PARENT PLEDGE AGREEMENT
This PARENT PLEDGE AGREEMENT (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Pledge Agreement"), dated as of September 30, 1997, is made by each party identified as a "Pledgor" on the signature pages hereto (each, individually, a "Pledgor", and collectively, the "Pledgors"), in favor of FLEET NATIONAL BANK, as administrative agent (together with its successor(s) thereto, in such capacity the "Administrative Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of September 30, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Credit Agreement"), among Duane Reade, a New York general partnership (the "Borrower"), the Pledgors, Duane Reade, Inc., a Delaware corporation, the various financial institutions as are, or may from time to time become, parties thereto (each, individually, a "Lender", and collectively, the "Lenders"), DLJ Capital Funding, Inc., as Syndication Agent, the Administrative Agent and Credit Lyonnais New York Branch, as the Documentation Agent, the Lenders and the Issuer have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the Credit Extensions (including the initial Credit Extension) under the Credit Agreement, each Pledgor is required to execute and deliver this Pledge Agreement;
WHEREAS, each Pledgor has duly authorized the execution, delivery and performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of each Pledgor to execute this Pledge Agreement inasmuch as such Pledgor will derive substantial direct and indirect benefits from the Credit Extensions made from time to time to the Borrower by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders and the Issuer to make Credit Extensions (including the initial Credit Extension) to the Borrower pursuant to the Credit Agreement, and to induce Secured Parties to enter into Rate Protection Agreement(s), each Pledgor agrees, for the benefit of each Secured Party, as follows:
SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Pledge Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares of stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Pledged Shares or other shares of capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any Pledged Shares or other Pledged Property made in the ordinary course of business and not a liquidating dividend.
"Lender" and "Lenders" are defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment 1 hereto as the issuer of the Pledged Note identified opposite the name of such Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer in substantially the form of Exhibit A hereto which are delivered by any Pledgor to the Administrative Agent as Pledged Property hereunder, as such promissory notes, in accordance with Section 4.6, are amended, modified or supplemented from time to time, together with any promissory note of any Pledged Note Issuer taken in extension or renewal thereof or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all other pledged shares of capital stock or promissory notes, all other securities, all assignments of any amounts due or to become due, all other instruments which are now being delivered by
any Pledgor to the Administrative Agent or may from time to time hereafter be delivered by such Pledgor to the Administrative Agent for the purpose of pledge under this Pledge Agreement or any other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share Issuer which are delivered by any Pledgor to the Administrative Agent as Pledged Property hereunder.
"Pledgor" and "Pledgors" are defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Pledge Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the Credit Agreement or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Pledge Agreement, including its preamble and recitals, with such meanings.
SECTION 2.1. Grant of Security Interest. Each Pledgor hereby pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for its benefit and the ratable benefit of each of the Secured Parties, and hereby grants to the Administrative Agent, for its benefit and the ratable benefit of the Secured Parties, a continuing security interest in, all of the following property of such Pledgor (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer
identified in Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter
delivered to the Administrative Agent in connection with this Pledge
(f) all Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the payment in full in cash of all Obligations of the Borrower now or hereafter existing under the Credit Agreement, the Notes and each other Loan Document to which the Borrower is or may become a party, whether for principal, interest, costs, fees, expenses, or otherwise, and all obligations of each Pledgor and each other Obligor whether now or hereafter existing under this Pledge Agreement and each other Loan Document to which such Pledgor or such other Obligor is or may become a party (all such obligations of the Borrower, such Pledgor and such other Obligor being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments representing or evidencing any Collateral, including all Pledged Shares and all Pledged Notes, shall be delivered to and held by or on behalf of (and, in the case of the Pledged Notes, endorsed to the order of) the Administrative Agent pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In the event that any Dividend is to be paid on any Pledged Share or any payment of principal or interest is to be made on any Pledged Note at a time when no Default of the nature referred to in Section 8.1.9 of the Credit Agreement or Event of Default has occurred and is continuing or would result therefrom, such Dividend or payment may be paid directly to the applicable Pledgor. If any such Default or Event of Default has occurred and is continuing, then any such Dividend or payment shall be paid directly to the Administrative Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge Agreement shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full in
cash of all Secured Obligations, the termination or expiration of all
Letters of Credit, the termination of all Rate Protection Agreements
and the termination of all Commitments,
(b) be binding upon each Pledgor and its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative
Agent and each other Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise transfer (in whole or in part) any Note or Loan held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights and benefits in respect thereof granted to such Lender under any Loan Document (including this Pledge Agreement) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 11.11 and Article X of the Credit Agreement. Upon (i) the sale, transfer or other disposition of Collateral in accordance with the Credit Agreement or (ii) the payment in full in cash of all Secured Obligations, the termination or expiration of all Letters of Credit, the termination of all Rate Protection Agreements and the termination of all Commitments, the security interests granted herein shall automatically terminate with respect to (x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the case of clause (ii)). Upon any such sale, transfer, disposition or termination, the Administrative Agent will, at such Pledgor's sole expense, deliver to such Pledgor, without any representations, warranties or recourse of any kind whatsoever, all certificates and instruments representing or evidencing all Pledged Shares and all Pledged Notes, together with all other Collateral held by the Administrative Agent hereunder, and execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Administrative Agent and the security interests granted to the Administrative Agent hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Credit
Agreement, any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person under the provisions of the Credit
Agreement, any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Secured
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and such Pledgor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement, any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. Each Pledgor will not exercise any rights which it may acquire by reason of any payment made hereunder, whether by way of subrogation, reimbursement or otherwise, until the prior payment, in full and in cash, of all Secured Obligations, the termination or expiration of all Letters of Credit, the termination of all Rate Protection Agreements and the termination of all Commitments. Any amount paid to any Pledgor on account of any payment made hereunder prior to the payment in full in cash of all Secured Obligations shall be held in trust for the benefit of the Secured Parties and each holder of a Note and shall immediately be paid to the Secured Parties and each holder of a Note and credited and applied against the Secured Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement; provided, however, that if
(a) such Pledgor has made payment to the Secured Parties and
each holder of a Note of all or any part of the Secured Obligations,
(b) all Secured Obligations have been paid in full in cash,
all Letters of Credit have been terminated or expired, all Rate
Protection Agreements have been terminated and all Commitments have
been permanently terminated,
each Secured Party and each holder of a Note agrees that, at such Pledgor's request, the Secured Parties and the holders of the Notes will execute and deliver to such Pledgor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Pledgor of an interest in the Secured Obligations resulting from such payment by such Pledgor. In furtherance of the foregoing, for so long as any Secured Obligations, Letters of Credit or Commitments remain outstanding or any Rate Protection Agreement remains in full force and effect, such Pledgor shall refrain from taking any action or commencing any proceeding against the Borrower or any other Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Pledge Agreement to any Secured Party or any holder of a Note.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. Each Pledgor represents and warrants to each Secured Party, as at the date of each pledge and delivery hereunder (including each pledge and delivery of Pledged Shares and each pledge and delivery of a Pledged Note) by such Pledgor to the Administrative Agent of any Collateral, as set forth in this Article III.
SECTION 3.2. Ownership, No Liens, etc. Such Pledgor is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign) such Collateral, free and clear of all liens, security interests, options, or other charges or encumbrances, except any lien or security interest granted pursuant hereto in favor of the Administrative Agent.
SECTION 3.3. Valid Security Interest. The delivery of such Collateral to the Administrative Agent is effective to create a valid, perfected, first priority security interest in such Collateral and all proceeds thereof, securing the Secured Obligations. No filing or other action will be necessary to perfect or protect such security interest.
SECTION 3.4. As to Pledged Shares. In the case of any Pledged Shares constituting such Collateral, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute all of the issued and outstanding shares of capital stock of each Pledged Share Issuer. Such Pledgor has no Subsidiaries other than the Pledged Share Issuers, except as set forth in Item C of Attachment 1.
SECTION 3.5. As to Pledged Notes. In the case of each Pledged Note, all of such Pledged Notes have been duly authorized, executed, endorsed, issued and delivered, and are the legal, valid and binding obligation of the issuers thereof, and are not in default.
SECTION 3.6. Authorization, Approval, etc. No authorization, approval, or other action by, and no notice to or filing with, any governmental authority, regulatory body or any other Person is required either