<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
and Exchange Act of 1934 For the quarterly period ended September 25, 1999.
Commission file number 333-41239
------------------------------
DUANE READE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S><C>
DELAWARE 04-3164702
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
DRI I INC.* DELAWARE 04-3166107
DUANE READE* NEW YORK 11-2731721
DUANE READE INTERNATIONAL, INC.* DELAWARE 22-3672347
DUANE READE REALTY, INC.* DELAWARE 13-4074383
* Guarantors with respect to the Company's 9 1/4% Senior Subordinated Notes due 2008
440 NINTH AVENUE
NEW YORK, NEW YORK 10001
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 273-5700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
-----------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $.01 par value per share New York Stock Exchange.Inc.
9 1/4% Senior Subordinated Notes due 2008 None
</TABLE>
----------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
None.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
The number of shares of the Common Stock outstanding as of November 2, 1999:
17,145,018
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C>
ITEM 1. - FINANCIAL STATEMENTS
Consolidated Statements of Operations (Unaudited) - For the 13 and 39
Weeks Ended September 25, 1999 and September 26, 1998 3
Consolidated Balance Sheets
As of September 25, 1999 (Unaudited) and December 26, 1998 4
Consolidated Statements of Cash Flows (Unaudited) -
For the 39 Weeks Ended September 25, 1999 and September 26, 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION 15
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Duane Reade Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the 13 Weeks Ended For the 39 Weeks Ended
------------------------------ ------------------------------
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 211,085 $ 144,472 $ 610,124 $ 398,651
Cost of sales 154,989 105,362 455,853 296,172
--------- --------- --------- ---------
Gross profit 56,096 39,110 154,271 102,479
--------- --------- --------- ---------
Selling, general & administrative expenses 33,547 22,768 98,412 63,687
Amortization 2,783 1,561 7,574 4,413
Depreciation 2,790 1,762 7,593 4,148
Store pre-opening expenses 284 1,141 1,280 3,008
--------- --------- --------- ---------
39,404 27,232 114,859 75,256
--------- --------- --------- ---------
Operating income 16,692 11,878 39,412 27,223
Interest expense, net 7,730 6,115 21,680 18,674
--------- --------- --------- ---------
Income before income taxes 8,962 5,763 17,732 8,549
Income taxes 1,702 -- 3,369 --
--------- --------- --------- ---------
Income before extraordinary charge 7,260 5,763 14,363 8,549
Extraordinary charge, net of income taxes
of $-0- -- -- -- (23,600)
--------- --------- --------- ---------
Net income (loss) $ 7,260 $ 5,763 $ 14,363 $ (15,051)
--------- --------- --------- ---------
--------- --------- --------- ---------
Per Common Share - Basic
Income before extraordinary charge $ 0.42 $ 0.34 $ 0.84 $ 0.54
Extraordinary charge -- -- -- (1.48)
--------- --------- --------- ---------
Net income (loss) $ 0.42 $ 0.34 $ 0.84 $ (0.94)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding 17,115 16,986 17,104 15,936
--------- --------- --------- ---------
--------- --------- --------- ---------
Per Common Share - Diluted
Income before extraordinary charge $ 0.39 $ 0.31 $ 0.78 $ 0.50
Extraordinary charge -- -- -- (1.37)
--------- --------- --------- ---------
Net income (loss) $ 0.39 $ 0.31 $ 0.78 $ (0.87)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding 18,425 18,355 18,377 17,211
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Duane Reade Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 25, December 26,
1999 1998
-------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash $ 901 $ 869
Receivables 34,689 25,547
Inventories 140,233 134,313
Property held for sale 1,020 11,527
Prepaid expenses and other current assets 6,463 4,774
--------- ---------
TOTAL CURRENT ASSETS 183,306 177,030
Property and equipment, net 83,891 71,974
Goodwill, net of accumulated amortization of $25,410 and $21,954 169,132 144,946
Other assets 39,968 34,190
--------- ---------
TOTAL ASSETS $ 476,297 $ 428,140
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 51,938 $ 50,028
Accrued interest 5,155 3,636
Other accrued expenses 19,045 25,677
Current portion of long-term debt 8,850 5,600
Current portion of capital leases 1,962 2,089
--------- ---------
TOTAL CURRENT LIABILITIES 86,950 87,030
Senior debt, less current portion 325,775 299,350
Capital lease obligations, less current portion 3,508 3,930
Other noncurrent liabilities 22,026 15,041
--------- ---------
TOTAL LIABILITIES 438,259 405,351
--------- ---------
Stockholders' equity
Preferred stock, $0.01 par; authorized 5,000,000 shares;
issued and outstanding: none -- --
Common stock, $0.01 par; authorized 30,000,000 shares;
issued and outstanding 17,116,608 and 16,985,557 shares 171 170
Paid-in capital 127,092 126,207
Accumulated deficit (89,225) (103,588)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 38,038 22,789
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 476,297 $ 428,140
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Duane Reade Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the 39 Weeks Ended
------------------------------------
September 25, September 26,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,363 $ (15,051)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Extraordinary charge -- 23,600
Depreciation and amortization of property and equipment 7,593 4,148
Amortization of goodwill and other intangibles 8,580 5,258
Accretion of principal of zero coupon debt -- 1,659
Gain on sale of assets (444) --
Other 3,879 2,406
Changes in operating assets and liabilities (net of effect of acquisitions):
Receivables (9,142) (14,962)
Inventories (9,611) (40,667)
Accounts payable 1,910 16,036
Prepaid and accrued expenses (10,146) (7,422)
Increase in other (assets) liabilities, net (7,214) (2,406)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (232) (27,401)
--------- ---------
Cash flows from investing activities:
Pharmacy acquisitions (10,332) --
Proceeds from sales of assets 10,732 --
Purchase of Rock Bottom assets -- (64,906)
Capital expenditures (28,126) (23,058)
--------- ---------
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (27,726) (87,964)
--------- ---------
Cash flows from financing activities:
Proceeds from initial public offering, net -- 101,606
Proceeds from new term loan 25,000 210,000
Proceeds from new senior subordinated notes -- 80,000
Repayment of old term loan -- (65,310)
Repayment of old senior subordinated notes -- (89,893)
Repayment of zero coupon debt -- (99,346)
Premiums paid on early extinguishment of debt -- (11,496)
Fees and expenses related to early extinguishment of debt -- (478)
Net borrowings (repayments) - old revolving credit facility -- (24,500)
Deferred financing costs (1,080) (7,058)
Exercise of stock options 886 106
Repayments of new term loan (4,325) (900)
Net borrowings - new revolving credit facility 9,000 24,500
Repayments of capital lease obligations (1,491) (1,525)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,990 115,706
--------- ---------
Net increase in cash 32 341
Cash at beginning of period 869 261
--------- ---------
--------- ---------
Cash at end of period $ 901 $ 602
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
DUANE READE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein reflect all adjustments
which, in the opinion of management, are necessary to present fairly the results
of operations and financial position of Duane Reade Inc. (the "Company"), and
have been prepared in accordance with the same accounting principles followed in
the presentation of the Company's annual financial statements for the year ended
December 26, 1998. The financial statements should be read in conjunction with
the Company's financial statements included in its Annual Report on Form 10K for
the year ended December 26, 1998. The results for the interim periods presented
are not necessarily indicative of the results expected for the full year.
The Company has no assets or operations other than its investment in its
subsidiary guarantors. Accordingly, the consolidated financial statements
present the combined assets and operations of the subsidiary guarantors.
2. NET INCOME (LOSS ) PER COMMON SHARE
Net income (loss) per common share is based on the weighted average shares
outstanding during each period in accordance with the provisions of FASB
Statement No. 128 "Earnings Per Share." Basic earnings per share are computed
based on the weighted average number of common shares outstanding during the
period. Diluted earnings per share gives effect to all dilutive potential common
shares outstanding during the period. Dilutive potential common shares include
shares issuable upon exercise of the Company's stock options. Options to
purchase 59,593 shares at September 25, 1999 and 17,901 shares at September
26, 1998 were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market price
of the common shares.
3. INCOME TAXES
Income taxes are recorded based on the estimated effective tax rate expected to
be applicable for the full fiscal year. The effective tax rate is lower than the
statutory rate, reflecting the benefit of net operating loss carryforwards.
While such carryforwards are adequate to offset all federal taxes that are
expected to be payable for the year (and therefore no tax payments are
expected), for accounting purposes, the benefit of certain carryforwards serves
to reduce goodwill, and not income tax expense, resulting in an effective rate
greater than zero.
4. ACQUISITION
On September 11, 1998, the Company purchased substantially all of the
operating assets (including inventory and leases) of Rock Bottom Stores,
Inc., a health and beauty aid retailer operating 38 stores primarily in the
outer boroughs of New York City (the "Rock Bottom Acquisition"). The purchase
price paid was $64.9 million, subject to certain post-closing adjustments.
The acquisition, accounted for under the purchase method, was financed with
additional term loans under the Existing Credit Agreement (See Note 5).
During the quarter ended September 25, 1999, the Company finalized the sale
of acquired non-compatible closeout inventory and recorded a $7.7 million
adjustment to increase goodwill for the difference between estimated and
actual markdowns. Additionally, the Company finalized its retrofit program
for acquired stores and recorded a write-down of $9.6 million related to the
disposal of acquired furniture and fixtures. The Company is currently a party
to legal proceedings arising out of disputes with the seller over the
purchase price, a part of which relates to an attempt to recover a portion of
the purchase price paid for acquired inventory. The purchase price (as
adjusted) was allocated to inventory ($12.0 million), property held for sale
($6.7 million), property ($7.3 million), identifiable intangibles ($5.2
million) and goodwill ($46.3 million) net of reserves for expenses, store
closings and liabilities assumed ($12.6 million).
6
<PAGE>
DUANE READE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. Acquisition (Continued)
Ten stores acquired as part of the Rock Bottom Acquisition were designated
for sale or closure. These stores were operated for a period of time after
the acquisition was completed. Six of these stores were sold in March 1999
at no resultant gain or loss. One of the remaining stores has been turned
back to the landlord and the Company has been released from the lease
obligations. Two stores have been closed, one of which has been subleased.
The remaining store is still operating and is planned to close early next
year. The results of operations from these ten stores have not been
included in the Company's statements of operations through the period
ending September 25, 1999. Their results have been included in goodwill
which, during the year, yielded an increase in goodwill of $1.3 million.
As one store was not exited within one year from the acquisition date,
generally accepted accounting principles require that the results of
operations for this store will be included in the Company's statement
of operations from September 26, 1999.
The unaudited operating results of the Rock Bottom stores to be retained have
been included in the consolidated statement of operations from the date of
acquisition. The unaudited pro forma results for the 39 weeks ended September
26, 1998 presented below assume the acquisition occurred as of December 28,
1997 (in thousands, except per share amounts): <TABLE><CAPTION>
For the 39 weeks ended
--------------------------------
September 25, September 26,
1999 1998
---------------- ---------------
(Historical) (Pro Forma)
<S> <C> <C>
Net sales $ 610,124 $ 536,288
----------- ---------------
----------- ---------------
Operating income $ 39,412 $ 32,546
----------- ---------------
----------- ---------------
Income before extraordinary charge $ 14,363 $ 9,482
Extraordinary charge, net of income taxes of $-0- -- (23,600)
----------- ---------------
Net income (loss) $ 14,363 $ (14,118)
----------- ---------------
----------- ---------------
Per Common Share-Basic:
Income before extraordinary charge $ 0.84 $ 0.59
Extraordinary charge -- (1.48)
----------- ---------------
Net income (loss) $ 0.84 $ (0.89)
----------- ---------------
----------- ---------------
Per Common Share-Diluted:
Income before extraordinary charge $ 0.78 $ 0.55
Extraordinary charge -- (1.37)
----------- ---------------
Net income (loss) $ 0.78 (0.82)
----------- ---------------
----------- ---------------
</TABLE>
In management's opinion, the unaudited pro forma combined results are not
necessarily indicative of the actual results that would have occurred had the
acquisition been consummated at the beginning of fiscal 1998 or of future
results of the combined operations under the ownership and management of the
Company.
7
<PAGE>
DUANE READE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. REFINANCING PLAN AND INITIAL PUBLIC OFFERING
In February 1998, the Company successfully completed an initial public offering
of its stock which was part of a plan to refinance all of the Company's existing
indebtedness (the "Refinancing Plan") in order to enhance the Company's
financial flexibility to pursue growth opportunities and implement capital
improvements. The Refinancing Plan resulted in a reduction in the Company's
overall indebtedness, a simplification of the Company's capital structure and
access to additional borrowings. The principal components of the Refinancing
Plan were: (i) the sale by the Company of 6.7 million shares of common stock for
net proceeds of approximately $102 million; (ii) the execution of a new secured
credit agreement (the "Existing Credit Agreement") which provided for borrowings
up to approximately $160 million ($130 million of term loans and up to $30
million of revolving loans); (iii) the issuance of $80 million aggregate
principal amount of the Company's 9 1/4% Senior Subordinated Notes due 2008 (the
"Senior Notes") for net proceeds of approximately $77 million; (iv) the
repayment of all outstanding borrowings under the Company's former credit
agreement (the "Old Credit Agreement"); (v) the redemption of the Company's
outstanding Zero Coupon Notes; and (vi) the redemption of the Company's
outstanding 12% Senior Notes due 2002. The interest rates under the Existing
Credit Agreement are approximately the same as interest rates under the Old
Credit Agreement.
6. EXTRAORDINARY CHARGE
During the 39 weeks ended September 26, 1998, as a result of the completion of
the Refinancing Plan, the Company incurred a $23.6 million extraordinary charge
due to the early extinguishment of debt. The extraordinary charge included
redemption premiums on the Senior Notes and Zero Coupon Notes of approximately
$11.5 million, accelerated amortization of deferred financing costs and other
transaction expenses of approximately $8.1 million, and accelerated accretion of
Zero Coupon Notes to the indenture stated value of approximately $4.0 million.
7. INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of income (loss) per common share
for the periods presented (in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the 13 Weeks Ended For the 39 Weeks Ended
------------------------------- -------------------------------
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Income before extraordinary charge $ 7,260 $ 5,763 $14,363 $ 8,549
Extraordinary charge -- -- -- (23,600)
------- ------- ------- -----------
Net income (loss) $ 7,260 $ 5,763 $14,363 $ (15,051)
------- ------- ------- -----------
------- ------- ------- -----------
Weighted average number of common shares
outstanding during the period - basic 17,115 16,986 17,104 15,936
Dilutive potential securities 1,310 1,369 1,273 1,275
------- ------- ------- -----------
Weighted average number of shares outstanding -
diluted 18,425 18,355 18,377 17,211
------- ------- ------- -----------
------- ------- ------- -----------
Per common share - basic
Income before extraordinary charge $ 0.42 $ 0.34 $ 0.84 $ 0.54
Extraordinary charge -- -- -- (1.48)
------- ------- ------- -----------
Net income (loss) $ 0.42 $ 0.34 $ 0.84 $ (0.94)
------- ------- ------- -----------
Per common share - diluted
Income before extraordinary charge $ 0.39 $ 0.31 $ 0.78 $ 0.50
Extraordinary charge -- -- -- (1.37)
------- ------- ------- -----------
Net income (loss) $ 0.39 $ 0.31 $ 0.78 $ (0.87)
------- ------- ------- -----------
------- ------- ------- -----------
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
THE INFORMATION CONTAINED HEREIN INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. A NUMBER OF FACTS COULD CAUSE
ACTUAL RESULTS, PERFORMANCE, ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE,
BUT ARE NOT LIMITED TO, THE COMPETITIVE ENVIRONMENT IN THE DRUGSTORE INDUSTRY IN
GENERAL AND IN THE COMPANY'S SPECIFIC MARKET AREA; INFLATION, CHANGES IN COSTS
OF GOODS AND SERVICES; ECONOMIC CONDITIONS IN GENERAL AND IN THE COMPANY'S
SPECIFIC MARKET AREAS; DEMOGRAPHIC CHANGES; CHANGES IN PREVAILING INTEREST RATES
AND THE AVAILABILITY OF AND TERMS OF FINANCING TO FUND THE ANTICIPATED GROWTH OF
THE COMPANY'S BUSINESS; LIABILITY AND OTHER CLAIMS ASSERTED AGAINST THE COMPANY;
CHANGES IN OPERATION STRATEGY OR DEVELOPMENT PLANS; THE ABILITY TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL; THE SIGNIFICANT INDEBTEDNESS OF THE COMPANY; LABOR
DISTURBANCE; CHANGES IN THE COMPANY'S ACQUISITION AND CAPITAL EXPENDITURE PLANS;
AND OTHER FACTORS REFERENCED HEREIN. IN ADDITION, SUCH FORWARD LOOKING
STATEMENTS ARE NECESSARILY DEPENDENT UPON ASSUMPTIONS, ESTIMATES AND DATES THAT
MAY BE INCORRECT OR IMPRECISE AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS. ACCORDINGLY, ANY FORWARD-LOOKING STATEMENTS INCLUDED HEREIN
DO NOT PURPORT TO BE PREDICTIONS OF FUTURE EVENTS OR CIRCUMSTANCES AND MAY NOT
BE REALIZED. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY, AMONG OTHER
THINGS, THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS, "
"MAY, " "WILL," "SHOULD," "SEEKS," "PRO FORMA," "ANTICIPATES," "INTENDS" OR THE
NEGATIVE OF ANY THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY,
OR BY DISCUSSION OF STRATEGY OR INTENTIONS. GIVEN THESE UNCERTAINTIES,
PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY OBLIGATIONS TO UPDATE ANY
SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE RESULTS OF ANY REVISIONS TO ANY OF THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT FUTURE EVENTS OR
DEVELOPMENTS.
RESULTS OF OPERATIONS
The following sets forth the results of operations as a percentage of sales for
the periods indicated.
<TABLE>
<CAPTION>
For the 13 Weeks Ended For the 39 Weeks Ended
-------------------------------- ---------------------------------
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 73.4 72.9 74.7 74.3
----- ----- ----- -----
Gross profit 26.6 27.1 25.3 25.7
Selling, general and administrative 15.9 15.8 16.1 16.0
expenses
Amortization 1.3 1.1 1.2 1.1
Depreciation 1.3 1.2 1.3 1.0
Store pre-opening expenses 0.1 0.8 0.2 0.8
----- ----- ----- -----
Operating income 8.0 8.2 6.5 6.8
Interest expense, net 3.7 4.2 3.6 4.7
----- ----- ----- -----
Income before income taxes 4.3 4.0 2.9 2.1
Income taxes 0.8 -- 0.5 --
----- ----- ----- -----
Income before extraordinary charge 3.5 4.0 2.4 2.1
Extraordinary charge -- -- -- (5.9)
----- ----- ----- -----
Net income (loss) 3.5% 4.0% 2.4% (3.8)%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
9
<PAGE>
THIRD QUARTER 1999 VERSUS THIRD QUARTER 1998.
Net sales in the third quarter 1999 were $211.1 million, an increase of 46.1%
over last year's third quarter net sales of $144.5 million. The increase was
primarily attributable to sales from the 28 former Rock Bottom stores that the
Company purchased in September 1998, increased comparable store sales of 9.0%,
the inclusion of 16 stores opened during the second half of fiscal year 1998 and
the sales from 18 new stores opened during the current fiscal year. The Company
opened three stores during the third quarter of 1999 compared to twelve store
openings during the third quarter of 1998. At September 25, 1999 the Company
operated 145 stores.
Cost of sales as a percentage of net sales increased to 73.4% this quarter from
72.9% in the comparable quarter last year resulting in a decrease in gross
profit margin to 26.6% from 27.1%. The decrease in gross profit margin was
principally related to the impact of the Rock Bottom stores acquired in
September of 1998 as well as the impact of the increase in pharmacy sales as a
percentage of total sales. Pharmacy sales have a lower gross profit margin
percentage than front end store sales.
Selling, general and administrative expenses were $33.5 million or 15.9% of net
sales and $22.8 million or 15.8% of net sales in the third quarter of 1999 and
1998, respectively.
Amortization of goodwill and other intangibles in the third quarter of 1999 and
1998 was $2.8 million and $1.6 million, respectively. The increase in
amortization resulted principally from the amortization of goodwill and
identifiable intangible assets related to the acquisition of the 28 former Rock
Bottom stores and the acquisition of six Love's stores in May 1999 as well as
increases in the amortization of lease acquisition and customer list costs for
pharmacy acquisitions during 1998 and 1999.
The increase in depreciation from $1.8 million in the third quarter of 1998
to $2.8 million in the third quarter of 1999 resulted principally from
depreciation on new stores opened in the fourth quarter of 1998 and the first
nine months of 1999, capital invested in renovations of existing stores and
depreciation expense on the 28 former Rock Bottom stores.
The Company incurred pre-opening costs of $0.3 million during the third quarter
of 1999 related to the opening of three stores. Pre-opening costs of $1.1
million were incurred during the third quarter of 1998 for the opening of twelve
stores.
Net interest expense increased 26.4% to $7.7 million in the third quarter of
1999 from $6.1 million in the third quarter of 1998. The increase was
principally due to the impact of additional term loans of $80 million incurred
in connection with the Rock Bottom Acquisition in the third quarter of 1998 and
$25 million incurred in March 1999 for the Company's store expansion program.
Income before income taxes increased by 55.5% or $3.2 million to $9.0 million in
the third quarter of 1999 from $5.8 million in the third quarter of 1998
primarily as a result of increased sales and gross profit dollars partially
offset by increased selling, general and administrative expenses, depreciation,
amortization and net interest expense.
Income tax expense for the third quarter of 1999 was $1.7 million or 0.8% of net
sales versus no provision for income taxes in the third quarter of 1998. The
Company anticipates that in 1999 it will begin to utilize the net tax loss
carryforward benefits it has accumulated in past years and, therefore, has
provided for income tax expense at its anticipated current year effective tax
rate of 19% (See Note 3 to consolidated financial statements).
The Company's net income increased by $1.5 million to $7.3 million in the third
quarter of 1999 from $5.8 million in the third quarter of 1998 due to factors
discussed above.
10
<PAGE>
THIRTY-NINE WEEKS ENDED SEPTEMBER 25, 1999 VERSUS THIRTY-NINE WEEKS ENDED
SEPTEMBER 26, 1998
Net sales for the thirty-nine weeks ended September 25, 1999 were $610.1
million, an increase of 53.0% over the net sales for the first thirty-nine weeks
of 1998 of $398.7 million. The increase was attributable to sales from the 28
former Rock Bottom stores that the Company purchased in September 1998,
increased comparable store sales of 7.9%, the inclusion of 29 stores opened
during the 39 weeks ended September 26, 1998 for the entire period, four stores
opened during the fourth quarter of fiscal year 1998 and the sales generated by
18 new stores opened during the current fiscal year. The Company opened 18
stores and closed one store during the period compared to 29 store openings
during the same period last year.
Cost of sales for the thirty-nine weeks ended September 25, 1999 as a percentage
of net sales increased to 74.7% from 74.3% in the comparable period last year,
resulting in a decrease in gross profit margin to 25.3% from 25.7%. The decrease
in gross profit margin was principally related to the impact of the Rock Bottom
stores acquired in September 1998 as well as the impact of the increase in
pharmacy sales as a percentage of total sales. Pharmacy sales have a lower gross
profit margin percentage than front end store sales.
Selling, general and administrative expenses were $98.4 million or 16.1% of
net sales and $63.7 million or 16.0% of net sales for the thirty-nine weeks
ended September 25, 1999 and September 26, 1998, respectively. The percentage
increase in 1999 compared to 1998 resulted principally from Rock Bottom
related transition costs of approximately $600,000 incurred during the first
quarter of 1999.
Amortization of goodwill and other intangibles for the thirty-nine weeks ended
September 25, 1999 and September 26, 1998 was $7.6 million and
$4.4 million, respectively. The increase in amortization resulted
principally from the amortization of goodwill and identifiable
intangible assets related to the September 1998 acquisition of the
28 former Rock Bottom stores and May 1999 acquisition of six Love's
stores as well as increases in the amortization of lease acquisition
and customer list costs for pharmacy acquisitions during 1998 and 1999.
The increase in depreciation from $4.1 million for the thirty-nine weeks ended
September 26, 1998 to $7.6 million for the thirty-nine weeks ended September 25,
1999 resulted principally from new stores opened in 1998 and the first nine
months of 1999, capital invested in renovations of existing stores and
depreciation expense on the 28 former Rock Bottom stores.
The Company incurred pre-opening costs of $1.3 million during the thirty-nine
weeks ended September 25, 1999 related to the opening of 18 stores. Pre-opening
costs of $3.0 million were incurred during the thirty-nine weeks ended
September 26, 1998 for the opening of 29 stores.
Net interest expense increased 16.1% to $21.7 million during the thirty-nine
weeks ended September 25, 1999 from $18.7 million in the comparable period
last year. The increase was principally due to the impact of additional term
loans of $80 million incurred during the third quarter of 1998 in connection
with the Rock Bottom Acquisition and $25 million incurred in March 1999 for
the Company's store expansion program.
Income before income taxes for the thirty-nine weeks ended September 25, 1999
increased by $9.2 million to $17.7 million from $8.5 million in the comparable
prior year period, primarily as a result of increased sales and gross profit
dollars partially offset by increased selling, general and administrative
expenses, depreciation, amortization and net interest expense.
Income tax expense for the thirty-nine weeks ended September 25, 1999 amounted
to $3.4 million or .5% of net sales versus no provision for income taxes in the
comparable prior year period. The Company anticipates it will begin to utilize
in 1999 the net tax loss carryforward benefits it has accumulated in past years
and, therefore, has provided for income tax expense at its current year
anticipated effective tax rate of 19% (See Note 3 to consolidated financial
statements).
The Company's income before extraordinary charge increased by $5.9 million to
$14.4 million for the thirty-nine weeks ended September 25, 1999 from $8.5
million in the thirty-nine weeks ended September 26, 1998 due to the factors
discussed above.
11
<PAGE>
Net loss for the thirty-nine weeks ended September 26, 1998 included a
$23.6 million extraordinary charge for costs associated with the early
extinguishment of debt as part of the Company's initial public offering
and related financing. Net income for the thirty-nine weeks ended September 25,
1999 was $14.4 million compared to a net loss for the thirty-nine weeks ended
September 26, 1998 of $15.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $96.4 million and $90.0 million as of September 25, 1999 and
December 26, 1998, respectively. The increase is principally due to increases in
inventory and receivables partially offset by a reduction in property held for
sale. The increase in inventory reflects inventory related to the opening of 18
additional stores less one store closed during the period. The property held for
sale was reduced as a result of the disposition of six stores acquired from Rock
Bottom Stores, Inc. which the Company elected not to continue to operate and the
related inventories as well as the disposition of the Company's former
distribution center facility.
The Company's EBITDA (earnings before interest, taxes, depreciation,
amortization, extraordinary charge and other non-cash items) for the third
quarter of 1999 increased by 44.4% to $23.7 million from $16.4 million for the
third quarter of 1998. EBITDA as a percentage of sales was 11.2% for the third
quarter of 1999 compared to 11.4% for the third quarter of 1998. The Company's
EBITDA for the thirty-nine weeks ended September 25, 1999 increased by 51.9% to
$58.0 million from $38.2 million for the thirty-nine weeks ended September 26,
1998. EBITDA as a percentage of sales was 9.5% and 9.6% in each of the
thirty-nine week periods respectively.
For the thirty-nine weeks ended September 25, 1999, net cash used in
operating activities was $0.2 million, compared to $27.4 million during the
thirty-nine weeks ended September 26, 1998. Increases in inventory related to
new stores as well as increases in vendor receivables and third party
pharmacy receivables contributed to the use of cash in the period.
During the thirty-nine weeks ended September 25, 1999, net cash used in
investing activities was $27.7 million compared to $88.0 million during the
thirty-nine weeks ended September 26, 1998. This reflects capital expenditures
in 1999 related to the conversion of former Rock Bottom stores to the hybrid
Duane Reade format, new store openings and remodelings and the acquisition of
seven pharmacies, net of proceeds related to the disposition of six former Rock
Bottom store locations and the Company's former distribution center facility.
The Company sold the leases for the six stores for proceeds of approximately
$3.5 million and liquidated the stores' inventories for proceeds of
approximately $3.0 million. The Company sold its former distribution center
facility for proceeds of approximately $4.2 million.
For the thirty-nine weeks ended September 25, 1999, net cash provided by
financing activities was $28.0 million compared to $115.7 million for the
thirty-nine weeks ended September 26, 1998. The decrease from last year
resulted from the implementation of the Company's Refinancing Plan during the
first half of 1998 and additional financings incurred in connection with the
Rock Bottom Acquisition in the third quarter of 1998. During the quarter
ended March 27, 1999, the Company secured an additional term loan of $25
million. In addition, the Company increased its revolving credit facility
from $30 million to $40 million. This will provide the Company with
additional flexibility under the existing credit agreement for the Company's
working capital requirements.
The Company's capital requirements primarily result from opening and stocking
new stores and renovating existing stores. The Company believes that there
are significant opportunities to open additional stores, and currently plans
to open 30 to 40 stores during fiscal years 1999 and 2000. The Company has
expended approximately $28.1 million on capital expenditures during the
thirty-nine weeks ended September 25, 1999 and expects to spend
approximately $3.0 million during the remainder of 1999. Capital
expenditures are made primarily for new and replacement stores and the
renovation of existing stores. Working capital is also required to support
inventory for the Company's existing stores. Historically, the Company has been
able to lease its store locations. On September 14, 1999, the Company filed a
Registration Statement on Form S-4 with the Securities and Exchange
Commission to register 506,329 shares of common stock which the Company may
issue as consideration for acquisitions of independent drug stores that may
be made from time to time. This represents an additional source of capital
available to the Company.
12
<PAGE>
The Company records significant accounts receivable related to pharmacy sales in
connection with third party plans and these receivables are collectible within
30 to 45 days. Prior to September 8, 1998, the Company had a non-recourse
factoring arrangement with an independent third party, Pharmacy Fund, Inc. (the
"Pharmacy Fund") under which the Company sold it accounts receivable associated
with the third party plans. On September 8, 1998, Pharmacy Fund declared
bankruptcy and no longer purchases the Company's third party plan receivables.
The outstanding amount from Pharmacy Fund was collected by the Company during
September 1999. The Company did not suffer any loss from the bankruptcy. The
Company plans to collect its own receivables for the foreseeable future.
The Company believes that, based on current levels of operations and anticipated
growth, cash flow from operations, together with borrowing facilities and the
ability to increase lines if needed, will be adequate for at least the next two
years to make required payments of principal and interest on the Company's
indebtedness, to fund anticipated capital expenditures and working capital
requirements and to comply with terms of its debt agreements. As of September
25, 1999, the Company had borrowed approximately $25.5 million under the
revolving portion of its bank credit facility and had approximately $14.0
million of remaining availability. The ability of the Company to meet its debt
service obligations and reduce its total debt will be dependent upon the future
performance of the Company and its subsidiaries which, in turn, will be subject
to general economic, financial, business, competitive, legislative, regulatory
and other conditions, many of which are beyond the Company's control. In
addition, there can be no assurance that the Company's operating results, cash
flow and capital resources will be sufficient for repayment of its indebtedness
in the future. Substantially all of the Company's borrowings under the Existing
Credit Agreement bear interest at floating rates; therefore, the Company's
financial condition will be affected by the changes in prevailing interest
rates. The Company has entered into interest rate protection agreements to
minimize the impact from a rise in interest rates.
TAX BENEFITS FROM NET OPERATING LOSSES
At December 26, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $107 million, which are due to expire in the years
2007 through 2018. These NOLs may be used to offset future taxable income and
thereby reduce or eliminate the Company's federal income taxes otherwise
payable. The Internal Revenue Code of 1986, as amended (the "Code"), imposes
significant limitations on the utilization of NOLs in the event of an
"ownership change," as defined in Section 382 of the Code (the "Section 382
Limitation"). The Section 382 Limitation is an annual limitation on the
amount of pre-ownership change NOLs that a corporation may use to offset its
post-ownership change income. The Section 382 Limitation is calculated by
multiplying the value of a corporation's stock immediately before an
ownership change by the long-term tax-exempt rate (as published by the
Internal Revenue Service). Generally, an ownership change occurs with respect
to a corporation if the aggregate increase in the percentage of stock
ownership (by value) of that corporation by one or more 5% shareholders
(including certain groups of shareholders who in the aggregate own at least
5% of that corporation's stock) exceeds 50 percentage points over a
three-year testing period. The recapitalization of the Company in June 1997
(the "Recapitalization") caused the Company to experience an ownership
change. As a result, the Company currently is subject to an annual Section
382 Limitation of approximately $5.1 million on the amount of NOLs generated
prior to the Recapitalization that the Company may utilize to offset future
taxable income. NOLs generated by the Company since the Recapitalization
(approximately $37 million) are not subject to the Section 382 Limitation and
may be used to offset future taxable income. There can be no assurance that
any NOLs will be able to be used by the Company to offset future taxable
income or that such NOLs will not become subject to limitation due to future
ownership changes.
YEAR 2000 UPDATE
The Company has implemented a program to ensure that the Company's computer
systems and applications (IT Systems) and non-IT Systems will function properly
beyond 1999. This program includes inventorying year 2000 items; assigning
priorities to the identified items; assessing year 2000 compliance of items
determined to be material to the Company; remediating or replacing material
items that are not year 2000 compliant; and determining contingency plans that
may be required.
13
<PAGE>
The Company has completed implementing year 2000 compliance for its IT Systems
and is in the process of completing its non-IT Systems, which includes surveying
significant third party vendors. Year 2000 compliance of the Company's IT
Systems has been successfully tested. The Company plans to complete year 2000
compliance for its non-IT systems prior to December 31, 1999.
The Company is using both internal and external resources to address year
2000 issues and believes that the cost of such modifications will approximate
$600,000, most of which has been expended. Approximately $250,000 of this
includes system upgrades that had been previously identified for operational
enhancements. Management regularly monitors the status of the year 2000
compliance process.
The failure to correct a material year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, financial condition and liquidity. No assurances,
however, can be given that the Company will be able to identify and address all
year 2000 issues due to their complexity as well as the Company's dependence on
the technical skills of employees and independent contractors and on the
representations and preparedness of third parties with which the Company does
business. Although the Company believes that its efforts are designed to
appropriately identify and address year 2000 issues that are subject to the
Company's reasonable control, there can be no assurance that year 2000 issues
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
SEASONALITY
In general, sales of drugstore items such as prescription drugs, OTC drugs and
health and beauty care products exhibit limited seasonality in the aggregate,
but do vary by product category. Quarterly results are primarily affected by the
timing of new store openings and the sale of seasonable products. In view of the
Company's recent expansion of seasonal merchandising, the Company expects
slightly greater revenue sensitivity relating to seasonality in the future.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging
Activities" requires that derivative instruments such as options, forward
contracts and swaps be recorded as assets and liabilities at fair value and
provides guidance for recognition of changes in fair value depending on the
reason for holding the derivative. The Company does not presently have
significant transactions involving derivative instruments, but may do so in the
future. The Company is required to adopt Statement No. 133 for the Third quarter
of 2001 and may adopt it earlier.
MARKET RISK
The financial results of the Company are subject to risk from interest rate
fluctuations on debt, which carries variable interest rates. Variable rate debt
outstanding under the Existing Credit Agreement was approximately $254.6
million at September 25, 1999, which is somewhat lower than the Company expects
its outstanding variable rate debt to be during the next twelve months. The
anticipated outstanding balances however, are not expected to be materially
greater than at September 25, 1999. Based on September 25, 1999 outstanding
balances, a 0.50% change in interest rates would affect annual results of
operations by approximately $1.3 million on a pre-tax basis. The Company also
has $80 million of Senior Notes outstanding at September 25, 1999. These notes,
which bear interest at a fixed rate of 9 1/4%, are not subject to risk from
interest rate fluctuations.
The principal objective of the Company's investment management activities is to
maintain acceptable levels of interest rate and liquidity risk to facilitate the
funding needs of the Company. As part of its investment management, the Company
may use derivative financial products such as interest rate hedges and interest
rate swaps. During the nine months ended September 26, 1998, there were no
derivative positions. During the nine-months ended September 25, 1999, in
connection with the Existing Credit Agreement requirements, the Company has an
interest rate protection agreement in place. The interest rate protection
agreement caps the LIBOR interest rate at 6.5% on $65 million of variable rate
debt and expires in November 2000. At September 25, 1999, the 30-day LIBOR
rate was 5.31%.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to certain legal actions arising in the
ordinary course of business. Based on information presently available to the
Company, the Company believes that it has adequate legal defenses or insurance
coverage for these actions and that the ultimate outcome of these actions will
not have a material adverse effect on the Company.
In addition, the Company is currently party to legal
proceedings arising out of disputes over the purchase price with respect
to the Rock Bottom Acquisition. The disputed amounts claimed against the
Company are not material to the Company, and the Company believes that the
ultimate outcome of these actions will not have a material adverse effect
on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this
report:
(i) Financial Statements
(ii) Exhibits:
<TABLE>
<CAPTION>
<S> <C>
3.1(i) Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1(i) to the Company's Registration Statement No. 333-41239 (the
"Common Stock S-1")).
3.1(ii) Form of Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit
3.1(i) to the Common Stock S-1).
3.2(i) Certificate of Incorporation of DRI I Inc. (incorporated by reference to Exhibit 3.2(i)
to the S-1 Registration Statement No. 333-43313 with respect to the Company's 9 1/4%
Senior Subordinated Notes due 2008 (the "Notes S-1")).
3.2(ii) By-laws of DRI I Inc. (incorporated by reference to Exhibit 3.2(ii) of the Notes S-1)
3.3 Third Amended and Restated Partnership Agreement of Duane Reade (incorporated by
reference to Exhibit 3.3 of the Notes S-1)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.4(i)* Certificate of Incorporation of Duane Reade International, Inc.
3.4(ii)* Bylaws of Duane Reade International, Inc.
3.5(i)* Certificate of Incorporation of Duane Reade Realty, Inc.
3.5(ii)* Bylaws of Duane Reade Realty, Inc.
4.1 Form of Indenture (incorporated by reference to Exhibit 4.1 of the Notes S-1).
10.1 Duane Reade Inc. 1997 Equity Participation Plan (incorporated by reference to Exhibit
10.1 to the Company's Form S-1 registration Statement (File No. 333-41239), the "Common Stock
S-1").
10.2 Duane Reade Inc. Holding Corp. 1992 Stock Incentive Plan (incorporated by reference to
Exhibit 10.2 to the Common Stock S-1).
10.3 Employment Agreement, dated as of October 27, 1997, between the Company and Anthony J.
Cuti (incorporated by reference to Exhibit 10.3 to the Common Stock S-1).
10.4 Employment Agreement, dated as of February 22, 1993, as amended, between the Company and Gary
Charboneau (incorporated by reference to Exhibit 10.4 to the Common Stock S-1).
10.5 Employment Agreement, dated as of April 10, 1995, as amended, between Duane Reade and Jerry M. Ray
(incorporated by reference to Exhibit 10.5 to the Common Stock S-1).
10.6 Employment Letter Agreement, dated as of October 9, 1996, between Duane Reade and Joseph Lacko
(incorporated by reference to Exhibit 10.6 to the Common Stock S-1).
10.7 Employment Letter Agreement, dated as of February 12, 1997, between the Company and
William Tennant (incorporated by reference to Exhibit 10.7 to the Common Stock S-1).
10.8 Agreement, dated as of November 22, 1996 between Duane Reade and Drug, Chemical,
Cosmetic, Plastics and Affiliated Industries Warehouse Employees Local 815 (incorporated
by reference to Exhibit 10.8 to the Common Stock S-1).
10.9 Agreement, dated July 16, 1992, as amended, between Duane Reade and Allied Trades Council
(incorporated by reference to Exhibit 10.9 to the Common Stock S-1).
10.10 Agreement, dated February 4, 1997, as amended between Duane Reade and The Pharmacy Fund, Inc.
(incorporated by reference to Exhibit 10.10 to the Common Stock S-1).
10.11 Stockholders and Registration Rights Agreement, dated as of June 18, 1997, among the Company,
DLJMB Funding II, Inc., DLJ Merchant Banking Partners II, L.P., DLJ Diversified Partners, L.P., DLJ
Third ESC L.L.C., DLJ Offshore Partners, II, C.V., DLJ EAB Partners, L.P., UK Investment Plan 1997
Partners, Bankers Trust New York Corporation, Conac & Co., Muico & Co., Roton & Co. , Putnam High
Yield Trust, PaineWebber Managed Investment Trust on behalf of PaineWebber High Income Fund, USL
Capital Corporation, Pearlman Family Partners, The Marion Trust, Bruce L. Weitz, BCIP Associates,
BCIP Trust Associates, L.P., Tyler Capital Fund L.P., Tyler International, L.P.-II, and Tyler
Massachusetts, L.P. (incorporated by reference to Exhibit 10.13 to the Common Stock S-1).
10.12 Third Amended and Restated Credit Agreement, dated as of March 17, 1999, among Duane Reade, as the
Borrower, Duane Reade Inc. and DRI I Inc., as the Parent Guarantors, Various Financial Institutions
set forth therein, as the Lenders, DLJ Capital Funding, Inc., as the Syndication Agent for the
Lenders, Fleet National Bank, as the Administrative Agent for the Lenders and Credit Lyonnais New
York Branch, as the Documentation Agent for the Lenders (incorporated by reference to Exhibit 10.12
of the Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1999).
10.13 Amended and Restated Partnership Security Agreement, dated as of September 11, 1998, among
Duane Reade Inc. and DRI I Inc. and Fleet National Bank, as Administrative Agent (Incorporated by
reference to Exhibit 10.15 of the Company's Current Report on Form 8-K dated September 24, 1998).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.14 Amended and Restated Borrower Security Agreement, dated as of September 11, 1998,
between Duane Reade and Fleet National Bank as Administrative Agent (Incorporated by
reference to Exhibit 10.16 of the Company's Current Report on Form 8-K dated September
24, 1998).
10.15 Amended and Restated Holdings Pledge Agreement, dated as of September 11, 1998, among
Duane Reade Inc. and Fleet National Bank, as Administrative Agent (incorporated by
reference to Exhibit 10.17 of the Company's Current Report on Form 8-K dated September
24, 1998).
10.16 Amendment Agreement to Credit Agreement, dated as of March 17, 1999, among Duane Reade,
Duane Reade Inc., DRI I Inc., various financial institutions as Lenders, DLJ Capital
Funding, Inc., as Syndication Agent, Fleet National Bank, as Administrative Agent, and
Credit Lyonnais New York Branch, as Documentation Agent (incorporated by reference to
Exhibit 10.16 of the Company's Quarterly Report on Form 10-Q for the quarter ended March
27, 1999).
10.17 Promissory Note, dated as of November 9, 1998, between the Company and Anthony J. Cuti
and (incorporated by reference to Exhibit 10.17 to the Company's 1998 Annual Report on
Form 10-K).
27.1* Financial Data Schedule.
</TABLE>
* Filed herewith.
(b) Reports on Form 8-K: None.
(c) Financial Statement Schedules: None.
Schedules for which provision is made in the applicable accounting regulations
of the Commission are either not required under the related instructions, are
inapplicable or not material, or the information called for thereby is otherwise
included in the financial statements and therefore has been omitted.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 1999
DUANE READE INC.
(Registrant)
By: /s/ John Henry
------------------------
Name: John Henry
Title: Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant in the capacities indicated on November 8, 1999:
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
/s/ Anthony J. Cuti President and Chief Executive Officer and Director
-------------------- (Principal Executive Officer)
Anthony J. Cuti
/s/ John Henry Senior Vice President, Chief Financial Officer
-------------------- (Principal Accounting and Financial Officer)
John Henry
</TABLE>
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 1999
DRI I INC.
By: /s/ John Henry
-------------------------------
Name: John Henry
Title: Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed on November 8, 1999 by:
SIGNATURES TITLES
---------- ------
<TABLE>
<CAPTION>
<S> <C>
/s/ Anthony J. Cuti President and Chief Executive Officer and Director
- -------------------- (Principal Executive Officer)
Anthony J. Cuti
/s/ John Henry Senior Vice President, Chief Financial Officer
- -------------------- (Principal Accounting and Financial Officer)
John Henry
</TABLE>
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 1999
DUANE READE INC.,
<TABLE>
<CAPTION>
<S> <C>
By: DRI I Inc. a general partner By: Duane Reade Inc., a general partner
By: /s/ John Henry By: /s/ John Henry
----------------------------- --------------------------------------
Name: John Henry Name: John Henry
Title: Senior Vice President and Chief Financial Officer Title: Senior Vice President and Chief Financial
Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on November 8, 1999 by the following
persons in the capacities indicated with respect to Duane Reade Inc. and DRI I
Inc., the general partners of Duane Reade, on behalf of Duane Reade (except as
otherwise indicated):
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
/s/ Anthony J. Cuti President and Chief Executive Officer and Director
- ------------------- (Principal Executive Officer)
Anthony J. Cuti
/s/ John Henry Senior Vice President, Chief Financial Officer
- ------------------- (Principal Accounting and Financial Officer)
John Henry
</TABLE>
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 1999
DUANE READE INTERNATIONAL, INC.
By: /s/ John Henry
-------------------------------
Name: John Henry
Title: Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed on November 8, 1999 by:
SIGNATURES TITLES
---------- ------
<TABLE>
<CAPTION>
<S> <C>
/s/ Anthony J. Cuti President and Chief Executive Officer and Director
- -------------------- (Principal Executive Officer)
Anthony J. Cuti
/s/ John Henry Senior Vice President, Chief Financial Officer
- -------------------- (Principal Accounting and Financial Officer)
John Henry
</TABLE>
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 1999
DUANE READE REALTY, INC.
By: /s/ John Henry
-------------------------------
Name: John Henry
Title: Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed on November 8, 1999 by:
SIGNATURES TITLES
---------- ------
<TABLE>
<CAPTION>
<S> <C>
/s/ Anthony J. Cuti President and Chief Executive Officer and Director
- -------------------- (Principal Executive Officer)
Anthony J. Cuti
/s/ John Henry Senior Vice President, Chief Financial Officer
- -------------------- (Principal Accounting and Financial Officer)
John Henry
</TABLE>
22
<PAGE>
Exhibit 3.4(i)
CERTIFICATE OF INCORPORATION
OF
DUANE READE INTERNATIONAL, INC.
FIRST: The name of the corporation is Duane Reade International, Inc.
SECOND: The address of it's registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware, 19805.
The name of the registered agent at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 having a par value of $0.01 per share. All such
shares are Common Stock.
FIFTH: The name and mailing address of the incorporator is:
Alexandra W. Schlesinger
Latham & Watkins
885 Third Avenue
New York, New York 10022
SIXTH The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented. Any repeal or modification of this
Article Sixth shall not adversely affect any right or protection of a director
of the Corporation existing immediately prior to such repeal or modification.
SEVENTH: The Corporation shall, to the fullest extent permitted or
required by Section 145 of the General Corporation Law of the Sate of Delaware,
as the same may be amended and supplemented, indemnify any and all persons to
whom it shall have power to indemnify under said section from and against any
and all of the expenses, liabilities or other matters referred to in or covered
by said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
<PAGE>
under any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person. Any
repeal or modification of this Article Seventh shall not adversely affect any
right or protection existing hereunder immediately prior to such repeal or
modification.
EIGHTH From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the provisions of this
Article Eighth.
NINTH: In furtherance and not in limitation of the rights, powers,
privileges and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the state
of Delaware, the Board of Directors is expressly authorized to make, alter,
amend or repeal the By-Laws of the Corporation, without any action on the part
of the Stockholders, but the Stockholders may make additional By-Laws and may
alter, amend or repeal any By-Law whether adopted by them or otherwise. The
Corporation may in its By-Laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
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I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this __ day of August, 1999.
---------------------------
Incorporator
Alexandra W. Schlesinger
<PAGE>
Exhibit 3.4(ii)
BYLAWS
OF
DUANE READE INTERNATIONAL, INC.
* * * * *
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Section 3. BOOKS. The books of the Corporation may be kept within or
without of the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware, on
such date and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a designation by the Board of
Directors).
Section 2. ANNUAL MEETINGS. Annual meetings of stockholders, commencing
1999, shall be held to elect the Board of Directors and transact such other
business as may properly be brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the Board of Directors or the Chairman of the Board of Directors, the
Chief Executive Officer, the President or the Secretary of the Corporation and
may not be called by any other person. Notwithstanding the foregoing, whenever
holders of one or more classes or series of Preferred Stock shall have the
right, voting separately as a class or series, to elect directors, such holders
may call, pursuant to the terms of the resolution or
<PAGE>
resolutions adopted by the Board of Directors pursuant to the certificate of
incorporation, special meetings of holders of such Preferred Stock.
Section 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS; WAIVERS OF
NOTICE. (a) Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given which shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended ("Delaware Law"), such notice shall be given
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. Unless these bylaws
otherwise require, when a meeting is adjourned to another time or place (whether
or not a quorum is present), notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 5. QUORUM. Unless otherwise provided under the certificate of
incorporation or these bylaws and subject to Delaware Law, the presence, in
person or by proxy, of the holders of a majority of the outstanding capital
stock of the Corporation entitled to vote at a meeting of stockholders shall
constitute a quorum for the transaction of business.
Section 6. VOTING. (a) Unless otherwise provided in the certificate of
incorporation and subject to Delaware Law, each stockholder shall be entitled to
one vote for each outstanding share of capital stock of the Corporation held by
such stockholder. Unless otherwise provided in Delaware Law, the certificate of
incorporation or these bylaws, the affirmative vote of a majority of the shares
of capital stock of the Corporation present, in person or by proxy, at a meeting
of stockholders and entitled to vote on the subject matter shall be the act of
the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to a corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be
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voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 7. ACTION BY CONSENT. (a) Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding capital
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written consents signed by a sufficient number
of holders to take action are delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
Section 8. ORGANIZATION. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, (or in his absence or if one shall
not have been elected, the Chief Executive Officer or the President) shall act
as chairman of the meeting. The secretary (or in his absence or inability to
act, the person whom the chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
Section 10. ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
Section 2.1. NOTICE OF BUSINESS. At any meeting of the stockholders,
only such business shall be conducted as shall have been brought before the
meeting (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of the notice provided for in this Section 10, who shall be entitled to
3
<PAGE>
vote at such meeting and who complies with the notice procedures set forth this
Section 10. For business to be properly brought before a stockholder meeting by
a stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given to made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. A stockholder's
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which such are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
Notwithstanding anything in the bylaws to the contrary, no business shall be
conducted at a stockholder meeting except in accordance with the procedures set
forth in this Section 10. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of the bylaws,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing, provisions of this Section 10, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, and the rules and regulations thereunder with respect to the
matters set forth in this Section 10.
ARTICLE III.
DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in Delaware Law
or the certificate of incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 2. NUMBER, ELECTION AND TERM OF OFFICE. The Board of Directors
shall consist of not less than two nor more than fourteen directors, with the
exact number of directors to be determined from time to time solely by
resolution adopted by the affirmative vote of a majority of the entire Board of
Directors. Except as otherwise provided in the certificate of incorporation,
each director shall serve for a term ending on the date of the first annual
meeting of stockholders next following the annual meeting at which such director
was elected. Notwithstanding the foregoing, each director shall hold office
until such director's successor shall have been duly elected and qualified or
until such director's earlier death, resignation or removal. Directors need not
be stockholders.
4
<PAGE>
Section 3. QUORUM AND MANNER OF ACTING. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the total
number of directors shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the directors present at meeting at
which a quorum is present shall be the act of the Board of Directors. When a
meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4. TIME AND PLACE OF MEETINGS. The Board of Directors shall
hold its meeting at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a determination by the Board of
Directors).
Section 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof signed by any
director who chooses to waive the requirement of notice.
Section 6. REGULAR MEETINGS. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice thereof
shall have been once given to each member of the Board of Directors, regular
meetings may be held without further notice being given.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
by the Chairman of the Board, President or Secretary on the written request of
two directors. Notice of special meetings of the Board of Directors shall be
given to each director at least three days before the date of the meeting in
such manner as is determined by the Board of Directors.
Section 8. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
5
<PAGE>
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation; and
unless the resolution of the Board of Directors or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep minutes of each of its meetings and report the same to the
Board of Directors when required.
Section 9. ACTION BY CONSENT. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the
certificate of incorporation or these bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. RESIGNATION. Any director may resign at any time by giving
written notice to the Board of Directors or to the Secretary of the Corporation.
The resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12. VACANCIES. Unless otherwise provided in the certificate of
incorporation, vacancies on the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the number of directors may be filled solely by a majority of
the directors then in office (although less than a quorum) or by the sole
remaining director. Each director so elected shall hold office for a term that
shall coincide with the term of the class, if any, to which such director shall
have been elected. If there are no directors in the office, then an election of
directors may be held in accordance with General Corporation law of the State of
Delaware, as amended. Unless otherwise provided in the certificate of
incorporation, when one or more directors shall resign from the Board, effective
at a future date, a
6
<PAGE>
majority of the directors then in office, including those who have so resigned,
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in the filling of the other
vacancies.
Section 13. REMOVAL. No director may be removed from office by the
stockholders except for cause with the affirmative vote of the holders of not
less than a majority of the total voting power of all outstanding securities of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class.
Section 14. COMPENSATION. Unless otherwise restricted by the
certificate of incorporated or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.
Section 15. PREFERRED DIRECTORS. Notwithstanding anything else
contained herein, whenever the holders of one or more classes or series of
preferred Stock shall have the right, voting separately as a class or series, to
elect directors, the election, term of office, filing of vacancies, removal and
other features of such directorships shall be governed by the terms of the
resolutions applicable thereto adopted by the Board of Directors pursuant to the
certificate of incorporation, and such directors so elected shall not be subject
to the provisions of Sections 2, 12 and 13 of this Article III unless otherwise
provided therein.
ARTICLE IV.
OFFICERS
Section 1. PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a Chief Executive Officer, a President, a Chief Financial
Officer, one or more Vice Presidents, a Treasurer and a Secretary who shall have
the duty, among other things, to record the proceedings of the meetings of
stockholders and directors in a book kept for that purpose. The Corporation may
also have such other principal officers, including one or more Controllers, as
the Board may in its discretion appoint. One person may hold the offices and
perform the duties any two or more of said offices, except that no one person
shall hold the offices and perform the duties of President and Secretary.
Section 2. ELECTION, TERM OF OFFICE AND REMUNERATION. The principal
officers Corporation shall be elected annually by the Board of Directors at the
annual meeting thereof. Each such officer shall hold office until his successor
is elected and qualified, or until his earlier death, resignation or removal.
The remuneration of all officers of the Corporation shall be fixed by the Board
of Directors. Any vacancy in any office shall be filled in such manner as the
Board of Directors shall determine.
Section 3. SUBORDINATE OFFICERS. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such
other
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<PAGE>
subordinate officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any principal officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 4. REMOVAL. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.
Section 5. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
registration shall not be necessary to make it effective.
Section 6. POWERS AND DUTIES. The officers of the Corporation shall
have such powers will perform such duties incident to each of their respective
offices and such other duties as may from time to time be conferred upon or
assigned to them by the Board of Directors.
ARTICLE V.
GENERAL PROVISIONS
Section 1. FIXING THE RECORD DATE. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record
8
<PAGE>
date is adopted by the Board of Directors, and which date shall not be more than
10 days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by Delaware Law, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which Proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of directors is required by Delaware Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the Stockholders entitled to exercise any rights in respect of
any change, conversion or exchange stock, of or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 2. DIVIDENDS. Subject to limitations contained in Delaware Law
and the certificate of incorporation, the Board of Directors may declare and pay
dividends upon the shares of capital stock of the Corporation, which dividends
may be paid either in cash, in property or in shares of the capital stock of the
Corporation.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall end on
the last Saturday in December of each year, and the next succeeding fiscal year
shall commence on the next succeeding day.
Section 4. CORPORATE SEAL. The corporate seal may have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
Section 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
9
<PAGE>
Section 6. AMENDMENTS. These bylaws or any of them, may be altered,
amended or repealed, or new bylaws may be made, by the stockholders entitled to
vote thereon at any annual or special meeting thereof or by the Board of
Directors.
<PAGE>
Exhibit 3.5(i)
CERTIFICATE OF INCORPORATION
OF
DUANE READE REALTY, INC.
FIRST: The name of the corporation is Duane Reade Realty, Inc.
SECOND: The address of it's registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware, 19805.
The name of the registered agent at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 having a par value of $0.01 per share. All such
shares are Common Stock.
FIFTH: The name and mailing address of the incorporator is:
Alexandra W. Schlesinger
Latham & Watkins
885 Third Avenue
New York, New York 10022
SIXTH The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented. Any repeal or modification of this
Article Sixth shall not adversely affect any right or protection of a director
of the Corporation existing immediately prior to such repeal or modification.
SEVENTH: The Corporation shall, to the fullest extent permitted or
required by Section 145 of the General Corporation Law of the Sate of Delaware,
as the same may be amended and supplemented, indemnify any and all persons to
whom it shall have power to indemnify under said section from and against any
and all of the expenses, liabilities or other matters referred to in or covered
by said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
<PAGE>
under any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person. Any
repeal or modification of this Article Seventh shall not adversely affect any
right or protection existing hereunder immediately prior to such repeal or
modification.
EIGHTH From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the provisions of this
Article Eighth.
NINTH: In furtherance and not in limitation of the rights, powers,
privileges and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the state
of Delaware, the Board of Directors is expressly authorized to make, alter,
amend or repeal the By-Laws of the Corporation, without any action on the part
of the Stockholders, but the Stockholders may make additional By-Laws and may
alter, amend or repeal any By-Law whether adopted by them or otherwise. The
Corporation may in its By-Laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
2
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this __ day of August, 1999.
---------------------------
Incorporator
Alexandra W. Schlesinger
<PAGE>
Exhibit 3.5(ii)
BYLAWS
OF
DUANE READE REALTY, INC.
* * * * *
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Section 3. BOOKS. The books of the Corporation may be kept within or
without of the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware, on
such date and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a designation by the Board of
Directors).
Section 2. ANNUAL MEETINGS. Annual meetings of stockholders, commencing
1999, shall be held to elect the Board of Directors and transact such other
business as may properly be brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the Board of Directors or the Chairman of the Board of Directors, the
Chief Executive Officer, the President or the Secretary of the Corporation and
may not be called by any other person. Notwithstanding the foregoing, whenever
holders of one or more classes or series of Preferred Stock shall have the
right, voting separately as a class or series, to elect directors, such holders
may call, pursuant to the terms of the resolution or
<PAGE>
resolutions adopted by the Board of Directors pursuant to the certificate of
incorporation, special meetings of holders of such Preferred Stock.
Section 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS; WAIVERS OF
NOTICE. (a) Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given which shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended ("Delaware Law"), such notice shall be given
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. Unless these bylaws
otherwise require, when a meeting is adjourned to another time or place (whether
or not a quorum is present), notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 5. QUORUM. Unless otherwise provided under the certificate of
incorporation or these bylaws and subject to Delaware Law, the presence, in
person or by proxy, of the holders of a majority of the outstanding capital
stock of the Corporation entitled to vote at a meeting of stockholders shall
constitute a quorum for the transaction of business.
Section 6. VOTING. (a) Unless otherwise provided in the certificate of
incorporation and subject to Delaware Law, each stockholder shall be entitled to
one vote for each outstanding share of capital stock of the Corporation held by
such stockholder. Unless otherwise provided in Delaware Law, the certificate of
incorporation or these bylaws, the affirmative vote of a majority of the shares
of capital stock of the Corporation present, in person or by proxy, at a meeting
of stockholders and entitled to vote on the subject matter shall be the act of
the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to a corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be
2
<PAGE>
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 7. ACTION BY CONSENT. (a) Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding capital
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written consents signed by a sufficient number
of holders to take action are delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
Section 8. ORGANIZATION. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, (or in his absence or if one shall
not have been elected, the Chief Executive Officer or the President) shall act
as chairman of the meeting. The secretary (or in his absence or inability to
act, the person whom the chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
Section 10. ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
Section 2.1. NOTICE OF BUSINESS. At any meeting of the stockholders,
only such business shall be conducted as shall have been brought before the
meeting (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of the notice provided for in this Section 10, who shall be entitled to
vote at such meeting and who complies with
3
<PAGE>
the notice procedures set forth this Section 10. For business to be properly
brought before a stockholder meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the secretary of the Corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given to made to stockholders, notice by the stockholder to be timely
must be received no later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. A stockholder's notice to the secretary shall set
forth as to each matter the stockholder proposes to bring before the meeting (a)
a brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which such
are beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the bylaws to the
contrary, no business shall be conducted at a stockholder meeting except in
accordance with the procedures set forth in this Section 10. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the
provisions of the bylaws, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted. Notwithstanding the foregoing, provisions of this Section 10,
a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, and the rules and regulations thereunder with
respect to the matters set forth in this Section 10.
ARTICLE III.
DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in Delaware Law
or the certificate of incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 2. NUMBER, ELECTION AND TERM OF OFFICE. The Board of Directors
shall consist of not less than two nor more than fourteen directors, with the
exact number of directors to be determined from time to time solely by
resolution adopted by the affirmative vote of a majority of the entire Board of
Directors. Except as otherwise provided in the certificate of incorporation,
each director shall serve for a term ending on the date of the first annual
meeting of stockholders next following the annual meeting at which such director
was elected. Notwithstanding the foregoing, each director shall hold office
until such director's successor shall have been duly elected and qualified or
until such director's earlier death, resignation or removal. Directors need not
be stockholders.
4
<PAGE>
Section 3. QUORUM AND MANNER OF ACTING. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the total
number of directors shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the directors present at meeting at
which a quorum is present shall be the act of the Board of Directors. When a
meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4. TIME AND PLACE OF MEETINGS. The Board of Directors shall
hold its meeting at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a determination by the Board of
Directors).
Section 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof signed by any
director who chooses to waive the requirement of notice.
Section 6. REGULAR MEETINGS. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice thereof
shall have been once given to each member of the Board of Directors, regular
meetings may be held without further notice being given.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
by the Chairman of the Board, President or Secretary on the written request of
two directors. Notice of special meetings of the Board of Directors shall be
given to each director at least three days before the date of the meeting in
such manner as is determined by the Board of Directors.
Section 8. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
5
<PAGE>
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation; and
unless the resolution of the Board of Directors or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep minutes of each of its meetings and report the same to the
Board of Directors when required.
Section 9. ACTION BY CONSENT. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the
certificate of incorporation or these bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. RESIGNATION. Any director may resign at any time by giving
written notice to the Board of Directors or to the Secretary of the Corporation.
The resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12. VACANCIES. Unless otherwise provided in the certificate of
incorporation, vacancies on the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the number of directors may be filled solely by a majority of
the directors then in office (although less than a quorum) or by the sole
remaining director. Each director so elected shall hold office for a term that
shall coincide with the term of the class, if any, to which such director shall
have been elected. If there are no directors in the office, then an election of
directors may be held in accordance with General Corporation law of the State of
Delaware, as amended. Unless otherwise provided in the certificate of
incorporation, when one or more directors shall resign from the Board, effective
at a future date, a
6
<PAGE>
majority of the directors then in office, including those who have so resigned,
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in the filling of the other
vacancies.
Section 13. REMOVAL. No director may be removed from office by the
stockholders except for cause with the affirmative vote of the holders of not
less than a majority of the total voting power of all outstanding securities of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class.
Section 14. COMPENSATION. Unless otherwise restricted by the
certificate of incorporated or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.
Section 15. PREFERRED DIRECTORS. Notwithstanding anything else
contained herein, whenever the holders of one or more classes or series of
preferred Stock shall have the right, voting separately as a class or series, to
elect directors, the election, term of office, filing of vacancies, removal and
other features of such directorships shall be governed by the terms of the
resolutions applicable thereto adopted by the Board of Directors pursuant to the
certificate of incorporation, and such directors so elected shall not be subject
to the provisions of Sections 2, 12 and 13 of this Article III unless otherwise
provided therein.
ARTICLE IV.
OFFICERS
Section 1. PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a Chief Executive Officer, a President, a Chief Financial
Officer, one or more Vice Presidents, a Treasurer and a Secretary who shall have
the duty, among other things, to record the proceedings of the meetings of
stockholders and directors in a book kept for that purpose. The Corporation may
also have such other principal officers, including one or more Controllers, as
the Board may in its discretion appoint. One person may hold the offices and
perform the duties any two or more of said offices, except that no one person
shall hold the offices and perform the duties of President and Secretary.
Section 2. ELECTION, TERM OF OFFICE AND REMUNERATION. The principal
officers Corporation shall be elected annually by the Board of Directors at the
annual meeting thereof. Each such officer shall hold office until his successor
is elected and qualified, or until his earlier death, resignation or removal.
The remuneration of all officers of the Corporation shall be fixed by the Board
of Directors. Any vacancy in any office shall be filled in such manner as the
Board of Directors shall determine.
Section 3. SUBORDINATE OFFICERS. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such
other
7
<PAGE>
subordinate officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any principal officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 4. REMOVAL. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.
Section 5. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
registration shall not be necessary to make it effective.
Section 6. POWERS AND DUTIES. The officers of the Corporation shall
have such powers will perform such duties incident to each of their respective
offices and such other duties as may from time to time be conferred upon or
assigned to them by the Board of Directors.
ARTICLE V.
GENERAL PROVISIONS
Section 1. FIXING THE RECORD DATE. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record
8
<PAGE>
date is adopted by the Board of Directors, and which date shall not be more than
10 days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by Delaware Law, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which Proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of directors is required by Delaware Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the Stockholders entitled to exercise any rights in respect of
any change, conversion or exchange stock, of or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 2. DIVIDENDS. Subject to limitations contained in Delaware Law
and the certificate of incorporation, the Board of Directors may declare and pay
dividends upon the shares of capital stock of the Corporation, which dividends
may be paid either in cash, in property or in shares of the capital stock of the
Corporation.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall end on
the last Saturday in December of each year, and the next succeeding fiscal year
shall commence on the next succeeding day.
Section 4. CORPORATE SEAL. The corporate seal may have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
Section 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
9
<PAGE>
Section 6. AMENDMENTS. These bylaws or any of them, may be altered,
amended or repealed, or new bylaws may be made, by the stockholders entitled to
vote thereon at any annual or special meeting thereof or by the Board of
Directors.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 25, 1999 AND THE RELATED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE 13 AND 39 WEEKS ENDED SEPTEMBER 25,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000895364
<NAME> Duane Reade, Inc.
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<S> <C>
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<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> SEP-25-1999
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<INVENTORY> 140,233
<CURRENT-ASSETS> 183,306
<PP&E> 108,158
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<CURRENT-LIABILITIES> 86,950
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0
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<SALES> 610,124
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<CGS> 455,853
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