<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 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. 2
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940
[X] AMENDMENT NO. 2
(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 20, 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>
===================================================================================================================
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.
The STRYPES have been approved for listing on the New York Stock Exchange
("NYSE"), subject to official notice of issuance. 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
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
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 $13,600, fees payable
to the Administrator, the Custodian and the Paying Agent for their services
in the amount of $115,000 and approximately $410,000 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 $318,000, 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 .05% 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 May
1, 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 19, 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 19, 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.
17
<PAGE> 20
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 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 (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.
18
<PAGE> 21
<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 the Offering in
2000 the Contracting Stockholder accelerates 20% of its then current obligation
under the Contract.
19
<PAGE> 22
<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, 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
20
<PAGE> 23
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 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
21
<PAGE> 24
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."
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
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<PAGE> 25
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 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.
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<PAGE> 26
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. The STRYPES have been approved for listing on the NYSE, subject to
official notice of issuance. There can be no assurance that 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 Restated Articles 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 $318,000, 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 $13,600 and approximately $410,000 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 bid price received by the Administrator from an
independent broker-dealer firm unaffiliated with the Trust which is 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. The
STRYPES have been approved for listing on the NYSE, subject to official notice
of issuance. 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 Deloitte & Touche LLP, 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 May 18, 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 May 18, 1998 in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 18, 1998
41
<PAGE> 44
DOLLAR GENERAL STRYPES TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
MAY 18, 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 May 18, 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
[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> 47
======================================================
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> 48
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of May 18, 1998
2. EXHIBITS
<TABLE>
<C> <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
Trust defining the rights of Holders of STRYPES (a) **
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h)(1) -- Form of Purchase Agreement**
(2) -- Form of Registration Agreement**
(i) -- Not applicable
(j) -- Custodian Agreement dated May 18, 1998 between the Trust and
The Bank of New York, as custodian**
(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 Deloitte & Touche LLP, independent auditors for
the Trust**
(o) -- Not applicable
</TABLE>
C-1
<PAGE> 49
<TABLE>
<C> <C> <S>
(p) -- Subscription Agreement dated May 18, 1998 between the Trust
and ML IBK Positions, Inc.**
(q) -- Not applicable
(r) -- Financial Data Schedule**
</TABLE>
- ---------------
(a) Reference is made to Article III (Section 3.02), Article IV, Article V and
Article VIII (Sections 8.01 and 8.06) of the Trust's Amended and Restated
Trust Agreement filed as Exhibit (a)(2) to this Registration Statement.
* Previously filed.
** Filed herewith.
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.
C-2
<PAGE> 50
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.
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> 51
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 20th 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 20, 1998
- -----------------------------------------------------
Donald J. Puglisi
* Trustee May 20, 1998
- -----------------------------------------------------
William R. Latham III
* Trustee May 20, 1998
- -----------------------------------------------------
James B. O'Neill
*By: /s/ DONALD J. PUGLISI
------------------------------------------------
Donald J. Puglisi, as Attorney-In-Fact
</TABLE>
C-4
<PAGE> 52
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 Trust defining
the rights of Holders of STRYPES(a)**
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h)(1) -- Form of Purchase Agreement**
(2) -- Form of Registration Agreement**
(i) -- Not applicable
(j) -- Custodian Agreement dated May 18, 1998 between the Trust and
The Bank of New York, as custodian**
(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 Deloitte & Touche LLP, independent auditors for
the Trust**
(o) -- Not applicable
(p) -- Subscription Agreement dated May 18, 1998 between the Trust
and ML IBK Positions, Inc.**
(q) -- Not applicable
(r) -- Financial Data Schedule**
</TABLE>
- ---------------
(a) Reference is made to Article III (Section 3.02), Article IV, Article V and
Article VIII (Sections 8.01 and 8.06) of the Trust's Amended and Restated
Trust Agreement filed as Exhibit (a)(2) to the Registration Statement.
* Previously filed.
** Filed herewith.
C-5
<PAGE> 1
Exhibit (a)(2)
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
DOLLAR GENERAL STRYPES TRUST
Dated as of May 1, 1998
<PAGE> 2
Table of Contents
Page
----
ARTICLE I.
DEFINITIONS
Section 1.01. DEFINITIONS ............................................. 2
ARTICLE II.
TRUST DECLARATION; PURPOSES, POWERS AND DUTIES OF THE TRUSTEES;
ADMINISTRATION
Section 2.01. NAME .................................................... 6
Section 2.02. OFFICE .................................................. 6
Section 2.03. RATIFICATION AND APPROVAL OF ACTION OF THE TRUSTEES ..... 6
Section 2.04. DECLARATION OF TRUST; PURPOSES OF THE TRUST ............. 7
Section 2.05. GENERAL POWERS AND DUTIES OF THE TRUSTEES ............... 7
Section 2.06. PORTFOLIO ACQUISITION ................................... 8
Section 2.07. PORTFOLIO ADMINISTRATION ................................ 9
Section 2.08. MANNER OF SALES ......................................... 11
Section 2.09. LIMITATIONS ON TRUSTEES' POWERS ......................... 11
ARTICLE III.
ACCOUNTS AND PAYMENTS
Section 3.01. THE TRUST ACCOUNT ....................................... 12
Section 3.02. DISTRIBUTIONS TO HOLDERS ................................ 12
Section 3.03. SEGREGATION ............................................. 12
Section 3.04. INVESTMENTS ............................................. 12
ARTICLE IV.
REDEMPTION
Section 4.01. REDEMPTION .............................................. 13
ARTICLE V.
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF STRYPES
Section 5.01. FORM OF CERTIFICATE ..................................... 13
Section 5.02. TRANSFER OF STRYPES; ISSUANCE, TRANSFER AND INTERCHANGE
OF CERTIFICATES ......................................... 13
Section 5.03. REPLACEMENT OF CERTIFICATES ............................. 14
Section 5.04. LIMITATION ON LIABILITY ................................. 14
Section 5.05. GENERAL PROVISIONS REGARDING THE STRYPES ................ 14
ARTICLE VI.
EXECUTION OF THE CONTRACT
Section 6.01. EXECUTION OF THE CONTRACT ............................... 15
i
<PAGE> 3
ARTICLE VII.
TRUSTEES
Section 7.01. TRUSTEES ................................................ 15
Section 7.02. VACANCIES ............................................... 15
Section 7.03. POWERS .................................................. 16
Section 7.04. MEETINGS ................................................ 16
Section 7.05. RESIGNATION AND REMOVAL ................................. 16
Section 7.06. LIABILITY ............................................... 16
Section 7.07. COMPENSATION ............................................ 17
ARTICLE VIII.
MISCELLANEOUS
Section 8.01. MEETINGS OF HOLDERS ..................................... 17
Section 8.02. BOOKS AND RECORDS; REPORTS .............................. 18
Section 8.03. DISSOLUTION ............................................. 19
Section 8.04. AMENDMENT AND WAIVER .................................... 20
Section 8.05. ACCOUNTANTS ............................................. 21
Section 8.06. NATURE OF HOLDER'S INTEREST ............................. 21
Section 8.07. DELAWARE LAW TO GOVERN .................................. 21
Section 8.08. NOTICES ................................................. 22
Section 8.09. SEVERABILITY ............................................ 22
Section 8.10. COUNTERPARTS ............................................ 22
Section 8.11. SUCCESSORS AND ASSIGNS .................................. 22
ii
<PAGE> 4
AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of May 1, 1998 (the
"Trust Agreement"), by and among ML IBK Positions, Inc., as sponsor (the
"Sponsor"), Donald J. Puglisi, William R. Latham III and James B. O'Neill, as
trustees (the "Trustees"), and the Holders (as defined herein), constituting
Dollar General STRYPES Trust (the "Trust").
W I T N E S S E T H:
WHEREAS, Samir A. Gandhi, as depositor (the "Depositor") and Donald J.
Puglisi, William R. Latham III and James B. O'Neill, as trustees (the
"Trustees"), have previously entered into a Trust Agreement dated as of April
15, 1998 (the "Original Agreement"), creating Dollar General STRYPES Trust;
WHEREAS, the Depositor has transferred his interest in Dollar General
STRYPES Trust to the Sponsor;
WHEREAS, the Trustees hereby ratify and approve the transfer of the
interest of the Depositor in Dollar General STRYPES Trust to the Sponsor;
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in certain respects; and
WHEREAS, the Trust has previously issued one STRYPES to the Sponsor in
consideration of the aggregate purchase price therefor of $100;
NOW, THEREFORE, the parties hereto agree to amend and restate the Original
Agreement as provided herein. Upon the execution and delivery of counterpart
signature pages hereto by the parties hereto, the Original Agreement will be
automatically amended and restated in its entirety to read as provided herein.
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used in this Trust Agreement, the
following words and phrases shall have the meanings listed below. Any reference
to any agreement shall be a reference to such agreement as supplemented or
amended from time to time.
"Acceleration Amount Notice" - An Acceleration Amount Notice as defined in
the Contract.
"Acceleration Value" - The Acceleration Value as defined in the Contract.
"Administration Agreement" - The Administration Agreement between the
Administrator and the Trust, substantially in the form of Exhibit E hereto, and
any substitute agreement therefor entered into pursuant to Section 2.05(a)
hereof.
"Administrator" - The Bank of New York, or its successor as permitted
under Section 6.1 of the Administration Agreement or appointed pursuant to
Section 2.05(a) hereof.
"Aggregate Acceleration Value" - The Aggregate Acceleration Value as
defined in the Contract.
"Business Day" - Any day that is not a Saturday, a Sunday or a day on
which the New York Stock Exchange, The NASDAQ National Market, or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
"Cash Settlement Option" - The option of the Contracting Stockholder
described in Section 2.5 of the Contract to settle its obligation to deliver
shares of Dollar General Common Stock contained in Section 2.1 of the Contract,
in whole or in part, through a cash payment on the Settlement Date.
"Certificate" - Any certificate evidencing the ownership of STRYPES
substantially in the form of Exhibit A hereto.
"Closing" - A Closing as defined in the Contract.
"Closing Date" - A Closing Date as defined in the Contract.
"Code" - The Internal Revenue Code of 1986, as amended from time to time;
each reference herein to any section of the Code or any regulation thereunder
shall constitute a reference to any successor provision thereto.
"Collateral Agent" - The Bank of New York or its successor as permitted
under the Security and Pledge Agreement.
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"Commencement Date" - The day on which the Purchase Agreement is executed.
"Commission" - The United States Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Trust Agreement such Commission is not existing or
performing the duties now assigned to it, then the body performing such duties
on such date.
"Company" - Dollar General Corporation, a Kentucky corporation.
"Company Successor" - Any surviving entity or subsequent surviving entity
of the Company.
"Contract" - The Forward Purchase Contract among the Trust, the Collateral
Agent, as agent and custodian for and on behalf of the Trust, and the
Contracting Stockholder, substantially in the form of Exhibit C hereto.
"Contract Consideration" - The Contract Consideration as defined in the
Contract.
"Contracting Stockholder" - The Person named as the "Seller" in the
Contract.
"Custodian" - The Bank of New York or its successor as permitted under
Section 11 of the Custodian Agreement or appointed pursuant to Section 2.05(a)
hereof.
"Custodian Agreement" - The Custodian Agreement, dated as of __________,
1998, between the Custodian and the Trust, and any substitute agreement therefor
entered into pursuant to Section 2.05(a) hereof.
"Date of Delivery" - A Date of Delivery as defined in the Contract.
"Depositary" - The Depository Trust Company, or any successor thereto.
"Distribution Date" - ________, ________, ________ and ________ of each
year, commencing ____________, 1998, to and including ____________, 2001 (or if
any such date is not a Business Day, then the first Business Day thereafter).
"Dollar General Common Stock" - Shares of common stock of the Company to
be exchanged by the Trustees for the STRYPES on the Exchange Date; provided
that, in the event of a reclassification referred to in clause (iv) of Section
3.1(a) of the Contract, the term "Dollar General Common Stock" shall mean the
other common stock of the Company issued pursuant thereto.
"Early Settlement Date" - The Early Settlement Date as defined in the
Contract.
"Event of Default" - An Event of Default as defined in the Security and
Pledge Agreement.
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"Exchange" - The delivery by the Trustees to the Holders of shares of
Dollar General Common Stock (or, if the Contracting Stockholder elects to
exercise the Cash Settlement Option under the Contract, the amount of cash or
combination of cash and Dollar General Common Stock, with an equal value, as
specified in the Contract as payable in respect thereof) in mandatory exchange
for the STRYPES on the Exchange Date.
"Exchange Act" - The Securities Exchange Act of 1934, as amended from time
to time; each reference herein to any section of such Act or any rule or
regulation thereunder shall constitute a reference to any successor provision
thereto.
"Exchange Date" - ____________, 2001.
"Firm Consideration Amount" - The Firm Consideration Amount as defined in
the Contract.
"Firm Payment Date" - The Firm Payment Date as defined in the Contract.
"Holder" - The registered owner of any STRYPES as recorded on the books of
the Paying Agent.
"Indemnity Agreement" - The Fund Indemnity Agreement among the Trust,
Merrill Lynch & Co., Inc. and the Contracting Stockholder, substantially in the
form of Exhibit D hereto.
"Independent Dealers" - Independent Dealers as defined in the Contract.
"Investment Amount" - With respect to each STRYPES, $______; provided,
however, on each Optional Acceleration Date, if any, the Investment Amount shall
be adjusted by multiplying the Investment Amount in effect immediately prior to
such Optional Acceleration Date by a fraction, the numerator of which shall be
the Optional Acceleration Value immediately after such Optional Acceleration
Date and the denominator of which shall be the Optional Acceleration Value
immediately prior to such Optional Acceleration Date.
"Investment Company Act" - The Investment Company Act of 1940, as amended
from time to time; each reference herein to any section of such Act or any rule
or regulation thereunder shall constitute a reference to any successor provision
thereto.
"Managing Trustee" - The Trustee designated the Managing Trustee by
resolution of the Trustees.
"Marketable Securities" - Any securities listed on a U.S. national
securities exchange or reported by The NASDAQ National Market.
"Optional Acceleration Amount" - The Optional Acceleration Amount as
defined in the Contract.
"Optional Acceleration Date" - An Optional Acceleration Date as defined in
the Contract.
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"Optional Acceleration Percentage" - The Optional Acceleration Percentage
as defined in the Contract.
"Optional Acceleration Value" - The Optional Acceleration Value as defined
in the Contract.
"Option Consideration Amount" - The Option Consideration Amount as defined
in the Contract.
"Original Agreement" - The meaning specified in the recitals hereof.
"Participant" - A Person having an account with the Depositary.
"Paying Agent" - The Bank of New York or its successor as permitted under
Section 6.6 of the Paying Agent Agreement or appointed pursuant to Section
2.05(a) hereof.
"Paying Agent Agreement" - The Paying Agent Agreement between the Paying
Agent and the Trust, substantially in the form of Exhibit F hereto, and any
substitute agreement therefor entered into pursuant to Section 2.05(a) hereof.
"Person" - An individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency or instrumentality thereof.
"Prospectus" - The prospectus of the Trust relating to the offering of the
STRYPES and constituting a part of the Registration Statement, as first filed
with the Commission pursuant to Rule 497(b) or (h) under the Securities Act, and
as subsequently amended or supplemented by the Trust.
"Purchase Agreement" - The Purchase Agreement among the Trust, the
Contracting Stockholder and the Underwriters relating to the issue and sale of
the STRYPES, as described in the Prospectus.
"Quarterly Distribution" - The amount of cash to be distributed by the
Trust on each Distribution Date in accordance with the investment objectives set
forth in the Prospectus (in the case of the period from and including ________,
1998 to and including ________, 1998, $[__________]).
"Record Date" - ________, ________, ________ and ________ of each year,
commencing ________, 1998.
"Registration Statement" - The Registration Statement on Form N-2
(Registration Nos. 333-50783; 811-08755) of the Trust, as amended.
"Reorganization Event" - A Reorganization Event as defined in the
Contract.
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"Securities Act" - The Securities Act of 1933, as amended from time to
time; each reference herein to any section of such Securities Act or any rule or
regulation thereunder shall constitute a reference to any successor provision
thereto.
"Security And Pledge Agreement" - The Security and Pledge Agreement among
the Collateral Agent, the Contracting Stockholder and the Trust, securing the
obligations of the Contracting Stockholder under the Contract, substantially in
the form of Exhibit B hereto.
"Settlement Date" - The Settlement Date as defined in the Contract.
"STRYPES" - Structured Yield Product Exchangeable for Stock(SM),
representing a proportionate share of beneficial ownership in the Trust
evidencing a Holder's undivided interest in the Trust and right to receive a pro
rata distribution upon liquidation of the Trust Estate.
"Temporary Investments" - Direct short-term U.S. government obligations,
as specified from time to time by the Trustees or through standing instructions
from the Trustees to the Administrator or the Paying Agent.
"Transfer Agent and Registrar" - as transfer agent and registrar for the
Dollar General Common Stock.
"Trust Account" - The account created pursuant to Section 3.01 hereof.
"Trust Estate" - The Contract and the U.S. Treasury Securities held at any
time by the Trust, together with any Temporary Investments held at any time
pursuant to Section 3.04 hereof, and any proceeds thereof or therefrom and any
other moneys held at any time in the Trust Account.
"Underwriters" - The several Underwriters named in the Purchase Agreement.
"U.S. Treasury Securities" - The meaning specified in Section 2.06(b)
hereof.
ARTICLE II.
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
Section 2.01. NAME. The Trust is named "Dollar General STRYPES Trust," as
such name may be modified from time to time by the Trustees following written
notice to the Holders. The Trust's activities may be conducted under the name of
the Trust or any other name deemed advisable by the Trustees.
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
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Section 2.02. OFFICE. The address of the principal office of the Trust is
c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715.
On ten Business Days written notice to the Holders the Trustees may designate
another principal office.
Section 2.03. RATIFICATION AND APPROVAL OF ACTION OF THE TRUSTEES. The
Sponsor hereby ratifies and approves any and all actions taken by the Trustees
on behalf of the Trust on or prior to the date hereof in connection with the
registration of the Trust under the Investment Company Act, in connection with
the registration of the offer and sale of the STRYPES under the Securities Act,
or otherwise incident to, or connected with, or necessary to accomplish, the
foregoing or the offer and sale of the STRYPES by the Underwriters and the
operation of the Trust as described in the Prospectus.
Section 2.04. DECLARATION OF TRUST; PURPOSES OF THE TRUST. The Sponsor
hereby creates the Trust in order that it may acquire the U.S. Treasury
Securities, enter into the Contract, issue and sell to the Sponsor and the
Underwriters the STRYPES, hold the Trust Estate in trust for the use and benefit
of all present and future Holders and otherwise carry out the terms and
conditions of this Trust Agreement, all for the purpose of achieving the
investment objectives set forth in the Prospectus. The Trustees hereby declare
that they will accept and hold the Trust Estate in trust for the use and benefit
of all present and future Holders. The Depositor has heretofore deposited with
the Trustees the sum of $1 to accept and hold in trust hereunder until the
issuance and sale of the STRYPES to the Underwriters, whereupon such sum shall
be donated to an organization satisfying the requirements of Section 170(c)(2)
of the Code selected by unanimous consent of the Trustees.
Section 2.05. GENERAL POWERS AND DUTIES OF THE TRUSTEES. In furtherance of
the provisions of Section 2.04 hereof, the Sponsor authorizes and directs the
Trustees, on behalf of the Trust:
(a) to enter into and perform (and, in accordance with Section
8.04(a) hereof, amend), the Contract, the Security and Pledge Agreement, the
Purchase Agreement, the Indemnity Agreement, the Custodian Agreement, the
Administration Agreement, the Paying Agent Agreement and the Subscription
Agreement and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce all rights
and remedies of the Trust under each of such agreements; and if any of the
Custodian Agreement, the Administration Agreement, the Security and Pledge
Agreement and the Paying Agent Agreement terminates, or the agent of the Trust
thereunder resigns or is discharged, to appoint a substitute agent and enter
into a new agreement with such substitute agent containing provisions
substantially similar to those contained in the agreement being terminated;
provided that in any such new agreement (i) the Custodian and the Paying Agent
shall each be a commercial bank or trust company organized and existing under
the laws of the United States of America or any state therein, shall have full
trust powers and shall have minimum capital, surplus and retained earnings of
not less than $100,000,000; and (ii) the Administrator and the Collateral Agent
shall each be a reputable financial institution eligible and qualified in all
respects to carry out its obligations under the Administration Agreement or the
Security and Pledge Agreement, as the case may be;
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(b) to hold the Trust Estate in trust, to create and administer the
Trust Account, to direct payments received by the Trust to the Trust Account and
to make payments out of the Trust Account as set forth in Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up to
8,625,000 STRYPES (including those STRYPES subject to the over-allotment option
of the Underwriters provided for in the Purchase Agreement) pursuant to the
Purchase Agreement and as contemplated by the Prospectus; provided, however,
that subsequent to the determination of the public offering price per STRYPES
and related underwriting discount for the STRYPES to be sold to the Underwriters
but prior to the sale of the STRYPES to the Underwriters, the STRYPES originally
issued to the Sponsor shall be split into a greater number of STRYPES so that
immediately following such split the value of each STRYPES held by the Sponsor
will equal the aforesaid public offering price per STRYPES;
(d) to select independent public accountants and, subject to the
provisions of Section 8.05 hereof, to engage such independent public
accountants;
(e) to engage legal counsel and, to the extent required by Section
2.07 hereof, to engage professional advisors and pay reasonable compensation
thereto;
(f) to defend any action commenced against the Trustees or the Trust
and to prosecute any action which the Trustees deem necessary to protect the
Trust and the rights and interests of Holders, and to pay the costs thereof;
(g) to delegate any or all of its powers and duties hereunder as
contemplated by the Custodian Agreement, the Paying Agent Agreement and the
Administration Agreement, to the extent permitted by applicable law; and
(h) to adopt the fundamental policies set forth in the Prospectus,
to adopt and amend a code of regulations, and take any and all such other
actions as necessary or advisable to carry out the purposes of the Trust,
subject to the provisions hereof and applicable law, including, without
limitation, the Investment Company Act.
Section 2.06. PORTFOLIO ACQUISITION. In furtherance of the provisions of
Section 2.04 hereof, the Sponsor further specifically authorizes and directs the
Trustees, acting on behalf of the Trust:
(a) to enter into the Contract with respect to the shares of Dollar
General Common Stock subject thereto with the Contracting Stockholder on the
Commencement Date for settlement on the date or dates provided thereunder and,
subject to satisfaction of the conditions set forth in the Contract, to pay to
the Contracting Stockholder the Firm Consideration Amount and any Option
Consideration Amount thereunder. Such payments shall be made with the proceeds
of the sale of the STRYPES, net of (1) the underwriting discount, (2) the
purchase price paid for the U.S. Treasury Securities as provided in paragraph
(b) below, and (3) an amount in cash equal to the difference between the
aggregate amount of all Quarterly Distributions to be made on the STRYPES
(determined on the basis of the initial Investment Amount) and the aggregate
proceeds to be received from the U.S. Treasury Securities upon maturity; and,
subject
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to the adjustments and exceptions set forth in the Contract, the Contract shall
entitle the Trust to receive from the Contracting Stockholder on the Settlement
Date the shares of Dollar General Common Stock subject thereto (or, if the
Contracting Stockholder elects to exercise the Cash Settlement Option under the
Contract, in whole or in part, an amount of cash or combination of cash and
Dollar General Common Stock, with an equal value) so that the Trust may execute
the Exchange with the Holders; and
(b) to purchase for settlement on the Firm Payment Date, and on any
Date of Delivery, as appropriate, with the proceeds of the sale the STRYPES, net
of the underwriting discount, U.S. Treasury securities from such brokers or
dealers as the Trustees shall designate in writing to the Administrator having
the terms set forth on Schedule I hereto ("U.S. Treasury Securities").
Section 2.07. PORTFOLIO ADMINISTRATION. In furtherance of the provisions
of Section 2.04 hereof, the Sponsor further specifically authorizes and directs
the Trustees:
(a) DETERMINATION OF DILUTION ADJUSTMENTS. Upon receipt of any
notice pursuant to Section 6.6(a) of the Contract of an event requiring an
adjustment to the Exchange Rate Formula, or upon otherwise acquiring knowledge
of such an event, to calculate the required adjustment and furnish notice
thereof to the Collateral Agent and the Administrator or to request from the
Administrator such further information as may be necessary to calculate or
effect the required adjustment;
(b) SELECTION OF INDEPENDENT INVESTMENT BANK. At such times and for
such purposes provided in the Contract, to select and retain a nationally
recognized investment banking firm to determine the market value of such
property as provided in the Contract, and to deliver to the Contracting
Stockholder notice pursuant to Section 8.1 of the Contract identifying the firm
proposed to be selected and retained, and to consult with the Contracting
Stockholder on such selection and retention as provided in such Section 8.1;
(c) ACCELERATION UPON EVENT OF DEFAULT. Upon receipt of any notice
pursuant to Section 6.6(b) of the Contract that an Event of Default has
occurred, or upon otherwise acquiring notice that an Event of Default has
occurred, to request quotations from Independent Dealers, compute the
Acceleration Value and the Aggregate Acceleration Value and deliver an
Acceleration Amount Notice, in each case with respect to the Contract, all as
described in Section 7.1 of the Contract;
(d) DETERMINATION OF CONTRACT CONSIDERATION. To calculate, at such
times and in such manner as provided in the Contract, the aggregate number of
shares of Dollar General Common Stock (or, if the Cash Settlement Option under
the Contract is exercised, in whole or in part, the amount of cash or
combination of cash and Dollar General Common Stock with an equal value)
required to be delivered by the Contracting Stockholder under Sections 2.1, 2.3,
2.4 and 2.5 of the Contract or, if a Reorganization Event shall have occurred,
the amount of cash and/or the aggregate number of units of any Marketable
Security required to be delivered by the Contracting Stockholder on the Early
Settlement Date, as provided in Section 7.2 of the Contract, or, if the
Contracting Stockholder shall have exercised
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its option to accelerate the settlement of its obligation under the Contract in
whole or in part as provided in Section 7.3 of the Contract, the amount of cash
and/or the aggregate number of shares of Dollar General Common Stock required to
be delivered by the Contracting Stockholder on the related Optional Acceleration
Date, as provided in Section 7.3 of the Contract, and to furnish notice of the
amounts so determined to the Collateral Agent and to the Contracting Stockholder
as provided in Section 8.1 of the Contract;
(e) DISTRIBUTION OF CONTRACT CONSIDERATION ON EXCHANGE DATE. Unless
an Event of Default or a Reorganization Event shall have occurred or the
Contracting Stockholder shall have exercised its option to accelerate the
settlement of its obligation under the Contract in whole as provided in Section
7.3 of the Contract (in which events distribution of the Contract Consideration
shall be governed by Section 8.03 below) or the Contracting Stockholder elects
to exercise the Cash Settlement Option, in whole, with respect to the shares of
Dollar General Common Stock otherwise deliverable under the Contract (in which
event the cash received in respect thereof shall be distributed pro rata to the
Holders of STRYPES on the Exchange Date):
(i) DETERMINATION OF FRACTIONAL SHARES. To determine, on
the Exchange Date: (A) for each Holder of STRYPES, such Holder's pro
rata share of the total number of shares of Dollar General Common
Stock delivered to the Trust on the Settlement Date under the
Contract; and (B) the number of fractional shares of Dollar General
Common Stock, if any, allocable to each Holder and in the aggregate;
(ii) CASH FOR FRACTIONAL SHARES. To sell, in the
principal market therefor, on the Exchange Date, a number of shares
of Dollar General Common Stock equal to the aggregate number of
fractional shares, if any, determined pursuant to clause (i)(B)
above;
(iii) DELIVERY OF SHARES. To deliver the remaining
shares of Dollar General Common Stock to the Transfer Agent and
Registrar on the Exchange Date, with instructions that such shares
of Dollar General Common Stock be re-registered and re-issued as
follows:
(A) for and in the name of each Holder (other than
the Depositary) who holds STRYPES in definitive form, the
Transfer Agent and Registrar shall be instructed to issue
definitive certificates representing a number of shares of
Dollar General Common Stock equal to such Holder's pro rata
share of the total number of shares of Dollar General Common
Stock delivered to the Trust on the Settlement Date under the
Contract, rounded down to the nearest integral number; and
(B) the Transfer Agent and Registrar shall be
instructed to transfer all remaining shares of Dollar General
Common Stock to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such shares of Dollar General
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Common Stock to each Participant who holds STRYPES, with each
Participant receiving its pro rata share of the total shares
of Dollar General Common Stock delivered to the Trust on the
Settlement Date under the Contract, reduced by the aggregate
cash value of any fractional shares of Dollar General Common
Stock allocable to such Participant;
(iv) DISTRIBUTION OF CASH IN RESPECT OF FRACTIONAL
SHARES. To distribute on or as soon as practicable after the
Exchange Date to each Holder of STRYPES to which a fractional share
of Dollar General Common Stock is allocable as determined pursuant
to clause (i)(B) above such Holder's pro rata portion of the
proceeds obtained from the liquidation of all fractional shares of
Dollar General Common Stock pursuant to clause (ii) above (net of
any brokerage or related expenses); and
(v) RECORD DATE. The distributions described in this
paragraph (e) shall be made to Holders of record as of the close of
business on the Business Day preceding the Exchange Date.
(f) DISTRIBUTION OF CONTRACT CONSIDERATION UPON OPTIONAL
ACCELERATION. Unless the Contracting Stockholder shall have exercised its option
to accelerate the settlement of its obligation under the Contract in whole as
provided in Section 7.3 of the Contract (in which event distribution of the
Contract Consideration shall be governed by Section 8.03 below) or the
Contracting Stockholder elects to pay the entire Optional Acceleration Amount in
cash (in which event the cash received on the related Optional Acceleration Date
shall be distributed pro rata to the Holders of STRYPES on the Business Day
immediately following the Optional Acceleration Date):
(i) DETERMINATION OF FRACTIONAL SHARES. To determine, on
the Optional Acceleration Date: (A) for each Holder of STRYPES, such
Holder's pro rata share of the total number of shares of Dollar
General Common Stock delivered to the Trust on the Optional
Acceleration Date under the Contract; and (B) the number of
fractional shares of Dollar General Common Stock, if any, allocable
to each Holder and in the aggregate;
(ii) CASH FOR FRACTIONAL SHARES. To sell, in the
principal market therefor, on the Business Day immediately following
the Optional Acceleration Date, a number of shares of Dollar General
Common Stock equal to the aggregate number of fractional shares, if
any, determined pursuant to clause (i)(B) above;
(iii) DELIVERY OF SHARES. To deliver the remaining
shares of Dollar General Common Stock to the Transfer Agent and
Registrar on the Business Day immediately following the Optional
Acceleration Date, with instructions that such shares of Dollar
General Common Stock be re-registered and re-issued as follows:
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(A) for and in the name of each Holder (other than
the Depositary) who holds STRYPES in definitive form, the
Transfer Agent and Registrar shall be instructed to issue
definitive certificates representing a number of shares of
Dollar General Common Stock equal to such Holder's pro rata
share of the total number of shares of Dollar General Common
Stock delivered to the Trust on the related Optional
Acceleration Date under the Contract, rounded down to the
nearest integral number; and
(B) the Transfer Agent and Registrar shall be
instructed to transfer all remaining shares of Dollar General
Common Stock to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such shares of Dollar General Common Stock to each
Participant who holds STRYPES, with each Participant
receiving its pro rata share of the total shares of Dollar
General Common Stock delivered to the Trust on the related
Optional Acceleration Date under the Contract, reduced by the
aggregate cash value of any fractional shares of Dollar
General Common Stock allocable to such Participant;
(iv) DISTRIBUTION OF CASH IN RESPECT OF FRACTIONAL
SHARES. To distribute on or as soon as practicable after the
Business Day immediately following the Optional Acceleration Date to
each Holder of STRYPES to which a fractional share of Dollar General
Common Stock is allocable as determined pursuant to clause (i)(B)
above such Holder's pro rata portion of the proceeds obtained from
the liquidation of all fractional shares of Dollar General Common
Stock pursuant to clause (ii) above (net of any brokerage or related
expenses);
(v) DISTRIBUTION OF OPTIONAL ACCELERATION AMOUNT PAID IN
CASH. To distribute to each Holder of STRYPES on the Business Day
immediately following the Optional Acceleration Date such Holder's
pro rata share of the aggregate amount of cash delivered to the
Trust on the related Optional Acceleration Date.
(vi) RECORD DATE. The distributions described in this
paragraph (f) shall be made to Holders of record as of the close of
business on the Optional Acceleration Date.
(g) DISTRIBUTION OF U.S. TREASURY SECURITIES. Unless the Contracting
Stockholder shall have exercised its option to accelerate the settlement of its
obligation under the Contract in whole as provided in Section 7.3 of the
Contract (in which event distribution of the U.S. Treasury Securities shall be
governed by Section 8.03 below):
(i) DETERMINATION OF U.S. TREASURY SECURITIES TO BE
DISTRIBUTED. To determine, on the Optional
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Acceleration Date, the Optional Acceleration Percentage of each
issue of U.S. Treasury Securities then held by the Trust.
(ii) DETERMINATION OF FRACTIONAL UNITS. To determine, on
the Optional Acceleration Date: (A) for each Holder of STRYPES, such
Holder's pro rata share of the Optional Acceleration Percentage of
each issue of U.S. Treasury Securities then held by the Trust; and
(B) the number of fractional units of any issue of U.S. Treasury
Securities, if any, allocable to each Holder and in the aggregate;
(iii) CASH FOR FRACTIONAL SHARES. To sell, in the
principal market therefor, on the Business Day immediately following
the Optional Acceleration Date, a principal amount of each issue of
U.S Treasury Securities equal to the aggregate number of fractional
units, if any, of such issue of U.S. Treasury Securities determined
pursuant to clause (ii)(B) above;
(iv) DELIVERY OF U.S. TREASURY SECURITIES. To distribute
to each Holder on the Business Day immediately following the
Optional Acceleration Date such Holder's pro rata share of the
remaining portion of the Optional Acceleration Percentage of each
issue of U.S. Treasury Securities;
(v) DISTRIBUTION OF CASH IN RESPECT OF FRACTIONAL UNITS.
To distribute on or as soon as practicable after the Business Day
immediately following the Optional Acceleration Date to each Holder
of STRYPES to which a fractional unit of any issue of U.S. Treasury
Securities is allocable as determined pursuant to clause (ii)(B)
above such Holder's pro rata portion of the proceeds obtained from
the liquidation of all fractional units of such issue of U.S.
Treasury Securities pursuant to clause (iii) above (net of any
brokerage or related expenses); and
(vi) RECORD DATE. The distributions described in this
paragraph (g) shall be made to Holders of record as of the close of
business on the Optional Acceleration Date.
Section 2.08. MANNER OF SALES. Any sale of Trust property required under
Section 2.07 hereof or permitted under Section 8.03(c) hereof shall be made
through such executing brokers or to such dealers as the Trustees, seeking best
price and execution for the Trust, shall designate in writing to the Paying
Agent, taking into account such factors as price, commission, size of order,
difficulty of execution and brokerage skill required.
Section 2.09. LIMITATIONS ON TRUSTEES' POWERS. The Trustees, acting on
behalf of the Trust, are not permitted:
(a) to purchase or hold any securities or instruments except for the
U.S. Treasury Securities, the Contract, shares of Dollar General Common Stock
acquired pursuant to the Contract, the Temporary Investments contemplated by
Section 3.04 hereof, and, in the event of a Reorganization Event, Marketable
Securities;
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(b) to dispose of the Contract prior to the Exchange Date;
(c) to issue any securities or instruments except for the STRYPES,
or to issue any STRYPES other than the STRYPES sold to the Sponsor and the
STRYPES to be sold pursuant to the Purchase Agreement and until such STRYPES
have been so purchased and paid for in full;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or commodities
contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the Administrator, the
Paying Agent or the Custodian to take any action, that would vary the investment
of the Holders within the meaning of Treasury Regulation Section 301.7701-4(c),
or otherwise take any action or direct or permit any action to be taken that
would or could cause the Trust not to be a "grantor trust" under the Code.
ARTICLE III.
ACCOUNTS AND PAYMENTS
Section 3.01. THE TRUST ACCOUNT. The Trustees shall, upon issuance of the
STRYPES, establish with the Paying Agent an account to be called the "Trust
Account". All moneys received by the Trustees in respect of the Contract, the
U.S. Treasury Securities and any Temporary Investments held pursuant to Section
3.04 hereof, all moneys received from the sale of the STRYPES to the Sponsor,
and any proceeds from the sale of the STRYPES to the Underwriters after the
purchase of the Contract and the U.S. Treasury Securities shall be credited to
the Trust Account.
Section 3.02. DISTRIBUTIONS TO HOLDERS. On or shortly after each
Distribution Date the Trustees shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trustees, an amount equal to
such Holder's pro rata share of the Quarterly Distribution computed as of the
close of business on such Distribution Date.
Section 3.03. SEGREGATION. All moneys and other assets deposited or
received by the Trustees hereunder shall be held by them in trust as part of the
Trust Estate until required to
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be disbursed or otherwise disposed of in accordance with the provisions of this
Trust Agreement, and the Trustees shall handle such moneys and other assets in
such manner as shall constitute the segregation and holding in trust within the
meaning of the Investment Company Act.
Section 3.04. 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 Trustees in the Trust Account shall be invested as soon
as possible by the Paying Agent in Temporary Investments maturing no later than
the Business Day preceding the next following Distribution Date. Except as
otherwise specifically provided herein or in the Paying Agent Agreement, the
Paying Agent shall not have the power to sell, transfer or otherwise dispose of
any Temporary Investment prior to the maturity thereof, or to acquire additional
Temporary Investments. The Paying Agent shall hold any Temporary Investment to
its maturity and shall apply the proceeds thereof upon maturity to the payment
of the next succeeding Quarterly Distribution. All such Temporary Investments
shall be selected from time to time by the Trustees or pursuant to standing
instructions from the Trustees to the Administrator, and the Administrator
and/or Paying Agent shall have no liability to the Trust or any Holder or any
other Person with respect to any such Temporary Investment. Any interest or
other income received on any moneys in the Trust Account shall, upon receipt
thereof, be deposited into the Trust Account. Notwithstanding the foregoing, not
more than 5% of the assets of the Trust may be held at any time in the form of
cash and Temporary Investments, and the Trustees shall distribute cash, or
liquidate Temporary Investments and distribute the proceeds thereof, if, when
and to the extent needed to maintain compliance with the foregoing restriction.
ARTICLE IV.
REDEMPTION
Section 4.01. REDEMPTION. The Trustees shall have no right or obligation
to redeem STRYPES.
ARTICLE V.
ISSUANCE OF CERTIFICATES;
REGISTRY; TRANSFER OF STRYPES
Section 5.01. FORM OF CERTIFICATE. Each Certificate evidencing STRYPES
shall be countersigned manually or in facsimile by the Managing Trustee and
executed manually by the Paying Agent in substantially the form of Exhibit A
hereto with the blanks appropriately filled in, shall be dated the date of
execution and delivery by the Paying Agent and shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of STRYPES set forth on the face of such Certificate and the denominator
of which shall be the total number of STRYPES outstanding at that time. All
STRYPES shall be issued in registered form and shall be numbered serially.
Pending the preparation of definitive Certificates, the Trustees may execute and
the Paying Agent shall authenticate and deliver temporary Certificates (printed,
lithographed, typewritten or otherwise reproduced, in each case
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in form satisfactory to the Paying Agent). Temporary Certificates shall be
issuable as registered Certificates substantially in the form of the definitive
Certificates but with such omissions, insertions and variations as may be
appropriate for temporary Certificates, all as may be determined by the Trustees
with the concurrence of the Paying Agent. Every temporary Certificate shall be
executed by the Managing Trustee and be authenticated by the Paying Agent upon
the same conditions and in substantially the same manner, and with like effect,
as the definitive Certificates. Without unreasonable delay the Managing Trustee
shall execute and shall furnish definitive Certificates and thereupon temporary
Certificates may be surrendered in exchange therefor without charge at each
office or agency of the Paying Agent and the Paying Agent shall authenticate and
deliver in exchange for such temporary Certificates definitive Certificates for
a like aggregate number of STRYPES. Until so exchanged, the temporary
Certificates shall be entitled to the same benefits hereunder as definitive
Certificates.
Section 5.02. TRANSFER OF STRYPES; ISSUANCE, TRANSFER AND INTERCHANGE OF
CERTIFICATES. STRYPES may be transferred by the Holder thereof by presentation
and surrender of properly endorsed Certificates at the office of the Paying
Agent, accompanied by such documents executed by the Holder or his authorized
attorney as the Paying Agent deems necessary to evidence the authority of the
person making the transfer. Certificates issued pursuant to this Trust Agreement
are interchangeable for one or more other Certificates evidencing an equal
aggregate number of STRYPES and all Certificates issued as may be requested by
the Holder and deemed appropriate by the Paying Agent shall be issued in
denominations of one STRYPES or any multiple thereof. The Paying Agent may deem
and treat the person in whose name any STRYPES shall be registered upon the
books of the Paying Agent as the owner of such STRYPES for all purposes
hereunder and the Paying Agent shall not be affected by any notice to the
contrary. The transfer books maintained by the Paying Agent for the purposes of
this Section 5.02 shall include the name and address of the record owners of the
STRYPES and shall be closed in connection with the dissolution of the Trust
pursuant to Section 8.03 hereof. A sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such transfer
shall be paid to the Paying Agent by the Holder. A Holder may be required to pay
a fee for each new Certificate to be issued pursuant to the preceding paragraph
in such amount as may be specified by the Paying Agent and approved by the
Trustees. All Certificates cancelled pursuant to this Trust Agreement may be
voided by the Paying Agent in accordance with the usual practice of the Paying
Agent or in accordance with the instructions of the Trustees; provided, however,
that the Paying Agent shall not be required to destroy cancelled Certificates.
The Paying Agent may adopt other reasonable rules and regulations for the
registration, transfer and tender of STRYPES as it may, in its discretion, deem
necessary.
Section 5.03. REPLACEMENT OF CERTIFICATES. In case any Certificate shall
become mutilated or be destroyed, stolen or lost, the Paying Agent shall execute
and deliver a new Certificate in exchange and substitution therefor upon the
Holder's furnishing the Paying Agent with proper identification and satisfactory
indemnity, complying with such other reasonable regulations and conditions as
the Paying Agent may prescribe and paying such expenses and charges, including
any bonding fee, as the Paying Agent may incur or reasonably impose; provided
that if the Trust has dissolved or is in the process of dissolving, the Paying
Agent, in lieu of issuing such new Certificate, may, upon the terms and
conditions set forth
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herein, make the distributions set forth in Section 8.03(c) hereof. Any
mutilated Certificate shall be duly surrendered and cancelled before any
duplicate Certificate shall be issued in exchange and substitution therefor.
Upon issuance of any duplicate Certificate pursuant to this Section 5.03, the
original Certificate claimed to have been lost, stolen or destroyed shall become
null and void and of no effect, and any bona fide purchaser thereof shall have
only such rights as are afforded under Article 8 of the Uniform Commercial Code
to a Holder presenting a Certificate for transfer in the case of an overissue.
Section 5.04. LIMITATION ON LIABILITY. Pursuant to ss.3803(a) of the
Delaware Business Trust Act, 12 Del. C. ss.3801, et seq., the Holders of the
STRYPES shall be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
Section 5.05. GENERAL PROVISIONS REGARDING THE STRYPES.
(A) The consideration received by the Trust for the issuance of the
STRYPES shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(B) Upon issuance of the STRYPES as provided in this Trust
Agreement, the STRYPES so issued shall be deemed to be validly issued, fully
paid and non-assessable. The issuance of the STRYPES will not be subject to
preemptive or other similar rights.
(C) Every person, by virtue of having become a Holder in accordance
with the terms of this Trust Agreement, shall be deemed to have expressly
assented and agreed to the terms of, and shall be bound by, this Trust
Agreement.
ARTICLE VI.
EXECUTION OF THE CONTRACT
Section 6.01. EXECUTION OF THE CONTRACT. The Contract shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by the Contracting Stockholder and the Collateral Agent and shall be
dated the date of execution and delivery by the Contracting Stockholder.
ARTICLE VII.
TRUSTEES
Section 7.01. TRUSTEES. The Trust shall have three Trustees. One Trustee
shall be the Managing Trustee and, as such, is authorized to execute documents
and instruments on behalf of the Trust. The Managing Trustee will be appointed
by resolution of the Trustees. Each Trustee shall serve until the next regular
annual or special meeting of Holders called for the purpose of electing Trustees
and, then, until such Trustee's successor is duly elected and qualified. Holders
may not cumulate their votes in the election of Trustees. Each Trustee shall not
be considered to have qualified for the office unless such Trustee shall agree
to be bound by
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the terms of this Trust Agreement and shall evidence his consent by executing
this Trust Agreement or a supplement hereto.
Section 7.02. VACANCIES. Any vacancy in the office of a Trustee may be
filled in compliance with Sections 10 and 16 of the Investment Company Act by
the vote, within 30 days, of the remaining Trustees; provided that if required
by Section 16 of the Investment Company Act, the Trustees shall forthwith cause
to be held as promptly as possible and in any event within 60 days (unless the
Commission by order shall extend such period) a meeting of Holders for the
purpose of electing Trustees in compliance with Sections 10 and 16 of the
Investment Company Act. Until a vacancy in the office of any Trustee is filled
as provided above, the remaining Trustees in office, regardless of their number,
shall have the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Trust Agreement. Election shall be by the
affirmative vote of Holders of a majority of the STRYPES entitled to vote
present in person or by proxy at a special meeting of Holders called for the
purpose of electing any Trustee. Each individual Trustee shall be at least 21
years of age and shall not be under any legal disability. No Trustee who is an
"interested person", as defined in the Investment Company Act, may assume office
if it would cause the composition of the Trustees of the Trust not to be in
compliance with the percentage limitations on interested persons in Section 10
of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or election of a successor Trustee shall be mailed promptly after
acceptance of such appointment by the successor Trustee to each Holder.
Section 7.03. POWERS. The Trust will be managed solely by the Trustees,
who will, subject to the provisions of Article II hereof, have complete and
exclusive control over the management, conduct and operation of the Trust's
business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
Section 7.04. MEETINGS. Meetings of the Trustees shall be held from time
to time upon the call of any Trustee on not less than 48 hours notice (which may
be waived by any or all of the Trustees in writing either before or after such
meeting or by attendance at the meeting unless the Trustee attends the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened). The Trustees
shall act either by majority vote of the Trustees present at a meeting at which
at least a majority of the Trustees then in office are present or by a unanimous
written consent of the Trustees without a meeting. Except as otherwise required
under the Investment Company Act, all or any of the Trustees may participate in
a meeting of the Trustees by means of a conference telephone call or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
communications equipment shall constitute presence in person at such meeting.
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Section 7.05. RESIGNATION AND REMOVAL. Any Trustee may resign and be
discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding STRYPES, notice of which vote
shall be given to the remaining Trustees and the Administrator. The resignation,
removal or failure to reelect any Trustee shall not cause the termination of the
Trust.
Section 7.06. LIABILITY. The Trustees shall not be liable to the Trust or
any Holder for any action taken or for refraining from taking any action except
in the case of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties of their office. Specifically, without limitation, the
Trustees shall not be responsible for or in respect of the recitals herein or
the validity or sufficiency of this Trust Agreement or for the due execution
hereof by any other Person, or for or in respect of the validity or sufficiency
of STRYPES or Certificates representing STRYPES and shall in no event assume or
incur any liability, duty or obligation to any Holder or to any other Person,
other than as expressly provided for herein. The Trustees may employ agents,
attorneys, administrators, accountants and auditors, and shall not be answerable
for the default or misconduct of any such Persons if such Persons shall have
been selected with reasonable care. Action in good faith may include action
taken in good faith in accordance with an opinion of counsel. In no event shall
any Trustee be personally liable for any expenses with respect to the Trust.
Each Trustee shall be indemnified by the Trust with respect to any claim,
liability or loss arising out of or in connection with such Trustee's acting as
Trustee of the Trust and with respect to all reasonable costs and expenses
(including the reasonable costs of investigation, preparation for and defense of
legal and/or administrative proceedings relating to a claim against such Trustee
and reasonable attorneys' fees and disbursements) incurred in connection with
any such claim, liability or loss, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties of his office.
Notwithstanding the foregoing, it is understood that the Trust shall not, in
respect of the legal expenses of any Trustee in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel).
Section 7.07. COMPENSATION. Each Trustee, other than a Trustee who is a
director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and anticipated out-of-pocket expenses.
In addition, the Managing Trustee shall receive an additional one-time, up-front
fee of $3,600 for serving in such capacity. The Trustees will not receive any
pension or retirement benefits. In the event of the resignation or removal of a
Trustee, such Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal through the Exchange
Date.
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ARTICLE VIII.
MISCELLANEOUS
Section 8.01. MEETINGS OF HOLDERS. The Trustees shall not hold annual or
regular meetings of Holders except as set forth herein. A special meeting may be
called at any time by the Trustees or upon petition of Holders of more than 50%
of the STRYPES outstanding (unless substantially the same matter was voted on
during the preceding 12 months), and shall be called as required by the
Investment Company Act and the rules and regulations thereunder, including,
without limitation, when requested by the Holders of not less than 10% of the
STRYPES outstanding for the purposes of voting upon the question of the removal
of any Trustee or Trustees. The Trustees shall establish, and notify the Holders
in writing of, the record date for each such meeting which shall be not less
than 10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The
Administrator shall, as soon as possible after any such record date (or prior to
such record date if appropriate), mail by first class mail to each Holder a
notice of meeting and a proxy statement and form of proxy in the form approved
by the Trustees and complying with the Investment Company Act and the rules and
regulations thereunder. Except as otherwise specified herein, in the Prospectus
(including, without limitation, changes to the Trust's fundamental policies set
forth in the prospectus) or in any provision of the Investment Company Act and
the rules and regulations thereunder, any action may be taken by vote of Holders
of a majority of the STRYPES outstanding present in person or by proxy if
Holders of a majority of STRYPES outstanding on the record date are so
represented. Each STRYPES shall have one vote and may be voted in person or by
duly executed proxy; provided, however, that any investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), owning
STRYPES in excess of the limits imposed by Sections 12(d)(1)(A)(i) and
12(d)(1)(C) of the 1940 Act must vote their STRYPES in proportion to the vote of
all other Holders of STRYPES that are not investment companies registered under
the 1940 Act. Any proxy may be revoked by notice in writing, by a subsequently
dated proxy or by voting in person at the meeting, and no proxy shall be valid
after eleven months following the date of its execution.
Section 8.02. BOOKS AND RECORDS; REPORTS. (a) The Trustees shall keep a
certified copy or duplicate original of this Trust Agreement on file at the
office of the Trust and the office of the Administrator available for inspection
at all reasonable times during its usual business hours by any Holder. The
Trustees shall keep proper books of record and account for all the transactions
under this Trust Agreement at the office of the Trust and the office of the
Administrator, and such books and records shall be open to inspection by any
Holder at all reasonable times during usual business hours. The Trustees shall
retain all books and records in compliance with Section 31 of the Investment
Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set forth,
either in the instruments by means of which payment is made or in a separate
statement, the amount being paid from the Trust Account expressed as a dollar
amount per STRYPES and the other information required under Section 19 of the
Investment Company Act and the rules and regulations thereunder. The Trustees
shall prepare and file or distribute reports as required by Section 30 of the
Investment Company Act and the rules and
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regulations thereunder. The Trustees shall prepare and file such reports as may
from time to time be required to be filed or distributed to Holders under any
applicable state or Federal statute or rule or regulation thereunder, and shall
file such tax returns as may from time to time be required under any applicable
state or Federal statute or rule or regulation thereunder. One of the Trustees
shall be designated by resolution of the Trustees to make the filings and give
the notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as required by
the Investment Company Act, (i) the U.S. Treasury Securities 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 Trustees, (ii) short-term
investments having a maturity of 60 days or less will be valued at cost with
accrued interest or discount earned included in interest receivable and (iii)
the Contract will be valued at the bid price received by the Administrator from
an independent broker-dealer firm unaffiliated with the Trust to be named by the
Trustees which is in the business of making bids on financial instruments
similar to the Contract and with terms comparable thereto. In the event that the
Trust (acting through the Administrator) is unable to obtain a valuation from an
independent broker-dealer firm, as required by clause (iii) of the preceding
sentence, on a timely basis or without unreasonable effort or expense, the
Contract shall be valued at an amount deemed to be fair and reflective of the
market value for the Contract based on all appropriate factors relevant to the
value of the Contract as [determined by an independent expert or appraiser
retained by the Trust or by the Administrator on the Trust's behalf].
Section 8.03. DISSOLUTION. (a) The Trust created hereby shall dissolve,
and its affairs be wound up, upon the earliest of (i) the date 90 days after the
execution of this Trust Agreement if (x) the STRYPES have not theretofore been
issued or (y) the net worth of the Trust is not at least $100 at such time, (ii)
the date five Business Days after any Closing Date (other than any Closing Date
in respect of a Closing of an acquisition, sale and delivery pursuant to Section
7.3 of the Contract if, immediately following such Closing, the Optional
Acceleration Value is greater than zero), and (iii) the date which is 21 years
less 91 days after the death of the last survivor of all of the descendants of
Joseph P. Kennedy Sr., the former United States Ambassador to the Court of St.
James', living on the date hereof. The Trust is irrevocable, the Sponsor has no
right to withdraw any assets constituting a portion of the Trust Estate, and the
dissolution of the Sponsor shall not operate to dissolve the Trust. The death or
incapacity of any Holder shall not operate to terminate this Trust Agreement,
nor entitle his legal representatives or heirs to claim an accounting or to take
any action or proceeding in any court for a partition or winding up of the
Trust, and shall not otherwise affect the rights, obligations and liabilities of
the parties hereto.
(b) Written notice of any dissolution shall be sent to Holders
specifying the record date for any 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, upon which the books maintained by
the Paying Agent pursuant to Section 5.02 hereof shall be closed. Any such
notice shall be provided
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by mail, sent to each Holder at such Holder's address as it appears on the books
of the Paying Agent, first class, postage prepaid not less than 9 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.
(c) Subject to any applicable provisions of law, for purposes of
dissolution under Sections 8.03(a)(ii) and (iii) hereof, within five Business
Days after such dissolution, the Trustees shall effect the sale of any remaining
property of the Trust (other than any Dollar General Common Stock or Marketable
Securities received pursuant to the Contract, U.S. Treasury Securities held by
the Trust and cash), and the Paying Agent shall distribute pro rata as soon as
practicable thereafter to each Holder, upon surrender for cancellation of its
Certificates, its interest in the Trust Estate. Together with the distribution
to the Holders, the Trustees shall furnish the Holders with a final statement as
of the date of the distribution of the amount distributable with respect to each
STRYPES.
(d) Notwithstanding anything to the contrary contained herein, no
fractional units of any security (including Dollar General Common Stock) will be
distributed to Holders pursuant to Section 8.03(c) hereof upon dissolution of
the Trust. All fractional units to which Holders would otherwise be entitled
upon dissolution of the Trust will be aggregated and liquidated by the Trustees
and, in lieu of the fractional unit 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
(net of any brokerage or related expenses).
Section 8.04. AMENDMENT AND WAIVER. (a) This Trust Agreement may be
amended from time to time by the Trustees for any purpose prior to the issuance
and sale to the Underwriters of the STRYPES and thereafter without the consent
of any of the Holders (i) to cure any ambiguity or to correct or supplement any
provision contained herein or therein which may be defective or inconsistent
with any other provision contained herein or therein; (ii) to change any
provision hereof or thereof as may be required by applicable law or the
Commission or any successor governmental agency exercising similar authority; or
(iii) to make such other provisions in regard to matters or questions arising
hereunder or thereunder as shall not materially adversely affect the interests
of the Holders (as determined in good faith by the Trustees, who may rely on an
opinion of counsel).
(b) This Trust Agreement may also be amended from time to time by
the Trustees (or the performance of any of the provisions of the Trust Agreement
may be waived) with the consent by the required vote of the Holders in
accordance with Section 8.01 hereof; provided that this Trust Agreement may not
be amended (i) without the consent by vote of the Holders of all STRYPES then
outstanding, so as to increase the number of STRYPES issuable hereunder above
the number of STRYPES specified in Section 2.05(c) hereof or such lesser number
as may be outstanding at any time during the term of this Trust Agreement, (ii)
to reduce the interest in the Trust represented by STRYPES without the consent
of the Holders of such STRYPES, (iii) if such amendment is prohibited by the
Investment Company Act or other applicable law or (iv) without the consent by
vote of the Holders of all STRYPES then outstanding, if such amendment
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would effect a change in Section 2.04 or 2.09 hereof or in the voting
requirements set forth in Section 8.01 hereof or this Section 8.04.
(c) Any of the agreements referred to in Section 2.05(a) hereof may
be amended from time to time by the Trustees and the other parties thereto for
any purpose without the consent of any of the Holders.
(d) Promptly after the execution of any amendment, the Trustees
shall furnish written notification of the substance of such amendment to each
Holder.
(e) Notwithstanding subsections (a) and (b) of this Section 8.04, no
amendment hereof shall permit the Trust, the Trustees, the Administrator, the
Paying Agent or the Custodian to take any action or direct or permit any Person
to take any action that (i) would vary the investment of Holders within the
meaning of Treasury Regulation Section 301.7701-4(c), or (ii) would or could
cause the Trust, or direct or permit any action to be taken that would or could
cause the Trust, not to be a "grantor trust" under the Code.
Section 8.05. ACCOUNTANTS. (a) The Trustees shall, in accordance with
Section 30 of the Investment Company Act, file annually with the Commission such
information, documents and reports as investment companies having securities
registered on a national securities exchange are required to file annually
pursuant to Section 13(a) of the Exchange Act and the rules and regulations
issued thereunder. The Trustees shall transmit to the Holders, at least
semi-annually, the reports required by Section 30(d) of the Investment Company
Act and the rules and regulations thereunder, including, without limitation, a
balance sheet accompanied by a statement of the aggregate value of investments
on the date of such balance sheet, a list showing the amounts and values of such
investments owned on the date of such balance sheet, and a statement of income
for the period covered by the report. Financial statements contained in such
annual reports shall be accompanied by a certificate of independent public
accounts based upon an audit not less in scope or procedures than that which
independent public accountants would ordinarily make for the purpose of
complying with generally accepted auditing standards and shall contain such
information as the Commission may prescribe. Each such report shall state that
such independent public accountants have verified investments owned, either by
actual examination or by receipt of a certificate from the Custodian.
(b) The independent public accountants referred to in subsection (a)
above shall be selected at a meeting held within 30 days before or after the
beginning of the fiscal year by the vote, cast in person, of a majority of the
Trustees who are not "interested persons" as defined in the Investment Company
Act and such selection shall be submitted for ratification at the first meeting
of Holders to be held as set forth in Section 8.01 hereof, and thereafter as
required by the Investment Company Act and the rules and regulations thereunder.
The employment of any independent public accountant for the Trust shall be
conditioned upon the right of the Holders by a vote of the lesser of (i) 67% or
more of the STRYPES present at a special meeting of Holders, if Holders of more
than 50% of STRYPES outstanding are present or represented by proxy at such
meeting or (ii) more than 50% of the STRYPES outstanding to terminate such
employment at any time without penalty.
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(c) The foregoing provisions of this Section 8.05 are in addition to
any applicable requirements of the Investment Company Act and the rules and
regulations thereunder.
Section 8.06. NATURE OF HOLDER'S INTEREST. Each Holder holds at any given
time a beneficial interest in the Trust Estate, but does not have any right to
take title or possession of any portion of the Trust Estate. Each Holder
expressly waives any right he may have under any rule of law, or the provisions
of any statute, or otherwise, to require the Trustees at any time to account, in
any manner other than as expressly provided in this Trust Agreement, for the
shares of Dollar General Common Stock, the Contract, the U.S. Treasury
Securities or other assets or moneys from time to time received, held and
applied by the Trustees hereunder. No Holder shall have any right except as
provided herein to control or determine the operation and management of the
Trust or the obligations of the parties hereto. Nothing set forth herein or in
the Certificates representing STRYPES shall be construed to constitute the
Holders from time to time as partners or members of an association.
Section 8.07. DELAWARE LAW TO GOVERN. This Trust Agreement is executed and
delivered in the State of Delaware, and all laws or rules of construction of the
State of Delaware, without regard to principles of conflict of laws, shall
govern the rights of the parties hereto and the Holders and the construction,
validity and effect of the provisions hereof.
Section 8.08. NOTICES. Any notice, demand, direction or instruction to be
given to the Sponsor hereunder shall be in writing and shall be duly given if
mailed or delivered to ML IBK Positions, Inc. at World Financial Center, North
Tower, New York, New York 10281, or at such other address as shall be specified
by the Sponsor to the other parties hereto in writing. Any notice, demand,
direction or instruction to be given to the Trust and the Trustees hereunder
shall be in writing and shall be duly given if mailed or delivered to the Trust
c/o The Bank of New York at 101 Barclay Street, New York, New York 10286, and to
each Trustee at such Trustee's address set forth beneath its signature below, or
such other address as shall be specified to the other parties hereto by such
party in writing. Any notice to be given to a Holder shall be duly given if
mailed, first class postage prepaid, or by such other substantially equivalent
means as the Trustees may deem appropriate, or delivered to such Holder at the
address of such Holder appearing on the registry of the Paying Agent.
Section 8.09. SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
Section 8.10. COUNTERPARTS. This Trust Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 8.11. SUCCESSORS AND ASSIGNS. Whenever in this Trust Agreement any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be
24
<PAGE> 28
deemed to be included, and all covenants and agreements in this Trust Agreement
by the Sponsor and Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether or not so expressed.
25
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
ML IBK POSITIONS, INC.
By:
---------------------------
Name:
Title:
TRUSTEES:
- ------------------------------
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
- ------------------------------
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
- ------------------------------
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
26
<PAGE> 30
Schedule I
U.S. TREASURY SECURITIES
All terms specified are for stripped principal or interest components of
U.S. Treasury debt obligations.
<TABLE>
<CAPTION>
Maturity Par Amount CUSIP No.
=================== ============== ==========================================
<S> <C> <C>
</TABLE>
27
<PAGE> 31
Exhibit A
DOLLAR GENERAL STRYPES TRUST
NO. ____________ ______________STRYPES(SM)
CUSIP NO. ______________
THIS CERTIFIES THAT ________ IS THE RECORD OWNER OF _______ FULLY PAID AND
NON-ASSESSABLE STRYPES, PAR VALUE $.10 PER STRYPES, OF DOLLAR GENERAL STRYPES
TRUST CONSTITUTING FRACTIONAL UNDIVIDED BENEFICIAL INTERESTS IN DOLLAR GENERAL
STRYPES TRUST, A TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT
TO AN AMENDED AND RESTATED TRUST AGREEMENT (THE "TRUST AGREEMENT") AMONG ML IBK
POSITIONS, INC., THE TRUSTEES NAMED THEREIN AND THE HOLDERS (AS DEFINED
THEREIN). THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, TO WHICH THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE
ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A COPY OF WHICH TRUST AGREEMENT IS
AVAILABLE AT THE OFFICE OF THE TRUST'S PAYING AGENT, THE BANK OF NEW YORK, 101
BARCLAY STREET NEW YORK, NEW YORK 10286. THIS CERTIFICATE IS TRANSFERABLE AND
INTERCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED
ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY
OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM
SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED
IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY THE PAYING
AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
DATED:
DOLLAR GENERAL STRYPES TRUST
By:
------------------------------
Donald J. Puglisi
Managing Trustee
COUNTERSIGNED:
THE BANK OF NEW YORK
as Paying Agent
By:
------------------------------
Authorized Signature
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
A-1
<PAGE> 32
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE AMENDED AND RESTATED TRUST AGREEMENT AMONG ML IBK POSITIONS,
INC., THE TRUSTEES NAMED THEREIN AND THE HOLDERS (AS DEFINED THEREIN) TO WHICH
THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--___Custodian___
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN-- as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _________
tenants in common (State)
Additional abbreviations also may be used though not in the above list.
For value received, _______________________ hereby sell, assign and transfer
unto
Please insert social securities or
other identifying number of assignee
- ---------------------------------------------
- ---------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
________ STRYPES of fractional undivided beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint _________
Attorney to transfer the said STRYPES on the books of the within-named Trust
with full power of substitution in the premises.
Dated: ______________________
______________________________________
NOTICE: The Signature to this assignment must correspond with the name as
written upon the face of the Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed: _____________________________________
The Signature(s) should be guaranteed by an eligible
guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C.
Rule 17Ad-15.
A-2
<PAGE> 33
Exhibit B
Security and Pledge Agreement
B-1
<PAGE> 34
Exhibit C
Forward Purchase Contract
C-1
<PAGE> 35
Exhibit D
Fund Indemnity Agreement
D-1
<PAGE> 36
Exhibit E
Administration Agreement
E-1
<PAGE> 37
Exhibit F
Paying Agent Agreement
F-1
<PAGE> 1
Exhibit (h)(1)
================================================================================
DOLLAR GENERAL STRYPES TRUST
(a Delaware business trust)
PURCHASE AGREEMENT
Dated: ____________, 1998
================================================================================
<PAGE> 2
Table of Contents
Page
----
SECTION 1. Representations and Warranties................................. 4
(a) Representations and Warranties by the Trust......................... 4
(b) Representations and Warranties by the Contracting
Stockholder......................................................... 9
(c) Officer's Certificates.............................................. 12
SECTION 2. Sale and Delivery to Underwriters; Closing..................... 13
(a) Initial Securities.................................................. 13
(b) Option Securities................................................... 13
(c) Payment............................................................. 13
(d) Denominations; Registration......................................... 14
SECTION 3. Covenants...................................................... 14
(a) Covenants of the Trust.............................................. 14
(b) Covenant of the Contracting Stockholder............................. 16
SECTION 4. Payment of Expenses............................................ 17
(a) Expenses Payable by the Contracting Stockholder..................... 17
(b) Termination of Agreement............................................ 17
(c) Allocation of Expenses.............................................. 17
SECTION 5. Conditions..................................................... 17
(a) Conditions of Underwriters' Obligations............................. 17
(b) Termination of Agreement............................................ 22
SECTION 6. Indemnification................................................ 22
(a) Indemnification of the Underwriters and the Trust by
the Contracting Stockholder......................................... 22
(b) Indemnification of the Trust and the Contracting
Stockholder......................................................... 24
(c) Actions against Parties; Notification............................... 24
(d) Settlement without Consent if Failure to Reimburse.................. 25
(e) Conditions of Indemnification by the Contracting
Stockholder......................................................... 25
SECTION 7. Contribution................................................... 25
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery....................................................... 27
SECTION 9. Termination of Agreement....................................... 27
(a) Termination; General................................................ 27
(b) Liabilities......................................................... 27
SECTION 10. Default by One or More Underwriters............................ 27
SECTION 11. Notices........................................................ 27
SECTION 12. Parties........................................................ 28
SECTION 13. GOVERNING LAW AND TIME......................................... 28
SECTION 14. Effect of Headings............................................. 28
i
<PAGE> 3
SECTION 15. No Personal Liability of Trustees.............................. 28
ii
<PAGE> 4
Dollar General STRYPES Trust
(a Delaware business trust)
7,500,000 STRYPES(SM)
Exchangeable for Shares of Common Stock of Dollar General Corporation
PURCHASE AGREEMENT
____________, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Dollar General STRYPES Trust (such trust and the trustees thereof acting
in their capacities as such being referred to herein as the "Trust"), a
statutory business trust created under the Business Trust Act (the "Delaware
Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12
Del. C. (Sections 3801 et seq.)), and the Turner Children Trust, a trust made by
Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and Katherine Turner
Weaver as Donors under the Indenture of Trust dated January 21, 1980, as amended
(the "Indenture of Trust"), and for which Cal Turner, Jr. and James Stephen
Turner act as Co-Trustees (such trust and the co-trustees thereof acting in
their capacities as such being referred to herein as the "Contracting
Stockholder"), confirm their respective agreements with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Goldman, Sachs & Co. (collectively, the "Underwriters", which term shall also
include any underwriter substituted as provided in Section 10 hereof) with
respect to (i) the issue and sale by the Trust and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of the
Trust's STRYPES4M (each, a "STRYPES") set forth in Schedule A hereto, and (ii)
the grant by the Trust to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
1,125,000 additional STRYPES to cover over-allotments, if any. The aforesaid
7,500,000 STRYPES (the "Initial Securities") to be
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
1
<PAGE> 5
purchased by the Underwriters pursuant to this Agreement and all or any part of
the 1,125,000 STRYPES subject to the option described in Section 2(b) hereof
(the "Option Securities") are hereinafter called, collectively, the
"Securities." The Securities are to be issued pursuant to an Amended and
Restated Trust Agreement, to be dated as of May 1, 1998, among the trustees of
the Trust (the "Trustees") and ML IBK Positions, Inc., as Sponsor (the "Trust
Agreement").
The Trust, Dollar General Corporation, a Kentucky corporation ("Dollar
General"), and the Underwriters are concurrently entering into an agreement,
dated the date hereof (the "Registration Agreement"), relating to the
registration of shares of common stock, par value $.50 per share (the "Dollar
General Common Stock"), of Dollar General deliverable upon exchange of the
STRYPES. The STRYPES will be exchanged for a specified number of shares of
Dollar General Common Stock 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") or upon
earlier dissolution of the Trust in certain circumstances.
The Trust and the Contracting Stockholder understand that the Underwriters
propose to make a public offering of the Securities as soon as the Underwriters
deem advisable after this Agreement and the Registration Statement been executed
and delivered.
The Trust has filed with the Securities and Exchange Commission (the
"Commission") (i) a notification on Form N-8A (the "Notification") of
registration of the Trust as an investment company; and (ii) a registration
statement on Form N-2 (Nos. 333-50783 and 811-08755) for the registration of the
Securities under the Securities Act of 1933, as amended (the "1933 Act"), and
Pre-Effective Amendments No. 1 and 2 thereto, including a preliminary prospectus
relating to the offering of the Securities. Promptly after execution and
delivery of this Agreement, the Trust will either (i) prepare and file a
prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") and paragraph (h) of Rule 497 ("Rule 497(h)") of the 1933 Act
Regulations or (ii) if the Trust has elected to rely upon Rule 434 ("Rule 434")
of the 1933 Act Regulations, prepare and file a term sheet (a "Trust Term
Sheet") in accordance with the provisions of Rule 434 and Rule 497(h). The
information included in such prospectus or in such Trust Term Sheet, as the case
may be, that was omitted from such registration statement (as so amended) at the
time it became effective but that is deemed to be part of such registration
statement (as so amended) at the time it became effective (i) pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (ii)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
Any prospectus relating to the offering of the Securities used before such
registration statement (as so amended) became effective, and any prospectus
relating to the offering of the Securities that omitted, as applicable, the Rule
430A Information or the Rule 434 Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, in each
case excluding any Dollar General preliminary prospectus (as defined below)
attached thereto, is herein called a "Trust preliminary prospectus." Such
registration statement (as so amended), including the exhibits thereto and the
schedules thereto, if any, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Trust Registration Statement." Any registration statement filed by
the Trust pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred
to as the
2
<PAGE> 6
"Trust Rule 462(b) Registration Statement," and after such filing the term
"Trust Registration Statement" shall include the Trust Rule 462(b) Registration
Statement. The final prospectus relating to the offering of the Securities,
excluding any Dollar General Prospectus (as defined below) attached thereto, in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities is referred to herein as the "Trust Prospectus." If
Rule 434 is relied on, the term "Trust Prospectus" shall refer to the Trust
preliminary prospectus dated May 12, 1998 together with the Trust Term Sheet and
all references in this Agreement to the date of the Trust Prospectus shall mean
the date of the Trust Term Sheet. For purposes of this Agreement, all references
to the Trust Registration Statement, any Trust preliminary prospectus, the Trust
Prospectus or any Trust Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
Dollar General has filed with the Commission a registration statement on
Form S-3 (No. 333-50451), covering the registration under the 1933 Act of the
shares of Dollar General Common Stock deliverable upon exchange of the
Securities, and Pre-Effective Amendments No. 1 and 2 thereto, including the
related preliminary prospectus or prospectuses. Each prospectus relating to the
shares of Dollar General Common Stock deliverable upon exchange of the
Securities used before such registration statement (as so amended) became
effective, in each case excluding any Trust preliminary prospectus attached
thereto, is herein called a "Dollar General preliminary prospectus." Such
registration statement, including the exhibits thereto, the schedules thereto,
if any, and the documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the 1933 Act, at the time it became effective, is herein
called the "Dollar General Registration Statement." Any registration statement
filed by Dollar General pursuant to Rule 462(b) of the 1933 Act Regulations is
herein referred to as the "Dollar General Rule 462(b) Registration Statement,"
and after such filing the term "Dollar General Registration Statement" shall
include the Dollar General Rule 462(b) Registration Statement. The final
prospectus relating to the shares of Dollar General Common Stock deliverable
upon exchange of the Securities, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, but
excluding any Trust Prospectus attached thereto, in the form first furnished to
the Underwriters for use in connection with the offering of the Securities is
herein called the "Dollar General Prospectus." For purposes of this Agreement,
all references to the Dollar General Registration Statement, any Dollar General
preliminary prospectus, the Dollar General Prospectus or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to EDGAR.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Dollar
General Registration Statement, any Dollar General preliminary prospectus or the
Dollar General Prospectus (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which are incorporated by reference in the Dollar General
Registration Statement, any Dollar General preliminary prospectus or the Dollar
General Prospectus, as the case may be, and shall be deemed to exclude all
financial statements and schedules and other information which are included in
any Trust preliminary prospectus or the Trust Prospectus which is attached to
any Dollar General preliminary prospectus or the Dollar General Prospectus; and
all references in this Agreement to amendments or supplements to the
3
<PAGE> 7
Dollar General Registration Statement, any Dollar General preliminary prospectus
or the Dollar General Prospectus shall be deemed to mean and include the filing
of any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Dollar General Registration
Statement, such Dollar General preliminary prospectus or the Dollar General
Prospectus, as the case may be.
Concurrently with the execution and delivery of this Agreement, the Trust,
the Contracting Stockholder and The Bank of New York ("BONY"), as collateral
agent, will enter into a forward purchase contract (the "Forward Purchase
Contract"), pursuant to which the Contracting Stockholder will agree to sell and
the Trust will agree to purchase, on the business day immediately preceding the
Exchange Date, the aggregate number of shares of Dollar General Common Stock
required by the Trust to exchange all of the Securities on the Exchange Date as
described in the Trust Prospectus, subject to the Contracting Stockholder's
right to satisfy its obligation thereunder in whole or in part through cash
payment based upon the value of the shares of Dollar General Common Stock
otherwise deliverable (the "Forward Purchase"). The Contracting Stockholder's
obligation under the Forward Purchase Contract will be secured by a pledge of
collateral pursuant to the terms of a security and pledge agreement (the
"Security and Pledge Agreement") among the Contracting Stockholder, the Trust
and BONY, as collateral agent.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Trust. The Trust represents and
warrants to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(i) Compliance with Registration Requirements. Each of the Trust
Registration Statement and any Trust Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending the
effectiveness of the Trust Registration Statement or any Trust Rule 462(b)
Registration Statement pursuant to Section 8(d) of the 1933 Act, or order
pursuant to Section 8(e) of the Investment Company Act of 1940, as amended
(the "1940 Act"), has been issued and no proceedings for either such
purpose have been instituted or are pending or, to the knowledge of the
Trust, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Trust Registration Statement, any Trust
Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the Notification, the
Trust Registration Statement, the Trust Rule 462(b) Registration Statement
and any amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the 1940 Act and the rules and regulations of the
Commission under the 1940 Act (the "1940 Act Regulations"), and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. Neither the Trust Prospectus nor
any
4
<PAGE> 8
amendments or supplements thereto, at the time the Trust Prospectus or any
such amendment or supplement was issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If Rule 434 is used, the Trust will comply with the
requirements of Rule 434. The representations and warranties in this
subsection shall not apply to statements in or omissions from the Trust
Registration Statement (or any amendments thereto) or the Trust Prospectus
(or any amendments or supplements thereto) made in reliance upon and in
conformity with information furnished to the Trust in writing by the
Underwriters through Merrill Lynch expressly for use in the Trust
Registration Statement (or any amendments thereto) or Trust Prospectus (or
any amendments or supplements thereto).
Each Trust preliminary prospectus and the prospectus relating to the
offering of the Securities filed as part of the Trust Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 497 under the 1933 Act, complied when so filed in
all material respects with the 1933 Act Regulations and the 1940 Act
Regulations, and, if applicable, each Trust preliminary prospectus and the
Trust Prospectus delivered to the Underwriters for use in connection with
the offering of the Securities was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified certain
financial statements and supporting schedules included in the Trust
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statement. The statement of assets, liabilities and
capital included in the Trust Registration Statement and the Trust
Prospectus, together with the notes thereto, present fairly the financial
position of the Trust at the date indicated; said financial statement has
been prepared in conformity with generally accepted accounting principles.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Trust Registration Statement
and the Trust Prospectus, except as otherwise stated therein or
contemplated thereby, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs,
business prospects, management, investment objectives or investment
policies of the Trust, whether or not arising in the ordinary course of
business (a "Material Adverse Effect") and (B) there have been no
transactions entered into by the Trust, other than those in the ordinary
course of business, which are material with respect to the Trust.
(v) Good Standing of the Trust; No Subsidiaries. The Trust has been
duly created and is validly existing as a business trust in good standing
under the Delaware Act with power and authority to own its properties and
to conduct its business as
5
<PAGE> 9
described in the Trust Prospectus and to enter into and perform its
obligations under this Agreement, the Trust Agreement and the Forward
Purchase Contract; the Trust is and will, under current law, be classified
for United States federal income tax purposes as a grantor trust and not
as an association taxable as a corporation; and the Trust has no
subsidiaries.
(vi) Registration Under the 1940 Act. The Trust is registered with
the Commission as a non-diversified, closed-end management investment
company under the 1940 Act. No order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or, to the
knowledge of the Trust, threatened by the Commission. No person is serving
or acting as an officer or trustee of the Trust, except in accordance with
the provisions of the 1940 Act.
(vii) Outstanding STRYPES. All of the outstanding STRYPES have been
duly and validly authorized and issued and are fully paid and
non-assessable undivided beneficial interests in the assets of the Trust;
and the form of certificate used to evidence the STRYPES is in due and
proper form and complies with all provisions of applicable law.
(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Trust. The performance of this
Agreement and the consummation of the transactions contemplated in this
Agreement and the Trust Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Trust with its obligations under this
Agreement have been duly authorized by the Trust.
(ix) Authorization and Description of the Securities. The Securities
have been duly authorized by the Trust for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by
the Trust pursuant to this Agreement against payment of the purchase price
therefor as provided herein, will be validly issued and fully paid and
non-assessable undivided beneficial interests in the assets of the Trust;
the STRYPES conform to all statements relating thereto contained in the
Trust Prospectus and such description conforms to the rights set forth in
the instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and the
issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Trust.
(x) Authorization of Fundamental Agreements. Each of the Forward
Purchase Contract, the Security and Pledge Agreement, the Administration
Agreement, to be dated ___________, 1998, between the Trust and BONY (the
"Administration Agreement"), the Custodian Agreement, dated ____________,
1998, between the Trust and BONY (the "Custodian Agreement"), the Paying
Agent Agreement, to be dated ____________, 1998, between the Trust and
BONY (the "Paying Agent Agreement") and the Fund Indemnity Agreement, to
be dated ____________, 1998, among the Trust, Merrill Lynch & Co., Inc.
and the Contracting Stockholder (the "Fund Indemnity Agreement") (the
Forward Purchase Contract, the Security and Pledge Agreement, the
Administration Agreement,
6
<PAGE> 10
the Custodian Agreement, the Paying Agent Agreement and the Fund Indemnity
Agreement are collectively referred to herein as the "Fundamental
Agreements"), has been duly authorized by the Trust and, at the Closing
Time, will have been duly executed and delivered by the Trust and
(assuming the due authorization, execution and delivery by the other
parties thereto) will constitute a valid and binding agreement of the
Trust, enforceable against the Trust in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xi) Compliance with Acts. The Trust Agreement and the Fundamental
Agreements comply with all applicable provisions of the 1933 Act and the
1940 Act, and all approvals of such documents required under the 1940 Act
by the holders of the STRYPES and the Trustees have been obtained and are
in full force and effect.
(xii) Description of Trust Agreement and Fundamental Agreements. The
Trust Agreement and the Fundamental Agreements will conform in all
material respects to the respective statements relating thereto contained
in the Trust Prospectus and, to the extent forms thereof were filed as
exhibits to the Trust Registration Statement, will be in substantially the
respective forms so filed.
(xiii) Absence of Defaults and Conflicts. The execution, delivery
and performance by the Trust of this Agreement and each Fundamental
Agreement and the consummation of the transactions contemplated herein,
therein and in the Trust Registration Statement (including the issuance
and sale of the Securities and the delivery of shares of Dollar General
Common Stock pursuant thereto, the consummation of the Forward Purchase
and the use of the proceeds from the sale of the Securities as described
in the Trust Prospectus under the caption "Use of Proceeds") and
compliance by the Trust with its obligations hereunder, under the
Securities and under each Fundamental Agreement do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Trust pursuant
to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Trust
is a party or by which it may be bound, or to which any of the property or
assets of the Trust is subject (collectively, "Agreements and
Instruments") (except for such conflicts, breaches, defaults or Repayment
Events or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the Trust Agreement or the trust certificate of the
Trust filed with the State of Delaware on April 15, 1998 or any applicable
law, statute, rule or regulation of any government or government
instrumentality having jurisdiction over the Trust or any of its assets,
properties or operations (other than any state securities or "blue sky"
law, statute, rule or regulation, as to which no representation or
warranty is made), or any applicable judgment, order, writ
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or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Trust or any of its assets or
properties (except for such violations of any law, statute, rule,
regulation, judgment, order, writ or decree that would not result in a
Material Adverse Effect). As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness of the Trust (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Trust.
(xiv) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending with respect to which the
Trust has received service of process, or, to the knowledge of the Trust,
threatened, against or affecting the Trust, which is required to be
disclosed in the Trust Registration Statement or the Trust Prospectus
(other than as disclosed therein), or which might, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect,
or which might, individually or in the aggregate, reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or the
Fundamental Agreements (including the issuance and sale of the Securities
and the delivery of shares of Dollar General Common Stock pursuant thereto
and the consummation of the Forward Purchase) or the performance by the
Trust of its obligations hereunder or thereunder; the aggregate of all
pending legal or governmental proceedings (with respect to which the Trust
has received service of process) to which the Trust is a party or of which
any of its property or assets is the subject which are not described in
the Trust Registration Statement or the Trust Prospectus, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xv) No Investment Restrictions, etc. There are no material
restrictions, limitations or regulations with respect to the ability of
the Trust to invest its assets as described in the Trust Prospectus, other
than as described therein.
(xvi) Exhibits. There are no contracts or documents which are of a
character required to be described in the Trust Registration Statement or
the Trust Prospectus or to be filed as exhibits thereto which have not
been so described or filed as required.
(xvii) Absence of Further Requirements. No declaration or filing
with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the Trust to own and use its assets and to
conduct its business in the manner described in the Trust Prospectus or
for the performance by the Trust of its obligations under this Agreement,
the Trust Agreement or any Fundamental Agreement or the consummation by
the Trust of the transactions contemplated herein or therein (including
the issuance and sale of the Securities and the delivery of shares of
Dollar General Common Stock pursuant thereto and the consummation of the
Forward Purchase), except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
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(xviii) Title to Property. The Trust has good title to all
properties owned by it, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances
of any kind except such as (A) are described in the Trust Prospectus or
(B) do not, singly or in the aggregate, materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Trust.
(b) Representations and Warranties by the Contracting Stockholder. The
Contracting Stockholder represents and warrants to each of the Underwriters and
the Trust as of the date hereof, as of the Closing Time referred to in Section
2(c) hereof, and as of each Date of Delivery (if any) referred to in Section
2(b) hereof, and agrees with each of the Underwriters and the Trust, as follows:
(i) Authority. The Contracting Shareholder has the full right, power
and authority to enter into and perform its obligations under this
Agreement, the Fund Expense Agreement to be dated __________, 1998 among
the Contracting Stockholder, Merrill Lynch & Co., Inc. and BONY (the "Fund
Expense Agreement"), the Fund Indemnity Agreement, the Forward Purchase
Contract and the Security and Pledge Agreement, to pledge and assign the
shares of Series A Convertible Junior Preferred Stock of Dollar General
(the "Series A Preferred Stock") to be pledged and assigned by the
Contracting Shareholder pursuant to the Security and Pledge Agreement, and
to sell, transfer and deliver the shares of Dollar General Common Stock to
be sold by the Contracting Shareholder pursuant to the Forward Purchase
Contract.
(ii) Delivery of Dollar General Common Stock. Cal Turner, Jr. and
James Stephen Turner, as Co-Trustees of the Contracting Stockholder, are
the sole registered owners of the shares of Series A Preferred Stock to be
delivered, pledged and assigned by the Contracting Stockholder pursuant to
the Security and Pledge Agreement; and the Contracting Stockholder has,
and at the Closing Time (and, if any Option Securities are purchased, at
the Date of Delivery) will have, all rights, title and interest in and to
the shares of Series A Preferred Stock to be pledged and assigned by it
pursuant to the Security and Pledge Agreement, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity,
other than those created pursuant to the Security and Pledge Agreement. If
the Contracting Stockholder delivers to the Trust shares of Dollar General
Common Stock pursuant to the Forward Purchase Contract, upon delivery by
the Contracting Stockholder to the Trust of the shares of Dollar General
Common Stock to be sold by the Contracting Stockholder pursuant to the
Forward Purchase Contract (whether such delivery is made on the business
day immediately preceding the Exchange Date, upon any acceleration of the
Contracting Stockholder's obligation under the Forward Purchase Contract
or otherwise), assuming the Trust purchased for value and without notice
of any adverse claim, the Trust will have acquired all rights, title and
interest in and to such shares of Dollar General Common Stock, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity. The sale, transfer and delivery of shares of Dollar General
Common Stock by the Contracting Stockholder to the Trust as contemplated
by the Forward Purchase Contract is not, and at the time of delivery of
such shares will not be, subject to any right of first refusal or similar
rights of
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any person pursuant to any contract or instrument to which the Contracting
Stockholder is a party or by which the Contracting Stockholder is bound
(other than rights which have been waived or satisfied).
(iii) Execution and Delivery of Agreement. This Agreement has been
duly executed and delivered by the Contracting Stockholder. The execution
and delivery of this Agreement and the sale and delivery of the Dollar
General Common Stock to be sold by the Contracting Stockholder and the
consummation by the Contracting Stockholder of the transactions
contemplated herein and in the Trust Registration Statement and compliance
by the Contracting Stockholder with its obligations hereunder do not and
will not, whether with or without the giving of notice or passage of time
or both, result in the creation or imposition of any tax, lien, charge or
encumbrance upon the Series A Preferred Stock or the Dollar General Common
Stock to be sold by the Contracting Stockholder, nor will such action
result in any violation of the provisions of the Indenture of Trust or, to
the best of the Contracting Stockholder's knowledge, any applicable
treaty, law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Contracting Stockholder or any of its
properties.
(iv) Execution and Delivery of the Fund Expense Agreement, the Fund
Indemnity Agreement, the Forward Purchase Contract and the Security and
Pledge Agreement. At the Closing Time, each of the Fund Expense Agreement,
the Fund Indemnity Agreement, the Forward Purchase Contract and the
Security and Pledge Agreement will have been duly executed and delivered
by the Contracting Stockholder and (assuming the due authorization,
execution and delivery by the other parties thereto) will constitute a
valid and binding agreement of the Contracting Stockholder, enforceable
against the Contracting Stockholder in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(v) Absence of Defaults and Conflicts. The execution, delivery and
performance by the Contracting Stockholder of this Agreement, the Fund
Expense Agreement, the Fund Indemnity Agreement, the Forward Purchase
Contract and the Security and Pledge Agreement and the consummation by the
Contracting Stockholder of the transactions contemplated herein and
therein and compliance by the Contracting Stockholder with its obligations
hereunder and thereunder do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Contracting Stockholder Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Contracting
Stockholder pursuant to, any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument
to which the Contracting Stockholder is a party or by which the
Contracting Stockholder may be bound, or to which any of the property or
assets of the Contracting
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<PAGE> 14
Stockholder is subject (except for such conflicts, breaches, defaults or
Contracting Stockholder Repayment Events or liens, charges or encumbrances
that would not, singly or in the aggregate, materially and adversely
affect the ability of the Contracting Stockholder to perform its
obligations under this Agreement, the Fund Expense Agreement, the Fund
Indemnity Agreement, the Forward Purchase Contract or the Security and
Pledge Agreement), nor will such action result in any violation of any
applicable law, statute, rule or regulation of any government or
government instrumentality having jurisdiction over the Contracting
Stockholder or any of its assets or properties (other than any state
securities or "blue sky" law, statute, rule or regulation, as to which no
representation and warranty is made), or any applicable judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Contracting Stockholder
or any of its assets or properties (except in all cases for such
violations that would not, singly or in the aggregate, materially and
adversely affect the ability of the Contracting Stockholder to perform its
obligations under this Agreement, the Fund Expense Agreement, the Fund
Indemnity Agreement, the Forward Purchase Contract or the Security and
Pledge Agreement). As used herein, a "Contracting Stockholder Repayment
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Contracting
Stockholder.
(vi) Absence of Further Requirements. To the best of the Contracting
Stockholder's knowledge, no declaration or filing with, or authorization,
approval, consent, license, order, registration, qualification or decree
of, any court or governmental authority or agency is necessary or required
for the execution, delivery or performance by the Contracting Stockholder
of this Agreement, the Fund Expense Agreement, the Fund Indemnity
Agreement, the Forward Purchase Contract or the Security and Pledge
Agreement or the consummation by the Contracting Stockholder of the
transactions contemplated herein or therein, except such as have been
already obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws.
(vii) Trust Registration Statement and Prospectus. At the respective
times the Trust Registration Statement, any Trust Rule 462(b) Registration
Statement and any post-effective amendments thereto became effective and
at the Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), the Notification, the Trust Registration Statement, the
Trust Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and the 1940
Act and the 1940 Act Regulations, and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither the Trust Prospectus nor any amendments or
supplements thereto, at the time the Trust Prospectus or any such
amendment or supplement was issued and at the Closing Time (and, if any
Option Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will
omit to state a material fact necessary in
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order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Trust Registration Statement (or any amendments
thereto) or the Trust Prospectus (or any amendments or supplements
thereto) made in reliance upon and in conformity with information
furnished to the Trust in writing by the Underwriters through Merrill
Lynch expressly for use in the Trust Registration Statement (or any
amendments thereto) or Trust Prospectus (or any amendments or supplements
thereto).
Each Trust preliminary prospectus and the prospectus relating to the
offering of the Securities filed as part of the Trust Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 497 under the 1933 Act, complied when so filed in
all material respects with the 1933 Act Regulations and the 1940 Act
Regulations.
(viii) Dollar General Registration Statement and Prospectus. The
Dollar General Registration Statement, any Dollar General Rule 462(b)
Registration Statement or any post-effective amendments thereto, at the
respective times the Dollar General Registration Statement, any Dollar
General Rule 462(b) Registration Statement or any post-effective
amendments thereto became effective, did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Dollar General Prospectus or any amendment or supplement thereto, at the
time the Dollar General Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time (and,
if any Option Securities are purchased, at the Date of Delivery), did not
and will not include an untrue statement of a material fact and did not
and will not omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties in this
subsection shall apply only to statements in or omissions from the Dollar
General Registration Statement (or any amendment thereto) or the Dollar
General Prospectus (or any amendment or supplement thereto) made in
reliance upon and in conformity with information furnished to Dollar
General in writing by the Contracting Stockholder expressly for use in the
Dollar General Registration Statement (or any amendment thereto) or the
Dollar General Prospectus (or any amendment or supplement thereto).
(ix) Security and Pledge Agreement. The representations and
warranties of the Contracting Stockholder set forth in Section 8(a) of the
Security and Pledge Agreement are true and correct on and as of the date
hereof with the same effect as though such representations and warranties
had been set forth in full in this Agreement.
(c) Officer's Certificates. Any certificate signed by any Trustee of the
Trust delivered to the Underwriters or counsel for the Underwriters shall be
deemed a representation and warranty by the Trust to the Underwriters as to the
matters covered thereby. Any certificate signed by the Contracting Stockholder
delivered to the Underwriters or counsel to the Underwriters or to the Trust or
counsel to the Trust shall be deemed a representation and warranty by the
Contracting
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<PAGE> 16
Stockholder to the Underwriters or the Trust, as the case may be, as to the
matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Trust agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Trust, at
the price per STRYPES set forth in Schedule B, the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Trust hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional 1,125,000 STRYPES at the price per
STRYPES set forth in Schedule B. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Securities upon notice by the
Underwriters to the Trust setting forth the number of Option Securities as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for such Option Securities. Any such time and date
of delivery (a "Date of Delivery") shall be determined by the Underwriters, but
shall not be later than seven full business days (or, in the case of any
exercise of said option by notice given after the Closing Time (as hereinafter
defined), earlier than two full business days) after the exercise of said
option, nor in any event prior to the Closing Time. If the option is exercised
as to all or any portion of the Option Securities, each of the Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter bears
to the total number of Initial Securities, subject in each case to such
adjustments as the Underwriters in their discretion shall make to eliminate any
sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048 or at such other
place as shall be agreed upon by the Underwriters and the Trust, at 9:00 A.M.
(Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof, or such
other time not later than ten business days after such date as shall be agreed
upon by the Underwriters and the Trust (such time and date of payment and
delivery being herein called "Closing Time"). In addition, in the event that any
or all of the Option Securities are purchased by the Underwriters, payment of
the purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above-mentioned offices, or at such other place as shall be
agreed upon by the Underwriters and the Trust, on each Date of Delivery as
specified in the notice from the Underwriters to the Trust.
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Payment shall be made to the Trust by wire transfer of immediately
available funds to a bank account designated by the Trust, against delivery to
the Underwriters of certificates for the Securities to be purchased by them. It
is understood that each Underwriter has authorized Merrill Lynch, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Securities which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Underwriters may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Underwriters in The City of New York not later than 10:00 A.M. (Eastern time) on
the business day prior to the Closing Time or the relevant Date of Delivery, as
the case may be.
SECTION 3. Covenants.
(a) Covenants of the Trust. The Trust covenants with each Underwriter as
follows:
(i) Compliance with Securities Regulations and Commission Requests.
The Trust, subject to Section 3(a)(ii), will comply with the requirements
of Rule 430A or Rule 434, as applicable, and will notify the Underwriters
immediately, and confirm the notice in writing, (A) when any
post-effective amendment to the Trust Registration Statement shall become
effective, or any supplement to the Trust Prospectus or any amended Trust
Prospectus shall have been filed, (B) of the receipt of any comments from
the Commission, (C) of any request by the Commission for any amendment to
the Trust Registration Statement or any amendment or supplement to the
Trust Prospectus or for additional information, and (D) of the issuance by
the Commission of any stop order suspending the effectiveness of the Trust
Registration Statement or of any order preventing or suspending the use of
any Trust preliminary prospectus or any order pursuant to Section 8(e) of
the 1940 Act, or of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Trust will
promptly effect the filings necessary pursuant to Rule 497(h) and will
take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 497(h) was received
for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Trust will make every reasonable effort
to prevent the issuance of any stop order pursuant to Section 8(d) of the
1933 Act or any order pursuant to Section 8(e) of the 1940 Act and, if any
such order is issued, to obtain the lifting thereof at the earliest
possible moment.
(ii) Filing of Amendments. The Trust will give the Underwriters
notice of its intention to file or prepare any amendment to the Trust
Registration Statement (including
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<PAGE> 18
any filing under Rule 462(b)), any Trust Term Sheet or any amendment,
supplement or revision to either the prospectus relating to the offering
of the Securities included in the Trust Registration Statement at the time
it became effective or to the Trust Prospectus, whether pursuant to the
1933 Act, the 1940 Act or otherwise, will furnish the Underwriters with
copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any
such document to which the Underwriters or counsel for the Underwriters
shall reasonably object.
(iii) Delivery of Trust Registration Statements. The Trust has
furnished or will deliver to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Trust Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and signed
copies of all consents and certificates of experts. If applicable, the
copies of the Trust Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(iv) Delivery of Trust Prospectuses. The Trust has delivered to each
Underwriter, without charge, as many copies of each Trust preliminary
prospectus as such Underwriter reasonably requested, and the Trust hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Trust will furnish to each Underwriter, without charge, during the
period when the Trust Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the Trust Prospectus
(as amended or supplemented) as such Underwriter may reasonably request.
If applicable, the Trust Prospectus and any amendments or supplements
thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(v) Continued Compliance with Securities Laws. The Trust will comply
with the 1933 Act and the 1933 Act Regulations, the 1934 Act and the 1934
Act Regulations, and the 1940 Act and the 1940 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Trust Prospectus. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion
of counsel for the Underwriters or for the Trust, to amend the Trust
Registration Statement or amend or supplement the Trust Prospectus in
order that the Trust Prospectus will not include any untrue statements of
a material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if
it shall be necessary, in the opinion of either such counsel, at any such
time to amend the Trust Registration Statement or amend or supplement the
Trust Prospectus in order to comply with the requirements of the 1933 Act
or the 1933 Act Regulations or the 1940 Act or the 1940 Act Regulations,
the Trust will promptly prepare and file with the Commission, subject to
Section 3(a)(ii), such amendment or supplement
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<PAGE> 19
as may be necessary to correct such statement or omission or to make the
Trust Registration Statement or the Trust Prospectus comply with such
requirements, and the Trust will furnish to the Underwriters such number
of copies of such amendment or supplement as the Underwriters may
reasonably request.
(vi) Blue Sky Qualifications. The Trust will use its best efforts,
in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions of the United States as the Underwriters may designate
and to maintain such qualifications in effect for a period of not less
than one year from the later of the effective date of the Trust
Registration Statement and any Trust Rule 462(b) Registration Statement;
provided, however, that the Trust shall not be obligated to file any
general consent to service of process or to qualify as a foreign trust or
association or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the
Trust will file such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period
of not less than one year from the effective date of the Trust
Registration Statement and any Trust Rule 462(b) Registration Statement.
(vii) Rule 158. The Trust will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(viii) Use of Proceeds. The Trust will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Trust
Prospectus under "Use of Proceeds."
(ix) Listing. The Trust will use its best efforts to effect and
maintain the listing of the Securities on the New York Stock Exchange.
(x) Reporting Requirements. The Trust, during the period when the
Trust Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations and all documents required to be filed with
the Commission pursuant to the 1940 Act within the time periods required
by the 1940 Act and the 1940 Act Regulations.
(b) Covenant of the Contracting Stockholder. The Contracting Stockholder
covenants with each Underwriter and the Trust that, during a period of 90 days
from the date of the Trust Prospectus, the Contracting Stockholder will not,
without the prior written consent of the Merrill Lynch, offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, any shares of Dollar
General Common Stock or any securities directly or indirectly convertible into
or exercisable or exchangeable for shares of Dollar General Common Stock. The
foregoing sentence shall not apply to the execution and delivery by the
Contracting Stockholder of the
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Forward Purchase Contract or the consummation by the Contracting Stockholder of
the transactions contemplated therein.
SECTION 4. Payment of Expenses.
(a) Expenses Payable by the Contracting Stockholder. The Contracting
Stockholder will pay all expenses incident to the performance by the Trust and
the Contracting Stockholder of their respective obligations under this Agreement
and the Registration Agreement, including (i) the preparation, printing and
filing of the Notification and the Trust Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, the Forward Purchase Contract and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, (iv) the fees and
disbursements of the Trust's counsel, accountants and other advisors, (v) the
fees and disbursements of the Contracting Stockholder's counsel and other
advisors, (vi) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(a)(vi) hereof, including filing fees
and the reasonable fees and disbursements of the counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vii) the printing and delivery to the
Underwriters of copies of each Trust preliminary prospectus, any Trust Term
Sheets and of the Trust Prospectus and any amendments or supplements thereto,
(viii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey and any supplement thereto, (ix) the fees and expenses of
any transfer agent or registrar for Securities, (x) the filing fees incident to,
and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities
and (xi) the fees and expenses incurred in connection with the listing of the
Securities on the New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Contracting Stockholder shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(c) Allocation of Expenses. The provisions of this Section 4 shall not
affect any agreement that the Contracting Stockholder may make for the sharing
of the costs and expenses to be borne by it pursuant to this Section 4.
SECTION 5. Conditions.
(a) Conditions of Underwriters' Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Trust and the Contracting Stockholder
contained in Sections 1(a) and 1(b) hereof, respectively, to the accuracy of the
representations and warranties of Dollar General contained in the Registration
Agreement, to the accuracy of the statements in certificates of any Trustee of
the Trust, any officer of Dollar General or by the Contracting Stockholder
delivered pursuant to the provisions hereof, to the performance by the Trust and
the Contracting Stockholder of their
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<PAGE> 21
respective covenants and other obligations hereunder, to the performance by
Dollar General of its covenants and other obligations under the Registration
Agreement, and to the following further conditions:
(i) Effectiveness of Trust Registration Statement. The Trust
Registration Statement, including any Trust Rule 462(b) Registration
Statement, has become effective and at Closing Time no stop order
suspending the effectiveness of the Trust Registration Statement pursuant
to Section 8(d) of the 1933 Act, or order pursuant to Section 8(e) of the
1940 Act, shall have been issued and no proceedings therefor shall have
been initiated or threatened by the Commission, and any request on the
part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of counsel to the Underwriters. A
prospectus containing the Rule 430A Information shall have been filed with
the Commission in accordance with Rule 497(h) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the
Trust has elected to rely upon Rule 434, a Trust Term Sheet shall have
been filed with the Commission in accordance with Rule 497(h).
(ii) Effectiveness of Dollar General Registration Statement. The
Dollar General Registration Statement, including any Dollar General Rule
462(b) Registration Statement, has become effective and at Closing Time no
stop order suspending the effectiveness of the Dollar General Registration
Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the
part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of counsel to the Underwriters.
(iii) Opinion of Counsel for the Trust. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood llp, counsel for the Trust, in form and
substance reasonably satisfactory to the Underwriters, to the effect set
forth in Exhibit A hereto. In giving such opinion such counsel may rely,
as to all matters governed by the laws of jurisdictions other than the law
of the State of New York and the federal law of the United States, upon
the opinions of counsel satisfactory to the Underwriters. Such counsel may
also state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of the
Trustees and certificates of public officials.
(iv) Opinion of Special Delaware Counsel for the Trust. At Closing
Time, the Underwriters shall have received the favorable opinion, dated as
of Closing Time, of Richards, Layton & Finger, P.A., special Delaware
counsel for the Trust, in form and substance reasonably satisfactory to
counsel for the Underwriters, to the effect set forth in Exhibit B hereto.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of the Trustees and certificates of public officials.
(v) Opinion of Counsel for Dollar General. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of Bass, Berry & Sims PLC, counsel for Dollar General, in
form and substance reasonably
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<PAGE> 22
satisfactory to counsel for the Underwriters, to the effect set forth in
Exhibit C hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the
State of Tennessee, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Underwriters. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of Dollar General
and its subsidiaries and certificates of public officials.
(vi) Opinion of Counsel for the Contracting Stockholder. At Closing
Time, the Underwriters shall have received the favorable opinion, dated as
of Closing Time, of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, counsel for the Contracting Stockholder, in form and
substance reasonable satisfactory to counsel for the Underwriters, to the
effect set forth in Exhibit D hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of Tennessee, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to the Underwriters. Such counsel may
also state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of the
Contracting Stockholder or officers of Dollar General and its subsidiaries
and certificates of public officials.
(vii) Managing Trustee's Certificate. At Closing Time, there shall
not have been, since the date hereof or since the respective dates as of
which information is given in the Trust Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs, business prospects, management, investment objectives or
investment policies of the Trust, whether or not arising in the ordinary
course of business, and the Underwriters shall have received a certificate
of the Managing Trustee of the Trust, dated as of Closing Time, to the
effect that (1) there has been no such material adverse change, (2) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time, (3) the Trust has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (4) no stop order suspending the effectiveness of the
Trust Registration Statement pursuant to Section 8(d) of the 1933 Act, or
order pursuant to Section 8(e) of the 1940 Act, has been issued and no
proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission.
(viii) Dollar General Officers' Certificate. At Closing Time, there
shall not have been, since the date hereof or since the respective dates
as of which information is given in the Dollar General Prospectus, any
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of Dollar General and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Underwriters shall have received
a certificate of each of the Chairman of the Board, the President or a
Vice President of Dollar General and of the chief financial or chief
accounting officer of Dollar General, in each case dated as of
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<PAGE> 23
Closing Time, to the effect that (1) there has been no such material
adverse change, (2) the representations and warranties of Dollar General
contained in Section 1(a) of the Registration Agreement are true and
correct with the same force and effect as though expressly made at and as
of Closing Time, (3) Dollar General has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time pursuant to the Registration Agreement, and (4) no
stop order suspending the effectiveness of the Dollar General Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of their knowledge, are pending or are
contemplated by the Commission.
(ix) Certificate of the Contracting Stockholder. At Closing Time,
the Underwriters shall have received a certificate by the Contracting
Stockholder, dated as of Closing Time, to the effect that (1) the
representations and warranties of the Contracting Stockholder contained in
Section 1(b) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time and (2) the Contracting
Stockholder has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time.
(x) Dollar General Accountants' Comfort Letters. At the time of the
execution of this Agreement, the Underwriters shall have received from
each of Deloitte & Touche LLP and Coopers & Lybrand L.L.P. a letter dated
such date, in form and substance satisfactory to counsel for the
Underwriters, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in
the Dollar General Registration Statement and the Dollar General
Prospectus.
(xi) Dollar General Bring-down Comfort Letters. At Closing Time, the
Underwriters shall have received from each of Deloitte & Touche LLP and
Coopers & Lybrand L.L.P. a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished by them
pursuant to Section 5(a)(x) hereof, except that the "specified date"
referred to shall be a date not more than three business days prior to
Closing Time.
(xii) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the New York Stock Exchange, subject
only to official notice of issuance.
(xiii) No Objection. At or prior to Closing Time, the NASD shall
have confirmed that it will not raise any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(xiv) Fundamental Agreements. Each Fundamental Agreement shall have
been executed and delivered by all parties thereto, and the Contracting
Stockholder shall have delivered to the Collateral Agent the number of
shares of Series A Preferred Stock required by the Security and Pledge
Agreement to be initially pledged and assigned by
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<PAGE> 24
the Contracting Stockholder thereunder in accordance with the requirements
of the Security and Pledge Agreement.
(xv) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations
and warranties of the Trust and the Contracting Stockholder contained
herein, the representations and warranties of Dollar General contained in
the Registration Agreement and the statements in any certificates
furnished by the Trust, Dollar General or the Contracting Stockholder
hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the Underwriters shall have received:
(A) Managing Trustee's Certificate. A certificate, dated such
Date of Delivery, of the Managing Trustee of the Trust confirming
that the certificate delivered at Closing Time pursuant to Section
5(a)(vii) hereof is true and correct as of such Date of Delivery.
(B) Officers' Certificate. A certificate, dated such Date of
Delivery, of the Chairman of the Board, the President or a Vice
President of Dollar General and of the chief financial or chief
accounting officer of Dollar General confirming that the certificate
delivered at Closing Time pursuant to Section 5(a)(viii) hereof is
true and correct as of such Date of Delivery.
(C) Certificate of the Contracting Stockholder. A certificate,
dated such Date of Delivery, by the Contracting Stockholder
confirming that the certificate delivered by it at Closing Time
pursuant to Section 5(a)(ix) hereof is true and correct as of such
Date of Delivery.
(D) Opinion of Counsel for the Trust. The favorable opinion of
Brown & Wood LLP, counsel for the Trust, in form and substance
satisfactory to the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion delivered
pursuant to Section 5(a)(iii) hereof.
(E) Opinion of Special Delaware Counsel for the Trust. The
favorable opinion of Richards, Layton & Finger, P.A., special
Delaware counsel for the Trust, in form and substance satisfactory
to counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion delivered
pursuant to Section 5(a)(iv) hereof.
(F) Opinion of Counsel for Dollar General. The favorable
opinion of Bass Berry & Sims PLC, counsel for Dollar General, in
form and substance satisfactory to counsel for the Underwriters,
dated such
21
<PAGE> 25
Date of Delivery, to the same effect as the opinion delivered
pursuant to Section 5(a)(v) hereof.
(G) Opinion of Counsel for the Contracting Stockholder. The
favorable opinion of Waller Lansden Dortch & Davis, A Professional
Limited Liability Company, counsel for the Contracting Stockholder,
in form and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, to the same effect as the opinion
delivered pursuant to Section 5(a)(vi) hereof.
(H) Dollar General Bring-down Comfort Letters. A letter from
each of Deloitte & Touche LLP and Coopers & Lybrand L.L.P., in form
and substance satisfactory to counsel for the Underwriters and dated
such Date of Delivery, substantially the same in form and substance
as the letter furnished to the Underwriters pursuant to Section
5(a)(xi) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(xvi) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, contained herein or in the Registration Agreement; and all
proceedings taken by the Trust in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(b) Termination of Agreement. If any condition specified in subsection (a)
of this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase of
Option Securities on a Date of Delivery which is after the Closing Time, the
obligations of the Underwriters to purchase the relevant Option Securities, may
be terminated by the Underwriters by notice to the Trust and the Contracting
Stockholder at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 6, 7
and 8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of the Underwriters and the Trust by the Contracting
Stockholder. Subject to Section 6(e) below, the Contracting Stockholder agrees
to indemnify and hold harmless each Underwriter, the Trust and each person, if
any, who controls any Underwriter or the Trust within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact
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<PAGE> 26
contained in the Trust Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Trust preliminary
prospectus or the Trust Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Dollar General
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Dollar General preliminary prospectus or
the Dollar General Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) or (ii) above;
provided that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Contracting Stockholder; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriters),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, referred to under (i) or (ii) above, to the extent that any such
expense is not paid under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with (A) written information furnished to the Trust by
the Underwriters through Merrill Lynch expressly for use in the Trust
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any Trust
preliminary prospectus or the Trust Prospectus (or any amendment or supplement
thereto) or (B) written information furnished to Dollar General by the
Underwriters through Merrill Lynch expressly for use in the Dollar General
Registration Statement (or any amendment thereto) or any Dollar General
preliminary prospectus or the Dollar General Prospectus (or any amendment or
supplement thereto); provided, further, that this indemnity agreement shall not
apply to any loss, liability, claim,
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<PAGE> 27
damage or expense of any Underwriter or person, if any, who controls such
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act with respect to any Dollar General preliminary prospectus to the
extent that any such loss, liability, claim, damage or expense of any
Underwriter results solely from the fact that such Underwriter sold Securities
to a person as to whom the Contracting Stockholder shall establish that there
was not sent by commercially reasonable means, at or prior to the written
confirmation of such sale, a copy of the Dollar General Prospectus in any case
where such delivery is required by the 1933 Act, if Dollar General has
previously furnished copies thereof in sufficient quantity to such Underwriter
and the loss, claim, damage or liability of such Underwriter results from an
untrue statement or omission of a material fact contained in the Dollar General
preliminary prospectus that was corrected in the Dollar General Prospectus.
(b) Indemnification of the Trust and the Contracting Stockholder. Each
Underwriter severally agrees to indemnify and hold harmless the Trust, the
Contracting Stockholder and each person, if any, who controls the Trust or the
Contracting Stockholder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a)(i) or (a)(ii)
of this Section, as incurred, but only with respect to (A) untrue statements or
omissions, or alleged untrue statements or omissions, made in the Trust
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any Trust
preliminary prospectus or the Trust Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Trust by the Underwriters through Merrill Lynch expressly for use in the
Trust Registration Statement (or any amendment thereto) or such Trust
preliminary prospectus or the Trust Prospectus (or any amendment or supplement
thereto) or (B) untrue statements or omissions, or alleged untrue statements or
omissions, made in the Dollar General Registration Statement (or any amendment
thereto) or any Dollar General preliminary prospectus or the Dollar General
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to Dollar General by the
Underwriters through Merrill Lynch expressly for use in the Dollar General
Registration Statement (or any amendment thereto) or any Dollar General
preliminary prospectus or the Dollar General Prospectus (or any amendment or
supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder which it may have otherwise than
on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Contracting Stockholder. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate
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<PAGE> 28
but similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Conditions of Indemnification by the Contracting Stockholder. The
obligations and liabilities of the Contracting Stockholder under Section 6(a)
hereof with respect to untrue statements or omissions or alleged untrue
statements or omissions made in the Dollar General Registration Statement (or
any amendment thereto), or any Dollar General preliminary prospectus or the
Dollar General Prospectus (or any amendment or supplement thereto), other than
in reliance upon and in conformity with written information furnished to Dollar
General by the Contracting Stockholder expressly for use in the Dollar General
Registration Statement (or any amendment thereto) or such Dollar General
preliminary prospectus or the Dollar General Prospectus (or any amendment or
supplement thereto), shall be subject to the following terms and conditions:
(i) the indemnified party shall have previously requested
indemnification for the loss, liability, claim, damage or expense arising
out of such untrue statements or omissions or alleged untrue statements or
omissions from Dollar General under Section 4(a) of the Registration
Agreement;
(ii) the Contracting Stockholder shall have received notice of the
indemnified party's request for indemnification from Dollar General; and
(iii) Dollar General shall have failed to pay or reimburse such
indemnified party, within 60 days from the date such request was made, in
accordance with such request.
SECTION 7. Contribution. If the indemnification provided for in Section 6
is for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party
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<PAGE> 29
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Trust and the Contracting Stockholder on the one hand and the Underwriters
on the other hand from the offering of the Securities pursuant to this Agreement
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Trust and the Contracting Stockholder on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Trust and the Contracting
Stockholder on the one hand and the Underwriters on the other hand in connection
with the offering of the Securities pursuant to this Agreement shall be deemed
to be such that the Underwriters shall be responsible for that portion of the
aggregate amount of such losses, liabilities, claims, damages and expenses
represented by the percentage that the total underwriting discount received by
the Underwriters as set forth on the cover of the Trust Prospectus, or, if Rule
434 is used, the corresponding location on the Trust Term Sheet, bears to the
aggregate initial public offering price of the Securities as set forth on such
cover and the Contracting Stockholder shall be responsible for the balance. The
relative fault of the Trust and the Contracting Stockholder on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Trust or the Contracting Stockholder on the one hand
or by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
The Trust, the Contracting Stockholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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<PAGE> 30
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Trust or the Contracting Stockholder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Trust. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Securities set forth opposite their respective names
in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of the Trust, Dollar General or the Contracting Stockholder
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters or
controlling persons, or by or on behalf of the Trust or the Contracting
Stockholder, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Underwriters may terminate this Agreement,
by notice to the Trust and the Contracting Stockholder, at any time at or prior
to Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Trust Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, business prospects, management,
investment objectives or investment policies of the Trust, whether or not
arising in the ordinary course of business, or (ii) if there has been, since the
time of execution of this Agreement, or since the respective dates as of which
information is given in the Dollar General Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of Dollar General and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of business, or
(iii) if there has occurred any material adverse change in the financial markets
in the United States, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Underwriters, impracticable to market the Securities or to enforce contracts for
the sale of the Securities, or (iv) if trading in the Securities or in the
Dollar General Common Stock has been suspended or limited by the Commission or
the New York Stock Exchange, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the Nasdaq National Market has
been suspended or limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said exchanges
or by such system or by order of the Commission, the NASD or any other
governmental authority, or (v) if a banking moratorium has been declared by
either federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section
9, such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 6, 7
and 8 shall survive such termination and remain in full force and effect.
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<PAGE> 31
SECTION 10. Default by One or More Underwriters. If one of the
Underwriters shall fail at Closing Time or a Date of Delivery to purchase the
Securities which it is obligated to purchase under this Agreement (the
"Defaulted Securities"), the non-defaulting Underwriter shall have the right,
within 24 hours thereafter, to make arrangements for the non-defaulting
Underwriter, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the non-defaulting Underwriter shall not
have completed such arrangements within such 24-hour period, then this Agreement
or, with respect to any Date of Delivery which occurs after the Closing Time,
the obligation of the Underwriters to purchase and of the Trust to sell the
Option Securities to be purchased and sold on such Date of Delivery, shall
terminate without liability on the part of the non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Trust to sell the relevant Option Securities,
as the case may be, either the non-defaulting Underwriter or the Trust shall
have the right to postpone the Closing Time or the relevant Date of Delivery, as
the case may be, for a period not exceeding seven days in order to effect any
required changes in the Trust Registration Statement or Trust Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to Merrill Lynch at North Tower, World Financial
Center, New York, New York 10281, attention Syndicate Operations; notices to the
Trust shall be directed to it c/o Puglisi & Associates, 850 Library Avenue,
Suite 204, Newark, Delaware 19715, attention of Donald J. Puglisi; and notices
to the Contracting Stockholder shall be directed to it c/o Cal Turner, Jr.,
Dollar General Corporation, 104 Woodmont Blvd., Suite 500, Nashville, TN 37205.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the Underwriters, the Trust and the Contracting Stockholder and
their respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the parties hereto and their respective successors and the controlling
persons referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto and their respective successors, and
said controlling persons and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
28
<PAGE> 32
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
SECTION 15. No Personal Liability of Trustees. By executing and delivering
this Agreement, none of the trustees of the Trust assumes, and in no event shall
incur, any personal liability hereunder, other than as expressly provided by
law. By executing and delivering this Agreement, none of the trustees of the
Contracting Stockholder assumes, and in no event shall incur, any personal
liability hereunder, other than as expressly provided by law.
29
<PAGE> 33
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Trust and the Contracting Stockholder a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the Underwriters, the Trust and the Contracting
Stockholder in accordance with its terms.
Very truly yours,
DOLLAR GENERAL STRYPES TRUST
By:
---------------------------------------------
Donald J. Puglisi, as Managing Trustee
TURNER CHILDREN TRUST
By:
---------------------------------------------
Cal Turner, Jr., as Co-Trustee
By:
---------------------------------------------
James Stephen Turner, as Co-Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By__________________________________
Authorized Signatory
30
<PAGE> 34
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
- -------------------------------------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................
Goldman, Sachs & Co............................
-------------
Total............................... 7,500,000
=============
</TABLE>
Sch A-1
<PAGE> 35
SCHEDULE B
DOLLAR GENERAL STRYPES TRUST
STRYPES
1. The initial public offering price of the Securities shall be
$_________ per STRYPES.
2. The purchase price for the Securities to be paid by the
Underwriters shall be $__________ per STRYPES, being an amount equal to
the initial public offering price set forth above less $_________ per
STRYPES.
3. The "Equity Appreciation Cap" with respect to the Securities
shall be $_________.
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
Sch B-1
<PAGE> 36
EXHIBIT A
FORM OF OPINION OF THE TRUST'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(iii)
(i) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act, and all filings required
under the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a business trust have been made.
(ii) Under the Delaware Act and the Declaration, the Trust has the
requisite power and authority to own property and conduct its business as
described in the Trust Prospectus.
(iii) Under the Delaware Act and the Declaration, the Trust has the
requisite power and authority to (a) execute and deliver, and to perform its
obligations under, the Purchase Agreement and the Fundamental Agreements, and
(b) issue and perform its obligations under the STRYPES.
(iv) Under the Delaware Act and the Declaration, the execution and
delivery by the Trust of the Purchase Agreement and the Fundamental Agreements
have been duly authorized by the requisite trust action on the part of the
Trust.
(v) Each of the Fundamental Agreements has been duly executed and
delivered by the Trust and (assuming the due authorization, execution and
delivery thereof by the other parties thereto) constitutes a valid and binding
agreement of the Trust, enforceable against the Trust in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(vi) The STRYPES, the Trust Agreement and the Fundamental Agreements
conform in all material respects as to legal matters to the descriptions thereof
contained in the Trust Prospectus.
(vii) The Trust is registered with the Commission as a non-diversified,
closed-end management investment company under the 1940 Act; and, to the best of
our knowledge, no order of suspension or revocation of such registration has
been issued or proceedings therefor initiated or threatened by the Commission.
(viii) The Trust Registration Statement has been declared effective under
the 1933 Act; the required filing of the Trust Prospectus pursuant to Rule
497(h) was made in the manner and within the time period required by Rule
497(h); and, to the best of our knowledge, no stop order suspending the
effectiveness of the Trust Registration Statement pursuant to Section 8(d) of
the
A-1
<PAGE> 37
1933 Act, or order pursuant to Section 8(e) of the 1940 Act, has been issued and
no proceedings for either such purpose have been instituted or are pending or
threatened by the Commission.
(ix) The Trust Registration Statement, as of its effective date, and the
Trust Prospectus, as of its issue date (in each case other than the financial
statements and supporting schedules and other financial data included therein or
omitted therefrom, as to which we express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the 1940 Act and the rules and regulations promulgated by the
Commission thereunder.
(x) The execution, delivery and performance by the Trust of the Purchase
Agreement and each Fundamental Agreement and the consummation by the Trust of
the transactions contemplated therein and in the Trust Registration Statement
(including the issuance and sale of the STRYPES and the delivery of the shares
of Dollar General Common Stock and/or cash in exchange therefor, the
consummation of the Forward Purchase and the use of the proceeds from the sale
of the STRYPES as described in the Trust Prospectus under the caption "Use of
Proceeds") and compliance by the Trust with its obligations under the Purchase
Agreement, the STRYPES and each Fundamental Agreement do not and will not,
whether with or without the giving of notice or lapse of time or both, conflict
with or constitute a breach of, or default or Repayment Event under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Trust pursuant to, any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to us, to which the Trust is a party or by which it may be
bound, or to which any of the property or assets of the Trust is subject (except
for such conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action result in
any violation of the provisions of the Declaration or the Trust Certificate, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Trust or any of its assets or properties.
(xi) To the best of our knowledge, there is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending or threatened against or affecting the
Trust, which is required to be disclosed in the Trust Registration Statement
(other than as disclosed therein), or which might, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, or
which might, individually or in the aggregate, reasonably be expected to
materially and adversely affect the properties or assets of the Trust or the
consummation by the Trust of the transactions contemplated in the Purchase
Agreement or the Fundamental Agreements (including the issuance and sale of the
STRYPES and the delivery of the shares of Dollar General Common Stock and/or
cash in exchange therefor and the consummation of the Forward Purchase) or the
performance by the Trust of its obligations thereunder.
(xii) No declaration or filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we express no
opinion) is necessary or required for the Trust to own or use its assets and to
conduct its business
A-2
<PAGE> 38
in the manner described in the Trust Prospectus or for the performance by the
Trust of its obligations under the Purchase Agreement or any Fundamental
Agreement or the consummation by the Trust of the transactions contemplated
therein (including the issuance and sale of the STRYPES and the delivery of the
shares of Dollar General Common Stock and/or cash in exchange therefor and the
consummation of the Forward Purchase).
(xiii) The Dollar General Registration Statement has been declared
effective under the 1933 Act; and, to the best of our knowledge, no stop order
suspending the effectiveness of the Dollar General Registration Statement has
been issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(xiv) The Dollar General Registration Statement, excluding the documents
incorporated by reference therein, as of its effective date, and Dollar General
Prospectus, excluding the documents incorporated by reference therein, as of its
issue date (in each case other than the financial statements and supporting
schedules and other financial data included therein or omitted therefrom, as to
which we express no opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
We have participated in conferences with the Trustees and representatives
of the Trust, officers and representatives of Dollar General and the Contracting
Stockholder, representatives of the independent accountants of the Trust and
Dollar General, and the Underwriters at which the contents of the Trust
Registration Statement and Prospectus, the contents of the Dollar General
Registration Statement and Prospectus and related matters were discussed and,
although we are not passing upon or assuming responsibility for the accuracy,
completeness or fairness of the statements contained or incorporated by
reference in said Registration Statements and Prospectuses and have made no
independent check or verification thereof, on the basis of the foregoing,
nothing has come to our attention that would lead us to believe (i) that the
Trust Registration Statement (except for financial statements and schedules and
other financial data included therein or omitted therefrom, as to which we make
no statement), at the time such Trust Registration Statement became effective or
at the date of the Purchase Agreement, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the Trust
Prospectus (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which we make no statement),
at the time the Trust Prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or (ii) that the
Dollar General Registration Statement (except for financial statements and
schedules and other financial data included or incorporated by reference therein
or omitted therefrom, as to which we make no statement), at the time the Dollar
General Registration Statement became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Dollar General Prospectus (except for financial statements and schedules and
other financial data included or incorporated by reference therein or omitted
therefrom, as to which we make no statement), at the time the Dollar General
Prospectus was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the
A-3
<PAGE> 39
statements therein, in the light of the circumstances under which they were
made, not misleading.
A-4
<PAGE> 40
EXHIBIT B
FORM OF OPINION OF THE TRUST'S DELAWARE COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(iv)
(i) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act, and all filings required
under the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a business trust have been made.
(ii) Under the Delaware Act and the Trust Agreement, the Trust has the
requisite trust power and authority to own property and conduct its business,
all as described in the Trust Prospectus.
(iii) The Trust Agreement constitutes a valid and binding obligation of ML
IBK Positions, Inc. and the Trustees, and is enforceable against ML IBK
Positions, Inc. and the Trustees in accordance with its terms, except as
enforcement may be limited by (i) bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation and other similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) principles of
equity (regardless of whether considered and applied in a proceeding in equity
or at law), (iii) the law of fraudulent transfer, (iv) public policy, (v)
applicable law relating to fiduciary duties, and (vi) judicial imposition of an
implied covenant of good faith and fair dealing.
(iv) Under the Delaware Act and the Trust Agreement, the Trust has the
requisite trust power and authority to (i) execute and deliver, and to perform
its obligations under, the Purchase Agreement, the Forward Purchase Contract,
the Security and Pledge Agreement and the Fundamental Agreements, and (ii) issue
and perform its obligations under the Securities.
(v) Under the Delaware Act and the Trust Agreement, the execution and
delivery by the Trust of the Purchase Agreement, the Forward Purchase Contract,
the Security and Pledge Agreement and the Fundamental Agreements have been duly
authorized by the requisite trust action on the part of the Trust.
(vi) The Securities have been duly authorized by the Trust Agreement and
are duly and validly issued and, subject to the qualifications set forth in this
paragraph (6), fully paid and nonassessable undivided beneficial interests in
the assets of the Trust and are entitled to the benefits provided by the Trust
Agreement. The holders of the Securities, as beneficial owners of the Trust,
will be entitled to the same limitation on personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. Such counsel may note that the Holders
of the Securities may be obligated to make payments as set forth in the Trust
Agreement.
(vii) Under the Delaware Act and the Trust Agreement, the issuance of the
Securities is not subject to preemptive rights.
B-1
<PAGE> 41
(viii) The issuance and sale by the Trust of the Securities, the
execution, delivery and performance by the Trust of the Purchase Agreement, the
Forward Purchase Contract, the Security and Pledge Agreement and the Fundamental
Agreements, the consummation by the Trust of the transactions contemplated
thereby and compliance by the Trust with its obligations thereunder do not
violate (i) any of the provisions of the Trust Certificate or the Trust
Agreement or (ii) any applicable Delaware law or administrative regulation
thereunder.
(ix) Except as previously made or obtained, as the case may be, no filing
with, or authorization, approval, consent or order of, any Delaware court or
governmental authority or agency is required to be made or obtained by the Trust
solely in connection with the execution or delivery by the Trust of the Purchase
Agreement, the Forward Purchase Contract, the Security and Pledge Agreement or
the Fundamental Agreements, or the consummation by the Trust of the transactions
contemplated thereby (including the issuance and sale of the Securities).
B-2
<PAGE> 42
EXHIBIT C
FORM OF OPINION OF DOLLAR GENERAL'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(v)
(i) Dollar General has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Kentucky.
(ii) Dollar General has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Dollar
General Prospectus and to enter into and perform its obligations under the
Registration Agreement.
(iii) Dollar General is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to be qualified
or to be in good standing would not result in a Material Adverse Effect.
(iv) The shares of issued and outstanding capital stock of the Company,
including the shares of Series A Preferred Stock owned by the Contracting
Stockholder, have been duly authorized and validly issued and are fully paid and
non-assessable and no holder of the Dollar General Common Stock is or will be
subject to personal liability by reason of being such a holder; and none of the
outstanding shares of capital stock of the Company, including the shares of
Series A Preferred Stock owned by the Contracting Stockholder, was issued in
violation of any preemptive or other similar rights of any securityholder of
Dollar General.
(v) Each Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Dollar General
Prospectus and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as otherwise
disclosed in the Dollar General Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to the best of our
knowledge, is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary was
issued in violation of the preemptive or similar rights of any securityholder of
such Subsidiary.
(vi) The Registration Agreement has been duly authorized, executed and
delivered by Dollar General.
C-1
<PAGE> 43
(vii) The Dollar General Registration Statement, including any Dollar
General Rule 462(b) Registration Statement, has been declared effective under
the 1933 Act; any required filing of the Dollar General Prospectus pursuant to
Rule 424(b) has been made in the manner and within the time period required by
Rule 424(b); and, to the best of our knowledge, no stop order suspending the
effectiveness of the Dollar General Registration Statement or any Dollar General
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
(viii) The Dollar General Registration Statement, including any Dollar
General Rule 462(b) Registration Statement, the Rule 430A Information and the
Rule 434 Information, as applicable, the Dollar General Prospectus, excluding
the documents incorporated by reference therein, and each amendment or
supplement to the Registration Statement and Dollar General Prospectus,
excluding the documents incorporated by reference therein, as of their
respective effective or issue dates (other than the financial statements and
supporting schedules and other financial data included therein or omitted
therefrom, as to which we express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(ix) The documents incorporated by reference in the Dollar General
Prospectus (other than the financial statements and supporting schedules and
other financial data included therein or omitted therefrom, as to which we
express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material respects
with the requirements of the 1933 Act or the 1934 Act, as applicable, and the
rules and regulations thereunder.
(x) The form of certificate used to evidence the Dollar General Common
Stock complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and by-laws of the
Dollar General and the requirements of the New York Stock Exchange.
(xi) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which Dollar General or
any subsidiary is a party, or to which the property of Dollar General or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Registration Agreement or the performance by
Dollar General of its obligations thereunder.
(xii) The information under "Description of Capital Stock" in Dollar
General's Registration Statement on Form 8-A filed with the Commission on April
27, 1970, and in the Dollar General Registration Statement under Item 15, to the
extent that it describes matters of law, summaries of legal matters, the
Company's Certificate of Incorporation or Bylaws, or legal conclusions, has been
reviewed by us and is correct in all material respects.
(xiii) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Dollar General Prospectus that are not
described as required.
C-2
<PAGE> 44
(xiv) All descriptions in the Dollar General Registration Statement of
contracts and other documents to which Dollar General or any Subsidiary is a
party are accurate in all material respects; to the best of our knowledge, there
are no franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in the
Dollar General Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed or incorporated by
reference as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
(xv) To the best of our knowledge, neither Dollar General nor any
Subsidiary is in violation of its charter or by-laws or partnership agreement,
as the case may be, and no default by Dollar General or any Subsidiary exists in
the due performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is described or
referred to in the Dollar General Registration Statement or the Dollar General
Prospectus or filed or incorporated by reference as an exhibit to the Dollar
General Registration Statement.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we express no
opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Registration Agreement or for the offering,
issuance, sale or delivery of the Securities.
(xvii) The execution, delivery and performance of the Registration
Agreement and the consummation of the transactions contemplated in the
Registration Agreement and in the Dollar General Registration Statement and the
compliance by Dollar General with its obligations under the Registration
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Registration Agreement)
under or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to us, to which the Company or
any Subsidiary is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Dollar General or any Subsidiary is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws or
partnership agreement, as the case may be, of Dollar General or any Subsidiary,
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over Dollar General or any Subsidiary
or any of their respective properties, assets or operations.
(xviii) To our knowledge, other than as described in the Dollar General
Prospectus, there are no persons with registration rights or other similar
rights to have any securities registered pursuant to the Dollar General
Registration Statement or otherwise registered by the Dollar General under the
1933 Act (other than rights which have been waived or satisfied).
C-3
<PAGE> 45
(xix) The Company is not an "investment company" as such term is defined
in the 1940 Act.
We have participated in conferences with officers and representatives of
Dollar General and the Contracting Stockholder, representatives of the
independent accountants of Dollar General, and the Underwriters at which the
contents of the Dollar General Registration Statement and Dollar General
Prospectus and related matters were discussed and, although we are not passing
upon or assuming responsibility for the accuracy, completeness or fairness of
the statements contained or incorporated by reference in the Dollar General
Registration Statement and the Dollar General Prospectus and have made no
independent check or verification thereof, on the basis of the foregoing,
nothing has come to our attention that would lead us to believe that the Dollar
General Registration Statement (except for financial statements and schedules
and other financial data included therein or omitted therefrom, as to which we
make no statement), at the time such Dollar General Registration Statement
became effective or at the date of the Purchase Agreement, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Dollar General Prospectus (except for financial statements and
schedules and other financial data included therein or omitted therefrom, as to
which we make no statement), at the time the Dollar General Prospectus was
issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
As used in this Exhibit, the terms "Material Adverse Effect,"
"Subsidiary," and "Subsidiaries" shall have the meanings ascribed to them in the
Registration Agreement.
C-4
<PAGE> 46
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE CONTRACTING STOCKHOLDER
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(vi)
(i) The trust made pursuant to the Indenture of Trust has been duly
created and is a valid trust under the laws of the Commonwealth of Kentucky.
(ii) The Purchase Agreement has been duly executed and delivered by the
Contracting Stockholder.
(iii) Each of the Fund Expense Agreement, the Fund Indemnity Agreement,
the Forward Purchase Contract and the Security and Pledge Agreement has been
duly executed and delivered by the Contracting Stockholder and (assuming the due
authorization, execution and delivery thereof by the other parties thereto)
constitutes a valid and binding agreement of the Contracting Stockholder,
enforceable against the Contracting Stockholder in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(iv) The execution, delivery and performance by the Contracting
Stockholder of the Purchase Agreement, the Fund Expense Agreement, the Fund
Indemnity Agreement, the Forward Purchase Contract and the Security and Pledge
Agreement and the consummation by the Contracting Stockholder of the
transactions contemplated therein and compliance by the Contracting Stockholder
with their obligations thereunder do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Contracting Stockholder Repayment Event (as defined in
Section 1(b)(v) of the Purchase Agreement) under, or result in the creation or
imposition of any tax, lien, charge or encumbrance upon any property or assets
of the Contracting Stockholder (including the shares of Series A Preferred Stock
owned by the Contracting Stockholder) pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease or other
agreement or instrument, known to us, to which the Contracting Stockholder is a
party or by which the Contracting Stockholder may be bound, or to which any of
the property or assets of the Contracting Stockholder is subject (except for
such conflicts, breaches or defaults or liens, charges or encumbrances that
would not, singly or in the aggregate, materially and adversely affect the
ability of the Contracting Stockholder to perform its obligations under the
Purchase Agreement, the Fund Expense Agreement, the Fund Indemnity Agreement,
the Forward Purchase Contract or the Security and Pledge Agreement), nor will
such action result in any violation of the provisions of the Indenture of Trust
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Contracting Stockholder or any
of its assets or properties (except for such violations that would not, singly
or
D-1
<PAGE> 47
in the aggregate, materially and adversely affect the ability of the Contracting
Stockholder to perform its obligations under the Purchase Agreement, the Fund
Expense Agreement, the Fund Indemnity Agreement, the Forward Purchase Contract
or the Security and Pledge Agreement).
(v) No declaration or filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states (as to which we express no
opinion), is necessary or required in connection with the due execution and
delivery by the Contracting Stockholder of the Purchase Agreement, the Fund
Expense Agreement, the Fund Indemnity Agreement, the Forward Purchase Contract
or the Security and Pledge Agreement or the performance by the Contracting
Stockholder of its obligations thereunder; and the Contracting Stockholder has
the full right, power and capacity to pledge and assign the shares of Series A
Preferred Stock to be pledged and assigned by the Contracting Stockholder
pursuant to the Security and Pledge Agreement and to sell, transfer and deliver
the shares of Dollar General Common Stock to be sold by the Contracting
Stockholder pursuant to the Forward Purchase Contract.
(vi) To the best of our knowledge, the Contracting Stockholder has all
rights in and to the shares of Series A Preferred Stock to be pledged and
assigned by the Contracting Stockholder pursuant to the Security and Pledge
Agreement, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, other than those created pursuant to the Security
and Pledge Agreement; and the shares of Series A Preferred Stock pledged by the
Contracting Stockholder as of the date hereof have been duly and validly
assigned, delivered and pledged by the Contracting Stockholder under the
Security and Pledge Agreement and such Security and Pledge Agreement, together
with such assignment, delivery and pledge, creates, as security for the
performance of the obligations of the Contracting Stockholder under the Forward
Purchase Contract, a valid first priority and perfected security interest in
such shares of Series A Preferred Stock prior to other liens. At the date
hereof, each share of Series A Preferred Stock is convertible into 4.625 shares
of Dollar General Common Stock.
(vii) If the Contracting Stockholder delivers to the Trust shares of
Dollar General Common Stock pursuant to the Forward Purchase Contract, upon
delivery by the Contracting Stockholder to the Trust of the shares of Dollar
General Common Stock pursuant to the Forward Purchase Contract (whether such
delivery is made on the business day immediately preceding the Exchange Date,
upon any acceleration of the Contracting Stockholder's obligation under the
Forward Purchase Contract or otherwise), the Trust will be the sole registered
owner of the shares of Dollar General Common Stock so delivered and, assuming
the Trust purchased for value and without notice of any adverse claim, the
Trust, assuming compliance with the Security and Pledge Agreement, will have
acquired all rights in and to such shares of Dollar General Common Stock, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity.
(viii) Upon the occurrence of an Event of Default specified in the
Security and Pledge Agreement, the rights of the Collateral Agent with respect
to the Collateral, as set forth in the Security and Pledge Agreement, shall
immediately become exercisable in accordance with the
D-2
<PAGE> 48
terms of the Security and Pledge Agreement, and such rights will not be subject
to any stay pursuant to Section 362(a) of Title 11 of the United States Code.
Because the primary purpose of our professional engagement was not to
establish or confirm factual matters or financial or accounting matters and
because of the wholly or partially non-legal character of many of the statements
contained in the Trust Registration Statement or the Trust Prospectus, we are
not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Trust Registration
Statement or the Trust Prospectuses and we make no representation that we have
independently verified the accuracy, completeness or fairness of such
statements. Without limiting the foregoing, we assume no responsibility for, and
have not independently verified, the accuracy, completeness or fairness of the
financial statements and the notes thereto and the schedules and other financial
data included in the Trust Registration Statement and we have not examined the
accounting or financial records from which such financial statements, notes,
schedules and data are derived.
However, on the basis of our participation, as counsel to the Contracting
Stockholder, with representatives of the Trust in the preparation of the Trust
Registration Statement and the Trust Prospectus, and our participation with the
Underwriters at meetings in which the contents of the Trust Registration
Statement and the Trust Prospectus and related matters were discussed and the
examination by us of such records, statutes, documents and questions of law as
we deemed necessary, but without independent verification by us of the accuracy,
completeness and fairness of the statements contained in the Trust Registration
Statement and the Trust Prospectus, nothing has come to our attention that would
lead us to believe that the Trust Registration Statement (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we make no statement), at the time such Trust
Registration Statement became effective or at the date of the Purchase
Agreement, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Trust Prospectus (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we make no statement), at the time the Trust
Prospectus was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
D-3
<PAGE> 1
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- --------------------------------------------------------------------------------
DOLLAR GENERAL CORPORATION
(a Kentucky corporation)
REGISTRATION AGREEMENT
Dated: ____________, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
SECTION 1.
Representations And Warranties...............................................4
Representations and Warranties by the Company..............................4
Compliance with Registration Requirements................................4
Incorporated Documents...................................................5
Independent Accountants..................................................6
Financial Statements.....................................................6
No Material Adverse Change in Business...................................6
Good Standing of the Company.............................................6
Good Standing of Subsidiaries............................................7
Capitalization...........................................................7
Capitalization...........................................................7
Authorization of Agreement...............................................7
Description of Securities................................................8
Absence of Defaults and Conflicts........................................8
Absence of Labor Dispute.................................................8
Absence of Proceedings...................................................8
Accuracy of Exhibits.....................................................9
Possession of Intellectual Property......................................9
Absence of Further Requirements..........................................9
Possession of Licenses and Permits.......................................9
Title to Property.......................................................10
Investment Company Act..................................................10
Registration Rights.....................................................11
Compliance with Laws....................................................11
Insurance...............................................................11
Officer's Certificates....................................................11
Covenants Of The Company....................................................11
Compliance with Securities Regulations and Commission Requests............12
Filing of Amendments......................................................12
Delivery of Dollar General Registration Statements........................12
Delivery of Dollar General Prospectuses...................................12
Continued Compliance with Securities Laws.................................13
Blue Sky Qualifications...................................................13
Rule 158..................................................................13
Restriction on Sale of Securities.........................................13
Reporting Requirements....................................................14
Payment Of Expenses.........................................................14
Expenses..................................................................14
2
<PAGE> 3
Allocation of Expenses....................................................14
Indemnification.............................................................14
Indemnification of Underwriters and the Trust.............................14
Indemnification of Company, Directors and Officers........................16
Actions against Parties; Notification.....................................16
Settlement without Consent if Failure to Reimburse........................17
Contribution................................................................17
Representations, Warranties And Agreements To Survive Delivery..............19
Termination ................................................................19
Notices ................................................................19
Parties ................................................................19
Governing Law...............................................................19
Effect Of Headings..........................................................20
3
<PAGE> 4
DOLLAR GENERAL CORPORATION
(a Kentucky corporation)
REGISTRATION AGREEMENT
____________, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
DOLLAR GENERAL STRYPES TRUST
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
Ladies and Gentlemen:
Dollar General Corporation, a Kentucky corporation (the "Company")
confirms its agreements with Dollar General STRYPES Trust, a Delaware business
trust (the "Trust"), and with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") and Goldman, Sachs & Co. (collectively,
the "Underwriters", which term shall also include any underwriter substituted as
provided in Section 10 of the Purchase Agreement (as defined below)), in
connection with the proposed issue and sale by the Trust to the Underwriters,
acting severally and not jointly, pursuant to a purchase agreement, dated the
date hereof (the "Purchase Agreement"), among the Trust, the Turner Children
Trust, a trust made by Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and
Katherine Turner Weaver as Donors under the Indenture of Trust dated January 21,
1980, as amended, and for which Cal Turner, Jr. and James Stephen Turner act as
Co-Trustees (such trust and the co-trustees thereof acting in their capacities
as such being hereinafter referred to as the "Contracting Stockholder"), and the
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<PAGE> 5
Underwriters, of an aggregate of 7,500,000 of the Trust's STRYPES(SM) (each, a
"STRYPES"), exchangeable for shares of common stock, par value $.50 per share,
of the Company (the "Dollar General Common Stock") upon conclusion of the term
of the Trust on ___________, 2001 (the "Exchange Date"), and, at the option of
the Underwriters, all or any part of 1,125,000 additional STRYPES to cover
over-allotments, if any. The aforesaid 7,500,000 STRYPES (the "Initial
Securities") to be purchased by the Underwriters and all or any part of the
1,125,000 STRYPES subject to the option described in Section 2(b) of the
Purchase Agreement (the "Option Securities") are hereinafter called,
collectively, the "Securities." Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.
The Company has been advised that the Underwriters propose to make a
public offering of the Securities as soon as the Underwriters deem advisable
after this Agreement and the Purchase Agreement have been executed and
delivered. The Company acknowledges that it has been advised that the execution
and delivery of this Agreement is a condition to the execution and delivery of
the Purchase Agreement by the Underwriters and the Trust, and that, in
consideration of the execution and delivery of the Purchase Agreement by the
Underwriters and the Trust, the Company is willing to make the representations,
warranties and covenants herein contained.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-50451) covering the
registration under the Securities Act of 1933, as amended (the "1933 Act"), of
the shares of Dollar General Common Stock deliverable upon exchange of the
Securities, and Pre-Effective Amendments No. 1 and 2 thereto, including the
related preliminary prospectus or prospectuses. Each prospectus relating to the
shares of Dollar General Common Stock deliverable upon exchange of the
Securities used before such registration statement (as so amended) became
effective, in each case excluding any Trust preliminary prospectus (as defined
below) attached thereto, is herein called a "Dollar General preliminary
prospectus." Such registration statement, including the exhibits thereto, the
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective, is herein called the "Dollar General Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) of the rules
and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") is herein referred to as the "Dollar General Rule 462(b)
Registration Statement," and after such filing the term "Dollar General
Registration Statement" shall include the Dollar General Rule 462(b)
Registration Statement. The final prospectus relating to the shares of Dollar
General Common Stock deliverable upon exchange of the Securities, including the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, but excluding any Trust Prospectus (as defined below)
attached thereto, in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is herein called the "Dollar
General Prospectus." For purposes of this Agreement, all references to the
Dollar General Registration Statement, any Dollar General preliminary
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
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<PAGE> 6
prospectus, the Dollar General Prospectus or any amendment or supplement to any
of the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Dollar
General Registration Statement, any Dollar General preliminary prospectus or the
Dollar General Prospectus (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which is incorporated by reference in the Dollar General
Registration Statement, any Dollar General preliminary prospectus or the Dollar
General Prospectus, as the case may be, and shall be deemed to exclude all
financial statements and schedules and other information which are included in
any Trust preliminary prospectus or the Trust Prospectus which is attached to
any Dollar General preliminary prospectus or the Dollar General Prospectus; and
all references in this Agreement to amendments or supplements to the Dollar
General Registration Statement, any Dollar General preliminary prospectus or the
Dollar General Prospectus shall be deemed to mean and include the filing of any
document under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
which is incorporated by reference in the Dollar General Registration Statement,
such Dollar General preliminary prospectus or the Dollar General Prospectus, as
the case may be.
The Trust has filed with the Commission (i) a notification on Form N-8A of
registration of the Trust as an investment company; and (ii) a registration
statement on Form N-2 (Nos. 333-50783 and 811-08755) for the registration of the
Securities under the 1933 Act, and Pre-Effective Amendments No. 1 and 2 thereto,
including a preliminary prospectus relating to the offering of the Securities.
Promptly after execution and delivery of the Purchase Agreement, the Trust will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the 1933 Act Regulations and paragraph (h) of Rule
497 ("Rule 497(h)") of the 1933 Act Regulations or (ii) if the Trust has elected
to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file
a term sheet (a "Trust Term Sheet") in accordance with the provisions of Rule
434 and Rule 497(h). The information included in such prospectus or in such
Trust Term Sheet, as the case may be, that was omitted from such registration
statement (as so amended) at the time it became effective but that is deemed to
be part of such registration statement (as so amended) at the time it became
effective (i) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (ii) pursuant to paragraph (d) of Rule 434 is referred to
as "Rule 434 Information." Any prospectus relating to the offering of the
Securities used before such registration statement (as so amended) became
effective, and any prospectus relating to the offering of the Securities that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of the Purchase Agreement, in each case excluding any Dollar General preliminary
prospectus attached thereto, is herein called a "Trust preliminary prospectus."
Such registration statement (as so amended), including the exhibits thereto and
the schedules thereto, if any, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Trust Registration Statement." Any registration statement filed by
the Trust pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred
to as the
3
<PAGE> 7
"Trust Rule 462(b) Registration Statement," and after such filing the term
"Trust Registration Statement" shall include the Trust Rule 462(b) Registration
Statement. The final prospectus relating to the offering of the Securities,
excluding any Dollar General Prospectus attached thereto, in the form first
furnished to the Underwriters for use in connection with the offering of the
Securities is referred to herein as the "Trust Prospectus." If Rule 434 is
relied on, the term "Trust Prospectus" shall refer to the Trust preliminary
prospectus dated May 12, 1998 together with the Trust Term Sheet and all
references in this Agreement to the date of the Trust Prospectus shall mean the
date of the Trust Term Sheet. For purposes of this Agreement, all references to
the Trust Registration Statement, any Trust preliminary prospectus, the Trust
Prospectus or any Trust Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to EDGAR.
Concurrently with the execution and delivery of the Purchase Agreement,
the Trust will enter into a forward purchase contract (the "Forward Purchase
Contract") with the Contracting Stockholder and The Bank of New York, as agent
and custodian for and on behalf of the Trust, pursuant to which the Contracting
Stockholder will agree to sell and the Trust will agree to purchase, on the
business day immediately preceding the Exchange Date, the shares of Dollar
General Common Stock required by the Trust to exchange all of the Securities on
the Exchange Date as described in the Trust Prospectus, subject to the
Contracting Stockholder's right to satisfy its obligation thereunder in whole or
in part through a cash payment based on the value of the Dollar General Common
Stock otherwise deliverable.
Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter and to the Trust as of the date hereof, as of
the Closing Time referred to in Section 2(c) of the Purchase Agreement, and as
of each Date of Delivery (if any) referred to in Section 2(b) of the Purchase
Agreement, and agrees with each Underwriter and the Trust as follows:
(i) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the Dollar
General Registration Statement and any Dollar General Rule 462(b)
Registration Statement has become effective under the 1933 Act and no stop
order suspending the effectiveness of the Dollar General Registration
Statement or any Dollar General Rule 462(b) Registration Statement has
been issued under the 1933 Act and no proceedings for that purpose have
been instituted or are pending or, to the knowledge of the Company, are
contemplated by the Commission, and any request on the part of the
Commission for additional information has been complied with.
At the respective times the Dollar General Registration Statement,
any Dollar General Rule 462(b) Registration Statement and any
post-effective amendments thereto became effective and at the Closing Time
(and, if any Option Securities are purchased, at the Date of Delivery),
the Dollar General Registration Statement, the Dollar General Rule 462(b)
Registration Statement and any amendments and supplements thereto complied
4
<PAGE> 8
and will comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither the Dollar General Prospectus nor any amendments
or supplements thereto, at the time the Dollar General Prospectus or any
such amendment or supplement thereto was issued and at the Closing Time
(and, if any Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties in this
subsection shall not apply to statements in or omissions from the Dollar
General Registration Statement (or any amendments thereto) or the Dollar
General Prospectus (or any amendments or supplements thereto) made in
reliance upon and in conformity with (A) information furnished to the
Company in writing by the Underwriters through Merrill Lynch expressly for
use in the Dollar General Registration Statement (or any amendments
thereto) or the Dollar General Prospectus (or any amendments or
supplements thereto), (B) information furnished to the Company in writing
by the Trust expressly for use in the Dollar General Registration
Statement (or any amendments thereto) or the Dollar General Prospectus (or
any amendments or supplements thereto) or (C) information furnished to the
Company in writing by the Contracting Stockholder expressly for use in the
Dollar General Registration Statement (or any amendments thereto) or the
Dollar General Prospectus (or any amendments or supplements thereto).
Each Dollar General preliminary prospectus and the prospectus
relating to the shares of Dollar General Common Stock deliverable upon
exchange of the Securities filed as part of the Dollar General
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
Dollar General preliminary prospectus and the Dollar General Prospectus
delivered to the Underwriters for use in connection with the offering of
the Securities was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Dollar General Registration Statement
and the Dollar General Prospectus, when they became effective or at the
time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations or the 1934 Act and the rules and regulations
of the Commission thereunder (the "1934 Act Regulations"), as applicable,
and, when read together with the other information in the Dollar General
Prospectus, at the time the Dollar General Registration Statement became
effective, at the time the Dollar General Prospectus was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date of
Delivery), did not and will not contain an
5
<PAGE> 9
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Dollar
General Registration Statement are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
Dollar General Registration Statement and the Dollar General Prospectus,
together with the related schedules and notes, present fairly the
financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. The supporting
schedules included in the Dollar General Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Dollar General Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Dollar General
Registration Statement.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Dollar General Registration
Statement and the Dollar General Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C) except
for regular quarterly dividends on the Dollar General Common Stock in
amounts per share that are consistent with past practice, there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Kentucky and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Dollar General Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified as
a foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
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<PAGE> 10
(vii) Good Standing of Subsidiaries. Each subsidiary of the Company
listed on Exhibit 21 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1998 (each, a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation or partnership, as the case may be, in good
standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, has corporate or partnership, as the
case may be, power and authority to own, lease and operate its properties
and to conduct its business as described in the Dollar General Prospectus
and is duly qualified as a foreign corporation or partnership, as the case
may be, to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where
the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; all of the issued and outstanding capital stock
of each corporate Subsidiary has been duly authorized and validly issued,
is fully paid and non-assessable and is owned by the Company directly or
indirectly through subsidiaries, and all of the partnership interests of
each partnership Subsidiary have been duly authorized and validly issued
and are owned by the Company, directly or indirectly through subsidiaries,
in each case free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock or partnership interests, as the case may be, of any
Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. The only subsidiaries of the
Company are (a) the subsidiaries listed on Exhibit 21 to the Company's
Annual Report on Form 10-K for the fiscal year ended January 30, 1998 and
(b) certain other subsidiaries which, considered in the aggregate as a
single subsidiary, do not constitute a "significant subsidiary" as defined
in Rule 1-02 of Regulation S-X.
(viii) Capitalization. The shares of issued and outstanding capital
stock of the Company, including the shares of Series A Preferred Stock
owned by the Contracting Stockholder, have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company, including the shares
of Series A Preferred Stock owned by the Contracting Stockholder, was
issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) Authorization of Dollar General Common Stock Issuable upon
Conversion of the Series A Preferred Stock. The Dollar General Common
Stock issuable upon conversion of the Series A Preferred Stock in
accordance with the Restated Articles of Incorporation of the Company, as
amended as of August 22, 1994 have been duly and validly authorized and
reserved for issuance upon such conversion by all necessary corporate
action and such shares, when issued upon such conversion, will be duly and
validly issued and will be fully paid and non-assessable, and the issuance
of such shares upon such conversion will not be subject to preemptive or
other similar rights.
(x) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
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<PAGE> 11
(xi) Description of Securities. The Dollar General Common Stock
conforms to all statements relating thereto contained in the Dollar
General Prospectus and such description conforms to the rights set forth
in the instruments defining the same.
(xii) Absence of Defaults and Conflicts. Neither the Company nor any
of the Subsidiaries is in violation of its charter or by-laws or
partnership agreement, as the case may be, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which any of
them may be bound, or to which any of the property or assets of the
Company or any of the Subsidiaries is subject (collectively, "Agreements
and Instruments"), except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
herein and compliance by the Company with its obligations hereunder have
been duly authorized by all necessary corporate action and do not and will
not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary pursuant to, the Agreements and Instruments (except for
such conflicts, breaches, or defaults or Repayment Events or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws or partnership agreement, as the case may be, of
the Company or any Subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any Subsidiary or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any Subsidiary.
(xiii) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any Subsidiary exists or, to the knowledge of the
Company, is imminent, which might reasonably be expected to result in a
Material Adverse Effect; and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers, customers or contractors, which, in either case,
might reasonably be expected to result in a Material Adverse Effect.
(xiv) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or
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<PAGE> 12
affecting the Company or any subsidiary, which is required to be disclosed
in the Dollar General Registration Statement (other than as disclosed
therein), or which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of
the transactions contemplated hereunder or the performance by the Company
of its obligations hereunder; and the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective properties or assets is the subject
which are not described in the Dollar General Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(xv) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Dollar General Registration Statement
or the Dollar General Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xvi) Possession of Intellectual Property. The Company and the
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and the Company has received no notice and is
otherwise unaware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, except such as have been already obtained or as may
be required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(xviii) Possession of Licenses and Permits. The Company and the
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them, except where the
failure to possess such Governmental Licenses would not, singly or in the
aggregate, have a Material Adverse Effect; the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect,
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<PAGE> 13
except when the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and the Subsidiaries have good
and marketable title to all real property owned by the Company and the
Subsidiaries and good title to all personal property owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such as
(a) are described in the Dollar General Prospectus, or (b) do not, singly
or in the aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property
by the Company or any of the Subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Dollar General Prospectus,
are in full force and effect, and the Company has no notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any Subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or such Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xx) Investment Company Act. The Company is not an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
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<PAGE> 14
(xxi) Registration Rights. Except as described in the Dollar
General Registration Statement and the Dollar General Prospectus, there
are no persons with registration rights or other similar rights to have
any securities registered pursuant to the Dollar General Registration
Statement or otherwise registered by the Company under the 1933 Act.
(xxii) Compliance with Laws. Each of the Company and the
Subsidiaries is in compliance with all applicable laws, statutes,
ordinances, rules or regulations of any applicable jurisdiction, the
enforcement of which, singly or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(xxiii) Insurance. Each of the Company and the Subsidiaries carries
or is entitled to the benefits of insurance in such amounts and covering
such risks as it reasonably believes are sufficient to cover potential
losses or damages, and all such insurance is in full force and effect.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company and delivered to the Underwriters or counsel for the Underwriters or to
the Trust or counsel for the Trust in connection with the offering of the
Securities shall be deemed a representation and warranty by the Company to each
Underwriter and to the Trust, as the case may be, as to the matters covered
thereby.
Section 2. Covenants of the Company. The Company covenants with each
Underwriter and with the Trust as follows:
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<PAGE> 15
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 2(b) hereof, will notify the Underwriters and the
Trust immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Dollar General Registration Statement, shall
become effective, or any supplement to the Dollar General Prospectus or any
amended Dollar General Prospectus shall have been filed, (ii) of the receipt of
any comments from the Commission, (iii) of any request by the Commission for any
amendment to the Dollar General Registration Statement or any amendment or
supplement to the Dollar General Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Dollar General Registration Statement or of any order
preventing or suspending the use of any Dollar General preliminary prospectus,
or of the suspension of the qualification of the shares of Dollar General Common
Stock deliverable upon exchange of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Underwriters and the
Trust notice of the Company's intention to file or prepare any amendment to the
Dollar General Registration Statement (including any filing under Rule 462(b))
or any amendment, supplement or revision to either the prospectus included in
the Dollar General Registration Statement at the time it became effective or to
the Dollar General Prospectus, will furnish the Underwriters and the Trust with
copies of any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such document to
which the Underwriters or the Trust or counsel for the Underwriters or counsel
for the Trust shall object.
(c) Delivery of Dollar General Registration Statements. The Company has
furnished or will deliver to the Underwriters and the Trust and counsel for the
Underwriters and the Trust, without charge, signed copies of the Dollar General
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts. The copies of the
Dollar General Registration Statement and each amendment thereto furnished to
the Underwriters and the Trust will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(d) Delivery of Dollar General Prospectuses. The Company has delivered to
each Underwriter, without charge, as many copies of each Dollar General
preliminary prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each Underwriter, without charge, during the
period when the Dollar General Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the Dollar General Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Dollar General
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<PAGE> 16
Prospectus and any amendments or supplements thereto furnished to the
Underwriters and the Trust will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in the Purchase Agreement and
in the Dollar General Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters, counsel for the Trust or counsel
for the Company, to amend the Dollar General Registration Statement or amend or
supplement the Dollar General Prospectus in order to ensure that the Dollar
General Prospectus will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Dollar General Registration Statement or
amend or supplement the Dollar General Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 2(b) hereof,
such amendment or supplement as may be necessary to correct such statement or
omission or to make the Dollar General Registration Statement or the Dollar
General Prospectus comply with such requirements, and the Company will furnish
to the Underwriters and the Trust such number of copies of such amendment or
supplement as the Underwriters and the Trust may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable best
efforts, in cooperation with the Underwriters, to qualify the shares of Dollar
General Common Stock deliverable in exchange for the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
of the United States as the Underwriters may designate and to maintain such
qualifications in effect through the Exchange Date; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the shares of Dollar General Common Stock
deliverable in exchange for Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect through the Exchange Date.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Restriction on Sale of Securities. During a period of 90 days from the
date of the Dollar General Prospectus, the Company will not, without the prior
written consent of Merrill Lynch, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares of
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<PAGE> 17
Dollar General Common Stock or any securities directly or indirectly convertible
into or exercisable or exchangeable for Dollar General Common Stock. The
foregoing sentence shall not apply to any shares of Dollar General Common Stock
issued or options to purchase shares of Dollar General Common Stock granted
pursuant to existing employee or director benefit plans of the Company referred
to in the Dollar General Prospectus, or any shares of Dollar General Common
Stock issued upon exercise of options granted pursuant to any such plan.
(i) Reporting Requirements. The Company, during the period when the Dollar
General Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the 1934
Act Regulations.
Section 3. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Dollar General Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing (or reproduction) and delivery
to the Underwriters and the Trust of this Agreement, and (iii) the fees and
disbursements of the Company's counsel, accountants and other advisors, (iv) the
qualification of the shares of Dollar General Common Stock deliverable upon
exchange of the Securities under securities laws in accordance with the
provisions of Section 2(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (v) the printing and delivery to the Underwriters of copies of each
Dollar General preliminary prospectus and of the Dollar General Prospectus and
any amendments or supplements thereto, (vi) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any supplement
thereto, and (vii) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. of the terms of the
offering and sale of the shares of Dollar General Common Stock deliverable upon
exchange of the Securities.
(b) Allocation of Expenses. The provisions of this Section 3 shall not
affect any agreement that the Company and the Contracting Stockholder may make
for the sharing of such costs and expenses.
Section 4. Indemnification.
(a) Indemnification of Underwriters and the Trust. Subject to the
provisions set forth in this Section 4(a), the Company agrees to indemnify and
hold harmless each Underwriter, the Trust and each person, if any, who controls
any Underwriter or the Trust within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact
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<PAGE> 18
contained in the Dollar General Registration Statement (or any amendment
thereto) or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein
not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Dollar General preliminary
prospectus or the Dollar General Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact made in the Trust Registration
Statement (or any amendment thereto) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact made in any Trust
preliminary prospectus or the Trust Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that the indemnity agreement contained in this clause (ii) shall
only apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission, or alleged untrue
statement or omission, made in reliance upon and in conformity with
written information furnished to the Trust by the Company expressly for
use in the Trust Registration Statement (or any amendment thereto) or any
Trust preliminary prospectus or the Trust Prospectus (or any amendment or
supplement thereto);
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) and (ii)
above; provided that (subject to Section 4(d) below) any such settlement
is effected with the written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriters or the
Trust, as the case may be), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, referred to under (i) or
(ii) above, to the extent that any such expense is not paid under (i),
(ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with (A) written information
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<PAGE> 19
furnished to the Company by the Underwriters through Merrill Lynch expressly for
use in the Dollar General Registration Statement (or any amendment thereto), or
any Dollar General preliminary prospectus or the Dollar General Prospectus (or
any amendment or supplement thereto), (B) written information furnished to the
Company by the Trust expressly for use in the Dollar General Registration
Statement (or any amendment thereto), or any Dollar General preliminary
prospectus or the Dollar General Prospectus (or any amendment or supplement
thereto) or (C) written information furnished to the Company by the Contracting
Stockholder expressly for use in the Dollar General Registration Statement (or
any amendment thereto), or any Dollar General preliminary prospectus or the
Dollar General Prospectus (or any amendment or supplement thereto); provided,
further, that this indemnity agreement shall not apply to any loss, liability,
claim, damage or expense of any Underwriter or person, if any, who controls such
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act with respect to any Dollar General preliminary prospectus to the
extent that any such loss, liability, claim, damage or expense of any
Underwriter results solely from the fact that such Underwriter sold Securities
to a person as to whom the Company shall establish that there was not sent by
commercially reasonable means, at or prior to the written confirmation of such
sale, a copy of the Dollar General Prospectus in any case where such delivery is
required by the 1933 Act, if the Company has previously furnished copies thereof
in sufficient quantity to such Underwriter and the loss, claim, damage or
liability of such Underwriter results from an untrue statement or omission of a
material fact contained in the Dollar General preliminary prospectus that was
corrected in the Dollar General Prospectus.
(b) Indemnification of Company, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors, each
of its officers who signed the Dollar General Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Dollar General
Registration Statement (or any amendment thereto), or any Dollar General
preliminary prospectus or the Dollar General Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by the Underwriters through Merrill Lynch expressly for
use in the Dollar General Registration Statement (or any amendment thereto) or
such Dollar General preliminary prospectus or the Dollar General Prospectus (or
any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 4(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch; and, in
the case of parties indemnified pursuant to Section
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4(b) above, counsel to the indemnified parties shall be selected by the Company.
An indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 4 or Section 5 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested in accordance with this Agreement an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(iii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Section 5. Contribution. If the indemnification provided for in Section 4
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then the parties hereto intend that the Company on
the one hand and the Underwriters and the Trust on the other hand, in accordance
with the applicable provisions of Section 4(a) hereof, shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
Contracting Stockholder on the one hand and the Underwriters and the Trust on
the other hand from the offering of the Securities pursuant to the Purchase
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Contracting Stockholder on the one hand and the Underwriters
and the Trust on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
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<PAGE> 21
The relative benefits received by the offering of the Securities pursuant
to the Purchase Agreement shall be deemed to be such that the Underwriters and
the Trust shall be responsible for that portion of the aggregate amount of such
losses, liabilities, claims, damages and expenses represented by the percentage
that the total underwriting discount received by the Underwriters, as set forth
on the cover of the Trust Prospectus, or, if Rule 434 is used, the corresponding
location on the Trust Term Sheet, bears to the aggregate initial public offering
price of the Securities as set forth on such cover and the Company and the
Contracting Stockholder shall be responsible for the balance.
The relative fault of the Company and the Contracting Stockholder on the
one hand and the Underwriters and the Trust on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Contracting Stockholder on the one hand or by the Underwriters or the Trust on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 5, the Underwriters and the
Trust shall not be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by the Underwriters
and distributed to the public were offered to the public exceeds the amount of
any damages which the Underwriters and the Trust have otherwise been required to
pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission.
The Company, the Underwriters and the Trust agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 5. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 5 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 5, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter; each
person, if any, who controls the Trust within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as the Trust; and each
director of the Company, each officer of the Company who signed the Dollar
General Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to
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contribution as the Company. The Underwriters' respective obligations to
contribute pursuant to this Section 5 are several in proportion to the number of
Securities set forth opposite their respective names on Schedule A hereto and
not joint.
Section 6. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant to the Purchase
Agreement, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Underwriters or controlling
persons, or by or on behalf of the Trust or controlling persons or by or on
behalf of the Company and shall survive delivery of the Securities to the
Underwriters pursuant to the Purchase Agreement.
Section 7. Termination. In the event that the Underwriters terminate the
Purchase Agreement as provided in Section 5, Section 9 or Section 10 thereof,
the Underwriters shall promptly give the Company notice thereof and this
Agreement shall simultaneously terminate, except that the provisions of Section
3, the indemnity agreements set forth in Section 4, the contribution provisions
set forth in Section 5, and the provisions of Section 6 shall remain in effect.
Section 8. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to: Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, North Tower, World Financial Center, New York, New
York 10281, attention of Syndicate Operations; notices to the Trust shall be
directed to it c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19715, attention of Donald J. Puglisi; notices to the Company shall be
directed to it at Dollar General Corporation, 104 Woodmont Blvd., Suite 500,
Nashville, TN 37205, attention of Robert C. Layne, Corporate Secretary.
Section 9. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Trust and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Trust and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 4 and 5
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Trust and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
the Underwriters shall be deemed to be a successor by reason merely of such
purchase.
Section 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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Section 11. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters, the Trust and the Company in accordance with its terms.
Very truly yours,
DOLLAR GENERAL CORPORATION
By: _____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: _____________________________
Authorized Signatory
DOLLAR GENERAL STRYPES TRUST
By: _____________________________
Donald J. Puglisi,
as Managing Trustee
21
<PAGE> 25
SCHEDULE A
<TABLE>
<CAPTION>
Number
of
Initial
Name of Underwriter Securities
- ------------------------------------------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Goldman, Sachs & Co........................................
---------
Total .......................................... 7,500,000
=========
</TABLE>
22
<PAGE> 1
Exhibit (j)
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this 18th day of May, 1998, by and
between The Bank of New York, a New York banking corporation (the "Custodian"),
and Dollar General STRYPES Trust (such trust and the trustees thereof acting in
their capacities as such being referred to herein as the "Trust"), a business
trust created pursuant to the Business Trust Act of the State of Delaware
(Chapter 38, Title 12, of the Delaware Code, 12 Del.C. (Sections 3801 et seq.)),
under and by virtue of an Amended and Restated Trust Agreement, to be dated as
of May 1, 1998 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), formed to purchase and hold certain zero-coupon U.S.
Government securities (the "U.S. Treasury Securities"), to enter into and hold a
forward purchase contract (the "Contract") with The Bank of New York, as agent
and custodian for and on behalf of the Trust, and the Turner Children Trust, a
stockholder of Dollar General Corporation, and to issue Structured Yield Product
Exchangeable for Stock(SM) (the "STRYPES") in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the Custodian to
perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is willing to assume such duties, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the respective meanings specified in the Trust Agreement.
2. APPOINTMENT OF CUSTODIAN; TRANSFER OF ASSETS. The Trust hereby
constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the property,
including but not limited to, the Contract, the U.S. Treasury Securities, the
Temporary Investments, any cash and any other property at any time owned or held
by the Trust (collectively, the "Assets"). The Trust hereby deposits the Assets
with the Custodian and the Custodian hereby accepts such into its custody, and
the Trust shall deliver to the Custodian all of the Assets, including all
monies, securities and other property received by the Trust at any time during
the period of this Agreement, subject to
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
<PAGE> 2
the following terms and conditions. The Custodian hereby agrees that it shall
hold the Assets in a segregated custody account, separate and distinct from all
other accounts, in accordance with Section 17(f) of, and in such manner as shall
constitute the segregation and holding in trust within the meaning of, the
Investment Company Act and the rules and regulations thereunder. The Trust
authorizes the Custodian, for any Assets held hereunder, to use the services of
any United States securities depository permitted to perform such services for
registered investment companies and their custodians under Rule 17f-4 under the
Investment Company Act and which has been approved by the Trust, including but
not limited to, The Depository Trust Company and the Federal Reserve Book Entry
System. The Custodian shall be under no duty or obligation to inspect, review or
examine any Assets to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
3. ASSET DISPOSITION; EXAMINATIONS. The Custodian shall have no power or
authority to assign, hypothecate, pledge or otherwise dispose of the Assets,
except pursuant to a written direction in accordance with Section 4 below and
then only for the account of the Trust. The Assets shall not be subject to any
lien, security interest, encumbrance, right of set-off or charge of any kind in
favor of the Custodian for itself or for any other Person claiming through the
Custodian. The Custodian shall permit actual examination of the Assets by the
Trust's independent public accountant at the end of each annual and semi-annual
fiscal period of the Trust and at least one other time during the fiscal year of
the Trust chosen by such independent public accountant and shall permit the
inspection of the Assets by the Commission through its employees or agents
during the normal business hours of the Custodian upon reasonable request.
4. AUTHORIZED ACTIONS. The Custodian shall take such reasonable actions
with respect to the Assets as directed in writing by the Trust or by any officer
of the Administrator duly authorized by the Trustees to give written
instructions on behalf of the Trust and named in such certified resolutions of
the Trustees, as may be received by the Custodian from time to time.
5. CUSTODIAN'S ACTIONS TAKEN IN GOOD FAITH. In connection with the
performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any action
taken in good faith in reliance on any paper, order, certification, list,
demand, request, consent, affidavit, notice, opinion, direction, endorsement,
assignment, resolution, draft or other document, prima facie properly executed,
or for the disposition of the Assets pursuant to the Trust Agreement or in
respect of any action taken or suffered under the Trust Agreement in good faith,
in accordance with an opinion of counsel or at the direction of the Trust
pursuant hereto; provided that this provision shall not protect the Custodian
against any liability to which it would otherwise be subject by reason of its
willful misfeasance or gross negligence in the performance of its duties, or its
reckless disregard of its obligations and duties hereunder.
Notwithstanding any other provision of this Agreement, the Custodian shall
under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages.
2
<PAGE> 3
6. TRUST AGREEMENT VALIDITY. The Custodian shall not be responsible for
the validity or sufficiency of the Trust Agreement or the due execution thereof,
or for the form, character, genuineness, sufficiency, value or validity of any
of the Assets and the Custodian shall in no event assume or incur any liability,
duty or obligation to any Holder or to the Trust, other than as expressly
provided for herein. The Custodian shall not be responsible for or in respect of
the validity of any signature by or on behalf of the Trust.
7. LITIGATION OBLIGATIONS, COSTS AND INDEMNITY. The Custodian shall not be
under any obligation to appear in, prosecute or defend any action which in its
opinion may involve it in expense or liability, unless it shall be furnished
with such reasonable security and indemnity against such expense or liability as
it may require, and any reasonable pecuniary costs of the Custodian from such
actions shall be expenses which are reimbursable pursuant to Section 13 hereof.
8. TAXES; TRUST EXPENSES. In no event shall the Custodian be personally
liable for any taxes or other governmental charges imposed upon or in respect of
the Assets or upon the monies, securities or other properties included therein.
The Custodian shall be reimbursed and indemnified by the Trust for all such
taxes and charges, for any tax or charge imposed against the Trust and for any
reasonable expenses, including reasonable counsel fees, interest, penalties and
additions to tax which the Custodian may sustain or incur with respect to such
taxes or charges.
9. CUSTODIAN RESIGNATION, SUCCESSION. (a) The Custodian may resign by
executing an instrument in writing resigning as Custodian and delivering the
same to the Trust, not less than 60 days before the date specified in such
instrument when, subject to subsection (b) of this Section 9, such resignation
is to take effect. Upon receiving such notice of resignation, the Trust shall
use its reasonable efforts promptly to appoint a successor Custodian in the
manner and meeting the qualifications provided in the Trust Agreement, by
written instrument or instruments delivered to the resigning Custodian and the
successor Custodian.
(b) In case no successor Custodian shall have been appointed within
30 days after notice of resignation has been received by the Trust, the
resigning Custodian may forthwith apply to a court of competent
jurisdiction for the appointment of a successor Custodian. Such court may
thereupon, after such notice, if any, as it may deem proper and
prescribed, appoint a successor Custodian.
10. CUSTODIAN REMOVAL. The Trust may remove the Custodian upon 60 days
prior written notice to the Custodian and appoint a successor Custodian. In case
at any time the Custodian shall not meet the requirements set forth in the Trust
Agreement or shall become incapable of acting or if a court having jurisdiction
shall enter a decree or order for relief in respect of the Custodian in an
involuntary case, or the Custodian shall commence a voluntary case, under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the Custodian or for any substantial part of its
property shall be appointed, or the Custodian shall make any general assignment
for the benefit of creditors, or shall generally fail to pay its debts as they
become due, the Trust may remove the Custodian immediately and appoint a
3
<PAGE> 4
successor Custodian. The termination of the Administration Agreement or the
Paying Agent Agreement shall cause the removal of the Custodian simultaneously
therewith.
11. TRANSFERS TO SUCCESSOR CUSTODIAN. Upon the request of any successor
Custodian, the Custodian hereunder shall, upon payment of all amounts due it,
execute and deliver an instrument acknowledged by it transferring to such
successor Custodian all the rights and powers of the resigning Custodian; and
the resigning Custodian shall transfer, deliver and pay over to the successor
Custodian the Assets at the time held by it hereunder, if any, together with all
necessary instruments of transfer and assignment or other documents properly
executed necessary to effect such transfer and such of the records or copies
thereof maintained by the resigning Custodian in the administration hereof as
may be requested by the successor Custodian, and shall thereupon be discharged
from all duties and responsibilities hereunder. Any resignation or removal of
the Custodian shall become effective upon such acceptance of appointment by the
successor Custodian. The indemnification of the resigning Custodian provided for
hereunder shall survive any resignation, discharge or removal of the Custodian
hereunder.
12. CUSTODIAN MERGER, CONSOLIDATION. Any corporation into which the
Custodian may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Custodian shall be a party, shall be the successor Custodian hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement.
13. COMPENSATION; EXPENSES. The Custodian shall receive compensation for
performing the usual, ordinary, normal and recurring services under this
Custodian Agreement and, with the prior written approval of the Trust,
reimbursement for any and all reasonable expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. SECTION 17(f) QUALIFICATION. The Custodian hereby represents that it
is qualified to act as a custodian under Section 17(f) of the Investment Company
Act.
15. INDEMNIFICATION. The Trust shall indemnify and hold the Custodian
harmless from and against any loss, damages, liability or claim incurred by
reason of any inaccuracy in information furnished to the Custodian by the Trust,
or any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, and any reasonable cost or expense (including
the reasonable costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements) incurred in connection with any such loss,
damages, liability or claim, provided that the Custodian shall not be
indemnified and held harmless from and against any such loss, damages,
liability, claim or reasonable cost or expense arising from its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
its reckless disregard of its duties and obligations hereunder. Notwithstanding
the foregoing, it is understood that (i) the Trust shall not, in respect of the
legal expenses of the Custodian in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) and (ii) the
Trust shall
4
<PAGE> 5
not be liable for any settlement of any proceeding effected without the written
consent of the Trust, but if settled with such consent or if there be a final
judgment for the third party claimant, the Trust agrees to indemnify the
Custodian from and against any loss or liability by reason of such settlement or
judgment. Neither the Federal Reserve Book Entry System nor The Depository Trust
Company shall be deemed to be agents of the Custodian.
16. RIGHTS OF SET-OFF; BANKER'S LIEN. The Custodian hereby waives all
rights of set-off or banker's lien it may have with respect to the Assets held
by it as Custodian hereunder.
17. TERMINATION. This Agreement shall terminate upon the earlier of the
dissolution of the Trust or the appointment of a successor Custodian.
18. CHOICE OF LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York applicable to
agreements made and to be performed wholly within such State.
19. NOTICES. All notices and other communications given by any party under
this Agreement shall be directed as follows (or to such other address for a
particular party as shall be specified by such party in a like notice given
pursuant to this Section 19):
The Trust: Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Custodian: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Betty Cocozza
Telephone: (212) 815-5366
Telecopier: (212) 815-7157
Except as otherwise specifically provided herein, all notices and other
communications provided for hereunder shall be in writing and shall be deemed to
have been duly given if either (i) personally delivered (including delivery by
courier service or by Federal Express or any other nationally recognized
overnight delivery service for next day delivery) to the offices set forth
above, in which case they shall be deemed received on the first Business Day by
which delivery shall have been made to said offices, (ii) transmitted by any
standard form of telecommunication to the offices set forth above, in which case
they shall be deemed received on the first Business Day by which a standard
confirmation that such transmission occurred is received by the transmitting
party (unless such confirmation states that such transmission occurred after
5:00 P.M. on such first Business Day, in which case delivery shall be deemed to
have been received on the immediately succeeding Business Day), or (iii) sent by
certified or registered mail, return receipt requested to the offices set forth
above, in which case they shall be deemed received
5
<PAGE> 6
when receipted for unless acknowledgment of receipt is refused (in which case
delivery shall be deemed to have been received on the first Business Day on
which such acknowledgment is refused).
20. NO THIRD PARTY BENEFICIARIES. Nothing herein, express or implied,
shall give to any Person, other than the Trust, the Custodian and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
21. AMENDMENTS; TRUST AGREEMENT CHANGES; WAIVER. This Agreement shall not
be deemed or construed to be modified, amended, rescinded, cancelled or waived,
in whole or in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trust shall notify the Custodian
of any change in the Trust Agreement prior to the effective date of any such
change. Failure of either party hereto to exercise any right or remedy hereunder
in the event of a breach hereof by the other party shall not constitute a waiver
of any such right or remedy with respect to any subsequent breach.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DOLLAR GENERAL STRYPES TRUST
By /s/ Donald J. Puglisi
----------------------------
Donald J. Puglisi,
as Managing Trustee
THE BANK OF NEW YORK
By /s/ Betty Cocozza
----------------------------
Betty Cocozza
Assistant Vice President
7
<PAGE> 1
Exhibit (k)(1)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this ____ day of May, 1998, by
and between The Bank of New York, a New York banking corporation (the
"Administrator"), and Dollar General STRYPES Trust (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"Trust"), a business trust created pursuant to the Business Trust Act of the
State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del.C.
(Sections 3801 et seq.)), under and by virtue of an Amended and Restated Trust
Agreement, dated as of May 1, 1998 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), formed to purchase and hold certain zero-coupon U.S.
Government securities (the "U.S. Treasury Securities"), to enter into and hold a
forward purchase contract (the "Contract") with The Bank of New York, as agent
and custodian for and on behalf of the Trust, and the Turner Children Trust (the
"Contracting Stockholder"), a stockholder of Dollar General Corporation, and to
issue Structured Yield Product Exchangeable for Stock(SM) (the "STRYPES") in
accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the Administrator to
assume certain duties and responsibilities of the Trustees under the Trust
Agreement and the Investment Company Act and to undertake certain services on
behalf of and subject to the supervision of the Trust as provided herein; and
WHEREAS, the Administrator is qualified and willing to assume such duties
and responsibilities and to undertake to render such services, subject to the
supervision of the Trust, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the respective meanings specified in the Trust Agreement.
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
<PAGE> 2
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1 ENGAGEMENT. The Trust hereby engages the Administrator, and the
Administrator hereby agrees to be so engaged, to provide or cause the provision
of the services hereinafter enumerated.
2.2 SERVICES OF ADMINISTRATOR. Subject to the supervision of the Trust,
the Administrator shall on behalf of the Trust take the actions set forth in
Sections 2.06, 2.07 and 2.08 of the Trust Agreement, to the extent such
responsibilities can lawfully be delegated to the Administrator; provided,
however, that the Administrator shall not (i) render investment advisory
services to the Trust as defined in the Investment Company Act or the Investment
Advisers Act of 1940, as amended; (ii) have the power of the Trustees to sell
the U.S. Treasury Securities except as provided in Section 2.08 of the Trust
Agreement; or (iii) have the power to select the independent public accountants
for the Trust. Additionally, the Administrator shall be responsible for
rendering the following services to the Trust:
(a) pay, or cause the Paying Agent to pay, out of moneys paid
to the Administrator pursuant to the Fund Expense Agreement, dated as of
__________ __, 1998, among the Underwriters, the Contracting Stockholder,
Merrill Lynch & Co., Inc. ("Merrill Lynch") and the Administrator (the
"Fund Expense Agreement"), but in no event out of the Trust Estate, the
fees and expenses of the Trust incurred in connection with the offering of
the STRYPES as specified in Schedule I hereto;
(b) pay, or cause the Paying Agent to pay, out of moneys paid
to the Administrator pursuant to the Fund Expense Agreement, but in no
event out of the Trust Estate, the fees and expenses of the Trust incurred
in connection with the organization of the Trust as specified in Schedule
II hereto;
(c) instruct the Paying Agent on behalf of the Trust to take
the actions set forth in Sections 2.06, 2.07 and 2.08 of the Trust
Agreement and to otherwise perform the duties of the Paying Agent referred
to in the Trust Agreement;
(d) with the approval of the Trustees, engage legal and other
professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above, to perform services on behalf of the
Trust;
(e) pay all demands, bills and invoices for expenses incurred
by or on behalf of the Trust, or cause the Paying Agent to pay the same,
out of moneys paid to the Administrator pursuant to the Fund Expense
Agreement, but in no event out of the Trust Estate and give notice to
Merrill Lynch and the Contracting Stockholder pursuant to the Fund
Indemnity Agreement dated as of __________ __, 1998 (the "Fund Indemnity
Agreement"), among the Trust, the Contracting Stockholder and Merrill
Lynch of any claim for Indemnification Expenses (as defined in the Fund
Indemnity Agreement) or any threatened claim for Indemnification Expenses;
2
<PAGE> 3
(f) (i) cause the legal and other professional advisors
engaged pursuant to Section 2.2(d) to prepare and mail, file or publish,
or, as appropriate, direct the Paying Agent to prepare and mail, file or
publish, any notices, proxies, reports, statements and other
communications required to be mailed or published pursuant to the Trust
Agreement and the Investment Company Act,
(ii) keep (or cause to be kept) all the books and records of
the Trust (other than those to be kept by the Paying Agent), and
(iii) cause the legal and other professional advisors engaged
pursuant to Section 2.2(d) to prepare and, as necessary, file any
and all reports, returns and other documents as required under the
Investment Company Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the Internal Revenue Code of 1986,
as amended, or, as reasonably requested by the Trustees, under any
other applicable laws, rules or regulations or otherwise; provided,
however, that responsibility for the adequacy and accuracy of any
such reports, returns and other documents shall be that of the
Trustees and provided, further, that the Administrator shall have no
liability for the adequacy or accuracy of such reports, returns and
other documents;
(g) at the request of the Trust and upon being furnished with such
reasonable security and indemnity against any related expense or liability
as the Administrator may require, institute and prosecute, in accordance
with the instructions of the Trust, legal or other appropriate proceedings
to enforce any and all rights and remedies of the Trust;
(h) review on behalf of the Trust all notices, reports, certificates
and other documents regarding the Contract and the U.S. Treasury
Securities;
(i) make or cause to be made all necessary arrangements with respect
to meetings of Trustees and meetings of Holders, including, without
limitation, the preparation of notices, proxies and minutes, subject to
the approval of the Trust;
(j) in conjunction with the Trust, determine and publish (or cause
to be determined and published), in such manner as the Trust shall direct
in writing, the Trust's net asset value in accordance with Section 8.02(c)
of the Trust Agreement and the Trust's policy as set forth in the
Prospectus;
(k) on or prior to the tenth Business Day preceding the Exchange
Date, notify the Depositary and publish (or cause to be published) a
notice in The Wall Street Journal or another daily newspaper of national
circulation stating whether shares of Dollar General Common Stock or cash
will be delivered in exchange for the STRYPES on the Exchange Date;
(l) not less than nine calendar days (14 calendar days if the
Contracting Stockholder elects to pay all or any portion of the Optional
Acceleration Amount in cash) nor more than 30 calendar days prior to the
related Optional Acceleration Date, provide written notice to Holders of
record of the STRYPES stating the following and containing such other
information as the Administrator deems advisable: (a) the Optional
3
<PAGE> 4
Acceleration Date, (b) the Optional Acceleration Percentage, (c) the
Optional Acceleration Value, (d) the Optional Acceleration Amount, (e)
whether the Contracting Stockholder will pay the Optional 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 and, at or prior to the mailing of such notice,
publish (or cause to be published) a public announcement to such effect in
The Wall Street Journal or another daily newspaper of national
circulation; and
(m) 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 occurrence, as soon as practicable
after becoming so aware), 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.
2.3 CERTAIN RIGHTS OF THE ADMINISTRATOR. In connection with the
performance of its duties under this Agreement, the Administrator shall not be
liable to the Trust, the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of its willful
misfeasance, bad faith, gross negligence or the reckless disregard of its duties
hereunder, (ii) with respect to any action taken or omitted to be taken by it in
good faith in accordance with the directions of the Trust or of any Trustee or
(iii) in connection with the performance of its duties under Section 2.2(j)
hereof, for good faith reliance upon information furnished by third parties
selected by the Administrator with due care. The Administrator shall under no
circumstances be liable for any punitive, exemplary, indirect or consequential
damages. The Administrator may consult with counsel and the written advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Administrator may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it but shall be liable for the acts and omissions of such
persons to the same extent as if the functions had been performed by the
Administrator itself (except to the extent that the Trustees shall have directed
the Administrator to retain such persons in which event the Administrator shall
not be liable for such persons' acts or omissions). Without limiting the
generality of the preceding sentence, the Administrator (i) may select and
employ independent accountants acceptable to the Trustees (other than the
independent public accountants referred to in clause (iii) of the first sentence
of Section 2.2 of this Agreement and Section 2.05(d) of the Trust Agreement) to
keep the financial books and records of the Trust, to prepare the financial
statements of the Trust and to prepare Trust tax returns, and (ii) may select
and engage attorneys acceptable to the Trustees to prepare annual, semi-annual
and periodical reports, notices of meetings and proxy statements, annual reports
to holders of STRYPES and other documents required under the Investment Company
Act or the Exchange Act. The Administrator shall not be liable and shall be
fully protected in acting upon any writing or document reasonably believed by it
to be genuine and to have been given, signed
4
<PAGE> 5
or made by the proper person or persons and shall not be held to have any notice
of any change of authority of any person until receipt of written notice thereof
from a Trustee.
2.4 POWER OF ATTORNEY. The Trust hereby appoints the Administrator, acting
through any duly appointed officer, its attorney-in-fact and agent for the
purpose of performing the duties prescribed in Sections 2.2(f)(iii) and 2.2(i).
2.5 DELIVERY OF CERTAIN DOCUMENTS. The Trust will deliver to the
Administrator, promptly following the execution hereof: (a) a complete conformed
copy of the registration statement of the Trust under the Securities Act and the
Investment Company Act, including all amendments, exhibits and schedules
thereto; and (b) the EDGAR access codes (Central Index Key, CIK Confirmation
Code, Password and Password Modification Access Code) employed to file such
registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 COMPENSATION. (a) For services to be rendered by the Administrator
pursuant to this Agreement, as custodian under the Custodian Agreement, dated as
of __________ __, 1998, between the Administrator, as custodian, and the Trust,
and as collateral agent under the Security and Pledge Agreement, dated as of
__________ __, 1998, among the Administrator, as collateral agent, the
Contracting Stockholder and the Trust, as paying agent, transfer agent and
registrar (the "Paying Agent") under the Paying Agent Agreement, dated as of
__________ __, 1998, between the Paying Agent and the Trust, and for the payment
of Trust expenses pursuant to Section 2.2(a), (b) and (e) hereof, the
Administrator shall receive only such fees and expenses as shall be paid to it
pursuant to the terms of the Fund Expense Agreement and shall have no recourse
to the Trust Estate for the payment of any such amounts.
(b) In connection with the performance of the services referred to
in Section 3(a), the Administrator, as such or in any other capacity, shall not
be required to advance, expend or risk its own funds or otherwise incur or
become exposed to financial liability in the performance of its duties hereunder
or under the other agreements referred to in Section 3(a).
3.2 ADDITIONAL SERVICES. If and to the extent that the Trust shall request
the Administrator to render services for the Trust, other than those to be
rendered by the Administrator hereunder, and if the Administrator agrees to
render such services, such additional services shall be compensated separately
on terms to be agreed upon between the Administrator and the Trust from time to
time.
ARTICLE IV
TERMINATION
4.1 TERMINATION.
(a) This Agreement shall terminate immediately upon written notice
of termination from the Trust to the Administrator if any of the following
events shall occur:
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<PAGE> 6
(i) If the Administrator shall violate any provision of this
Agreement, the Trust Agreement, or the Investment Company Act, and after
notice of such violation, shall not cure such violation within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or an order shall be made
by a court of competent jurisdiction for the appointment of a receiver,
liquidator, or trustee of the Administrator, or of all or substantially
all of its property by reason of the foregoing, or approving any petition
filed against the Administrator for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period of 30
days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver of
the Administrator or of all or substantially all of its property, or shall
make a general assignment for the benefit of its creditors, or shall admit
in writing its inability to pay its debts generally as they become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with any
other entity.
If any of the events specified in clauses (ii), (iii) or (iv) of this
Section 4.1(a) shall occur, the Administrator shall give immediate written
notice thereof to the Trust.
(b) Notwithstanding anything to the contrary contained herein, this
Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of the Security and Pledge Agreement, (iv) upon termination of the
Custodian Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trust may remove the Administrator, or the Administrator may
resign, and thereby terminate this Agreement without penalty upon 60 days prior
written notice to the other party hereto; provided that neither party hereto may
terminate this Agreement pursuant to this Section 4.1(c) unless a successor
Administrator shall have been appointed and shall have accepted the duties of
the Administrator. If, within 30 days after notice by the Administrator to the
Trust of termination of this Agreement, no successor Administrator shall have
been selected and accepted the duties of the Administrator, the Administrator
may apply to a court of competent jurisdiction for the appointment of a
successor Administrator.
4.2 EFFECT OF TERMINATION. The Administrator shall forthwith upon
termination of this Agreement deliver to the Trust any records or other property
of the Trust then in the possession or custody of the Administrator. Any
obligation to indemnify the Administrator pursuant to Section 6.6 shall survive
the termination of this Agreement.
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<PAGE> 7
ARTICLE V
RECORDS AND REPORTS
5.1 BOOKS AND RECORDS; INSPECTION AND COPYING. The Administrator shall
keep, or cause to be kept, appropriate, and reasonably detailed and accurate,
books and records of all its activities pursuant to this Agreement. The Trust
shall have the right to inspect such books and records during the
Administrator's normal business hours upon reasonable request, and to make
copies of the same at the expense of the Trust.
5.2 ACCESS TO INFORMATION. The Administrator shall make available to the
Trust all information it receives and compiles with respect to the Contract and
the U.S. Treasury Securities, the moneys available to the Trust, the financial
condition of the Trust and all other relevant matters concerning the Trust.
ARTICLE VI
MISCELLANEOUS
6.1 BINDING EFFECT; SUCCESSORS AND ASSIGNS. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement. This Agreement shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings, whether oral or written. This Agreement
shall not be amended, changed, modified, or discharged, in whole or in part,
except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 NOTICES. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be directed as follows
(or to such other address for a particular party as shall be specified by such
party in a like notice given pursuant to this Section 6.3):
The Trust: Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: The Bank of New York
101 Barclay Street
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<PAGE> 8
New York, New York 10286
Attn: Betty Cocozza
Telephone: (212) 815-5366
Telecopier: (212) 815-7157
Except as otherwise specifically provided herein, all notices, reports and
other communications provided for hereunder shall be in writing and, unless some
other method of giving such notice, report or other communication is accepted by
the party to whom it is to be given or is required by the Trust Agreement or the
Investment Company Act, shall be deemed to have been duly given if either (i)
personally delivered (including delivery by courier service or by Federal
Express or any other nationally recognized overnight delivery service for next
day delivery) to the offices set forth above, in which case they shall be deemed
received on the first Business Day by which delivery shall have been made to
said offices, (ii) transmitted by any standard form of telecommunication to the
offices set forth above, in which case they shall be deemed received on the
first Business Day by which a standard confirmation that such transmission
occurred is received by the transmitting party (unless such confirmation states
that such transmission occurred after 5:00 P.M. on such first Business Day, in
which case delivery shall be deemed to have been received on the immediately
succeeding Business Day), or (iii) sent by certified or registered mail, return
receipt requested to the offices set forth above, in which case they shall be
deemed received when receipted for unless acknowledgment of receipt is refused
(in which case delivery shall be deemed to have been received on the first
Business Day on which such acknowledgment is refused).
6.4 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
6.5 NON-ASSIGNABILITY. This Agreement and the rights and obligations of
the parties hereunder may not be assigned or delegated by either party without
the prior written consent of the other party.
6.6 INDEMNIFICATION. The Trust shall indemnify and hold the Administrator
harmless from and against any loss, damages, cost, liability or claim incurred
by reason of any inaccuracy in information furnished to the Administrator by the
Trustees, or any act or omission in the course of, connected with or arising out
of any services to be rendered hereunder, and any reasonable expense (including
the reasonable costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements) incurred in connection with any such loss,
damages, cost, liability or claim, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
liability, claim or reasonable expense incurred by reason of its willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
its reckless disregard of its duties and obligations hereunder. Notwithstanding
the foregoing, it is understood that (i) the Trust shall not, in respect of the
legal expenses of the Administrator in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) and (ii) the
Trust shall not be liable for any settlement of any proceeding effected without
the written
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<PAGE> 9
consent of the Trust, but if settled with such consent or if there be a final
judgment for the third party claimant, the Trust agrees to indemnify the
Administrator from and against any loss or liability by reason of such
settlement or judgment.
6.7 PROVISIONS OF LAW TO CONTROL. This Agreement shall be subject to the
applicable provisions of the Investment Company Act and the rules and
regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or such rules and regulations, the latter shall control.
6.8 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
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<PAGE> 10
IN WITNESS WHEREOF the parties have hereunto executed this Administration
Agreement as of the day and year first above written.
DOLLAR GENERAL STRYPES TRUST
By:____________________________
Donald J. Puglisi,
as Managing Trustee
THE BANK OF NEW YORK
By:_____________________________
Name:
Title:
10
<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
NYSE Listing Fees $
Printing (other than STRYPES Certificates)
Legal Fees
Blue Sky Fees
Initial Legal Review
Miscellaneous
-----------
Total $
</TABLE>
11
<PAGE> 12
SCHEDULE II
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
STRYPES Certificates $
Fees and Expenses of Special Delaware
Counsel to the Trust
----------
Total $
</TABLE>
12
<PAGE> 1
Exhibit (k)(2)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this ____ day of May, 1998, by and
between The Bank of New York, a New York banking corporation (the "Paying
Agent"), and Dollar General STRYPES Trust (such trust and the trustees thereof
acting in their capacities as such being referred to herein as the "Trust"), a
business trust created pursuant to the Business Trust Act (the "Delaware Act")
of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C.
(Sections 3801 et seq.)) under and by virtue of an Amended and Restated Trust
Agreement, dated as of May 1, 1998 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), formed to purchase and hold certain zero-coupon U.S.
Government securities (the "U.S. Treasury Securities"), to enter into and hold a
forward purchase contract with The Bank of New York, as agent and custodian for
and on behalf of the Trust, and the Turner Children Trust, a stockholder of
Dollar General Corporation, and to issue Structured Yield Product Exchangeable
for Stock(sm) (the "STRYPES") to the public in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the Paying Agent to
assume certain responsibilities and to perform certain duties as the paying
agent, transfer agent and registrar with respect to the STRYPES upon the terms
and conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume such
responsibilities and to perform such duties, subject to the supervision of the
Trust, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the respective meanings specified in the Trust Agreement.
ARTICLE II
- ----------
(sm) Service mark of Merrill Lynch & Co., Inc.
<PAGE> 2
PAYING AGENT
2.1 APPOINTMENT OF PAYING AGENT AND ACCEPTANCE. The Trust Agreement
provides that The Bank of New York shall act as the initial Paying Agent. The
Bank of New York accepts such appointment and agrees to act in accordance with
its standard procedures and the provisions of the Trust Agreement and the
provisions set forth in this Article II as Paying Agent with respect to the
STRYPES. Without limiting the generality of the foregoing, The Bank of New York,
as Paying Agent, agrees that it shall establish and maintain the Trust Account,
subject to the provisions of Section 2.3 hereof.
2.2 CERTIFICATES AND NOTICES. The Trust shall deliver to the Paying Agent
the certificates and notices required to be delivered to the Paying Agent
pursuant to the Trust Agreement, and the Paying Agent shall mail or publish such
certificates or notices as required by the Trust Agreement, but the Paying Agent
shall have no responsibility to confirm or verify the accuracy of certificates
or notices of the Trust so delivered.
2.3 PAYMENTS AND INVESTMENTS. The Paying Agent shall make payments out of
the Trust Account as provided for in Section 3.02 of the Trust Agreement. The
Paying Agent on behalf of the Trust shall take the actions set forth in Sections
2.06, 2.07, 2.08, 3.04 and 8.03 of the Trust Agreement upon instructions to do
so from the Administrator (except that with respect to its obligations under
Section 8.03 of the Trust Agreement, the Paying Agent shall act without
instructions from the Administrator) and shall invest moneys on deposit in the
Trust Account in Temporary Investments in accordance with Section 3.04 of the
Trust Agreement. Except as otherwise specifically provided herein or in the
Trust Agreement, the Paying Agent shall not have the power to sell, transfer or
otherwise dispose of any Temporary Investment prior to the maturity thereof, or
to acquire additional Temporary Investments. The Paying Agent shall hold any
Temporary Investment to its maturity and shall apply the proceeds thereof paid
upon maturity to the payment of the next succeeding Quarterly Distribution. All
such Temporary Investments shall be selected by the Trust from time to time or
pursuant to standing instructions from the Trust, and the Paying Agent shall
have no liability to the Trust or any Holder or any other Person with respect to
any such Temporary Investment.
2.4 INSTRUCTIONS FROM ADMINISTRATOR. The Paying Agent shall receive and
execute all instructions from the Administrator, except to the extent they
conflict with or are contrary to the terms of the Trust Agreement or this
Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 ORIGINAL ISSUE OF CERTIFICATES. On the date the STRYPES sold pursuant
to the Purchase Agreement are originally issued, certificates for the STRYPES
shall be issued by the Trust, and, at the written request of the Trust,
registered in such names and such denominations as the Underwriters shall have
previously requested of the Trust, executed manually or in facsimile by the
Managing Trustee and countersigned by the Paying Agent. At no time shall the
aggregate number of STRYPES represented by such countersigned certificates
exceed the number of then outstanding STRYPES, except as permitted by Section
3.4 hereof.
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<PAGE> 3
3.2 REGISTRY OF HOLDERS. The Paying Agent shall maintain a registry of the
Holders of the STRYPES.
3.3 REGISTRATION OF TRANSFER OF THE STRYPES. The STRYPES shall be
registered for transfer or exchange, and new certificates shall be issued, in
the name of the designated transferee or transferees, upon surrender of the old
certificates in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes or funds necessary for the
payment of such taxes.
3.4 LOST CERTIFICATES. If there shall be delivered to the Paying Agent (i)
evidence to its satisfaction of the destruction, loss or theft of any
certificate for a STRYPES and (ii) such security or indemnity as may be required
by it to hold it and any of its agents harmless, then, in the absence of notice
to the Paying Agent that such certificate has been acquired by a bona fide
purchaser, the Managing Trustee shall execute and upon its request the Paying
Agent shall countersign and deliver, in lieu of any such destroyed, lost or
stolen certificate, a new certificate of like tenor, and bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this Section 3.4
shall be deemed to be a representation and warranty by the Trust to the Paying
Agent that such issuance will comply with provisions of law, the Trust Agreement
and the resolutions adopted by the Trustees with respect to lost securities. If
after the delivery of such new certificate, a bona fide purchaser of the
original certificate in lieu of which such new certificate was issued presents
for payment such original certificate, the Trust and the Paying Agent shall be
entitled to recover such new certificate from the person to whom it was
delivered or any transferee thereof, except a bona fide purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Trust or the Paying
Agent in connection therewith. Upon the issuance of any new certificate under
this Section 3.4, the Trust and the Paying Agent may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Paying Agent) connected therewith.
3.5 TRANSFER BOOKS. The Paying Agent shall maintain the transfer books
listing the Holders of the STRYPES. In case of any written request or demand for
the inspection of the transfer books of the Trust or any other books in the
possession of the Paying Agent, the Paying Agent will notify the Trust and
secure instructions as to permitting or refusing such inspection. The Paying
Agent reserves the right, however, to exhibit the transfer books or other books
to any person in case it is advised by its counsel that its failure to do so
would be unlawful.
3.6 DISPOSITION OF CANCELLED CERTIFICATES; RECORDS. The Paying Agent shall
retain certificates which have been cancelled in transfer or in exchange and
accompanying documentation in accordance with applicable rules and regulations
of the Securities and Exchange Commission (the "Commission") for six calendar
years from the date of such cancellation, and shall make such records available
during this period at any time, or from
3
<PAGE> 4
time to time, for reasonable periodic, special, or other examinations by
representatives of the Commission and the Board of Governors of the Federal
Reserve System. In case of any request or demand for the inspection of the
register of the Trust or any other books in the possession of the Paying Agent,
the Paying Agent will notify the Trust and seek to secure instructions as to
permitting or refusing such inspection. The Paying Agent reserves the right,
however, to exhibit the register or other records to any person in case it is
advised by its counsel that its failure to do so would (i) be unlawful, or (ii)
expose it to liability, unless the Trust shall have offered indemnification
satisfactory to the Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Paying Agent that:
(a) the Trust is a validly existing business trust under the Delaware Act
and has full power under the Trust Agreement to execute and deliver this
Agreement and to authorize, create and issue the STRYPES;
(b) this Agreement has been duly and validly authorized, executed and
delivered by the Trust and constitutes the valid and binding agreement of the
Trust, enforceable against the Trust in accordance with its terms, subject as to
such enforceability to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles;
(c) the form of the certificate evidencing the STRYPES complies with all
applicable laws of the State of Delaware and the State of New York;
(d) the STRYPES have been duly and validly authorized, executed and
delivered by the Trust and are validly issued;
(e) the offer and sale of the STRYPES subject to the Purchase Agreement
has been registered under the Securities Act and the Trust has been registered
under the Investment Company Act and no further action by or before any
governmental body or authority of the United States or of any state thereof is
required in connection with the execution and delivery of this Agreement or the
issuance of the STRYPES;
(f) the execution and delivery of this Agreement and the issuance and
delivery of the STRYPES do not and will not conflict with, violate, or result in
a breach of, the terms, conditions or provisions of, or constitute a default
under, the Trust Agreement, any law or regulation, any order or decree of any
court or public authority having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the Trust is a party or
by which it is bound; and
(g) no taxes are payable upon or in respect of the execution of this
Agreement or the issuance of the STRYPES.
ARTICLE V
4
<PAGE> 5
DUTIES AND RIGHTS
5.1 DUTIES. (a) The Paying Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person by reason of this
Agreement.
(b) In the absence of bad faith, gross negligence or willful misfeasance
on its part in the performance of its duties hereunder or its reckless disregard
of its duties and obligations hereunder, the Paying Agent shall not be liable
for any action taken, suffered, or omitted in the performance of its duties
under this Agreement or in accordance with any direction or request of the
Managing Trustee not inconsistent with the provisions of this Agreement. The
Paying Agent shall under no circumstances be liable for any punitive, exemplary,
indirect or consequential damages hereunder.
5.2 RIGHTS. (a) The Paying Agent may rely and shall be protected in acting
or refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document reasonably believed by
it to be genuine. The Paying Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Paying Agent believes in
good faith to have been given by the Managing Trustee.
(b) The Paying Agent may consult with legal counsel and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Paying Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys appointed with
due care by it hereunder but shall be liable for the acts and omissions of such
persons to the same extent as if the functions had been performed by the Paying
Agent itself.
5.3 DISCLAIMER. The Paying Agent makes no representation as to (a) the
first two recitals of this Agreement or (b) the validity, sufficiency,
marketability or adequacy of the STRYPES.
5.4 COMPENSATION, EXPENSES AND INDEMNIFICATION. (a) The Paying Agent shall
receive for all services rendered by it under this Agreement and, upon the prior
written approval of the Trust, for all reasonable expenses, disbursements and
advances incurred or made by the Paying Agent in accordance with any provision
of this Agreement (including the reasonable compensation and the reasonable
expenses and disbursements of its agents and counsel), the compensation set
forth in Section 3.1 of the Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and hold it harmless
against any loss, liability or claim arising out of or in connection with the
performance of its obligations under this Agreement and any reasonable cost or
expense (including the reasonable costs of investigation, preparation for and
defense of legal and/or administrative proceedings relating to a claim against
it and reasonable attorneys' fees and disbursements) incurred in connection with
any such loss, liability or claim, provided such loss, liability, claim or
reasonable cost or expense is not the result of gross negligence, willful
misfeasance or bad faith on its part in the performance of its duties hereunder
or its reckless disregard of its duties or obligations hereunder.
Notwithstanding
5
<PAGE> 6
the foregoing, it is understood that (i) the Trust shall not, in respect of the
legal expenses of the Paying Agent in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) and (ii) the
Trust shall not be liable for any settlement of any proceeding effected without
the written consent of the Trust, but if settled with such consent or if there
be a final judgment for the third party claimant, the Trust agrees to indemnify
the Paying Agent from and against any loss or liability by reason of such
settlement or judgment. The indemnification provided by this Section 5.4(b)
shall survive the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 TERM OF AGREEMENT. (a) The term of this Agreement is unlimited unless
terminated as provided in this Section 6.1 or unless the Trust is dissolved, in
which case this Agreement shall terminate ten days after the date of dissolution
of the Trust. This Agreement may be terminated by either party hereto without
penalty upon 60 days prior written notice to the other party hereto; provided
that neither party hereto may terminate this Agreement pursuant to this Section
6.1(a) unless a successor Paying Agent shall have been appointed and shall have
accepted the duties of the Paying Agent. Notwithstanding the foregoing, the
termination of the Trust Agreement, the Collateral Agreement, the Administration
Agreement or the Custodian Agreement or the resignation or removal of the
Custodian shall cause the termination of this Agreement simultaneously
therewith. If, within 30 days after notice by the Paying Agent of termination of
this Agreement, no successor Paying Agent shall have been selected and accepted
the duties of the Paying Agent, the Paying Agent may apply to a court of
competent jurisdiction for the appointment of a successor Paying Agent.
(b) The respective rights and duties of the Trust and the Paying Agent
under this Agreement shall cease upon termination of this Agreement, except as
otherwise provided in this paragraph (b) and except that Section 5.4 hereof
shall survive the termination of this Agreement. Upon termination of this
Agreement, the Paying Agent shall, at the Trust's request, promptly deliver to
the Trust or to any successor Paying Agent as requested by the Trust (i) copies
of all books and records maintained by it and (ii) any funds deposited with the
Paying Agent by the Trust.
6.2 COMMUNICATIONS. All notices, requests and other communications given
by any party under this Agreement shall be directed as follows (or to such other
address for a particular party as shall be specified by such party in a like
notice given pursuant to this Section 6.2):
The Trust: Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
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<PAGE> 7
The Paying Agent: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Betty Cocozza
Telephone: (212) 815-5366
Telecopier: (212) 815-7157
A copy of any notice, request or other communication given by any party
under this Agreement shall be directed to the Administrator if the duties of the
Administrator are being performed by a Person other than the Person performing
the obligations of the Paying Agent. Except for communications authorized to be
made by telephone pursuant to this Agreement, each such notice, request or
communication shall be in writing and shall be deemed to have been duly given if
either (i) personally delivered (including delivery by courier service or by
Federal Express or any other nationally recognized overnight delivery service
for next day delivery) to the offices set forth above, in which case they shall
be deemed received on the first Business Day by which delivery shall have been
made to said offices, (ii) transmitted by any standard form of telecommunication
to the offices set forth above, in which case they shall be deemed received on
the first Business Day by which a standard confirmation that such transmission
occurred is received by the transmitting party (unless such confirmation states
that such transmission occurred after 5:00 P.M. on such first Business Day, in
which case delivery shall be deemed to have been received on the immediately
succeeding Business Day), or (iii) sent by certified mail, return receipt
requested to the offices set forth above, in which case they shall be deemed
received when receipted for unless acknowledgment of receipt is refused (in
which case delivery shall be deemed to have been received on the first Business
Day on which such acknowledgment is refused). Communications shall be given by
the Trust (or by the Administrator, provided that the Trust shall not have
delivered to the Paying Agent an instrument in writing revoking the
authorization of the Administrator to act for it pursuant hereto) and on behalf
of the Paying Agent by a Relationship Manager.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
6.4 NO THIRD PARTY BENEFICIARIES. Nothing herein, express or implied,
shall give to any Person, other than the Trust, the Paying Agent and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
6.5 AMENDMENT; WAIVER. (a) This Agreement shall not be deemed or construed
to be modified, amended, rescinded, cancelled or waived, in whole or in part,
except by a written instrument signed by a duly authorized representative of the
party to be charged. The Trust shall notify the Paying Agent of any change in
the Trust Agreement prior to the effective date of any such change.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
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<PAGE> 8
6.6 SUCCESSORS AND ASSIGNS. Any corporation into which the Paying Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Paying Agent shall be a party, shall be the successor Paying Agent hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement,
provided further that the Trust has given its prior written consent to the
Paying Agent with respect to any such merger, conversion or consolidation. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the respective successors of each of the Trust and the Paying Agent. This
Agreement shall not be assignable by either the Trust or the Paying Agent,
without the prior written consent of the other party.
6.7 SEVERABILITY. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
DOLLAR GENERAL STRYPES TRUST
By: __________________________
Donald J. Puglisi,
as Managing Trustee
THE BANK OF NEW YORK
By: __________________________
Name:
Title:
9
<PAGE> 1
Exhibit (k)(3)
================================================================================
DOLLAR GENERAL STRYPES TRUST
FORWARD PURCHASE CONTRACT
Dated: __________, 1998
================================================================================
<PAGE> 2
Table of Contents
Page
----
I.
Definitions
1.1. Definitions.........................................................2
II.
Contract Consideration or Cash Settlement
2.1. Sale and Purchase...................................................8
2.2. Consideration.......................................................8
2.3. Delivery of Contract Consideration..................................9
2.4. No Fractional Shares or Units......................................10
2.5. Cash Settlement Option.............................................10
2.6. Conditions to Purchaser's Obligations..............................10
III.
Exchange Rate Formula Adjustments
IV.
Representations and Warranties of the Seller
V.
Representations and Warranties of Purchaser
VI.
Covenants
6.1 Collateral.........................................................18
6.2. Taxes..............................................................18
6.3. Tax Treatment......................................................18
6.4. Certain Notices....................................................18
6.5. Limitations on Trading During Certain Days.........................19
6.6. Further Assurances.................................................19
VII.
Acceleration of Delivery
7.1. Liquidation of Agreement Upon Event of Default.....................19
7.2. Dollar General Reorganization Event; Delivery......................21
7.3. Acceleration at the Option of the Seller...........................21
i
<PAGE> 3
VIII.
Miscellaneous
8.1. Adjustments to Exchange Rate Formula; Selection of Independent
Firm...............................................................22
8.2. Notices............................................................22
8.3. Governing Law; Consent to Jurisdiction.............................23
8.4. WAIVER OF JURY TRIAL...............................................23
8.5. Headings; Entire Agreement.........................................24
8.6. Amendments; Waivers................................................24
8.7. Termination........................................................24
8.8. Successors, Assigns................................................24
8.9. No Third Party Rights..............................................24
8.10. Application of Bankruptcy Code.....................................24
8.11. Counterparts.......................................................24
Exhibit A..................................................................A-1
Exhibit B .................................................................B-1
ii
<PAGE> 4
FORWARD PURCHASE CONTRACT
This FORWARD PURCHASE CONTRACT is made as of this ____ day of May, 1998
among Dollar General STRYPES Trust, a business trust created pursuant to the
Business Trust Act of the State of Delaware (Chapter 38, Title 12, of the
Delaware Code, 12 Del. C. (Sections 3801 et seq.)) (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"Purchaser"), The Bank of New York, a New York banking corporation, as agent and
custodian for and on behalf of the Purchaser (the "Collateral Agent") and as
Administrator (as defined herein), and the Turner Children Trust, a trust made
by Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and Katherine Turner
Weaver as Donors under the Indenture of Trust dated January 21, 1980, as
amended, and for which Cal Turner, Jr. and James Stephen Turner act as
Co-Trustees (such trust and the co-trustees thereof acting in their capacities
as such being referred to herein as the "Seller").
WHEREAS, the Purchaser has filed with the Securities and Exchange
Commission a registration statement on Form N-2 (File Nos. 333-50783 and
811-08755) and Pre-Effective Amendments No. 1 and 2 thereto contemplating the
offering of up to 8,625,000 of its Structured Yield Product Exchangeable for
Stock(SM) (the "STRYPES"), the terms of which contemplate that, on __________,
2001 (the "Exchange Date"), each such STRYPES will be mandatorily exchanged for
a specified number of shares of the Common Stock, par value $.50 per share (the
"Dollar General Common Stock"), of Dollar General Corporation, a Kentucky
corporation ("Dollar General"), or, in certain circumstances, cash, or a
combination of cash and Dollar General Common Stock, with an equal value.
WHEREAS, the Purchaser has agreed, pursuant to a purchase agreement dated
the date hereof (the "Purchase Agreement") among the Purchaser, the Seller and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co.
(together, the "Underwriters", which term shall also include any underwriter
substituted as provided in Section 10 of the Purchase Agreement), to issue and
sell to the Underwriters, acting severally and not jointly, an aggregate of
7,500,000 STRYPES (the "Initial STRYPES") and, at the Underwriters' option, all
or any part of 1,125,000 additional STRYPES (the "Option STRYPES") to cover
over-allotments, if any.
WHEREAS, the STRYPES are to be issued pursuant to an Amended and Restated
Trust Agreement, dated as of May 1, 1998 (the "Trust Agreement"), among the
trustees of the Purchaser and ML IBK Positions, Inc., as Sponsor.
WHEREAS, in exchange for certain consideration to be paid by the Purchaser
hereunder, the Purchaser and the Seller desire to provide for the future
acquisition, sale and delivery of that number of shares of Dollar General Common
Stock required by the Purchaser in order to exchange all of the STRYPES on the
Exchange Date, subject to the Seller's right to accelerate the settlement of its
obligation hereunder, at the price established under this Agreement.
- --------
(SM) Service mark of Merrill Lynch and Co., Inc.
<PAGE> 5
WHEREAS, the Seller owns at least ___ shares of Series A Convertible
Junior Preferred Stock of Dollar General (the "Series A Preferred Stock"), each
of which is convertible, at the date hereof, into 4.625 shares of Dollar General
Common Stock.
WHEREAS, pursuant to a Security and Pledge Agreement to be dated as of
__________, 1998 (the "Security and Pledge Agreement"), among the Purchaser, the
Seller and the Collateral Agent, an aggregate of ___ shares of the Series A
Preferred Stock initially will be delivered to the Collateral Agent in order to
secure the Seller's delivery and other obligations hereunder.
WHEREAS, the Seller and the Purchaser desire that ownership of the shares
of Series A Preferred Stock held by the Collateral Agent (including, without
limitation, voting rights and rights to receive any dividends, interest,
distributions and other payments in respect thereof) remain in the Seller unless
and until such shares are delivered to the Purchaser pursuant to the provisions
of this Agreement and the Security and Pledge Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby mutually covenant and agree as follows:
I.
Definitions
1.1. Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following
terms, when used herein, shall have the following meanings:
"Acceleration Amount" has the meaning specified in Section 7.1 hereof.
"Acceleration Amount Notice" has the meaning specified in Section 7.1
hereof.
"Acceleration Date" means the date on which an Event of Default shall have
occurred.
"Acceleration Value" has the meaning specified in Section 7.1 hereof.
"Administration Agreement" means the agreement between the Administrator
and the Purchaser, substantially in the form of Exhibit E to the Trust
Agreement, and any substitute agreement therefor entered into pursuant to
Section 2.05(a) of the Trust Agreement.
"Administrator" means The Bank of New York, the Administrator for the
Purchaser under the Administration Agreement, or any successor thereto.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a partner in, or a director or officer of, such Person.
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<PAGE> 6
"Agreement" means this Forward Purchase Contract and any schedules and
exhibits hereto.
"Aggregate Acceleration Value" has the meaning specified in Section 7.1
hereof.
"Bankruptcy Code" means title 11 of the United States Code.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE, The NASDAQ National Market, or banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.
"Cash Payment Amount" has the meaning specified in Section 2.5 hereof.
"Closing" has the meaning specified in Section 2.3 hereof.
"Closing Date" means the date of the Closing.
"Closing Price" means, with respect to any security on any date of
determination, 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 listed on a
United States national or regional securities exchange, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System, 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 the shares of such security on such date as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator.
"Collateral" has the meaning ascribed thereto in the Security and Pledge
Agreement.
"Collateral Agent" means the financial institution identified as such in
the introductory paragraph of this Agreement, or any successor thereto.
"Collateral Amount" has the meaning specified in Section 6.1 hereof.
"Contract Commitment" has the meaning specified in Section 2.1(a) hereof.
"Contract Consideration" means (i) in the case of a Closing under Section
2.1 hereof, the aggregate number of shares of Dollar General Common Stock
deliverable by the Seller on the Settlement Date as provided in Section 2.1,
assuming that the Seller has not elected to exercise the option contained in
Section 2.5 to deliver cash in lieu of such Dollar General Common Stock; (ii) in
the case of a Closing under Section 7.1 hereof, the aggregate number of shares
of Dollar General Common Stock deliverable by the Seller on the Acceleration
Date as provided in Section 7.1 hereof; (iii) in the case of a Closing under
Section 7.2 hereof, the amount of cash and/or the aggregate number of units of
any Marketable Security deliverable by the Seller on the Early Settlement Date
as provided in Section 7.2 hereof; and (iv) in the case of any Closing
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<PAGE> 7
under Section 7.3 hereof, the amount of cash and/or the aggregate number of
shares of Dollar General Common Stock deliverable by the Seller on the related
Optional Acceleration Date as provided in Section 7.3 hereof.
"Control" (including the terms "controlled by" or "under common control
with") means, as to any Person, the possession, direct or indirect, of the power
to vote ten percent or more of the securities having ordinary voting power for
the election of directors of such Person or to direct or cause the direction of
the management and policies of such Person, whether through ownership of voting
securities or by contract or otherwise.
"Current Market Price" means, on any date of determination, the average of
the daily Closing Prices per share of the Dollar General Common Stock 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
Seller's obligation under Section 2.1 hereof as provided in Section 7.3 hereof,
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 Optional 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
"Date of Delivery" has the meaning specified in Section 2.1(b) hereof.
"Dollar General" has the meaning specified in the first recital in this
Agreement.
"Dollar General Common Stock" has the meaning specified in the first
recital in this Agreement; provided that, in the event of a reclassification
referred to in clause (iv) of Section 3.1(a), the term "Dollar General Common
Stock" shall mean the other common stock of Dollar General issued pursuant
thereto.
"Dollar General Successor" means any surviving entity or subsequent
surviving entity of Dollar General.
"Early Settlement Amount" has the meaning specified in Section 7.2 hereof.
"Early Settlement Date" has the meaning specified in Section 7.2 hereof.
"Equity Appreciation Cap" means, $[_______].
"Event of Default" means an Event of Default as defined in the Security
and Pledge Agreement.
4
<PAGE> 8
"Exchange Amount" means the number of shares of Dollar General Common
Stock determined as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Exchange Date in accordance with the Exchange Rate Formula,
subject to adjustment as provided in Section 7.3(d) hereof in connection with
any exercise by the Seller of its acceleration option contained in Section
7.3(a) hereof.
"Exchange Rate Formula" means the following formula, subject to adjustment
as a result of certain dilution events relating to the Dollar General Common
Stock as provided for in Article III: (a) if the Exchange Price is greater than
the Equity Appreciation Cap, a fractional share of Dollar General Common Stock
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.
"Exchange Date" has the meaning specified in the first recital in this
Agreement.
"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, subject to
adjustment as provided in Section 3.1(f).
"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 under Section 3.1)
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; provided that, for
purposes of the foregoing definition, the amount of cash dividends paid on a per
share basis shall be appropriately adjusted to reflect the occurrence during
such period of any event described in Section 3.1 (a), (b) or (c).
"Firm Consideration Amount" has the meaning specified in Section 2.2(a)
hereof.
"Firm Contract Commitment" has the meaning specified in Section 2.1(a)
hereof.
"Firm Payment Date" has the meaning specified in Section 2.2(a) hereof.
"Independent Dealers" has the meaning specified in Section 7.1 hereof.
"Initial STRYPES" has the meaning specified in the second recital in this
Agreement.
"Marketable Securities" means any securities listed on a U.S. national
securities exchange or reported by The NASDAQ National Market.
"Notice Date" means, with respect to any notice given to the holders of
STRYPES pursuant to Section 2.2(l) of the Administration Agreement in connection
with any exercise by the Seller of its acceleration option contained in Section
7.3(a) hereof, the commencement of the mailing of such notice to the holders of
STRYPES by the Administrator pursuant to Section 2.2(l) of the Administration
Agreement.
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<PAGE> 9
"NYSE" means the New York Stock Exchange, Inc.
"Option Consideration Amount" has the meaning specified in Section 2.2(b)
hereof.
"Option Contract Commitment" has the meaning specified in Section 2.1(b)
hereof.
"Option STRYPES" has the meaning specified in the second recital in this
Agreement.
"Optional Acceleration Amount" has the meaning specified in Section 7.3(a)
hereof.
"Optional Acceleration Date" means any date fixed by the Seller for
accelerated settlement of all or any portion of its obligation under Section 2.1
hereof, as specified in an Optional Acceleration Notice given as provided in
Section 7.3(c) hereof.
"Optional Acceleration Notice" has the meaning specified in Section 7.3(c)
hereof.
"Optional Acceleration Percentage" means, with respect to any Optional
Acceleration Date, the percentage of the Optional Acceleration Value selected
for accelerated settlement on such Optional Acceleration Date, as specified in
an Optional Acceleration Notice given as provided in Section 7.3(c) hereof.
"Optional Acceleration Value" means, on any date of determination, the
Original Optional Acceleration Value less the sum of all Optional Acceleration
Amounts previously paid by the Seller to the Purchaser hereunder.
"Original Optional Acceleration Value" means an amount equal to the
product of (i) the Equity Appreciation Cap and (ii) the Contract Commitment.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency or instrumentality thereof.
"Purchase Agreement" has the meaning specified in the second recital in
this Agreement.
"Purchaser" has the meaning specified in the introductory paragraph of
this Agreement.
"Purchaser Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any Person
acting on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Purchaser.
"Reorganization Event" means any of the following events: (i) any
consolidation or merger of Dollar General, or any Dollar General Successor, with
or into another corporation (other than (x) a consolidation or merger in which
Dollar General 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 Dollar General or another
entity or (y) a statutory merger effected solely for the purpose of changing the
state of
6
<PAGE> 10
incorporation of Dollar General or any Dollar General Successor), (ii) any sale,
transfer, lease or conveyance to another corporation of the property of Dollar
General or any Dollar General Successor as an entirety or substantially as an
entirety, (iii) any statutory exchange of securities of Dollar General or any
Dollar General Successor with another corporation (other than in connection with
a merger or acquisition) or (iv) any liquidation, dissolution, or winding up of
Dollar General or any Dollar General Successor (other than any liquidation,
dissolution or winding up constituting an Event of Default).
"Securities Act" means the Securities Act of 1933, as amended.
"Security and Pledge Agreement" has the meaning specified in the sixth
recital in this Agreement.
"Sellers" has the meaning specified in the introductory paragraph of this
Agreement.
"Seller Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any Person
acting on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Seller.
"Series A Preferred Stock" has the meaning specified in the fifth recital
in this Agreement.
"Settlement Date" has the meaning specified in Section 2.3 hereof.
"Share Component" means the number of shares of Dollar General Common
Stock specified in clause (b) of the Exchange Rate Formula.
"STRYPES" has the meaning specified in the first recital in this
Agreement.
"Total Option Contract Commitment" has the meaning specified in Section
2.1(b) hereof.
"Trading Day" means, with respect to any security the Closing Price of
which is being determined, a day on which such security (i) 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 (ii) 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.
"Transaction Value" means, with respect to any Reorganization Event, the
sum of (x) for any cash received in such Reorganization Event, the amount of
cash received per share of Dollar General Common Stock, (y) for any property
other than cash or securities received in 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 (z) for any securities received in 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
7
<PAGE> 11
Date, multiplied by the number of such securities (subject to adjustment on a
basis consistent with the provisions of Section 3.1 hereof) 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.
"Trust Agreement" has the meaning specified in the third recital in this
Agreement.
"Underwriters" has the meaning specified in the second recital in this
Agreement.
II.
Contract Consideration or Cash Settlement
2.1. Sale and Purchase. (a) On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Seller agrees to sell, assign, transfer, convey and deliver to the
Purchaser on the Settlement Date, and the Purchaser agrees to acquire from the
Seller on the Settlement Date, the aggregate number of shares of Dollar General
Common Stock equal to the product of the Exchange Amount and the Contract
Commitment. The term "Contract Commitment" initially means ___________ (the
"Firm Contract Commitment") and shall be increased by each Option Contract
Commitment as provided in Section 2.1(b) below.
(b) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Seller
hereby grants an option to the Purchaser to increase the Contract Commitment by
up to _________ in the aggregate (the "Total Option Contract Commitment"). The
option granted hereby will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time for the sole purpose of
obtaining the aggregate number of shares of Dollar General Common Stock that
would be required to be delivered by the Purchaser upon exchange of any Option
STRYPES issued by the Purchaser upon exercise by the Underwriters of the option
described in Section 2(b) of the Purchase Agreement. The Purchaser may exercise
the option granted hereby by delivering to the Seller, upon receipt by the
Purchaser of notice that the Underwriters are exercising their option to
purchase Option STRYPES, prompt notice of such exercise by the Underwriters,
stating the number of Option STRYPES as to which the Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option STRYPES (any such time and date of delivery, a "Date of Delivery"). Upon
delivery of any such notice as aforesaid, the Contract Commitment shall be
increased automatically by a number equal to the total number of Option STRYPES
then being purchased by the Underwriters, such number by which the Contract
Commitment shall so increase being referred to an "Option Contract Commitment".
2.2. Consideration. (a) The consideration to be paid by the Purchaser for
the Seller's obligation hereunder to deliver (or cause to be delivered) the
Contract Consideration in respect of
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<PAGE> 12
the Seller's Firm Contract Commitment shall be an amount in cash (the "Firm
Consideration Amount") equal to $[ ]. Upon the terms and subject to the
conditions of this Agreement, the Purchaser shall deliver to the Seller the Firm
Consideration Amount at the offices of Brown & Wood LLP, One World Trade Center,
New York, New York 10048, or at such other place as shall be agreed upon by the
Purchaser and the Seller, at 9:00 A.M. (New York City time) on the third
(fourth, if the pricing of the STRYPES offering occurs after 4:30 P.M. (New York
City time) on any given day) Business Day after the date hereof, or such other
time not later than ten Business Days after such date as shall be agreed upon by
the Purchaser and the Seller (such time and date of payment being herein called
the "Firm Payment Date").
(b) The consideration to be paid by the Purchaser for the Seller's
obligation hereunder to deliver (or cause to be delivered) the Contract
Consideration in respect of any Option Contract Commitment shall be an amount in
cash (the "Option Consideration Amount") equal to the product of such Option
Contract Commitment and the Option Unit Consideration set forth in an Option
Unit Pricing Agreement substantially in the form of Exhibit A hereto. The Option
Unit Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication among the Purchaser and the Seller. From and after the
date of execution and delivery of any Option Unit Pricing Agreement, this
Agreement shall be deemed to incorporate such Option Unit Pricing Agreement.
Upon the terms and subject to the conditions of this Agreement, the Purchaser
shall deliver to the Seller the Option Consideration Amount on the related Date
of Delivery at the offices of Brown & Wood LLP, One World Trade Center, New
York, New York 10048, or at such other place as shall be agreed upon by the
Purchaser and the Seller.
(c) Payment of the Firm Consideration Amount and any Option Consideration
Amount to the Seller shall be made by Fedwire transfer of immediately available
funds to an account designated by the Seller, or such other form of payment
specified by the Seller, against delivery by the Seller to the Collateral Agent
of the number of shares of Series A Preferred Stock necessary to comply with the
Seller's obligation under Section 6.1 hereof.
2.3. Delivery of Contract Consideration. Consummation of the acquisition,
sale and delivery of the Contract Consideration to be sold, assigned,
transferred, conveyed and delivered by the Seller, and acquired by the
Purchaser, pursuant to this Agreement (the "Closing") shall take place (i) in
the case of an acquisition, sale and delivery pursuant to Section 2.1 hereof, on
the Business Day immediately preceding the Exchange Date (the "Settlement
Date"), (ii) in the case of an acquisition, sale and delivery pursuant to
Section 7.1 hereof, upon delivery of the Dollar General Common Stock to the
Purchaser pursuant to Section 6(a) of the Security and Pledge Agreement, (iii)
in the case of an acquisition, sale and delivery pursuant to Section 7.2 hereof,
on the Early Settlement Date and (iv) in the case of an acquisition, sale and
delivery pursuant to Section 7.3 hereof, on the related Optional Acceleration
Date. Delivery of the Contract Consideration shall be made at the offices of the
Administrator at 101 Barclay Street, New York, New York 10286, or at such other
place as shall be agreed upon by the Purchaser and the Seller. Certificates
representing the shares of Dollar General Common Stock (or units of any
Marketable Security deliverable pursuant to Section 7.2 hereof) in registered
form that are part of the Contract Consideration shall be registered in the
Purchaser's name or in the name of a depositary or a nominee of a depositary as
requested by the Purchaser at least one full Business
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<PAGE> 13
Day before the Closing Date, unless such shares of Dollar General Common Stock
(or units of any Marketable Security) are represented by one or more global
certificates registered in the name of a depositary or a nominee of a depositary
or are book entry securities, in which event the Purchaser's interest in such
securities shall be noted in a manner reasonably satisfactory to the Purchaser
and its counsel. Marketable Securities that are part of the Contract
Consideration delivered to the Purchaser shall be transferable by the Purchaser,
following receipt from the Seller, without any restrictions not generally
applicable to all holders of such Marketable Securities (other than restrictions
created by the Purchaser or the Collateral Agent).
2.4. No Fractional Shares or Units. (a) No fractional shares or scrip
representing fractional shares of Dollar General Common Stock shall be delivered
on the Settlement Date. Instead of any fractional share of Dollar General Common
Stock which would otherwise be deliverable by the Seller on the Settlement Date,
the Seller shall make a cash payment in respect of such fractional share in an
amount equal to the value of such fractional share based upon the Exchange
Price.
(b) No fractional units or scrip representing fractional units of any
Marketable Security shall be delivered on the Early Settlement Date. Instead of
any fractional unit of any Marketable Security which would otherwise be
deliverable by the Seller on the Early Settlement Date, the Seller shall make a
cash payment in respect of such fractional unit in an amount equal to the value
of such fractional unit based upon 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.
(c) No fractional shares or script representing fractional shares of
Dollar General Common Stock shall be delivered on any Optional Acceleration
Date. Instead of any fractional share of Dollar General Common Stock which would
otherwise be deliverable by the Seller on any Optional Acceleration Date, the
Seller shall make a cash payment in respect of such fractional share in an
amount equal to the value of such fractional share based on the Current Market
Price as of the second Trading Day immediately preceding the applicable Notice
Date.
2.5. Cash Settlement Option. Notwithstanding the provisions of Sections
2.1, 2.2, 2.3, and 2.4, but subject to the provisions of Section 7.1 hereof, the
Seller shall have the option, exercisable in its sole discretion by notice given
to the Purchaser as provided below, to settle its obligation contained in
Section 2.1 hereof to deliver shares of Dollar General Common Stock, in whole or
in part, through a cash payment on the Settlement Date, in lieu of delivery of
such shares of Dollar General Common Stock. The amount of such cash settlement
payment (the "Cash Payment Amount") to be made by the Seller shall be determined
as of 10:00 A.M. (New York City time) on the Settlement Date and shall equal 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, multiplied by the number of shares of Dollar General Common
Stock in respect of which an election to exercise the cash settlement option is
made. The Cash Payment Amount shall be 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. Notice of the Seller's irrevocable election to
exercise its cash settlement option shall be given to the
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Purchaser and the Collateral Agent, not more than 45 nor less than 10 Trading
Days prior to the Settlement Date.
2.6. Conditions to Purchaser's Obligations. (a) The Purchaser's obligation
to deliver the Firm Consideration Amount on the Firm Payment Date is conditioned
upon (i) the purchase and sale of the Initial STRYPES pursuant to the Purchase
Agreement having been consummated as contemplated therein, (ii) the
representations and warranties of the Seller contained in Article IV hereof
being true and correct as of the Firm Payment Date, (iii) the Security and
Pledge Agreement having been executed by the parties thereto and the delivery of
the Collateral thereunder having been made, and (iv) the Seller having obtained
and delivered to the Purchaser a written waiver by Dollar General of its right
of first refusal contained in paragraph 8(A) of Paragraph B of Article V of
Dollar General's Restated Articles of Incorporation, as amended as of August 22,
1994, with respect to the Collateral.
(b) The Purchaser's obligation to deliver any Option Consideration Amount
on any Date of Delivery is conditioned upon (i) the purchase and sale of the
related Option STRYPES pursuant to the Purchase Agreement having been
consummated as contemplated therein, (ii) the representations and warranties of
the Seller contained in Article IV hereof being true and correct as of such Date
of Delivery and (iii) the Security and Pledge Agreement having been executed by
the parties thereto and the delivery of the Collateral thereunder having been
made.
(c) If any condition specified in this Section 2.6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement, or in the case
of any condition to the delivery of any Option Consideration Amount on a Date of
Delivery which is after the Firm Payment Date, the obligation of the Purchaser
to deliver such Option Consideration Amount on such Date of Delivery (and
obligations of the Purchaser and the Seller with respect to the future
acquisition, sale and delivery of the Contract Consideration in respect of the
related Option Contract Commitment), may be terminated by the Purchaser by
notice to the Seller at any time at or prior to the Firm Payment Date or such
Date of Delivery, as the case may be, and such termination shall be without
liability of any party to any other party, except that Sections 8.3 and 8.4
shall survive any such termination and remain in full force and effect.
III.
Exchange Rate Formula Adjustments
3.1. (a) Adjustment for Subdivisions, Splits, Combinations or
Reclassifications. If Dollar General shall, after the date hereof:
(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;
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<PAGE> 15
(iii) combine the outstanding shares of Dollar General Common
Stock into a smaller number of shares; or
(iv) issue by reclassification of shares of Dollar General
Common Stock any shares of other common stock of Dollar General;
then, in any such event, the Share Component in the Exchange Rate Formula shall
be adjusted so that the Purchaser will receive on the Settlement 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
Dollar General issued pursuant thereto) which the Purchaser would have owned or
been entitled to receive immediately following any event described above had the
Seller's obligation under Section 2.1 hereof been satisfied by delivery of
Dollar General Common Stock immediately prior to such event or any record date
with respect thereto. Each such adjustment shall become effective at the opening
of business on the Business Day next following the record date for determination
of holders of Dollar General Common Stock entitled to receive such dividend or
distribution in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
split, combination or reclassification. Each such adjustment shall be made
successively.
(b) Adjustment for Issuance of Certain Rights or Warrants. If Dollar
General shall, after the date hereof, 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), then in each case 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 such rights or warrants 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 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 such current market price, 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. Such adjustment
shall become effective at the opening of business on the Business Day next
following the record date for the determination of stockholders entitled to
receive such rights or warrants. 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. Each such adjustment shall be
made successively. For purposes of this subparagraph (b) only, the term "current
market price" shall mean the average Closing Price per share of Dollar General
Common Stock on the 20 Trading
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<PAGE> 16
Days immediately prior to the date such rights or warrants are issued; provided,
however, if any event that would result in another adjustment of the Exchange
Rate Formula pursuant to this Section 3.1 occurs during such 20-day period, the
current market price as determined pursuant to the foregoing shall be
appropriately adjusted to reflect the occurrence of such event.
(c) Adjustment for Distributions. If Dollar General shall, after the date
hereof, 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 described in clause (i) of Section 3.1(a) above
or any cash dividends that do not constitute Extraordinary Cash Dividends) or
shall issue to all holders of Dollar General Common Stock rights or warrants to
subscribe for or purchase any of its securities (excluding any rights to
purchase shares of Dollar General Common Stock pursuant to a plan for the
reinvestment of dividends or interest and any rights or warrants referred to in
Section 3.1(b) above), then in each such case, 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 such
dividend or distribution or such rights or warrants, 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. Each
such adjustment shall become effective on the opening of business on the
Business Day next following the record date for the determination of
stockholders entitled to receive such dividend or distribution or such rights or
warrants. Each such adjustment shall be made successively. For purposes of this
subsection (c) only, the term "market price" shall mean the average Closing
Price per share of Dollar General Common Stock on the 20 Trading Days
immediately prior to such record date for the determination of stockholders
entitled to receive such dividend or distribution or such rights or warrants;
provided, however, if any event that would result in another adjustment of the
Exchange Rate Formula pursuant to this Section 3.1 occurs during such 20-day
period, the market price as determined pursuant to the foregoing shall be
appropriately adjusted to reflect the occurrence of such event.
(d) Adjustment for Statutory Merger. In the event of a statutory merger
effected solely for the purpose of changing the state of incorporation of Dollar
General or any Dollar General Successor, the Exchange Rate Formula shall be
adjusted so that the Purchaser will receive on the Settlement Date the number of
shares of capital stock of the continuing corporation in such statutory merger
which the Purchaser would have owned or been entitled to receive immediately
following such statutory merger had the Seller's obligation under Section 2.1
hereof been satisfied by delivery of Dollar General Common Stock immediately
prior to the effective date of such statutory merger.
(e) Issuance in Payment of Dividend. Any shares of Dollar General Common
Stock issuable in payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date for such dividend
for purposes of calculating the number of outstanding shares of Dollar General
Common Stock under subsection (b) above.
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(f) General; Exchange Price Adjustment. All adjustments to the Exchange
Rate Formula shall 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 this subsection (f) 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 pursuant to subsection (a), (b), (c) or (d) of
this Section 3.1, an adjustment shall 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 shall 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
immediately after such adjustment pursuant to subsection (a), (b), (c) or (d)
and the denominator of which shall be the Share Component immediately before
such adjustment. Each such adjustment shall be made successively. This
subsection (f) shall be so used to adjust the definition of Exchange Price only
as such term is used for the first time in each of clauses (a) and (b) of the
Exchange Rate Formula.
IV.
Representations and Warranties of the Seller
The Seller represents and warrants to the Purchaser as of the date hereof,
as of the Firm Payment Date, as of each Date of Delivery (if any) and as of the
Closing Date as follows:
(a) The Seller has the full right, power and authority to enter into and
perform its obligations under this Agreement and the Security and Pledge
Agreement, including, without limitation, to pledge and assign the shares of
Series A Preferred Stock to be pledged and assigned by the Seller pursuant to
the Security and Pledge Agreement, and to sell, transfer and deliver the
Contract Consideration to be sold by the Seller pursuant to this Agreement.
(b) This Agreement has been duly, executed and delivered by the Seller and
(assuming the due authorization, execution and delivery by the other parties
thereto) constitutes a valid and binding agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as the enforcement
hereof may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and except as
enforcement hereof and thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(c) At the Firm Payment Date, the Security and Pledge Agreement will have
been duly, executed and delivered by the Seller and (assuming the due
authorization, execution and delivery by the other parties thereto) will
constitute a valid and binding agreement of the Seller, enforceable against the
Seller in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to
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fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement hereof and
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(d) (i) At the date hereof, Cal Turner, Jr. and James Stephen Turner, as
Co-Trustees of the Seller, are the sole registered owners of the shares of
Series A Preferred Stock to be delivered, pledged and assigned by the Seller
pursuant to the Security and Pledge Agreement, and each such share is
immediately convertible into 4.625 shares of Dollar General Common Stock, (ii)
the Seller has all rights, title and interest in and to the shares of Series A
Preferred Stock to be delivered, pledged and assigned by the Seller pursuant to
the Security and Pledge Agreement, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity and (iii) to the extent
that the Seller elects to deliver any shares of Dollar General Common Stock (or,
in the event there shall occur a Reorganization Event, units of any Marketable
Security) at any Closing, upon delivery of such shares of Dollar General Common
Stock (or, in the event there shall occur a Reorganization Event, units of any
Marketable Security) against payment therefor pursuant to this Agreement,
assuming the Purchaser purchased for value and without notice of any adverse
claim, the Purchaser will have acquired all rights, title and interest in and to
such shares of Dollar General Common Stock (or, in the event there shall occur a
Reorganization Event, units of any Marketable Security), free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity (except
for any security interest, mortgage, pledge, lien, encumbrance, claim or equity
created by the Purchaser or the Collateral Agent). The sale, transfer and
delivery of the shares of Dollar General Common Stock (or, in the event there
shall occur a Reorganization Event, units of any Marketable Security) by the
Seller as contemplated by this Agreement is not, and at the time of delivery of
such shares of Dollar General Common Stock (or, in the event there shall occur a
Reorganization Event, units of any Marketable Security) will not be, subject to
any right of first refusal or similar rights of any person pursuant to any
contract or instrument to which the Seller is a party or by which the Seller is
bound (other than rights which have been waived or satisfied).
(e) No declaration or filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the execution,
delivery or performance by the Seller of this Agreement or the Security and
Pledge Agreement or the consummation by the Seller of the transactions
contemplated herein and therein, except such as have been already obtained or as
may be required under the Securities Act or the rules and regulations
promulgated thereunder or state securities laws.
(f) The execution, delivery and performance by the Seller of this
Agreement and the Security and Pledge Agreement and the consummation by the
Seller of the transactions contemplated herein and therein and compliance by the
Seller with its obligations hereunder and thereunder do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Seller Repayment Event
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets held in trust by the Seller pursuant to,
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Seller is a
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<PAGE> 19
party or by which the Seller is bound, or to which any of the property or assets
of the Seller is subject (except for such conflicts, breaches, defaults or
Seller Repayment Events or liens, charges or encumbrances that would not, singly
or in the aggregate, materially and adversely affect the ability of the Seller
to perform its obligations under this Agreement or the Security and Pledge
Agreement), nor will such action result in any violation of the provisions of
the Indenture of Trust or any applicable law, statute, rule or regulation of any
government or government instrumentality having jurisdiction over the Seller or
any of its assets or properties (other than any state securities or "blue sky"
law, statute, rule or regulation, as to which no representation and warranty is
made), or any applicable judgment, order, writ or decree of any government,
government instrumentality or domestic court having jurisdiction over the Seller
or any of its assets or properties (except in all cases for violations that
would not, singly or in the aggregate, materially and adversely affect the
ability of the Seller to perform its obligations under this Agreement or the
Security and Pledge Agreement).
V.
Representations and Warranties of Purchaser
The Purchaser represents and warrants to the Seller as of the date hereof,
as of the Firm Payment Date, as of each Date of Delivery (if any) and, with
respect to the representations and warranties contained in paragraph (a) and (b)
below only, as of the Closing Date, as follows:
(a) The Purchaser has been duly created and is validly existing as a
business trust in good standing under the laws of the State of Delaware with
power and authority to enter into and perform its obligations under this
Agreement and the Security and Pledge Agreement. Through the date hereof, the
Purchaser's activities have been limited to (i) registering the Purchaser under
the Investment Company Act of 1940, as amended, (ii) registering the offer and
sale of the STRYPES under the Securities Act and (iii) such other activities
that are necessarily incident to, or connected with, or necessary to accomplish,
the foregoing and the offer and sale of the STRYPES and the operation of the
Purchaser as described in the Purchaser's Prospectus dated May __, 1998,
relating to the STRYPES.
(b) This Agreement has been duly authorized, executed and delivered by the
Purchaser and (assuming the due authorization, execution and delivery by the
other parties thereto) constitutes a valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as the enforcement hereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement hereof and thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
(c) At the Firm Payment Date, the Security and Pledge Agreement will have
been duly authorized, executed and delivered by the Purchaser and (assuming the
due authorization, execution and delivery by the other parties thereto) will
constitute a valid and binding agreement of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as the
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enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement hereof and thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(d) No declaration or filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the execution,
delivery or performance by the Purchaser of this Agreement or the Security and
Pledge Agreement or the consummation by the Purchaser of the transactions
contemplated herein and therein, except such as have been already obtained or as
may be required under the Securities Act or the rules and regulations
promulgated thereunder or state securities laws.
(e) The execution, delivery and performance by the Purchaser of this
Agreement and the Security and Pledge Agreement and the consummation by the
Purchaser of the transactions contemplated herein and therein and compliance by
the Purchaser with its obligations hereunder and thereunder do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Purchaser Repayment Event
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Purchaser pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument to which the Purchaser is a party or
by which the Purchaser is bound, or to which any of the property or assets of
the Purchaser is subject (except for such conflicts, breaches, defaults or
Purchaser Repayment Events or liens, charges or encumbrances that would not,
singly or in the aggregate, materially and adversely affect the ability of the
Purchaser to perform its obligations under this Agreement or the Security and
Pledge Agreement), nor will such action result in any violation of the
provisions of the Trust Agreement or the trust certificate of the Trust filed
with the State of Delaware on April 15, 1998 or any applicable law, statute,
rule, or regulation of any government or government instrumentality having
jurisdiction over the Purchaser or any of its assets or properties (other than
any state securities or "blue sky" law, statute, rule or regulation, as to which
no representation and warranty is made), or any applicable judgment, order, writ
or decree of any government, government instrumentality or domestic court having
jurisdiction over the Purchaser or any of its assets, properties or operations
(except in all cases for violations that would not, singly or in the aggregate,
materially and adversely affect the ability of the Purchaser to perform its
obligations under this Agreement or the Security and Pledge Agreement).
VI.
Covenants
6.1. Collateral. The Seller shall cause to be held by the Collateral Agent
at all times during the term of this Agreement either (i) an aggregate number of
shares of Dollar General Common Stock at least equal to the maximum number of
shares of Dollar General Common Stock that would be required to be delivered by
the Seller on the Settlement Date pursuant to
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Section 2.1 hereof, assuming that the Seller has not elected to exercise its
option to settle its obligation under such Section 2.1 through cash payment on
the Settlement Date pursuant to Section 2.5 hereof or (ii) an aggregate number
of shares of Series A Preferred Stock that are immediately convertible into a
number of shares of Dollar General Common Stock at least equal to the maximum
number of shares of Dollar General Common Stock that would be required to be
delivered by the Seller on the Settlement Date pursuant to Section 2.1 hereof,
assuming that the Seller has not elected to exercise its option to settle its
obligation under such Section 2.1 through cash payment on the Settlement Date
pursuant to Section 2.5 hereof; provided, however, that, from and after the
effective date for any Reorganization Event, the Seller shall cause to be held
by the Collateral Agent, in lieu of shares of Dollar General Common Stock or
Series A Preferred Stock, as the case may be, an aggregate amount of cash and/or
an aggregate amount of Marketable Securities at least equal to the maximum
amount of cash and/or maximum amount of Marketable Securities that would be
required to be delivered by the Seller on the Early Settlement Date pursuant to
Section 7.2 hereof (such aggregate number of shares of Dollar General Common
Stock or Series A Preferred Stock, as the case may be, or, in the event there
shall have occurred a Reorganization Event, such aggregate amounts of cash
and/or Marketable Securities being referred to herein as the "Collateral
Amount").
6.2. Taxes. The Seller shall pay any and all documentary, stamp, transfer
or similar taxes and charges that may be payable in respect of the execution and
delivery by the Seller of this Agreement and the transfer and delivery by the
Seller of the Contract Consideration pursuant hereto.
6.3. Tax Treatment. The Purchaser and the Seller hereby agree to treat,
for United States Federal, state and local tax purposes, this Agreement as a
pre-paid forward contract, which does not constitute, in whole or in part,
indebtedness, pursuant to which the Purchaser is obligated to purchase at the
Closing the Contract Consideration which the Seller is obligated to deliver at
that time (subject to the Seller's right to deliver cash in lieu of the Contract
Consideration as provided in Section 2.5 hereof). Notwithstanding the foregoing,
as used in this Section 6.3, the term "forward contract" does not mean a
"forward contract" as referred to in either Section 101(49)(B)(iii) of the
Bankruptcy Code or Section 1259(d)(1) of the Internal Revenue Code of 1986, as
amended.
6.4. Certain Notices. (a) In case at any time while any of the STRYPES are
outstanding the Seller receives written notice that:
(i) Dollar General shall declare a dividend (or any other
distribution) on or in respect of the Dollar General Common Stock to which
Section 3.1(a) or (c) hereof shall apply (other than any cash dividends,
if any, paid from time to time by Dollar General that do not constitute
Extraordinary Cash Dividends);
(ii) Dollar General shall authorize the issuance to all
holders of Dollar General Common Stock of rights or warrants to subscribe
for or purchase shares of Dollar General Common Stock (other than rights
to purchase shares of Dollar General Common Stock pursuant to a plan for
the reinvestment of dividends or interest) or of any other subscription
rights or warrants;
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<PAGE> 22
(iii) there shall occur any conversion or reclassification of
the Dollar General Common Stock (other than a subdivision or combination
of outstanding shares of Dollar General Common Stock) or any
consolidation, merger or reorganization to which Dollar General is a party
and for which approval of any stockholders of Dollar General is required,
or the sale or transfer of all or substantially all of the assets of
Dollar General; or
(iv) there shall occur the voluntary or involuntary
dissolution, liquidation or winding up of Dollar General or Dollar General
shall commence or have commenced against it a case under the Bankruptcy
Code;
then the Seller shall promptly notify the Purchaser and the Administrator of
such fact and of (x) the date, if known by the Seller, on which a record is to
be taken for the purpose of such dividend, distribution or grant of rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Dollar General Common Stock of record to be entitled to such dividend,
distribution or grant of rights or warrants are to be determined, or (y) the
date, if known by the Seller, on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up has become, or is
expected to become, effective or on which such bankruptcy case was commenced.
(b) Immediately upon becoming aware that an Event of Default has occurred,
the Seller shall promptly notify the Purchaser of such occurrence and of all
facts relating to such occurrence of which the Seller is aware.
6.5. Limitations on Trading During Certain Days. Each of the Purchaser and
the Seller hereby agrees that it will not, and it will cause each of its
Affiliates not to, buy or sell any shares of Dollar General Common Stock for its
own account during (i) the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Exchange Date or any Early
Settlement Date or (ii) during the five consecutive Trading Days ending on and
including the second Trading Day immediately preceding any Notice Date.
6.6. Further Assurances. During the term of this Agreement, the Purchaser
and the Seller shall use their respective best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
and advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof, including (i) using best efforts to remove any legal
impediment to the consummation of such transactions, (ii) complying with any and
all applicable laws, statutes, rules or regulations of any government or
government instrumentality, any and all official interpretations, notices or
announcements by any government or government instrumentality, and any and all
applicable judgments, orders, writs or decrees of any government, government
instrumentality or domestic court having jurisdiction over the parties to this
Agreement and (iii) executing and delivering of all such deeds, agreements,
assignments and further instruments of transfer and conveyance necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement in accordance with the terms and conditions hereof.
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VII.
Acceleration of Delivery
7.1. Liquidation of Agreement Upon Event of Default. If an Event of
Default shall occur, then (a) an Acceleration Date shall be deemed to have
occurred simultaneously with the occurrence of such Event of Default, (b) the
Seller's rights under Section 2.5 shall terminate immediately and (c) there
shall become immediately deliverable and payable by the Seller (and immediately
deliverable by the Collateral Agent under the Security and Pledge Agreement to
the Purchaser) a number of shares of Dollar General Common Stock having an
aggregate value (determined 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 Acceleration Date) equal to the
Aggregate Acceleration Value (the "Acceleration Amount"). The "Aggregate
Acceleration Value" means the product obtained by multiplying (i) the quotient
obtained by dividing (A) the Acceleration Value by (B) 1,000 by (ii) the
Contract Commitment. If no quotations for the determination of the Acceleration
Value are obtained as described below, the Aggregate Acceleration Value shall be
the value (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 Acceleration Date) of the aggregate number of shares
of Dollar General Common Stock that would be required to be delivered by the
Seller under Section 2.1 hereof if the Exchange Date were redefined for all
purposes of this Agreement (including, without limitation, for purposes of
Section 2.4 hereof) to be the Acceleration Date.
The "Acceleration Value" means an amount determined on the basis of
quotations from four nationally recognized independent investment banking firms
selected by the Administrator (the "Independent Dealers") as follows. Each
quotation will be for the amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between the Purchaser and such
Independent Dealer that would have the effect of preserving the Purchaser's
right to receive the payments and deliveries that the Purchaser would, but for
the occurrence of the Event of Default, have been entitled to receive after the
Acceleration Date under Article II hereof (taking into account any adjustments
to the Exchange Rate Formula that may have been effected on or prior to the
Acceleration Date and any adjustment to the Exchange Amount provided for in
Section 7.3(d) hereof). On or as soon as reasonably practicable following the
Acceleration Date, the Administrator will request each Independent Dealer to
provide its quotation as soon as reasonably practicable, but in any event within
two Business Days. The Administrator shall compute the Acceleration Value upon
receipt of each Independent Dealer's quotation, provided that if, at the close
of business on the fourth Business Day following the Acceleration Date, the
Administrator shall have received quotations from fewer than four of the
Independent Dealers, the Administrator shall compute the Acceleration Value
using the quotations, if any, it shall have received at or prior to such time.
If four quotations are provided, the Acceleration Value shall be the arithmetic
mean of the two quotations remaining after disregarding the highest and lowest
quotations. (For this purpose, if more than one quotation has the same highest
or lowest value, then one of such quotations shall be disregarded.) If two or
three quotations are provided, the Acceleration Value shall be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
shall be equal to such quotation. If no quotations are provided, the
20
<PAGE> 24
Acceleration Value will not be determined and the Aggregate Acceleration Value
shall be determined as provided above.
As promptly as reasonably practicable after receipt of the quotations on
which the Acceleration Value is based (or, as the case may be, after failure to
receive any such quotations within the time period prescribed above) the
Purchaser shall deliver to the Collateral Agent and the Seller a notice (the
"Acceleration Amount Notice") specifying the Acceleration Amount required to be
delivered by the Seller. The Purchaser and the Seller agree that the Purchaser
will not be entitled to recover any amounts not expressly provided for herein as
a consequence of an Event of Default.
7.2. Dollar General Reorganization Event; Delivery. Notwithstanding the
provisions of Sections 2.1, 2.3 and 2.5 hereof, if any Reorganization Event
shall occur, the Seller's obligation under Section 2.1 hereof shall be
automatically accelerated and the Seller shall deliver to the Purchaser, on the
tenth Business Day after the effective date for such Reorganization Event (the
"Early Settlement Date"), an amount of cash (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 product of the Contract Commitment and
(a) if the Transaction Value is greater than the Equity Appreciation Cap, $[ ]
or (b) if the Transaction Value is less than the Equity Appreciation Cap, the
Transaction Value (such amount of cash being referred to herein as the "Early
Settlement Amount"), subject to adjustment as provided in Section 7.3(d) hereof
in connection with any exercise by the Seller of its acceleration option
contained in Section 7.3(a) hereof. Notwithstanding the foregoing, if any
Marketable Securities are received by holders of Dollar General Common Stock in
a Reorganization Event, then the Seller may, at its option, in lieu of
delivering cash as described above, deliver an equivalent amount (based on the
value determined in accordance with clause (z) of the definition of "Transaction
Value") of Marketable Securities, but not exceeding, as a percentage of the
Early Settlement Amount, the percentage of the total Transaction Value
attributable to such Marketable Securities.
7.3. Acceleration at the Option of the Seller. (a) Notwithstanding
anything to the contrary contained herein, the Seller shall have the option,
exercisable in its sole discretion, to accelerate the settlement of its
obligation under Section 2.1 hereof, in whole at any time or from time to time
in part, by delivering to the Purchaser on an Optional Acceleration Date an
amount equal to the related Optional Acceleration Percentage of the Optional
Acceleration Value (such amount being referred to herein as the "Optional
Acceleration Amount"); provided that, in the case of any partial acceleration
pursuant to this Section 7.3, the Optional Acceleration Value, after giving
effect to such partial acceleration, would not be less than 25% of the Original
Optional Acceleration Value.
(b) Any Optional Acceleration Amount payable by the Seller pursuant to
subsection (a) above shall be payable, at the Seller's option, either in shares
of Dollar General Common Stock (calculated based on the Current Market Price as
of the second Trading Day immediately preceding the applicable Notice Date), in
cash or in a combination of Dollar General Common Stock and cash.
21
<PAGE> 25
(c) The Seller may exercise the acceleration option contained in this
Section 7.3 upon notice (the "Optional Acceleration Notice") to the Purchaser,
the Administrator and the Collateral Agent, given by the Seller in accordance
with Section 8.2 hereof and Section 10(b) of the Security and Pledge Agreement
not more than 30 and not less than 10 calendar days prior to the applicable
Optional Acceleration Date, as specified therein; provided that, if the Seller
intends to pay all or a portion of the Optional Acceleration Amount in cash,
then such notice must be given not less than 15 calendar days prior to the
applicable Optional Acceleration Date. The Optional Acceleration Notice shall be
in the form of Exhibit B hereto and shall be signed by the Seller. The Seller's
election to exercise the option contained in this Section 7.3 shall be
irrevocable once made.
(d) The Exchange Amount or Early Settlement Amount determined pursuant to
this Agreement shall be adjusted for each exercise by the Seller of the
acceleration option contained in this Section 7.3. The required adjustment to
the Exchange Amount or Early Settlement Amount, as the case may be, shall be
made by multiplying the Exchange Amount or Early Settlement Amount otherwise
determined by a fraction, the numerator of which shall be the Optional
Acceleration Value immediately prior to the Exchange Date or Early Settlement
Date, as the case may be, and the denominator of which shall be the Original
Optional Acceleration Value.
VIII.
Miscellaneous
8.1. Adjustments to Exchange Rate Formula; Selection of Independent Firm.
The Purchaser shall be responsible for the effectuation and calculation of any
adjustment to the Exchange Rate Formula and any amount deliverable pursuant to
Sections 2.1, 2.4 and 2.5 hereof and Article VII hereof. The Purchaser shall
provide the Seller reasonable opportunity to review the calculations pertaining
to any adjustment of the Exchange Rate Formula and any amount deliverable
pursuant to Sections 2.1, 2.4 and 2.5 hereof and Article VII hereof. As soon as
practicable, but in no event later than 11:30 A.M. (New York City time) on the
Business Day immediately preceding the Closing Date, the Purchaser shall provide
the Seller with a statement showing the Purchaser's calculation of the Exchange
Price, the Exchange Amount and, assuming no subsequent adjustments to the
Exchange Rate Formula shall be required pursuant to Article III hereof, the
Contract Consideration or Cash Payment Amount, as applicable, to be delivered by
the Seller on the Closing Date. As soon as practicable, but in no event later
than 10:00 A.M. (New York City time) on the Closing Date, the Purchaser shall
provide the Seller with a statement showing the Purchaser's final calculations
of the amounts deliverable pursuant to Sections 2.1, 2.4, 2.5, 7.2 and 7.3
hereof. If the Seller disagrees with any such calculation or determination, the
Contract Consideration or any Cash Payment Amount, [Ernst & Young LLP]or such
other independent accounting or investment banking firm agreed upon by the
Seller and the Purchaser shall be retained to make such calculation, which shall
be binding upon the Purchaser and the Seller and the Closing shall occur as
promptly as practicable after such calculation has been provided to the
Purchaser and the Seller. The fees and expenses of such firm shall be borne by
the Seller. If, pursuant to the terms and conditions of this Agreement, the
22
<PAGE> 26
Administrator shall be required to retain a nationally recognized independent
investment banking firm for any purpose provided herein (other than for purposes
of determining the Acceleration Value pursuant to Section 7.1 hereof), such
nationally recognized independent investment banking firm shall be selected and
retained by the Administrator only after giving the Seller 30 calendar days
prior notice (or such shorter notice as may be reasonably practicable) of the
identity of such firm and after consultation with the Seller, and the
Administrator shall not select any firm that is not reasonably acceptable to the
Seller. The fees and expenses of any such nationally recognized independent
investment banking firm retained by the Administrator shall be borne by the
Seller.
8.2. Notices. All notices and other communications shall be directed as
follows (or to such other address for a particular party as shall be specified
by such party in a like notice given pursuant to this Section 8.2): notices to
the Purchaser the Collateral Agent or the Administration Agent shall be directed
to them in care of the Administrator at 101 Barclay Street, New York, New York
10286, telecopy number (212) 815-7157, attention of Betty Cocozza, with a copy
to Richard Bourgerie, Esq., Emmet, Marvin & Martin, 120 Broadway, New York, New
York 10271, telecopy number (212) 238-3100; notices to the Seller shall be
directed to it in care of: Cal Turner, Jr., Dollar General Corporation, 104
Woodmont Blvd., Suite 500, Nashville, Tennessee 37205. Except as otherwise
specifically provided herein, all notices and other communications provided for
hereunder shall be in writing and shall be deemed to have been duly given if
either (i) personally delivered (including delivery by courier service or by
Federal Express or any other nationally recognized overnight delivery service
for next day delivery) to the offices specified in the preceding sentence, in
which case they shall be deemed received on the first Business Day by which
delivery shall have been made to said offices; (ii) transmitted by any standard
form of telecommunication to the offices set forth in the preceding sentence, in
which case they shall be deemed received on the first Business Day by which a
standard confirmation that such transmission occurred is received by the
transmitting party (unless such confirmation states that such transmission
occurred after 5:00 P.M. on such first Business Day, in which case delivery
shall be deemed to have been received on the immediately succeeding Business
Day), or (iii) sent by certified mail, return receipt requested, to the offices
set forth in the preceding sentence, in which case they shall be deemed received
when receipted for unless acknowledgment of receipt is refused (in which case
delivery shall be deemed to have been received on the first Business Day on
which such acknowledgment is refused).
8.3. Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. For
the purpose of any suit, action or proceeding arising out of or relating to this
Agreement, the parties hereto hereby expressly and irrevocably consent and
submit to the non-exclusive jurisdiction of any United States Federal or New
York State court sitting in the Borough of Manhattan, City and State of New
York, and expressly and irrevocably waive, to the extent permitted under
applicable law, any immunity from the jurisdiction thereof and any claim or
defense in such suit, action or proceeding based on a claim of improper venue,
forum non conveniens or any similar basis to which it might otherwise be
entitled.
23
<PAGE> 27
8.4. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, SUIT, ACTION OR CAUSE OF ACTION ARISING OUT
OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY EACH
OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY HERETO TO THE WAIVER OF ITS
RIGHTS TO TRIAL BY JURY.
8.5. Headings; Entire Agreement. The paragraph headings and table of
contents have been inserted as a reference only and are not a part of this
Agreement and shall not affect the meaning or construction of any provisions
hereof. Except as expressly set forth herein, this Agreement and the Security
and Pledge Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, among the parties with
respect to the subject matter hereof.
8.6. Amendments; Waivers. Any provision of this Agreement may be amended
or waived prior to the Closing if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Purchaser and the Seller
or, in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
8.7. Termination. Notwithstanding anything to the contrary contained in
this Agreement, if the purchase and sale of the Initial STRYPES pursuant to the
Purchase Agreement is not consummated as contemplated therein, this Agreement
shall automatically terminate, and such termination shall be without liability
of any party to any other party, except that Sections 8.3 and 8.4 shall survive
any such termination and remain in full force and effect.
8.8. Successors, Assigns. The provisions of this Agreement shall be
binding upon and accrue to the benefit of the parties hereto and their
respective successors and permitted assigns. Notwithstanding the foregoing,
neither this Agreement nor any right, remedy, obligation or liability arising
hereunder or by reason hereof shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
24
<PAGE> 28
8.9. No Third Party Rights. This Agreement is not intended and shall not
be construed to create any rights in any person other than the Seller and the
Purchaser and no person shall assert any rights as third party beneficiary
hereunder.
8.10. Application of Bankruptcy Code. The parties hereto acknowledge and
agree that (i) the Collateral Agent is a "financial institution" within the
meaning of Sections 101(22) and 555 of the Bankruptcy Code, (ii) the Collateral
Agent is acting as agent and custodian for the Purchaser in connection with this
Agreement, and (iii) the Purchaser is a "customer" of the Collateral Agent
within the meaning of said Sections 101(22) and 555. The parties hereto further
acknowledge and agree that this Agreement is a "securities contract", as such
term is defined in Section 741(7) of the Bankruptcy Code, and is entitled to the
protection of Section 555 of the Bankruptcy Code.
8.11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
8.12. No Personal Liability of Trustees. By executing and delivering this
Agreement, none of the trustees of the Purchaser assumes, and in no event shall
incur, any personal liability hereunder, other than as expressly provided by
law. By executing and delivering this Agreement none of the trustees of the
Seller assumes, and in no event shall incur, any personal liability hereunder,
other than as expressly provided by law.
25
<PAGE> 29
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
DOLLAR GENERAL STRYPES TRUST TURNER CHILDREN TRUST
By: By:
----------------------------- ------------------------------
Name: Donald J. Puglisi, Cal Turner, Jr., as Co-Trustee
as Managing Trustee
THE BANK OF NEW YORK, By:
as Collateral Agent -------------------------------
James Stephen Turner, as
Co-Trustee
By:
-----------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Administrator
By:
-----------------------------
Name:
Title:
26
<PAGE> 30
Exhibit A
DOLLAR GENERAL STRYPES TRUST
(a Delaware business trust)
Option Unit Pricing Agreement
____________, 1998
Cal Turner, Jr.
James Stephen Turner,
As Co-Trustees of the Turner Children Trust
c/o Cal Turner, Jr.
Dollar General Corporation
104 Woodmont Blvd., Suite 500
Nashville, TN 37205
Ladies and Gentlemen:
Reference is made to the Forward Purchase Contract, dated as of
____________, 1998 (the "Forward Purchase Contract"), among Dollar General
STRYPES Trust (the "Purchaser"), The Bank of New York, as agent and custodian
for and on behalf of the Purchaser, and the Turner Children Trust, a trust made
by Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and Katherine Turner
Weaver as Donors under that certain Indenture of Trust dated January 21, 1980,
as amended (the "Seller"), relating to the future purchase by the Purchaser of
the Contract Consideration from the Seller. The Underwriters have exercised
their option, pursuant to Section 2(b) of the Purchase Agreement, to purchase an
aggregate of __________ Option STRYPES. Payment for and delivery of such Option
STRYPES will be made at __________________ on __________, 1997 (the "Date of
Delivery").
Pursuant to subsection (b) of Section 2.1 of the Forward Purchase
Contract, the Purchaser and the Seller hereby agree that the Option Unit
Consideration to be used in calculating the Option Consideration Amount payable
by the Purchaser to the Seller on the Date of Delivery as consideration for the
Seller's obligation to deliver (or cause to be delivered) the Contract
Consideration in respect of the Option Contract Commitment created hereby shall
be $___________.*
- ----------
* The Option Unit Consideration shall be an amount equal to the initial
public offering price per Option STRYPES, net of (1) the underwriting
discount per Option STRYPES and (2) the cost per Option STRYPES of the
zero-coupon U.S. Government securities to be purchased by the
(continued...)
A-1
<PAGE> 31
The Contract Commitment shall increase by ____________.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Forward Purchase Contract.
- ---------------------
...(continued)
Purchaser to provide for the quarterly distributions on the Option STRYPES
to which this Option Unit Pricing Agreement relates. The selection of the
zero-coupon U.S. Government securities to be purchased in respect of any
Option STRYPES shall be made in a manner and on a basis consistent with
the selection of the zero-coupon U.S. Government securities purchased in
respect of the Initial STRYPES.
A-2
<PAGE> 32
Exhibit B
Optional Acceleration Notice
________________, 199
Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
The Bank of New York
101 Barclay Street
New York, New York 10286
Ladies and Gentlemen:
In accordance with Section 7.3 of the Forward Purchase Contract dated May
__, 1998 (the "Forward Purchase Contract"), among Dollar General STRYPES Trust,
a business trust created pursuant to the Business Trust Act of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (Sections 3801
et seq.)) (the "Purchaser"), The Bank of New York, a New York banking
corporation, as agent and custodian for and on behalf of the Purchaser and as
administrator for the Purchaser, and the Turner Children Trust, a trust made by
Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and Katherine Turner
Weaver as Donors under that certain Indenture of Trust dated January 21, 1980,
as amended (the "Seller"), the Seller hereby irrevocably exercise its option to
accelerate ____% of the Optional Acceleration Value of the Forward Purchase
Contract for settlement on ____________,____.
The Seller irrevocably elects to pay ______% of the Optional Acceleration
Amount in shares of Dollar General Common Stock (calculated based on the Current
Market Price as of the second Trading Day immediately preceding the applicable
Notice Date) and ____% of the Optional Acceleration Amount in cash.
Very truly yours,
TURNER CHILDREN TRUST
By:
-------------------------------------
Cal Turner, Jr., as Co-Trustee
By:
-------------------------------------
James Stephen Turner, as Co-Trustee
B-1
<PAGE> 33
If the foregoing is in accordance with our agreement, please sign and
return to Purchaser a counterpart hereof, whereupon this instrument, along with
all counterparts, will become a binding agreement between the Purchaser and the
Seller in accordance with its terms.
Very truly yours,
DOLLAR GENERAL STRYPES TRUST
By:
---------------------------------
Donald J. Puglisi,
as Managing Trustee
CONFIRMED AND ACCEPTED, as of
the date first above written:
TURNER CHILDREN TRUST
By:
---------------------------------
Cal Turner, Jr., as Co-Trustee
By:
---------------------------------
James Stephen Turner, as Co-Trustee
B-2
<PAGE> 1
Exhibit (k)(4)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DOLLAR GENERAL STRYPES TRUST
SECURITY AND PLEDGE AGREEMENT
Dated: ______________________, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
Page
1. Definitions............................................................2
(a) Terms Defined in this Security and Pledge Agreement..............2
"Collateral".....................................................2
"Collateral Agent"...............................................2
"Collateral Amount"..............................................2
"Collateral Event of Default"....................................2
"Delivery........................................................2
"Dollar General".................................................3
"Dollar General Common Stock"....................................3
"Event of Default"...............................................3
"Forward Purchase Contract"......................................3
"Lien"...........................................................3
"Pledgor"........................................................3
"Responsible Officer"............................................3
"Secured Amounts"................................................3
"Securities Account".............................................4
"Securities Intermediary"........................................4
"Security and Pledge Agreement"..................................4
"Security Entitlement"...........................................4
"Series A Preferred Stock".......................................4
"Transfer Restriction"...........................................4
"Trust"..........................................................4
"Trust Agreement"................................................4
"Trustee" or "Trustees"..........................................5
"Turner Trustees"................................................5
"Uniform Commercial Code"........................................5
(b) Uniform Commercial Code..........................................5
(c) Terms Defined in Forward Purchase Contract.......................5
2. Required Collateral....................................................5
(a) Initial Delivery by Pledgor to Collateral Agent..................5
(b) Collateral Requirement...........................................5
3. Grant of Security Interest.............................................5
4. Administration of Collateral...........................................6
(a) Collateral Adequacy..............................................6
(b) Additional Collateral............................................6
(c) Examination of Collateral........................................7
(d) Release of Excess Collateral.....................................7
(e) Conversion of Series A Preferred Stock...........................7
(f) Maintenance of Collateral........................................8
i
<PAGE> 3
(g) Investment of Cash Collateral....................................8
(h) Delivery of Contract Consideration...............................9
5. Distributions in Respect of Collateral.................................9
6. Remedies Upon Events of Default.......................................10
(a) Delivery Upon Event of Default..................................10
(b) Power of Attorney...............................................11
(c) Waivers by the Pledgor..........................................11
(d) Rights and Remedies Under the Uniform Commercial Code...........11
7. Other Provisions Regarding the Collateral.............................11
(a) No Disposition..................................................11
(b) Further Protections.............................................11
(c) Delay in Enforcement; No Waiver.................................12
8. Representations and Warranties........................................12
(a) Representations and Warranties of Pledgor.......................12
(b) Representations and Warranties of Collateral Agent..............13
9. The Collateral Agent..................................................14
(a) Appointment of Collateral Agent.................................14
(b) Duties of Collateral Agent......................................14
(c) Reliance........................................................14
(d) Liability of Collateral Agent...................................14
(e) Risk of Funds...................................................15
(f) Use of Sub-Agents or Attorneys..................................15
(g) Recitals and Statements.........................................15
(h) Knowledge.......................................................15
(i) Merger..........................................................15
(j) Resignation of Collateral Agent.................................15
(k) Removal.........................................................16
(l) Appointment of Successor........................................16
(m) Acceptance by Successor.........................................16
10. Miscellaneous.........................................................16
(a) Amendments, Etc.................................................16
(b) Notices and Other Communications................................17
(c) Waivers.........................................................17
(d) Non-Assignment..................................................18
(e) Waiver of Jury Trial............................................18
(f) Governing Law...................................................18
(g) Headings........................................................18
(h) Entire Agreement................................................18
(i) Counterparts....................................................18
ii
<PAGE> 4
(j) Force Majeure...................................................18
(k) Binding Effect..................................................19
(l) Separability....................................................19
11. Termination of Security and Pledge Agreement..........................19
12. Application of Bankruptcy Code........................................19
13. No Personal Liability of Trustees.....................................19
SCHEDULE A Events of Default.......................................Sch A-1
EXHIBIT A Certificate for Additional Collateral....................Ex A-1
iii
<PAGE> 5
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement is made as of _________________, 1998
among Dollar General STRYPES Trust, a business trust created pursuant to the
Business Trust Act of the State of Delaware (Chapter 38, Title 12, of the
Delaware Code, 12 Del. C. (Sections 3801 et seq.)) (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"Trust"), the Turner Children Trust, a trust made by Cal Turner, Jr., James
Stephen Turner, Laura J. Dugas and Katherine Turner Weaver as Donors under the
Indenture of Trust dated January 21, 1980, as amended (the "Indenture of
Trust"), and for which Cal Turner, Jr. and James Stephen Turner act as
Co-Trustees (such trust and the co-trustees thereof acting in their capacities
as such being referred to herein as the "Pledgor"), and The Bank of New York, a
New York banking corporation, as agent and custodian for and on behalf of the
Trust (the "Collateral Agent").
WHEREAS, the Trust has filed with the Securities and Exchange Commission a
registration statement on Form N-2 (File Nos. 333-50783 and 811-08755) and
Pre-Effective Amendments No. 1 and 2 thereto contemplating the offering of up to
8,625,000 of its Structured Yield Product Exchangeable for Stock(SM) (the
"STRYPES"), the terms of which contemplate that, on [ ], 2001 (the "Exchange
Date"), each such STRYPES will be mandatorily exchanged for a specified number
of shares of Common Stock, par value $.50 per share (the "Dollar General Common
Stock"), of Dollar General Corporation, a Kentucky corporation ("Dollar
General"), or, in certain circumstances, cash, or a combination of cash and
Dollar General Common Stock, with an equal value.
WHEREAS, the STRYPES are to be issued pursuant to an Amended and Restated
Trust Agreement, dated as of May 1, 1998 (the "Trust Agreement"), among the
trustees of the Trust and ML IBK Positions, Inc., as Sponsor.
WHEREAS, in order to obtain the shares of Dollar General Common Stock that
would be required by the Trust in order to exchange all of the STRYPES on the
Exchange Date, the Trust has entered into a Forward Purchase Contract, dated as
of _____________, 1998 (the "Forward Purchase Contract"), with the Collateral
Agent and the Pledgor providing for the future acquisition, sale and delivery of
the aggregate number of shares of Dollar General Common Stock that would be
required by the Trust in order to exchange all of the STRYPES on the Exchange
Date, subject to the Pledgor's right to accelerate the settlement of its
obligation under the Forward Purchase Contract.
WHEREAS, the Pledgor has initially Delivered ______ shares of Series A
Convertible Junior Preferred Stock of Dollar General (the "Series A Preferred
Stock") to the Collateral Agent, which has agreed to hold such shares pursuant
to the terms hereof as security for the obligations of the Pledgor pursuant to
the Forward Purchase Contract.
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
<PAGE> 6
WHEREAS, the Trust and the Pledgor desire that ownership of the shares of
Series A Preferred Stock held by the Collateral Agent (including, without
limitation, voting rights and rights to receive any dividends, interest,
distributions and other payments in respect thereof) remain in the Pledgor
unless and until such shares are delivered to the Trust pursuant to the
provisions hereof and of the Forward Purchase Contract.
WHEREAS, the Trust and the Pledgor desire that the obligations of the
Pledgor under the Forward Purchase Contract shall be secured pursuant to the
terms hereof.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) Terms Defined in this Security and Pledge Agreement. For all purposes
of this Security and Pledge Agreement, except as otherwise expressly provided or
unless the context otherwise requires, the following terms, when used herein,
shall have the following meanings:
"Collateral" means all the cash, securities and other property Delivered
to the Collateral Agent hereunder or pursuant to the Forward Purchase Contract
in respect of the Collateral Amount and held by the Collateral Agent, including,
without limitation, cash, securities or other property purchased with cash
Delivered pursuant to Section 4(g) or otherwise obtained by the Collateral Agent
in respect of the foregoing.
"Collateral Agent" means the financial institution identified as such in
the introductory paragraph hereof, or any successor appointed in accordance with
Section 9(l).
"Collateral Event of Default" has the meaning specified in Schedule A.
"Delivery" means (i) with respect to shares of Dollar General Common Stock
or Series A Preferred Stock, the delivery of such shares, free and clear of all
Liens (other than a Lien created or permitted by this Security and Pledge
Agreement or a Lien created by the Collateral Agent or the Trust), to the
Collateral Agent at such location in The City of New York as it shall direct,
registered in the name of the Collateral Agent or its nominee or in suitable
form for delivery and transfer, accompanied by duly executed instruments of
transfer or assignment in blank and accompanied by any required transfer tax
stamps; (ii) with respect to cash or Marketable Securities, the delivery of such
cash or Marketable Securities, free and clear of all Liens (other than a Lien
created or permitted by this Security and Pledge Agreement or a Lien created by
the Collateral Agent or the Trust), (A) to the Collateral Agent at such location
in The City of New York as it shall direct, in suitable form for delivery and
transfer, accompanied by duly executed instruments of transfer or assignment in
blank and accompanied by any required transfer tax stamps, or (B) to an account
of the Collateral Agent in a clearing system (or with a Securities Intermediary)
acceptable to the Collateral Agent and (iii) with respect to any Treasury
securities maintained in the Treasury/Reserve Automated Debt Entry System
(TRADES), (a) delivery to the Collateral Agent of a listing of such securities
by title (or series), unpaid principal amount
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<PAGE> 7
and maturity date and (b) such steps as are necessary for the Collateral Agent
or its Securities Intermediary to become the holder of a Security Entitlement
with respect to such securities through the Securities Account. The term
"Deliver" used as a verb has a corresponding meaning.
"Dollar General" has the meaning specified in the first recital in this
Security and Pledge Agreement.
"Dollar General Common Stock" has the meaning specified in the first
recital in this Security and Pledge Agreement; provided that, in the event of a
reclassification referred to in clause (iv) of Section 3.1(a) of the Forward
Purchase Contract, the term "Dollar General Common Stock" shall mean the other
common stock of Dollar General issued pursuant thereto.
"Event of Default" has the meaning specified in Schedule A.
"Forward Purchase Contract" has the meaning specified in the third recital
in this Security and Pledge Agreement.
"Lien" means any lien, mortgage, security interest, pledge, charge,
encumbrance, claim or equity of any kind.
"Pledgor" has the meaning specified in the introductory paragraph of this
Security and Pledge Agreement.
"Responsible Officer" means, when used with respect to the Collateral
Agent, any vice president, assistant vice president, trust officer, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Security and Pledge Agreement, or in any other division or
department of the Collateral Agent performing operations substantially
equivalent to those performed by such division or department pursuant hereto, or
any other officer of the Collateral Agent or any successor Collateral Agent
customarily performing functions similar to those performed by any of the
aforesaid officers, and also means, with respect to any matter relating to this
Security and Pledge Agreement or the Collateral, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Secured Amounts" means the amounts at any time payable or obligations to
be performed by the Pledgor to or for the benefit of the Trust pursuant to the
Forward Purchase Contract and this Security and Pledge Agreement, including,
without limitation, (i) the delivery of the Contract Consideration on the
Closing Date pursuant to Section 2.1, 7.1, 7.2 or 7.3 of the Forward Purchase
Contract and/or, if the Pledgor has elected to exercise its option to settle its
obligations under Sections 2.1, 2.2, 2.3 or 2.4 of the Forward Purchase Contract
in whole or in part by making the cash settlement payment pursuant to Section
2.5 of the Forward Purchase Contract in lieu of delivering shares of Dollar
General Common Stock, the delivery of such cash settlement payment pursuant to
Section 2.5 of the Forward Purchase Contract and (ii) the delivery to the Trust
of all or any portion of the Collateral required to be delivered to the Trust
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<PAGE> 8
by the Pledgor pursuant to Section 6.1 of the Forward Purchase Contract at the
respective times specified therein.
"Securities Account" means the account in the name of the Collateral Agent
at a Federal Reserve Bank or branch to which Treasury securities are or may be
credited and which is identified as such to the Pledgor by notice from the
Collateral Agent.
"Securities Intermediary" has the meaning ascribed thereto in the Uniform
Commercial Code.
"Security and Pledge Agreement" means this Security and Pledge Agreement
and any schedules and exhibits hereto.
"Security Entitlement" has the meaning ascribed thereto in the Uniform
Commercial Code.
"Series A Preferred Stock" has the meaning specified in the fourth recital
in this Security and Pledge Agreement.
"Transfer Restriction" means, with respect to any item of Collateral, any
condition to or restriction on the ability of the holder thereof to sell, assign
or otherwise transfer such item of Collateral or to enforce the provisions
thereof or of any document related thereto whether set forth in such item of
Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any federal or
state securities law; provided that (x) the required delivery of any assignment
from the seller, pledgor, assignor or transferor of such item of Collateral,
together with any evidence of the corporate or other authority of such Person,
or (y) any registration or qualification requirement for such item of Collateral
pursuant to any federal or state securities law which is generally applicable to
all holders of such item of Collateral, shall not constitute a "Transfer
Restriction."
"Trust" has the meaning specified in the introductory paragraph of this
Security and Pledge Agreement.
"Trust Agreement" has the meaning specified in the second recital in this
Security and Pledge Agreement.
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<PAGE> 9
"Trustee" or "Trustees" means any trustee or trustees of the Trust
identified on the signature pages to the Trust Agreement, or any successor as
such trustee or trustees.
"Turner Trustee" or "Turner Trustees" means any trustee or trustees of the
Pledgor identified on the signature page to the Indenture of Trust, dated
January 21, 1980, made by Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas
and Katherine Turner Weaver, as Donors, or any successor as such trustee or
trustees.
"Uniform Commercial Code" means the Uniform Commercial Code in effect in
the State of New York or, in connection with Delivery of any security referred
to in clause (ii) of the definition of the term Delivery, deemed to be in effect
pursuant to U.S. law and regulations applicable thereto.
(b) Uniform Commercial Code. Unless otherwise defined herein or in the
Forward Purchase Contract, all terms defined in Article 8 or Article 9 of the
Uniform Commercial Code are used herein as therein defined.
(c) Terms Defined in Forward Purchase Contract. Capitalized words and
phrases used herein and not otherwise defined herein are used herein as defined
in the Forward Purchase Contract.
2. Required Collateral.
(a) Initial Delivery by the Pledgor to Collateral Agent. The Pledgor has
Delivered to the Collateral Agent certificates representing [ ] shares of
Series A Preferred Stock, representing the Collateral Amount as of the date
hereof.
(b) Collateral Requirement. The Pledgor shall Deliver, or cause to be
Delivered, to the Collateral Agent cash, securities and other property such that
the Collateral is at all times at least equal to the Collateral Amount. The
Collateral Agent shall hold such amounts of cash, securities and/or other
property as from time to time may be Delivered, or caused to be Delivered, to
the Collateral Agent as Collateral as expressly provided herein in order to
perfect the continuing first priority security interest in such Collateral
granted to the Collateral Agent, as agent of and for the benefit of the Trust.
3. Grant of Security Interest.
(a) As security for the prompt and complete payment and performance when
due of the Secured Amounts, the Pledgor hereby pledges, assigns, grants and
conveys unto the Collateral Agent, as agent of and for the benefit of the Trust,
a continuing first priority security interest under the Uniform Commercial Code
or other applicable law in and to, and a general first lien upon and right of
set off against, all of the Pledgor's right, title and interest in and to, the
cash, securities and other property of the Pledgor which are Delivered to the
Collateral Agent on behalf of the Trust and to any other assets in possession of
the Collateral Agent as security pursuant to and in accordance with the
provisions of this Security and Pledge Agreement, all certificates or
instruments representing or evidencing any or all of the foregoing, and all
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<PAGE> 10
principal, interest and payments and distributions or dividends, cash or other
property and proceeds from time to time received, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the foregoing
(whether such proceeds arise before or after the commencement of any proceeding
under any applicable bankruptcy, insolvency or other similar law, by or against
any donor of the Pledgor) (except for the cash dividends, interest and payments
required to be distributed to the Pledgor in accordance with Section 5 hereof)
and, subject to Section 5 hereof, all powers and rights of the Pledgor now or
hereafter acquired by the Pledgor, including rights of enforcement, under or
with respect to any or all of the foregoing.
(b) The Pledgor shall, at its expense and in such manner and form as the
Trust or the Collateral Agent may reasonably require, give, execute, deliver,
file and record any financing statement, notice, instrument, document, agreement
or other papers, and shall take all other action, that may be necessary or
desirable in order to create, preserve, perfect, substantiate or validate any
security interest in the Collateral granted by the Pledgor pursuant hereto or to
enable the Collateral Agent to exercise and enforce its rights and the rights of
the Trust hereunder with respect to such security interest. Upon the request of
the Collateral Agent, the Pledgor will execute and deliver to the Collateral
Agent financing statements conforming to the Uniform Commercial Code in effect
in any state or jurisdiction deemed appropriate by the Collateral Agent, and
such other documents as may be required in order to perfect the security
interest, all in a form the Collateral Agent reasonably deems to be acceptable.
Upon the request of the Collateral Agent, the Pledgor also agrees to execute and
deliver to the Collateral Agent for filing by the Collateral Agent continuation
statements conforming to the Uniform Commercial Code in effect in any state or
jurisdiction deemed appropriate by the Collateral Agent and in a form the
Collateral Agent reasonably deems to be acceptable. If the Pledgor fails to
deliver to the Collateral Agent financing statements or continuation statements
that the Collateral Agent requests, the Collateral Agent may, to the extent
permitted by law and without limiting its other rights under this Security and
Pledge Agreement, execute and file in the Pledgor's name, as the Pledgor's
attorney-in-fact, such documents and the Pledgor does hereby designate the
Collateral Agent as its attorney-in-fact to execute and file any such financing
statement or continuation statement.
4. Administration of Collateral.
(a) Collateral Adequacy. As soon as practicable after becoming aware of
any event that requires an adjustment to the Exchange Rate Formula, the
Collateral Agent shall determine whether the Collateral is at least equal to the
Collateral Amount. If the Collateral Agent determines that the Collateral is
less than the Collateral Amount, the Collateral Agent shall promptly notify the
Pledgor of such determination by telephone call followed by a written
confirmation of such call [given as contemplated by Section 10(b) hereof].
(b) Additional Collateral. The Pledgor shall Deliver, or cause to be
Delivered, to the Collateral Agent such additional cash, securities and other
property of the Pledgor in the manner described in this Section 4(b) as are
necessary to satisfy the Collateral requirement set forth in Section 2(b)
hereof. Concurrently with the Delivery of any additional cash, securities or
other property as Collateral hereunder, the Pledgor shall deliver (i) a
certificate of the Pledgor substantially in the form of Exhibit A hereto and
dated the date of such Delivery, (A) identifying
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<PAGE> 11
the additional items of Collateral being Delivered and (B) certifying that with
respect to such additional items of Collateral the representations and
warranties contained in such Exhibit A hereto are true and correct on and as of
the date thereof and (ii) an opinion of counsel, dated the date of such
delivery, addressed to the Collateral Agent, confirming the representations
contained in the second sentence of paragraph 2(b) of Exhibit A hereto. The
Pledgor hereby covenants and agrees to take all actions required under Section
3(b) and any other actions necessary to create for the benefit of the Collateral
Agent a valid, first priority perfected security interest in, and a first lien
upon, any such additional Collateral.
(c) Examination of Collateral. Upon Delivery of any cash, securities or
other property by the Pledgor as Collateral under this Security and Pledge
Agreement, the Collateral Agent shall examine such cash, securities or property
and any opinions and certificates delivered pursuant to Section 4(b) or
otherwise pursuant to the terms hereof in connection therewith to determine that
they comply as to form with the requirements of this Security and Pledge
Agreement.
(d) Release of Excess Collateral. Unless an Event of Default or a failure
by the Pledgor to meet any of its obligations under Sections 2 or 4 hereof has
occurred and is continuing, the Pledgor may obtain the release from the Lien
hereof of any Collateral in excess of the Collateral Amount, upon delivery to
the Collateral Agent of a written notice from the Pledgor indicating the items
of Collateral to be released. Such Collateral shall be released only after the
Collateral Agent shall have determined that the Collateral at the time of such
proposed release, after giving effect to the proposed release, shall at least
equal the Collateral Amount.
(e) Conversion of Series A Preferred Stock. (i) As soon as practicable
after the tenth Trading Day prior to the Settlement Date, unless the Collateral
Agent shall have been notified by the Administrator that the Pledgor has made a
proper election, pursuant to Section 2.5 of the Forward Purchase Contract, to
settle its obligation under Section 2.1 thereof in whole through a cash payment,
the Collateral Agent shall convert into Dollar General Common Stock such number
of shares of Series A Preferred Stock then held by the Collateral Agent
hereunder as is necessary to obtain an aggregate number of shares of Dollar
General Common Stock equal to the number required to be delivered by the Pledgor
on the Settlement Date pursuant to Section 2.1 of the Forward Purchase Contract.
(ii) As soon as practicable after the Collateral Agent shall have received
notice from the Administrator that the Pledgor has properly exercised its
acceleration option contained in Section 7.3 of the Forward Purchase Contract
and has elected to pay the Optional Acceleration Amount in shares of Dollar
General Common Stock, but in no event later than five calendar days prior to the
related Optional Acceleration Date, the Collateral Agent shall convert into
Dollar General Common Stock such number of shares of Series A Preferred Stock
then held by the Collateral Agent hereunder as is necessary to obtain an
aggregate number of shares of Dollar General Common Stock equal to the number
required to be delivered by the Pledgor on the related Optional Acceleration
Date pursuant to Section 7.3 of the Forward Purchase Contract.
(iii) The Collateral Agent shall effect any conversion of Series A
Preferred Stock required pursuant to this Section 4(e) by surrendering to Dollar
General or any transfer agent for the Series A Preferred Stock the certificate
or certificates for the shares of Series A Preferred
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<PAGE> 12
Stock so to be converted, with the notice of conversion on such certificate duly
completed and executed. All shares of Dollar General Common Stock obtained by
the Collateral Agent upon conversion of shares of Series A Preferred Stock as
contemplated by this Section 4(e) shall be held as Collateral for all purposes
hereof pending delivery pursuant to the Forward Purchase Agreement as expressly
provided herein.
(f) Maintenance of Collateral. The Collateral shall be maintained by the
Collateral Agent in a separate non-commingled account and the Collateral Agent
shall use reasonable care with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession and shall accord the Collateral
treatment substantially equal to that which it accords its own property, it
being understood that the Collateral Agent in its capacity as such shall not,
except as specifically set forth herein or contemplated hereby, have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities or other matters relative to any Collateral,
whether or not the Collateral Agent has or is deemed to have knowledge of such
matters, (b) taking any necessary steps to preserve rights against parties with
respect to any Collateral or (c) investing or reinvesting any of the Collateral.
The Collateral Agent shall have no right of offset against the Collateral with
respect to any amounts owed to the Collateral Agent, whether or not arising
under this Security and Pledge Agreement, and the Collateral Agent hereby waives
any such right of offset that it may otherwise have. Except as specifically
provided in this Security and Pledge Agreement, the Collateral Agent covenants
and agrees that it will not sell, assign, transfer, exchange or otherwise
dispose of, or grant any option with respect to, any of the Collateral, nor will
it create, incur or permit to exist any Lien or Transfer Restriction on or with
respect to any of the Collateral, any interest therein, or any proceeds thereof.
Any certificated securities to be held by the Collateral Agent shall be
registered in the name of the Collateral Agent or its nominee. In the event that
certificates evidencing any securities shall be Delivered to the Collateral
Agent accompanied by duly executed instruments of transfer or assignment in
blank, the Collateral Agent shall, as soon as practicable after such Delivery,
take such steps as are necessary to register such securities in the name of the
Collateral Agent or its nominee. Any uncertificated securities to be held by the
Collateral Agent shall be held by the Collateral Agent as Delivered, or caused
to be Delivered, to it by the Pledgor or as obtained by the Collateral Agent
pursuant to Section 4(f), if applicable.
In the event of (i) any adjustment to the Exchange Rate Formula resulting
from the application of the provisions of Section 3.1 of the Forward Purchase
Contract or (ii) any Reorganization Event, the Collateral Agent shall take all
measures reasonably designed to assure that the Collateral is maintained by the
Collateral Agent as provided in this Security and Pledge Agreement and
facilitating the operation of Section 5 of this Security and Pledge Agreement.
(g) Investment of Cash Collateral. The Collateral Agent shall, in
accordance with the written instructions of the Pledgor, invest and reinvest all
cash Collateral in United States Treasury Bills with maturities of 7 days or
less but in any case maturing not later than the second Business Day prior to
the Early Settlement Date and all such securities so obtained and amounts
obtained in respect thereof shall be held as Collateral for all purposes hereof.
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<PAGE> 13
(h) Delivery of Contract Consideration. (i) On the Settlement Date, the
Collateral Agent shall deliver to the Trust, in respect of the Pledgor's
obligation under Section 2.1 of the Forward Purchase Contract, an aggregate
number of shares of Dollar General Common Stock then held by the Collateral
Agent hereunder equal to the number of shares of Dollar General Common Stock
then required to be delivered by the Pledgor under Section 2.1 of the Forward
Purchase Contract, except to the extent that the Pledgor has made a proper
election, pursuant to Section 2.5 of the Forward Purchase Contract, to settle
its obligation under such Section 2.1 in whole through a cash payment. Upon such
delivery, the Trust shall hold such delivered shares of Dollar General Common
Stock free and clear of all Liens (other than Liens created by the Collateral
Agent or the Trust) and Transfer Restrictions (other than Transfer Restrictions
created by the Collateral Agent or the Trust).
(ii) On the Early Settlement Date (if any), the Collateral Agent shall
deliver to the Trust, in respect of the Pledgor's obligation under Section 7.2
of the Forward Purchase Contract, an aggregate amount of cash and/or an
aggregate number or amount of Marketable Securities then held by the Collateral
Agent hereunder equal to the amount or number of cash and/or Marketable
Securities then required to be delivered by the Pledgor under Section 7.2 of the
Forward Purchase Contract. Upon such delivery, the Trust shall hold such
delivered cash and/or Marketable Securities free and clear of all Liens (other
than Liens created by the Collateral Agent or the Trust) and Transfer
Restrictions (other than Transfer Restrictions created by the Collateral Agent
or the Trust).
(iii) On any Optional Acceleration Date, the Collateral Agent shall
deliver to the Trust, in respect of the Pledgor's obligation under Section 7.3
of the Forward Purchase Contract, an aggregate number of shares of Dollar
General Common Stock then held by the Collateral Agent hereunder equal to the
number of shares of Dollar General Common Stock then required to be delivered by
the Pledgor under Section 7.3 of the Forward Purchase Contract, except to the
extent the Pledgor has made a proper election, pursuant to said Section 7.3, to
settle its obligation in whole through a cash payment. Upon such delivery, the
Trust shall hold such delivered shares of Dollar General Common Stock free and
clear of all Liens (other than Liens created by the Collateral Agent or the
Trust) and Transfer Restrictions (other than Transfer Restrictions created by
the Collateral Agent or the Trust).
(iv) If after effecting the delivery, if any, required by subsection (i),
(ii) or (iii) of this Section 4(h), as applicable, all of the obligations of the
Pledgor under Articles II and VII of the Forward Purchase Contract (including
any obligation to pay the Cash Payment Amount pursuant to Section 2.5 thereof)
have been discharged or sufficient funds have been deposited with the
Administrator for the discharge thereof, any remaining cash, securities and
other property then pledged by the Pledgor and held by the Collateral Agent
shall be released and Delivered to such account or place as the Pledgor shall
have specified by notice to the Collateral Agent.
5. Distributions in Respect of Collateral.
(a) Unless an Event of Default or a failure by the Pledgor to meet any of
its obligations under Sections 2 or 4 hereof has occurred and is continuing, the
Pledgor shall be entitled to receive for its own account all dividends,
interest, distributions and other payments
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<PAGE> 14
relating to all of the Collateral. The Collateral Agent agrees to release from
the Lien hereof all such payments received by it and to remit the same to the
Pledgor on the Business Day received or as soon as practicable thereafter;
provided that such payments shall be so released and remitted only after the
Collateral Agent shall have determined that the Collateral at the time of such
proposed release and remittance, after giving effect to the proposed release and
remittance, shall at least equal the Collateral Amount. At any time when the
Pledgor is not entitled to receive any such payments hereunder, the Collateral
Agent shall retain such payments (and any such payments which are received by
the Pledgor shall be received in trust for the benefit of the Trust, shall be
segregated from other funds of the Pledgor and shall forthwith be paid over to
the Collateral Agent), and the Collateral Agent shall hold all such payments so
retained by, or paid over to, the Collateral Agent as Collateral hereunder. The
security interest of the Collateral Agent shall continue in any such payment so
retained by, or paid over to, the Collateral Agent.
(b) Unless an Event of Default or a failure by the Pledgor to meet any of
its obligations under Sections 2 or 4 hereof has occurred and is continuing,
until delivery pursuant to Section 4(h) hereof, the Pledgor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to the Collateral, and the Collateral Agent shall deliver
to the Pledgor such proxies, powers of attorney, consents, ratifications and
waivers in respect of any of the Collateral which is registered in the name of
the Collateral Agent or its nominee as shall be necessary or appropriate to give
effect to such right.
If an Event of Default or a failure by the Pledgor to meet any of
its obligations under Sections 2 or 4 hereof shall have occurred and be
continuing, until delivery pursuant to Section 4(h) hereof, the Collateral Agent
may, and at the direction of the managing trustee of the Trust shall, to the
extent permitted by law (and the Pledgor shall take all such action as may be
necessary or appropriate to give effect to such right), vote and give consents,
ratifications and waivers, and take any other action with respect to any or all
of the Collateral with the same force and effect as if the Collateral Agent were
the absolute and sole owner thereof.
6. Remedies Upon Events of Default.
(a) Delivery Upon Event of Default. If an Event of Default shall have
occurred and be continuing, the Collateral Agent shall deliver to the Trust on
the date the Acceleration Amount Notice relating to such Event of Default is
received by the Collateral Agent or as soon as practicable thereafter an
aggregate number of shares of Dollar General Common Stock equal to the number
then required to be delivered by the Pledgor under Section 7.1 of the Forward
Purchase Contract, whereupon the Trust shall hold such shares of Dollar General
Common Stock free and clear of all Liens (other than Liens created by the
Collateral Agent or the Trust) and Transfer Restrictions (other than Transfer
Restrictions created by the Collateral Agent or the Trust), including any equity
or right of redemption of the Pledgor which may be waived, and the Pledgor, to
the extent permitted by law, hereby specifically waive all rights of redemption,
stay or appraisal which it has or may have under any law now existing or
hereafter adopted.
(b) Power of Attorney. Upon any delivery of all or any part of any
Collateral duly made under the power of delivery given hereunder or under
judgment or decree in any judicial proceedings for foreclosure or otherwise for
the enforcement of this Security and Pledge
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Agreement, the Collateral Agent is hereby irrevocably appointed the true and
lawful attorney of the Pledgor, in the name and stead of the Pledgor, to make
all necessary deeds, bills of sale and instruments of assignment, transfer or
conveyance of the property thus delivered. For that purpose the Collateral Agent
may execute all such documents and instruments. This power of attorney shall be
deemed coupled with an interest, and the Pledgor hereby ratifies and confirms
all that attorneys acting under such power, or such attorneys' successors or
agents, shall lawfully do by virtue of this Security and Pledge Agreement. If so
requested by the Collateral Agent or by the Trustees, the Pledgor shall further
ratify and confirm any such delivery by executing and delivering to the
Collateral Agent or to the Trustees at the expense of the Pledgor all proper
deeds, instruments of assignment, conveyance of transfer and releases as may be
designated in any such request.
(c) Waivers by the Pledgor. The Pledgor waives any presentment, demand,
protest or, to the extent permitted by applicable law, notice in connection with
this Security and Pledge Agreement.
(d) Rights and Remedies Under the Uniform Commercial Code. In the event
that any Secured Amounts payable by the Pledgor are not paid when due or any
Secured Amounts to be performed by the Pledgor are not performed when due, in
addition to all other rights and remedies provided for herein or otherwise
available to the Collateral Agent and the Trust, the Collateral Agent may, and
at the direction of the managing trustee of the Trust shall, exercise all of the
rights and remedies of a secured party under the Uniform Commercial Code
(whether or not the Uniform Commercial Code applies to the Collateral) and all
other applicable law with respect to all or any part of the Collateral.
7. Other Provisions Regarding the Collateral.
Until all obligations of the Pledgor under Articles II and VII of the
Forward Purchase Contract have been performed in full, the parties hereto
covenant and agree as follows:
(a) No Disposition. The Pledgor covenants and agrees that it will not
sell, assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, any of the Collateral, nor will it create, incur or permit to
exist any Lien on or with respect to any of the Collateral, any interest
therein, or any proceeds thereof, other than Liens created by this Security and
Pledge Agreement and Liens created by the Collateral Agent or the Trust.
(b) Further Protections. The Pledgor will pay in a timely fashion all
taxes, assessments, fees or charges of any nature that are imposed in respect of
the Collateral as a result of the Pledgor's ownership thereof or any action or
omission on the part of the Pledgor. The Pledgor will give written notice to the
Trust and the Collateral Agent of, and defend the Collateral against, any suit,
action or proceeding against the Collateral or which could adversely affect the
security interests granted hereunder.
(c) Delay in Enforcement; No Waiver. To the extent consistent with the
Uniform Commercial Code and applicable law, the Collateral Agent can choose to
delay or not to enforce any of its rights under this Security and Pledge
Agreement without losing such rights. If the
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<PAGE> 16
Collateral Agent chooses not to exercise or enforce any of its rights, the
Pledgor agrees that the Collateral Agent is not waiving the right to enforce
such rights at a later time or any of its other rights. Any waiver of the
Collateral Agent's rights under this Security and Pledge Agreement must be in
writing. Representations and Warranties. (a) Representations and Warranties of
Pledgor. On a continuing basis during the term of this Security and Pledge
Agreement, the Pledgor represents and warrants to the Collateral Agent and to
the Trust as follows:
(i) the Pledgor has full power and authority to execute and deliver
this Security and Pledge Agreement and to perform and observe the
provisions hereof, except as performance may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar
laws now or hereafter in effect relating to creditors' rights, and
general principles of equity (regardless of whether the
enforceability of such performance is considered in a proceeding in
equity or at law);
(ii) the execution, delivery and performance of this Security and
Pledge Agreement by the Pledgor do not contravene any requirement of
law, the Indenture of Trust or any material transactional
restriction or material agreement binding on or affecting the
Pledgor or any of its assets;
(iii) this Security and Pledge Agreement has been duly and properly
executed and delivered by the Pledgor and constitutes a legal, valid
and binding agreement of the Pledgor enforceable against the Pledgor
in accordance with its terms, except as the enforcement of rights
and remedies may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, and general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(iv) no Transfer Restrictions (other than Transfer Restrictions
applicable to the Series A Preferred Stock contained in the Restated
Articles of Incorporation of Dollar General, as amended as of August
22, 1994, Transfer Restrictions created by this Security and Pledge
Agreement and Transfer Restrictions created by the Collateral Agent
or the Trust) exist with respect to or otherwise apply to the
assignment of, or transfer by the Pledgor of possession of, any
items of Collateral to the Collateral Agent hereunder, or the
subsequent sale or transfer of such items of Collateral by the
Collateral Agent pursuant to the terms hereof;
(v) except for the rights of the Trust and of the Collateral Agent
on the Trust's behalf established under this Security and Pledge
Agreement and the Forward Purchase Contract, the Pledgor has all
rights, title and interest in and to the Collateral pledged by it
under this Security and Pledge Agreement, free and clear of all
Liens (other than the Lien created by this Security and Pledge
Agreement and any Lien created by the Collateral Agent or the Trust)
and Transfer
12
<PAGE> 17
Restrictions (other than Transfer Restrictions applicable to the
Series A Preferred Stock contained in the Restated Articles of
Incorporation of Dollar General, as amended as of August 22, 1994,
Transfer Restrictions created by this Security and Pledge Agreement
and Transfer Restrictions created by the Collateral Agent or the
Trust), and has the right to pledge such Collateral as provided in
this Security and Pledge Agreement;
(vi) the Pledgor is not in default under any agreement by which the
Collateral may be bound and no litigation, arbitration or
administrative proceeding of which the Pledgor has received notice
or service of process is pending, which default, litigation,
arbitration or administrative proceeding is material to the
Collateral in the context of this Security and Pledge Agreement;
(vii) upon Delivery of the Collateral to the Collateral Agent
hereunder, the Collateral Agent will obtain a valid first priority,
perfected and enforceable security interest in, and a first lien on,
such Collateral subject to no other Lien; and none of such
Collateral is or shall be pledged by the Pledgor as collateral for
any other purpose; and
(viii) the Pledgor is presently solvent and able to pay, and is
paying, its debts as they come due, and anticipates that it will
continue to be able to pay its debts as they come due for the
foreseeable future.
(b) Representations and Warranties of Collateral Agent. On a continuing
basis during the term of this Security and Pledge Agreement, the Collateral
Agent represents and warrants to the Pledgor and to the Trust as follows:
(i) the Collateral Agent is a banking corporation, duly
incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all corporate
powers and all material governmental licenses, authorizations,
consents and approvals required to enter into, and perform its
obligations under, this Security and Pledge Agreement;
(ii) the execution, delivery and performance by the Collateral Agent
of this Security and Pledge Agreement have been duly authorized by
all necessary corporate action on the part of the Collateral Agent
(no action by the shareholders of the Collateral Agent being
required) and do not and will not violate, contravene or constitute
a default under any provision of applicable law or regulation or of
the charter or by-laws of the Collateral Agent or of any material
agreement, judgment, injunction, order, decree or other instrument
binding upon the Collateral Agent; and
(iii) this Security and Pledge Agreement has been duly and properly
executed and delivered by the Collateral Agent and constitutes a
legal, valid and binding agreement of the Collateral Agent
enforceable against the Collateral Agent in accordance with its
terms, except as the enforcement of rights and remedies may
13
<PAGE> 18
be limited by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect relating to creditors'
rights, and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
9. The Collateral Agent.
(a) Appointment of Collateral Agent. The Trust hereby appoints and
designates the Collateral Agent as its agent and custodian for the purposes set
forth herein, and the Collateral Agent does hereby accept such appointment under
the terms and conditions set forth herein.
(b) Duties of Collateral Agent. The Collateral Agent undertakes to perform
only such duties as are expressly set forth herein. The duties and
responsibilities of the Collateral Agent hereunder shall be determined solely by
the express provisions of this Security and Pledge Agreement and no other or
further duties or responsibilities shall be implied.
(c) Reliance. Subject to the limitations, covenants and provisions hereof,
the Collateral Agent may rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon the face of any note,
notice, resolution, consent, certificate, affidavit, letter, telegram,
statement, order or other document furnished to it hereunder by the Trust or the
Pledgor and believed by it to be genuine and to have been signed or presented by
the proper party or parties, and shall have no responsibility for determining
the accuracy thereof.
(d) Liability of Collateral Agent. Neither the Collateral Agent nor any of
its directors, officers or employees shall be liable for any action taken or
omitted by it hereunder except in the case of its gross negligence, bad faith,
willful misconduct or its failure to use reasonable care with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession. The Collateral Agent may consult with counsel of its own choice,
including in-house counsel, and shall have full and complete authorization and
protection for any action taken or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel. The Collateral Agent shall not be
liable with respect to any action taken, suffered or omitted by it in good faith
(i) reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Security and Pledge Agreement or (ii)
in accordance with any direction or request of the Trustees. In no event shall
the Collateral Agent be personally liable for any taxes or other governmental
charges imposed upon or in respect of (i) the Collateral or (ii) the income or
other distributions thereon. Except as specifically provided herein, the
Collateral Agent shall not be responsible for the validity, sufficiency,
collectibility or marketability of any Collateral Delivered to or held by it
hereunder or for the validity or sufficiency of the Forward Purchase Contract or
the Lien (or the priority thereof) on the Collateral purported to be created
hereby. In no event shall the Collateral Agent be liable for punitive,
exemplary, indirect or consequential damages. Except as specifically set forth
herein or contemplated hereby, the Collateral Agent shall have no duty (a) to
see to any recording, filing or depositing of this Security and Pledge Agreement
or any agreement referred to herein or therein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (b) to see to the maintenance of any
insurance or (c) to see to the
14
<PAGE> 19
payment or discharge of any tax, assessment, or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Collateral. The Collateral Agent shall not be
accountable for the use or application by the Trust of any of the proceeds of
the Collateral.
(e) Risk of Funds. No provision of this Security and Pledge Agreement
shall require the Collateral Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(f) Use of Sub-Agents or Attorneys. The Collateral Agent may perform any
duties hereunder either directly or by or through agents or attorneys, provided
that the Collateral Agent shall remain liable to fulfill all of such duties to
the same extent, and with the same protections, as if the Collateral Agent was
performing them itself.
(g) Recitals and Statements. The Collateral Agent shall not be responsible
for the correctness of the recitals and statements herein which are made by the
Trust and the Pledgor or for any statement or certificate delivered by the
Pledgor pursuant hereto.
(h) Knowledge. The Collateral Agent shall not be deemed to have knowledge
of any Event of Default (except a Collateral Event of Default), unless and until
a Responsible Officer of the Collateral Agent shall have actual knowledge
thereof or shall have received written notice thereof.
(i) Merger. Any corporation or association into which the Collateral Agent
may be converted or merged, or with which it may be consolidated, or to which it
may sell or transfer its agency business and assets as a whole or substantially
as a whole, or any corporation or association resulting from any such
conversion, sale, merger, consolidation or transfer to which it is a party,
anything herein to the contrary notwithstanding, shall be and become a successor
Collateral Agent hereunder and vested with all of the title to the Collateral
and all of the powers, discretions, immunities, privileges and other matters as
was its predecessor without, the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
provided that such corporation or association meets the requirements set forth
in Section 9(l)(2) hereof and in the Trust Agreement.
(j) Resignation of Collateral Agent. The Collateral Agent may resign and
be discharged from its duties or obligations hereunder by giving thirty (30)
days' prior notice in writing of such resignation to the Trust and the Pledgor.
Such resignation shall take effect upon the appointment of a successor
Collateral Agent by the Trust. If, within 30 days after notice by the Collateral
Agent to the Trust and the Pledgor of the Collateral Agent's resignation, no
successor Collateral Agent shall have been appointed and accepted the duties of
the Collateral Agent as provided herein, the Collateral Agent may apply to a
court of competent jurisdiction for the appointment of a successor Collateral
Agent.
15
<PAGE> 20
(k) Removal. The Collateral Agent may be removed at any time by an
instrument or concurrent instruments in writing delivered to the Collateral
Agent and to the Pledgor and signed by the Trust.
(l) Appointment of Successor.
(1) If the Collateral Agent hereunder shall resign or be removed, or
be dissolved or shall be in the course of dissolution or liquidation
or otherwise become incapable of action hereunder, or if it shall be
taken under the control of any public officer or officers or of a
receiver appointed by a court, a successor may be appointed by the
Trust by an instrument or concurrent instruments in writing signed
by the Trust or by its attorneys in fact fully authorized. A copy of
such instrument or concurrent instruments shall be sent by
registered mail to the Pledgor.
(2) Every such temporary or permanent successor Collateral Agent
appointed pursuant to the provisions hereof shall be a trust company
or bank in good standing, having a reported capital and surplus of
not less than $100,000,000 and capable of holding the Collateral in
the State of New York, if there be such an institution willing,
qualified and able to accept the duties of the Collateral Agent
hereunder upon customary terms.
(m) Acceptance by Successor. Every temporary or permanent successor
Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
its predecessor and also to the Pledgor an instrument in writing accepting such
appointment hereunder, whereupon such successor, without any further act, deed
or conveyance, shall become fully vested with all the estates, properties,
rights, powers, duties and obligations of its predecessors. Such predecessor
shall, nevertheless, on the written request of its successor or the Pledgor,
execute and deliver an instrument transferring to such successor all the
estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the Pledgor be required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties, rights, powers,
duties and obligations hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, at the request of
the temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Pledgor.
10. Miscellaneous.
(a) Amendments, Etc. Any amendment or modification of any provision of
this Security and Pledge Agreement shall be in writing with the express written
consent of the parties hereto. Any terms and conditions of this Security and
Pledge Agreement may be waived in writing at any time by the party or parties
entitled to the benefits of such terms and conditions. Any waiver shall be
effective only for the specific purpose for which given and for the specific
time period, if any, contemplated therein. A waiver of any of the terms and
conditions of this Security and Pledge Agreement on one occasion shall not
constitute a waiver of the other terms and
16
<PAGE> 21
conditions of this Security and Pledge Agreement, or of such terms and
conditions on any other occasion.
(b) Notices and Other Communications. All notices and other communications
shall be directed as follows (or to such other address for a particular party as
shall be specified by such party in a like notice given pursuant to this Section
10(b)):
Pledgor: The Turner Children Trust
c/o Cal Turner, Jr.
Dollar General Corporation
104 Woodmont Blvd.
Suite 500
Nashville, Tennessee 37205
Collateral Agent: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Betty Cocozza
Telephone: (212) 815-5366
Telecopier: (212) 815-7157
Trust: c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
Attention: Donald J. Puglisi
Telephone: 302-738-6680
Telecopier: 302-738-7210
Except as otherwise specifically provided herein, all notices and other
communications provided for hereunder shall be in writing and shall be deemed to
have been duly given if either (i) personally delivered (including delivery by
courier service or by Federal Express or any other nationally recognized
overnight delivery service for next day delivery) to the offices set forth
above, in which case they shall be deemed received on the first Business Day by
which delivery shall have been made to said offices, (ii) transmitted by any
standard form of telecommunication to the offices set forth above, in which case
they shall be deemed received on the first Business Day by which a standard
confirmation that such transmission occurred is received by the transmitting
party (unless such confirmation states that such transmission occurred after
5:00 P.M. on such first Business Day, in which case delivery shall be deemed to
have been received on the immediately succeeding Business Day), or (iii) sent by
certified mail, return receipt requested to the offices set forth above, in
which case they shall be deemed received when receipted for unless
acknowledgment of receipt is refused (in which case delivery shall be
17
<PAGE> 22
deemed to have been received on the first Business Day on which such
acknowledgment is refused).
(c) Waivers. No failure or delay by any party hereto in exercising any
rights, power or privilege hereunder shall operate as a waiver thereof.
(d) Non-Assignment. No party hereto shall have the right to assign their
rights or obligations hereunder to any other person without the other parties'
prior written consent.
(e) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS SECURITY AND PLEDGE AGREEMENT OR THE SUBJECT MATTER HEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. EACH PARTY HERETO HEREBY ACKNOWLEDGES THAT IT HAS BEEN
INFORMED THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH THE OTHER PARTIES HERETO HAVE RELIED, ARE RELYING AND WILL RELY IN
ENTERING INTO THIS SECURITY AND PLEDGE AGREEMENT AND ANY DOCUMENT RELATED
THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTIES HERETO TO THE
WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
(f) Governing Law. This Security and Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed wholly within such State; provided that as
to Collateral located in any jurisdiction other than the State of New York, the
Collateral Agent on behalf of the Trust shall have all of the rights to which a
secured party is entitled under the laws of such other jurisdiction. For the
purpose of any suit, action or proceeding arising out of or relating to this
Security and Pledge Agreement, the parties hereto hereby expressly and
irrevocably consent and submit to the non-exclusive jurisdiction of any United
States Federal or New York State court sitting in the Borough of Manhattan, City
and State of New York, and expressly and irrevocably waive, to the extent
permitted under applicable law, any immunity from the jurisdiction thereof and
any claim or defense in such suit, action or proceeding based on a claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled.
(g) Headings. The headings herein are for the convenience of reference
only and shall not affect the meaning or construction of any provision hereof.
(h) Entire Agreement. This Security and Pledge Agreement and the Forward
Purchase Contract contains the entire agreement between the parties relating to
the subject matter hereof and supersede all oral statements and prior writings
with respect thereto.
18
<PAGE> 23
(i) Counterparts. This Security and Pledge Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed for all purposes an original, but all such counterparts shall
constitute but one and the same instrument.
(j) Force Majeure. None of the Pledgor, the Collateral Agent or the Trust
shall be responsible for delays or failures in performance resulting from acts
beyond its control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, power failures, earthquakes or other
disasters.
(k) Binding Effect. This Security and Pledge Agreement shall be binding
upon the respective parties hereto and their respective successors and assigns.
All the covenants and agreements herein contained by or on behalf of the Pledgor
and the Collateral Agent shall be enforceable by and inure to the benefit of the
Trust and its successors and assigns.
(l) Separability. To the extent permitted by law, the unenforceability or
invalidity of any provision or provisions of this Security and Pledge Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid.
11. Termination of Security and Pledge Agreement. This Security and Pledge
Agreement and the rights hereby granted by the Pledgor in the Collateral shall
cease, terminate and be void upon fulfillment of all of the obligations of the
Pledgor under Articles II and VII of the Forward Purchase Contract, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.
12. Application of Bankruptcy Code. The parties hereto acknowledge and agree
that the Collateral Agent is a "financial institution" within the meaning of
Section 101(22) of the Bankruptcy Code and is acting hereunder as agent and
custodian for the Trust in connection with the Forward Purchase Contract and
that the Trust is a "customer" of the Collateral Agent within the meaning of
said Section 101(22). The parties hereto further acknowledge and agree that the
term "forward contract", as such term is used in the Forward Purchase Contract,
does not mean a "forward contract" as referred to in either Section
101(49)(B)(iii) of the Bankruptcy Code or Section 1259(d)(1) of the Internal
Revenue Code of 1986, as amended.
13. No Personal Liability of Trustees. By executing and delivering this Security
and Pledge Agreement, none of the Trustees assumes, and in no event shall incur,
any personal liability hereunder, other than as expressly provided by law. By
executing and delivering this Security and Pledge Agreement, none of the Turner
Trustees assumes, and in no event shall incur, any personal liability hereunder,
other than as expressly provided by law.
19
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Security and
Pledge Agreement to be executed by their respective officers or representatives
thereunto duly authorized as of the day and year first above written.
TURNER CHILDREN TRUST
By:
--------------------------------------
Cal Turner, Jr., as Co-Trustee
By:
--------------------------------------
James Stephen Turner, as Co-Trustee
THE BANK OF NEW YORK,
as Collateral Agent
By:
--------------------------------------
Name:
Title:
DOLLAR GENERAL STRYPES TRUST
By:
--------------------------------------
Donald J. Puglisi, as Managing Trustee
20
<PAGE> 25
SCHEDULE A
Events of Default
An "Event of Default" shall have occurred upon the occurrence at any time
of any of the following events:
1. Failure of the Collateral to equal the Collateral Amount if such
failure is not remedied on or before the third Business Day after written notice
of such failure is given to the Pledgor by the Collateral Agent as contemplated
by Section 10(b) of this Security and Pledge Agreement (a "Collateral Event of
Default");
2. Failure by the Pledgor to comply with or perform any agreement or
obligation (other than an obligation to make or cause to be made any Delivery
under Section 2(b) of this Security and Pledge Agreement) to be complied with or
performed by the Pledgor in accordance with this Security and Pledge Agreement
if such failure is not remedied on or before the fifteenth day after written
notice of such failure is given to the Pledgor by the Collateral Agent as
contemplated by Section 10(b) of this Security and Pledge Agreement;
3. The Pledgor (a) defaults in making any payment or delivery of
securities or cash due to be paid or delivered to the Purchaser under the
Forward Purchase Contract (other than Section 6.2 thereof) or (b) disaffirms,
disclaims, repudiates or rejects, in whole or in part, the Forward Purchase
Contract;
4. Any donor of the Turner Children Trust shall commence a voluntary case
or other proceeding seeking relief with respect to himself or his debts under
the Bankruptcy Code or any other bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
custodian or other similar official of his property or any substantial part of
his property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against him;
5. An involuntary case or other proceeding shall be commenced against any
donor of the Turner Children Trust seeking relief with respect to him or his
debts under the Bankruptcy Code or any other bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, custodian or other similar official of his property or any substantial
part of his property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or all or substantially all of
the assets of the Turner Children Trust shall become subject to the jurisdiction
of a bankruptcy court; or an order for relief or similar decree shall be entered
against any donor of the Turner Children Trust under the Bankruptcy Code or any
other bankruptcy, insolvency or other similar law now or hereafter in effect;
6. Any of the representations or warranties made by the Pledgor in this
Security and Pledge Agreement or the Forward Purchase Contract or in any
document delivered by or on
Sch A-1
<PAGE> 26
behalf of the Pledgor hereunder or thereunder shall be materially false on the
date as of which made;
7. The Collateral Agent fails, at any time, to have a valid first and
perfected and enforceable security interest in, and lien on, the Collateral, and
such failure is not remedied on or before the fifth calendar day after written
notice of such failure is given to the Pledgor by the Collateral Agent as
contemplated by Section 10(b) of this Security and Pledge Agreement;
8. A judgment, statutory or other Lien (other than a Lien created or
permitted by this Security and Pledge Agreement) is asserted or assessed against
any of the Collateral;
9. Paragraph B of Article V of the Restated Articles of Incorporation of
Dollar General, as amended as of August 22, 1994, setting forth the powers,
designations, preferences and relative, participating, optional and other
special rights of the Series A Preferred Stock and the qualifications,
limitations and restrictions of the Series A Preferred Stock, 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 Forward Purchase
Contract or the Security and Pledge Agreement;
10. The donors of the Turner Children Trust 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 Forward Purchase Contract or the
Security Pledge Agreement; or
11. 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, 1980, as
amended.
Sch A-2
<PAGE> 27
EXHIBIT A
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, Cal Turner, Jr. and James Stephen Turner, as Co-Trustees
of the Turner Children Trust (the "Pledgor"), hereby certify, pursuant to
Section 4(b) of the Security and Pledge Agreement, dated as of _______________,
1998, among the Pledgor, The Bank of New York, as Collateral Agent, and Dollar
General STRYPES Trust (the "Security and Pledge Agreement"; terms defined in the
Security and Pledge Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities, obligations or
other property to the Collateral Agent to be held by the Collateral Agent as
additional Collateral (the "Additional Collateral"):
[Specify Additional Collateral]
2. The Pledgor hereby represents and warrants to the Collateral Agent
that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by
the Pledgor of possession of, any items of Additional Collateral to
the Collateral Agent under the Security and Pledge Agreement, or the
subsequent sale or transfer of such items of Additional Collateral
by the Collateral Agent pursuant to the terms of the Security and
Pledge Agreement.
(b) Title to Collateral; Perfected Security Interest. The Pledgor
has all rights, title and interest in and to the Additional
Collateral, free of all Liens (other than the Lien created by the
Security and Pledge Agreement) and Transfer Restrictions. Upon
Delivery of the Additional Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Additional
Collateral subject to no other Lien. None of such Additional
Collateral is or shall be pledged by the Pledgor as collateral for
any other purpose.
This Certificate may be relied upon by the Trust as fully and to the same
extent as if this Certificate had been specifically addressed to the Trust.
Ex A-1
<PAGE> 28
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_______ day of _______________, 199__.
TURNER CHILDREN TRUST
By:
--------------------------------------
Cal Turner, Jr., as Co-Trustee
By:
--------------------------------------
James Stephen Turner, as Co-Trustee
Ex A-2
<PAGE> 1
Exhibit (k)(5)
FUND EXPENSE AGREEMENT
This FUND EXPENSE AGREEMENT dated as of this___ day of May, 1998, among
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Goldman, Sachs & Co. (collectively, the "Underwriters"), the Turner Children
Trust, a trust made by Cal Turner, Jr., James Stephen Turner, Laura Jo Dugas and
Katherine Turner Weaver as Donors under the Indenture of Trust dated January 21,
1980, as amended, and for which Cal Turner, Jr. and James Stephen Turner act as
Co-Trustees (such trust and the co-trustees thereof acting in their capacities
as such being hereinafter referred to as the "Contracting Stockholder"), Merrill
Lynch & Co., Inc. ("Merrill Lynch") and The Bank of New York (the "Service
Provider"), in its capacities as administrator, custodian, paying agent and
collateral agent for Dollar General STRYPES Trust (the "Trust").
WHEREAS, the Trust is a business trust created pursuant to the Business
Trust Act of the State of Delaware (Chapter 38, Title 12, of the Delaware Code,
12 Del.C. (Sections 3801 et seq.)), under and by virtue of an Amended and
Restated Trust Agreement dated as of May 1, 1998 (the "Trust Agreement"); and
WHEREAS, the Underwriters, the Contracting Stockholder and Merrill Lynch
desire to make provisions for the payment of certain initial and on-going
expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
1. DEFINITIONS. (a) Capitalized terms used herein and not defined herein
shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings:
"Additional Expense" means the Ordinary Expense the incurring of which
will require the Service Provider to provide the Additional Expense Notice
pursuant to Section 3(a) hereof and any Ordinary Expense incurred thereafter.
"Additional Expense Notice" means the notice required to be given by the
Service Provider to Merrill Lynch pursuant to Section 3(a) hereof.
"Closing Time" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Offering Expense Amount" means the amount set forth as such on Schedule I
hereto as the fees and expenses of the Trust incurred in connection with the
offering of the STRYPES.
"Ordinary Expense" of the Trust means any expense of the Trust other than
any expense of the Trust arising under Sections 2.2(g) and 6.6 of the
Administration Agreement, Section 15
<PAGE> 2
of the Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and
Section 7.06 of the Trust Agreement.
"Organizational Expense Amount" means the amount set forth as such on
Schedule II hereto as the fees and expenses of the Trust incurred in connection
with the organization of the Trust.
"Up-front Fee Amount" means the amount set forth as such on Schedule III
hereto payable as a one-time payment to the Service Provider in respect of its
collective services as Administrator, Custodian, Paying Agent and Collateral
Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such on Schedule
IV hereto payable as a one-time payment to the Service Provider in respect of
Ordinary Expenses anticipated to be incurred by the Administrator on behalf of
the Trust, pursuant to the Administration Agreement, during the term of the
Trust.
2. AGREEMENT TO PAY UP-FRONT FEES AND OFFERING, ORGANIZATIONAL AND
UP-FRONT EXPENSES. (a) The Underwriters severally agree to pay to the Service
Provider in Federal (same day) funds at the Closing Time the Offering Expense
Amount, the Organizational Expense Amount and the Up-Front Fee Amount.
(b) The Contracting Stockholder agrees to pay to the Service Provider in
Federal (same day) funds at the Closing Time the Up-front Expense Amount.
3. AGREEMENT TO PAY ADDITIONAL EXPENSES. (a) Prior to incurring any
Ordinary Expense on behalf of the Trust that, together with all prior Ordinary
Expenses incurred by the Administrator on behalf of the Trust and all Ordinary
Expenses set forth on Schedule IV hereto which are anticipated but have not yet
been incurred by the Administrator on behalf of the Trust, would cause the
aggregate amount of Ordinary Expenses of the Trust to exceed the Up-front
Expense Amount, the Administrator shall provide to Merrill Lynch and to the
Contracting Stockholder (i) prompt written notice to the effect that the
aggregate amount of Ordinary Expenses of the Trust will exceed the Up-front
Expense Amount, and (ii) an accounting, in such detail as shall be reasonably
acceptable to Merrill Lynch and the Contracting Stockholder, of all Ordinary
Expenses incurred on behalf of the Trust through the date of the Additional
Expense Notice.
(b) From and after the date of the Additional Expense Notice, the Service
Provider agrees that it will not, without the prior written consent of Merrill
Lynch and the Contracting Stockholder, incur on behalf of the Trust (i) any
single expense in excess of $2,500 or (ii) in any calendar quarter expenses
aggregating in excess of $5,000. Subject to the foregoing, the Service Provider
shall give notice to Merrill Lynch and the Contracting Stockholder in writing
promptly following the incurring of any Additional Expense. Such notice to
Merrill Lynch shall be accompanied by any demand, bill, invoice or other similar
document in respect of such Additional Expense.
(c) Subject to the first sentence of subsection (b) of this Section 3,
Merrill Lynch agrees to pay to the Service Provider from time to time the amount
of any Additional Expense.
2
<PAGE> 3
Payment by Merrill Lynch of any Additional Expense shall be made in New York
Clearing House (next-day) funds by the later of (i) five Business Days after the
receipt by Merrill Lynch from the Service Provider of notice of the incurring
thereof or (ii) two Business Days prior to the due date for the payment of such
Additional Expense.
(d) The Contracting Stockholder agrees to reimburse Merrill Lynch from
time to time for the amount of any Additional Expense paid by Merrill Lynch
pursuant to subsection (c) of this Section 3. Merrill Lynch shall be reimbursed
for any such Additional Expense in New York Clearing House (next-day) funds by
the later of (i) five Business Days after the receipt by the Contracting
Stockholder from the Service Provider of notice of the incurring thereof or (ii)
two Business Days prior to the due date for the payment of such Additional
Expense.
(e) Merrill Lynch or the Contracting Stockholder may contest in good faith
the reasonableness of any Additional Expense and the parties shall attempt to
resolve amicably the disagreement; provided that if the parties cannot resolve
the dispute by the due date hereunder with respect to such Additional Expense,
subject to the first sentence of subsection (b) of this Section 3, Merrill Lynch
shall pay the amount of such Additional Expense, and the Contracting Stockholder
shall reimburse Merrill Lynch for the amount so paid, subject to later
adjustment and credit if such dispute is resolved in favor of Merrill Lynch or
the Contracting Stockholder, as the case may be.
4. CONDITION TO PAYMENT. The obligations of the Underwriters under Section
2(a) hereof, the obligations of the Contracting Stockholder under Sections 2(b)
and 3 hereof and the obligations of Merrill Lynch under Section 3 hereof shall
be subject to the condition that the Structured Yield Product Exchangeable for
StockSM (the "STRYPES") issued by the Trust shall have been issued and paid for
at the Closing Time.
5. TRUST DISSOLUTION; REFUND OF UNUSED EXPENSE FUNDS. If at the
dissolution of the Trust in accordance with Section 8.3 of the Trust Agreement
the aggregate amount of Ordinary Expenses incurred by the Service Provider on
behalf of the Trust through the date of dissolution shall be less than the
Up-front Expense Amount, the Service Provider shall, promptly following the date
of such dissolution, pay to the Contracting Stockholder in New York Clearing
House (next-day) funds the amount of such excess.
6. TERMINATION OF ADMINISTRATION AGREEMENT. In the event of the
termination of the Administration Agreement in accordance with Section 4.1
thereof, (i) the Service Provider shall promptly pay to the Underwriters in New
York Clearing House (next-day) funds the portion of the Service Provider's
Up-front Fee Amount ratable for the period from the date of the termination of
the Administration Agreement to the Exchange Date and (ii) the Service Provider
shall promptly pay to the Contracting Stockholder in New York Clearing House
(next-day) Funds any unexpended portion of the Up-front Expense Amount.
7. STATEMENTS AND REPORTS. The Service Provider shall collect and safekeep
all demands, bills, invoices or other written communications received from third
parties in connection with any Ordinary Expenses and Additional Expenses and
shall prepare and
- ----------
(SM) Service mark of Merrill Lynch & Co., Inc.
3
<PAGE> 4
maintain (or cause to be prepared and maintained) adequate books and records
showing all receipts and disbursements of funds in connection therewith. Merrill
Lynch and the Contracting Stockholder shall have the right to inspect and to
copy, at its expense, all such documents, books and records at all reasonable
times and from time to time during the term of this Agreement.
8. TERM OF CONTRACT. This Agreement shall continue in effect until the
dissolution of the Trust in accordance with Section 8.03 of the Trust Agreement.
9. NO ASSIGNMENT. No party to this Agreement may assign its rights or
delegate its duties hereunder without the prior written consent of the other
parties.
10. AMENDMENTS. The Service Provider agrees that it will not consent to
any amendment of the Administration Agreement, the Custodian Agreement, the
Paying Agent Agreement or the Collateral Agreement without the prior written
consent of Merrill Lynch and the Contracting Stockholder.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
12. NOTICES. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be directed as follows
(or to such other address for a particular party as shall be specified by such
party in a like notice given pursuant to this Section 12):
The Service Provider: The Bank of New York
101 Barclay Street
New York, New York 10286
Telecopier: (212) 815-7157
Attention: Betty Cocozza
Merrill Lynch: Merrill Lynch & Co., Inc.
North Tower
New York, New York 10281-1329
Telecopier: (212) 449-3150
Attention: Douglas W. Squires
The Contracting Stockholder: Turner Children Trust
c/o Dollar General Corporation
104 Woodmont Blvd.
Suite 500
Nashville, Tennessee 37205
Attention: Cal Turner, Jr.
The Underwriters: c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4
<PAGE> 5
North Tower
World Financial Center
New York, New York 10281
Telecopier: (212) _____________
Attention: Syndicate Operations
A copy of any communication to Merrill Lynch shall be furnished to Merrill Lynch
& Co., Inc., World Financial Center, North Tower, New York, New York 10281-1334,
telecopier (212) 449-9813, Attention: Associate General Counsel, provided that
the failure to furnish such copy shall not affect the effectiveness of any such
communication. Except as otherwise specifically provided herein, all notices and
other communications provided for hereunder shall be in writing and shall be
deemed to have been duly given if either (i) personally delivered (including
delivery by courier service or by Federal Express or any other nationally
recognized overnight delivery service for next day delivery) to the offices set
forth above, in which case they shall be deemed received on the first Business
Day by which delivery shall have been made to said offices, (ii) transmitted by
any standard form of telecommunication to the offices set forth above, in which
case they shall be deemed received on the first Business Day by which a standard
confirmation that such transmission occurred is received by the transmitting
party (unless such confirmation states that such transmission occurred after
5:00 P.M. on such first Business Day, in which case delivery shall be deemed to
have been received on the immediately succeeding Business Day), or (iii) sent by
certified mail, return receipt requested to the offices set forth above, in
which case they shall be deemed received when receipted for unless
acknowledgment of receipt is refused (in which case delivery shall be deemed to
have been received on the first Business Day on which such acknowledgment is
refused).
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
15. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized representatives the date first above written.
TURNER CHILDREN TRUST
By:
-----------------------------------
Cal Turner, Jr., as Co-Trustee
By:
-----------------------------------
James Stephen Turner, as Co-Trustee
MERRILL LYNCH & CO., INC.
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-----------------------------------
Name:
Title:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-----------------------------------
Authorized Signatory
6
<PAGE> 7
7
<PAGE> 8
SCHEDULE I
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
NYSE Listing Fees $
Printing (other than STRYPES Certificates)
Legal Fees
Blue Sky Fees
Initial Legal Review
Miscellaneous
-----------
Total $
</TABLE>
8
<PAGE> 9
SCHEDULE II
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
STRYPES Certificates $
Fees and Expenses of Special Delaware
Counsel to the Trust
---------
Total $
</TABLE>
9
<PAGE> 10
SCHEDULE III
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
Initial Acceptance Fee $
Administrative Agent Fee
-----------
Total $
</TABLE>
10
<PAGE> 11
SCHEDULE IV
<TABLE>
<CAPTION>
Item Amount
- ---- ------
<S> <C>
Ongoing NYSE Listing Fees $
Administrative Agent's Accountants
Initial and Ongoing Auditor of the Trust
Mailing of Reports to Shareholders
Trustees Fees
Preparation and Filing of Annual Tax
Returns of the Trust
Ongoing Legal Fees of Trust Counsel
Out of Pocket/Miscellaneous
-----------
Total $
</TABLE>
11
<PAGE> 1
Exhibit (k)(6)
FUND INDEMNITY AGREEMENT
This FUND INDEMNITY AGREEMENT, dated this ___ day of May, 1998, among the
Turner Children Trust, a trust made by Cal Turner, Jr., James Stephen Turner,
Laura Jo Dugas and Katherine Turner Weaver as Donors under the Indenture of
Trust dated January 21, 1980, as amended, and for which Cal Turner, Jr. and
James Stephen Turner act as Co-Trustees (such trust and the co-trustees thereof
acting in their capacities as such being hereinafter referred to as the
"Contracting Stockholder"), Merrill Lynch & Co., Inc. ("Merrill Lynch") and
Dollar General STRYPES Trust (such trust and the trustees thereof acting in
their capacities as such being referred to herein as the "Trust").
WHEREAS, the Trust is a business trust created pursuant to the Business
Trust Act of the State of Delaware (Chapter 38, Title 12, of the Delaware Code,
12 Del.C. (Sections 3801 et seq.)), under and by virtue of an Amended and
Restated Trust Agreement dated as of May 1, 1998 (the "Trust Agreement"); and
WHEREAS, the Contracting Stockholder and Merrill Lynch desire to make
provision for the payment of certain indemnification expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not defined herein shall
have the meanings ascribed thereto in the Trust Agreement.
2. AGREEMENT TO PAY EXPENSES. Merrill Lynch agrees to pay to the Trust,
and hold the Trust harmless from, any expenses of the Trust arising under
Sections 2.2(g) and 6.6 of the Administration Agreement, Section 15 of the
Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and Section
7.06 of the Trust Agreement (collectively, "Indemnification Expenses").
Notwithstanding the foregoing, it is understood that (i) Merrill Lynch shall
not, in respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to any
local counsel) and (ii) Merrill Lynch shall not be liable for any settlement of
any proceeding effected without the written consent of Merrill Lynch and the
Contracting Stockholder, but if settled with such consent or if there be a final
judgment for the Claimant (as defined herein), Merrill Lynch agrees to indemnify
the Trustees and the Trust from and against any loss or liability by reason of
such settlement or judgment. Any payment hereunder by Merrill Lynch shall be
made in New York Clearing House (next-day) funds no later than five Business
Days after the receipt by Merrill Lynch, pursuant to Section 4 hereof, of
written notice of any claim for Indemnification Expenses.
3. AGREEMENT TO REIMBURSE FOR PAYMENTS MADE. The Contracting Stockholder
agrees to reimburse Merrill Lynch from time to time for the amount of any
Indemnification Expenses paid by Merrill Lynch pursuant to Section 2 hereof.
Merrill Lynch
<PAGE> 2
shall be reimbursed for any such Indemnification Expenses in New York Clearing
House (next-day) funds no later than five Business Days after the receipt by the
Contracting Stockholder, pursuant to Section 4 hereof, of written notice of any
claim for Indemnification Expenses.
4. NOTICE OF RECEIPT OF CLAIM. The Trust shall give notice to, or cause
notice to be given to, Merrill Lynch and the Contracting Stockholder in writing
of any claim for Indemnification Expenses or any threatened claim for
Indemnification Expenses immediately upon the Trust acquiring knowledge thereof.
Such written notice to Merrill Lynch shall be accompanied by any demand, bill,
invoice or other communication received from any third party claimant (a
"Claimant") in respect of such Indemnification Expense.
5. STATEMENTS AND REPORTS. The Trust shall collect and keep safe all
demands, bills, invoices or other written communications received from third
parties in connection with any claim for Indemnification Expenses and shall
prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Merrill Lynch and the
Contracting Stockholder shall have the right to inspect and to copy, at its
expense, all such documents, books and records at all reasonable times and from
time to time during the term of this Agreement.
6. TERM OF CONTRACT. This Agreement shall continue in effect until the
dissolution of the Trust in accordance with Section 8.03 of the Trust Agreement.
7. NO ASSIGNMENT. No party to this Agreement may assign its rights or
delegate its duties hereunder without the prior written consent of the other
parties, except that the Trust may delegate any and all duties hereunder to the
Administrator to the extent permitted by law.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all parties to this Agreement.
9. NOTICES. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be directed as follows
(or to such other address for a particular party as shall be specified by such
party in a like notice given pursuant to this Section 9):
The Trust: Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telecopier: (302) 738-7210
Attention: Donald J. Puglisi
Merrill Lynch: Merrill Lynch & Co., Inc.
North Tower
New York, New York 10281-1329
Telecopier: (212) 449-3150
Attention: Douglas W. Squires
2
<PAGE> 3
The Contracting Stockholder: Turner Children Trust
c/o Dollar General Corporation
104 Woodmont Blvd.
Suite 500
Nashville, Tennessee 37205
Attention: Cal Turner, Jr.
A copy of any communication to Merrill Lynch shall be furnished to Merrill Lynch
& Co., Inc., World Financial Center, North Tower, New York, New York 10281-1334,
telecopier (212) 449-9813, Attention: Associate General Counsel, provided that
the failure to furnish such copy shall not affect the effectiveness of any such
communication. Except as otherwise specifically provided herein, all notices and
other communications provided for hereunder shall be in writing and shall be
deemed to have been duly given if either (i) personally delivered (including
delivery by courier service or by Federal Express or any other nationally
recognized overnight delivery service for next day delivery) to the offices set
forth above, in which case they shall be deemed received on the first Business
Day by which delivery shall have been made to said offices, (ii) transmitted by
any standard form of telecommunication to the offices set forth above, in which
case they shall be deemed received on the first Business Day by which a standard
confirmation that such transmission occurred is received by the transmitting
party (unless such confirmation states that such transmission occurred after
5:00 P.M. on such first Business Day, in which case delivery shall be deemed to
have been received on the immediately succeeding Business Day), or (iii) sent by
certified mail, return receipt requested to the offices set forth above, in
which case they shall be deemed received when receipted for unless
acknowledgment of receipt is refused (in which case delivery shall be deemed to
have been received on the first Business Day on which such acknowledgment is
refused).
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
12. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized representatives the date first above written.
MERRILL LYNCH & CO., INC.
By:
-----------------------------
Name:
Title:
DOLLAR GENERAL STRYPES TRUST
By:
-----------------------------
Donald J. Puglisi, as
Managing Trustee
TURNER CHILDREN TRUST
By:
-----------------------------
Cal Turner, Jr., as Co-Trustee
By:
-----------------------------
James Stephen Turner, as
Co-Trustee
4
<PAGE> 1
EXHIBIT 1
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
May 20, 1998
Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as counsel for Dollar General STRYPES Trust, a Delaware
business trust (the "Trust"), in connection with the registration of STRYPES,
par value $0.10 per STRYPES (the "STRYPES"), under the Securities Act of 1933,
as amended, pursuant to a registration statement on Form N-2 to be filed with
the Securities and Exchange Commission on the date hereof (the "Registration
Statement").
As counsel for the Trust, we are familiar with the proceedings taken by
the Trust in connection with the authorization, issuance and sale of the
STRYPES. In addition, we have examined and are familiar with the Certificate of
Trust of the Trust, the Amended and Restated Trust Agreement of the Trust and
such other documents as we have deemed relevant to the matters referred to in
this opinion.
Based upon the foregoing, we are of the opinion that the STRYPES, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less that the par value thereof, will be legally issued,
fully paid and non-assessable STRYPES of the Trust.
In rendering this opinion, we have relied as to matters of Delaware law
upon an opinion of Richards, Layton & Finger, P.A. rendered to the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus
constituting a part thereof.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE> 2
[Letterhead of Richards, Layton & Finger, P.A.]
May 20, 1998
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Re: Dollar General STRYPES Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for Dollar General STRYPES
Trust, a Delaware business trust (the "Trust"), in connection with the matters
set forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of
the following:
(a) The Certificate of Trust of the Trust, dated as of April 14, 1998
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on April 15, 1998;
(b) The Trust Agreement of the Trust, dated as of April 14, 1998,
between Samir A. Gandhi, as depositor, and Donald J. Puglisi, William R. Latham
III and James B. O'Neill, as trustees;
(c) The registration statement (the "Initial Registration Statement")
on Form N-2 (Registration No. 333-50783), filed by the Trust with the Securities
and Exchange
<PAGE> 3
Brown & Wood LLP
May 20, 1998
Page 2
Commission (the "SEC") on April 20, 1998, as amended by Pre-Effective Amendment
No. 1 to the Initial Registration Statement, as filed by the Trust with the SEC
on May 12, 1998 ("Amendment No. 1"), and Pre-Effective Amendment No. 2 to the
Initial Registration Statement, as proposed to be filed by the Trust with the
SEC on or about May 19, 1998 ("Amendment No. 2"), including a related
preliminary prospectus (the "Prospectus"), relating to the Structured Yield
Product Exchangeable for Stock representing a proportionate share of beneficial
interests in the Trust (the "STRYPES") (the Initial Registration Statement, as
amended by Amendment No. 1 and Amendment No. 2, is hereinafter referred to as
the "Registration Statement");
(d) A form of Amended and Restated Trust Agreement of the Trust (the
"Trust Agreement"), to be entered into by ML IBK Positions, Inc., as sponsor,
Donald J. Puglisi, James B. O'Neill and William R. Latham III, as trustees, and
the Holders (as defined therein), including Exhibit A attached thereto; and
(e) A Certificate of Good Standing for the Trust, dated May 19, 1998,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to
be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed that
(i) all signatures on documents examined by us are genuine, (ii) all documents
submitted to us as originals are authentic, and (iii) all documents submitted
to us as copies conform with the original copies of those documents.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Trust Agreement and the
Certificate are in full force and effect and have not been amended and no
amendment of the Trust Agreement or the Certificate is pending or has been
proposed, (ii) except to the extent provided in paragraph 1 below, the due
creation, organization or formation, as the case may be, and valid existence in
good standing of each party to the
<PAGE> 4
Brown & Wood LI.P
May 20, 1998
Page 3
documents examined by us under the laws of the jurisdiction governing its
creation, organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties to the documents examined by us has the power and authority to execute
and deliver, and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a STRYPES is to be
issued by the Trust (collectively, the "STRYPES Holders") of a certificate
(substantially in the form of Exhibit A to the Trust Agreement) evidencing such
STRYPES and the payment of the STRYPES acquired by it, in accordance with the
Trust Agreement and the Registration Statement, and (vii) that the STRYPES are
issued and sold to the STRYPES Holders in accordance with the Trust Agreement
and the Registration Statement. We have not participated in the preparation of
the Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
Sec. 3801, et seq.
2. When issued and sold, the STRYPES will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The STRYPES Holders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We note that the STRYPES Holders may be obligated to
make payments as set forth in the Trust Agreement.
We consent to your reliance as to matters of Delaware law upon this
opinion in connection with an opinion to be rendered by you on the date hereof
relating to the filing of the Registration Statement. In addition, we hereby
consent to the use of our name under the
<PAGE> 5
Brown & Wood LLP
May 20, 1998
Page 4
heading "Legal Matters" in the Prospectus. In giving the foregoing consents, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the SEC thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
MIL/DJM/dts
<PAGE> 1
EXHIBIT (N)(1)
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
May 20, 1998
Dollar General STRYPES Trust
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
Re: Registration Statement on Form N-2
Registration Nos. 333-50783 and 811-08755
-----------------------------------------
Ladies and Gentlemen:
We have acted as tax counsel to the Dollar General STRYPES Trust (the
"Trust") in connection with the registration of its Structured Yield Product
Exchangeable for Stock (the "STRYPES"). In connection therewith, we have
prepared the discussion set forth under the caption "Certain United States
Federal Income Tax Considerations" (the "Discussion") in the Prospectus
(the "Prospectus") that is part of Amendment No 2. to the Registration Statement
on Form N-2 (Registration Nos. 333-50783 and 811-08755) filed by the Trust with
the Securities and Exchange Commission on May 20, 1998.
We hereby confirm our opinion as set forth in the Discussion. In rendering
our opinion, we have examined (i) the Amended and Restated Trust Agrement
constituting Dollar General STRYPES Trust, (ii) the Contract and (iii) the
Security and Pledge Agreement, each in the form filed as an exhibit to the
Registration Statement, and have assumed that the obligations contemplated
thereunder will be performed in accordance with their terms.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Certain
United States Federal Income Tax Considerations" in the Prospectus. The
issuance of such consent does not concede that we are an "expert" for the
purposes of the Securities Act of 1933.
Very truly yours,
/s/ Brown & Wood LLP
- ----------------------------------------------
(SM) Service mark of Merrill Lynch & Co., Inc.
<PAGE> 1
EXHIBIT (N)(2)
INDEPENDENT AUDITOR'S CONSENT
We consent to the inclusion in this Pre-Effective Amendment No. 2 to
Registration Statement Nos. 333-50783 and 811-08755 of Dollar General STRYPES
Trust (the "Trust") on Form N-2 of our reported dated May 18, 1998 relating to
the audit of the statement of assets, liabilities and capital of the Trust and
to the reference to us under the heading "Experts" in the Prospectus, which is
a part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 18, 1998
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Exhibit (p)
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT dated as of this 18th day of May, 1998, by and
between Dollar General STRYPES Trust, a business trust created pursuant to the
Business Trust Act of the State of Delaware (Chapter 38, Title 12, of the
Delaware Code, 12 Del. C. (Sections 3801 et seq.)) (such trust and the trustees
thereof acting in their capacities as such being referred to herein as the
"Trust"), and ML IBK Positions, Inc. (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE STRYPES
1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and conditions
of this Agreement, the Trust agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Trust, one Structured Yield Product
Exchangeable for Stock(SM), representing an undivided beneficial interest
in the Trust (the "STRYPES"), at a purchase price of $100.
1.2 CLOSING. The purchase and sale of the STRYPES shall take place
at the offices of Brown & Wood LLP, One World Trade Center, New York, New
York 10048 at 9:00 a.m., New York City time, on May 18, 1998, or at such
other time ("Closing Date") and place as the Trust and the Purchaser
mutually agree upon. At or after the Closing, the Trust shall deliver to
the Purchaser a certificate representing the STRYPES purchased by the
Purchaser, registered in the name of the Purchaser or its nominee. Payment
for the STRYPES shall be made on the Closing Date by the Purchaser by bank
wire transfer or by delivery of a certified or official bank check, in
either case in immediately available funds, of an amount equal to the
purchase price of the STRYPES purchased by the Purchaser.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
Purchaser hereby represents and warrants to, and covenants for the benefit of,
the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made by the
Trust with the Purchaser in reliance upon the Purchaser's representation
to the Trust, which by the Purchaser's execution of this Agreement the
Purchaser hereby confirms, that the STRYPES are being acquired for
investment for the Purchaser's own account, and not as a nominee or agent
and not with a view to the resale or distribution by the Purchaser of any
of the STRYPES, and that the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the
STRYPES, in either case in violation of any securities registration
requirement under applicable law, but subject nevertheless, to any
requirement of law that the disposition of its property shall at all times
be within its control. By executing this Agreement, the Purchaser further
represents that the Purchaser does not have any contract, undertaking,
agreement or
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arrangement with any person to sell, transfer or grant participation to
such person or to any third person, with respect to any of the STRYPES.
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it can
bear the economic risk of the investment for an indefinite period of time
and has such knowledge and experience in financial and business matters
(and particularly in the business in which the Trust operates) as to be
capable of evaluating the merits and risks of the investment in the
STRYPES. The Purchaser is an "accredited investor" as defined in Rule
501(a) of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that the
STRYPES are characterized as "restricted securities" under the United
States securities laws inasmuch as they are being acquired from the Trust
in a transaction not involving a public offering and that under such laws
and applicable regulations such STRYPES may be resold without registration
under the Securities Act only in certain circumstances. In this
connection, the Purchaser represents that it understands the resale
limitations imposed by the Securities Act and is generally familiar with
the existing resale limitations imposed by Rule 144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further agrees
not to make any disposition directly or indirectly of all or any portion
of the STRYPES unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement;
or
(b) The Purchaser shall have furnished the Trust with an
opinion of counsel, reasonably satisfactory to the Trust, that such
disposition will not require registration of such STRYPES under the
Securities Act.
Notwithstanding the provisions of subsections (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser to any affiliate of the Purchaser, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate evidencing the
STRYPES may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act or
an opinion of counsel reasonably satisfactory to the Trustees of
Dollar General STRYPES Trust that such registration is not
required."
2
<PAGE> 3
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trust agree that the legend contained in the
paragraph (a) above shall be removed at a holder's request when it is no
longer necessary to ensure compliance with federal securities laws.
2.6 SPLIT OF STRYPES. The Purchaser consents to the split of the
Purchaser's STRYPES. Subsequent to the determination of the public
offering price per STRYPES and related underwriting discount for the
STRYPES to be sold to the Underwriters (as defined in the Amended and
Restated Trust Agreement of the Trust to be dated as of May 1, 1998, by ML
IBK Positions, Inc., as sponsor, and the trustees named therein) but prior
to the sale of the STRYPES to the Underwriters, the STRYPES purchased
hereby shall be split into a greater number of STRYPES so that immediately
following such split the value of each STRYPES held by the Purchaser will
equal the aforesaid public offering price per STRYPES.
2.7 ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or
modification of this Agreement shall be valid unless the amendment or
modification is in writing and is signed by all parties to this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
2.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DOLLAR GENERAL STRYPES TRUST
By /s/ Donald J. Puglisi
-----------------------------------------------
Donald J. Puglisi, as Managing Trustee
ML IBK POSITIONS, INC.
By /s/ Joseph S. Valenti
-----------------------------------------------
Joseph S. Valenti
Vice President
4
<PAGE> 1
[ARTICLE] 6
[CIK] 1059807
[NAME] DOLLAR GENERAL STRYPES TRUST
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] MAY-18-1998
[PERIOD-END] MAY-18-1998
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 100
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 100
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
