<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1998
SECURITIES ACT FILE NO. 333-50783
INVESTMENT COMPANY ACT FILE NO. 811-08755
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 1
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 1
(CHECK APPROPRIATE BOX OR BOXES)
DOLLAR GENERAL STRYPES TRUST
(Exact Name of Registrant as Specified in Charter)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(302) 738-6680
RL&F SERVICE CORP.
ONE RODNEY SQUARE, 10TH FLOOR
10TH AND KING STREETS
WILMINGTON, DELAWARE 19801
(Name and Address of Agent for Service)
Copy to:
NORMAN D. SLONAKER, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
CROSS-REFERENCE SHEET*
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-2 CAPTION IN PROSPECTUS
----------------------- ---------------------
<C> <S> <C>
PART A -- INFORMATION REQUIRED IN A PROSPECTUS
1. Outside Front Cover........................ Front Cover Page
2. Inside Front and Outside Back Cover Page... Front Cover Page; Inside Front Cover Page;
Underwriting
3. Fee Table and Synopsis..................... Prospectus Summary; Fee Table
4. Financial Highlights....................... Not Applicable
5. Plan of Distribution....................... Front Cover Page; Prospectus Summary; Net
Asset Value; Underwriting
6. Selling Shareholders....................... Not Applicable
7. Use of Proceeds............................ Use of Proceeds; Investment Objective and
Policies
8. General Description of the Registrant...... Front Cover Page; Prospectus Summary; The
Trust; Investment Objective and Policies;
Investment Restrictions; Risk Factors;
Dividends and Distributions; Additional
Information
9. Management................................. Trustees; Management Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities............................... Description of STRYPES
11. Defaults and Arrears on Senior
Securities............................... Not Applicable
12. Legal Proceedings.......................... Not Applicable
13. Table of Contents of the Statement of
Additional Information................... Not Applicable
PART B -- INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page................................. Not Applicable
15. Table of Contents.......................... Not Applicable
16. General Information and History............ Not Applicable
17. Investment Objective and Policies.......... Prospectus Summary; Investment Objective
and Policies; Investment Restrictions
18. Management................................. Trustees; Management Arrangements
19. Control Persons and Principal Holders of
Securities............................... Management Arrangements; Underwriting
20. Investment Advisory and Other Services..... Management Arrangements
21. Brokerage Allocation and Other Practices... Investment Objective and Policies
22. Tax Status................................. Certain United States Federal Income Tax
Considerations
23. Financial Statements....................... Experts; Independent Auditors' Report;
Statement of Assets, Liabilities and
Capital
PART C -- OTHER INFORMATION
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 12, 1998
PROSPECTUS
7,500,000 STRYPES(SM)
DOLLAR GENERAL STRYPES TRUST
(EXCHANGEABLE FOR SHARES OF COMMON STOCK OF DOLLAR GENERAL CORPORATION)
------------------------
Each of the Structured Yield Product Exchangeable for Stock(SM) (the
"STRYPES") of Dollar General STRYPES Trust (the "Trust") offered hereby
represents a proportionate share of beneficial interest in the assets of the
Trust, which entitles the holder to receive a cash distribution at the rate of
% of the Investment Amount (as defined herein) per annum and will be
exchanged for common stock, par value $.50 per share (the "Dollar General Common
Stock"), of Dollar General Corporation (the "Company") (or, in certain
circumstances, cash, or a combination of cash and Dollar General Common Stock,
with an equal value) upon conclusion of the term of the Trust on ,
2001 (the "Exchange Date"). The cash distribution on the STRYPES is payable
quarterly on each , , and , commencing
, 1998. The term "Investment Amount" means, with respect to each
STRYPES, $ initially and is subject to adjustment from time to time
prior to the Exchange Date to reflect the distribution of assets by the Trust
upon any exercise by the Contracting Stockholder (as defined herein) of the
acceleration right described herein.
The Trust is a newly created Delaware business trust established to purchase
and hold (i) a series of zero-coupon U.S. Government securities ("U.S. Treasury
Securities") maturing on a quarterly basis through the Exchange Date and (ii) a
forward purchase contract (the "Contract") with an existing stockholder (the
"Contracting Stockholder") of the Company relating to shares of Dollar General
Common Stock. The Trust's investment objective is to distribute cash to holders
of STRYPES on a quarterly basis at the rate of % of the Investment Amount
per annum and, on the Exchange Date, to exchange each STRYPES for a number of
shares of Dollar General Common Stock (or, under certain circumstances, cash, or
a combination of cash and Dollar General Common Stock, with an equal value)
determined in accordance with the following formula (the "Exchange Rate
Formula"), subject to certain adjustments: (a) if the Exchange Price is greater
than $ (the "Equity Appreciation Cap"), a fractional share of Dollar
General Common Stock per STRYPES so that the value thereof (determined based on
the Exchange Price) equals the Equity Appreciation Cap and (b) if the Exchange
Price is less than or equal to the Equity Appreciation Cap, one share of Dollar
General Common Stock per STRYPES. The "Exchange Price" means the average Closing
Price (as defined herein) per share of Dollar General Common Stock on the 20
Trading Days (as defined herein) immediately prior to, but not including, the
second Trading Day preceding the Exchange Date. Holders otherwise entitled to
receive fractional shares of Dollar General Common Stock in respect of their
aggregate holdings of STRYPES will receive cash in lieu thereof. AS DESCRIBED
HEREIN, THE EXCHANGE PRICE WILL REPRESENT A DETERMINATION OF THE VALUE OF A
SHARE OF DOLLAR GENERAL COMMON STOCK IMMEDIATELY PRIOR TO THE EXCHANGE DATE.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF
THE STRYPES ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE STRYPES. IF THE EXCHANGE PRICE OF THE DOLLAR GENERAL COMMON STOCK
IS LESS THAN THE ISSUE PRICE OF THE STRYPES, SUCH AMOUNT RECEIVABLE ON THE
EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH
CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. See "Investment Objectives
and Policies -- General" and "-- The Contract."
(continued on following page)
SEE "RISK FACTORS," BEGINNING ON PAGE 25 OF THIS PROSPECTUS, FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO SALES PROCEEDS TO
PUBLIC LOAD(1) TRUST(2)
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<S> <C> <C> <C>
Per STRYPES.......................... $ $ $
- -------------------------------------------------------------------------------------------------------------------
Total (3)............................ $ $ $
===================================================================================================================
</TABLE>
(1) The Company and the Contracting Stockholder have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) The Trust will not pay any expenses of the offering.
(3) The Trust has granted the Underwriters an option, exercisable for 30 days
from the date hereof, to purchase up to 1,125,000 additional STRYPES
(subject to decrease as a result of the issuance and sale of STRYPES in
connection with the formation of the Trust) solely to cover over-allotments,
if any. If all such STRYPES are purchased, the total Price to Public, Sales
Load and Proceeds to Trust will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The STRYPES are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made through the facilities of The Depository
Trust Company on or about , 1998.
- ---------------
(SM)Service mark of Merrill Lynch & Co., Inc.
------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
------------------------
The date of this Prospectus is , 1998.
<PAGE> 4
Our Mission-Serving Others
[Photographs of merchandise aisles in Dollar General Stores displaying basic
consumable merchandise sold in stores and store-wide view of typical Dollar
General Store.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
STRYPES OR THE DOLLAR GENERAL COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE
STABILIZING AND THE PURCHASE OF STRYPES TO COVER SYNDICATE SHORT POSITIONS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 5
(continued from cover page)
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day (as defined herein)
immediately preceding the Exchange Date a number of shares of Dollar General
Common Stock equal to the number required by the Trust in order to exchange all
of the STRYPES on the Exchange Date in accordance with the Trust's investment
objective. The obligation of the Contracting Stockholder to deliver shares of
Dollar General Common Stock under the Contract may be cash settled, at the
option of the Contracting Stockholder, in whole or in part, by delivery to the
Trust on the Business Day immediately preceding the Exchange Date, in lieu of
the number of shares of Dollar General Common Stock otherwise deliverable in
respect of which an election to exercise the cash settlement option is made,
cash in an amount equal to the value of such shares at the Exchange Price. In
the event that the Contracting Stockholder elects to satisfy its obligation
under the Contract in whole or in part by delivering cash, holders of the
STRYPES will receive cash, or a combination of cash and Dollar General Common
Stock, on the Exchange Date. See "Investment Objective and Policies -- The
Contract."
Subject to certain limitations described herein, the Contracting
Stockholder may, at its option, accelerate its obligation under the Contract, in
whole at any time or from time to time in part, by delivering to the Trust on
the date fixed for acceleration an amount equal to the applicable Acceleration
Percentage (as defined herein) of the Optional Acceleration Value (as defined
herein) of the Contract. Such amount will be payable, at the Contracting
Stockholder's option, either in shares of Dollar General Common Stock (based on
the Current Market Price (as defined herein) as of the second Trading Day prior
to the applicable Notice Date (as defined herein)), in cash or in any
combination thereof. In connection with any exercise by the Contracting
Stockholder of its acceleration right, the Trust will distribute pro rata to the
holders of STRYPES the consideration received from the Contracting Stockholder
on the acceleration date, together with the applicable Acceleration Percentage
of each issue of U.S. Treasury Securities then held by the Trust. See
"Investment Objective and Policies -- The Contract -- Acceleration at the Option
of the Contracting Stockholder."
In the event of certain consolidations or mergers of the Company or any
successor thereto into another entity, or the liquidation of the Company or any
such successor, or certain related events or upon the occurrence of certain
defaults by the Contracting Stockholder under the Contract or the collateral
arrangements described herein, the Contracting Stockholder's obligation under
the Contract would be accelerated, the net assets of the Trust would be
distributed pro rata to the holders of the STRYPES and the term of the Trust
would expire. See "Investment Objective and Policies -- The
Contract -- Reorganization Events Causing a Termination of the Trust" and
"-- Collateral Arrangements; Acceleration."
Reference is made to the accompanying prospectus of the Company with
respect to the shares of Dollar General Common Stock that may be received by a
holder of STRYPES upon exchange on the Exchange Date, upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract or upon
early dissolution of the Trust. The Company is not affiliated with the Trust,
will not receive any of the proceeds from the sale of the STRYPES and will have
no obligations with respect to the STRYPES.
Application has been made to list the STRYPES on the New York Stock
Exchange ("NYSE"). Prior to the offering there has been no public market for the
STRYPES. Shares of closed-end investment companies have in the past frequently
traded at a discount from their net asset values and initial public offering
prices. The risks associated with this characteristic of closed-end investment
companies may be greater for investors expecting to sell shares of a closed-end
investment company soon after the completion of an initial public offering.
The STRYPES are designed to provide investors with a current distribution
yield that is higher than the current dividend yield on the Dollar General
Common Stock, while also providing the opportunity for investors to share in the
appreciation, if any, of the value of the Dollar General Common Stock above
$ (the "Initial Price"), which amount is equal to the last reported
sale price of the Dollar General Common Stock on the NYSE on , 1998.
However, the opportunity for equity appreciation afforded by an investment in
the STRYPES is less than that afforded by a direct investment in the Dollar
General Common Stock because the value of the Dollar General Common Stock (or
the amount of cash or
3
<PAGE> 6
combination of cash and Dollar General Common Stock) receivable by a holder of a
STRYPES upon exchange on the Exchange Date or upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract will not
exceed the Equity Appreciation Cap, which represents an appreciation of %
over the Initial Price. Holders of STRYPES will realize the entire decline in
value if the Exchange Price is less than the Initial Price. There can be no
assurance that the distribution yield on the STRYPES will be higher than the
dividend yield on the Dollar General Common Stock over the term of the Trust.
The STRYPES may be a suitable investment for investors who are able to
understand the unique nature of the Trust and the economic characteristics of
the Contract and the U.S. Treasury Securities held by the Trust.
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that the U.S. Treasury Securities
may not be disposed of (other than by distribution to the holders of STRYPES)
prior to their respective maturities. As a result, the Trust will continue to
hold the Contract despite any significant decline in the market price of the
Dollar General Common Stock or adverse changes in the financial condition of the
Company. The Trust will not be managed like a typical closed-end investment
company. The Trust will be treated as a grantor trust for United States Federal
income tax purposes and each holder of STRYPES will be treated as the owner of
its pro rata portion of the Contract and the U.S. Treasury Securities. The U.S.
Treasury Securities held by the Trust will be treated for United States Federal
income tax purposes as having original issue discount and holders of STRYPES
will be required to recognize currently as income their pro rata portion of such
original issue discount as it accrues over the term of the Trust. The quarterly
cash distributions paid to the holders of STRYPES, which distributions are
anticipated to exceed the currently includible original issue discount, will be
treated as a tax-free return of the holders' costs of the U.S. Treasury
Securities and any previously included original issue discount, and therefore
will not be considered current income to holders upon receipt thereof for United
States Federal income tax purposes. Although under current law holders of
STRYPES should not recognize income, gain or loss with respect to the Contract
over its term, holders may recognize taxable gain or loss upon receipt of cash,
if any, upon dissolution of the Trust or upon any exercise by the Contracting
Stockholder of its acceleration right under the Contract. For a discussion of
certain United States Federal income tax considerations for holders of the
STRYPES, see "Certain United States Federal Income Tax Considerations."
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing and should be read and
retained for future reference.
4
<PAGE> 7
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised.
THE TRUST
Dollar General STRYPES Trust (the "Trust") is a newly created Delaware
business trust that will be registered as a non-diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The term of the Trust will expire on or
shortly after , 2001 (the "Exchange Date"), except that the Trust
may be dissolved prior to such date under certain limited circumstances. The
Trust will be treated as a grantor trust for United States Federal income tax
purposes.
THE OFFERING
The Trust is offering 7,500,000 STRYPES, each representing a proportionate
share of beneficial interest in the assets of the Trust, at an initial public
offering price of $ per STRYPES (which amount is equal to the last
reported sale price of the Dollar General Common Stock on the NYSE on
, 1998, the date of the offering of the STRYPES (the "Offering")). The
Underwriters have been granted an option, exercisable for 30 days from the date
of this Prospectus, to purchase up to an aggregate of 1,125,000 additional
STRYPES (subject to decrease as a result of the issuance and sale of STRYPES in
connection with the formation of the Trust) solely to cover over-allotments, if
any. See "Underwriting."
THE COMPANY
The Company is a leading discount retailer of quality general merchandise
at everyday low prices through its conveniently located stores. The Company's
stores offer a focused assortment of consumable basic merchandise including
health and beauty aids, packaged food products, cleaning supplies, housewares,
stationary, seasonal goods, non-fashion apparel and domestics. Through
convenient neighborhood locations, Dollar General Stores primarily serve low,
middle and fixed income families. As of January 30, 1998, the Company operated
3,169 stores located in 24 states, primarily in the midwestern and southeastern
United States.
Reference is made to the accompanying prospectus of the Company with
respect to the shares of Dollar General Common Stock that may be received by a
holder of STRYPES upon exchange on the Exchange Date, upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract or upon
early dissolution of the Trust. The Company is not affiliated with the Trust,
will not receive any of the proceeds from the sale of the STRYPES and will have
no obligations with respect to the STRYPES. THE PROSPECTUS OF THE COMPANY IS
BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES
TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS
OF THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
INVESTMENT OBJECTIVE AND POLICIES
The Trust will purchase and hold a series of zero-coupon U.S. Government
securities ("U.S. Treasury Securities") maturing on a quarterly basis through
the Exchange Date and a forward purchase contract (the "Contract") with an
existing stockholder (the "Contracting Stockholder") of the Company relating to
shares of Dollar General Common Stock. The Trust's investment objective is to
distribute cash to holders of the STRYPES ("Holders") on a quarterly basis at
the rate of % of the Investment Amount (as defined under "Dividends and
Distributions" below) per annum (which quarterly distributions will equal the
fixed quarterly distributions from the proceeds of the maturing U.S. Treasury
Securities held by the Trust) and, on the Exchange Date, to exchange each
STRYPES for a number of shares (such number of shares being hereinafter referred
to as the "Exchange Amount") of Dollar General Common Stock (or, in certain
circumstances, cash, or a combination of cash and Dollar General Common Stock,
with an equal value)
5
<PAGE> 8
determined in accordance with the following formula (the "Exchange Rate
Formula"), subject to certain adjustments: (a) if the Exchange Price is greater
than $ (the "Equity Appreciation Cap"), a fractional share of Dollar
General Common Stock per STRYPES so that the value thereof (determined based on
the Exchange Price) equals the Equity Appreciation Cap and (b) if the Exchange
Price is less than or equal to the Equity Appreciation Cap, one share of Dollar
General Common Stock per STRYPES. The "Exchange Price" means the average Closing
Price (as defined herein) per share of Dollar General Common Stock on the 20
Trading Days (as defined herein) immediately prior to, but not including, the
second Trading Day preceding the Exchange Date. Holders otherwise entitled to
receive fractional shares in respect of their aggregate holdings of STRYPES will
receive cash in lieu thereof. See "Investment Objective and Policies --
General," "-- The Contract -- Dilution Adjustments," "-- The
Contract -- Acceleration at the Option of the Contracting Stockholder" and
"-- Fractional Shares and Units."
Holders will receive cash distributions at the rate of % of the
Investment Amount per annum, payable quarterly on each , ,
and (or, if any such date is not a Business Day, on the next
succeeding Business Day), to Holders of record as of each ,
, and , respectively. The first distribution (in
respect of the period from , 1998 until , 1998) will be
payable on , 1998 to Holders of record as of , 1998. See
"Investment Objective and Policies -- Trust Assets."
The number of shares of Dollar General Common Stock distributable to
Holders on the Exchange Date, as determined pursuant to the Exchange Rate
Formula, will be subject to adjustment in the event of certain dividends or
distributions, subdivisions, splits, combinations, issuances of certain rights
or warrants or distributions of certain assets with respect to the Dollar
General Common Stock. Such number will also be subject to adjustment upon
exercise by the Contracting Stockholder of its acceleration right under the
Contract. In the event of certain consolidations or mergers of the Company or
any successor thereto into another entity, or the liquidation of the Company or
any such successor, or certain related events or upon the occurrence of certain
defaults by the Contracting Stockholder under the Contract or the collateral
arrangements described herein, the Contracting Stockholder's obligation under
the Contract would be accelerated, the net assets of the Trust would be
distributed pro rata to the Holders and the term of the Trust would expire. See
"Investment Objective and Policies -- The Contract -- Dilution Adjustments,"
"-- Acceleration at the Option of the Contracting Stockholder,"
"-- Reorganization Events Causing a Termination of the Trust" and "-- Collateral
Arrangements; Acceleration."
TRUST ASSETS
The Trust's assets will consist of: (i) a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to the
amounts and payment dates of the distributions payable with respect to the
STRYPES, comprising approximately % of the initial assets of the Trust, and
(ii) the Contract with the Contracting Stockholder relating to shares of Dollar
General Common Stock, comprising approximately % of the initial assets of
the Trust.
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day (as defined herein)
immediately preceding the Exchange Date a number of shares of Dollar General
Common Stock equal to the number required by the Trust in order to exchange all
of the STRYPES (including any STRYPES issued pursuant to the over-allotment
option granted by the Trust to the Underwriters and STRYPES issued in connection
with the formation of the Trust) on the Exchange Date in accordance with the
Trust's investment objective. The obligation of the Contracting Stockholder to
deliver shares of Dollar General Common Stock under the Contract may be cash
settled, at the option of the Contracting Stockholder, in whole or in part, by
delivery to the Trust on the Business Day immediately preceding the Exchange
Date, in lieu of the number of shares of Dollar General Common Stock otherwise
deliverable in respect of which an election to exercise the cash settlement
option is made, cash in an amount equal to the value of such shares at the
Exchange Price. In the event that the Contracting Stockholder elects to satisfy
its obligation under the Contract in whole or in part by delivering cash,
Holders will receive cash, or a combination of cash and Dollar General Common
Stock, on the Exchange Date. See "Investment Objective and Policies -- The
Contract."
6
<PAGE> 9
Subject to certain limitations described herein, the Contracting
Stockholder may, at its option, accelerate its obligation under the Contract, in
whole at any time or from time to time in part, by delivering to the Trust on
the date fixed for acceleration an amount equal to the applicable Acceleration
Percentage (as defined herein) of the Optional Acceleration Value (as defined
herein) of the Contract. Such amount will be payable, at the Contracting
Stockholder's option, either in shares of Dollar General Common Stock (based on
the Current Market Price (as defined herein) as of the second Trading Day prior
to the applicable Notice Date (as defined herein)), in cash or in any
combination thereof. In connection with any exercise by the Contracting
Stockholder of its acceleration right, the Trust will distribute pro rata to the
Holders the consideration received from the Contracting Stockholder on the
acceleration date, together with the applicable Acceleration Percentage of each
issue of U.S. Treasury Securities then held by the Trust. See "Investment
Objective and Policies -- The Contract -- Acceleration at the Option of the
Contracting Stockholder."
The purchase price under the Contract is equal to $ in the
aggregate (assuming the Underwriters' over-allotment option is not exercised)
and is payable to the Contracting Stockholder by the Trust on or about
, 1998. No other consideration is payable by the Trust to the
Contracting Stockholder in connection with its acquisition of the Contract or
the performance of the Contract by the Contracting Stockholder. See "Investment
Objective and Policies -- The Contract."
The obligations of the Contracting Stockholder under the Contract will be
secured by a pledge of shares of Series A Convertible Junior Preferred Stock of
the Company that are currently convertible into the maximum number of shares of
Dollar General Common Stock deliverable by the Contracting Stockholder pursuant
to the Contract (subject to adjustment in accordance with the adjustment
provisions of the Contract, as described herein). See "Investment Objective and
Policies -- The Contract -- Collateral Arrangements; Acceleration."
RELATIONSHIP TO DOLLAR GENERAL COMMON STOCK
Holders will receive cash distributions at the rate of % of the
Investment Amount per annum. While such distribution rate exceeds the current
dividend yield on the Dollar General Common Stock (approximately % per
annum on the date of this Prospectus based on the current quarterly dividend
rate of $ per share of Dollar General Common Stock and the Initial
Price), there can be no assurance that the distribution yield on the STRYPES
will be higher than the dividend yield on the Dollar General Common Stock over
the term of the Trust. The dividends payable per share of Dollar General Common
Stock may be increased or decreased at the discretion of the Company's Board of
Directors. Any future determination as to the payment of dividends on the Dollar
General Common Stock will depend upon the Company's operating results, financial
condition and capital requirements, contractual restrictions, general business
conditions and such other factors as the Company's Board of Directors deems
relevant. Holders will not be entitled to receive any future dividends on the
Dollar General Common Stock unless and until such time, if any, as the Trust
shall have delivered Dollar General Common Stock upon exchange on the Exchange
Date, upon any exercise by the Contracting Stockholder of its acceleration right
under the Contract or upon early dissolution of the Trust, and unless the
applicable record date for determining stockholders entitled to receive such
dividends occurs after such delivery. See "Risk Factors -- No Stockholder
Rights."
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than that afforded by a direct investment in the Dollar General
Common Stock because the value of the Dollar General Common Stock (or the amount
of cash or combination of cash and Dollar General Common Stock) receivable by a
Holder upon exchange on the Exchange Date or upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract will not
exceed the Equity Appreciation Cap, which represents an appreciation of %
over the Initial Price. Holders will realize the entire decline in value if the
Exchange Price is less than the Initial Price. See "Risk Factors -- Limitations
on Opportunity for Equity Appreciation; Potential Losses."
7
<PAGE> 10
DILUTION
The number of shares of Dollar General Common Stock (or the amount of cash
or combination of cash and Dollar General Common Stock) that Holders are
entitled to receive upon exchange on the Exchange Date, upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract or upon
early dissolution of the Trust will not be adjusted for certain events, such as
offerings of Dollar General Common Stock by the Company for cash or in
connection with acquisitions. The Company is not restricted in connection with
the STRYPES from issuing additional shares of Dollar General Common Stock during
the term of the Trust. In addition, stockholders of the Company (including the
Contracting Stockholder and beneficiaries of the Contracting Stockholder) are
not precluded from selling shares of Dollar General Common Stock, either
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or by causing the Company to register such shares. Neither
the Company nor any stockholder of the Company has any obligation to consider
the interests of Holders for any reason. Additional issuances or sales may
materially and adversely affect the price of Dollar General Common Stock and,
because of the relationship of the number of shares of Dollar General Common
Stock (or the amount of cash or combination of cash and Dollar General Common
Stock) to be received on the Exchange Date to the price of the Dollar General
Common Stock, such other events may materially and adversely affect the trading
price of the STRYPES. There can be no assurance that the Company will not take
any of the foregoing actions, or that it will not make offerings of, or that
stockholders will not sell any, Dollar General Common Stock in the future, or as
to the amount of any such offerings or sales. See "Risk Factors -- Dilution
Adjustments."
TERM OF THE TRUST
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. On or shortly after the
Exchange Date, the shares of Dollar General Common Stock and/or cash to be
exchanged for the STRYPES and any other remaining Trust assets, net of any
remaining Trust expenses or liabilities, if any, will be distributed pro rata to
Holders. In the event that the Contracting Stockholder shall have exercised its
right to accelerate its remaining obligation under the Contract as a whole, the
net assets of the Trust would be distributed pro rata to the Holders and the
term of the Trust would expire. Similarly, in the event that a Reorganization
Event (as defined herein) shall have occurred or certain defaults shall have
occurred with respect to the Contracting Stockholder under the Contract or the
collateral arrangements described herein, the Contracting Stockholder's
obligation under the Contract would accelerate, the net assets of the Trust
would be distributed pro rata to the Holders and the term of the Trust would
expire. See "Investment Objective and Policies -- The Contract," "-- Trust
Dissolution" and "Risk Factors -- Limited Term."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be classified as a grantor trust for United States Federal
income tax purposes. Accordingly, each Holder will be treated for United States
Federal income tax purposes as the owner of its pro rata portion of the U.S.
Treasury Securities and the Contract, and income received (including original
issue discount treated as received) by the Trust will generally be treated as
income of the Holders. See "Certain United States Federal Income Tax
Considerations."
The U.S. Treasury Securities held by the Trust will be treated for United
States Federal income tax purposes as having "original issue discount" which
will accrue over the term of the U.S. Treasury Securities. It is anticipated
that each quarterly cash distribution to the Holders will be treated as a
tax-free return of the Holders' costs of the U.S. Treasury Securities and any
previously included original issue discount, and therefore will not be
considered current income to Holders upon receipt thereof for United States
Federal income tax purposes. However, a Holder (whether on the cash or accrual
method of tax accounting) must recognize currently as income original issue
discount on the U.S. Treasury Securities as it accrues. See "Certain United
States Federal Income Tax Considerations."
Under existing law, a Holder should not recognize income, gain or loss upon
the Trust's entry into the Contract or over the term of the Contract. In
general, the delivery of Dollar General Common Stock pursuant
8
<PAGE> 11
to the Contract will not be taxable to the Holders. A Holder may have taxable
gain or loss upon receipt of cash, if any, upon dissolution of the Trust or to
the extent that the Contracting Stockholder satisfies its obligation under the
Contract in whole or in part with cash (whether on the Exchange Date or upon any
exercise by the Contracting Stockholder of its acceleration right under the
Contract). In general, each Holder's initial tax basis in any Dollar General
Common Stock received from the Trust on the Exchange Date or upon earlier
dissolution of the Trust will be equal to its basis in its pro rata portion of
the Contract less the portion of such basis allocable to any cash that is
received under the Contract. See "Certain United States Federal Income Tax
Considerations."
MANAGEMENT ARRANGEMENTS
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The administration
of the Trust will be overseen by the Trustees. The day-to-day administration of
the Trust will be carried out by The Bank of New York (or its successor) as
trust administrator (the "Administrator"). The Bank of New York (or its
successor) will also act as custodian for the Trust's assets (the "Custodian")
and as paying agent, transfer agent and registrar (the "Paying Agent") with
respect to the STRYPES. Except as aforesaid, and except for The Bank of New
York's role as collateral agent under the Trust's Security and Pledge Agreement
(see "Investment Objective and Policies -- The Contract -- Collateral
Arrangements; Acceleration"), The Bank of New York has no other affiliation
with, and is not engaged in any other transaction with, the Trust. For their
services, the Underwriters will pay each of the Administrator, the Custodian and
the Paying Agent at the closing of the Offering a one-time, up-front amount in
respect of its fee. See "Management Arrangements."
RISK FACTORS
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that the U.S. Treasury Securities
may not be disposed of (other than by distribution to the Holders) prior to
their respective maturities. The Trust will continue to hold the Contract
despite any significant decline in the market price of the Dollar General Common
Stock or adverse changes in the financial condition of the Company.
Although the STRYPES will provide investors with a current distribution
yield which exceeds the current dividend yield on the Dollar General Common
Stock, there is no assurance that the distribution yield on the STRYPES will be
higher than the dividend yield on the Dollar General Common Stock over the term
of the Trust. The opportunity for equity appreciation afforded by an investment
in the STRYPES is less than that afforded by a direct investment in the Dollar
General Common Stock. The value of the Dollar General Common Stock (or the
amount of cash or combination of cash and Dollar General Common Stock)
receivable by a Holder upon exchange on the Exchange Date or upon any exercise
by the Contracting Stockholder of its acceleration right under the Contract will
not exceed the Equity Appreciation Cap, which represents an appreciation of
% over the Initial Price. Holders will realize the entire decline in value
if the Exchange Price is less than the Initial Price. AS DESCRIBED HEREIN, THE
EXCHANGE PRICE WILL REPRESENT A DETERMINATION OF THE VALUE OF A SHARE OF DOLLAR
GENERAL COMMON STOCK IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE
CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS ON THE EXCHANGE DATE
WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE EXCHANGE
PRICE OF THE DOLLAR GENERAL COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH
AMOUNT RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID
FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the U.S. Treasury Securities and the Contract, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
The trading prices of the STRYPES in the secondary market will be directly
affected by the trading prices of the Dollar General Common Stock in the
secondary market. It is impossible to predict whether the
9
<PAGE> 12
price of Dollar General Common Stock will rise or fall. Trading prices of Dollar
General Common Stock will be influenced by the Company's operating results and
prospects and by economic, financial and other factors and market conditions.
Holders will not be entitled to any rights with respect to the Dollar
General Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Trust shall have delivered shares of Dollar
General Common Stock upon exchange on the Exchange Date, upon any exercise by
the Contracting Stockholder of its acceleration right under the Contract or upon
early dissolution of the Trust, and unless the applicable record date, if any,
for the exercise of such rights occurs after such delivery.
The bankruptcy of any donor of the Contracting Stockholder could adversely
affect the time of exchange or, as a result, the amount received by the Holders.
See "Risk Factors -- Risk Relating to Bankruptcy."
Holders may experience a taxable event upon receipt of cash, if any, upon
dissolution of the Trust or to the extent that the Contracting Stockholder
satisfies its obligations under the Contract in whole or in part with cash
(whether on the Exchange Date or upon any exercise by the Contracting
Stockholder of its acceleration right under the Contract). Because of an absence
of authority as to the proper character of any gain or loss resulting from such
a taxable event, the ultimate tax consequences to Holders as a result of the
Contracting Stockholder satisfying its obligations under the Contract in whole
or in part with cash is uncertain. See "Risk Factors -- Tax Matters."
LISTING
Application has been made to list the STRYPES on the NYSE.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage
of offering price).............. 3%(a)
Automatic Dividend Reinvestment
Plan Fees....................... Not Applicable
Annual Expenses (as a percentage of
net assets)
Management Fees(b)................. 0%
Other Expenses(c).................. 0%
------------------------
Total Annual Expenses(c)........... 0%
========================
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------- ------ -------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment, including the maximum sales load of $30 and
assuming (1) no annual expenses and (2) a 5% annual return
throughout the periods.................................... $30 $30
</TABLE>
- ---------------
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently there will be no separate investment advisory fee paid by the
Trust. The Bank of New York will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $ and
approximately $ in respect of costs associated with the initial
registration and offering of the STRYPES will be paid by the Underwriters.
Anticipated ongoing expenses over the term of the Trust, estimated to be
approximately $ , will be paid by the Contracting Stockholder. Any
unanticipated operating expenses of the Trust will be paid by Merrill Lynch
& Co., Inc., which will be reimbursed by the Contracting Stockholder. See
"Management Arrangements -- Estimated Expenses." Absent such arrangements,
the Trust's "Other Expenses" and "Total Annual Expenses" would be
approximately % of the Trust's net assets.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Trust will bear directly or
indirectly. The Example set forth above utilizes a 5% annual rate of return as
mandated by Securities and Exchange Commission regulations. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR ANNUAL RATES OF RETURN,
AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
ASSUMED FOR PURPOSES OF THE EXAMPLE.
10
<PAGE> 13
THE TRUST
Dollar General STRYPES Trust is a newly created Delaware business trust and
will be registered as a closed-end management investment company under the
Investment Company Act. The Trust was created on April 15, 1998 pursuant to a
Certificate of Trust of the Trust, dated as of April 14, 1998, as filed in the
office of the Secretary of State of the State of Delaware on April 15, 1998, and
a Trust Agreement dated as of April 15, 1998 (as amended and restated as of
, 1998, the "Declaration of Trust"). The term of the Trust will
expire on or shortly after , 2001, except that the Trust may be
dissolved prior to such date under certain limited circumstances. The Trust will
be treated as a grantor trust for United States Federal income tax purposes. The
Trust's principal office is located at 850 Library Avenue, Suite 204, Newark,
Delaware 19715, and its telephone number is (302) 738-6680.
USE OF PROCEEDS
The net proceeds of the Offering will be approximately $ (or
approximately $ , if the Underwriters' over-allotment option is
exercised in full), after payment of the sales load. At the time of the closing
of the Offering, or shortly thereafter, the net proceeds of the Offering will be
used to purchase a fixed portfolio comprised of a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to the
amounts and payment dates of the distributions payable with respect to the
STRYPES and to pay the purchase price under the Contract to the Contracting
Stockholder.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will purchase and hold (i) a series of zero-coupon U.S. Treasury
Securities maturing on a quarterly basis through the Exchange Date and (ii) the
Contract with the Contracting Stockholder relating to shares of Dollar General
Common Stock. The Trust's investment objective is to distribute cash to holders
of the STRYPES ("Holders") on a quarterly basis at the rate of % of the
Investment Amount per annum (which quarterly distributions will equal the fixed
quarterly distributions from the proceeds of the maturing U.S. Treasury
Securities held by the Trust) and, on the Exchange Date, to exchange each
STRYPES for a number of shares (such number of shares being hereinafter referred
to as the "Exchange Amount") of Dollar General Common Stock (or, under certain
circumstances, cash, or a combination of cash and Dollar General Common Stock,
with an equal value) determined in accordance with the following Exchange Rate
Formula, subject to certain adjustments: (a) if the Exchange Price is greater
than the Equity Appreciation Cap, a fractional share of Dollar General Common
Stock per STRYPES so that the value thereof (determined based on the Exchange
Price) equals the Equity Appreciation Cap and (b) if the Exchange Price is less
than or equal to the Equity Appreciation Cap, one share of Dollar General Common
Stock per STRYPES. See "-- The Contract -- Dilution Adjustments" and
"-- Acceleration at the Option of the Contracting Stockholder." THERE CAN BE NO
ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS ON THE EXCHANGE DATE WILL BE
EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE EXCHANGE PRICE
OF THE DOLLAR GENERAL COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT
RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. Holders
otherwise entitled to receive fractional shares of Dollar General Common Stock
in respect of their aggregate holdings of STRYPES will receive cash in lieu
thereof. See "Fractional Shares and Units." The number of shares of Dollar
General Common Stock per STRYPES specified in clause (b) of the Exchange Rate
Formula is hereinafter referred to as the "Share Component."
The "Exchange Price" means the average Closing Price per share of Dollar
General Common Stock on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Exchange Date. The "Closing
Price" of any security on any date of determination means the closing sale price
(or, if no closing price is reported, the last reported sale price) of such
security on the NYSE on such date or, if such security is not listed for trading
on the NYSE on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such security is so listed,
or, if such security is not so
11
<PAGE> 14
listed on a United States national or regional securities exchange, as reported
by National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or, if such security is not so reported, the last quoted bid price
for such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by The Bank of New York (or its successor) as administrator of the Trust
(the "Administrator"). In the event that the Exchange Rate Formula is adjusted
as described under "-- The Contract -- Dilution Adjustments" below, each of the
Closing Prices used in determining the Exchange Price will be similarly adjusted
to derive, for purposes of determining which of clauses (a) or (b) of the
Exchange Rate Formula will apply on the Exchange Date, an Exchange Price stated
on a basis comparable to the Equity Appreciation Cap. A "Trading Day" is defined
as a day on which the security the Closing Price of which is being determined
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security. The term "Business Day" means any day that is not a
Saturday, a Sunday or a day on which the NYSE, NASDAQ, or banking institutions
or trust companies in The City of New York are authorized or obligated by law or
executive order to close.
Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day immediately preceding the
Exchange Date an aggregate number of shares of Dollar General Common Stock equal
to the product of the Exchange Amount and the aggregate number of STRYPES then
outstanding. The obligation of the Contracting Stockholder to deliver shares of
Dollar General Common Stock under the Contract may be cash settled, at the
option of the Contracting Stockholder, in whole or in part, by delivery to the
Trust on the Business Day immediately preceding the Exchange Date, in lieu of
the number of shares of Dollar General Common Stock otherwise deliverable in
respect of which an election to exercise the cash settlement option is made,
cash in an amount equal to the value of such shares at the Exchange Price. In
the event that the Contracting Stockholder elects to satisfy its obligation
under the Contract in whole or in part by delivering cash, Holders will receive
cash, or a combination of cash and Dollar General Common Stock, on the Exchange
Date. On or prior to the tenth Business Day preceding the Exchange Date, the
Administrator will notify The Depository Trust Company (the "Depositary") and
publish a notice in The Wall Street Journal or another daily newspaper of
national circulation stating whether shares of Dollar General Common Stock or
cash, or a combination thereof, will be delivered in exchange for the STRYPES on
the Exchange Date. At the time such notice is published, the Exchange Price will
not have been determined. If the Contracting Stockholder elects to deliver
shares of Dollar General Common Stock, Holders will be responsible for the
payment of any and all brokerage costs upon the subsequent sale thereof.
The Trust has adopted a fundamental policy as required by the Declaration
of Trust to invest at least 65% of its portfolio in the Contract. The Contract
will comprise approximately % of the Trust's initial assets. The Trust has
also adopted a fundamental policy that the Contract may not be disposed of
during the term of the Trust and that the U.S. Treasury Securities may not be
disposed of (other than by distribution to the Holders) prior to their
respective maturities. The foregoing fundamental policies of the Trust may not
be changed without the vote of 100% in interest of the Holders.
TRUST ASSETS
The Trust's assets primarily will consist of: (i) U.S. Treasury Securities
and (ii) the Contract. The Trust may also make certain temporary investments.
See "-- Temporary Investments." For illustrative purposes only, the following
table shows the number of shares of Dollar General Common Stock or amount of
cash that a Holder would receive for each STRYPES on the Exchange Date at
various hypothetical Exchange Prices. The table assumes an Equity Appreciation
Cap of $54.00. In addition, the table assumes that there will be no dilution
adjustments to the Exchange Rate Formula as described below under "-- The
Contract -- Dilution Adjustments" and that the Contracting Stockholder does not
exercise its right to accelerate its obligation under the Contract in whole or
in part prior to the Exchange Date. There can be no assurance that the Exchange
Price will be within the range set forth below. A Holder would receive on the
Exchange Date the
12
<PAGE> 15
following number of shares of Dollar General Common Stock or amount of cash (in
the event that the Contracting Stockholder elects to satisfy its obligation
under the Contract, in whole, with cash) per STRYPES:
<TABLE>
<CAPTION>
EXCHANGE PRICE OF NUMBER OF SHARES OF
DOLLAR GENERAL DOLLAR GENERAL
COMMON STOCK COMMON STOCK AMOUNT OF CASH
----------------- ------------------- --------------
<S> <C> <C>
$44.00 1.0000 $44.00
54.00 1.0000 54.00
64.00 0.8438 54.00
</TABLE>
The following table sets forth information regarding the distributions to
be received on the U.S. Treasury Securities, the portion of each year's
distributions that will constitute a return of capital for United States Federal
income tax purposes and the amount of original issue discount accruing, assuming
a yield-to-maturity accrual election, on the U.S. Treasury Securities with
respect to a Holder who acquires its STRYPES at the issue price from an
Underwriter pursuant to the Offering. The table assumes that the Contracting
Stockholder does not exercise its right to accelerate its obligation under the
Contract in whole or in part prior to the Exchange Date. See "Certain United
States Federal Income Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL INCLUSION OF
DISTRIBUTIONS U.S. TREASURY ANNUAL RETURN ORIGINAL ISSUE
FROM U.S. TREASURY SECURITIES PER OF CAPITAL PER DISCOUNT IN
YEAR SECURITIES STRYPES STRYPES INCOME PER STRYPES
- ---- ------------------ ------------------ -------------- -------------------
<S> <C> <C> <C> <C>
1998.................... $ $ $ $
1999....................
2000....................
2001....................
</TABLE>
The anticipated annual distribution of $ per STRYPES (assuming
that the Contracting Stockholder does not exercise its acceleration right) is
payable quarterly on each , , and ,
commencing , 1998. Quarterly distributions on the STRYPES will
consist solely of the cash received from the proceeds of the maturing U.S.
Treasury Securities held by the Trust. The Trust will not be entitled to any
future dividends that may be declared on the Dollar General Common Stock. See
"Dividends and Distributions."
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN DOLLAR GENERAL
COMMON STOCK; NO DEPRECIATION PROTECTION
Although the STRYPES will provide investors with a current distribution
yield which exceeds the current dividend yield on the Dollar General Common
Stock, there is no assurance that the distribution yield on the STRYPES will be
higher than the dividend yield on the Dollar General Common Stock over the term
of the Trust. The opportunity for equity appreciation afforded by an investment
in the STRYPES is less than that afforded by a direct investment in the Dollar
General Common Stock. The value of the Dollar General Common Stock (or the
amount of cash or combination of cash and Dollar General Common Stock)
receivable by a Holder upon exchange on the Exchange Date or upon any exercise
by the Contracting Stockholder of its acceleration right under the Contract will
not exceed the Equity Appreciation Cap, which represents an appreciation of
% over the Initial Price. Holders will realize the entire decline in value
if the Exchange Price is less than the Initial Price.
THE COMPANY
The Company is a leading discount retailer of quality general merchandise
at everyday low prices through its conveniently located stores. The Company's
stores offer a focused assortment of consumable basic merchandise including
health and beauty aids, packaged food products, cleaning supplies, housewares,
stationary, seasonal goods, non-fashion apparel and domestics. Through
convenient neighborhood locations, Dollar General Stores primarily serve low,
middle and fixed income families. As of January 30, 1998, the
13
<PAGE> 16
Company operated 3,169 stores located in 24 states, primarily in the midwestern
and southeastern United States.
The Dollar General Common Stock is listed on the NYSE under the symbol
"DG." Beginning with 1997, the Company's fiscal year ends on the last Friday in
January. The table below sets forth the high and low sale prices per share of
the Dollar General Common Stock on the NYSE for the periods indicated and sets
forth the per share dividends declared with respect to the Dollar General Common
Stock. Per share prices of the Dollar General Common Stock and the amount of the
dividend declared have been adjusted to reflect prior stock splits.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1997
First Quarter............................................... $13 5/8 $ 9 5/8 $.03
Second Quarter.............................................. 15 12 5/8 .03
Third Quarter............................................... 17 3/4 14 .03
Fourth Quarter.............................................. 17 1/8 14 1/4 .03
1998
First Quarter............................................... $22 5/8 $16 3/4 $.03
Second Quarter.............................................. 29 5/8 18 1/2 .03
Third Quarter............................................... 30 3/4 23 .03
Fourth Quarter.............................................. 32 24 1/2 .04
1999
First Quarter............................................... $40 1/8 $29 1/4 $.04
Second Quarter (through May 8, 1998)........................ 40 1/2 36 13/16 N/A
</TABLE>
The last reported sale price of the Dollar General Common Stock on the NYSE
on May 8, 1998 was $40 per share. As of March 31, 1998, the Company estimates
that it had approximately 4,000 stockholders of record.
The Company has paid quarterly cash dividends on the Dollar General Common
Stock since 1975. The Board of Directors regularly reviews the Company's
dividend policy to ensure that it is consistent with the Company's earnings
performance, financial condition and need for capital and other relevant
factors.
Holders will not be entitled to receive any future dividends on the Dollar
General Common Stock unless and until such time, if any, as the Trust shall have
delivered Dollar General Common Stock upon exchange on the Exchange Date, upon
any exercise by the Contracting Stockholder of its acceleration right under the
Contract or upon early dissolution of the Trust, and unless the applicable
record date for determining stockholders entitled to receive such dividends
occurs after such delivery. See "Risk Factors -- No Stockholder Rights."
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the Company
files reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Copies of such material
can be inspected and copied at the public reference facilities maintained by the
Commission at the address specified under "Additional Information." Reports,
proxy and information statements and other information concerning the Company
may also be inspected at the offices of the NYSE.
THE COMPANY IS NOT AFFILIATED WITH THE TRUST, WILL NOT RECEIVE ANY OF THE
PROCEEDS FROM THE SALE OF THE STRYPES AND WILL HAVE NO OBLIGATIONS WITH RESPECT
TO THE STRYPES. THIS PROSPECTUS RELATES ONLY TO THE STRYPES OFFERED HEREBY AND
DOES NOT RELATE TO THE COMPANY OR THE DOLLAR GENERAL COMMON STOCK. THE COMPANY
HAS FILED A REGISTRATION STATEMENT ON FORM S-3 WITH THE COMMISSION WITH RESPECT
TO THE SHARES OF DOLLAR GENERAL COMMON STOCK THAT MAY BE RECEIVED BY A HOLDER OF
STRYPES UPON EXCHANGE ON THE EXCHANGE DATE, UPON ANY EXERCISE BY THE CONTRACTING
14
<PAGE> 17
STOCKHOLDER OF ITS ACCELERATION RIGHT UNDER THE CONTRACT OR UPON EARLY
DISSOLUTION OF THE TRUST. THE PROSPECTUS OF THE COMPANY (THE "DOLLAR GENERAL
PROSPECTUS") CONSTITUTING A PART OF SUCH REGISTRATION STATEMENT INCLUDES
INFORMATION RELATING TO THE COMPANY AND THE DOLLAR GENERAL COMMON STOCK,
INCLUDING CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN DOLLAR GENERAL
COMMON STOCK. THE DOLLAR GENERAL PROSPECTUS IS BEING ATTACHED HERETO AND
DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES TOGETHER WITH THIS PROSPECTUS FOR
CONVENIENCE OF REFERENCE ONLY. THE DOLLAR GENERAL PROSPECTUS DOES NOT CONSTITUTE
A PART OF THIS PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
THE CONTRACT
General. Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day immediately
preceding the Exchange Date an aggregate number of shares of Dollar General
Common Stock equal to the product of the Exchange Amount and the aggregate
number of STRYPES then outstanding. The obligation of the Contracting
Stockholder to deliver shares of Dollar General Common Stock under the Contract
may be cash settled, at the option of such Contracting Stockholder, in whole or
in part, by delivery to the Trust on the Business Day immediately preceding the
Exchange Date, in lieu of the number of shares of Dollar General Common Stock
otherwise deliverable in respect of which an election to exercise the cash
settlement option is made, cash in an amount (calculated to the nearest 1/100th
of a dollar or, if there is not a nearest 1/100th of a dollar, then to the next
higher 1/100th of a dollar) equal to the value of such shares at the Exchange
Price. In the event that the Contracting Stockholder elects to satisfy its
obligation under the Contract in whole or in part by delivering cash, Holders
will receive cash, or a combination of cash and Dollar General Common Stock, on
the Exchange Date.
Dilution Adjustments. The Exchange Rate Formula is subject to adjustment
if the Company shall: (i) pay a stock dividend or make a distribution with
respect to Dollar General Common Stock in shares of such stock; (ii) subdivide
or split the outstanding shares of Dollar General Common Stock into a greater
number of shares; (iii) combine the outstanding shares of Dollar General Common
Stock into a smaller number of shares; (iv) issue by reclassification of shares
of Dollar General Common Stock any shares of other common stock of the Company;
(v) issue rights or warrants to all holders of Dollar General Common Stock
entitling them to subscribe for or purchase shares of Dollar General Common
Stock at a price per share less than the then current market price of the Dollar
General Common Stock (other than rights to purchase Dollar General Common Stock
pursuant to a plan for the reinvestment of dividends or interest); or (vi) pay a
dividend or make a distribution to all holders of Dollar General Common Stock of
evidences of its indebtedness or other assets (excluding any stock dividends or
distributions referred to in clause (i) above or any cash dividends other than
any Extraordinary Cash Dividends (as defined below)) or issue to all holders of
Dollar General Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than those referred to in clause (v) above).
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate Formula shall be adjusted so that the Trust will
receive on the Business Day immediately preceding the Exchange Date the number
of shares of Dollar General Common Stock (or, in the case of a reclassification
referred to in clause (iv) above, the number of shares of other common stock of
the Company issued pursuant thereto) which the Trust would have owned or been
entitled to receive immediately following any event described above had the
Contracting Stockholder's obligation under the Contract been satisfied by
delivery of Dollar General Common Stock immediately prior to such event or any
record date with respect thereto.
In the case of the event referred to in clause (v) above, the Exchange Rate
Formula shall be adjusted by multiplying the Share Component in the Exchange
Rate Formula in effect immediately prior to the date of issuance of the rights
or warrants referred to in clause (v) above by a fraction, the numerator of
which shall be the number of shares of Dollar General Common Stock outstanding
on the date of issuance of such rights or warrants, immediately prior to such
issuance, plus the number of additional shares of Dollar General Common Stock
offered for subscription or purchase pursuant to such rights or warrants, and
the denominator of which
15
<PAGE> 18
shall be the number of shares of Dollar General Common Stock outstanding on the
date of issuance of such rights or warrants, immediately prior to such issuance,
plus the number of additional shares of Dollar General Common Stock which the
aggregate offering price of the total number of shares of Dollar General Common
Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the current market price (determined as the average
Closing Price per share of Dollar General Common Stock on the 20 Trading Days
immediately prior to the date such rights or warrants are issued, subject to
certain adjustments), which shall be determined by multiplying such total number
of shares by the exercise price of such rights or warrants and dividing the
product so obtained by such current market price. To the extent that shares of
Dollar General Common Stock are not delivered after the expiration of such
rights or warrants, the Exchange Rate Formula shall be readjusted to the
Exchange Rate Formula which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of shares of Dollar General Common Stock actually delivered.
In the case of the event referred to in clause (vi) above, the Exchange
Rate Formula shall be adjusted by multiplying the Share Component in the
Exchange Rate Formula in effect on the record date referred to below by a
fraction, the numerator of which shall be the market price per share of Dollar
General Common Stock on the record date for the determination of stockholders
entitled to receive the dividend or distribution or the rights or warrants
referred to in clause (vi) above (such market price being determined as the
average Closing Price per share of Dollar General Common Stock on the 20 Trading
Days immediately prior to such record date, subject to certain adjustments), and
the denominator of which shall be such market price per share of Dollar General
Common Stock less the fair market value (as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator, whose determination shall be conclusive) as of such record date
of the portion of the assets or evidences of indebtedness to be distributed or
of such subscription rights or warrants applicable to one share of Dollar
General Common Stock.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all cash
dividends on the Dollar General Common Stock occurring in such 12-month period
(excluding any such dividends occurring in such period for which a prior
adjustment to the Exchange Rate Formula was previously made) exceeds on a per
share basis 10% of the average of the Closing Prices per share of the Dollar
General Common Stock over such 12-month period. All adjustments to the Exchange
Rate Formula will be calculated to the nearest 1/10,000th of a share of Dollar
General Common Stock (or if there is not a nearest 1/10,000th of a share to the
next lower 1/10,000th of a share). No adjustment in the Exchange Rate Formula
shall be required unless such adjustment would require an increase or decrease
of at least one percent therein; provided, however, that any adjustments which
by reason of the foregoing are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. If an adjustment is made to
the Exchange Rate Formula as described above, an adjustment will also be made to
the Exchange Price solely to determine which of clauses (a) or (b) of the
Exchange Rate Formula will apply on the Exchange Date. The required adjustment
to the Exchange Price will be made by multiplying each of the Closing Prices
used in determining the Exchange Price by a fraction, the numerator of which
shall be the Share Component in clause (b) of the Exchange Rate Formula
immediately after such adjustment described above, and the denominator of which
shall be the Share Component in clause (b) of the Exchange Rate Formula
immediately before such adjustment described above. Each such adjustment to the
Exchange Rate Formula shall be made successively.
In the event of a statutory merger effected solely for the purpose of
changing the state of incorporation of the Company, or any surviving entity or
subsequent surviving entity of the Company (a "Company Successor"), the Exchange
Rate Formula shall be adjusted so that the Trust will receive on the Business
Day immediately preceding the Exchange Date the number of shares of capital
stock of the continuing corporation in such statutory merger which the Trust
would have owned or been entitled to receive immediately following such
statutory merger had the Contracting Stockholder's obligation under the Contract
been satisfied by delivery of Dollar General Common Stock immediately prior to
the effective date for such statutory merger.
The Administrator is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Exchange Rate Formula
(or if the Administrator is not aware of such
16
<PAGE> 19
occurrence, as soon as practicable after becoming so aware), to provide written
notice to the Holders of the occurrence of such event and a statement in
reasonable detail setting forth the adjusted Exchange Rate Formula and the
method by which the adjustment to the Exchange Rate Formula was determined,
provided that, in respect of any adjustment to the Exchange Price, such notice
will only disclose the factor by which each of the Closing Prices used in
determining the Exchange Price is so multiplied in order to determine the
Exchange Amount on the Exchange Date. Until the Exchange Date, it will not be
possible to determine the Exchange Amount.
No adjustments will be made for certain other events, such as offerings of
Dollar General Common Stock by the Company for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of Dollar
General Common Stock by any stockholder of the Company (including the
Contracting Stockholder and beneficiaries of the Contracting Stockholder).
Acceleration at the Option of the Contracting Stockholder. The Contracting
Stockholder may, at its option, accelerate its obligation under the Contract, in
whole at any time or from time to time in part, by delivering to the Trust on
the date fixed for acceleration (the "Acceleration Date") an amount (the
"Acceleration Amount") equal to the applicable Acceleration Percentage (as
defined below) of the "Optional Acceleration Value" of the Contract; provided
that, in the case of any partial acceleration, the Optional Acceleration Value
of the Contract, after giving effect thereto, would not be less than 25% of the
"Original Optional Acceleration Value" of the Contract. The "Optional
Acceleration Value" means, on any date of determination, the Original Optional
Acceleration Value less the sum of all Acceleration Amounts previously paid to
the Trust pursuant to the Contract. The "Original Optional Acceleration Value"
of the Contract shall mean an amount equal to the product of the Equity
Appreciation Cap and the aggregate number of STRYPES issued by the Trust
(including any STRYPES issued pursuant to the over-allotment option granted by
the Trust to the Underwriters and STRYPES issued in connection with the
formation of the Trust). The Acceleration Amount payable by the Contracting
Stockholder on any Acceleration Date may be paid, at the Contracting
Stockholder's option, either in shares of Dollar General Common Stock (based on
the Current Market Price (as defined below) as of the second Trading Day prior
to the applicable Notice Date), cash or a combination of Dollar General Common
Stock and cash. If the Contracting Stockholder elects to deliver shares of
Dollar General Common Stock, Holders will be responsible for the payment of any
and all brokerage costs upon the subsequent sale thereof.
The Administrator will provide notice of the Contracting Stockholder's
election to exercise its acceleration right to Holders of record not less than
nine calendar days (14 calendar days if the Contracting Stockholder elects to
pay all or any portion of the Acceleration Amount in cash) nor more than 30
calendar days prior to the related Acceleration Date. Such notice will state the
following and may contain such other information as the Administrator deems
advisable: (a) the Acceleration Date, (b) the Acceleration Percentage, (c) the
Optional Acceleration Value, (d) the Acceleration Amount, (e) whether the
Contracting Stockholder will pay the Acceleration Amount by delivery of shares
of Dollar General Common Stock, cash or a combination thereof and, if payable in
whole or in part in Dollar General Common Stock, will also state the number of
shares of Dollar General Common Stock to be delivered to the Trust and the
Current Market Price used to calculate such number of shares, and (f) the amount
of cash and/or Dollar General Common Stock and U.S. Treasury Securities to be
distributed in respect of each STRYPES. Any such notice will be provided by
mail, sent to each Holder of record at such Holder's address as it appears on
the register for the STRYPES, first class, postage prepaid. At or prior to the
mailing of such notice of acceleration, the Administrator will publish an
announcement in The Wall Street Journal or another daily newspaper of national
circulation.
As soon as practicable after any Acceleration Date, the Trust will
distribute pro rata to the Holders the shares of Dollar General Common Stock
and/or cash received from the Contracting Stockholder on such Acceleration Date,
together with the applicable Acceleration Percentage of each issue of U.S.
Treasury Securities then held by the Trust.
If at any time prior to the Exchange Date or the Early Settlement Date (as
defined below) the Contracting Stockholder shall have exercised its acceleration
right described above, the Exchange Amount or
17
<PAGE> 20
amount of cash, as the case may be, per STRYPES otherwise deliverable by the
Contracting Stockholder under the Contract shall be adjusted by multiplying such
Exchange Amount or amount of cash, as the case may be, by a fraction (the
"Adjustment Factor"), the numerator of which shall be the Optional Acceleration
Value immediately prior to the Exchange Date or Early Settlement Date and the
denominator of which shall be the Original Optional Acceleration Value.
The "Acceleration Percentage" means, with respect to any acceleration
notice given by the Contracting Stockholder, the percentage of the Optional
Acceleration Value in respect of which the Contracting Stockholder has elected
to accelerate its obligation under the Contract on the related Acceleration
Date.
The "Current Market Price" per share of the Dollar General Common Stock on
any date of determination means the average of the daily Closing Prices for the
five consecutive Trading Days ending on and including such date of determination
(appropriately adjusted to take into account the occurrence during such five-day
period of any event that results in an adjustment of the Exchange Rate Formula);
provided, however, that if the Closing Price of the Dollar General Common Stock
on the Trading Day next following such five-day period (the "Next-Day Closing
Price") is less than 95% of such five-day average, then the Current Market Price
per share of Dollar General Common Stock on such date of determination will be
the Next-Day Closing Price; and provided further that, for purposes of
calculating the Current Market Price in connection with any acceleration of the
Contracting Stockholder's obligation under the Contract, if any adjustment to
the Exchange Rate Formula becomes effective as of any date during the period
beginning on the first day of such five-day period and ending on the applicable
Acceleration Date, as the case may be, then the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
such adjustment. Because the price of the Dollar General Common Stock is subject
to market fluctuations, it is possible that the Next-Day Closing Price could be
significantly less than such five-day average.
A "Notice Date" with respect to any notice given by the Administrator in
connection with any exercise by the Contracting Stockholder of its acceleration
right under the Contract means the commencement of the mailing of such notice to
the Holders as described above.
HYPOTHETICAL ILLUSTRATION OF OPTIONAL ACCELERATION
The hypothetical Exchange Prices set forth in the tables below are for
purposes of illustration only. There can be no assurance that the actual
Exchange Price will be within the range of hypothetical Exchange Prices shown.
The actual number of shares of Dollar General Common Stock or the amount of cash
that a Holder will receive for each STRYPES on the Exchange Date will depend
upon the actual Exchange Price, determined as described herein, and upon the
actual Equity Appreciation Cap. The actual Equity Appreciation Cap will be
determined when the issue price of the STRYPES is determined.
Initial 25% Acceleration in 1999
For illustrative purposes only, the following table shows the amount that a
Holder would receive for each STRYPES upon exercise by the Contracting
Stockholder of its acceleration right under the Contract and, given various
hypothetical Exchange Prices, the number of shares of Dollar General Common
Stock and/or the amount of cash that a Holder would receive upon exchange at the
Exchange Date in 2001. The table assumes (i) an Equity Appreciation Cap of
$54.00, (ii) that on the first anniversary of the Offering in 1999 the
Contracting Stockholder accelerates 25% of its then current obligation under the
Contract, (iii) that there will be no dilution adjustments to the Exchange Rate
Formula, (iv) that no Reorganization Event or Default
18
<PAGE> 21
(as defined below) occurs during the term of the Trust, and (v) that the total
number of STRYPES issued by the Trust is 7,500,000.
<TABLE>
<CAPTION>
1999 2001
- ---------------- ----------------------------------------------------
NUMBER OF
AMOUNT SHARES OF
RECEIVED EXCHANGE PRICE OF DOLLAR GENERAL
UPON 25% DOLLAR GENERAL COMMON STOCK, AMOUNT OF
ACCELERATION* COMMON STOCK AS ADJUSTED OR CASH
- ---------------- ----------------- -------------- --- ---------
<S> <C> <C> <C> <C>
$13.50 $44.00 .7500 $33.00
13.50 54.00 .7500 40.50
13.50 64.00 .6328 40.50
</TABLE>
- ---------------
* Payable in shares of Dollar General Common Stock (based upon the Current
Market Price as of the second Trading Day prior to the applicable Notice
Date), cash or a combination thereof.
Computation of Amount Received upon 25% Acceleration in 1999
The amount that a Holder would receive for each STRYPES upon acceleration
by the Contracting Stockholder on the first anniversary of the Offering in 1999
of 25% of its then current obligation under the Contract, as shown in the table
above, was computed as follows:
<TABLE>
<S> <C>
Original Optional Acceleration Value: $405,000,000 (Equity Appreciation Cap x Number
of STRYPES issued)
Optional Acceleration Value: $405,000,000 (Original Optional Acceleration
Value less the sum of all previously paid
Acceleration Amounts)
Acceleration Percentage: 25%
Acceleration Amount: $101,250,000 (Acceleration Percentage of the
Optional Acceleration Value)
Acceleration Amount per STRYPES: $13.50
</TABLE>
Adjustment of Exchange Amount for 1999 Acceleration
The number of shares of Dollar General Common Stock or amount of cash that
a Holder would receive on the Exchange Date in 2001, as set forth in the table
above, has been adjusted as shown below to take into account the prior exercise
by the Contracting Stockholder of its acceleration right in 1999.
<TABLE>
<S> <C> <C> <C> <C>
Number of Shares Optional Acceleration Value Number of Shares of
of Dollar
General X immediately prior to Exchange Date = Dollar General Common
Common Stock Original Optional Acceleration Value Stock, As Adjusted
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
EXCHANGE PRICE DOLLAR GENERAL DOLLAR GENERAL
OF DOLLAR GENERAL COMMON STOCK COMMON STOCK,
COMMON STOCK EXCHANGE AMOUNT ADJUSTMENT FACTOR AS ADJUSTED
- ----------------- ------------------- ----------------- -------------------
<S> <C> <C> <C>
$44.00 1.0000 .7500 .7500
54.00 1.0000 .7500 .7500
64.00 0.8438 .7500 .6328
</TABLE>
Subsequent 20% Acceleration in 2000
For illustrative purposes only, the following table further assumes that,
following the acceleration of 25% of the Contracting Stockholder's obligation
under the Contract described above, on the second anniversary of
19
<PAGE> 22
the Offering in 2000 the Contracting Stockholder accelerates 20% of its then
current obligation under the Contract.
<TABLE>
<CAPTION>
2000 2001
- ---------------- ----------------------------------------------------
NUMBER OF
AMOUNT SHARES OF
RECEIVED EXCHANGE PRICE OF DOLLAR GENERAL
UPON 20% DOLLAR GENERAL COMMON STOCK, AMOUNT OF
ACCELERATION* COMMON STOCK AS ADJUSTED OR CASH
- ---------------- ----------------- -------------- --- ---------
<S> <C> <C> <C> <C>
$8.10 $44.00 .6000 $26.40
8.10 54.00 .6000 32.40
8.10 64.00 .5063 32.40
</TABLE>
- ---------------
* Payable in shares of Dollar General Common Stock (based upon the Current
Market Price as of the second Trading Day prior to the applicable Notice
Date), cash or a combination thereof.
Computation of Amount Received upon 20% Acceleration in 2000
The amount that a Holder would receive for each STRYPES upon a subsequent
acceleration by the Contracting Stockholder on the second anniversary of the
Offering in 2000 of 20% of its then current obligation under the Contract, as
shown in the table above, was computed as follows:
<TABLE>
<S> <C>
Original Acceleration Value: $303,750,000 (Original Acceleration Value less
sum of all previously paid Acceleration
Amounts)
Acceleration Percentage: 20%
Acceleration Amount: $60,750,000 (Acceleration Percentage of the
Optional Acceleration Value)
Acceleration Amount per STRYPES: $8.10
</TABLE>
Adjustment of Exchange Amount for 2000 Acceleration
The number of shares of Dollar General Common Stock or amount of cash that
a Holder would receive on the Exchange Date in 2001, as set forth in the table
above, has been adjusted as shown below to take into account the prior exercises
by the Contracting Stockholder of its acceleration right in 1999 and 2000.
<TABLE>
<S> <C> <C> <C> <C>
Number of Shares Optional Acceleration Value Number of Shares of
of Dollar
General X immediately prior to Exchange Date = Dollar General Common
Common Stock Original Optional Acceleration Value Stock, As Adjusted
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
EXCHANGE PRICE DOLLAR GENERAL DOLLAR GENERAL
OF DOLLAR GENERAL COMMON STOCK COMMON STOCK,
COMMON STOCK EXCHANGE AMOUNT ADJUSTMENT FACTOR AS ADJUSTED
- ----------------- ------------------- ----------------- -------------------
<S> <C> <C> <C>
$44.00 1.0000 .6000 .6000
54.00 1.0000 .6000 .6000
64.00 0.8438 .6000 .5063
</TABLE>
Reorganization Events Causing a Dissolution of the Trust. In the event of
(A) any consolidation or merger of the Company or any Company Successor with or
into another entity (other than (x) a consolidation or merger in which the
Company is the continuing corporation and in which the Dollar General Common
Stock outstanding immediately prior to the consolidation or merger is not
exchanged for cash, securities or other property of the Company or another
corporation or (y) a statutory merger effected solely for the purpose of
changing the state of incorporation of the Company or a Company Successor), (B)
any sale, transfer, lease or conveyance to another entity of the property of the
Company or any Company Successor as an entirety or substantially as an entirety,
(C) any statutory exchange of securities of the Company or any Company Successor
with another entity (other than in connection with a merger or acquisition) or
(D) any liquidation,
20
<PAGE> 23
dissolution or winding up of the Company or any Company Successor (other than
any liquidation, dissolution or winding up constituting an Event of Default)
(any such event described in clause (A), (B), (C) or (D), a "Reorganization
Event"), the Contracting Stockholder's obligation under the Contract shall be
automatically accelerated and the Contracting Stockholder shall be obligated to
deliver to the Trust, on the tenth Business Day after the effective date for
such Reorganization Event (the "Early Settlement Date"), an amount of cash per
STRYPES equal to: (i) if the Transaction Value (as defined below) is greater
than the Equity Appreciation Cap, $ and (ii) if the Transaction Value
is less than or equal to the Equity Appreciation Cap, the Transaction Value.
"Transaction Value" means (i) for any cash received in any such Reorganization
Event, the amount of cash received per share of Dollar General Common Stock,
(ii) for any property other than cash or securities received in any such
Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Dollar General Common Stock as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator and (iii)
for any securities received in any such Reorganization Event, an amount equal to
the average Closing Price per unit of such securities on the 20 Trading Days
immediately prior to, but not including, the second Trading Day preceding the
Early Settlement Date, multiplied by the number of such securities (subject to
adjustment on a basis consistent with the adjustment provisions described above)
received for each share of Dollar General Common Stock; provided, however, if
one or more adjustments to the Exchange Rate Formula shall have become effective
prior to the effective date for such Reorganization Event, then the Transaction
Value determined in accordance with the foregoing shall be adjusted by
multiplying such Transaction Value by the Share Component immediately before the
effective date for such Reorganization Event. Notwithstanding the foregoing, if
any Marketable Securities (as defined below) are received by holders of Dollar
General Common Stock in such Reorganization Event, then in lieu of delivering
cash as provided above, the Contracting Stockholder may at its option deliver a
proportional amount of such Marketable Securities. If the Contracting
Stockholder elects to deliver Marketable Securities, Holders will be responsible
for the payment of any and all brokerage and other transaction costs upon the
sale of such securities. "Marketable Securities" means any securities listed on
a U.S. national securities exchange or reported by NASDAQ.
IF A REORGANIZATION EVENT OCCURS, THE NET ASSETS OF THE TRUST WILL BE
DISTRIBUTED PRO RATA TO THE HOLDERS AND THE TERM OF THE TRUST WILL EXPIRE.
Collateral Arrangements; Acceleration. Pursuant to a Security and Pledge
Agreement among the Contracting Stockholder, the Trust and The Bank of New York,
as collateral agent (the "Collateral Agent"), the Contracting Stockholder's
obligations under the Contract will be secured by a security interest in shares
of Series A Convertible Junior Preferred Stock of the Company that are currently
convertible into the maximum number of shares of Dollar General Common Stock
deliverable by the Contracting Stockholder under the Contract (subject to
adjustment in accordance with the adjustment provisions of the Contract,
described above). The Collateral Agent will promptly pay over to the Contracting
Stockholder any dividends, interest, principal or other payments received by the
Collateral Agent in respect of any collateral pledged by the Contracting
Stockholder, unless the Contracting Stockholder is in "Default" or unless the
payment of such amount to the Contracting Stockholder would cause the collateral
to become insufficient under the Security and Pledge Agreement. The Contracting
Stockholder shall have the right to vote any pledged shares of Series A
Convertible Junior Preferred Stock for so long as such shares are owned by it
and pledged under the Security and Pledge Agreement, unless the Contracting
Stockholder is in "Default."
A "Default" under the Security and Pledge Agreement means, at any time, (i)
failure of the collateral to consist of (x) at least the maximum number of
shares of Dollar General Common Stock deliverable by the Contracting Stockholder
under the Contract at such time or (y) a number of shares of Series A
Convertible Junior Preferred Stock of the Company that are currently convertible
into at least the maximum number of shares of Dollar General Common Stock
deliverable by the Contracting Stockholder at such time, in either case if such
failure is not remedied on or before the third Business Day after written notice
of such failure is given to the Contracting Stockholder, (ii) failure of the
Contracting Stockholder to perform any agreement or obligation under the
Security and Pledge Agreement (other than an obligation to deliver collateral)
if such failure is not remedied on or before the fifteenth calendar day after
written notice of such failure is given to the
21
<PAGE> 24
Contracting Stockholder, (iii) the Contracting Stockholder defaults in making
any payment or delivery of securities or cash due to be paid or delivered to the
Trust under the Contract or disaffirms, disclaims, repudiates or rejects, in
whole or in part, the Contract, (iv) certain events in bankruptcy or insolvency
of any donor of the Contracting Stockholder; (v) any of the representations or
warranties made by the Contracting Stockholder in the Security and Pledge
Agreement or the Contract or in any document delivered by or on behalf of the
Contracting Stockholder in connection therewith shall be materially false on the
date as of which made; (vi) the Collateral Agent fails, at any time, to have a
valid first, perfected and enforceable security interest in, and lien on, the
collateral pledged pursuant to the Security and Pledge Agreement, and such
failure is not remedied on or before the fifth calendar day after written notice
of such failure is given to the Contracting Stockholder; (vii) a judgment,
statutory or other lien (other than the lien created or permitted by the
Security and Pledge Agreement) is asserted or assessed against any of the
collateral pledged under the Security and Pledge Agreement; (viii) the
provisions of the Company's charter setting forth the powers, designations,
preferences and relative, participating, optional and other special rights of
the Series A Convertible Junior Preferred Stock of the Company and the
qualifications, limitations and restrictions of the Series A Convertible Junior
Preferred Stock of the Company, shall be amended or modified in any respect
which, in the judgment of the Trust upon advice of counsel, adversely affects
the rights of the Trust under the Contract or the Security and Pledge Agreement;
(ix) the donors of the Contracting Stockholder shall amend or modify the Turner
Children Trust or transfer the situs of administration thereof or change the
governing law applicable thereto and, in the judgment of the Trust upon advice
of counsel, such amendment, modification, transfer or change adversely affects
the rights of the Trust under the Contract or the Security and Pledge Agreement;
or (x) the donors of the Turner Children Trust shall revoke or terminate the
Turner Children Trust, or the Turner Children Trust shall otherwise terminate in
accordance with the terms of the Indenture of Trust dated January 21, 1990, as
amended.
The occurrence of a Default under the Security and Pledge Agreement will
cause an automatic acceleration of the Contracting Stockholder's obligation
under the Contract. In any such event, the Contracting Stockholder will become
obligated to deliver a number of shares of Dollar General Common Stock having an
aggregate value equal to the "Aggregate Acceleration Value" of the Contract. The
Aggregate Acceleration Value will be based on an "Acceleration Value" determined
by the Administrator on the basis of quotations from independent dealers. Each
quotation will be for an amount that would be paid to the relevant dealer in
consideration of an agreement between the Trust and such dealer that would have
the effect of preserving the Trust's rights to receive the number of shares of
Dollar General Common Stock under a portion of the Contract that corresponds to
1,000 of the STRYPES offered hereby. The Administrator will request quotations
from four nationally recognized independent dealers on or as soon as reasonably
practicable following the date of acceleration. If four quotations are provided,
the Acceleration Value will be the arithmetic mean of the two quotations
remaining after disregarding the highest and the lowest quotations. If two or
three quotations are provided, the Acceleration Value will be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
will be such quotation. The Aggregate Acceleration Value will be computed by
dividing the Acceleration Value by 1,000 and multiplying the quotient by the
aggregate number of STRYPES then outstanding, except that, if no quotations are
provided, the Aggregate Acceleration Value will be the product of the average
Closing Price per share of Dollar General Common Stock on the 20 Trading Days
immediately prior to, but not including, the second Trading Day preceding the
acceleration date and the number of shares of Dollar General Common Stock that
would be required to be delivered on such date under the Contract if the
Exchange Date were redefined for all purposes to be the acceleration date. Upon
the occurrence of a Default, the number of shares of Dollar General Common Stock
deliverable for each STRYPES will be based solely on the Aggregate Acceleration
Value described above for the Contract.
The Collateral Agent is a "financial institution" for purposes of Sections
555 and 101(22) of Title 11 of the United States Code (the "Bankruptcy Code").
The Trust believes that the Collateral Agent will be the agent and custodian for
the Trust such that the Trust will be a "financial institution" as defined in
Section 101(22) of the Bankruptcy Code. Upon any acceleration, the Collateral
Agent will convert the shares of Series A Convertible Junior Preferred Stock
then pledged into shares of Dollar General Common Stock and will distribute to
the Trust, for distribution pro rata to the Holders, the Aggregate Acceleration
Value in the form of shares of Dollar General Common Stock. See "-- Trust
Dissolution."
22
<PAGE> 25
Fractional Shares and Units. No fractional share of Dollar General Common
Stock will be delivered to the Trust if at any time the Contracting Stockholder
satisfies its obligation under the Contract in whole or in part by delivering
shares of Dollar General Common Stock. In lieu of any fractional share otherwise
deliverable in respect of the Contracting Stockholder's obligation under the
Contract, the Trust shall be entitled to receive an amount in cash equal to the
value of such fractional share based on the average Closing Price per share of
Dollar General Common Stock on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Exchange Date. No fractional
unit of any Marketable Security will be delivered to the Trust if the
Contracting Stockholder elects to deliver Marketable Securities on any Early
Settlement Date. In lieu of any fractional unit otherwise deliverable on the
Early Settlement Date in respect of the Contracting Stockholder's obligation
under the Contract, the Trust shall be entitled to receive an amount in cash
equal to the value of such fractional unit based on the average Closing Price
per unit of such Marketable Security on the 20 Trading Days immediately prior
to, but not including, the second Trading Day preceding the Early Settlement
Date.
Description of Contracting Stockholder. The Contracting Stockholder is the
Turner Children Trust, of which Cal Turner, Jr., Chairman of the Board and Chief
Executive Officer of the Company, and James Stephen Turner are Co-Trustees.
Specific information regarding the holdings of Dollar General Common Stock by
the Contracting Stockholder is included in the accompanying prospectus of the
Company with respect to the shares of Dollar General Common Stock that may be
received by a Holder of STRYPES upon exchange on the Exchange Date, upon any
exercise by the Contracting Stockholder of its acceleration right under the
Contract or upon early dissolution of the Trust.
Purchase Price. The purchase price under the Contract is equal to
$ in the aggregate and is payable to the Contracting Stockholder by the
Trust on or about , 1998. No other consideration is payable by the Trust
to the Contracting Stockholder in connection with its acquisition of the
Contract or the performance of the Contract by the Contracting Stockholder.
The Contract will be valued by the Trust at fair value as determined in
good faith at the direction of the Trustees (if necessary, through consultation
with accountants, bankers and other specialists). See "Net Asset Value."
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon U.S. Treasury
Securities with face amounts and maturities corresponding to the amounts and
payment dates of the distributions payable with respect to the STRYPES. Up to
% of the Trust's total assets may be invested in these U.S. Treasury
Securities. In the event that the Contracting Stockholder's obligation under the
Contract is accelerated as described under "-- Acceleration at the Option of the
Contracting Stockholder," "-- Reorganization Event Causing a Termination of the
Trust," or "-- Collateral Arrangements; Acceleration," the Administrator will
distribute pro rata to the Holders all or a portion of such U.S. Treasury
Securities then held in the Trust, together with amounts distributed upon
acceleration.
TEMPORARY INVESTMENTS
To the extent necessary to enable the Paying Agent to make the next
succeeding quarterly distribution, any moneys deposited with or received by the
Trust will be invested by the Paying Agent in short-term obligations of the U.S.
Government maturing no later than the Business Day preceding the next following
distribution date.
TRUST DISSOLUTION
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. Although the Trust has
adopted a fundamental policy that it will not dispose of the
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<PAGE> 26
Contract prior to the Exchange Date, under certain circumstances the Contract
may terminate prior to the Exchange Date. In the event that the Contracting
Stockholder shall have exercised its option to accelerate its remaining
obligation under the Contract in whole or a Reorganization Event or Default
shall have occurred, the net assets of the Trust would be distributed pro rata
to the Holders and the term of the Trust would expire. See "-- The
Contract -- Acceleration at the Option of the Contracting Stockholder,"
"-- Reorganization Event Causing Termination of the Trust" and "-- Collateral
Arrangements; Acceleration."
Written notice of any dissolution shall be sent to Holders specifying the
record date for the distribution to Holders, the amount distributable
(including, if applicable, the number of shares of Dollar General Common Stock
or, if a Reorganization Event shall have occurred, the number of units of any
Marketable Security) with respect to each STRYPES and the time of dissolution as
determined by the Trustees. Any such notice will be provided by mail, sent to
each Holder at such Holder's address as it appears on the register for the
STRYPES, first class, postage prepaid not less than nine days prior to the date
on which such distribution is to be made. At or prior to the mailing of such
notice, the Administrator shall publish a public announcement in The Wall Street
Journal or another daily newspaper of national circulation.
FRACTIONAL SHARES AND UNITS
No fractional shares of Dollar General Common Stock, or fractional units of
any Marketable Security, will be distributed by the Trust to Holders upon
exchange on the Exchange Date, upon any exercise by the Contracting Stockholder
of its acceleration right under the Contract or upon early dissolution of the
Trust. All fractional shares or units to which Holders would otherwise be
entitled will be aggregated and liquidated by the Administrator and, in lieu of
the fractional share or units to which a Holder would otherwise have been
entitled in respect of the total number of STRYPES held by such Holder, such
Holder will receive its pro rata portion of the proceeds from such liquidation.
As described herein, upon exercise by the Contracting Stockholder of its
acceleration right under the Contract or upon dissolution of the Trust prior to
the Exchange Date, the Trust will distribute pro rata to the Holders all or a
portion of the U.S. Treasury Securities then held by the Trust. The U.S.
Treasury Securities will be distributed in authorized denominations only. All
fractional amounts of any issue of U.S Treasury Securities to which Holders
would otherwise be entitled upon any acceleration of the Contract will be
aggregated and liquidated by the Administrator and, in lieu of the fractional
amount of such issue to which a Holder would otherwise be entitled in respect of
the total number of STRYPES held by such Holder, such Holder will receive its
pro rata portion of the proceeds from such liquidation.
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may not purchase
any securities or instruments other than the U.S. Treasury Securities, the
Contract and the Dollar General Common Stock or other assets received pursuant
to the Contract (including Marketable Securities) and, for cash management
purposes, short-term obligations of the U.S. Government; issue any securities or
instruments except for the STRYPES; make short sales or purchase securities on
margin; write put or call options; borrow money; underwrite securities; purchase
or sell real estate, commodities or commodities contracts; or make loans. The
Trust has adopted a fundamental policy to invest at least 65% of its portfolio
in the Contract. The Trust has also adopted a fundamental policy that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury Securities may not be disposed of (other than by distribution to the
Holders) prior to their respective maturities.
Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the retail industry, which is the industry in which
the Company currently operates. However, to the extent that in the future the
Company diversifies its operations into one or more other industries, the
Trust's investments will be less concentrated in the retail industry.
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<PAGE> 27
RISK FACTORS
NO ACTIVE PORTFOLIO MANAGEMENT
It is a fundamental policy of the Trust that the Contract may not be
disposed of during the term of the Trust and that the U.S. Treasury Securities
may not be disposed of (other than by distribution to the Holders) prior to
their respective maturities. As a result, the Trust will continue to hold the
Contract despite any significant decline in the market price of the Dollar
General Common Stock or adverse changes in the financial condition of the
Company. The Trust will not be managed like a typical closed-end investment
company.
ABSENCE OF TRADING HISTORY; MARKETABILITY; POSSIBILITY OF THE STRYPES TRADING AT
A DISCOUNT FROM NET ASSET VALUE
The STRYPES have no trading history and it is not possible to predict how
they will trade in the secondary market. The trading price of the STRYPES may
vary considerably prior to the Exchange Date due to, among other things,
fluctuations in trading prices of the Dollar General Common Stock (which may
occur due to changes in the Company's financial condition, results of operations
or prospects, or because of complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
stock exchanges or quotation systems on which the Dollar General Common Stock is
traded and the market segment of which the Company is a part) and fluctuations
in interest rates and other factors that are difficult to predict and beyond the
Trust's control.
The STRYPES are a new issue of securities and, accordingly, have no
established trading market. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide the
Holders with liquidity of investment or that it will continue for the life of
the STRYPES. Application has been made to list the STRYPES on the NYSE. There
can be no assurance that such application will be accepted or that, if accepted,
the STRYPES will not later be delisted or that trading in the STRYPES on the
NYSE will not be suspended. In the event of a delisting or suspension of trading
on such exchange, the Trust will apply for listing of the STRYPES on another
national securities exchange or for quotation on another trading market. If the
STRYPES are not listed or traded on any securities exchange or trading market,
or if trading of the STRYPES is suspended, pricing information for the STRYPES
may be more difficult to obtain, and the price and liquidity of the STRYPES may
be adversely affected.
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the STRYPES will trade at, below or above their net asset
value. The risk of purchasing investments that might trade at a discount is more
pronounced for investors who wish to sell their investments in a relatively
short period of time after completion of the Trust's initial public offering
because for those investors realization of a gain or loss on their investments
is likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The STRYPES are not subject to redemption.
DILUTION ADJUSTMENTS
The number of shares of Dollar General Common Stock (or the amount of cash
or combination of cash and Dollar General Common Stock) that the Trust is
entitled to receive pursuant to the Contract on the Business Day immediately
preceding the Exchange Date is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends and certain other actions of
the Company that modify its capital structure. See "Investment Objective and
Policies -- The Contract -- Dilution Adjustments." Such number of shares of
Dollar General Common Stock (or the amount of cash or combination of cash and
Dollar General Common Stock) to be received by the Trust will not be adjusted
for other events, such as offerings of Dollar General Common Stock for cash or
in connection with acquisitions. Likewise, no adjustments will be made for any
sales of Dollar General Common Stock by any stockholder of the Company
(including the Contracting Stockholder and beneficiaries of the Contracting
Stockholder).
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<PAGE> 28
The Company is not restricted in connection with the STRYPES from issuing
additional shares of Dollar General Common Stock during the term of the Trust.
In addition, the stockholders of the Company (including the Contracting
Stockholder and beneficiaries of the Contracting Stockholder) are not precluded
from selling shares of Dollar General Common Stock, either pursuant to Rule 144
under the Securities Act or by causing the Company to register such shares.
Neither the Company nor any stockholder of the Company has any obligation to
consider the interests of the Holders for any reason. Additional issuances or
sales may materially and adversely affect the price of the Dollar General Common
Stock and, because of the relationship of the number of shares of Dollar General
Common Stock (or the amount of cash or combination of cash and Dollar General
Common Stock) to be received pursuant to the Contract to the price of the Dollar
General Common Stock, such other events may materially and adversely affect the
trading price of the STRYPES. There can be no assurance that the Company will
not take any of the foregoing actions, or that it will not make offerings of, or
that stockholders (including the Contracting Stockholder and beneficiaries of
the Contracting Stockholder) will not sell any, Dollar General Common Stock in
the future, or as to the amount of any such offerings or sales.
LIMITED TERM
The term of the Trust will expire on or shortly after the Exchange Date,
unless the Trust is dissolved earlier under certain limited circumstances. On or
shortly after the Exchange Date, the Trust will distribute the shares of Dollar
General Common Stock and/or cash received by the Trust pursuant to the Contract
and other net assets held by the Trust pro rata to the Holders and dissolve
shortly thereafter. In the event that the Contracting Stockholder shall have
exercised its right to accelerate its remaining obligation under the Contract as
a whole, the Trust will distribute pro rata to the Holders the shares of Dollar
General Common Stock and/or cash received by the Trust and any other net assets
of the Trust (including the U.S. Treasury Securities then held) and the term of
the Trust would expire. Similarly, in the event that a Reorganization Event or a
Default shall have occurred, the net assets of the Trust would be distributed
pro rata to Holders and the term of the Trust would expire.
NON-DIVERSIFIED PORTFOLIO
The Trust's assets will consist almost entirely of the Contract and the
U.S. Treasury Securities. As a result, investments in the Trust may be subject
to greater risk than would be the case for a company with a more diversified
portfolio of investments.
COMPARISON TO OTHER EQUITY SECURITIES; RELATIONSHIP TO DOLLAR GENERAL COMMON
STOCK
The terms of the STRYPES are similar to those of ordinary equity securities
in that the value of the Dollar General Common Stock (or, pursuant to the right
of the Contracting Stockholder, the amount of cash or combination of cash and
Dollar General Common Stock) that a Holder will receive on the Exchange Date is
not fixed, but is based on the Exchange Price of the Dollar General Common Stock
(see "Investment Objective and Policies -- General" and "-- The Contract").
THERE CAN BE NO ASSURANCE THAT SUCH AMOUNT RECEIVABLE BY THE HOLDER ON THE
EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE PAID FOR THE
STRYPES. IF THE EXCHANGE PRICE OF THE DOLLAR GENERAL COMMON STOCK IS LESS THAN
THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN
THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES
WILL RESULT IN A LOSS. ACCORDINGLY, A HOLDER ASSUMES THE RISK THAT THE MARKET
VALUE OF THE DOLLAR GENERAL COMMON STOCK MAY DECLINE, AND THAT SUCH DECLINE
COULD BE SUBSTANTIAL. REFERENCE IS MADE TO THE ACCOMPANYING PROSPECTUS OF THE
COMPANY, INCLUDING THE INFORMATION UNDER THE CAPTION "RISK FACTORS" THEREIN.
The trading prices of the STRYPES in the secondary market will be affected
by the trading prices of the Dollar General Common Stock in the secondary
market. It is impossible to predict whether the price of Dollar General Common
Stock will rise or fall. Trading prices of Dollar General Common Stock will be
influenced by the Company's operating results and prospects and by economic,
financial and other factors and market conditions that can affect the capital
markets generally, including the level of, and fluctuations in, the trading
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<PAGE> 29
prices of stocks generally and sales of substantial amounts of Dollar General
Common Stock in the market subsequent to the Offering or the perception that
such sales could occur.
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION; POTENTIAL LOSSES
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the Dollar General Common Stock because the amount
receivable by a Holder upon exchange on the Exchange Date or upon any exercise
by the Contracting Stockholder of its acceleration right under the Contract will
not exceed the Equity Appreciation Cap (which represents an appreciation of
% over the Initial Price). Holders will realize the entire decline in value
if the Exchange Price is less than the Initial Price. See "Investment Objective
and Policies -- The Contract." Because the price of the Dollar General Common
Stock is subject to market fluctuations, the value of the Dollar General Common
Stock (or, pursuant to the right of the Contracting Stockholder, the amount of
cash or combination of cash and Dollar General Common Stock) received by a
Holder in exchange for a STRYPES on the Exchange Date, determined as described
herein, may be more or less than the issue price paid for such STRYPES.
NO STOCKHOLDER RIGHTS
Holders will not be entitled to any rights with respect to the Dollar
General Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) until such
time, if any, as the Trust shall have delivered the Dollar General Common Stock
upon exchange on the Exchange Date, upon any exercise by the Contracting
Stockholder of its acceleration right under the Contract or upon early
dissolution of the Trust, and unless the applicable record date, if any, for the
exercise of such right occurs after such delivery. For example, in the event
that an amendment is proposed to the Certificate of Incorporation of the Company
and the record date for determining the stockholders of record entitled to vote
on such amendment occurs prior to such delivery, Holders will not be entitled to
vote on such amendment.
The Contracting Stockholder is not responsible for the determination or
calculation of the amount receivable by Holders upon exchange on the Exchange
Date, upon any exercise by the Contracting Stockholder of its acceleration right
under the Contract or upon early dissolution of the Trust. The Contract among
the Trust, the Collateral Agent and the Contracting Stockholder is a commercial
transaction and does not create any rights in, or for the benefit of, any third
party, including any Holder.
RISK RELATING TO BANKRUPTCY
The Trust believes that the Contract will constitute a "securities
contract" for purposes of the Bankruptcy Code, performance of which would not
under Section 555 of the Bankruptcy Code be subject to the automatic stay
provisions of the Bankruptcy Code in the event of bankruptcy of any donor of the
Contracting Stockholder. It is, however, possible that the Contract will be
determined not to qualify as a "securities contract" or other protected
transaction under Sections 556 and 560 of the Bankruptcy Code for this purpose
(or that there will be a delay while the bankruptcy court considers such issue),
in which case the bankruptcy of any donor of the Contracting Stockholder may
cause a delay in settlement of the Contract with the Contracting Stockholder, or
otherwise subject the Contract to the bankruptcy proceedings, which could
adversely affect the time of exchange or, as a result, the amount received by
the Holders in respect of the STRYPES.
TAX MATTERS
Holders may experience a taxable event upon the exchange of STRYPES or upon
any exercise by the Contracting Stockholder of its acceleration right under the
Contract to the extent that the Contracting Stockholder satisfies its obligation
under the Contract in whole or in part with cash (including upon the occurrence
of a Reorganization Event). Because of an absence of authority as to the proper
character of any gain or loss resulting from such a taxable event, the ultimate
tax consequences to Holders as a result of the
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<PAGE> 30
Contracting Stockholder satisfying its obligation under the Contract, in whole
or in part, with cash is uncertain. Accordingly, prospective investors in the
STRYPES should consult their own tax advisors in this regard. Investors should
also consult their own tax advisors concerning the proper treatment of their pro
rata share of the Trust's fees and expenses, and the application of the United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the STRYPES arising
under the laws of any other taxing jurisdiction. The tax consequences of
investing in the STRYPES are described in greater detail under "Certain United
States Federal Income Tax Considerations."
DESCRIPTION OF THE STRYPES
Each STRYPES represents a proportionate share of beneficial interest in the
assets of the Trust, and a total of 7,500,000 STRYPES will be issued in the
Offering, assuming no exercise of the Underwriters' over-allotment option. Upon
liquidation of the Trust, Holders are entitled to share pro rata in the net
assets of the Trust available for distribution. The STRYPES have no preemptive,
redemption or conversion rights. The STRYPES, when issued and outstanding, will
be fully paid and nonassessable.
Holders are entitled to one vote for each STRYPES held on all matters to be
voted on by Holders and are not able to cumulate their votes in the election of
Trustees. The Trust intends to hold annual meetings as required by the rules of
the NYSE. The Holders have the right, upon the declaration in writing or vote of
more than two-thirds of the outstanding STRYPES, to remove a Trustee. The
Trustees will call a meeting of Holders to vote on the removal of a Trustee upon
the written request of the record Holders of 10% of the STRYPES or to vote on
other matters upon the written request of the record Holders of more than 50% of
the STRYPES (unless substantially the same matter was voted on during the
preceding 12 months).
BOOK-ENTRY SYSTEM
The STRYPES will be issued in the form of one or more global securities
(the "Global Securities") deposited with the Depositary and registered in the
name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective STRYPES represented by such Global Security to the
accounts of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in such Global Securities will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of
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<PAGE> 31
the STRYPES. Except as set forth below, owners of beneficial interests in such
Global Securities will not be entitled to have the STRYPES registered in their
names and will not receive or be entitled to receive physical delivery of the
STRYPES in definitive form and will not be considered the owners or Holders
thereof.
Payment of shares of Dollar General Common Stock or amounts payable or
other consideration deliverable on exchange of, and any quarterly distributions
on, STRYPES registered in the name of or held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner or the holder of the Global Security. None of the Trust, any
Trustee, the Administrator, the Paying Agent or the Custodian for the STRYPES
will have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in such Global Security as shown on the records of the Depositary. The Trust
also expects that payments by participants to owners of beneficial interests in
such Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Trust within ninety days, the Trust will
issue STRYPES in definitive registered form in exchange for the Global Security
representing such STRYPES. In addition, the Trust may at any time and in its
sole discretion determine not to have any STRYPES represented by one or more
Global Securities and, in such extent, will issue STRYPES in definitive form in
exchange for all of the Global Securities representing the STRYPES. Further, if
the Trust so specifies with respect to the STRYPES, an owner of a beneficial
interest in a Global Security representing STRYPES may, on terms acceptable to
the Trust and the Depositary for such Global Security, receive STRYPES in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
STRYPES represented by such Global Security equal in number to that represented
by such beneficial interest and to have such STRYPES registered in its name.
TRUSTEES
The Trustees of the Trust consist of three individuals, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act. The
Trustees of the Trust are responsible for the overall supervision of the
operations of the Trust and perform the various duties imposed on the trustees
of management investment companies by the Investment Company Act.
The Trustees of the Trust are:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- -----------------------
<S> <C> <C>
Donald J. Puglisi, 52............................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53........................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
</TABLE>
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<PAGE> 32
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- -----------------------
<S> <C> <C>
James B. O'Neill, 58................................ Trustee Professor of Economics
Center for Economic University of Delaware
Education & Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
COMPENSATION OF TRUSTEES
Each unaffiliated Trustee will be paid by the Underwriters, in respect of
its annual fees and anticipated out-of-pocket expenses, a one-time, up-front fee
of $10,800. The Trust's Managing Trustee will also receive an additional
up-front fee of $3,600 for serving in that capacity. The Trustees will not
receive, either directly or indirectly, any compensation, including any pension
or retirement benefits, from the Trust. None of the Trustees receives any
compensation for serving as a trustee or director of any other affiliated
investment company.
MANAGEMENT ARRANGEMENTS
PORTFOLIO MANAGEMENT AND ADMINISTRATION
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The Trustees of the
Trust will authorize the purchase of the Contract and the U.S. Treasury
Securities as directed by the Declaration of Trust. It is a fundamental policy
of the Trust that the Contract may not be disposed of during the term of the
Trust and that the U.S. Treasury Securities may not be disposed of (other than
by distribution to the Holders) prior to their respective maturities.
The Contracting Stockholder and the Underwriters will pay all expenses
incurred in the operation of the Trust, including, among other things,
accounting services, expenses for legal and auditing services, taxes, costs of
printing proxies, listing fees, if any, stock certificates and shareholder
reports, charges of the Administrator, the Custodian and the Paying Agent,
expenses of registering the STRYPES under Federal and state securities laws,
Commission fees, fees and expenses of Trustees, accounting costs, brokerage
costs, litigation and other extraordinary or non-recurring expenses, mailing and
other expenses properly payable by the Trust. See "-- Estimated Expenses."
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New
York, as trust administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
pay, or cause to be paid, all expenses incurred by the Trust; (ii) with the
approval of the Trustees, engage legal and other professional advisors (other
than the independent public accountants for the Trust); (iii) instruct the
Paying Agent to pay distributions on STRYPES as described herein; (iv) cause the
legal and other professional advisors engaged by it to prepare and mail, file or
publish all notices, proxies, reports, tax returns and other communications and
documents for the Trust, and keep all books and records for the Trust; (v) at
the direction of the Trustees, and upon being furnished with reasonable security
and indemnity as the Administrator may require, institute and prosecute legal
and other appropriate proceedings to enforce the rights and remedies of the
Trust; and (vi) make, or cause to be made, all necessary arrangements with
respect to meetings of Trustees and any meetings of Holders. The Administrator
will not, however, select the independent public accountants for the Trust or
sell or otherwise dispose of the Trust assets (except in connection with the
settlement of the Contract on the Business Day immediately preceding the
Exchange Date).
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<PAGE> 33
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian and Paying Agent of the
Trust, and except for its role as Collateral Agent under the Security and Pledge
Agreement, The Bank of New York has no other affiliation with, and is not
engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
CUSTODIAN
The Trust's custodian is The Bank of New York pursuant to a custodian
agreement (the "Custodian Agreement"). In the event of any termination of the
Custodian Agreement by the Trust or the resignation of the Custodian, the Trust
must engage a new Custodian to carry out the duties of the Custodian as set
forth in the Custodian Agreement. The Custodian will also act as Collateral
Agent under the Security and Pledge Agreement and will hold a perfected security
interest in the shares of Series A Convertible Junior Preferred Stock or other
assets consistent with the terms of the Contract pledged thereunder.
PAYING AGENT
The paying agent, transfer agent and registrar for the STRYPES is The Bank
of New York pursuant to a paying agent agreement (the "Paying Agent Agreement").
In the event of any termination of the Paying Agent Agreement by the Trust or
the resignation of the Paying Agent, the Trust will use its best efforts to
engage a new Paying Agent to carry out the duties of the Paying Agent.
INDEMNIFICATION
The Trust, to the fullest extent permitted by law, will indemnify each
Trustee, the Administrator, the Paying Agent and the Custodian with respect to
any claim, liability, loss which it may incur in acting as Trustee,
Administrator, Paying Agent or Custodian, as the case may be, and any reasonable
expense incurred in connection with any such claim, liability or loss (including
the reasonable costs and expenses of the defense against any claim or liability)
except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of their respective duties. Subject to the satisfaction of
certain conditions, Merrill Lynch & Co., Inc. will reimburse the Trust for any
amounts it may be required to pay as indemnification to any Trustee, the
Administrator, the Paying Agent or the Custodian, and Merrill Lynch & Co., Inc.
will in turn be reimbursed by the Contracting Stockholder for all such
reimbursements paid by it.
ESTIMATED EXPENSES
At the closing of the Offering, the Underwriters will pay to each of the
Administrator, the Custodian and the Paying Agent a one-time, up-front amount in
respect of its fee. In addition, the Contracting Stockholder will pay to the
Administrator at the closing of the Offering an amount, estimated to be
approximately $ , in respect of certain anticipated ongoing expenses of
the Trust over the term of the Trust. The anticipated Trust expenses to be borne
by the Contracting Stockholder include, among other things, expenses for legal
and independent accountants' services, costs of printing proxies, STRYPES
certificates and Holder reports and stock exchange fees. Organization costs of
the Trust in the amount of $ and approximately $ in respect of
costs associated with the initial registration and public offering of the
STRYPES will be paid by the Underwriters.
The amount payable to the Administrator in respect of the anticipated
ongoing expenses of the Trust was determined based on expense estimates made in
good faith on the basis of information currently available to the Trust,
including estimates furnished by the Trust's agents. Merrill Lynch & Co., Inc.
will pay any unanticipated operating expenses of the Trust. Merrill Lynch & Co.,
Inc. will be reimbursed by the Contracting Stockholder for all fees and expenses
of the Trust paid by it.
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DIVIDENDS AND DISTRIBUTIONS
The Trust intends to distribute cash to Holders on a quarterly basis at the
rate of % of the Investment Amount per annum (which quarterly distribution
will equal the fixed quarterly distributions from the proceeds of the maturing
U.S. Treasury Securities held by the Trust). The first distribution, in respect
of the period from , 1998 until , 1998, will be made on
, 1998 to Holders of record as of , 1998. Thereafter,
distributions will be made on , , and
of each year to Holders of record as of each ,
, and , respectively.
The "Investment Amount" means, with respect to each STRYPES, $
initially and is subject to adjustment from time to time prior to the Exchange
Date to reflect the distribution of assets by the Trust upon any exercise by the
Contracting Stockholder of its acceleration right under the Contract. On each
Acceleration Date, if any, the Investment Amount shall be adjusted by
multiplying the Investment Amount in effect immediately prior to such
Acceleration Date by a fraction, the numerator of which shall be the Optional
Acceleration Value of the Contract immediately after such Acceleration Date and
the denominator of which shall be the Optional Acceleration Value of the
Contract immediately prior to such Acceleration Date.
As soon as practicable after any Acceleration Date, the Trust will
distribute pro rata to the Holders the shares of Dollar General Common Stock
and/or cash received from the Contracting Stockholder on such Acceleration Date,
together with the applicable Acceleration Percentage of each issue of U.S.
Treasury Securities then held by the Trust.
Upon dissolution of the Trust as described in "Investment Objective and
Policies -- Trust Dissolution," each Holder will share pro rata in any remaining
net assets of the Trust.
NET ASSET VALUE
The net asset value of the STRYPES will be calculated by the Trust no less
frequently than quarterly by dividing the value of the net assets of the Trust
(the value of its assets less its liabilities) by the total number of STRYPES
outstanding. The Trust's net asset value will be published semi-annually as part
of the Trust's semi-annual report to Holders and at such other times as the
Trustees may determine. The U.S. Treasury Securities held by the Trust will be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trust.
Short-term investments having a maturity of 60 days or less are valued at cost
with accrued interest or discount earned included in interest receivable. The
Contract will be valued at the mean of the bid prices received by the
Administrator from at least three independent broker-dealer firms unaffiliated
with the Trust who are in the business of making bids on financial instruments
similar to the Contract and with terms comparable thereto.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood LLP, counsel to the
Trust, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change (including retroactive changes in effective dates) or possible
differing interpretations. The discussion below deals only with STRYPES held as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, tax-exempt entities,
persons holding STRYPES in a tax-deferred or tax-advantaged account, or persons
holding STRYPES as a hedge against currency risks, as a position in a "straddle"
or as part of a "hedging" or "conversion" transaction for tax purposes. It also
does not deal with Holders other than original purchasers of STRYPES (except
where otherwise specifically noted herein). Moreover, the discussion below
generally does not address the tax consequences of ownership of the Dollar
General Common Stock or Marketable Securities. The following discussion also
does not address the tax consequences of investing in the STRYPES arising under
the laws of any state, local or foreign jurisdiction. Persons considering the
purchase of the STRYPES should consult their own tax advisors concerning the
application of
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the United States Federal income tax laws to their particular situations as well
as any consequences of the purchase, ownership and disposition of the STRYPES
arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of STRYPES
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, a partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate the
income of which is subject to United States Federal income taxation regardless
of its source, or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. Notwithstanding the preceding sentence, to the extent
provided in Treasury regulations, certain trusts in existence on August 20,
1996, and treated as United States persons prior to such date that elect to
continue to be treated as United States persons also will be a U.S. Holder. As
used herein, the term "non-U.S. Holder" means a beneficial owner of STRYPES that
is not a U.S. Holder. Unless otherwise specifically provided, the following
opinion of Brown & Wood LLP assumes that on the Exchange Date Holders will
receive shares of Dollar General Common Stock.
CLASSIFICATION OF THE TRUST
The Trust will be classified as a grantor trust under subpart E, Part I of
subchapter J of the Internal Revenue Code of 1986, as amended (the "Code"). As
such, Holders will be treated for United States Federal income tax purposes as
owners of a pro rata undivided interest in the Trust's assets which will consist
of the U.S. Treasury Securities and the Contract. Accordingly, each Holder will
be required to report on its United States Federal income tax return its pro
rata share of the entire income on the Trust's assets in accordance with such
Holder's regular method of tax accounting.
U.S. HOLDERS
As previously discussed, each U.S. Holder will be considered the owner of
its pro rata portion of the U.S. Treasury Securities and the Contract held by
the Trust. The cost to a U.S. Holder of its STRYPES will be allocated among such
U.S. Holder's pro rata portion of the U.S. Treasury Securities and the Contract
(in proportion to the relative fair market values thereof on the date on which
the U.S. Holder acquires its STRYPES) in order to determine the U.S. Holder's
initial tax basis in the U.S. Holder's pro rata portion of the U.S. Treasury
Securities and the Contract. It is currently anticipated that % and %
of the net proceeds of the offering will be used by the Trust to purchase the
U.S. Treasury Securities and as payments under the Contract, respectively.
The U.S. Treasury Securities held by the Trust will be treated for United
States Federal income tax purposes as having original issue discount which will
accrue over the term of the U.S. Treasury Securities. In general, a U.S. Holder
will be treated as having purchased each U.S. Treasury Security held by the
Trust with original issue discount in an amount equal to the excess of the U.S.
Holder's pro rata portion of the amount payable on such U.S. Treasury Security
over the U.S. Holder's initial tax basis therefor as discussed above. A U.S.
Holder (whether on the cash or accrual method of tax accounting) will be
required to include such original issue discount in income for United States
Federal income tax purposes as it accrues in accordance with a constant yield
method. Because it is expected that 20% or more of the Holders will be accrual
basis taxpayers, original issue discount on any short-term U.S. Treasury
Securities (i.e., any U.S. Treasury Security with a maturity of one year or less
from the date it is purchased by the Trust) held by the Trust will also be
currently includable in income by U.S. Holders as it accrues on a straight-line
basis (unless a U.S. Holder elects to accrue such original issue discount on a
constant yield basis). A U.S. Holder's tax basis in its pro rata portion of a
U.S. Treasury Security will be increased by the amount of any original issue
discount included in income by the U.S. Holder with respect to such U.S.
Treasury Security (as described above). A U.S. Holder will also be required to
recognize capital gain or loss with respect to such U.S. Holder's pro rata
portion of the U.S. Treasury Securities upon an early dissolution of the Trust
in an amount equal to the difference between the amount of cash, if any,
received by the U.S. Holder in respect of such U.S. Holder's pro rata portion of
the U.S. Treasury Securities and the U.S. Holder's tax basis in its pro rata
portion of the U.S. Treasury Securities.
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Such capital gain or loss would be long-term capital gain or loss if the STRYPES
have been held by the U.S. Holder for more than one year. The receipt by a U.S.
Holder of its pro rata portion of U.S. Treasury Securities upon the Contracting
Stockholder's exercise of its acceleration right under the Contract or upon
dissolution of the Trust will not be a taxable event to the U.S. Holder. The
U.S. Holder's tax basis in such U.S. Treasury Securities will be the same as
such U.S. Holder's tax basis in such U.S. Treasury Securities immediately prior
to the receipt thereof, and the U.S. Holder's holding period for such U.S.
Treasury Securities will include the period during which the U.S. Holder held
the related STRYPES.
Each U.S. Holder will also be treated as having entered into a pro rata
portion of the Contract. Under current law, a U.S. Holder should not be required
to recognize any income, gain or loss with respect to the Contract until the
earlier of the Exchange Date, upon the occurrence of a Reorganization Event or
"Default" or, in certain cases, upon exercise by the Contracting Stockholder of
its acceleration right under the Contract. On the Exchange Date or upon a
"Default", if the Contracting Stockholder delivers Dollar General Common Stock
pursuant to the Contract in respect of a U.S. Holder's STRYPES, the U.S. Holder
will generally not realize any taxable gain or loss upon the receipt of such
Dollar General Common Stock. However, a U.S. Holder will generally be required
to recognize taxable gain or loss with respect to any cash received in lieu of
fractional shares. The amount of such gain or loss recognized by a U.S. Holder
will be equal to the difference, if any, between the amount of cash received by
the U.S. Holder and the portion of the U.S. Holder's tax basis in the Contract
that is allocable to the fractional shares. Any such taxable gain or loss will
be treated as short-term capital gain or loss. A U.S. Holder will have an
initial tax basis in any Dollar General Common Stock received thereby on the
Exchange Date or upon a "Default" in an amount equal to the U.S. Holder's tax
basis in the Contract less the portion of such tax basis that is allocable to
any fractional shares (as described above) and will realize taxable gain or loss
with respect to any such Dollar General Common Stock received thereby on the
Exchange Date or upon a "Default" only upon the subsequent sale or disposition
by the U.S. Holder of such Dollar General Common Stock. In addition, a U.S.
Holder's holding period for any Dollar General Common Stock received by such
U.S. Holder on the Exchange Date or upon a "Default" will begin on the Exchange
Date or the day immediately following the date of acceleration, respectively,
and will not include the period during which the U.S. Holder held the related
STRYPES.
Alternatively, if the Contracting Stockholder satisfies its obligations
under the Contract in whole in cash on the Exchange Date in respect of a U.S.
Holder's STRYPES, the U.S. Holder will recognize taxable gain or loss with
respect to the Contract in an amount equal to the difference, if any, between
the total amount of cash received by such U.S. Holder and an amount equal to the
U.S. Holder's tax basis in the Contract. It is uncertain whether such gain or
loss would be treated as capital or ordinary gain or loss. If such gain or loss
is properly treated as capital, then such gain or loss will be treated as
long-term capital gain or loss if the STRYPES has been held by the U.S. Holder
for more than one year. If such gain or loss is properly treated as ordinary
gain or loss, it is possible that the deductibility of any loss by a U.S. Holder
who is an individual could be subject to the limitations applicable to
miscellaneous itemized deductions provided for under Section 67(a) of the Code.
In general, Section 67(a) of the Code provides that an individual may only
deduct miscellaneous itemized deductions for a particular taxable year to the
extent that the aggregate amount of the individual's miscellaneous itemized
deductions for such taxable year exceed two percent of the individual's adjusted
gross income for such taxable year (the miscellaneous itemized deductions and
other itemized deductions allowable to high-income individuals, however, are
generally subject to further limitations under Section 68 of the Code).
Prospective investors in the STRYPES who are individuals should also be aware
that miscellaneous itemized deductions are not allowable in computing the United
States Federal alternative minimum tax imposed by Section 55 of the Code.
Prospective investors in the STRYPES are urged to consult their own tax advisors
concerning the character of any gain or loss realized on the Exchange Date with
respect to the Contract in the event that the Contracting Stockholder elects to
satisfy its obligations under the Contract in whole in cash on the Exchange
Date, as well as the deductibility of any such loss.
In the event that a U.S. Holder receives a combination of cash and shares
of Dollar General Common Stock on the Exchange Date, the tax consequences to a
U.S. Holder are not entirely certain. It is likely that in such event a U.S.
Holder generally should not be required to recognize taxable gain or loss. A
U.S. Holder's tax basis in any Dollar General Common Stock received thereby
generally should equal the U.S. Holder's tax
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basis in the Contract less the amount of any cash received by the U.S. Holder. A
U.S. Holder should, however, be required to recognize taxable gain to the extent
that the amount of cash received by the U.S. Holder exceeds the U.S. Holder's
tax basis in the Contract. As an alternative to the foregoing rules, in the
event that a U.S. Holder receives a combination of cash and shares of Dollar
General Common Stock on the Exchange Date, it is possible that the U.S. Holder
could be required to apply the rules described in the two preceding paragraphs
to the STRYPES held thereby on a pro rata basis in proportion to the amount of
the Dollar General Common Stock and cash received thereby. U.S. Holders are
urged to consult their own tax advisors in this regard.
In general, if the Contracting Stockholder exercises its acceleration
option under the Contract, the tax consequences to a U.S. Holder are not
entirely certain. It is likely that upon any acceleration (other than a one-time
acceleration in whole, which generally should be treated in the same manner as
an exchange of STRYPES on the Exchange Date) a U.S. Holder should not be
required to recognize taxable gain or loss upon receipt of either Dollar General
Common Stock or cash. A U.S. Holder's tax basis in any Dollar General Common
Stock received thereby as a result of any exercise by the Contracting
Stockholder of its acceleration option under the Contract generally should equal
the U.S. Holder's tax basis in the Contract less any cash received by the U.S.
Holder upon such acceleration and any prior accelerations. However, a U.S.
Holder should be required to recognize taxable gain in respect of the Contract
to the extent that the total amount of cash received by the U.S. Holder under
the Contract upon such acceleration and any prior accelerations exceeds the U.S.
Holder's tax basis in the Contract. As previously discussed, the proper
character of any such gain is not entirely certain. As an alternative to the
foregoing rules, it is possible that a U.S. Holder will be required to allocate
the U.S. Holder's tax basis in the portion of the Contract accelerated among any
shares of Dollar General Common Stock and cash received by the U.S. Holder upon
an exercise by the Contracting Stockholder of its acceleration option under the
Contract. In such event, the U.S. Holder would be required to recognize taxable
gain or loss in an amount equal to the difference between the amount of cash
received and the portion of the U.S. Holder's tax basis in the Contract that is
allocable to such cash. In no event, however, will a U.S. Holder's holding
period for any Dollar General Common Stock received by the U.S. Holder upon an
exercise by the Contracting Stockholder of its acceleration option under the
Contract include the period during which the U.S. Holder held the related
STRYPES. U.S. Holders are urged to consult their own tax advisors regarding the
tax consequences to them of the Contracting Stockholder exercising its
acceleration option under the Contract.
Upon the sale or other disposition of a STRYPES prior to the Exchange Date,
a U.S. Holder generally will be required to allocate the total amount realized
by such U.S. Holder upon such sale or other disposition between the U.S.
Holder's pro rata portion of the U.S. Treasury Securities and the Contract based
upon their relative fair market values (as determined on the date of
disposition). A U.S. Holder will generally be required to recognize taxable gain
or loss with respect to each such component (i.e., the U.S. Holder's pro rata
portion of the U.S. Treasury Securities and the Contract) in an amount equal to
the difference, if any, between the amount realized with respect to each such
component upon the sale or disposition of the STRYPES (as determined in the
manner described above) and the U.S. Holder's adjusted tax basis in each such
component. Any such gain or loss will generally be treated as long-term capital
gain or loss if the U.S. Holder has held the STRYPES for more than one year at
the time of disposition.
The proper treatment of the payment by the Contracting Stockholder or
Merrill Lynch & Co., Inc. of various costs and expenses associated with the
organization and operation of the Trust is uncertain. It is possible that there
will be no United States Federal income tax consequences to U.S. Holders as a
result of any such payments. However, it is possible that the Internal Revenue
Service ("IRS") could assert that any such payments constitute income to U.S.
Holders. If the IRS were to prevail in treating such payments as income, then an
individual U.S. Holder who itemizes deductions could possibly amortize and
deduct over the term of the Trust (subject to any applicable limitation such as
Section 67(a) of the Code) its pro rata portion of the one-time, up-front fees
paid to the Administrator, the Custodian and the Paying Agent, and could
possibly deduct (subject to any applicable limitations such as those in Section
67(a) of the Code) its pro rata portion of the other expenses described under
"Management Arrangements -- Estimated Expenses" incurred by the Trust resulting
from its ongoing operations (including the fees payable to the Trustees) as such
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expenses are incurred. Brown & Wood LLP, counsel to the Trust, believes that a
U.S. Holder's pro rata portion of the expenses directly incurred by a U.S.
Holder in connection with the organization of the Trust, underwriting discounts
and commissions and other offering expenses should be includable in the cost to
the U.S. Holder of the STRYPES. However, there can be no assurance that the IRS
will not take a contrary view. If the IRS were to prevail in treating such
expenses as excludible from a U.S. Holder's cost of the STRYPES, such expenses
would not be includable in the basis of the assets of the Trust and should
instead, subject to the limitations provided for under Section 67(a) of the
Code, be amortizable and deductible over the term of the Trust.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS OF THE CONTRACT
Brown & Wood LLP, counsel to the Trust, believes the Contract should be
treated for United States Federal income tax purposes as a prepaid forward
contract for the purchase of a variable number of shares of Dollar General
Common Stock. The IRS could conceivably take the view that the Contract should
be treated as a loan to the Contracting Stockholder in exchange for a contingent
debt obligation of the Contracting Stockholder. If the IRS were to prevail in
making such an assertion, a U.S. Holder might be required to include original
issue discount in income over the term of the STRYPES based on the excess of the
anticipated value of the Dollar General Common Stock to be received in respect
of the Contract over the amount paid for the Contract. In addition, a U.S.
Holder would be required to include interest (rather than capital gain) in
income on the Exchange Date in an amount equal to the excess, if any, of the
value of the Dollar General Common Stock received on the Exchange Date (or the
proceeds from prior disposition of the Contract) over the aggregate of the basis
of the Contract and any interest on the Contract previously included in income
(or might be entitled to an ordinary deduction to the extent of interest
previously included in income and not ultimately received). The IRS could also
conceivably take the view that a U.S. Holder should simply include in income as
interest the amount of cash actually received each year in respect of the
STRYPES.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions. For instance,
Section 1258 of the Code may possibly require certain U.S. Holders who enter
into hedging transactions or offsetting positions with respect to the STRYPES to
treat all or a portion of any gain realized on the STRYPES as ordinary income in
instances where such gain may have otherwise been treated as capital gain. U.S.
Holders hedging their positions with respect to the STRYPES or otherwise holding
their STRYPES in a manner described above should consult their own tax advisors
regarding the applicability of Section 1258 of the Code, or any other provision
of the Code, to their investment in the STRYPES.
If as a result of a Reorganization Event, cash, Marketable Securities, or a
combination of cash and Marketable Securities is delivered pursuant to the
Contract, U.S. Holders generally may be required to recognize taxable gain or
loss in respect of any cash received, including cash received in lieu of
fractional shares of Marketable Securities and, in some instances, in respect of
any Marketable Securities received upon receipt thereof. Moreover, in some
instances, U.S. Holders may be required to recognize at the time of a
Reorganization Event taxable gain or loss in respect of the amount of cash (and,
in some cases, Marketable Securities) which is fixed at the time of such
Reorganization Event and is to be delivered pursuant to the Contract. It is
uncertain whether any taxable gain or loss recognized by a U.S. Holder as a
result of a Reorganization Event would be capital or ordinary. U.S. Holders are
urged to consult their own tax advisors concerning the specific tax consequences
of a Reorganization Event on their investment in a STRYPES.
THE TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act adds new Section 1259 to the Code. In general,
Section 1259 of the Code requires taxpayers (including corporations) to
recognize gain (but not loss) upon entering into a "constructive sale" of any
appreciated position in stock. For these purposes, a taxpayer is treated as
making a "constructive sale" of an appreciated
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position in stock when the taxpayer (or a person related to the taxpayer) enters
into a forward contract to deliver the stock. A "forward contract" is defined
for these purposes as a contract to deliver a substantially fixed amount of
property for a substantially fixed price. Section 1259 of the Code generally
applies to constructive sales entered into after June 8, 1997. The Contracting
Stockholder does not believe that it will be considered to have made a
constructive sale of any of its Dollar General Common Stock as a result of
having entered into the Contract. There can be no assurance, however, that
future guidance will not be issued under Section 1259 of the Code which would
indicate that the Contracting Stockholder has made a constructive sale of its
shares of Dollar General Common Stock as a result of having entered into the
Contract. In such event, it is possible that the Contracting Stockholder could
elect to exercise its acceleration option under the Contract.
The Tax Act also reduces the maximum rates on long-term capital gains
recognized on capital assets held by individual taxpayers for more than eighteen
months as of the date of disposition (and would further reduce the maximum rates
on such gains in the year 2001 and thereafter for certain individual taxpayers
who meet specified conditions). Prospective investors should consult their own
tax advisors concerning these tax law changes.
NON-U.S. HOLDERS
Subject to the discussion below concerning income that is effectively
connected with a trade or business conducted by a non-U.S. Holder in the United
States, payments of interest (including original issue discount) made with
respect to the U.S. Treasury Securities will not be subject to United States
withholding tax, provided that such non-U.S. Holder complies with applicable
certification requirements. In general, for a non-U.S. Holder to qualify for
this exemption from taxation, the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent") must
have received in the year in which a payment of interest or principal occurs, or
in either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the U.S. Treasury Securities under penalties of perjury,
(ii) certifies that such owner is not a U.S. Holder and (iii) provides the name
and address of the beneficial owner. The statement may be made on an IRS Form
W-8 or a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If STRYPES is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution.
Any capital gain realized in respect of STRYPES by a non-U.S. Holder will
generally not be subject to United States Federal income tax if (i) such gain is
not effectively connected with a United States trade or business of such
non-U.S. Holder and (ii) in the case of an individual non-U.S. Holder, such
individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition, or the gain is not attributable
to a fixed place of business maintained by such individual in the United States
and such individual does not have a "tax home" (as defined for United States
Federal income tax purposes) in the United States.
If any interest or gain realized by a non-U.S. Holder is effectively
connected with the non-U.S. Holder's conduct of a trade or business in the
United States, such interest or gain will be subject to regular United States
Federal income tax in the same manner as if the non-U.S. Holder were a U.S.
Holder. In addition, in such event, if such non-U.S. Holder is a foreign
corporation, such interest or gain may be included in the earnings and profits
of such non-U.S. Holder in determining such non-U.S. Holder's United States
branch profits tax liability.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
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Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisers concerning the New Regulations.
PROSPECTIVE INVESTORS IN THE STRYPES SHOULD BE AWARE THAT THERE IS NO
AUTHORITY DIRECTLY ADDRESSING THE PROPER UNITED STATES FEDERAL INCOME TAX
TREATMENT OF THE STRYPES OR SECURITIES WITH TERMS SUBSTANTIALLY THE SAME AS THE
STRYPES, AND THAT NO RULING HAS BEEN REQUESTED FROM THE IRS WITH RESPECT TO THE
STRYPES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE IRS WILL AGREE WITH THE
FOREGOING DISCUSSION AND THAT THE IRS WILL NOT ASSERT A CONTRARY POSITION AS TO
THE PROPER UNITED STATES FEDERAL INCOME TAX TREATMENT OF THE STRYPES WHICH MIGHT
CAUSE THE CHARACTER AND TIMING OF INCOME, GAIN OR LOSS RECOGNIZED WITH RESPECT
TO A STRYPES TO DIFFER SIGNIFICANTLY FROM SUCH CHARACTER AND TIMING DISCUSSED
ABOVE. PROSPECTIVE INVESTORS IN THE STRYPES ARE THEREFORE URGED TO CONSULT WITH
THEIR OWN TAX ADVISORS PRIOR TO MAKING AN INVESTMENT IN THE STRYPES.
38
<PAGE> 41
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the underwriters
named below (the "Underwriters"), and each of the Underwriters has severally
agreed to purchase, the aggregate number of STRYPES set forth opposite its name
below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF
----------- STRYPES
---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Goldman, Sachs & Co.........................................
---------
Total.......................................... 7,500,000
=========
</TABLE>
The Purchase Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the STRYPES offered hereby if any of such STRYPES
are purchased. In the event of a failure to close, any funds debited from any
investor's account maintained with an Underwriter will be credited to such
account and any funds received by such Underwriter by check or money order from
any investor will be returned to such investor by check.
The Underwriters have advised the Trust that they propose to offer the
STRYPES to the public initially at the public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per STRYPES. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per STRYPES
to certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed. The sales load of $ per
STRYPES is equal to % of the initial public offering price. Investors must
pay for any STRYPES purchased in the initial public offering on or before
, 1998.
The Trust has granted the Underwriters an option to purchase up to an
additional 1,125,000 STRYPES (subject to decrease by the number of STRYPES
resulting from the split of the initial STRYPES described below) at the initial
public offering price, less the underwriting discount. Such option, which will
expire 30 days after the date of this Prospectus, may be exercised solely to
cover over-allotments. To the extent that the Underwriters exercise such option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase from the Trust approximately the same percentage of the
option shares that the number of shares to be purchased initially by that
Underwriter is of the 7,500,000 STRYPES initially purchased by the Underwriters.
The Company and the Contracting Stockholder have agreed, subject to certain
exceptions, not to offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any shares of Dollar General Common Stock or securities
directly or indirectly convertible into, or exercisable or exchangeable for,
Dollar General Common Stock for a period of 90 days after the date of this
Prospectus, without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
The Underwriters do not intend to confirm sales of STRYPES offered hereby
to any accounts over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the STRYPES.
Application has been made to list the STRYPES on the NYSE. In connection with
the listing, the Underwriters will undertake that sales of STRYPES will meet the
NYSE's minimum distribution standards.
The Company and the Contracting Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
In connection with the formation of the Trust, ML IBK Positions, Inc., an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, subscribed for
and purchased one STRYPES for a purchase price of $100. Prior to the Offering,
the initial STRYPES will be split into the smallest whole number of STRYPES
39
<PAGE> 42
that would result in the per STRYPES amount recorded as capital, after effecting
the split, not exceeding the initial public offering price per STRYPES. Under
the Contract, the Contracting Stockholder will be obligated to deliver to the
Trust on the Business Day immediately preceding the Exchange Date a number of
shares of Dollar General Common Stock (or, pursuant to the right of the
Contracting Stockholder, cash, or a combination of cash and Dollar General
Common Stock, with an equal value) in respect of such STRYPES on the same terms
as the STRYPES offered hereby.
Until the distribution of the STRYPES is completed, rules of the Commission
may limit the ability of the Underwriters and any selling group members to bid
for and purchase the STRYPES or shares of Dollar General Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the STRYPES or the Dollar General
Common Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the STRYPES or the Dollar General
Common Stock.
If the Underwriters create a short position in the STRYPES in connection
with the Offering, i.e., if they sell more STRYPES than are set forth on the
cover page of this Prospectus, the Underwriters may reduce that short position
by purchasing STRYPES in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the STRYPES or the Dollar General
Common Stock. In addition, neither the Trust nor any of the Underwriters makes
any representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The Underwriters render investment banking and other financial services to
the Company from time to time.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
Underwriters by their counsel, Brown & Wood LLP, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by special counsel to
the Trust, Richards, Layton & Finger, P.A., Wilmington, Delaware.
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by , independent auditors, as stated in
their opinion appearing herein, and has been included in reliance upon such
opinion given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form N-2 under the Securities Act with respect to the
STRYPES offered hereby. Further information concerning the STRYPES and the Trust
may be found in the Registration Statement, of which this Prospectus constitutes
a part. The Registration Statement may be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained from such office after payment of the fees prescribed by the
Commission. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, such as the Trust, that file electronically with the Commission.
40
<PAGE> 43
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholder of Dollar General STRYPES Trust:
We have audited the accompanying statement of assets, liabilities and
capital of Dollar General STRYPES Trust as of , 1998. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by the
Trust's management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the financial statement provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Dollar General STRYPES
Trust, as of , 1998 in conformity with generally accepted accounting
principles.
New York, New York
, 1998
41
<PAGE> 44
DOLLAR GENERAL STRYPES TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 1998
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 100
---------
Total Assets...................................... $ 100
=========
LIABILITIES
Total Liabilities........................................... $ 0
=========
NET ASSETS.................................................. $ 100
=========
CAPITAL STRYPES, par value $.10 per STRYPES; 1 STRYPES
issued and outstanding (Note 3)........................... $ 100
=========
</TABLE>
- ---------------
(1) The Trust was created as a Delaware business trust on April 15, 1998 and has
had no operations other than matters relating to its organization and
registration as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940, as amended. Costs incurred in
connection with the organization of the Trust and ongoing administrative
expenses will be paid by the Underwriters and the Contracting Stockholder.
(2) Offering expenses will be payable upon completion of the Offering and will
be paid by the Underwriters.
(3) On , 1998, the Trust issued one STRYPES to ML IBK Positions,
Inc., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, in
consideration for a purchase price of $100.
The Declaration of Trust provides that prior to the Offering, the Trust
will split the outstanding STRYPES to be effected on the date that the price and
underwriting discount of the STRYPES being offered to the public are determined,
but prior to the sale of the STRYPES to the Underwriters. The outstanding
STRYPES will be split into the smallest whole number of STRYPES that would
result in the per STRYPES amount recorded as capital, after effecting the split,
not exceeding the public offering price per STRYPES.
42
<PAGE> 45
THE FOLLOWING PROSPECTUS OF DOLLAR GENERAL CORPORATION IS ATTACHED AND
DELIVERED FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF DOLLAR GENERAL
CORPORATION DOES NOT CONSTITUTE A PART OF THE FOREGOING PROSPECTUS OF DOLLAR
GENERAL STRYPES TRUST, NOR IS IT INCORPORATED BY REFERENCE THEREIN.
<PAGE> 46
[DOLLAR GENERAL PROSPECTUS]
<PAGE> 47
[Image of southeastern and lower midwestern United States indicating Executive
Offices and Distribution Centers of Company and graphic legend identifying
symbols for Executive Offices and Distribution Centers; photographs of loading
dock at a Distribution Center, a training session for customer service
representatives, the outside front of Dollar General Store announcing the grand
opening of the store and a customer service representative scanning prices of
products in a store aisle.]
<PAGE> 48
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER
THAN THOSE SPECIFICALLY OFFERED HEREBY, OR OF ANY SECURITIES OFFERED HEREBY, IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF OR SINCE THE DATES AS OF WHICH
INFORMATION IS SET FORTH HEREIN. IN THE EVENT THAT ANY SUCH CHANGE SHALL OCCUR
DURING THE PERIOD IN WHICH APPLICABLE LAW REQUIRES DELIVERY OF THIS PROSPECTUS,
THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
Fee Table............................. 10
The Trust............................. 11
Use of Proceeds....................... 11
Investment Objective and Policies..... 11
Investment Restrictions............... 24
Risk Factors.......................... 25
Description of the STRYPES............ 28
Trustees.............................. 29
Management Arrangements............... 30
Dividends and Distributions........... 32
Net Asset Value....................... 32
Certain United States Federal Income
Tax
Considerations...................... 32
Underwriting.......................... 39
Legal Matters......................... 40
Experts............................... 40
Additional Information................ 40
Independent Auditors' Report.......... 41
Statement of Assets, Liabilities and
Capital............................. 42
</TABLE>
Prospectus relating to Common Stock
of Dollar General Corporation
------------------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE STRYPES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
DOLLAR GENERAL
STRYPES TRUST
7,500,000 STRYPES(SM)
EXCHANGEABLE FOR
SHARES OF COMMON STOCK OF
(DOLLAR GENERAL CORPORATION LOGO)
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
, 1998
(SM)SERVICE MARK OF MERRILL LYNCH & CO., INC.
======================================================
<PAGE> 49
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of , 1998
2. EXHIBITS
<TABLE>
<S> <C> <S>
(a)(1) -- Trust Agreement*
(2) -- Form of Amended and Restated Trust Agreement**
(3) -- Certificate of Trust*
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of Specimen certificate for STRYPES (included in Exhibit 2(a)(2))**
(2) -- Portions of the Amended and Restated Trust Agreement of the Registrant defining the rights of Holders
of STRYPES **
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h)(1) -- Form of Purchase Agreement**
(2) -- Form of Registration Agreement**
(i) -- Not applicable
(j) -- Form of Custodian Agreement**
(k)(1) -- Form of Administration Agreement**
(2) -- Form of Paying Agent Agreement**
(3) -- Form of Forward Purchase Contract**
(4) -- Form of Security and Pledge Agreement**
(5) -- Form of Fund Expense Agreement**
(6) -- Form of Fund Indemnity Agreement**
(l) -- Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(m) -- Not applicable
(n)(1) -- Tax Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(2) -- Consent of , independent auditors for the Trust**
(o) -- Not applicable
(p) -- Form of Subscription Agreement**
(q) -- Not applicable
(r) -- Financial Data Schedule**
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
C-1
<PAGE> 50
ITEM 25. MARKETING ARRANGEMENTS
See Exhibits (h)(1) and (h)(2) to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be incurred in connection with the offering described in
this Registration Statement will be paid by the Underwriters.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
There will be one record holder of the STRYPES as of the effective date of
this Registration Statement.
ITEM 29. INDEMNIFICATION
Section 7.06 of the Amended and Restated Trust Agreement, Section 6 of the
Purchase Agreement and Section 4 of the Registration Agreement provide for
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained at the offices of the Registrant (850
Library Avenue, Suite 204, Newark, Delaware 19715), its custodian (101 Barclay
Street, New York, New York 10286) and its paying agent (101 Barclay Street, New
York, New York 10286).
ITEM 32. MANAGEMENT SERVICES
Not applicable.
C-2
<PAGE> 51
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectuses contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10 percent from its net asset value per share
as of the effective date of the Registration Statement or (2) the net asset
value per share increases to an amount greater than its net proceeds as stated
in the prospectuses contained herein.
(b) The Registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectuses filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant under Rule
497(h) under the 1933 Act shall be deemed to be part of this registration
statement as of the time it was declared effective; (ii) for the purpose of
determining any liability under the 1933 Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering thereof.
C-3
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Newark, State of
Delaware, on the 12th day of May, 1998.
DOLLAR GENERAL STRYPES TRUST
By: /s/ DONALD J. PUGLISI
------------------------------------
Donald J. Puglisi
Managing Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement has been signed below by
the following persons, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD J. PUGLISI Managing Trustee May 12, 1998
- -----------------------------------------------------
Donald J. Puglisi
* Trustee May 12, 1998
- -----------------------------------------------------
William R. Latham III
* Trustee May 12, 1998
- -----------------------------------------------------
James B. O'Neill
*By: /s/ DONALD J. PUGLISI
------------------------------------------------
Donald J. Puglisi, as Attorney-In-Fact
</TABLE>
C-4
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<C> <C> <S> <C>
(a)(1) -- Trust Agreement*
(2) -- Form of Amended and Restated Trust Agreement**
(3) -- Certificate of Trust*
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of Specimen certificate for STRYPES (included in
Exhibit 2(a)(2))**
(2) -- Portions of the Declaration of Trust of the Registrant
defining the rights of Holders of STRYPES**
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h)(1) -- Form of Purchase Agreement**
(2) -- Form of Registration Agreement**
(i) -- Not applicable
(j) -- Form of Custodian Agreement**
(k)(1) -- Form of Administration Agreement**
(2) -- Form of Paying Agent Agreement**
(3) -- Form of Forward Purchase Contract**
(4) -- Form of Security and Pledge Agreement**
(5) -- Form of Fund Expense Agreement**
(6) -- Form of Fund Indemnity Agreement**
(l) -- Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(m) -- Not applicable
(n)(1) -- Tax Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(2) -- Consent of independent auditors for the Trust**
(o) -- Not applicable
(p) -- Form of Subscription Agreement**
(q) -- Not applicable
(r) -- Financial Data Schedule**
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
C-5
