PURCHASE AGREEMENT

Table of Contents

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Purchase Agreement

August 4, 2005

BANC OF AMERICA SECURITIES LLC
9 West 57 ^th Street
New York, New York 10019

Ladies and Gentlemen:

Introductory.    Duane Reade Inc., a Delaware corporation (the “Company”) and Duane Reade, a New York general partnership and subsidiary of the Company (“Duane Reade GP”, and together with the Company, the “Issuers”) propose to issue and sell to Banc of America Securities LLC (the “Initial Purchaser”) $50,000,000 aggregate principal amount of the Issuers’ Senior Secured Floating Rate Notes due 2010 (the “Notes”). The Notes will be the joint and several obligations of each of the Issuers.

The payment of principal, premium and Liquidated Damages (as defined in the Indenture (as defined below)), if any, and interest on the Notes and the Exchange Notes (as defined in the Offering Memorandum (as defined below)), will be fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by Duane Reade Holdings, Inc., a Delaware corporation (“Holdings”) and all the existing and future direct and indirect domestic subsidiaries of the Company (other than Duane Reade GP), and any subsidiary of the Company formed or acquired after the Closing Date (as defined in Section 2) that executes an additional guarantee in accordance with the terms of the Indenture, and their respective successors and assigns (collectively, the “Guarantors”), pursuant to their guarantees (the “Guarantees”). The Notes and the Guarantees thereof are herein collectively referred to as the “Securities”; and the Exchange Notes and the Guarantees attached thereto are herein collectively referred to as the “Exchange Securities.”

The Issuers have prepared and will deliver to the Initial Purchaser copies of the final Offering Memorandum, dated on or about the date hereof, describing the terms of the Securities, for use by the Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the “Offering Memorandum” shall mean, with respect to any date or time referred to in this Agreement, the Issuers’ final Offering Memorandum, dated on or about the date hereof, including amendments or supplements thereto and any exhibits thereto, in the most recent form that has been prepared and delivered by the Issuers to the Initial Purchaser in connection with its solicitation of offers to purchase Securities and all information incorporated therein by reference. Further, any reference to the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3) furnished by the Issuers prior to the completion of the distribution of the Securities.

The Securities will be issued pursuant to the indenture, dated as of December 20, 2004 (the “Indenture”), among the Issuers, U.S. Bank National Association, as trustee (the “Trustee”) and the Guarantors. Securities issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depository Trust Company (the “Depositary”) pursuant to a DTC blanket issuer letter of representations (the “DTC Agreement”), among the Issuers and the Depositary.

Concurrently with the issuance of the Securities, the Issuers and the Guarantors will use the proceeds of the issuance of the Notes to permanently repay part of the borrowings under the Credit Agreement, dated as of July 21, 2003, as amended by Amendment No. 1 thereto, dated July 22, 2004, and Amendment No. 2 thereto, dated August 9, 2005, among the Issuers, the Guarantors, and the agents and lenders thereunder (the “Revolving Credit Agreement”) and for other purposes described under the caption “Use of Proceeds” in the Offering Memorandum (collectively, the “Refinancing”).

The holders of the Securities and their direct and indirect transferees will also be entitled to the benefit of security interests (“Liens”) in various personal property and other assets (the “Collateral”)

granted under the Amended and Restated Security Agreement among the Issuers, the Guarantors and the collateral agent named thereunder (the “Collateral Agent”), and the Pledge Agreement, among the same parties, in each case, dated as of December 20, 2004 (collectively, the “Security Agreements”), and the other collateral documents related thereto (the “Other Collateral Documents”). All of the aforementioned Liens will be subject to the terms of the Intercreditor Agreement, dated as of July 30, 2004, between the Collateral Agent and the collateral agent for lenders under the Revolving Credit Agreement (as amended, restated, supplemented or modified from time to time, the “Intercreditor Agreement”). Together, the Security Agreements and the Other Collateral Documents are referred to herein as the “Collateral Documents.” The issuance and sale of the Securities, the Refinancing and all related transactions are hereinafter referred to collectively as the “Transactions,” and documents executed in connection therewith are referred to collectively as the “Transaction Documents.”

The holders of the Securities will be entitled to the benefits of a registration rights agreement, to be dated as of the Closing Date (the “Registration Rights Agreement”), among the Issuers, the Guarantors and the Initial Purchaser.

Each of the Issuers understands that the Initial Purchaser proposes to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum and agrees that the Initial Purchaser may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the “Subsequent Purchasers”) at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchaser without being registered with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933 (as amended, the “Securities Act,” which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder), in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors who acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A (“Rule 144A”) or Regulation S (“Regulation S”) thereunder).

The Issuers and the Guarantors hereby confirm their agreement with the Initial Purchaser as follows:

SECTION 1.    Representations and Warranties.   The Issuers and Guarantors hereby represent, warrant and covenant, jointly and severally, to the Initial Purchaser as follows:

(a)        No Registration Required .   Subject to compliance by the Initial Purchaser with the representations, warranties and covenants set forth in Section 2 and Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchaser and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the offer, issuance and sale of the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the “Trust Indenture Act,” which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder).

(b)        No Integration of Offerings or General Solicitation .   None of the Issuers, the Guarantors or any of their respective subsidiaries or affiliates (as such term is defined in Rule 501 under the Securities Act (each, an “Affiliate”)) have, directly or indirectly, solicited any offer to buy or offered to sell, and will not, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the offer, issuance and sale of the Securities to be registered under the Securities Act. None of the Issuers, the Guarantors, any of their subsidiaries or Affiliates, or any person acting on its or any of their behalf (other than the Initial Purchaser, as to whom the Issuers and the

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Guarantors make no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502 under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Issuers , the Guarantors, any of their subsidiaries or Affiliates or any person acting on its or any of their behalf (other than the Initial Purchaser, as to whom the Issuers and the Guarantors make no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) the Issuers, the Guarantors, any of their subsidiaries or Affiliates and any person acting on its or their behalf (other than the Initial Purchaser, as to whom the Issuers and the Guarantors make no representation or warranty) have complied and will comply with the offering restrictions set forth in Regulation S.

(c)        Non-Fungibility .   The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as, within the meaning of Rule 144A, securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system.

(d)        The Offering Memorandum .   The Offering Memorandum did not, as of its date and will not, as of the Closing Date, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by the Initial Purchaser expressly for use in the Offering Memorandum. The Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A in all material respects. Neither of the Issuers has distributed, and the Issuers will not distribute, prior to the later of the Closing Date and the completion of the Initial Purchaser’s distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than the Offering Memorandum.

(e)        The Purchase Agreement.   This Agreement has been duly authorized, executed and delivered by each of the Issuers and Guarantors.

(f)         The Registration Rights Agreement and DTC Agreement .

(i)         The Registration Rights Agreement has been duly authorized by the Issuers and the Guarantors and, at the Closing Date, will be duly executed and delivered by, and, assuming due authorization, execution, and delivery by each other party thereto, will constitute a valid and binding agreement of, the Issuers and the Guarantors, enforceable against each such party in accordance with its terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and except as rights to indemnification under the Registration Rights Agreement may be limited by applicable law.

(ii)       The DTC Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, each of the Issuers, enforceable against each of the Issuers in accordance with its terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(g)        Authorization of the Securities and the Exchange Securities .   (i) The Notes to be purchased by the Initial Purchaser from the Issuers are in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date,

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will have been duly executed by the Issuers and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of each of the Issuers, enforceable in accordance with their terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture. (ii) The Exchange Notes have been duly and validly authorized for issuance by each of the Issuers, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with their terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture. (iii) The Guarantees of the Notes and the Exchange Notes are in the respective forms contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by each of the Guarantors and, when the Notes have been authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of each such Guarantor, enforceable against it in accordance with their terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and will be entitled to the benefits of the Indenture.

(h)        Authorization of the Indenture .   The Indenture has been duly authorized by each of the Issuers and Guarantors and has been duly executed and delivered by each of the Issuers and the Guarantors and constitutes a valid and binding agreement of each of the Issuers and Guarantors enforceable against each of the Issuers and Guarantors in accordance with its terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(i)         Authorization of the Collateral Documents and the Transactions .   Each of the Collateral Documents has been authorized by the Issuers and Guarantors that are party thereto, and has been duly executed and delivered by the Issuers and the Guarantors, and constitutes valid and binding agreements of each of the Issuers and Guarantors party thereto, enforceable against each of the Issuers and Guarantors party thereto, in accordance with their respective terms, except as the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). Each of the Transactions has been authorized by the Issuers and Guarantors that are party thereto.

(j)         Security Interests .   The Collateral Documents are effective to create, and have created, in favor of the Collateral Agent for the benefit of the Collateral Agent and will create, in favor of the holders of the Securities and the Exchange Securities (upon issuance of such Securities and Exchange Securities as contemplated hereby), legal, valid and enforceable Liens on or in all of the Collateral, and such Liens comprise a valid and perfected lien in Collateral consisting of personal property, having the respective priorities set forth in the Offering Memorandum, but nevertheless, on the Closing Date, superior to and prior to the rights of all third persons other than holders of Permitted Liens (as defined in the Indenture), and subject to no other Liens except for Liens permitted under the Indenture.

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(k)        Description of the Securities, the Exchange Securities, the Indenture, the Registration Rights Agreement, the Collateral Documents, the Revolving Credit Agreement, the Existing Notes and the Intercreditor Agreement.    The Notes, the Guarantees of the Notes, the Indenture, the Registration Rights Agreement, each of the Collateral Documents, the Revolving Credit Agreement, the Existing Notes (as defined in the Offering Memorandum) and the Intercreditor Agreement conform, or will conform, in all material respects to the respective descriptions thereof contained in the Offering Memorandum. The Exchange Notes and the Guarantees of the Exchange Notes will conform in all material respects to the respective descriptions thereof contained in the Offering Memorandum.

(l)         No Material Adverse Change .   Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations, whether or not arising from transactions in the ordinary course of business, of the Issuers, the Guarantors and their respective subsidiaries, considered as one entity (any such change or development is called a “Material Adverse Change”); (ii) the Issuers, the Guarantors and their respective subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Issuers, the Guarantors or their respective subsidiaries, except for dividends paid to Issuers, the Guarantors or any of their respective subsidiaries, on any class of capital stock or repurchase or redemption by the Issuers, the Guarantors or any of their respective subsidiaries of any class of capital stock.

(m)      Independent Accountants .   PricewaterhouseCoopers LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum, are, to the knowledge of the Company, independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act, and any non-audit services provided by PricewaterhouseCoopers LLP to either of the Issuers or any of the Guarantors have been approved by the Audit Committee of the Board of Directors of the Company.

(n)        Preparation of the Financial Statements .   Except as stated therein, the financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods involved, except as disclosed therein. Except as stated therein, the pro forma financial statements and other pro forma and as adjusted information presented in the Offering Memorandum present fairly the information shown therein, have been prepared in accordance with Article 11 of Regulation S-X with respect to pro forma financial statements and have been properly compiled on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. Except as stated therein, the financial statements and the financial information included in the Offering Memorandum comply as to form with the requirements applicable to financial statements required in a registration statement on Form S-1 under the Securities Act. The financial data set forth in the Offering Memorandum under the captions “Summary—Summary Historical Financial Information and Statistical Data” and “Selected Consolidated Financial and Operating Data” fairly present in all material respects the information set forth therein on a basis consistent with that of the audited financial statements contained in the Offering Memorandum. The financial data set forth in the Offering Memorandum under the captions “Summary—Summary Unaudited Pro Forma Financial

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Information and Statistical Data” fairly present the information set forth therein on a basis consistent with that of the pro forma financial statements contained in the Offering Memorandum.

(o)        Incorporation and Good Standing of Holdings, the Company and its subsidiaries .   Each of Holdings, the Company and its subsidiaries has been duly incorporated or formed and is validly existing as a corporation or partnership, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation and has corporate or partnership, as the case may be, power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and, in the case of each of the Issuers and Guarantors party thereto, to enter into and perform its respective obligations under each of this Agreement, the Registration Rights Agreement, the DTC Agreement, the Securities, the Exchange Securities, the Indenture, each of the Collateral Documents and the Intercreditor Agreement, as the case may be. Each of Holdings, the Company and its subsidiaries is duly qualified as a foreign corporation or partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change.

(p)        Capitalization and Other Capital Stock Matters .   At June 25, 2005, on a historical basis, and on an as adjusted basis, after giving effect to the Transactions, the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption “Capitalization” (other than for subsequent issuances of capital stock, if any, pursuant to employee benefit plans described in the Offering Memorandum or upon exercise of outstanding options described in the Offering Memorandum). All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock of the Company were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those accurately described in the Offering Memorandum. All of the issued and outstanding capital stock or partnership interests of each subsidiary of the Company has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim (other than any transfer restrictions imposed by the Securities Act, the securities or Blue Sky laws of certain jurisdictions and any security interest pursuant to agreements described in the Offering Memorandum). The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit A hereto.

(q)        Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required .   Except as otherwise disclosed in the Offering Memorandum, none of the Issuers, Guarantors or any of their respective subsidiaries is in violation of its charter, by-laws or similar constitutive document or is in default (or, with the giving of notice or lapse of time, would be in default) (“Default”) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease, license or other instrument to which either of the Issuers, any of the Guarantors or any of their respective subsidiaries is a party or by which it or any of them may be bound (including, without limitation, the Revolving Credit Agreement, the Indenture, the Intercreditor Agreement and the Existing Notes) or to which any of the property or assets of either of the Issuers, any of the Guarantors or any of their respective subsidiaries is subject (each, an “Existing Instrument”), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. Except as set forth in the Offering Memorandum, and assuming the accuracy of, and the Initial Purchaser’s compliance with, the representations, warranties and agreements of the Initial

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Purchaser set forth in Sections 2 and 7 of this Agreement, and the compliance by the holders of the Securities with the offering and transfer restrictions set forth in the Offering Memorandum, the execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Securities by each Issuer and each Guarantor party thereto, the Issuers’ performance of the DTC Agreement, and the issuance and delivery of the Securities or the Exchange Securities, and consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum (i) will not result in any violation of the provisions of the charter, by-laws, partnership agreement, operating agreement or other similar constitutive document of either of the Issuers, any of the Guarantors or any of their respective subsidiaries, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance (other than Liens granted pursuant to the Collateral Documents) upon any property or assets of either of the Issuers, any of the Guarantors or any of their respective subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change, and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to either of the Issuers, any of the Guarantors or any of their respective subsidiaries. Assuming the accuracy of the representations and warranties of the Initial Purchaser in Sections 2 and 7 of this Agreement, no consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency (collectively, “Consents”), is required for the Issuers’ and the Guarantors’ execution, delivery and performance (as applicable) of this Agreement, the Registration Rights Agreement, the DTC Agreement, the Indenture, any of the Collateral Documents or the Intercreditor Agreement, to which either of the Issuers or any of the Guarantors is a party, or the issuance and delivery of the Securities or the Exchange Securities, or consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum, except (A) such Consents as have been or will be obtained or made on or prior to the Closing Date; and (B) registration of the Exchange Offer or resale of the Notes under the Securities Act pursuant to the Registration Rights Agreement, and qualification of the Indenture under the Trust Indenture Act, in connection with the issuance of the Exchange Notes. As used herein, a “Debt Repayment Triggering Event” means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Issuers, the Guarantors or any of their respective subsidiaries.

(r)        No Material Actions or Proceedings .   Except as otherwise disclosed in the Offering Memorandum, there are no known legal or governmental actions, suits, investigations or proceedings pending or, to either of the Issuers’ or any of the Guarantors’ knowledge, threatened against either of the Issuers, any of the Guarantors or any of their respective subsidiaries, or the officers, directors or agents (as defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) of either of the Issuers, any of the Guarantors or any of their respective subsidiaries, which has as the subject thereof any property owned or leased by, either of the Issuers, any of the Guarantors or any of their respective subsidiaries, where in any such case there is a reasonable possibility that such action, suit or proceeding might be determined adversely to such Issuer, such Guarantor or such subsidiary and any such action, suit, investigation or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially adversely affect the consummation of the transactions contemplated by this Agreement.

(s)        Intellectual Property Rights .   The Issuers, the Guarantors and their respective subsidiaries own, possess or license sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, “Intellectual Property Rights”) reasonably necessary to conduct their businesses as now conducted, except where the failure to own, possess or license such Intellectual Property Rights, individually or in the aggregate, would not reasonably be expected to result in

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a Material Adverse Change. None of the Issuers, the Guarantors or any of their respective subsidiaries has received any written notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, ruling or filing would reasonably be expected to result in a Material Adverse Change. None of the Issuers, the Guarantors or any of their respective subsidiaries is in default under the terms of any license or similar agreement related to any Intellectual Property Rights necessary to conduct their business as now conducted or contemplated except as would not reasonably be expected to result in a Material Adverse Change.

(t)         All Necessary Permits, etc.

(i)         Except as otherwise disclosed in the Offering Memorandum, the Issuers, the Guarantors and their respective subsidiaries possess such valid and current franchises, grants, easements, variances, exceptions, certificates, certifications, registrations, authorizations, qualifications, licenses, permits, consents or approvals (including pharmacy licenses, Medicare and Medicaid provider agreements, accreditations and other similar documentation, or approvals of any health departments) and other permits of any Governmental Entity (“Permits”) necessary to conduct their respective businesses except for those Company Permits the failure to possess would not reasonably be expected, either individually or in the aggregate, to result in a Material Adverse Change (collectively, the “Company Permits”), and none of the Issuers, the Guarantors or any of their respective subsidiaries has received any notice of proceedings relating to the revocation, suspension, cancellation, or modification of, or non-compliance with, any of the Company Permits which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to result in a Material Adverse Change.

(ii)       The Issuers, the Guarantors and each of their respective subsidiaries that directly or indirectly receive reimbursement or payments under Titles XVIII and XIX of the Social Security Act (the “Medicare and Medicaid programs”) are certified for participation and reimbursement under the Medicare and Medicaid programs. The Issuers, the Guarantors and each of their respective subsidiaries that directly or indirectly receive reimbursement or payments under the Medicare and Medicaid programs, the CHAMPUS and TRICARE programs and such other similar federal, state or local reimbursement or governmental programs, (collectively, the “Government Programs”), have current provider numbers and provider agreements required under such Government Programs. The Issuers, the Guarantors and each of their respective subsidiaries that directly or indirectly receive payments under any non-governmental program, including any private insurance program (collectively, the “Private Programs”), have all provider agreements and provider numbers that are required under such Private Programs.

(u)        Compliance with Laws.

(i)         Except as otherwise disclosed in the Offering Memorandum, none of the Issuers, the Guarantors, each of their respective subsidiaries or any of their respective directors, officers, managers, employees or agents, is, and during the past two years has not been, in conflict with, or in default or violation of, (A) any domestic or foreign laws, statutes, ordinances, rules, regulations, codes or executive orders enacted, issued, adopted, promulgated or applied by any Governmental Entity (defined below) (“Laws”) applicable to the Issuers, the Guarantors or each of their respective subsidiaries or by which any of their respective assets or properties is bound or (B) any Company Permits, except, in the case of each (A) and (B), as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, no violation, default, order, judgment, injunction, award, decree or writ handed down, adopted or imposed by any domestic or foreign, international, national, federal, state, provincial or local governmental, regulatory or administrative authority, agency, commission, court, tribunal, arbitral body or self-regulated entity (each, a “Governmental

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Entity”) or legal action, claim, demand, arbitration, hearing, charge, complaint, investigation, examination, indictment, litigation, suit or other civil, criminal, administrative or investigative proceeding exists with respect to the aforementioned Company Permits, Medicare or Medicaid certifications, provider agreements or provider numbers (collectively, “Company Regulatory Authorizations”), except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. Neither the Issuers, the Guarantors, or each of their respective subsidiaries has received any written or oral notice of any pending and unresolved (or, if resolved, without material liability or obligation of any kind, whether accrued, contingent, absolute, inchoate or otherwise, whether due or to become due and whether known or unknown to the Issuers, the Guarantors or each of their respective subsidiaries) violation or of any investigation or inquiry into an alleged or suspected violation of any Law or of any of the Company Regulatory Authorizations that would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. To the knowledge of the Issuers, the Guarantors and each of their respective subsidiaries, no event has occurred that, with the giving of notice, the passage of time, or both, would constitute grounds for a material violation or order with respect to any such Company Regulatory Authorizations, or to revoke, withdraw or suspend any such Company Regulatory Authorizations, or to terminate the participation of the Issuers, the Guarantors or each of their respective subsidiaries in any Government Program or Private Program that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

(ii)       To the knowledge of the Issuers, the Guarantors and each of their respective subsidiaries, since January 1, 2001, none of the Issuers, the Guarantors, each of their respective subsidiaries or any officer, professional employee or contractor of the Issuers, the Guarantors or each of their respective subsidiaries (during the term of such individual’s employment by either of the Issuers or any of the Guarantors, as the case may be, or while acting as an agent of either of the Issuers or any of the Guarantors, as the case may be) or Affiliates has been convicted of any crime, or knowingly engaged in any conduct, for which debarment or similar punishment is mandated or permitted by any applicable Law. None of the Issuers, the Guarantors, each of their respective subsidiaries or any officer, director or managing employee of the Issuers, the Guarantors or each of their respective subsidiaries and no person providing professional services in connection with the operations of the Issuers, the Guarantors or each of their respective subsidiaries has engaged in any activities that are prohibited, or cause for the imposition of penalties or mandatory or permissive exclusion, under 42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1395nn or 1396b, 31 U.S.C. §§ 3729-3733, or the federal CHAMPUS/TRICARE statute (or other federal or state statutes related to false or fraudulent claims) or the regulations promulgated thereunder pursuant to such Laws or related Laws, or under any criminal Laws relating to health care services or payments, or that are prohibited by rules of professional conduct except such activities as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

(iii)      Except as otherwise disclosed in the Offering Memorandum, since January 1, 2001, the Issuers, the Guarantors and each of their respective subsidiaries have timely filed all reports and billings required to be filed prior to the date hereof with respect to the Government Programs and Private Programs, all fiscal intermediaries and other insurance carriers and all such reports and billings are complete and accurate in all material respects and have been prepared in compliance in all material respects with all applicable Laws, regulations, rules, manuals and guidance governing reimbursement and claims, except where the failure to file in a timely manner would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, the Issuers, the Guarantors and each of their respective subsidiaries have paid or caused to be paid all known and undisputed refunds, overpayments, discounts or adjustments that have become due pursuant to such reports and billings, except those payments the failure to pay would not, individually or in the aggregate, reasonably be

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expected to result in a Material Adverse Change. To the knowledge of the Issuers, the Guarantors and each of their respective subsidiaries, the Issuers, the Guarantors and each of their respective subsidiaries have not claimed or received reimbursements from Government Programs or Private Programs in excess of amounts permitted by Law, and have no liability or obligation of any kind, whether accrued, contingent, absolute, inchoate or otherwise, whether due or to become due, under any Government Program or Private Program for any material refund, overpayment, discount or adjustment. There are no pending appeals, adjustments, challenges, audits, inquiries, litigation or written notices of intent to audit with respect to such prior reports or billings, and during the last three years none of the Issuers, the Guarantors or each of their respective subsidiaries has been audited, or otherwise examined by any Government Program or Private Program.

(iv)       None of the Issuers, the Guarantors or each of their respective subsidiaries (A) is a party to any consent, agreement or memorandum of understanding with any Governmental Entity, (B) is subject to any order, judgment, injunction, award, decree or writ handed down, adopted or imposed by any Governmental Entity or (C) has adopted any board resolutions at the request of any Governmental Entity, in any case that restricts the conduct of its business or that in any manner relates to the management or operation of its business (collectively, “Company Regulatory Agreements”). To the knowledge of the Issuers, the Guarantors and each of their respective subsidiaries, none of the Issuers, the Guarantors or each of their respective subsidiaries has been advised by any Governmental Entity that such Governmental Entity is considering issuing or requesting any Company Regulatory Agreement.

(v)        To the knowledge of the Issuers, the Guarantors and each of their respective subsidiaries, none of the Issuers, the Guarantors or each of their respective subsidiaries, nor any director, officer, employee, agent or representative of the Issuers, the Guarantors or each of their respective subsidiaries has made, directly or indirectly, any (A) bribe or kickback, (B) illegal political contribution, (C) payment from corporate funds which was improperly recorded on the books and records of Holdings, the Company or any of its subsidiaries, (D) unlawful payment from corporate funds to governmental officials for the purpose of influencing their actions or the actions of the Governmental Entity which they represent or (E) unlawful payment from corporate funds to obtain or retain any business.

(v)        Title to Properties .   The Issuers, the Guarantors and each of their respective subsidiaries have good and marketable title to all items of real property and valid title to all personal property reflected as owned in the Offering Memorandum, in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects of any third party, except (A) such as do not materially interfere with the use made or proposed to be made of such property by such Issuer, such Guarantor or such subsidiary, (B) as otherwise disclosed in the Offering Memorandum, (C) as created pursuant to the Indenture, the Revolving Credit Agreement and each of the Collateral Documents or (D) liens permitted by the Indenture, the Revolving Credit Agreement and each of the Collateral Documents. The real property, improvements, equipment and personal property held under lease by either of the Issuers, any of the Guarantors or any of their respective subsidiaries are held under valid and enforceable leases (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity), and to limitations of public policy), with such exceptions as do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by such Issuer, such Guarantor or such subsidiary and would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Change.

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(w)       Tax Law Compliance .   Except as otherwise disclosed in the Offering Memorandum, the Issuers, the Guarantors and their respective subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them, other than those being contested in good faith and for which reserves have been provided in accordance with generally accepted accounting principles or those currently payable without penalty or interest and except where the failure to make such required filings or payments would not, individually or in the aggregate, reasonab