any Person purchasing a participation in
the Loans, Commitments hereunder pursuant to Section 2.01,  2.12
or 10.07(d) may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder and
any such set-off shall reduce the amount owed by such Loan Party to the Lender.

 

Section
10.10  Interest Rate Limitation.  Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts that are treated as
interest on such Loan under applicable law (collectively, the “Charges”),
shall exceed the maximum lawful rate (the “Maximum Rate”) that may be
charged or contracted for, charged or otherwise received by the Lender holding
such Loan in accordance with applicable law, the rate of interest payable in
respect of such Loan hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan but
were not payable as a result of the operation of this Section 10.10,
shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or periods shall be increased (but not above the Maximum
Rate therefor) until such Lender shall have received such cumulated amount,
together with interest thereon at the Federal Funds Rate to the date of
payment.

 

Section
10.11  Counterparts.  This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, but all of which shall constitute one and the same instrument.
It shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart. 
Delivery of an executed counterpart by facsimile shall be effective as
an original executed counterpart and shall be deemed a representation that the
original executed counterpart will be delivered.

 

Section
10.12  Integration.  This Agreement, together with the
other Term Loan Documents, comprises the complete and integrated agreement of
the parties on the subject matter hereof and thereof and supersedes all prior
agreements, written or oral, on such subject matter.  In the event of any conflict between the
provisions of this Agreement and those of any other Term Loan Document, the
provisions of this Agreement shall control; provided that the inclusion
of supplemental rights or remedies in favor of the Administrative Agent or the
Lenders in any other Term Loan Document shall not be deemed a conflict with
this Agreement.  Each Term Loan Document
was drafted with the joint participation of the respective parties thereto and
shall be construed neither against nor in favor of any party, but rather in
accordance with the fair meaning thereof.

 

Section
10.13  Survival of Representations and Warranties.  All
representations and warranties made hereunder and in any other Term Loan
Document or other document delivered pursuant

 

106

 

hereto or thereto
or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof.  Such representations
and warranties have been or will be relied upon by the Administrative Agent and
each Lender, regardless of any investigation made by the Administrative Agent
or any Lender or on their behalf and notwithstanding that the Administrative Agent
or any Lender may have had notice or knowledge of any Default or Event of
Default at the time of any Loan, and shall continue in full force and effect as
long as any Loan or any other Term Loan Obligation shall remain unpaid or
unsatisfied.

 

Section
10.14  Severability.  If any provision of this Agreement
or the other Term Loan Documents is held to be illegal, invalid or
unenforceable, (i) the legality, validity and enforceability of the remaining
provisions of this Agreement and the other Term Loan Documents shall not be
affected or impaired thereby and (ii) the parties shall endeavor in good faith
negotiations to replace the illegal, invalid or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

Section
10.15  Tax Forms.

 

(a)           Certain Provisions Pertinent to Foreign Lenders.

 

(i)            Each
Lender that is not a “United States person” within the meaning of Section
7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to the
Administrative Agent, prior to receipt of any payment subject to withholding under
the Code (or upon accepting an assignment of an interest herein), two duly
signed and properly completed copies of whichever of the following forms is
applicable: (A) Internal Revenue Service Form W-8BEN, certifying that such
Foreign Lender is entitled to benefits under an income tax treaty to which the
United States is a party that reduces to zero the rate of withholding on
payments of interest; (B) Internal Revenue Service Form W-8ECI; (C) Internal
Revenue Service Form W-8IMY (including all appropriate attachments); (D) in the
case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Section 881(c) of the Code, (x) a certificate to the effect that
such Non-US Lender is not (1) a “bank” within the meaning of Section 881(c)(3)(A)
of the Code, (2) a “10 percent shareholder” of the Company within the meaning
of Section 881(c)(3)(B) of the Code, or (3) a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code and (y) duly completed copies of
Internal Revenue Service Form W-8BEN; or (E) any other form or certificate
required by any taxing authority (including any certificate required by Section
871(h) of the Internal Revenue Code), certifying that such Foreign Lender is
entitled to a complete exemption from tax on payments pursuant to this
Agreement or any other Term Loan Document. 
Thereafter and from time to time, each such Foreign Lender shall (A)
promptly submit to the Administrative Agent such additional duly completed and
signed copies of one of such forms (or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities) as may then
be available under then current United States laws and regulations to avoid, or
such evidence as is satisfactory to the Company and the Administrative Agent of
any available complete exemption from, United States withholding taxes in
respect of all payments to be made to such Foreign Lender by the Borrower
pursuant to this Agreement, (B) promptly notify the Administrative Agent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction, and (C) if any Borrower is required to pay any
additional amount to or for the account of such Lender pursuant to Section
3.01 hereof, then such Lender will use reasonable efforts to change the
jurisdiction of its Applicable Lending office if, in the judgment of such
Lender, such change would (x) eliminate or reduce any such additional payment
which may thereafter accrue, (y) not subject such Lender to any unreimbursed
cost or expense and (z) not be otherwise disadvantageous to such Lender.

 

107

 

(ii)           Each
Foreign Lender, to the extent it does not act or ceases to act for its own
account with respect to any portion of any sums paid or payable to such Lender
under any of the Term Loan Documents (for example, in the case of a typical
participation by such Lender), shall deliver to the Administrative Agent on the
date when such Foreign Lender ceases to act for its own account with respect to
any portion of any such sums paid or payable, and at such other times as may be
necessary in the determination of the Administrative Agent (in the reasonable
exercise of its discretion), (A) two duly signed completed copies of the forms
or statements required to be provided by such Lender as set forth above, to
establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account that is not subject to U.S. withholding
tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any
successor thereto), together with any information such Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Lender is not acting for its
own account with respect to a portion of any such sums payable to such Lender.

 

(iii)          The Borrowers shall not be required to pay
any additional amount to any Foreign Lender under Section 3.01 (A) with
respect to any Taxes required to be deducted or withheld on the basis of the
information, certificates or statements of exemption such Lender transmits with
an IRS Form W-8IMY pursuant to this Section 10.15(a) or (B) if such
Lender shall have failed to satisfy the foregoing provisions of this Section
10.15(a); provided that if such Lender shall have satisfied the
requirement of this Section 10.15(a) on the date such Lender became a
Lender or ceased to act for its own account with respect to any payment under
any of the Term Loan Documents, nothing in this Section 10.15(a) shall
relieve the Borrowers of their obligation to pay any amounts pursuant to Section
3.01 in the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender or other Person for the
account of which such Lender receives any sums payable under any of the Term
Loan Documents is not subject to withholding or is subject to withholding at a
reduced rate.

 

(iv)          The
Administrative Agent may, without reduction, withhold any Taxes required to be
deducted and withheld from any payment under any of the Term Loan Documents
with respect to which no Borrower is required to pay additional amounts under
this Section 10.15(a).

 

(b)           Certain Provisions Pertinent to US Lenders.  Upon the request of the Administrative Agent,
each Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Administrative Agent
two duly signed completed copies of IRS Form W-9.  If such Lender fails to deliver such forms,
then the Administrative Agent may withhold from any interest payment to such
Lender an amount equivalent to the applicable back-up withholding tax imposed
by the Code, without reduction.

 

(c)           Lender Indemnification.  If any Governmental Authority asserts that the
Administrative Agent did not properly withhold or backup withhold, as the case
may be, any tax or other amount from payments made to or for the account of any
Lender, such Lender shall indemnify the Administrative Agent therefor,
including all penalties and interest, any taxes imposed by any jurisdiction on
the amounts payable to the Administrative Agent under this Section, and costs
and expenses (including Attorney Costs) of the Administrative Agent.  The obligation of the Lenders under this
Section shall survive the termination of the Commitments, repayment of all
other Term Loan Obligations hereunder and the resignation of the Administrative
Agent.

 

108

 

Section
10.16  Headings. 
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.

 

Section
10.17  Governing Law; Submission to Jurisdiction.

 

(a)           THIS
AGREEMENT AND THE OTHER TERM LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH
IN SUCH OTHER TERM LOAN DOCUMENTS) AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER 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 Term
Loan 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 of Holdings and each Borrower
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditional, the nonexclusive jurisdiction of such courts.  Each of Holdings and each Borrower
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
of Holdings and each Borrower 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 receipt requested, to Holdings’ or
such Borrower’s address referred to in Section 10.02, as the case
may be.  Each of Holdings and each
Borrower 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 10.17
shall affect the right of any Lender to serve process in any manner permitted
by law or limit the right of any Lender to bring proceedings against Holdings
or any Borrower in the courts of any jurisdiction or jurisdictions.

 

Section
10.18  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 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 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
10.19  USA Patriot Act Notice; Lenders’ Compliance Certification.

 

(a)           Notice to Borrowers.  Each Lender and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies Holdings and each
Borrower that pursuant to the

 

109

 

requirements of
the US Patriot Act it is required to obtain, verify and record information that
identifies each of Holdings and each Borrower, which information includes the
name and address of each Loan Party and other information that will allow such
Lender or the Administrative Agent, as applicable, to identify each such Loan
Party in accordance with the Act.

 

(b)           Lenders’ Certification.  Each Lender or assignee or participant of a
Lender that is not incorporated under the Laws of the United States or a State
thereof (and is not excepted from the certification requirement contained in
Section 313 of the U.S. Patriot Act and the applicable regulations because
it is both (i) an Affiliate of a depository institution or foreign bank that
maintains a physical presence in the United States or foreign country and (ii)
subject to supervision by a banking regulatory authority regulating such
affiliated depository institution or foreign bank) shall deliver to the
Administrative Agent the certification or, if applicable, recertification,
certifying that such Lender is not a “shell” and certifying to other matters as
required by Section 313 of the U.S. Patriot Act and the applicable
regulations thereunder:  (i) within 10
days after the Closing Date or, if later, the date such Lender, assignee or
participant of a Lender becomes a Lender, assignee or participant of a Lender
hereunder and (ii) at such other times as are required under the U.S. Patriot
Act.

 

Section
10.20  Defaulting Lenders.  Each Lender understands and agrees
that if such Lender is a Defaulting Lender then, notwithstanding the provisions
of Section 10.03, it shall not be entitled to vote on any matter
requiring the consent of the Required Lenders or to object to any matter
requiring the consent of all the Lenders adversely affected thereby; provided,
however, that all other benefits and obligations under the Term Loan
Documents shall apply to such Defaulting Lender, except as provided in Section 2.03(d).

 

Section
10.21  Binding Effect.  This Agreement shall become effective at
such time when it shall have been executed by Holdings, the Company, and the
Administrative Agent, and the Administrative Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the signatures
of each Lender, and thereafter this Agreement shall be binding upon and inure
to the benefit of Holdings, the Borrowers, the Administrative Agent and each
Lender and their respective successors and assigns; provided, however,
unless the conditions set forth in Section 4.01 have been satisfied
by the Loan Parties or waived by the Lenders on or before August 18, 2004, none
of Holdings, the Borrowers, the Administrative Agent or the Lenders shall have
any obligations under this Agreement.

 

Section
10.22  Conflict. 
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any other Term Loan
Document, on the other hand, this Agreement shall control.

 

[Signature Pages Follow]

 

110

 

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

 

	
   

  	
  DUANE READE HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JOHN K. HENRY 

  
	
   

  	
   

  	
  Name: John K. Henry 

  
	
   

  	
   

  	
  Title: Senior Vice President and Chief

  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  DUANE READE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MICHELLE D. BERGMAN

  
	
   

  	
   

  	
  Name: Michelle D. Bergman 

  
	
   

  	
   

  	
  Title: Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  DUANE READE, a New York general partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  DUANE READE INC., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MICHELLE D. BERGMAN 

  
	
   

  	
   

  	
  Name: Michelle D. Bergman 

  
	
   

  	
   

  	
  Title: Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  DRI I INC., a General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MICHELLE D. BERGMAN 

  
	
   

  	
   

  	
  Name: Michelle D. Bergman 

  
	
   

  	
   

  	
  Title: Vice President and General Counsel

  

 

S-1

 

	
   

  	
   

  	
  BANK OF AMERICA, N.A., 

  
	
   

  	
   

  	
  as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JAMES W. FORD 

  
	
   

  	
   

  	
  Name: James W. Ford 

  
	
   

  	
   

  	
  Title: Managing Director

  

 

S-2

 

	
   

  	
  CREDIT SUISSE FIRST BOSTON,

  CAYMAN ISLANDS BRANCH,

  
	
   

  	
   

  	
  as Syndication Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JOSEPH ADIPIETRO 

  
	
   

  	
   

  	
  Name:  Joseph Adipietro 

  
	
   

  	
   

  	
  Title:  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JOSHUA PARRISH 

  
	
   

  	
   

  	
  Name:  Joshua Parrish 

  
	
   

  	
   

  	
  Title:  Associate

  

 

S-3

 

	
   

  	
  CITICORP NORTH AMERICA INC.,

  
	
   

  	
   

  	
  as Co-Documentation Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JULIE PERSILY 

  
	
   

  	
   

  	
  Name:  Julie Persily 

  
	
   

  	
   

  	
  Title:  Managing Director and
  Vice President

  

 

S-4

 

	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Co-Documentation Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JASON L. WEIGHTER

  
	
   

  	
   

  	
  Name:  Jason L. Weighter 

  
	
   

  	
   

  	
  Title:  Vice President

  

 

S-5

 

	
   

  	
  BANC OF AMERICA BRIDGE LLC, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  JAMES W. FORD 

  
	
   

  	
   

  	
  Name: James W. Ford 

  
	
   

  	
   

  	
  Title: Managing Director

  

 

S-6

 

SCHEDULE 1.01A

 

Consolidated
EBITDA

 

1.             Consolidated EBITDA shall be calculated by making the
following adjustments:

 

Normalized EBITDA Adjustments

($ in millions)

 

 

	
   

  	
   

  	
  LTM

  6/04

  	
   

  	
  LTM

  9/04E

  	
   

  	
  LTM

  12/04E

  	
   

  	
  LTM

  3/05E

  	
   

  	
  LTM

  6/05E

  	
   

  	
  LTM

  9/05E

  	
   

  	
  LTM

  12/05E

  	
   

  
	
  Non-recurring/non-operational items:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-recurring professional fees(1)

  	
   

  	
  $

  	
  4.6

  	
   

  	
  $

  	
  4.2

  	
   

  	
  $

  	
  2.9

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  
	
  Blackout losses

  	
   

  	
  1.3

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Severance costs

  	
   

  	
  .2

  	
   

  	
  .2

  	
   

  	
  .2

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Shelf relabeling program cost

  	
   

  	
  1.0

  	
   

  	
  .5

  	
   

  	
  .1

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Implemented cost reductions:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Public company expenses

  	
   

  	
  1.5

  	
   

  	
  1.3

  	
   

  	
  .9

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Shelf relabeling cost savings

  	
   

  	
  1.6

  	
   

  	
  .5

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Workforce Reduction

  	
   

  	
  1.7

  	
   

  	
  1.0

  	
   

  	
  .3

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total non-recurring items

  	
   

  	
  $

  	
  11.9

  	
   

  	
  $

  	
  7.7

  	
   

  	
  $

  	
  4.4

  	
   

  	
  $

  	
  3.0

  	
   

  	
  $

  	
  3.0

  	
   

  	
  $

  	
  3.0

  	
   

  	
  $

  	
  3.0

  	
   

  
																							

 

2.             Non-recurring
settlement costs in connection with the litigations described below to the
extent deducted in determining Consolidated Net Income for the applicable
period.

 

a.             Duane
Reade Inc., Securities Litigation, U.S.D.C. 
S.D.N.Y. Case No. 1:02 CV 6478 (NRB). 
Class action suits on behalf of shareholders who purchased common stock
between April 1, 2002 and July 24, 2002, inclusive, alleging violation of
federal securities laws.  The complaint
alleges that Duane Reade Inc. violated the federal securities laws by issuing
materially false and misleading statements during the class period.  On December 1, 2003, the district judge
granted Duane Reade Inc.’s motion to dismiss the plaintiffs’ action, with
prejudice.  The plaintiffs have appealed
the decision.

 

b.             Ansoumana v. Gristedes, U.S.D.C.  S.D.N.Y. Case No. 00-CV-0253 (ADH)(DFE).  Duane Reade Inc. is a defendant in a class
action suit regarding alleged violations of the Fair Labor Standards Act as to
a group of individuals who provided delivery services on a contract basis to
Duane Reade Inc.  In December 2002, the
judge in the action issued a partial 

 

(1)  The adjustment to EBITDA in
2005 may only be made for non-recurring professional fees and expenses incurred
during such period in connection with litigation relating to: (i) the WTC
business interruption insurance policy number 144SP0390 issued by the St. Paul
Fire and Marine Insurance Company, and (ii) the collective bargaining agreement
with the Allied Trades Council (including any related claim involving Local
338).

 

 

summary judgment in favor of a subclass of the
plaintiffs and against Duane Reade Inc. 
In December 2003, Duane Reade settled the issue of the amount of liability
to the plaintiffs without any admission of wrongdoing and in an amount
consistent with Duane Reade’s previously established reserves.  The amount of attorney’s fees owed to the
plaintiffs’ attorneys remains an open issue in the case.

 

c.             Disabled in Action of Metropolitan New York, Inc. v.
Duane Reade, U.S.D.C. S.D.N.Y. Case No. 01-CV-4692 (WHP).  Duane Reade Inc. is the defendant in a suit
for alleged violations of the Americans with Disabilities Act (“ADA”).  Settlement discussions are active.  However, it is likely at this stage that a
portion of the case will be litigated as the parties have been unable to reach
agreement as the requirements of the ADA with respect to two issues.

 

d.             Cardinal
Health Litigation.  Duane Reade Inc. is
involved in an ongoing dispute with Cardinal Health, a former supplier of
pharmaceutical products.  Both parties
have claims against the other involving, among other claims, breach of
contract, promissory estoppel and unjust enrichment.  Duane Reade Inc. is seeking from Cardinal an
unspecified amount of damages and punitive damages.  Cardinal is seeking approximately $18 million
in damages plus attorney’s fees and interest. 
Non-party discovery in the case has concluded and it is expected to go
to trial some time in late 2004 or 2005.

 

e.             Irving
Kroop, et al. v. Duane Reade, NY, NY et al., 00 Civ. 9841 et al.  Trustees of several union benefit
funds have brought suit alleging that Duane Reade Inc. did not make certain
required contributions to these funds from January 2000 through August
2001.  The plaintiffs have recently filed
a motion seeking summary judgment of $2.29 million of claims for alleged
understanding and related penalties and interest.  In addition, at various times, the plaintiffs
have stated that they believe Duane Reade Inc. may owe additional amounts.  However, any additional amounts that the
plaintiffs may claim are not known at this time.  Duane Reade has filed a motion opposing these
claims.

 

f.              Allied
Trades Council Dispute.  Duane Reade Inc.
is party to an NLRB administrative proceeding regarding a dispute with the
Allied Trades Council over whether a negotiating impasse was reached between
Duane Reade Inc. and the union in 2001. 
The Allied Trades Council represents employees in 139 Duane Reade stores
and was party to a collective bargaining agreement that had an expiration date
of August 31, 2001.  The bargaining over
a new term for the collective bargaining agreement was not successful, and upon
declaring impasses at different times, the company unilaterally made changes in
certain terms and conditions of employment. 
On February 18, 2004, an administrative law judge (ALJ) who had reviewed
various matters related to this proceeding issued a decision and related recommendations,
which concluded that the parties were not at impasse.  The remedies recommended by the ALJ included,
among other things, a requirement that Duane Reade Inc. make its employees
whole by reimbursing them for expenses ensuing from the company’s failure to
make contributions to certain union funds and to make such funds whole, plus
interest.  If this recommendation is
adopted by the full NLRB and enforced by a circuit court of appeals, it could
result in Duane Reade Inc. being required to contribute amounts that have yet
to be determined into the union’s pension benefit, health and welfare and
vacation funds.  Any potential required
contributions resulting from a final judicial determination of this matter
would potentially be subject to offset by a portion of the amounts that Duane
Reade Inc. had paid for similar benefits provided to employees represented by
the Allied Trades Council.  Because this
is just the first phase of a long and complicated administrative process likely
to be followed by a judicial review of the NLRB findings, the final outcome
cannot be reliably determined at this time. 
The ALJ’s recommendation is not a binding order and has no force and
effect of law.  Rather, it is a

 

2

 

recommendation to the full NLRB in Washington, D.C.,
which will conduct a review at some point in the future and decide to uphold,
reject or modify the recommendation.  The
full NLRB decision is also subject to judicial review by a circuit court of
appeals and a compliance hearing before any financial remedy can be determined
with specificity.  Duane Reade Inc.
recorded a pre-tax charge of $12.6 million for the year ended December 27, 2003
and an additional pre-tax charge of $1.1 million in the quarter ended March 27,
2004.  These charges represent Duane
Reade Inc.’s current best estimate of the loss that would result upon
application of the ALJ’s recommendation. 
Duane Reade Inc. notes that such charge is based upon the facts
available to it at the time and such charges could be subject to significant
modification in the future, upon review by the full NLRB, the Federal Circuit
of Appeals and completion of a compliance hearing and any appeals relating to
the outcome of that hearing.  These
charges reflect the amount of contributions that Duane Reade Inc. did not make
into the vacation benefit funds for the period from July 1, 2001 through March
27, 2004, and the amount of contributions that Duane Reade Inc. did not make
into the pension and health and welfare funds from the August 31, 2001 expiration
of the contract through March 27, 2004, with the combined amounts reduced by a
portion of the benefits Duane Reade Inc. paid directly to or for the benefit of
these employees over the same periods. 
They also include an interest cost for these net contributions from the
date they would have been paid until March 27, 2004.

 

g.             Item
1. on Schedule 5.06

 

3

 

SCHEDULE 1.01B

 

Management
Group

 

Management Group:

 

(a)           Anthony J. Cuti

(b)           Gary Charboneau

(c)           John Henry

(d)           Jerry Ray

(e)           Timothy LeBeau

 

 

SCHEDULE 1.01C

 

Fixed Charge Coverage Ratio

 

The “Fixed Charge Coverage Ratio” for any
period shall mean the ratio of (i) Consolidated Earnings for such period to
(ii) Consolidated Fixed Charges for such period, in each case after giving pro
forma effect to, without duplication:

 

(i)              the
incurrence of the Indebtedness giving rise to the need to make such calculation
and (if applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, on the first day of such period;

 

(ii)             the
incurrence, repayment or retirement of any other Indebtedness by the Company
and its Subsidiaries since the first day of such period as if such Indebtedness
was incurred, repaid or retired at the beginning of such period (except that,
in making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of such
Indebtedness during such period);

 

(iii)          in
the case of (A) Indebtedness of a Person whose Equity Interests or assets are
acquired in a Permitted Business Acquisition which is acquired or assumed by
the Borrower or a Subsidiary of the Borrower in such Permitted Business
Acquisition in accordance with clause (vi) of the definition of
“Permitted Indebtedness” or (B) any Permitted Business Acquisition occurring at
the time of the incurrence of such Indebtedness, the related Permitted Business
Acquisition, assuming such Permitted Business Acquisition had been consummated
on the first day of such period;

 

(iv)          any
acquisition or disposition by the Company and its Subsidiaries of any company
or any business or any assets out of the ordinary course of business, whether
by merger, stock purchase or sale or asset purchase or sale, or any related
repayment of Indebtedness, in each case since the first day of such period,
assuming such acquisition or disposition had been consummated on the first day
of such period;

 

(v)           all
adjustments to “EBITDA” for such period used to calculate “Adjusted EBITDA” for
such period that are disclosed in the “Summary Unaudited Pro Forma Financial
Information and Statistical Data” section included in the final offering memorandum
relating to the Senior Subordinated Notes; and

 

(vi)          Pro
Forma Cost Savings;

 

provided that:

 

(i)            any
such computation shall be set forth in an officer’s certificate duly executed
by a Responsible Officer of the Company and delivered to the Administrative
Agent prior to the consummation of the transaction giving rise to the need to
perform such calculation;

 

(ii)           in
making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a pro forma basis
and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the
entire period and (B) which was not outstanding during the period for
which the computation is being made but which bears, at the option of such
Person, a fixed or 

 

 

floating rate of
interest, shall be computed by applying at the option of such Person either the
fixed or floating rate; and

 

(iii)          in
making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average
balance at the end of each calendar month of such Indebtedness during the
applicable period.

 

Solely for purposes of this Schedule 1.01C, the
following terms have the meanings set forth below.  All other capitalized terms defined in the
Credit Agreement to which this Schedule 1.01C is attached and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.

 

“Consolidated Earnings” means for any period
the sum (without duplication) of:

 

(i)            Consolidated
Net Income for such period; plus

 

(ii)           an
amount which, in the determination of Consolidated Net Income for such period,
has been deducted for (A) Consolidated Interest Expense, (B) Consolidated
Income Tax Expense, (C) Consolidated Non-cash Charges, (D) financial advisory
fees, accounting fees, legal fees and other similar advisory and consulting
fees and related out-of-pocket expenses incurred as a result of any Equity
Issuance or Debt Issuance permitted pursuant to the Agreement, (E)
restructuring costs and acquisition integration costs and fees, including cash
severance payments made in connection with restructurings and acquisitions, or
other types of special charges or reserves, (F) Permitted Management Fees paid
in accordance with Section 7.09(i) of the Agreement, (G) deferred rental
expense for such period which is in excess of the amount of cash rental expense
actually paid during such period, (H) non-cash charges or expenses relating to
recording inventory on a LIFO basis, (I) so long as the Company and its
Consolidated Subsidiaries file a consolidated tax return, or are part of a
consolidated group for tax purposes, with Holdings or any other holding
company, the excess of (x) the Consolidated Income Tax Expense of the Company
and its Consolidated Subsidiaries for such period over (y) all tax payments
payable in cash for such period (whether paid in such period or at any time
prior to such period) by the Company and its Consolidated Subsidiaries to
Holdings or such other holding company under a tax sharing agreement or
arrangement, all determined in accordance with GAAP and (J) non-recurring
losses; minus

 

(iii)          the
sum of (A) the aggregate amount of all deferred rental expense which was
deducted in the determination of Consolidated Earnings in any prior period
pursuant to clause (ii)(G) above and with respect to which cash payments
were made during the relevant period of determination plus (B) the aggregate
amount of all non-cash charges or expenses relating to recording inventory on a
LIFO basis which were deducted in the determination of Consolidated Earnings in
any prior period pursuant to clause (ii)(H) above and with respect to
which cash payments were made during the relevant period of determination plus
(C) the aggregate amount of all Consolidated Income Tax Expense which was
deducted in the determination of Consolidated Earnings in any prior period
pursuant to clause (ii)(I) above and with respect to which cash payments
were made during the relevant period of determination plus (D) the aggregate
amount of all other cash payments during such period relating to non-cash
charges that were added back to Consolidated Net Income in the determination of
Consolidated Earnings for any prior period plus (E) all non-cash items
increasing Consolidated Net Income for such period.

 

2

 

“Consolidated Fixed Charges” means, for any
period, without duplication, the sum of (i) Consolidated Interest Expense for
such period plus (ii) the aggregate amount of all cash and non-cash dividends
(other than those paid in the form of Equity Interests (other than Debt
Equivalents)) paid on any Debt Equivalents or Preferred Stock of the Company
and its Consolidated Subsidiaries during such period.

 

“Consolidated
Income Tax Expense” means, for any period, the provision for
federal, state, local and foreign income taxes of the Company and its
Consolidated Subsidiaries for such period as determined in accordance with
GAAP.

 

“Consolidated Interest Expense” means, for any
period, the sum (without duplication) of: 
(i) the total interest expense of the Company and its Consolidated
Subsidiaries, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments under
Capital Leases and the implied interest component of Synthetic Lease
Obligations (regardless of whether accounted for as interest expense under
GAAP), all commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers’ acceptances and net costs in respect of Swap
Obligations constituting interest rate swaps, collars, caps or other
arrangements requiring payments contingent upon interest rates of the Company
and its Consolidated Subsidiaries), determined on a consolidated basis for such
period; provided that (A) any interest on Indebtedness of another Person
that is guaranteed by the Company or any of its Consolidated Subsidiaries or
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien on, or payable out of the
proceeds of the sale of or production from, assets of the Company or any of its
Consolidated Subsidiaries (whether or not such guarantee or Lien is called
upon) shall be included to the extent (but only to the extent) actually paid by
the Company or its Consolidated Subsidiaries and (B) dividend requirements of
the Company and its Consolidated Subsidiaries during such period with respect
to Debt Equivalents and of any Consolidated Subsidiary of the Company with
respect to Preferred Stock (except, in either case, dividends payable solely in
shares of Equity Interests (other than Debt Equivalents) of the Company or such
Consolidated Subsidiary, as the case may be) shall be included, minus (ii) the
total interest income of the Company and its Consolidated Subsidiaries,
determined on a consolidated basis for such period in accordance with GAAP,
minus (iii) in each case to the extent included in consolidated interest
expense for such period in accordance with GAAP, (A) the amortization during
such period of capitalized financing costs, (B) any charges during such period
resulting from the application of Statement of Financial Accounting Standards
No. 150, “Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity” with respect to Equity Interests and (C) any
charges during such period resulting from the application of Statement of
Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4,
44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections”.

 

“Consolidated Net Income” means, for any
period, the net income (or net loss) after taxes of the Company and its
Consolidated Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded from the
calculation of Consolidated Net Income for any period (without duplication):

 

(i)            all
extraordinary or nonrecurring gains (or extraordinary losses or nonrecurring, non-cash
losses), together with any related provision for taxes on any such
extraordinary or nonrecurring gain (and the tax effect of any such
extraordinary loss or nonrecurring, non-cash loss), realized by the Company or
any of its Consolidated Subsidiaries during such period;

 

3

 

(ii)           the
income (or loss) of any Person in which any other Person (other than the
Company or any of its Wholly-Owned Consolidated Subsidiaries) has an ownership
interest and which is not a Consolidated Subsidiary of the Company, except to
the extent that any such income is actually distributed in cash to the Company
or such Wholly-Owned Consolidated Subsidiary during such period;

 

(iii)          the
income of any Subsidiary of the Company (other than a Loan Party) to the extent
that the declaration or payment of Restricted Payments or similar distributions
by that Subsidiary of that income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary;

 

(iv)          any
non-cash income or non-cash loss for such period attributable to the
application of the purchase method of accounting in accordance with GAAP;

 

(v)           any
gain or loss realized during such period upon the termination of any employee
pension benefit plan, together with any related provision for taxes on any such
termination (or the tax effect of any such termination);

 

(vi)          any
gain or loss realized during such period in respect of Asset Dispositions other
than in the ordinary course of business (including, without limitation, Asset
Dispositions pursuant to Sale/Leaseback Transactions), together with any
related provision for taxes on any such Asset Disposition (or the tax effect of
any such Asset Disposition);

 

(vii)         any
income for such period arising as a result of the restoration of any
contingency reserve, except to the extent the original provision for such
reserve was made after the Closing Date;

 

(viii)        any
gain or loss arising from the acquisition of any securities during such period
or the extinguishment, under GAAP, during such period of any Indebtedness of
the Company or its Consolidated Subsidiaries;

 

(ix)           any
financial advisory fees, accounting fees, legal fees and other similar advisory
and consulting fees and related out-of-pocket expenses incurred during such
period as a result of the Transaction;

 

(x)            all
deferred financing costs amortized or written off, and premiums and prepayment
penalties paid, in each case during such period in connection with (A) the
Transaction or (B) the refinancing of any Equity Interests (other than Debt
Equivalents);

 

(xi)           any
charges during such period resulting from the application of Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”
or No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”;

 

(xii)          unrealized
gains and losses associated with Swap Agreements;

 

(xiii)         non-cash
compensation charges or other non-cash expenses or charges for such period
arising from the grant of or issuance or repricing of Equity Interests or any
amendment or substitution of any such Equity Interests; and

 

(xiv)        the
cumulative effect of a change in accounting principles.

 

4

 

“Consolidated Non-cash Charges” means, for any
period, the aggregate depreciation, amortization and write-downs, write-offs
and other non-cash charges of the Company and its Consolidated Subsidiaries on
a consolidated basis for such period, as determined in accordance with GAAP
(excluding any such non-cash charge to the extent that it represents an accrual
of, or a reserve for, cash charges or expenses in any future period).

 

“Indebtedness”
means, with respect to any Person, without duplication, (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
or services, excluding any trade payables and other accrued current liabilities
arising in the ordinary course of business, but including, without limitation,
all obligations, contingent or otherwise, of such Person in connection with any
letters of credit issued under letter of credit facilities, acceptance
facilities or other similar facilities, (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables and accrued expenses arising in the ordinary course of
business, (iv) all obligations of such Person under Swap Agreements, (v) all
Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in
clauses (i) through (v) above of other Persons and all dividends or
similar distributions of other Persons, to the extent the payment of such
Indebtedness or dividends or similar distributions is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien, upon or with respect to property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness, (vii) all Guaranty Obligations of such Person in respect of
Indebtedness of any other Person, (viii) all Debt Equivalents issued by such
Person, and (ix) all Preferred Stock of any Subsidiary of the Company.  The amount of any Indebtedness outstanding as
of any date will be: (i) the accreted value of the Indebtedness, in the case of
any Indebtedness issued with original issue discount, and (ii) the principal
amount of the Indebtedness, together with any interest on the Indebtedness that
is more than 30 days past due, in the case of any other Indebtedness.  Notwithstanding the foregoing, Indebtedness
shall not include:  (i) trade accounts
payable and other accrued liabilities arising in the ordinary course of
business; (ii) obligations of such Person other than principal; or (iii) any
liability for federal, state or local taxes or other taxes or by such Person.

 

“Pro Forma Cost Savings” means, with respect to
any period, the reductions in costs that occurred during such period that are
(i) directly attributable to an asset acquisition and calculated on a basis
that is consistent with Article 11 of Regulation S-X under the Securities Act
or (ii) implemented, committed to be implemented or the commencement of
implementation of which has begun in good faith by the business that was the
subject of any such asset acquisition within six months of the date of the
asset acquisition and that are supportable and quantifiable by the underlying
records of such business, as if, in the case of each of clauses (i) and (ii),
all such reductions in costs had been effected as of the beginning of such
period, decreased by any incremental expenses incurred or to be incurred during
such period in order to achieve such reduction in costs.

 

5

 

SCHEDULE
1.01D

 

ABL
Priority Collateral

 

All of the following
property and interests in property of the Loan Parties, whether now owned or
existing, or hereafter created, acquired or arising and wherever located:

 

(a)           All
Accounts;

 

(b)           All
Inventory;

 

(c)           All
Chattel Paper, Instruments and Documents;

 

(d)                                 All Payment
Intangibles constituting proceeds of other ABL Priority Collateral;

 

(e)                                  All prescription
files, and all books, records, electronically stored data and information
relating to the prescription files and all rights of access to such books,
records and information;

 

(f)                                    All tax refunds and
abatements, and rights to payment for credit extended;

 

(g)                                 All Deposit Accounts;

 

(h)                                 All Letter of Credit
Rights and Supporting Obligations relating to ABL Priority Collateral;

 

(i)                                     All books and
records of the Loan Parties relating to any other foregoing; and

 

(j)                                     All products and
proceeds of the foregoing, including, without limitation, proceeds of insurance
policies to the extent such proceeds relate to any of the foregoing.

 

All capitalized terms used herein and not otherwise defined shall have
the same meaning herein as in the Uniform Commercial Code as in effect from
time to time in the State of New York.

 

 

SCHEDULE 2.01

 

Lenders
and Commitments

 

	
  Lender

  	
   

  	
  Commitment Amount

  	
   

  	
  Commitment

  Percentage

  	
   

  	
  Commitment Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Banc of America Bridge LLC

  	
   

  	
  $

  	
  155,000,000.00

  	
   

  	
  100.0000

  	
  %

  	
  July 30, 2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals

  	
   

  	
  $

  	
  155,000,000.00

  	
   

  	
  100.0000

  	
  %

  	
   

  	
   

  

 

 

SCHEDULE
5.03

 

Required
Consents, Authorizations, Notices and Filings

 

1.                                       The New Jersey
Board of Pharmacy requires the submission of a “Transfer of Ownership
Application” for each store located in New Jersey on or before the DRI
Merger.  The New York Board of Pharmacy
must be notified within thirty (30) days of the closing of the DRI Merger.  Since the federal identification numbers,
directors and officers of the entities that possess the pharmacy licenses and
the Medicare and Medicaid provider agreements will not change at the closing of
the DRI Merger, no other approvals or notices to the New York and New Jersey
Boards of Pharmacy or to the applicable Medicare or Medicaid intermediaries,
carriers and agencies must be made as a result of the closing of the DRI
Merger.

 

2.                                       If there is a
subsequent foreclosure of the assets or equity of the Company or of Duane Reade
or if there is a change of the federal identification numbers of the entities
that possess the New York or New Jersey pharmacy licenses, the Drug Enforcement
Agency registrations or the Medicare or Medicaid provider numbers and
agreements, then new pharmacy licenses will be required to operate the
pharmacies, new DEA registrations will be required and new Medicare and/or
Medicaid provider agreements and numbers will be required.  This will require the filing of the
appropriate applications with the applicable federal and state regulatory
authorities.  In addition, if there is a
change of the officers, directors or principal shareholders of an entity that
possesses a New York pharmacy license, the New York Board of Pharmacy must be
notified within thirty (30) days of the change. 
If there is a change of 5% or more of the directors of an entity that
possesses a New York Medicaid provider number or agreement, then the New York
Medicaid agency requires a change of ownership application.  The New Jersey and New York Medicare
intermediary/carrier requires notice if any individual listed as an authorized
individual of the Form 855B changes.  In
addition, if there is a change in the individual listed as the power of
attorney for a pharmacy for the purposes of the Drug Enforcement Agency
registration, then the Drug Enforcement Agency must be notified immediately of
the change.

 

3.                                       See Section
5.02(iii)(B) of the Credit Agreement.

 

 

SCHEDULE 5.06

 

Litigation

 

1.             Litigation
Relating to the DRI Merger.  Duane Reade
Inc. is aware of six purported class action complaints challenging the DRI
Merger that have been filed in the Court of Chancery of the State of Delaware
(the “Delaware
Complaints”), and three purported class action complaints that have been
filed in the Supreme Court of the State of New York (the “New York
Complaints”).  Two of the New York
Complaints have been voluntarily dismissed without prejudice.  Both the Delaware Complaints and the New York
Complaints named Mr. Anthony Cuti and certain other members of the board of
directors of Duane Reade Inc., certain executive officers and Duane Reade Inc.
as defendants.  Four of the Delaware
Complaints name Oak Hill Capital Partners, L.P. as a defendant.  One of the dismissed New York Complaints
named Oak Hill Capital Partners, L.P. as a defendant.  The Delaware Complaints were consolidated on
January 28, 2004, and on April 8, 2004 the plaintiffs in the Delaware actions
filed a consolidated class action complaint. 
The consolidated complaint alleges that defendants failed to disclose
material information in the preliminary proxy statement, which was filed with
the SEC on March 19, 2004.

 

Plaintiffs seek, among
other things, an order that the complaints are properly maintainable as a class
action, a declaration that defendants have breached their fiduciary duties and
other duties, injunctive relief, an unspecified amount of monetary damages,
attorneys’ fees, costs and expenses and any such other and further relief as
the court may deem just and proper. 
Duane Reade Inc. has received a letter, dated June 14, 2004, from
co-lead counsel for the plaintiffs in the stockholder litigation relating to
the transaction expressing “substantial concern” over Oak Hill’s proposal,
which was announced in a press release on June 14, 2004, to reduce the per
share price set forth in the original merger agreement from $17.00 to $16.00.

 

 

SCHEDULE
5.12

 

ERISA
Matters

 

 

Schedule 5.12(c) – ERISA Events

 

 

1.                                            Executive
Life Program Split Dollar Agreement between Anthony J. Cuti and Duane Reade,
Inc., dated January 25, 2002.

 

2.                                            Futurity
Corporate VUL Allocation Form Sun Life Assurance Company of Canada (U.S.),
insuring John K. Henry.

 

3.                                            Split
Dollar Life Insurance Policies covering Messrs. Cuti, Charboneau, Henry &
Ray.

 

4.                                            Post-retirement
medical for Mr. Cuti and his spouse pursuant to the terms of Mr. Cuti’s
employment agreement which are limited to a cost of $50,000 per year.

 

 

Schedule 5.12(d) – Multiemployer Plan

 

 

                The Company
has ceased making contributions to the UMFPP, the Union Mutual Medical Fund and
the Union Mutual Vacation Fund with respect to its employees covered by the
Allied Trade Council Bargaining Unit.

 

 

Schedule 5.12(f) – Welfare Plan

 

 

1.                                     Post-retirement
medical for Mr. Cuti and his spouse pursuant to the terms of his employment
agreement which are limited to a cost of $50,000 per year.

 

2.                                     Futurity
Corporate VUL Allocation Form Sun Life Assurance Company of Canada (U.S.),
insuring John K. Henry.

 

3.                                     Split
Dollar Life Insurance Policies covering Messrs. Cuti, Charboneau, Henry and
Ray.

 

4.                                     Executive
Life Program Split Dollar Agreement between Anthony J. Cuti and Duane Reade,
Inc., dated January 25, 2002.

 

 

SCHEDULE 5.13

 

Subsidiaries

 

	
  Name of Subsidiary

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Number of

  Authorized Shares of

  each Class of Equity Interests

  	
   

  	
  Number of

  outstanding Shares of

  each Class of Equity Interests

  	
   

  	
  Number and Percentage

  of Outstanding Shares of

  each Class of Equity

  Interests Owned by any

  Person

  	
   

  	
  Number and

  Effect, if

  exercised, of

  all Equity

  Equivalents

  of Subsidiary

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Duane
  Reade Holdings, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100
  Common Shares

  	
   

  	
  100/100%

  	
   

  	
   

  
	
  DRI I Inc.

  	
   

  	
  Duane
  Reade Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  Common Shares

  	
   

  	
  1,000/100%

  	
   

  	
  None

  
	
  Duane Reade International, Inc.

  	
   

  	
  Duane
  Reade Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  Common Shares

  	
   

  	
  1,000/100%

  	
   

  	
  None

  
	
  Duane Reade Realty, Inc.

  	
   

  	
  Duane
  Reade Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  Common Shares

  	
   

  	
  1,000/100%

  	
   

  	
  None

  
	
  Duane Reade

  	
   

  	
  Duane
  Reade Inc.  

  	
   

  	
  New
  York

  	
   

  	
  N/A

  	
   

  	
  -
  990/99%

  	
  (Duane Reade Inc.)

  	
   

  	
  None

  
	
   

  	
   

  	
  DRI
  I Inc.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  -
  10/1%

  	
  (DRI I Inc.)

  	
   

  	
   

  

 

 

SCHEDULE 5.17

 

Intellectual
Property

 

None.

 

 

SCHEDULE 5.22

 

Ownership
of Duane Reade, Inc.

 

 

1.                                          Stockholders and Registration
Agreement, dated as of July 30, 2004, by and among Holdings, DR Shareholders,
LLC and certain members of the management of the Company, as amended, restated
or modified from time to time

 

2.                                       Preemptive Rights Agreement, dated as July
30, 2004, by and among Oak Hill Capital Partners, L.P., Oak Hill Capital
Management Partners, L.P., OHCP DR Co-Investors, LLC, Duane Reade Shareholders,
LLC, Duane Reade Holdings, Inc., Duane Reade Inc., Anthony J. Cuti and certain
other members of the management of Duane Reade Inc. listed on Schedule 1
thereto

 

 

SCHEDULE
7.01

 

Existing
Indebtedness

 

 

1.             ABL Credit
Agreement

 

2.                                       Capital Lease
between Duane Reade Inc. and IBM Credit Corporation, dated March 22, 2002

 

3.                                       Existing
Convertible Notes

 

 

SCHEDULE 7.02

 

Existing
Liens

 

	
  Filing

  	
   

  	
  Secured Party

  Name

  	
   

  	
  Debtor Name

  	
   

  	
  Filing

  Jurisdiction

  	
   

  	
  Record

  Date

  	
   

  	
  File #

  	
   

  	
  Related UCC-1 File

  #

  	
   

  	
  Description

  
	
  UCC1

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade Realty, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/17/03

  	
   

  	
  31831315

  	
   

  	
  —

  	
   

  	
  Blanket

  
	
  UCC3

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade Realty, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/29/03

  	
   

  	
  31960130

  	
   

  	
  31831315

  	
   

  	
  Amendment-restated collateral description excluding “Excluded
  Collateral” which are various insurance policies

  
	
  UCC1

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade International, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/17/03

  	
   

  	
  31831331

  	
   

  	
  —

  	
   

  	
  Blanket

  
	
  UCC3

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade International, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/29/03

  	
   

  	
  31950164

  	
   

  	
  31831331

  	
   

  	
  Amendment-restated collateral description excluding “Excluded
  Collateral” which are various insurance policies

  
	
  UCC1

  	
   

  	
  Matrix Funding Corporation

  	
   

  	
  Rock Bottom Stores, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  07/07/97

  	
   

  	
  139656

  	
   

  	
  —

  	
   

  	
  IBM Point of Sale equipment-Funding Agreement 10/14/96

  
	
  UCC3

  	
   

  	
  Matrix Funding Corporation

  	
   

  	
  Rock Bottom Stores, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  11/24/97

  	
   

  	
  242625

  	
   

  	
  139656

  	
   

  	
  Amendment-Property described in original filing deleted and new
  description provided

  
	
  UCC3

  	
   

  	
  Matrix Funding Corporation

  	
   

  	
  Rock Bottom Stores, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  11/26/97

  	
   

  	
  244505

  	
   

  	
  139656

  	
   

  	
  Assignment to Lyon Credit Corporation

  

 

1

 

	
  UCC3

  	
   

  	
  Lyon Credit Corporation

  	
   

  	
  Rock Bottom Stores, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  04/24/00

  	
   

  	
  081081

  	
   

  	
  139656

  	
   

  	
  Assignment to Hudson United Bank

  
	
  UCC3

  	
   

  	
  Hudson United Bank

  	
   

  	
  Rock Bottom Stores, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/11/00

  	
   

  	
  093800

  	
   

  	
  139656

  	
   

  	
  Amendment—Debtor name change to: Duane Reade, Inc.

  
	
  UCC3

  	
   

  	
  Hudson United Bank

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  04/03/02

  	
   

  	
  076643

  	
   

  	
  139656

  	
   

  	
  Continuation

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  05/14/99

  	
   

  	
  096353

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #39998

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/23/99

  	
   

  	
  147577

  	
   

  	
  096353

  	
   

  	
  Amendment-no change to collateral. 
  Addition of new serial numbers Master Lease #37625, Sched. #39998

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/02/04

  	
   

  	
  200402525

  7682

  	
   

  	
  096353

  	
   

  	
  Continuation

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  05/14/99

  	
   

  	
  096355

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #39997

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/02/04

  	
   

  	
  200404025

  257670

  	
   

  	
  096355

  	
   

  	
  Continuation

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  09/02/99

  	
   

  	
  177583

  	
   

  	
  096355

  	
   

  	
  Amendment-no change to collateral. 
  Addition of new serial numbers Master Lease #37625, Sched. #39997

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/01/99

  	
   

  	
  131468

  	
   

  	
  —

  	
   

  	
  Equipment—Lease #40169

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/16/04

  	
   

  	
  200406165

  494738

  	
   

  	
  131468

  	
   

  	
  Continuation

  

 

2

 

	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/01/99

  	
   

  	
  131470

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #40168

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/02/04

  	
   

  	
  200406165

  49470

  	
   

  	
  131470

  	
   

  	
  Continuation

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  08/12/99

  	
   

  	
  162511

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #40279

  
	
  UCC1

  	
   

  	
  El Camino Resources, Ltd.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  09/03/99

  	
   

  	
  178286

  	
   

  	
  —

  	
   

  	
  Equipment-Master Lease #4045, Schedule #001

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  11/03/99

  	
   

  	
  222085

  	
   

  	
  —

  	
   

  	
  Equipment—RVA#3428

  
	
  UCC3

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/25/00

  	
   

  	
  144827

  	
   

  	
  231476

  	
   

  	
  Assignment to: The Chase Manhattan Bank

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  11/16/99

  	
   

  	
  231481

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC3

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/25/00

  	
   

  	
  144840

  	
   

  	
  231481

  	
   

  	
  Assignment to: The Chase Manhattan Bank

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  12/28/99

  	
   

  	
  260226

  	
   

  	
  —

  	
   

  	
  Equipment-all replacement parts, accessions & substitutions
  #C0885003

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  12/28/99

  	
   

  	
  260230

  	
   

  	
  —

  	
   

  	
  Equipment-all replacement parts, accessions & substitutions
  #C0885004

  

 

3

 

	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  01/05/00

  	
   

  	
  002803

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  01/05/00

  	
   

  	
  003065

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/24/00

  	
   

  	
  037585

  	
   

  	
  —

  	
   

  	
  Equipment-all replacement parts, accessions & substitutions
  #C0885005

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/27/00

  	
   

  	
  083598

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #40890

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/09/00

  	
   

  	
  114397

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #40960

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/28/00

  	
   

  	
  127069

  	
   

  	
  114397

  	
   

  	
  Amendment-no change to collateral. 
  Addition of new serial numbers Master Lease #37625 Sched. #40960

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/06/00

  	
   

  	
  131963

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/06/00

  	
   

  	
  131964

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  De Lage Landen Financial

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  07/28/00

  	
   

  	
  147798

  	
   

  	
  —

  	
   

  	
  Equipment—Contract #24350027

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  08/10/00

  	
   

  	
  156271

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #41135

  

 

4

 

	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  09/08/00

  	
   

  	
  174691

  	
   

  	
  156271

  	
   

  	
  Amendment-no change to collateral. 
  Addition of new serial numbers Master Lease #37625 Sched. #41135

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc

  	
   

  	
  NY SoS

  	
   

  	
  12/27/00

  	
   

  	
  247750

  	
   

  	
  —

  	
   

  	
  All computer, information processing equipment—Supplement #914477
  12/01/00

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc

  	
   

  	
  NY SoS

  	
   

  	
  01/25/01

  	
   

  	
  018314

  	
   

  	
  —

  	
   

  	
  All computer, information processing equipment—Supplement #909186
  11/21/00

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/06/01

  	
   

  	
  025690

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #41597

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  04/13/01

  	
   

  	
  072541

  	
   

  	
  025690

  	
   

  	
  Amendment-No change in collateral. New Serial Numbers added.

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/06/01

  	
   

  	
  025692

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #41598

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032846

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032852

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 003

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032855

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 004

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032856

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 005

  

 

5

 

	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032858

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 006

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032861

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 007

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032863

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 008

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032864

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 009

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032865

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 010

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032867

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 011

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032868

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 012

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032869

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 014

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032870

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 016

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032872

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 017

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032873

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 018

  

 

6

 

	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032874

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 019

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc. (Assignee-CIT)

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  02/15/01

  	
   

  	
  032875

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #1409-10 Schedule 020

  
	
  UCC1

  	
   

  	
  Crown Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  03/08/01

  	
   

  	
  045904

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  04/06/01

  	
   

  	
  067100

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc

  	
   

  	
  NY SoS

  	
   

  	
  04/25/01

  	
   

  	
  080587

  	
   

  	
  —

  	
   

  	
  All computer, information processing equipment—Supplement #955641
  03/27/01

  
	
  UCC1

  	
   

  	
  Imaging Financial Service, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/09/01

  	
   

  	
  090626

  	
   

  	
  —

  	
   

  	
  Kodak Picture Maker Units & accessories

  
	
  UCC1

  	
   

  	
  Colonial Pacific Leasing

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/24/01

  	
   

  	
  101763

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital camera module software, etc

  
	
  UCC1

  	
   

  	
  Colonial Pacific Leasing

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/24/01

  	
   

  	
  101764

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital camera module software, etc

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  01/04/02

  	
   

  	
  002620

  	
   

  	
  —

  	
   

  	
  Equipment—Master Lease #37625, Schedule #41650

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/25/02

  	
   

  	
  045582

  	
   

  	
  —

  	
   

  	
  Equipment-Film along with cash and noncash proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/25/02

  	
   

  	
  045726

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  

 

7

 

	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/25/02

  	
   

  	
  045753

  	
   

  	
  —

  	
   

  	
  Equipment-Film along with cash and noncash proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/27/02

  	
   

  	
  047365

  	
   

  	
  —

  	
   

  	
  Equipment-all replacement parts, accessions & substitutions

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  03/18/02

  	
   

  	
  063337

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC1

  	
   

  	
  General Electric Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  04/30/02

  	
   

  	
  099949

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC1

  	
   

  	
  Tennant Financial Services

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/21/02

  	
   

  	
  117870

  	
   

  	
  —

  	
   

  	
  Tennant Model 8300 Sweeper/Scrubber

  
	
  UCC1

  	
   

  	
  General Electric Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/23/02

  	
   

  	
  119837

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  12/19/02

  	
   

  	
  200212192

  818827

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital minilabs

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/04/03

  	
   

  	
  200302040

  255667

  	
   

  	
  —

  	
   

  	
  Equipment-Printer along with cash and noncash proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/27/03

  	
   

  	
  200302270

  438954

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  10/30/03

  	
   

  	
  200310301

  793381

  	
   

  	
  200302270438954

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added.

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/27/03

  	
   

  	
  200302270

  438978

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  02/27/03

  	
   

  	
  200302270

  438992

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  

 

8

 

	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/04/03

  	
   

  	
  200306041

  111991

  	
   

  	
  200302270438992

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added.

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  03/13/03

  	
   

  	
  200303130

  556553

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  03/18/03

  	
   

  	
  200303180

  592319

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/04/03

  	
   

  	
  200306041

  111977

  	
   

  	
  200303180592319

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added.

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/17/03

  	
   

  	
  200304170

  834488

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  06/04/03

  	
   

  	
  200306041

  111941

  	
   

  	
  200304170834488

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added.

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/03/03

  	
   

  	
  200307031

  274399

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/21/03

  	
   

  	
  200307211

  358547

  	
   

  	
  200307031274399

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added.

  
	
  UCC1

  	
   

  	
  Fleet Retail Finance, Inc., as Collateral Agent

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/17/03

  	
   

  	
  200307173

  41389

  	
   

  	
  —

  	
   

  	
  Blanket

  
	
  UCC3

  	
   

  	
  Fleet Retail Finance, Inc., as Collateral Agent

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/29/03

  	
   

  	
  200307291

  395717

  	
   

  	
  20030717341389

  	
   

  	
  Amendment-restated collateral description excluding “Excluded
  Collateral” which are various insurance policies

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  07/23/03

  	
   

  	
  200307231

  369760

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  

 

9

 

	
  UCC1

  	
   

  	
  Key Equipment Finance, a Division of Key Corporate Capital Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NY SoS

  	
   

  	
  07/25/03

  	
   

  	
  200307251

  378573

  	
   

  	
  —

  	
   

  	
  All right, title & interest in & to Master Flex Digital 1008

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  10/10/03

  	
   

  	
  200310101

  706158

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  11/10/03

  	
   

  	
  200311101

  834997

  	
   

  	
  200310101706158

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  11/25/03

  	
   

  	
  200311251

  900189

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  12/01/03

  	
   

  	
  200312011

  917201

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  12/22/03

  	
   

  	
  200312222

  005291

  	
   

  	
  200312011917201

  	
   

  	
  Amendment-No change in collateral. 
  New serial Numbers were added

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  12/10/03

  	
   

  	
  200312101

  956187

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Richmond County, NY

  	
   

  	
  02/25/00

  	
   

  	
  2000-510

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  02/26/02

  	
   

  	
  20896072

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  12/18/02

  	
   

  	
  21355677

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital minilabs

  

 

10

 

	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  02/04/03

  	
   

  	
  21419546

  	
   

  	
  —

  	
   

  	
  Equipment-Printer along with cash and noncash proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  02/24/03

  	
   

  	
  21446733

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  09/03/03

  	
   

  	
  21446733

  	
   

  	
  21446733

  	
   

  	
  Amendment-No change to collateral. 
  Addition of new serial numbers.

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  12/01/03

  	
   

  	
  21907357

  	
   

  	
  —

  	
   

  	
  Fuji frontier mini lab

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  12/26/03

  	
   

  	
  21907357

  	
   

  	
  21907357

  	
   

  	
  Amendment-No change to collateral. 
  Addition of new serial numbers.

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  11/16/99

  	
   

  	
  1941416

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC3

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  07/25/00

  	
   

  	
  1941416

  	
   

  	
  1941416

  	
   

  	
  Assignment to: The Chase Manhattan Bank

  

 

11

 

	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  11/16/99

  	
   

  	
  1941417

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC3

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  NJ Dept. of Treasury Commercial Recording

  	
   

  	
  07/25/00

  	
   

  	
  1941417

  	
   

  	
  1941417

  	
   

  	
  Assignment to: The Chase Manhattan Bank

  
	
  UCC1

  	
   

  	
  Fleet Retail Finance, Inc., as Collateral Agent

  	
   

  	
  DRI I Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/17/03

  	
   

  	
  31831307

  	
   

  	
  —

  	
   

  	
  Blanket

  
	
  UCC3

  	
   

  	
  Fleet Retail Finance, Inc., as Collateral Agent

  	
   

  	
  DRI I Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/29/03

  	
   

  	
  31960163

  	
   

  	
  31831307

  	
   

  	
  Amendment-restated collateral description excluding “Excluded
  Collateral” which are various insurance policies

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/24/00

  	
   

  	
  0011253

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/11/01

  	
   

  	
  10670708

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/11/01

  	
   

  	
  10670757

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  

 

12

 

	
  UCC1

  	
   

  	
  GE Capital Colonial Pacific Leasing

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/19/01

  	
   

  	
  10734660

  	
   

  	
  —

  	
   

  	
  Masterflex digital 1008 photo processing machine

  
	
  UCC1

  	
   

  	
  GE Capital Colonial Pacific Leasing

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/20/01

  	
   

  	
  10762133

  	
   

  	
  —

  	
   

  	
  Masterflex digital 1008 photo processing machine

  
	
  UCC1

  	
   

  	
  GE Capital Colonial Pacific Leasing

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/01/01

  	
   

  	
  10841861

  	
   

  	
  —

  	
   

  	
  Masterflex digital 1008 photo processing machine

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  10/03/01

  	
   

  	
  11304208

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  DE SoS

  	
   

  	
  10/11/01

  	
   

  	
  11371603

  	
   

  	
  —

  	
   

  	
  Equipment-under lease # 42144

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  DE SoS

  	
   

  	
  10/11/01

  	
   

  	
  11372080

  	
   

  	
  —

  	
   

  	
  Equipment-under lease #42145

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  10/19/01

  	
   

  	
  11441240

  	
   

  	
  —

  	
   

  	
  Equipment-under lease #42188

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/05/01

  	
   

  	
  11606164

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/09/01

  	
   

  	
  11648554

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  

 

13

 

	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/09/01

  	
   

  	
  11648836

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/20/01

  	
   

  	
  20170781

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital minilab model

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/20/01

  	
   

  	
  20170815

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital minilab model

  
	
  UCC1

  	
   

  	
  Delphi Energy Fund, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/14/02

  	
   

  	
  20402168

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 028

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20444921

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 029

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20445142

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 030

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20445720

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 031

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20446454

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 033

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20446652

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 034

  

 

14

 

	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/20/02

  	
   

  	
  20446868

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1409-10, Schedule 035

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/15/02

  	
   

  	
  20614358

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC3

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/17/02

  	
   

  	
  21728595

  	
   

  	
  20614358

  	
   

  	
  Amendment—Debtor name change to: Duane Reade

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/25/02

  	
   

  	
  20680664

  	
   

  	
  —

  	
   

  	
  Equipment—Film Tools

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/25/02

  	
   

  	
  20680714

  	
   

  	
  —

  	
   

  	
  Equipment—Film Tools

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  02/26/02

  	
   

  	
  20681365

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20702567

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 001

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20702781

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles-Master Lease Agreement 1423-10,
  Schedule 002

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20703128

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 003

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20703458

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 004

  

 

15

 

	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20703656

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 005

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20703755

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 006

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20703904

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 007

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20704209

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 008

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20704530

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 009

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20704738

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 010

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20704944

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 011

  
	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20705396

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 012

  

 

16

 

	
  UCC1

  	
   

  	
  Bank of the West

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/19/02

  	
   

  	
  20705644

  	
   

  	
  —

  	
   

  	
  Equipment, general intangibles—Master Lease Agreement 1423-10,
  Schedule 014

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/18/02

  	
   

  	
  20886295

  	
   

  	
  —

  	
   

  	
  Gretag equipment

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21068869

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 001

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21068919

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 002

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21068976

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 003

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069065

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 004

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069115

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 005

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069214

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 006

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069354

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 007

  
	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069545

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 008

  

 

17

 

	
  UCC1

  	
   

  	
  Allen and Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  04/30/02

  	
   

  	
  21069701

  	
   

  	
  —

  	
   

  	
  Goods & equipment—Lease No. 1426-10, Schedule 009

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  05/15/02

  	
   

  	
  21219348

  	
   

  	
  —

  	
   

  	
  In Lieu filing

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  05/15/02

  	
   

  	
  21219587

  	
   

  	
  —

  	
   

  	
  In Lieu filing

  
	
  UCC1

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  05/08/02

  	
   

  	
  21336647

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule Nos. 1-5

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/12/02

  	
   

  	
  21440167

  	
   

  	
  21336647

  	
   

  	
  Partial assignment to Key Equipment Finance, a division of Key
  Corporate Capital Inc.—Master Lease Agreement No. 300327, Schedule No. 1

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/01/02

  	
   

  	
  21612948

  	
   

  	
  21336647

  	
   

  	
  Full assignment to Key Equipment Finance, a division of Key Corporate
  Capital Inc.—Master Lease Agreement No. 300327, Schedule No. 1

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/02/02

  	
   

  	
  21865611

  	
   

  	
  21336647

  	
   

  	
  Full assignment to Excel Bank-Master Lease Agreement No. 300327,
  Schedule No. 3

  

 

18

 

	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/08/02

  	
   

  	
  21896780

  	
   

  	
  21336647

  	
   

  	
  Full assignment to Excel Bank—Master Lease Agreement No. 300327,
  Schedule No. 4

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/08/02

  	
   

  	
  21897176

  	
   

  	
  21336647

  	
   

  	
  Full assignment to BankChicago—Master Lease Agreement No. 300327,
  Schedule No. 2

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/08/02

  	
   

  	
  22060360

  	
   

  	
  21336647

  	
   

  	
  Full assignment to Excel Bank, N.A.—Master Lease Agreement No. 300327,
  Schedule No. 5

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/03/02

  	
   

  	
  21637903

  	
   

  	
  —

  	
   

  	
  Equipment & software—IBM Credit Supplement #062946

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/06/02

  	
   

  	
  21665698

  	
   

  	
  —

  	
   

  	
  Equipment & software—IBM Credit Supplement #026808

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/18/02

  	
   

  	
  21744154

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/18/02

  	
   

  	
  21744170

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  
	
  UCC1

  	
   

  	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/28/02

  	
   

  	
  21843535

  	
   

  	
  —

  	
   

  	
  Equipment-Energy Management Control Systems

  
	
  UCC1

  	
   

  	
  IBM Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/01/02

  	
   

  	
  21852924

  	
   

  	
  —

  	
   

  	
  Equipment & software—IBM Credit Supplement #092134

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/02/02

  	
   

  	
  21869225

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  

 

19

 

	
  UCC1

  	
   

  	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/27/02

  	
   

  	
  22216533

  	
   

  	
  —

  	
   

  	
  Equipment-Energy Management Control Systems

  
	
  UCC1

  	
   

  	
  Orix Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  10/10/02

  	
   

  	
  22657249

  	
   

  	
  —

  	
   

  	
  Equipment-under lease #42274

  
	
  UCC1

  	
   

  	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/04/02

  	
   

  	
  22880783

  	
   

  	
  —

  	
   

  	
  Equipment-attachment not available

  
	
  UCC1

  	
   

  	
  IBM Credit LLC

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  01/07/03

  	
   

  	
  30215338

  	
   

  	
  —

  	
   

  	
  Equipment & software—IBM Credit LLC Supplement #141857

  
	
  UCC1

  	
   

  	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  01/17/03

  	
   

  	
  30308745

  	
   

  	
  —

  	
   

  	
  Equipment-Energy Management Control Systems

  
	
  UCC1

  	
   

  	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  03/10/03

  	
   

  	
  30731409

  	
   

  	
  —

  	
   

  	
  Equipment-Schedule No.4 dd.12/11/02 to Master Lease Agrmt

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/03/03

  	
   

  	
  31393209

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/11/03

  	
   

  	
  31474249

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 6

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/18/03

  	
   

  	
  31540585

  	
   

  	
  31474249

  	
   

  	
  Full Assignment to Excel Bank

  
	
  UCC1

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/17/03

  	
   

  	
  31831323

  	
   

  	
  —

  	
   

  	
  Blanket

  

 

20

 

	
  UCC3

  	
   

  	
  Fleet Retail Finance Inc., as Collateral Agent

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/29/03

  	
   

  	
  31950321

  	
   

  	
  31831323

  	
   

  	
  Amendment-restated collateral description excluding “Excluded
  Collateral” which are various insurance policies

  
	
  UCC1

  	
   

  	
  De Lage Landen Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  06/19/03

  	
   

  	
  31858938

  	
   

  	
  —

  	
   

  	
  Savin Equipment

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/24/03

  	
   

  	
  31903858

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 7

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  07/24/03

  	
   

  	
  31904062

  	
   

  	
  31903858

  	
   

  	
  Full Assignment to Sterling National Bank

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/20/03

  	
   

  	
  32165820

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 8

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/20/03

  	
   

  	
  32165861

  	
   

  	
  32165820

  	
   

  	
  Full Assignment to First Bank of Highland Park

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/25/03

  	
   

  	
  32202136

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 9

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  09/05/03

  	
   

  	
  32300906

  	
   

  	
  32202136

  	
   

  	
  Full Assignment to First Bank of Highland Park

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/25/03

  	
   

  	
  32202169

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 10

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  09/05/03

  	
   

  	
  32301029

  	
   

  	
  32202169

  	
   

  	
  Full Assignment to First Bank of Highland Park

  

 

21

 

	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  DE SoS

  	
   

  	
  08/26/03

  	
   

  	
  32207150

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/03/03

  	
   

  	
  32875196

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 11

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  11/03/03

  	
   

  	
  32875337

  	
   

  	
  32875196

  	
   

  	
  Full assignment to Excel Bank, N.A.

  
	
  UCC1

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/18/03

  	
   

  	
  33343459

  	
   

  	
  —

  	
   

  	
  All equipment under Master Lease Agreement No. 300327, Schedule No. 12

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/18/03

  	
   

  	
  33343947

  	
   

  	
  33343459

  	
   

  	
  Full assignment to American Enterprise Bank

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Nassau County, NY

  	
   

  	
  08/13/99

  	
   

  	
  UC

  99013451

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 40279

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Nassau County, NY

  	
   

  	
  12/03/99

  	
   

  	
  UC

  99019499

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Nassau County, NY

  	
   

  	
  12/03/99

  	
   

  	
  UC

  99019501

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  

 

22

 

	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Nassau County, NY

  	
   

  	
  12/29/99

  	
   

  	
  UC

  99020542

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds #C0885003

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  12/09/99

  	
   

  	
  99

  PQ20098

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  12/09/99

  	
   

  	
  99

  PQ20099

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  01/05/00

  	
   

  	
  00

  PQ00157

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  01/05/00

  	
   

  	
  00

  PQ00158

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  

 

23

 

	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  03/07/00

  	
   

  	
  00

  PQ03845

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  07/11/00

  	
   

  	
  00

  PQ11229

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  07/11/00

  	
   

  	
  00

  PQ11230

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  03/12/01

  	
   

  	
  01

  PQ03982

  	
   

  	
  —

  	
   

  	
  Crown Lift Trucks

  
	
  UCC1

  	
   

  	
  Crown Credit Company

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  04/10/01

  	
   

  	
  01

  PQ05814

  	
   

  	
  —

  	
   

  	
  Crown Lift Truck

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Kings County, NY

  	
   

  	
  11/19/99

  	
   

  	
  99

  PK16826

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC3

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Kings County, NY

  	
   

  	
  07/27/00

  	
   

  	
  00

  PK10146

  	
   

  	
  99

  PK16826

  	
   

  	
  Assignment to: The Chase Manhattan Bank, as collateral agent

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Kings County, NY

  	
   

  	
  11/19/99

  	
   

  	
  99

  PK16827

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Kings County, NY

  	
   

  	
  12/29/99

  	
   

  	
  99

  PK18851

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  

 

24

 

	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  Kings County, NY

  	
   

  	
  03/06/00

  	
   

  	
  00

  PK02902

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Kings County, NY

  	
   

  	
  06/14/00

  	
   

  	
  00

  PK08154

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 40960

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Kings County, NY

  	
   

  	
  07/07/00

  	
   

  	
  00

  PK09317

  	
   

  	
  00

  PK08154

  	
   

  	
  Amendment-No change to collateral. 
  Addition of new serial numbers.

  
	
  UCC1

  	
   

  	
  El Camino Resources, Ltd.

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  08/13/99

  	
   

  	
  99

  PN43967

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 4045, Schedule no. 1

  
	
  UCC1

  	
   

  	
  Fleet National Bank, as Administrative Agent

  	
   

  	
  Duane Reade Realty, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  09/24/99

  	
   

  	
  99

  PN52642

  	
   

  	
  —

  	
   

  	
  Blanket

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  11/04/99

  	
   

  	
  99

  PN59987

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  11/18/99

  	
   

  	
  99

  PN62825

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  

 

25

 

	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  11/18/99

  	
   

  	
  99

  PN62826

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  FINOVA Capital Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  01/03/00

  	
   

  	
  00

  PN00107

  	
   

  	
  —

  	
   

  	
  Equipment-and all replacement parts, accessions & substitutions
  & all cash & noncash proceeds including insurance proceeds

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  04/28/00

  	
   

  	
  00

  PN21919

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 40890

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  07/20/00

  	
   

  	
  00

  PN36022

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  Bergen Brunswig Drug Company, as Consignor

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  07/20/00

  	
   

  	
  00

  PN36023

  	
   

  	
  —

  	
   

  	
  All prescription pharmaceutical products, insulin & syringes

  
	
  UCC1

  	
   

  	
  De Lage Landen Financial Services, Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  08/01/00

  	
   

  	
  00

  PN38140

  	
   

  	
  —

  	
   

  	
  Toshiba copier systems

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  08/16/00

  	
   

  	
  00

  PN41092

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 41135

  
	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade

  	
   

  	
  Queens County, NY

  	
   

  	
  09/22/00

  	
   

  	
  00

  PN46937

  	
   

  	
  00

  PN41092

  	
   

  	
  Amendment-No change to collateral. 
  Addition of new serial numbers.

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  02/08/01

  	
   

  	
  01

  PN06340

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 41597

  

 

26

 

	
  UCC3

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  04/24/01

  	
   

  	
  01

  PN19601

  	
   

  	
  01

  PN06340

  	
   

  	
  Amendment-No change to collateral. 
  Addition of new serial numbers.

  
	
  UCC1

  	
   

  	
  Orix USA Corporation

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  02/08/01

  	
   

  	
  01

  PN06341

  	
   

  	
  —

  	
   

  	
  Equipment—Master lease no. 37625, lease schedule no. 41598

  
	
  UCC1

  	
   

  	
  Imaging Financial Services Inc.

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  05/21/01

  	
   

  	
  01

  PN23359

  	
   

  	
  —

  	
   

  	
  3 Kodak picture maker units

  
	
  UCC1

  	
   

  	
  Colonial Pacific Leasing

  	
   

  	
  Duane Reade, Inc.

  	
   

  	
  Queens County, NY

  	
   

  	
  06/13/01

  	
   

  	
  01

  PN28480

  	
   

  	
  —

  	
   

  	
  Gretag masterflex digital camera module software, etc.

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/18/03

  	
   

  	
  33343947

  	
   

  	
  33343459

  	
   

  	
  Full assignment to American Enterprise Bank

  
	
  UCC3

  	
   

  	
  Spectrum Medical Leasing, a division of IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  DE SoS

  	
   

  	
  12/18/03

  	
   

  	
  33343947

  	
   

  	
  33343459

  	
   

  	
  Full assignment to American Enterprise Bank

  
	
  UCC1

  	
   

  	
  Orix Financial Services Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  03/30/04

  	
   

  	
  200403305

  247791

  	
   

  	
   

  	
   

  	
  Equipment-Printer & all accessories, replacements, along with cash
  & non-cash proceeds

  
	
  UCC3

  	
   

  	
  Orix Financial Services Inc.

  	
   

  	
  Duane Reade

  	
   

  	
  NY SoS

  	
   

  	
  04/08/04

  	
   

  	
  200404085

  277523

  	
   

  	
   

  	
   

  	
  Amendment-restated Collateral Description by adding new serial numbers

  

 

27

 

	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/27/04

  	
   

  	
  200405275

  433818

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.15 to Master Lease Agrmt
  No.300327

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  528196

  	
   

  	
  200405275433818

  	
   

  	
  Amendment-restated collateral description to amend all equip. covered
  under Master Lease No.300327 Lease Sched No.015

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/27/04

  	
   

  	
  200452754

  33844

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.13 to Master Lease Agrmt
  No.300327

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/27/04

  	
   

  	
  200405275

  434795

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.14 to Master Lease Agrmt
  No.300327

  
	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  28211

  	
   

  	
  200405275434795

  	
   

  	
  Amendment-restated collateral description to amend all equip. covered
  under Master Lease No.300327 Lease Sched No.014

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  05/27/04

  	
   

  	
  200405275

  434834

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.16 to Master Lease Agrmt
  No.300327

  

 

28

 

	
  UCC3

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  528184

  	
   

  	
  200405275434834

  	
   

  	
  Amendment-restated collateral description to amend all equip. covered
  under Master Lease No.300327 Lease Sched No.016

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  527877

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.16 to Master Lease Agrmt
  No.300327

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  527904

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.18 to Master Lease Agrmt
  No.300327

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SoS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  527954

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.19 to Master Lease Agrmt
  No.300327

  
	
  UCC1

  	
   

  	
  IFC Credit Corporation

  	
   

  	
  Duane Reade Inc.

  	
   

  	
  NY SOS

  	
   

  	
  06/25/04

  	
   

  	
  200406255

  528019

  	
   

  	
   

  	
   

  	
  Equipment-covered under Lease Schedule No.17 to Master Lease Agrmt
  No.300327

  

 

29

 

SCHEDULE 7.06

 

Investments

 

 

	
  Entity

  	
   

  	
  Entity Holds Interests in the Following:

  
	
  Duane Reade Inc.

  	
   

  	
  1.

  	
  Investment in Arclight Systems LLC, a Delaware limited liability
  company pursuant to the Arclight Systems LLC Limited Liability Company
  Agreement, dated February 26, 2001

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  Investment in Chain Drug Consortium LLC, a Delaware limited liability
  company pursuant to the Chain Drug Consortium Operating Agreement, dated
  August 1, 2000, as amended June 7, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  Partnership interest in Duane Reade

  
	
   

  	
   

  	
   

  	
   

  
	
  DRI I Inc.

  	
   

  	
  1.

  	
  Partnership interest in Duane Reade

  
	
   

  	
   

  	
   

  	
   

  
	
  Duane Reade International, Inc.

  	
   

  	
  1.

  	
  Promissory Note issued by Duane Reade Inc. to Duane Reade International,
  Inc.

  

 

 

SCHEDULE 7.07(iii)

 

Redemption/Repurchase
of Equity Interests: Employment Agreements

 

 

Reference is made to each of the employment and consulting agreements
in Item 1. of Schedule 7.09 attached hereto.

 

 

SCHEDULE 7.07(vii)

 

Restricted Payments To Be Made on the
Closing Date

 

 

1.                                       Repurchases
of outstanding common stock of DRI in connection with the Transaction.

 

2.                                       Cash-out
payments for outstanding options and any existing price guarantees of stock
options in connection with the consummation of the Transaction.

 

3.                                       Issuances
of stock options and phantom stock awards of Holdings in connection with the
consummation of the Transaction.

 

 

Transactions with Affiliates

 

1.             The following
agreements and transactions:

 

	
  Loan Party

  	
   

  	
  Description

  
	
  Duane Reade Inc.

  	
   

  	
  Amended and Restated
  Employment Agreement dated August 12, 2002, with Anthony J. Cuti.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Executive Life Program
  Split Dollar Agreement between Anthony J. Cuti and Duane Reade, Inc., dated
  January 25, 2002.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Employment Letter, dated
  June 10, 1999, with John K. Henry.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Employment Agreement,
  dated October 9, 1996, as amended, with Jerry M. Ray.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Employment Agreement,
  dated February 22, 1993, as amended, with Gary Charboneau.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Split Dollar Life
  Insurance Policies covering Messrs. Cuti, Charboneau, Henry & Ray.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Long-term cash target
  awards applicable to Messrs. Charboneau, Ray & Henry.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Employment Agreement,
  dated June 25, 2003, with Timothy R. LaBeau.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Consulting Agreement with
  Transportation Services International, an entity operated by Joseph Cuti.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Relationship with DRI
  Investment Group, LLC, as more fully described in the Company’s most recent
  Proxy Statement dated June 30, 2004.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Management Services
  Agreement, dated as of July 30, 2004, between Oak Hill Capital Management,
  Inc. and Duane Reade Acquisition Corp., as the same may be amended, modified
  or supplemented from time to time in accordance with the provisions thereof.

  
	
   

  	
   

  	
   

  
	
  Duane Reade Holdings and
  Subsidiaries

  	
   

  	
  Tax Sharing Agreement,
  dated as of July 30, 2004, among Duane Reade Holdings, Inc. and its
  Subsidiaries as amended, restated or modified from time to time.

  

 

1

 

	
  Duane Reade Holdings

  	
   

  	
  Stockholders and
  Registration Rights Agreement, dated as of July 30, 2004, between Duane Reade
  Holdings, Inc., Duane Reade Shareholders, LLC, and certain members of the
  management of Duane Reade Inc., as amended, restated or modified from time to
  time, and the transactions contemplated thereunder.

  
	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  Employment Agreement,
  dated as of March 19, 2004, and amended on June 18, 2004, between Anthony J.
  Cuti and Duane Reade Acquisition Corp. and all transactions contemplated
  thereunder

  
	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  Employment Agreement,
  dated as of March 16, 2004, between Gary Charboneau and Duane Reade
  Acquisition Corp. and all transactions contemplated thereunder

  
	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  Employment Agreement,
  dated as of March 16, 2004, between Jerry Ray and Duane Reade Acquisition
  Corp. and all transactions and payments contemplated thereunder

  
	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  Employment Agreement,
  dated as of March 16, 2004, between Timothy LaBeau and Duane Reade
  Acquisition Corp. and all transactions and payments contemplated thereunder

  
	
   

  	
   

  	
   

  
	
  Duane Reade

  	
   

  	
  Employment Agreement,
  dated as of March 16, 2004, between John K. Henry and Duane Reade Acquisition
  Corp. and all transactions and payments contemplated thereunder

  
	
   

  	
   

  	
   

  
	
  Duane Reade Holdings, Inc.

  	
   

  	
  The Duane Reade Holdings,
  Inc. 2004 Management Stock Option Plan

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  option agreement under the
  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option
  Plan) to Anthony J. Cuti

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  option agreement under the
  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option
  Plan) to Gary Charboneau

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  option agreement under the
  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option
  Plan) to Jerry Ray

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  option agreement under the
  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option
  Plan) to Timothy LaBeau

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  option agreement under the
  Non-Qualified Stock Option Agreement (under the 2004 Management Stock Option
  Plan) to John K. Henry

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Duane Reade Inc. Phantom
  Stock Plan

  

 

2

 

	
  Duane Reade Inc.

  	
   

  	
  Phantom Stock Award
  Agreement between Duane Reade Inc. and Gary Charboneau

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Phantom Stock Award
  Agreement between Duane Reade Inc. and John K. Henry

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Phantom Stock Award
  Agreement between Duane Reade Inc. and Timothy LaBeau

  
	
   

  	
   

  	
   

  
	
  Duane Reade Inc.

  	
   

  	
  Phantom Stock Award
  Agreement between Duane Reade Inc. and Jerry Ray

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Preemptive Rights
  Agreement, dated as July 30, 2004, by and among Oak Hill Capital Partners,
  L.P., Oak Hill Capital Management Partners, L.P., OHCP DR Co-Investors, LLC,
  Duane Reade Shareholders, LLC, Duane Reade Holdings, Inc., Duane Reade Inc.,
  Anthony J. Cuti and certain other members of the management of Duane Reade
  Inc. listed on Schedule 1 thereto

  

 

2.             Schedule 5.12(c)
and Schedule 5.12(f) are incorporated herein by reference.

 

3.             Schedule 7.06
is incorporated herein by reference.

 

3

 

SCHEDULE 10.02

 

Duane
Reade Inc., Duane Reade and Administrative Agent’s Office,

Certain Addresses for Notices

 

DUANE READE INC.:

440 Ninth Avenue, 6th Floor

New York, New York 10001

Attention:  John K. Henry

Telephone:  212 273 5700

Facsimile:  212 244 6525

 

DUANE READE:

440 Ninth Avenue, 6th Floor

New York, New York 10001

Attention:  John K. Henry

Telephone:  212 273 5700

Facsimile:  212 244 6525

 

ADMINISTRATIVE AGENT:

Administrative Agent’s Office 

(for payments and Requests for Loans):

 

Bank of America, N.A.

Credit
Services - Charlotte Servicing Team

Street Address: 101 North Tryon Street

Mail Code: Mail Code: NC1-001-15-04

City, State ZIP Code:  Charlotte,
NC 28255

Attention: Deborah Gwin

Telephone: 704 387 2471

Facsimile: 704 409 0019

Electronic Mail: deborah.gwin@bankofamerica.com

 

Bank of America, N.A.

New York NY.

ABA # :  026009593

Acct # :  1366212250600

Attn: Credit Services

Reference:  Duane Reade

 

Other Notices as Administrative Agent:

Bank of America, N.A.

Street Address: 1455 Market Street, 5th Floor

Mail Code: CA5-701-05-19

City, State ZIP Code:  San
Francisco, CA 94103

Attention:  Robert J.
Rittelmeyer, Vice President

Telephone:  415 436 2616

Facsimile:  415 503 5099

Electronic Mail: 
robert.j.rittelmeyer@bankofamerica.com

 

1

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