Document:

Exhibit 10.3

 

EXECUTION COPY

 

 

 

STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT

 

 

by and among

 

 

DUANE READE HOLDINGS, INC.

 

 

and

 

 

DUANE READE SHAREHOLDERS, LLC 

AND THE MANAGEMENT STOCKHOLDERS 

LISTED HEREIN

 

 

 

Dated:  July 30, 2004

 

 

 

 

 

Table of Contents

 

	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
   

  	
  1.1

  	
  Definitions.

  	
   

  
	
   

  	
  1.2

  	
  Usage Generally.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II
  TRANSFERS

  	
   

  
	
   

  	
  2.1

  	
  General Restrictions.

  	
   

  
	
   

  	
  2.2

  	
  Permitted Transfers.

  	
   

  
	
   

  	
  2.3

  	
  Drag-Along Right.

  	
   

  
	
   

  	
  2.4

  	
  Tag-Along
  Right.

  	
   

  
	
   

  	
  2.5

  	
  Conditions to Transfers.

  	
   

  
	
   

  	
  2.6

  	
  Apportionment.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III
  OTHER RIGHTS

  	
   

  
	
   

  	
  3.1

  	
  Initial Public Offering.

  	
   

  
	
   

  	
  3.2

  	
  Registration Rights.

  	
   

  
	
   

  	
  3.3

  	
  Holdback Agreements.

  	
   

  
	
   

  	
  3.4

  	
  Dividends.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV
  AFTER-ACQUIRED SECURITIES; AGREEMENT TO BE BOUND

  	
   

  
	
   

  	
  4.1

  	
  After-Acquired Securities.

  	
   

  
	
   

  	
  4.2

  	
  Agreement to be Bound.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V
  CORPORATE GOVERNANCE

  	
   

  
	
   

  	
  5.1

  	
  General.

  	
   

  
	
   

  	
  5.2

  	
  Stockholder Actions.

  	
   

  
	
   

  	
  5.3

  	
  Election
  of Directors; Number and Composition.

  	
   

  
	
   

  	
  5.4

  	
  Removal and
  Replacement of Directors.

  	
   

  
	
   

  	
  5.5

  	
  Reimbursement of Expenses.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI STOCK
  CERTIFICATE LEGEND

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII
  MISCELLANEOUS

  	
   

  
	
   

  	
  7.1

  	
  Notices.

  	
   

  
	
   

  	
  7.2

  	
  Entire Agreement.

  	
   

  
	
   

  	
  7.3

  	
  Amendment.

  	
   

  
	
   

  	
  7.4

  	
  No Waivers.

  	
   

  
	
   

  	
  7.5

  	
  Applicable Law.

  	
   

  
	
   

  	
  7.6

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

  	
   

  
	
   

  	
  7.7

  	
  Further Assurances.

  	
   

  
	
   

  	
  7.8

  	
  Assignment of
  Contracts and Rights.

  	
   

  

 

i

 

	
   

  	
  7.9

  	
  No Third-Party Rights.

  	
   

  
	
   

  	
  7.10

  	
  Successors and Assigns.

  	
   

  
	
   

  	
  7.11

  	
  Severability.

  	
   

  
	
   

  	
  7.12

  	
  Remedies Not Exclusive.

  	
   

  
	
   

  	
  7.13

  	
  Representation by Counsel.

  	
   

  
	
   

  	
  7.14

  	
  Counterparts.

  	
   

  
	
   

  	
  7.15

  	
  Table of Contents and
  Headings.

  	
   

  
	
   

  	
  7.16

  	
  Rules of Construction.

  	
   

  
	
   

  	
  7.17

  	
  Term of Agreement.

  	
   

  
	
   

  	
  7.18

  	
  Survival of Certain
  Provisions.

  	
   

  
	
   

  	
  7.19

  	
  Fees.

  	
   

  
	
   

  	
  7.20

  	
  Management
  Stockholder Representation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  Form
  of Joinder to the Stockholders and Registration Rights Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
  Management Members

  	
   

  
	
  2

  	
  Optionholders

  	
   

  
	
  3

  	
  Phantom Stockholders

  	
   

  

 

ii

 

STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT

 

STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of July 30, 2004, by and among Duane Reade Holdings, Inc.
(formerly known as Rex Corner Holdings, Inc.), a Delaware corporation (the “Company”),
Duane Reade Shareholders, LLC (formerly known as Rex Corner Holdings, LLC), a
Delaware limited liability company (“Parent”), and certain members of
the management of Duane Reade Inc., a wholly-owned Subsidiary of the Company,
listed on Schedule 1 hereto (as such Schedule may be updated
from time to time, the “Management Members”).

 

WHEREAS, immediately following the consummation of the
transactions contemplated by the Agreement and Plan of Merger, dated as of
December 22, 2003, by and among Duane Reade Acquisition Corp. (formerly
known as Rex Corner Acquisition Corp.), Parent and Duane Reade Inc., 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”),
Parent will beneficially own shares of Common Stock (as hereinafter defined);

 

WHEREAS, immediately following consummation of the
transactions contemplated by the Merger Agreement, the Management Members
identified on Schedule  2 hereto will be granted options to
purchase Common Stock (“Options”) pursuant to the Duane Reade Holdings,
Inc. 2004 Management Stock Option Plan (the “Option Plan”);

 

WHEREAS, immediately following consummation of the
transactions contemplated by the Merger Agreement, the Management Members
identified on Schedule 3 hereto (the “Phantom Stockholders”)
will be awarded shares of phantom stock (the “Phantom Stock”) pursuant
to the Duane Reade Inc. Phantom Stock Plan (the “Phantom Stock Plan”);
and

 

WHEREAS, the parties hereto wish to restrict the
transfer of the Shares (as hereinafter defined) and to provide for, among other
things, tag-along, drag-along, registration rights and corporate governance
rights and obligations and certain other rights under certain conditions.

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

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

 

“Affiliate” means, with respect to any Person,
any other Person who, directly or indirectly, controls, is controlled by, or is
under direct or indirect common control with, such Person.  For the purposes of this definition
“control,” when used with respect to any specified Person, shall mean the power
to direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through ownership of voting securities or
partnership or other ownership interests, by contract or otherwise; and the
terms “controlling” and “controlled” shall have correlative meanings.

 

“Agreement” has the meaning set forth in the
Preamble.

 

“Board of Directors” means the Board of
Directors of the Company.

 

“Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks in the State of
New York are authorized or required by law or executive order to close.

 

“Chairman” means Anthony J. Cuti.

 

“Chairman Employment Agreement” means the
Amended and Restated Employment Agreement, dated as of March 16, 2004, by
and among Duane Reade Acquisition Corp., the Company, Parent and the Chairman.

 

“Chairman Transfer Amount” means, in connection
with a Parent Tag-Along Sale and as of the date thereof, a number of shares of
Common Stock equal to the sum of (a) (i) if in connection with such Parent
Tag-Along Sale the Chairman is Transferring less than all of his Class B Units,
zero or (ii) if as of such date the Chairman has previously Transferred all of
his Class B Units or would do so in connection with such Parent Tag-Along Sale,
the excess, if any, of (A) the product of the Chairman Transfer Percentage
multiplied by the number of Parent Transfer Units, over (B) the product of
(x) the quotient obtained by dividing the number of Class B Units to be
Transferred by the Chairman in connection with such Parent Tag-Along Sale by
the number of Units outstanding multiplied by (y) the number of Shares
held by Parent; plus (b) the number of shares of Common Stock equal to the
product of the Percentage Interest of the Chairman (the numerator of such
Percentage Interest to be calculated only as to the Chairman’s shares of Common
Stock and not Options) multiplied by the number of shares of Common Stock
proposed to be Transferred by the Parent Stockholders pursuant to such
Tag-Along Sale (or the Parent Transfer Units in the case of a Parent Tag-Along
Sale).

 

2

 

“Chairman Transfer Percentage” shall mean, as of any date of determination, a fraction equal to the
sum of (a) the quotient obtained by dividing (A) the number of Vested
Option Shares owned by the Chairman by (B) the total number of issued and
outstanding Shares; plus (b) the product of (i) the quotient obtained by
dividing (A) the aggregate number of Class B Units by (B) the aggregate
number of Units issued and outstanding, multiplied by (ii) the quotient
obtained by dividing (A) the number of Shares owned by Parent by (B) the
aggregate number of issued and outstanding Shares.

 

“Charity” means any Person organized and
operated for a charitable purpose.

 

“Charter Documents” means the Certificate of
Incorporation and the By-laws of the Company.

 

“Chosen Court” has the meaning set forth in
Section 7.6.

 

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

 

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

 

“Commission” means the Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.

 

“Common Stock” means the Common Stock, par
value $0.01 per share, of the Company or any other capital stock of the Company
into which such stock is reclassified or reconstituted and any other common
stock of the Company.

 

“Common Stock Equivalents” means any
convertible securities, warrants, Options, Phantom Stock or other similar
rights which by their terms are convertible into or exercisable, exchangeable
or settle for Equity Securities of the Company.

 

“Company” has the meaning set forth in the
Preamble.

 

“Demand Registration” has the meaning set forth
in Section 3.1(a).

 

“Drag-Along Notice” has the meaning set forth
in Section 2.3(a).

 

“Drag-Along Sale” has the meaning set forth in
Section 2.3(a).

 

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

 

“Equity Securities” has the meaning ascribed to
such term in Rule 405 promulgated under the Securities Act as in effect on
the date hereof, and in any event includes any common stock, any limited
partnership interest, any limited liability company interest and any other
interest or security having the attendant right to vote for directors or
similar representatives.

 

3

 

“Governmental Authority” means the government
of any nation, state, city, locality or other political subdivision thereof,
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.

 

“Independent Director” means an individual who
(a) is not a current or former employee, officer or consultant of (i) the Company,
(ii) any Stockholder or (iii) any Affiliate of the Company or any Stockholder;
(b) is not a Stockholder; (c) is not a family member or Affiliate of any Person
described in clause (a) or (b) above; and (d) has no material business
relationship with the Company.

 

“Initial Public Offering” means an underwritten
Public Sale of Equity Securities of an IPO Entity pursuant to an effective
registration statement under the Securities Act that (a) results in the
listing for trading on an internationally recognized securities exchange or
inter-dealer quotation system and (b) involves (alone or in combination
with any prior such offerings) either (i) a Public Sale of at least twenty
percent (20%) of such Equity Securities or (ii) an offering of Equity
Securities which generates gross proceeds of at least $100 million.

 

“IPO Effectiveness Date” means the date upon
which the Initial Public Offering is closed.

 

“IPO Entity” shall mean any of Parent, the
Company, any Subsidiary of the Company, including Duane Reade, or any of their
respective successors.

 

“LLC Agreement” means the Amended and Restated
Limited Liability Company Operating Agreement of Parent, dated as of the date
hereof, by and among Oak Hill Capital Partners, L.P., Oak Hill Capital
Management Partners, L.P., OHCP DR Co-Investors, LLC and the Chairman.

 

“Management Director” has the meaning set forth
in Section 5.3(c).

 

“Management Members” has the meaning set forth
in the Preamble.

 

“Management Stockholders” means the Management
Members and any Permitted Transferee thereof to whom Shares are Transferred in
accordance with Section 2.2 of this Agreement, and the term “Management
Stockholder” shall mean any such Person.

 

“Member” has the meaning set forth in the LLC
Agreement.

 

“Merger Agreement” has the meaning set forth in
the Recitals.

 

“Old Equity” has the meaning set forth in
Section 7.20.

 

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

 

4

 

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

 

“Parent” has the meaning set forth in the
Preamble.

 

“Parent Director(s)” has the meaning set forth
in Section 5.3(b).

 

“Parent Drag-Along Notice” means a Drag-Along
Notice (as defined in the LLC Agreement) delivered pursuant to Section 9.3
of the LLC Agreement.

 

“Parent Drag-Along Sale” means a Drag-Along
Sale (as defined in the LLC Agreement) pursuant to Section 9.3 of the LLC
Agreement.

 

“Parent Stockholders” means Parent and, subject
to the proviso set forth in Section 2.5(b), any Permitted Transferee thereof
to whom Shares are Transferred in accordance with Section 2.2 of this
Agreement, and the term “Parent Stockholder” shall mean any such Person.

 

“Parent Tag-Along Notice” means a Tag-Along
Notice (as defined in the LLC Agreement) delivered pursuant to Section 9.4
of the LLC Agreement.

 

“Parent Tag-Along Sale” means a Tag-Along Sale
(as defined in the LLC Agreement) pursuant to Section 9.4 of the LLC
Agreement.

 

“Parent Transfer Percentage Interest” means, as
of any date of determination, (a) in connection with a Drag-Along Sale
other than a Parent Drag-Along Sale, the quotient obtained by dividing the
number of Shares proposed to be Transferred by the Parent Stockholders by the
number of Shares held by the Parent Stockholders immediately prior to such Drag-Along
Sale or (b) in the case of a Parent Drag-Along Sale, the product obtained
by multiplying (i) the quotient obtained by dividing (A) the number
of Units to be Transferred by the Class A Members pursuant to such Parent
Drag-Along Sale by (B) the number of Units held by the Class A Members
immediately prior to such Parent Drag-Along Sale, by (ii) the number of
Shares held by the Parent Stockholders.

 

“Parent Transfer Units” means in connection
with a Parent Tag-Along Sale and as of the date thereof, the product of (a) the
number of Class A Units proposed to be Transferred in connection with such
Parent Tag-Along Sale divided by the number of Units issued and outstanding
multiplied by (b) the number of Shares owned by the Parent.

 

“Percentage Interest” means, as of any date of
determination, with respect to any Stockholder, the percentage determined by
dividing (a) the number of Shares held by such Stockholder by (b) the
total number of Shares issued and outstanding.

 

“Permitted Transfer” has the meaning set forth
in Section 2.2.

 

“Permitted Transferee” has the meaning set
forth in Section 2.2.

 

5

 

“Person” means any individual, firm,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, Governmental
Authority or other entity of any kind, and shall include any successor (by
merger or otherwise) of such entity.

 

“Phantom Stock” has the meaning set forth in
the Recitals.

 

“Phantom Stock Plan” has the meaning set forth
in the Recitals.

 

“Phantom Stockholders” has the meaning set
forth in the Recitals.

 

“Piggyback Notice” has the meaning set forth in
Section 3.1(b).

 

“Preemptive Rights Agreement” has the meaning
set forth in the LLC Agreement.

 

“Public Sale” means any sale of Equity Securities to the public
(a) pursuant to an offering registered under the Securities Act or
(b) through a broker, dealer or market maker pursuant to the provisions of
Rule 144 (or any similar provision then in effect) adopted under the Securities
Act, other than Rule 144(k) or any similar provision then in effect.

 

“Securities Act” means the United States
Securities Act of 1933 and the rules and regulations of the Commission
promulgated thereunder.

 

“Shares” means, as of any date of
determination, all shares of Common Stock, all Common Stock Equivalents and all
Equity Securities of the Company issued and outstanding.  For purposes of determining the number of
Shares issued and outstanding at any time, all outstanding Common Stock
Equivalents shall be deemed converted, exercised or exchanged as applicable and
the shares of Common Stock issuable upon such conversion, exercise or exchange
shall be deemed issued and outstanding, whether or not such conversion,
exercise or exchange has actually been effected; provided, however,
that as to any options, such number shall be determined solely based on Vested
Option Shares.

 

“Stock Option Agreement” has the meaning set
forth in the Option Plan.

 

“Stockholders” means (a) the Parent
Stockholders, the Management Stockholders and any Transferee thereof who has
agreed to be bound by the terms and conditions of this Agreement in accordance
with Section 2.5 and (b) any Person who has agreed to be bound by the
terms and conditions of this Agreement in accordance with Section 4.2, and
the term “Stockholder” shall mean any such Person.

 

“Stockholders Meeting” has the meaning set
forth in Section 5.1.

 

“Subsidiary” means, with respect to any Person,
any entity of which (a) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors,

 

6

 

managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, collectively or
individually, by such Person or by one or more Subsidiaries of such Person, and
(b) if a partnership, association, limited liability company or other
entity, (i) the general partner or similar managing entity and (ii) a
majority of the partnership, membership or other similar ownership interest
thereof is at the time of determination beneficially owned or controlled,
directly or indirectly, collectively or individually, by such Person or by one
or more Subsidiaries of such Person.  For
purposes of this Agreement, the Company and its Subsidiaries shall be deemed to
own a majority ownership interest in a partnership, association, limited
liability company or other entity if the Company and its Subsidiaries shall
control the general partner or managing member or managing director of such
entity.

 

“Tag-Along Exercise Notice” has the meaning set
forth in Section 2.4(a).

 

“Tag-Along Notice” has the meaning set forth in
Section 2.4(a).

 

“Tag-Along Right” has the meaning set forth in
Section 2.4(a).

 

“Tag-Along Sale” has the meaning set forth in
Section 2.4(a).

 

“Third Party Purchaser” has the meaning set
forth in Section 2.3(a).

 

“Transfer” means any direct or indirect
transfer, sale, assignment, pledge, lease, hypothecation, mortgage, gift or
creation of security interest, lien or trust (voting or otherwise) or other
encumbrance or other disposition of any Shares. 
“Transferor” and “Transferee” have correlative meanings.

 

“Units” has the meaning set forth in the LLC
Agreement.

 

“Valid Business Reason” has the meaning set
forth in Section 3.1(a)(i).

 

“Vested Option Shares” has the meaning set
forth in the LLC Agreement.

 

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

 

7

 

agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein.

 

ARTICLE II

 

TRANSFERS

 

2.1                                 General
Restrictions.  Except as otherwise
permitted in this Article II, no Management Stockholder shall Transfer all or
any portion of his or her Shares,  or
rights to income or other attributes with respect to his or her Shares, it
being understood that any such Transfer or issuance not in accordance with this
Section 2.1 or the remainder of this Article II will be deemed to constitute a
Transfer by such Management Stockholder in violation of this Agreement, shall
be void ab initio and shall not be recognized by
the Company.  Any Transfer of Shares by
the Parent Stockholders shall be subject to Sections 2.3, 2.4 (each, if
applicable in connection with such Transfer) and 2.5.

 

2.2                                 Permitted
Transfers.  The provisions of
Section 2.1 shall not apply to the following Transfers of Shares by a
Management Stockholder (each, a “Permitted Transfer” and the Transferee
pursuant to each such Permitted Transfer, a “Permitted Transferee”):

 

(a)                                  with
respect to each Management Stockholder, any Transfer to:

 

(i)                                     such
Management Stockholder’s parents, spouse, descendants (whether natural, step or
adopted) or other family members;

 

(ii)                                  following
the death of a Management Stockholder, one or more Charities designated by such
Management Stockholder in his or her will;

 

(iii)                               subject to the prior
written consent of the board of directors of Duane Reade (which consent shall
not be unreasonably withheld), except as permitted by clauses (i) and
(ii), upon such Management Stockholder’s death, his or her heirs, executors or administrators;

 

(iv)                              a trust or family limited partnership formed
exclusively for the benefit of any of the Persons described in
clauses (i) and/or, upon such Management Stockholder’s death, (ii) or
(iii) above;

 

(v)                                 in
connection with a Drag-Along Sale or a Tag-Along Sale, to a Third-Party
Purchaser;

 

(vi)                              subject
to Section 3.2 (Holdback Agreements), in connection with the Initial
Public Offering or any subsequent Public Sale; or

 

8

 

(vii)                           pursuant to the prior
written consent of a majority of the board of directors of Duane Reade
(excluding, if applicable, the Management Stockholder); and

 

(b)                                 with
respect to the Parent Stockholders, subject, to the extent applicable, to the
provisions of Sections 2.3 and 2.4, any Transfer.

 

2.3                                 Drag-Along
Right.

 

(a)                                  If,
at any time prior to an Initial Public Offering, (i) a Parent Drag-Along
Notice is delivered or (ii) the Parent Stockholders desire to Transfer
Shares (each, a “Drag-Along Sale”), that, as to clause (ii) only and
together with any Shares previously Transferred, represent fifty percent (50%)
or more of the aggregate number of Shares owned by the Parent Stockholders to
one or more third parties (each, a “Third-Party Purchaser”), then the
Parent Stockholders shall have the right to require the Management Stockholders
(A) other than in respect of the Phantom Stockholders (solely in their
capacity as such), if such Transfer is structured as a sale of capital stock of
the Company, to Transfer, or cause to be Transferred, to the Third-Party
Purchaser the number of shares of Common Stock determined in accordance with
Section 2.6(a), (B) if such Transfer is structured as a merger,
consolidation, sale of all or substantially all of the assets of the Company or
other transaction requiring the consent or approval of the Stockholders, to
vote all of the Shares held by the Management Stockholders in favor thereof,
and otherwise to consent to and raise no objection to such transaction, and the
Management Stockholders shall waive any dissenters’ rights, appraisal rights or
similar rights which the Management Stockholders may have in connection
therewith, (C) other than in respect of the Phantom Stockholders (solely in
their capacity as such), if such Transfer is in connection with a Parent
Drag-Along Sale, to Transfer, or cause to be Transferred, in connection with
the Drag-Along Sale, the number of shares of Common Stock determined in
accordance with Section 2.6(a) and (D) as to the Phantom Stockholders
(solely in their capacity as such), to Transfer, or cause to be Transferred, to
the Third-Party Purchaser the number of shares of Common Stock to be issued to
settle a Phantom Stock award immediately prior to and as a result of such
Drag-Along Sale computed in accordance with Section 6(a) of the Phantom
Stock Plan.  The rights of the Parent
Stockholders under this Section 2.3 shall be exercisable by written notice
(a “Drag-Along Notice”) delivered by the Parent Stockholders to the
Management Stockholders, which shall state (1) that a Parent Drag-Along
Notice has been delivered or that the Parent Stockholders propose to effect a
Drag-Along Sale, (2) the number of Shares and the Percentage Interest of
the Parent Stockholders (or the Parent Transfer Percentage Interest) proposed
to be Transferred, (3) the proposed purchase price to be paid by the
Third-Party Purchaser for the Shares to be Transferred and (4) the other
principal terms of the Drag-Along Sale. 
The Management Stockholders agree, upon receipt of a Drag-Along Notice,
(x) to be bound by the same terms, provisions and conditions in respect of
the Drag-Along Sale as are applicable to the Parent Stockholders (or, if
applicable, the Members) and (y) to be obligated to sell the number of
shares of Common Stock as determined in accordance with this
Section 2.3(a) and to take all reasonably necessary actions to cause the
consummation of the proposed transaction,

 

9

 

including voting (pursuant to
clause (B) of the first sentence above) in favor of such transaction.

 

(b)                                 In
connection with any proposed Drag-Along Sale:

 

(i)                                     prior
to the consummation of any such proposed Drag-Along Sale, the Management
Stockholders shall execute any purchase or sale agreement and any other
certificate, instrument and agreement reasonably requested by the Parent
Stockholders or the Third-Party Purchaser to consummate the proposed Drag-Along
Sale, containing terms no less favorable to the Management Stockholders than
those executed by the Parent Stockholders (or the Members) with respect to the
Shares (or the Units) proposed to be Transferred by the Parent Stockholders (or
the Members) in connection with such Drag-Along Sale.  For the avoidance of doubt, the Management Stockholders
shall be required (A) to bear, to the extent not borne by the Company,
their pro rata share (based upon the
percentage of the total consideration to which each such Person is entitled in
respect of the Drag-Along Sale) of any indemnities, escrows, holdbacks or
adjustments in purchase price established pursuant to the agreement evidencing
such Transfer and (B) to make such representations, warranties and
covenants and enter into such agreements customarily made or entered into in
similar transactions;

 

(ii)                                  the
Parent Stockholders and each Management Stockholder shall bear their respective
pro rata share (based upon the
percentage of the total consideration to which each such Person is entitled in
respect of the Drag-Along Sale) of the costs incurred in connection with such
Drag-Along Sale to the extent such costs are incurred for the benefit of the
Parent Stockholders (or the Members) and the Management Stockholders and are
not otherwise paid by the Company or the Third-Party Purchaser, with the
understanding that the Company shall pay such costs unless prohibited from
doing so by the terms of the transaction; provided, however, that
costs incurred by each Member, Parent Stockholders and Management Stockholder,
as applicable, on their own behalf shall not be considered to be costs of the
transaction hereunder;

 

(iii)                               at the closing of any
Drag-Along Sale, the Management Stockholders shall deliver to the Parent
Stockholders or the Third-Party Purchaser such instruments of Transfer as shall
be requested by the Parent Stockholders or the Third-Party Purchaser with
respect to the Shares of the Management Stockholders to be Transferred, against
receipt of the purchase price therefor, including certificates representing the
Shares of the Management Stockholders to be Transferred, which shall be duly
endorsed for Transfer with all applicable stock transfer tax stamps attached,
paid or otherwise provided for by the Management Stockholders;

 

(iv)                              the
consideration payable in respect of each share of Common Stock in connection
with any Drag-Along Sale shall equal the consideration payable in respect of
each share of Common Stock Transferred by the Parent Stockholders or, if in
connection with a Parent Drag-Along Sale, the consideration payable in respect
of each Class A Unit Transferred; and

 

10

 

(v)                                 there
shall be no liability on the part of any Member, the Parent Stockholders or the
Company to the Management Stockholders if any Drag-Along Sale is not
consummated for whatever reason.  For the
avoidance of doubt, the determination of whether to effect a Drag-Along Sale
shall be in the sole and absolute discretion of the Parent Stockholders (or the
applicable Members).

 

2.4                                 Tag-Along
Right.

 

(a)                                  If,
at any time prior to an Initial Public Offering, (i) a Parent Tag-Along
Notice is delivered or (ii) in connection with a Transfer by the Parent
Stockholders to a Third-Party Purchaser of Shares that, as to this clause (ii)
only and together with Shares previously Transferred, represent five percent
(5%) or more of the Shares held by the Parent as of the date hereof (each, a “Tag-Along
Sale”), the Management Stockholders shall have the right (but not the
obligation) (such right, the “Tag-Along Right”) to require the Parent
Stockholders (or the Members) to cause the Third-Party Purchaser to purchase
(A) if the Tag-Along Sale is not effected pursuant to a Parent Tag-Along
Sale, as to each Management Stockholder other than the Phantom Stockholders
(solely in their capacity as such), a number of shares of Common Stock
determined in accordance with Section 2.6(b), (B) if the Tag-Along Sale is
effected pursuant to a Parent Tag-Along Sale, (x) as to each Management
Stockholder other than the Chairman and the Phantom Stockholders (solely in
their capacity as such), the number of shares of Common Stock determined in
accordance with Section 2.6(b) and (y) as to the Chairman, the Chairman
Transfer Amount, and (C) as to the Phantom Stockholders (solely in their
capacity as such), the number of shares of Common Stock to be issued to settle
a Phantom Stock award immediately prior to and as a result of such Tag-Along
Sale computed in accordance with Section 6(b) of the Phantom Stock Plan.  Prior to completing a Tag-Along Sale, the
Parent Stockholders shall provide no less than fifteen (15) calendar days’ (and
shall use commercially reasonable efforts to provide thirty (30) calendar
days’) prior written notice to the Management Stockholders (the “Tag-Along
Notice”) setting forth (1) the number of Shares of the Parent
Stockholders (or the Parent Transfer Units) proposed to be Transferred,
(2) the proposed purchase price to be paid by the Third Party Purchaser
for the Shares to be Transferred and (3) the other principal terms of the
Tag-Along Sale.  No later than fourteen
(14) calendar days after delivery of the Tag-Along Notice, each Management
Stockholder may exercise the Tag-Along Right by delivering to the Parent
Stockholders written notice of his or her irrevocable agreement to participate
in the proposed Transfer on the terms and conditions provided for in this
Section 2.4 (the “Tag-Along Exercise Notice”).  If applicable, the number of Shares proposed
to be Transferred to the Third-Party Purchaser by the Parent Stockholders shall
be reduced by the number of Shares to be Transferred by the Management
Stockholders.  The failure of any of the
Management Stockholders to deliver the Tag-Along Exercise Notice within the
period described above shall be deemed to be a waiver by such Management
Stockholder of such Tag-Along Right under this Section 2.4.

 

(b)                                 In
the event that any of the Management Stockholders deliver the Tag-Along
Exercise Notice to the Parent Stockholders:

 

11

 

(i)                                     prior
to the closing of any such proposed Tag-Along Sale, such Management
Stockholders shall execute any purchase or sale agreement and any other
certificate, instrument or agreement reasonably requested by the Parent
Stockholders or the Third-Party Purchaser to consummate the proposed Tag-Along
Sale, containing terms no less favorable to such Management Stockholders than
those executed by the Parent Stockholders (or the Members) with respect to the
Shares (or Units) proposed to be Transferred in connection with such Tag-Along
Sale.  For the avoidance of doubt, such Management
Stockholders shall be required (A) to bear, to the extent not borne by the
Company, their pro rata share (based upon the
percentage of the total consideration to which each such Person is entitled in
respect of the Tag-Along Sale) of any indemnities, escrows, holdbacks or
adjustments in purchase price established pursuant to the agreement evidencing
such Transfer and (B) to make such representations, warranties and covenants
and enter into such agreements customarily made or entered into in similar
transactions;

 

(ii)                                  the
Parent Stockholder and each such Management Stockholder shall bear their
respective pro rata share (based upon the
percentage of the total consideration to which each such Person is entitled in
respect of the Tag-Along Sale) of the costs incurred in connection with such
Tag-Along Sale to the extent such costs are incurred for the benefit of the
Parent Stockholders (or the Members) and such Management Stockholders and are
not otherwise paid by the Company or the Third-Party Purchaser, with the
understanding that the Company shall pay such costs unless prohibited from
doing so by the terms of the transaction; provided, however, that
costs incurred by each Member, Parent Stockholder and each such Management
Stockholder, as applicable, on their own behalf shall not be considered to be
costs of the transaction hereunder;

 

(iii)                               at the closing of any
such proposed Tag-Along Sale, such Management Stockholders shall deliver to the
Parent Stockholders or the Third-Party Purchaser such instruments of Transfer
as shall be requested by the Parent Stockholders or the Third-Party Purchaser
with respect to the Shares of such Management Stockholders to be Transferred,
against receipt of the purchase price therefor, including certificates
representing the Shares of such Management Stockholders to be Transferred,
which shall be duly endorsed for Transfer with all applicable stock transfer
tax stamps attached, paid or otherwise provided for by such Management
Stockholders;

 

(iv)                              the
consideration payable in respect of each share of Common Stock in connection
with any Tag-Along Sale shall equal the consideration payable in respect of
each share of Common Stock Transferred by the Parent Stockholders or, if in
connection with a Parent Tag-Along Sale, the consideration in respect of each
Class A Unit Transferred; and

 

(v)                                 there
shall be no liability on the part of any Member, the Parent Stockholders or the
Company to the Management Stockholders if the Tag-Along Sale is not consummated
for whatever reason.  For the avoidance
of doubt,

 

12

 

the
determination of whether to effect a Tag-Along Sale shall be in the sole and
absolute discretion of the Parent Stockholders (or the applicable Members).

 

2.5                                 Conditions
to Transfers.  In addition to all
other terms and conditions contained in this Agreement, no Transfers to which
the provisions of Section 2.2 would apply (other than any Transfer
pursuant to Section 2.3 or 2.4) shall be complete or effective for any
purpose unless prior thereto:

 

(a)                                  the
Transferor shall have provided to the Company (i) at least five (5)
Business Days’ prior notice of such Transfer or in the case of a Transfer by
reason of death pursuant to 2.2(a), at least five (5) Business Days’ notice
prior to the proposed effectiveness of such Transfer for purposes of this
Agreement and (ii) in the case of the Management Stockholders, a
certificate of the Transferor, delivered with such notice, containing a
statement as to which provision of Section 2.2 is applicable to such
Transfer, together with such information as is reasonably necessary for the
Board of Directors to determine whether such Transfer is permitted thereby;

 

(b)                                 the
Transferee of such Shares shall have executed and delivered to the Company a
joinder in the form of Exhibit A pursuant to which it shall become
a party to and be bound by the applicable terms and provisions of this
Agreement; provided, however, that any Transferee of Parent shall
not be bound by or otherwise subject to Section 2.4 (Tag-Along Rights); provided,
further, that to the extent any such Permitted Transferee is a
Third-Party Purchaser pursuant to a Drag-Along Sale or Tag-Along Sale such
Permitted Transferee shall not have any rights pursuant to Section 2.4
(Tag-Along Right); and

 

(c)                                  if
requested by the Company and at the Company’s expense, counsel to the
Transferee of such Shares shall have delivered to the Company an opinion
reasonably satisfactory in form and substance to the Company, to the effect
that such Transfer would not violate the Securities Act or any state securities
or “blue sky” laws applicable to the Company or the Shares to be Transferred.

 

2.6                                 Apportionment.  Each of the parties hereby acknowledges and
agrees that with respect to the number of shares of Common Stock to be
Transferred by a Management Stockholder (other than in his or her capacity as a
Phantom Stockholder) pursuant to Section 2.3 or 2.4 the following shall
apply:

 

(a)                                  in
connection with a Drag-Along Sale, the number of shares of Common Stock to be
Transferred by each such Management Stockholder shall be comprised of
(i) the number of shares of Common Stock held by such Management
Stockholder (excluding Options) multiplied by the Parent Transfer Percentage
Interest and (ii) a number of shares of Common Stock to be obtained
through the exercise (whether on a cashless exercise basis or otherwise) of
Options equal to the number of vested Options held by such Management
Stockholder (after giving effect to any acceleration of vesting resulting from such
Drag-Along Sale) multiplied by the Parent Transfer Percentage Interest; or

 

13

 

(b)                                 in
connection with a Tag-Along Sale, the number of shares of Common Stock to be
Transferred by each such Management Stockholder shall be comprised of
(i) the number of shares of Common Stock held by such Management
Stockholder (excluding Options) equal to the product of the Percentage Interest
of such Management Stockholders as of such date (the numerator of such Percentage
Interest to be calculated only as to such Management Stockholder’s shares of
Common Stock and not Options) multiplied by the number of shares of Common
Stock proposed to be Transferred by the Parent Stockholders pursuant to such
Tag-Along Sale (or the Parent Transfer Units in the case of a Parent Tag-Along
Sale) and (ii) a number of shares of Common Stock to be obtained through
the exercise (whether on a cashless basis or otherwise) of Options equal to the
product of the Percentage Interest of such Management Stockholder as of such
date (the numerator of such Percentage Interest to be calculated only as to
such Management Stockholder’s Options and not shares of Common Stock)
multiplied by the number of shares of Common Stock proposed to be Transferred
by the Parent Stockholders pursuant to such Tag-Along Sale (or the Parent
Transfer Units in the case of a Parent Tag-Along Sale); provided, however,
that in the case of the Chairman in connection with a Parent Tag-Along Sale,
the number of shares of Common Stock to be Transferred by the Chairman in
respect of Options shall be limited to the number of such shares, if any, that
constitute all or a portion of the Chairman Transfer Amount.

 

ARTICLE III

 

OTHER RIGHTS

 

3.1                                 Initial
Public Offering.

 

(a)                                  Conversion
Rights.  In connection with an
Initial Public Offering, (i) upon not less than thirty (30) calendar days’
prior written notice, (A) each Stockholder may elect to convert such
Stockholder’s shares of Common Stock into Equity Securities of the IPO Entity
and (B) the Management Stockholders may elect to convert their Options
into options to purchase Equity Securities of the IPO Entity in accordance with
the terms of the applicable option award agreement and (ii) shares of
Phantom Stock shall be settled and converted in accordance with
Section 6(c) of the Phantom Stock Plan. 
The terms and conditions of any conversion with respect to shares of
Common Stock, Phantom Stock and Options held by the Management Stockholders shall
be no less favorable than those applicable to the shares of Common Stock held
by the Parent Stockholders.  Following
the Initial Public Offering and a conversion pursuant to this
Section 3.1(a) references to shares of Common Stock in this Agreement, the
Option Plan, the Phantom Stock Plan and the applicable Option and Phantom Stock
award agreements shall be deemed to refer to Equity Securities of the IPO
Entity that are issued pursuant to this Section 3.1(a) and references to
the Company in this Agreement, the Option Plan, the Phantom Stock Plan and
applicable Option and Phantom Stock award agreements shall be deemed to refer
to the IPO Entity.

 

14

 

(b)                                 Form
S-8.  Upon an Initial Public
Offering, the IPO Entity will use commercially reasonable efforts to register
under the Securities Act the Equity Securities to be acquired pursuant to the
Option Plan and the Phantom Stock Plan, to the extent not exercised or settled,
on a Form S-8 provided that in the reasonable judgment of the Board of
Directors (or the managing underwriter in the Initial Public Offering) such a
registration on Form S-8 could not reasonably be expected to have an adverse
effect on the market for the securities being registered in the Initial Public
Offering.

 

3.2                                 Registration
Rights.

 

(a)                                  Demand
Registrations.  Subject to
Section 3.3, at any time, and from time to time, the Parent Stockholders
may make a written request to the Company or its successor to register all or
any portion of its shares of Common Stock under the Securities Act (other than
pursuant to a Registration Statement on Form S-4 or S-8 or any successor
or similar forms thereto) (one or more registrations made in response to such a
written request by the Parent Stockholders, a “Demand Registration”).  The written request shall state the number of
shares of Common Stock held by the Parent Stockholders proposed to be
Transferred and the proposed method or methods of disposition.  Upon the Company’s receipt of such written
request by the Parent Stockholders:

 

(i)                                     the
Company shall register the shares of Common Stock stated in such request and
shall use its reasonable best efforts to cause any such Demand Registration to
become effective as promptly as practicable after it receives any request from
a Parent Stockholder relating to such Demand Registration, unless the Board of
Directors (or the board of directors of the IPO Entity), in its good faith
judgment, determines that any registration of such shares should not be made or
continued because it would materially interfere with any material financing,
acquisition, corporate reorganization or merger or other material transaction
involving the Company or the IPO Entity (a “Valid Business Reason”), in
which instance the Company may (x) postpone filing a registration
statement relating to such Demand Registration until such Valid Business Reason
no longer exists and (y) in case a registration statement has been filed
relating to a Demand Registration, the Company or the IPO Entity, upon the
approval of a majority of the Board of Directors, may cause such registration
statement to be withdrawn and its effectiveness terminated or may postpone
amending or supplementing such registration statement upon written notice to
the Parent Stockholders and the Management Stockholders of such determination,
in each case, promptly after the occurrence thereof; and

 

(ii)                                  within
ten (10) calendar days after the Company’s receipt of any request for such
Demand Registration from a Parent Stockholder, the Company shall give written
notice thereof to the Management Stockholders and the Management Stockholders
may, within five (5) Business Days after receipt of such written notice, send
to the Company a written request to include in such Demand Registration the
number of shares of Common Stock equal to the product of the number of shares
of Common Stock held by the Management Stockholders as of such time

 

15

 

multiplied
by the quotient obtained by dividing the number of shares of Common Stock to be
registered by the Parent Stockholders pursuant to such Demand Registration by
the aggregate number of shares of Common Stock held by the Parent Stockholders
as of such time. Such written request shall be irrevocable.  The failure of any of the Management
Stockholders to send to the Company such irrevocable written request within
such five (5) Business Day period shall be deemed to be a waiver by such
Management Stockholder of his or her rights under this Section 3.2(a) with
respect to such Demand Registration.  In
connection with any such Demand Registration involving an underwritten
offering, none of the shares of Common Stock held by any of the Management
Stockholders stated in such irrevocable  written
request for inclusion shall be included unless such Management Stockholders
accept the terms of the offering pursuant to such Demand Registration as agreed
upon by the Company, the Parent Stockholders and the underwriter(s).

 

(b)                                 Company
Registration.  If the Company, at any
time, or from time to time, proposes to register any of its Common Stock by
filing a registration statement under the Securities Act (other than a
registration on Form S-4 or S-8 or any successor or similar forms
thereto), solely for the sale on its own account, on a form and in a manner
that would permit registration of Common Stock for sale to the public under the
Securities Act, the Company shall use its reasonable best efforts to afford
each Stockholder an opportunity to include in such registration statement all
or part of the Common Stock held by such Stockholders by notifying such
Stockholders at least fifteen (15) Business Days prior to the filing of such
registration statement (the “Piggyback Notice”).  Each Stockholder shall have five (5) Business
Days after the delivery of the Piggyback Notice to notify the Company in
writing that it desires to include its Common Stock in such offering,
specifying the number of shares of Common Stock that it proposes to include
therein; provided, however, that in no event shall the number of
shares of Common Stock to be included by the Management Stockholders exceed the
product of the number of shares of Common Stock held by the Management
Stockholders as of such time multiplied by the quotient obtained by dividing
the number of shares of Common Stock to be registered by the Parent
Stockholders by the aggregate number of shares of Common Stock held by the
Parent Stockholders as of such time. 
Each Stockholder’s rights to register its Common Stock under this
Section 3.2 shall terminate with respect to the applicable offering if
such Stockholder has not exercised its piggyback registration rights within
such five (5) Business Day period. 
Notwithstanding anything to the contrary herein, the Company shall not
be obligated to effect any registration of Common Stock held by a Stockholder
under this Section 3.2 incidental to the registration of any of its
securities in connection with mergers, acquisitions, convertible securities,
exchange offers, dividend reinvestment plans, employee stock ownership plans or
other employee benefit plans, and the Company shall have the right to terminate
or withdraw any registration initiated by it prior to the effectiveness of such
registration whether or not any Stockholder has elected to include its Common
Stock in such registration and there shall be no liability on the part of the
Company to the Stockholders if any registration is not consummated for whatever
reason.

 

16

 

(c)                                  Limitations
on Piggyback Registration. 
Notwithstanding any other provision of this Agreement, if the
registration statement is for an underwritten offering and the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares of Common Stock to be underwritten, the number of shares of
Common Stock proposed to be registered by any Stockholder under this
Section 3.2 shall be subject to customary underwriter cutbacks, and in all
cases the Common Stock being offered by the Company shall have priority over
any Common Stock proposed to be registered by any Stockholder; provided,
however, that such cutback will be on a pro rata
basis determined using the number of shares of Common Stock proposed to be
registered by each such Stockholder. 
Each Stockholder agrees to execute reasonably acceptable documents to
effect the exercise of any of its piggyback registration rights pursuant to
this Section 3.2.

 

(d)                                 Exercise
of Rights; Expenses; Underwriters. 
The Company shall bear all expenses in connection with any registration
of any Stockholder’s Common Stock under this Section 3.2 (other than the
fees and expenses of counsel for such Stockholder and any underwriting
discounts on the Common Stock included in the registration by such
Stockholder).  In no event shall any
Stockholder other than the Parent Stockholders (on behalf of the Stockholders)
have the right to select the underwriters of any underwritten offering of the
Company that it participates in pursuant to this Section 3.2.

 

(e)                                  Subsidiary
Registration Rights.  To the extent
that an Initial Public Offering or other registration is consummated with
respect to any IPO Entity other than the Company, the Stockholders shall have
registration rights, substantially similar to the registration rights set forth
in this Section 3.2 with respect to the Equity Securities held in such IPO
Entity (including, without limitation, Equity Securities acquired in such
Subsidiary pursuant to the conversion under Section 3.1(a)).

 

(f)                                    Terms.  Any registration statement effected pursuant
to this Section 3.2 shall, as to the terms and conditions on which shares
of Common Stock may be sold pursuant to such registration statement, be no less
favorable in respect of shares of Common Stock held by the Management
Stockholders than in respect of such shares held by the Parent
Stockholders.  For the avoidance of
doubt, the Management Stockholders acknowledge and agree that nothing in this
Section 3.2 shall constitute a guarantee or other commitment or
understanding as to (i) the price at which such shares may be sold or (ii) the
Management Stockholders being afforded the opportunity to Transfer such shares
to one or more Persons to whom the Parent Stockholders propose to Transfer
shares of Common Stock (other than the general public).

 

3.3                                 Holdback
Agreements.  In connection with an
Initial Public Offering or any underwritten Public Sale, to the extent
requested by the Company or the underwriter of such offering, each Stockholder
agrees (a) not to effect any public distribution of any Shares, including
a sale pursuant to Rule 144 under the Securities Act, or offer or contract
to sell (including any short sale), grant any option to purchase or enter into
any hedging or similar transaction with the same economic effect as a sale of
any 

 

17

 

Shares and (y) not to make
any request for a Demand Registration under this Agreement, during the one
hundred eighty (180) calendar day period (or any shorter period mutually agreed
upon by such Stockholder and the requesting party, which shall apply to all
Stockholders) beginning on the effective date of the registration statement
(except as part of such registration) for such Initial Public Offering or
underwritten Public Sale.  No Stockholder
holding Shares subject to this Section 3.3 shall be released from any
obligation under any agreement, arrangement or understanding entered into with
respect to this Section 3.3 unless all other Stockholders holding Shares
subject to the same obligation are also released.

 

3.4                                 Dividends.  Prior to the issuance of any dividend on the
Common Stock by the Company, the Company shall provide the Chairman with ten
(10) Business Days’ prior written notice. 
During such ten (10) Business Day period the Chairman shall be entitled
to exercise (for cash) all of his vested Options in accordance with the
Chairman’s Stock Option Agreement.

 

ARTICLE IV

AFTER-ACQUIRED SECURITIES; AGREEMENT TO BE BOUND

 

4.1                                 After-Acquired
Securities.  All of the provisions of
this Agreement shall apply to all of the Shares now owned or which may be
issued or Transferred hereafter to a Stockholder in consequence of any
additional issuance, purchase, exchange or reclassification of any of such
Shares, corporate reorganization, or any other form of recapitalization,
consolidation, merger, share split or share dividend, or which are acquired by
a Stockholder in any other manner.

 

4.2                                 Agreement
to be Bound.  The Company shall not
grant any Options or award shares of Phantom Stock, pursuant to the Stock
Option Plan or the Phantom Stock Plan, as applicable, to any Person not a party
to this Agreement, unless either (a) such Person has agreed in writing to
be bound by the terms and conditions of this Agreement pursuant to a joinder
substantially in the form attached hereto as Exhibit A or (b) such
Person has entered into an agreement with the Company restricting the Transfer
of its or his shares of Common Stock underlying Options or Phantom Stock in
form and substance reasonably satisfactory to the Parent Stockholders.  Upon becoming a party to this Agreement, such
Person shall be deemed to be, and shall be subject to the same obligations as,
a Management Stockholder hereunder.  Any
grant of Options by the Company in violation of this Section 4.2 shall be
null and void ab  initio.

 

ARTICLE V

CORPORATE GOVERNANCE

 

5.1                                 General.  From and after the execution of this
Agreement, at any regular or special meeting of stockholders of the Company
(each, a “Stockholders Meeting”) (a) each Stockholder shall vote
its Shares, and each Stockholder and the Company shall take all other actions
necessary, to give effect to the provisions of this

 

18

 

Agreement (including
Section 5.3) and (b) each Stockholder shall vote his or its Shares,
upon any matter submitted for action by the Company’s stockholders or with
respect to which such Stockholder may vote, in conformity with the specific
terms and provisions of this Agreement and the Charter Documents.

 

5.2                                 Stockholder
Actions.  In order to effectuate the
provisions of this Agreement, each Stockholder (a) hereby agrees that when
any action or vote is required to be taken by such Stockholder pursuant to this
Agreement, such Stockholder shall use his or its reasonable best efforts to
call, or cause the appropriate officers and directors of the Company to call, a
Stockholders Meeting and (b) shall use his or its reasonable best efforts
to cause the Board of Directors to adopt, at a meeting of the Board of
Directors, all the resolutions necessary to effectuate the provisions of this
Agreement.

 

5.3                                 Election
of Directors; Number and Composition.

 

(a)                                  Each
Stockholder shall vote its Shares at any Stockholders Meeting and take all
other actions necessary to ensure that the number of directors constituting the
entire Board of Directors shall be seven.

 

(b)                                 Each
Stockholder shall vote its Shares at any Stockholders Meeting called for the
purpose of filling the positions on the Board of Directors and take all other
actions necessary to ensure the election to the Board of Directors of four  individuals designated by the Parent Stockholders
(collectively, the “Parent Directors” and each a “Parent Director”).

 

(c)                                  For
so long as the Chairman is employed by Duane Reade, each Stockholder shall vote
its Shares at any Stockholders Meeting called for the purpose of filling the
positions on the Board of Directors and take all other actions necessary to
ensure the election to the Board of Directors of the Chairman as a member and
the chairman of the Board of Directors (the “Management Director”).

 

(d)                                 Each
Stockholder shall vote its Shares at any Stockholders Meeting called for the
purpose of filling the positions on the Board of Directors and take all other
actions necessary to ensure the election to the Board of Directors of two
Independent Directors designated by the Parent Stockholders.

 

(e)                                  The
Company shall, in connection with filling the positions on the board of
directors of any Subsidiary of the Company (other than, at the election of the
Parent Stockholders as the same may be revoked or made from time to time, Duane
Reade International, Inc.), take all actions necessary to cause the composition
of such board to be the same as the composition of the Board of Directors.

 

(f)                                    Any
action to be taken at a Stockholders Meeting may be taken pursuant to a written
consent executed in lieu of such Stockholders Meeting in accordance with the
Charter Documents.

 

19

 

(g)                                 Notwithstanding
anything to the contrary contained herein, any vacancy on the Board of
Directors shall not affect the validity of any action taken by the Board of
Directors, to the extent such action is otherwise validly taken in accordance
with the General Corporation Law of the State of Delaware.

 

5.4                                 Removal
and Replacement of Directors.

 

(a)                                  Removal
of Parent Directors.  If at any time
the Parent Stockholders notify the other Stockholders of their wish to remove
at any time and for any reason (or no reason) a Parent Director, then each
Stockholder shall vote all of its Shares so as to remove such Parent Director.

 

(b)                                 Removal
of Management Director.  The
Management Director may only be removed, as Chairman of the Board of Directors,
in accordance with the terms of the Chairman Employment Agreement.

 

(c)                                  Replacement
of Directors.

 

(i)                                     If
at any time, a vacancy is created on the Board of Directors by reason of the
incapacity, death, removal or resignation of either (x) any of the Parent
Directors designated pursuant to Section 5.3(b) or (y) any of the
Independent Directors designated pursuant to Section 5.3(d), then the
Parent Stockholders shall designate a qualified individual who shall be elected
to fill the vacancy until the next Stockholders Meeting.

 

(ii)                                  Upon
receipt of notice of the designation of a nominee pursuant to Section 5.4(b)(i),
each Stockholder shall, as soon as practicable after the date of such notice,
take all reasonable actions, including the voting of its Shares, to elect the
director so designated to fill the vacancy.

 

5.5                                 Reimbursement
of Expenses.  The Company shall
reimburse the Parent Directors, the Management Director and the Independent
Directors, or their respective designees, for all reasonable travel and
accommodation expenses incurred by the Parent Directors, the Management
Director and the Independent Directors in connection with the performance of
their duties as directors of the Company upon presentation of appropriate
documentation therefor.

 

ARTICLE VI

 

STOCK CERTIFICATE LEGEND

 

6.1                                 A
copy of this Agreement shall be filed with the Secretary of the Company and
kept with the records of the Company. 
Each certificate representing Shares now held or hereafter acquired by
any Stockholder shall for as long as this Agreement is effective bear legends
substantially in the following forms:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR THE SECURITIES LAWS OF ANY

 

20

 

STATE.  THE
SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS.

 

THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE,
ENCUMBRANCE OR OTHER DISPOSITION (EACH A “TRANSFER”) AND VOTING OF ANY
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS
OF THE STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT, DATED JULY 30,
2004, AMONG THE COMPANY AND THE OTHER PERSONS NAMED THEREIN, A COPY OF WHICH
MAY BE INSPECTED AT THE COMPANY’S PRINCIPAL OFFICE.  THE COMPANY WILL NOT REGISTER THE TRANSFER OF
SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS AND REGISTRATION
RIGHTS AGREEMENT.

 

ARTICLE VII

 

MISCELLANEOUS

 

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

 

(a)                                  if
to the Company:

 

Duane Reade
Holdings, Inc. 

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

201 Main Street

Fort Worth, TX  76102

Facsimile:  (817) 339-7350  

Attention:  Ray Pinson

 

with a copy to:

 

Oak Hill Capital
Management, Inc.

Park Avenue Tower

65 East 55th Street, 36 Floor

New York, NY 10022

Facsimile:  (212) 758-3572

Attention:  John R. Monsky, Esq.

 

21

 

and

 

Paul, Weiss,
Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019-6064

Facsimile: (212) 757-3990

Attention:  Robert B. Schumer, Esq.

 

(b)                                 if
to the Parent Stockholders:

 

Duane Reade
Shareholders, LLC

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

201 Main Street

Fort Worth, TX  76102

Facsimile:  (817) 339-7350  

Attention:  Ray Pinson

with a copy to:

 

Oak Hill Capital
Management, Inc.

Park Avenue Tower

65 East 55th Street, 36 Floor

New York, NY 10022

Facsimile:  (212) 758-3572

Attention:  John R. Monsky, Esq.

 

and

 

Paul, Weiss,
Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019-6064

Facsimile: (212) 757-3990

Attention:  Robert B. Schumer, Esq.

 

(c)                                  if
to the Chairman:

 

Anthony J. Cuti

c/o Duane Reade Inc.

440 Ninth Avenue, 6th Floor

New York, NY  10001

Facsimile:  (212) 244-6525

 

with a copy to:

 

Shearman &
Sterling LLP

599 Lexington
Avenue

New York, NY  10022-6069

Facsimile:  (212) 848-7179

Attention:  Kenneth J. Laverriere, Esq.

 

22

 

(d)                                 if
to any other Management Stockholder, at his or her address as it appears on the
record books of the Company;

 

with a copy to:

 

Shearman &
Sterling LLP

599 Lexington
Avenue

New York, NY  10022-6069

Facsimile:  (212) 848-7179

Attention:  Kenneth J. Laverriere, Esq.

 

(e)                                  if
to any other Stockholder, at its address as it appears on the record books of
the Company;

 

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

 

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

 

7.3                                 Amendment.  Any amendment, supplement or modification of
or to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by (i) the Company and (ii) the Parent
Stockholders.  Any such amendment,
supplement, modification, waiver or consent shall be binding upon the Company
and all of the Stockholders. 
Notwithstanding the above, any amendment that has a material adverse

 

23

 

effect on the rights granted
herein to (a) the Management Stockholders (including the Chairman), shall
not be effective against the Management Stockholders without the approval of
the Management Stockholders holding a majority of the voting power of the
Shares held by the Management Stockholders and (b) the Chairman, shall not
be effective against the Chairman without the approval of the Chairman.

 

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

 

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

 

7.6                                 SUBMISSION
TO JURISDICTION; WAIVER OF JURY TRIAL; SELECTION OF FORUM.  EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
(A) THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK, NEW YORK OR (B) IN
THE EVENT THAT SUCH COURT LACKS JURISDICTION TO HEAR THE CLAIM,  IN THE
FEDERAL OR STATE COURTS LOCATED IN WILMINGTON, DELAWARE (ANY SUCH COURT, THE
“CHOSEN COURT”) AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE CHOSEN COURTS, (II) WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE
CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT ANY CHOSEN COURT IS AN
INCONVENIENT FORUM OR DOES NOT HAVE JURISDICTION OVER ANY PARTY HERETO,
(IV) IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A JURY TRIAL AND
(V) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR
PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 7.1 OF THIS AGREEMENT.

 

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

 

7.8                                 Assignment
of Contracts and Rights.  Except in
connection with a Transfer permitted under Article II, no party to this
Agreement may assign any of its rights or remedies or delegate any of its
obligations under this Agreement without the prior written consent of the Board
of Directors.

 

24

 

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

 

7.10                           Successors
and Assigns.  Subject to the
restrictions on Transfer set forth herein, and except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, successors and permitted assignees under this Agreement.

 

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

 

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

 

7.13                           Representation
by Counsel.  Each of the parties has
been represented by and has had an opportunity to consult legal counsel in
connection with the negotiation and execution of this Agreement.  No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party by any court
or arbitrator or any Governmental Authority by reason of such party having
drafted or being deemed to have drafted such provision.

 

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

 

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

 

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

 

25

 

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

 

7.18                           Survival
of Certain Provisions. 
Notwithstanding the termination or expiration of this Agreement, the provisions
of Articles I, III and VII and Sections 2.1, 2.2 and 2.5 shall survive and
continue and shall bind the parties and their legal representatives, successors
and permitted assigns.

 

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

 

7.20                           Management
Stockholder Representation.  Each
Management Stockholder (other than the Chairman) hereby represents, warrants
and covenants that, as of the Effective Date, DRI Investments (or any successor
thereto) has no right, title or interest to pay any payments from, or
liabilities to any OH Affiliate (as defined in the Chairman’s Employment Agreement),
the Company, Holdings or any of their Affiliates with respect to any shares,
options to purchase shares, or any other equity security of Duane Reade with
respect to the Merger Consideration (as defined in the Merger Agreement).

 

[Remainder of Page Intentionally Left Blank]

 

26

 

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

 

	
   

  	
  DUANE READE HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Andrew J.
  Nathanson

  
	
   

  	
   

  	
  Name: 

  	
   Andrew J.
  Nathanson

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DUANE READE
  SHAREHOLDERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Andrew J. Nathanson

  
	
   

  	
   

  	
  Name: 

  	
   Andrew J.
  Nathanson

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Anthony J. Cuti

  
	
   

  	
   

  	
  Anthony J. Cuti

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Gary Charboneau

  
	
   

  	
   

  	
  Gary Charboneau

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Timothy R. LaBeau

  
	
   

  	
   

  	
  Timothy R.
  LaBeau

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  John K. Henry

  
	
   

  	
   

  	
  John K. Henry

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Jerry M. Ray

  
	
   

  	
   

  	
  Jerry
  M. Ray

  

 

 

Signature Page to Stockholders and Registration Rights Agreement

 

S-1

 

Schedule 1

 

Management
Members

 

	
  1.

  	
  Anthony J.
  Cuti

  
	
   

  	
   

  
	
  2.

  	
  Gary
  Charboneau

  
	
   

  	
   

  
	
  3.

  	
  Timothy R.
  LaBeau

  
	
   

  	
   

  
	
  4.

  	
  John K.
  Henry

  
	
   

  	
   

  
	
  5.

  	
  Jerry M. Ray

  

 

 

Schedule 2

 

Optionholders

 

	
  Name

  	
   

  	
  No. of Options

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Anthony J.
  Cuti

  	
   

  	
  116,746.66

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gary
  Charboneau

  	
   

  	
  8,500.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Timothy R.
  Labeau

  	
   

  	
  8,500.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John K.
  Henry

  	
   

  	
  30,600.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Jerry M. Ray

  	
   

  	
  13,600.00

  	
   

  

 

 

Schedule 3

 

Phantom
Stockholders

 

	
  1.

  	
  Gary Charboneau

  
	
   

  	
   

  
	
  2.

  	
  Timothy R.
  LaBeau

  
	
   

  	
   

  
	
  3.

  	
  John K.
  Henry

  
	
   

  	
   

  
	
  4.

  	
  Jerry M. Ray

  

 

 

Exhibit A

 

FORM OF JOINDER TO

THE STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT

 

THIS JOINDER to the Stockholders and Registration
Rights Agreement,  dated as of
July 30, 2004, by and among and Duane Reade Holdings, Inc. (the “Company”)
and the other persons named therein (the “Agreement”), is made and
entered into as of
           by and
between the Company and
                             
(the “Joining Stockholder”). 
Capitalized terms used herein but not otherwise defined shall have the
meanings set forth in the Agreement.

 

WHEREAS, on the date hereof, Joining Stockholder
proposes to acquire
              
Shares from
             and
the Agreement and the Company require Joining Stockholder, as a holder of such
Shares, to become a party to the Agreement, and Joining Stockholder agrees to
do so in accordance with the terms hereof.

 

NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Joinder hereby agree as follows:

 

1.                                       Agreement
to be Bound.  The Joining Stockholder
hereby (i) acknowledges that it has received and reviewed a complete copy
of the Agreement and (ii) agrees that upon execution of this Joinder, it
shall become a party to the Agreement and shall be fully bound by, and subject
to, all of the covenants, terms and conditions of the Agreement as though an
original [Parent Stockholder (other than Section 2.4 of the Agreement)]
[Management Stockholder] thereto and shall be deemed, and is hereby admitted
as, a Stockholder for all purposes thereof and entitled to all the rights
incidental thereto.

 

2.                                       Company
Records.  For purposes of the records
of the Company, the address of the Joining Stockholder is as follows:

 

[Name]

[Address]

[Facsimile Number]

 

3.                                       Governing
Law.  This Agreement and the rights
of the parties hereunder shall be interpreted in accordance with the laws of
the State of Delaware, and all rights and remedies shall be governed by such
laws without regard to principles of conflicts of laws.

 

4.                                       Descriptive
Headings.  The descriptive headings
of this Joinder are inserted for convenience only and do not constitute a part
of this Joinder.

 

5.                                       Counterparts.  This Joinder may be executed in counterparts
each of which, taken together, shall constitute one and the same original.

 

[Signature Page follows]

 

 

IN WITNESS WHEREOF, the parties hereto have executed
this Joinder as of
                                            .

 

 

	
   

  	
  DUANE READE
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [JOINING
  STOCKHOLDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:Exhibit 10.4

 

EXECUTION COPY

 

TAX SHARING AGREEMENT

 

This Tax Sharing agreement is entered into as
of July 30, 2004 by and among Duane Reade Holdings, Inc. (“Parent”), the
Subsidiaries (as hereinafter defined) of Parent that are signatories hereto,
Duane Reade, a New York general partnership, (“DR Partnership”), and any
entities which become parties hereto pursuant to Paragraph 19 hereof.  Parent and its Subsidiaries are hereinafter
sometimes referred to as the “Group.”

 

WHEREAS, Parent and the Subsidiaries desire,
to the extent permitted by the Internal Revenue Code of 1986, as amended (the
“Code”), and the regulations promulgated thereunder (the “Treasury
Regulations”), that the Parent file consolidated Federal income tax returns on
behalf of the Group; and

 

WHEREAS, Parent and the Subsidiaries desire
that the Group participate, to the extent permitted by applicable state or
local law, to file combined state or local income tax returns (which shall be
deemed for all purposes of this Agreement to include any combined,
consolidated, unitary or similar state or local tax return) if so requested by
Parent; and

 

WHEREAS, Parent and the Subsidiaries, and DR
Partnership, wish to allocate and settle among themselves in an equitable
manner the consolidated Federal and combined state and local income tax
liability of the Group, for Taxable Periods (as hereinafter defined) governed
by this Agreement; and

 

WHEREAS, the Subsidiaries desire to be
indemnified by Parent with respect to certain tax liabilities, and Parent is willing
to so indemnify the Subsidiaries.

 

 

NOW, THEREFORE, in consideration of the
mutual covenants contained herein, the parties agree as follows:

 

1.                                       Definitions.

 

For purposes of this Agreement, the following
terms shall be defined as follows:

 

(a)                                  “Estimated Tax
Payments” for a Taxable Period shall mean, with respect to each Subsidiary,
the aggregate payments by the Subsidiary to Parent for such Taxable Period
provided in Paragraph 3.

 

(b)                                 “Final
Determination” shall mean a closing agreement with the Internal Revenue
Service or the relevant state or local taxing authorities, an agreement
contained on Internal Revenue Service Form 870-AD or other comparable form, an
agreement that constitutes a determination under Section 1313(a)(4) of the
Code, a claim for refund that has been allowed, a deficiency notice with
respect to which the period for filing a petition with the Tax Court or the
relevant state or local tribunal has expired or a decision of any court of
competent jurisdiction that is not subject to appeal or as to which the time
for appeal has expired.

 

(c)                                  “Separate Federal
Taxable Income” for a Taxable Period shall mean, with respect to each
Subsidiary, the Federal taxable income (including, for all purposes of this
Agreement, alternative minimum taxable income) for such Taxable Period that the
Subsidiary would have reported if it had not been included in the consolidated
Federal income tax return filed for the Group with respect to such Taxable
Period but instead had filed its own separate Federal income tax return for
such Taxable Period.  In computing such
taxable income, (i) the Subsidiary shall not take into account

 

2

 

any amounts paid or payable by the Subsidiary to Parent under
Paragraphs 2, 3 or 5 hereof with respect to Federal taxes or by Parent to the
Subsidiary under Paragraphs 2, 5 or 7 hereof with respect to Federal taxes;
(ii) the Subsidiary shall take into account all elections, positions and
methods used in the consolidated Federal income tax return filed for the Group
that must be applied on a consolidated basis; (iii) the Subsidiary shall be
entitled to take into account any carryovers of net operating losses, net
capital losses, excess tax credits, or other tax attributes which could have
been utilized by such Subsidiary if it had never been included in the
consolidated Federal income tax return filed for the Group; and (iv) the
Subsidiary shall not take into account transactions between such Subsidiary and
another Subsidiary or Parent until the first taxable year in which such
transaction is required to be taken into account pursuant to Treasury
Regulations promulgated under Section 1502 (including taking into account
any income, gains or losses of such Subsidiary on transactions that must be
taken into account pursuant to Treasury Regulation Section 1.1502-13 and
any income that must be taken into account pursuant to Treasury Regulation
Section 1.1502-19).

 

(d)                                 “Separate Federal
Tax” for a Taxable Period shall mean, 

with respect to each Subsidiary, the Federal income tax liability or, if
applicable, the Federal alternative minimum tax liability for such Taxable
Period that the Subsidiary would have incurred if it had not been included in
the consolidated Federal income tax return filed for the Group with respect to
such Taxable Period, but had instead filed its own Federal income tax return
for such Taxable Period; provided, that in computing such tax liability
for any Taxable Period, the Subsidiary shall not take into account any amounts
paid or payable by the Subsidiary to Parent under Paragraphs 2, 3 or 5 hereof

 

3

 

with respect to Federal taxes or by Parent to the Subsidiary under
Paragraphs 2, 5 or 7 hereof with respect to Federal taxes.  In computing such tax liability, (i) the
Subsidiary shall not take into account any amounts paid or payable by the
Subsidiary to Parent under Paragraphs 2, 3 or 5 hereof with respect to Federal
taxes or by Parent to the Subsidiary under Paragraphs 2, 5 or 7 hereof with
respect to Federal taxes; (ii) the Subsidiary shall take into account all
elections, positions and methods used in the consolidated Federal income tax
return filed for the Group that must be applied on a consolidated basis; (iii)
the Subsidiary shall be entitled to take into account any carryovers of net
operating losses, net capital losses, excess tax credits, or other tax
attributes which could have been utilized by such Subsidiary if it had never
been included in the consolidated Federal income tax return filed for the
Group; and (iv) the Subsidiary shall not take into account transactions between
such Subsidiary and another Subsidiary or Parent until the first taxable year
in which such transaction is required to be taken into account pursuant to
Treasury Regulations promulgated under Section 1502 (including taking into
account any income, gains or losses of such Subsidiary on transactions that
must be taken into account pursuant to Treasury Regulation
Section 1.1502-13 and any income that must be taken into account pursuant
to Treasury Regulation Section 1.1502-19). 
If the computation of the Separate Federal Tax for a Subsidiary for any
Taxable Period does not result in a positive number, such Subsidiary’s,
Separate Federal Tax for such Taxable Period shall be deemed to be zero.

 

(e)                                  “Separate State
and Local Taxable Income” shall mean, with respect to each Subsidiary, the
state and local taxable income, computed in a manner consistent with the
computation of the Separate Federal Taxable Income, as defined

 

4

 

above, that the Subsidiary would have reported with respect to each
state or local taxing jurisdiction, for any Taxable Period for which the
Subsidiary participates, with Parent or any Subsidiary of Parent (other than
the Subsidiary), in the filing of a combined state or local income tax return
with such jurisdiction, if the Subsidiary had filed with such jurisdiction a
separate return.

 

(f)                                    “Separate State
and Local Tax” shall mean, with respect to each Subsidiary, the aggregate
state and local income tax, computed in a manner consistent with the
computation of the Separate Federal Tax, as defined above, that the Subsidiary
would have incurred with respect to each relevant state and local taxing
jurisdiction, for any Taxable Period for which the Subsidiary participates with
Parent or any Subsidiary of Parent (other than the Subsidiary) in the filing of
a combined state or local income tax return with such jurisdiction, if the Subsidiary
had filed with such jurisdiction a separate return.

 

(g)                                 “Subsidiary” as
to any entity (the parent corporation) shall mean a corporation that would be
an includible corporation that is a member of an affiliated group of
corporations of which the parent corporation would be the common parent, all
within the meaning attributable to such terms in Section 1504 of the Code
and Treasury Regulations thereunder or, for purposes of Paragraph 2(b) below,
any corresponding provision of state or local income tax law.

 

(h)                                 “Taxable Period”
shall mean any taxable year or portion thereof, beginning on or after the date
hereof, with respect to which a consolidated Federal income tax return is
properly filed on behalf of the Group; or, in the case of any combined state or
local return, any such taxable year or portion thereof, with respect to

 

5

 

which a combined state or local income tax return is filed by Parent or
any Subsidiary of Parent.

 

2.                                       Payments
Between Parent and Subsidiaries.

 

(a)                                  For each Taxable
Period, each Subsidiary shall pay to Parent, an amount equal to the excess, if
any, of the Separate Federal Tax for such Taxable Period of such Subsidiary
over the aggregate amount of the Estimated Tax Payments actually made by the
Subsidiary to Parent with respect to Federal income taxes for such Taxable
Period.  If the aggregate amount of the
Estimated Tax Payments actually made to Parent with respect to Federal income
taxes for such Taxable Period exceeds the Separate Federal Tax for such Taxable
Period of the Subsidiary, Parent shall pay to the Subsidiary, an amount equal
to such excess.

 

(b)                                 For each Taxable
Period with respect to which any Subsidiary participates (or is included) in
the filing of any combined state or local income tax return with Parent or any
Subsidiary of Parent (other than such Subsidiary), such Subsidiary shall pay to
Parent an amount equal to the excess, if any, of the Separate State and Local
Tax of such Subsidiary for such Taxable Period over the aggregate amount of the
Estimated Tax Payments actually made by such Subsidiary to Parent with respect
to such state and local income tax for such Taxable Period.  If the aggregate amount of the Estimated Tax
Payments actually made to Parent with respect to such state or local income tax
for such Taxable Period exceeds the Separate State or Local Tax of such
Subsidiary for such Taxable Period, Parent shall pay to such Subsidiary, an
amount equal to such excess.

 

6

 

3.                                       Estimated
Tax Payments.

 

(a)                                  For each Taxable
Period, each Subsidiary shall pay to Parent, no later than the fifth day prior
to the date an estimated Federal income tax payment is due, the amount of
estimated Federal income taxes that such Subsidiary would have been required to
pay on or before the fifteenth day of such month if such Subsidiary had filed
for such period a separate return.  Such
estimated Federal income tax liability shall be determined consistent with the
calculation of the Separate Federal Tax of such Subsidiary and shall reflect
the estimated tax of such Subsidiary projected for the Taxable Period (without
taking into account any tax liability shown on a preceding Taxable Period tax
return) .

 

(b)                                 For every Taxable
Period with respect to which any Subsidiary participates in the filing of a
combined state or local income tax return with Parent or any Subsidiary of
Parent (other than such Subsidiary), such Subsidiary shall pay to Parent no
later than the fifth day prior to the date an estimated state or local income
tax payment is due, the amount of estimated taxes that such Subsidiary would
have been required to pay if such Subsidiary had filed for such period a
separate return.  Such estimated state or
local income tax liability shall be determined consistent with the calculation
of the Separate State and Local Tax for such Subsidiary and, to the extent
permitted by applicable law, shall reflect the estimated tax of such Subsidiary
projected for such period (without taking into account any tax liability shown
on a preceding Taxable Period tax return).

 

7

 

4.                                       Time
and Form of Payment.

 

Payments by the Subsidiaries or Parent
pursuant to Paragraph 2 hereof shall be made no later than the fifth day prior
to the due date of the Group’s consolidated Federal income tax return or any
relevant combined state or local income tax return for the period for which
such a payment is due.  If the due date
for any such return is extended, any amounts due at the time of filing a
request for extension of time to file shall be paid on an estimated basis.  No later than five (5) days prior to the
extended due date for such return for such Taxable Period, the payment of each
Subsidiary shall be recalculated, and any difference between (i) the tax
liability of such Subsidiary to be reflected on such return and (ii) all prior
Estimated Tax Payments made by such Subsidiary with respect to the such Taxable
Period shall be paid by such fifth day to the party entitled thereto, with
interest from the original due date at the relevant statutory rate.

 

5.                                       Adjustments.

 

(a)                                  Redeterminations
of Tax Liability.  In the event of
any redetermination of the consolidated Federal income tax liability of the
Group for any Taxable Period (or of the combined state or local income tax
liability for any Taxable Period for which a combined state or local income tax
return is filed) as a result of an audit by the Internal Revenue Service (or
the relevant state or local taxing authorities), a claim for refund or
otherwise, the Separate Federal Tax (or Separate State and Local Tax) for each
Subsidiary shall be recomputed for such Taxable Period and any prior and
subsequent Taxable Periods to take into account such redetermination, including
any applicable interest, penalties and additions to tax (to the extent actually
imposed or, in the case of interest, imposed or received), and payments due
pursuant to Paragraph 2 hereof

 

8

 

shall be appropriately adjusted. 
Any payment by a Subsidiary to Parent or by Parent to a Subsidiary
required by such adjustment shall be paid within ten (10) days after the date
of a Final Determination with respect to such redetermination or as soon as
such adjustment practicably can be calculated.

 

(b)                                 Refund of Tax
Sharing Payment.  In the event that
the calculation of the Separate Federal Taxable Income (or Separate State or
Local Taxable Income) for any Subsidiary for any Taxable Period results in a
loss, such loss may be carried back and deducted in calculating the Separate
Federal Tax (or Separate State and Local Tax) of such Subsidiary for prior
Taxable Periods in the same manner as it would have been carried back and
deducted had it never been included in the consolidated Federal income tax
return filed for the Group.  In such
case, the Separate Federal Tax (or Separate State and Local Tax) of such
Subsidiary shall be recomputed for the Taxable Period or Periods to which such
loss is carried and for any subsequent Taxable Periods to take into account the
deduction of such loss, including any interest actually received, and payments
made pursuant to Paragraph 2 hereof shall be appropriately adjusted.  In the case of any carryback of a loss
pursuant to this Paragraph 5(b), any payment by Parent to such Subsidiary
required by such adjustment shall be paid within seven (7) days after such
refunds are received by Parent, or, in the case of contested proceedings,
within thirty (30) days after the Final Determination with respect
thereto.  Excess credits for any Taxable
Period shall be carried back and otherwise treated in a manner consistent with
the provision of this Paragraph 5.

 

9

 

6.                                       Interest on
Unpaid Amounts.

 

In the event that any party fails to pay any
amount owed pursuant to this Agreement within ten (10) days after the date when
due, interest shall accrue on any unpaid amount at the “designated rate” from
the due date until such amounts are fully paid. 
For purposes of this Agreement, the “designated rate” shall mean a rate
equal to such percentage as is provided with respect to tax deficiencies or
refunds charged or credited by the Internal Revenue Service or state or local
taxing authority, as the case may be.

 

7.                                       Indemnification.

 

Parent shall indemnify each Subsidiary on an
after-tax basis (taking into account, when realized, any tax detriment or tax
benefit to such Subsidiary of (x) a payment hereunder or (y) the liability to
the Internal Revenue Service or state, local or foreign taxing authority giving
rise to such a payment), with respect to and in the amount of:

 

(a)                                  any liability to the
Internal Revenue Service for Federal income tax incurred by such Subsidiary for
any Taxable Period with respect to which such Subsidiary is included in a
consolidated Federal income tax return filed on behalf of the Group;

 

(b)                                 any liability for
state or local income tax to a state or local taxing authority incurred by such
Subsidiary with respect to any jurisdiction for any Taxable Period with respect
to which such Subsidiary participates in the filing of a combined state or
local income tax return with Parent or any Subsidiary of Parent (other than
such Subsidiary);

 

(c)                                  any liability for
Federal, state or local income tax to the

 

10

 

Internal Revenue Service
or a state or local taxing authority, as the case may be, incurred by such
Subsidiary, to the extent attributable to any other member of the Group and for
which such Subsidiary is liable as a result of being included in a consolidated
Federal income tax return of the Group or as a result of participating in the
filing of a combined state or local income tax return with Parent or any other
Subsidiary of Parent; and

 

(d)                                 interest, penalties
and additions to tax, and costs and expenses in connection with any liabilities
described in Paragraphs 7(a), (b) or (c) above. Parent shall pay to each
Subsidiary amounts due under Paragraphs 7(a), (b) and (c) and Paragraph 7(d)
(to the extent such amounts are related to amounts under Paragraphs 7(a), (b),
or (c)) no later than ten (10) days after the date of a Final Determination
with respect thereto; provided, however, that Parent shall not be
required to pay a Subsidiary if such Subsidiary has failed to timely pay to
Parent all amounts required to be paid by such Subsidiary to Parent under this
Agreement, unless (i) any such failures are de minimis and
(ii) any such amounts that have not been paid to Parent reduce the amounts
required to be paid by Parent to Subsidiary under this Paragraph 7.

 

8.                                       Filing of
Returns, Payment of Tax, Etc.

 

(a)                                  Agent.  Parent and the Subsidiaries agree that Parent
shall file consolidated Federal income tax returns for each Taxable Period of
the Group.  Each Subsidiary hereby
appoints Parent as its agent, as long as such Subsidiary is a member of the
Group, for the purpose of filing consolidated Federal income tax returns and
for making any election or application or taking any action in connection therewith
on behalf of such Subsidiary consistent with the terms of this Agreement.  Each Subsidiary hereby appoints Parent as its
agent, as long as such Subsidiary is a member of the Group, for the

 

11

 

purpose of filing any combined state or local income tax returns that
Parent may elect to file or cause to be filed, and for making any election or
application or taking any action in connection therewith on behalf of such
Subsidiary consistent with the terms of this Agreement.  Each Subsidiary hereby consents to the filing
of such returns, and to the making of such elections and applications.  Parent agrees that to the extent the filing of
any combined state or local return by Parent (or a Subsidiary of Parent) with
any Subsidiary with such Subsidiary for any period will reduce the state or
local tax liability of such Subsidiary, without causing an increase in the
state or local tax liability of Parent or any other Subsidiary of Parent in
such period, Parent will file or cause to be filed for such taxable period a
combined state or local income tax return with such Subsidiary; provided,
however, that such filing is permitted by applicable state or local
law.  Except as provided in this
Paragraph 8, nothing herein shall be construed as requiring Parent or any
Subsidiary of Parent to file combined state or local income tax returns on
behalf of any members of the Group for any Taxable Period.

 

(b)                                 Cooperation.   Each Subsidiary shall cooperate with Parent
in the filing, to the extent permitted by law, of a consolidated Federal income
tax return and such combined state or local income tax returns for members of
the Group as Parent elects to file or cause to be filed, by maintaining such
books and records and providing such information as may be necessary or useful
in the filing of such returns and executing any documents and taking any
actions that Parent may reasonably request in connection therewith.  Parent and each Subsidiary shall provide one
another with such information concerning such returns and the application of
payments made under this Agreement as any of such corporations may reasonably
request of one another.

 

12

 

(c)                                  Payment of Tax.  For each Taxable Period, Parent shall timely
pay or discharge, or cause to be timely paid or discharged, the consolidated
Federal income tax liability of the Group for such Taxable Period and the
combined state or local income tax liability shown on any combined state or
local income tax return that Parent or any Subsidiary elects or is required to
file.

 

9.                                       Resolution of
Disputes.

 

Any dispute concerning the calculation or
basis of determination of any payment provided for hereunder shall be resolved
by the independent certified financial accountants of Parent or by another
individual so designated by the independent certified financial accountants of
Parent, whose judgment shall be conclusive and binding upon the parties, in the
absence of manifest error.

 

10.                                 Adjudications.

 

In any audit, conference, or other proceeding
with the Internal Revenue Service or the relevant state or local authorities,
or in any judicial proceedings concerning the determination of the Federal
income tax liabilities of the Group or the state or local income tax liability
of any combined group including Parent or any Subsidiary, the relevant
taxpayer(s) shall be represented by persons selected by Parent.  Parent shall undertake any settlement or
other action that it is permitted to take pursuant to this Paragraph 10
affecting the income tax liability of a Subsidiary or any amount payable by a
Subsidiary to or receivable by a Subsidiary from Parent with the same diligence
and care as if such action pertained to an income tax liability of Parent and
as if any amount that might be so payable or receivable by such Subsidiary were
payable or receivable by

 

13

 

Parent.  Each Subsidiary hereby
appoints Parent as its agent for the purpose of proposing and concluding any such
settlement.

 

11.                                 DR
Partnership Joint and Several Liability.

 

Notwithstanding anything to the contrary
herein, DR Partnership shall be jointly and severally liable for, and make all
payments with respect to, any obligations of its partners under Paragraphs 2, 3
or 5 to the extent attributable to each such partner’s interest in DR
Partnership; provided, that it is the parties’ intent that each of the
partners in DR Partnership remains severally liable for all of its obligations
under this Agreement.

 

12.                                 Binding Effect;
Successors.

 

This Agreement shall be binding upon Parent
and each Subsidiary that is a signatory hereto, DR Partnership, and each
Subsidiary of Parent that becomes a party hereto pursuant to Paragraph 19
hereof.  This Agreement shall inure to
the benefit of, and be binding upon, any successors or assigns of the parties
hereto, including, without limitation, any Subsidiary that becomes a party
hereto pursuant to Paragraph 19.  Each
party hereto may assign its right to receive payments under this Agreement, but
may not assign or delegate its obligations hereunder.

 

13.                                 Interpretation.

 

This Agreement is intended to calculate and
allocate certain Federal and state and local income tax liabilities of Parent
and the Subsidiaries, and DR Partnership, and any situation or circumstance
concerning such calculation and allocation that is not specifically
contemplated hereby or provided for herein shall be dealt with in a manner
consistent with the underlying principles of calculation and allocation in this
Agreement.

 

14

 

14.                                 Limitation On
Additional Tax Agreements; Effect of the Agreement.

 

This Agreement shall determine the liability
of Parent and the members of the Group and DR Partnership to each other as to
the matters provided for herein, whether or not such determination is effective
for purposes of the Code or the Treasury Regulations promulgated thereunder or
state or local revenue laws and regulations, financial reporting purposes or
other purposes.

 

15.                                 Entire Agreement;
Assignment.

 

This Agreement embodies the entire
understanding among the parties relating to its subject matter and supersedes
and terminates all prior agreements and understandings among the parties with
respect to such subject matter.  Any and
all prior correspondence, conversations and memoranda are merged herein and
shall be without effect hereon.  No
promises, covenants or representations of any kind, other than those expressly
stated herein, have been made to induce any party to enter into this
Agreement.  This Agreement, including
this provision against oral modification, shall not be modified or terminated
except by a writing duly signed by each of the parties hereto, and no waiver of
any provisions of this Agreement shall be effective unless in a writing duly
signed by the party sought to be bound.

 

16.                                 Code References.

 

Any references to the Code or Treasury
Regulations shall be deemed to refer to the relevant provisions of any
successor statute or regulation and shall refer to such provisions as in effect
from time to time.

 

15

 

17.                                 Notices.

 

Any payment, notice or communication required
or permitted to be given under this Agreement shall be in writing (including
telecopy communication) and mailed, telecopied or delivered:

 

If to Parent:

 

Duane Reade Holdings,
Inc.  

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

201 Main Street

Fort Worth, TX  76102

Facsimile:  (817) 339-7350  

Attention:  Ray Pinson

 

with a copy to:

 

Oak Hill Capital Management,
Inc.

Park Avenue Tower

65 East 55th Street, 36 Floor

New York, NY  10022

Facsimile:  (212) 758-3572

Attention:  John R. Monsky, Esq.

 

and

 

Paul, Weiss, Rifkind, Wharton & Garrison
LLP

1285 Avenue of the Americas

New York, NY  10019-6064

Facsimile: (212) 757-3990

Attention:  Robert B. Schumer, Esq.

 

If to Subsidiary:

 

c/o Duane Reade Inc.

440 Ninth Avenue, 6th Floor

New York, NY  10001

Facsimile:  (212) 244-6525

 

If to DR Partnership:

 

c/o Duane Reade Inc.

440 Ninth Avenue, 6th Floor

New York, NY  10001

Facsimile:  (212) 244-6525

 

16

 

or to such other address
as a party shall furnish in writing to the other parties.  All such notices and communications shall be
effective when received.

 

18.                                 Counterparts.

 

This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

 

19.                                 New Members.

 

Each of the parties to this Agreement
recognizes that from time to time, new Subsidiaries of Parent may be added to
the Group.  Each of the parties to   this Agreement agrees that any new
Subsidiary of Parent shall, without the express written consent of the other
parties, become a party to this Agreement for all purposes of this Agreement
with respect to Taxable Periods ending after such Subsidiary was added to the
Group.

 

20.                                 Governing Law.

 

This Agreement shall be governed by the laws
applicable to contracts entered into and to be fully performed within the State
of New York.

 

21.                                 Termination.

 

(a)                                  This Agreement shall
be terminated if all of the parties agree in writing to such termination or the
Group fails to file a consolidated Federal income tax return for any tax year
of this Agreement.

 

(b)                                 In the event any party
ceases to be affiliated within the Group, this Agreement only terminates with
respect to that member.

 

17

 

(c)                                  Notwithstanding the
termination of this Agreement pursuant to this Paragraph 21, the provisions of
this Agreement shall remain in effect, with respect to any period of time
during the tax year in which termination occurs, for which the income of the
terminating party must be included in the consolidated Federal income tax
return.

 

(d)                                 Following the
termination of this Agreement pursuant to this Paragraph 21, the obligations
and liabilities of the parties arising under this Agreement with respect to any
Taxable Period prior to the termination date and the indemnification obligation
of Parent pursuant to Paragraph 7 shall continue in full force and effect until
all such obligations have been met and all such liabilities have been paid in
full, whether by expiration of time, operation of law or otherwise.

 

18

 

IN WITNESS WHEREOF, each of the parties has
caused this Agreement to be executed by its respective duly authorized officer
as of the date first set forth above.

 

	
   

  	
  PARENT

  
	
   

  	
   

  
	
   

  	
  DUANE READE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBSIDIARY

  
	
   

  	
   

  
	
   

  	
  DUANE READE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBSIDIARY

  
	
   

  	
   

  
	
   

  	
  DRI I INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBSIDIARY

  
	
   

  	
   

  
	
   

  	
  DUANE READE INTERNATIONAL

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBSIDIARY

  
	
   

  	
   

  
	
   

  	
  DUANE READE REALTY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  

 

19

 

	
   

  	
  DUANE READE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:  DUANE READE INC., a
  general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:  DRI I INC., a general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michelle D. Bergman

  	
   

  

 

20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]