As filed with the Securities and Exchange Commission on August 18, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 5331
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
54-1387365
(I.R.S. Employer
Identification No.
500 VOLVO PARKWAY, CHESAPEAKE, VIRGINIA 23320, (757) 321-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
FREDERICK C. COBLE, SENIOR VICE PRESIDENT - CHIEF FINANCIAL OFFICER
500 VOLVO PARKWAY, CHESAPEAKE, VIRGINIA 23320, (757) 321-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
WILLIAM A. OLD, JR., ESQ.
HOFHEIMER NUSBAUM, P.C.
999 WATERSIDE DRIVE, SUITE 1700
NORFOLK, VIRGINIA 23510
TELEPHONE: (757) 629-0613
FACSIMILE: (757) 629-0660
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
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. [ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed Proposed
Number of Shares Maximum Maximum
Title of Shares to Be Offering Price Aggregate Amount of
to Be Registered Registered per Share(1) Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock...... 501,600 $38.22 $19,171,152 $5,655.49
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<FN>
(1) Estimated pursuant to paragraph (c) of Rule 457 solely for the purpose
of calculating the registration fee, based upon the average of the
reported high and low sales prices for a share of Common Stock on
August 16, 1999, as reported on the Nasdaq National Market.
</FN>
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</TABLE>
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 thereunder become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the 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>
SUBJECT TO COMPLETION, DATED AUGUST 18, 1999
Preliminary Prospectus
The information contained in this preliminary prospectus is not
complete and may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state
jurisdiction where the offer or sale is not permitted.
501,600 Shares
Dollar Tree Stores, Inc.
Common Stock
This prospectus relates to the public offering, which is not being
underwritten, of 501,600 shares of our common stock which is held by some of our
current shareholders.
The prices at which such shareholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the
symbol "DLTR" On August 16, 1999, the average of the high and low price for the
common stock was $38.22.
Investing in the common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is August __, 1999.
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CERTAIN INTRODUCTORY MATTERS
References to "we," "our" and "the company" generally refer to Dollar
Tree Stores, Inc. and its direct and indirect subsidiaries on a consolidated
basis. References to "Dollar Tree" and "98 CENTS Clearance Centers" generally
refer to the distinct store types.
Dollar Tree(R), 98 CENTS Clearance Centers(R), Only $One(R) and their
respective logos are registered trademarks of the Company. Other trademarks
referenced herein are trademarks of their respective legal owners.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by Dollar
Tree, any selling shareholder or by any other person. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We have made "forward-looking statements" in this document (and certain
documents we refer to in this document) as that term is used in the Private
Securities Litigation Reform Act of 1995. Such statements are based on the
beliefs and assumptions of our management, and on information currently
available to our management. The assumptions, beliefs and current information
could be mistaken.
Forward-looking statements include the information concerning our
operations, economic performance and financial condition and also include any
statements preceded by, followed by or including words such as "believe,"
"anticipate," "expect," "intend," "plan" or "estimate." Any statements
concerning the anticipated performance of the Company in future periods could be
inaccurate and are subject to risks relating to, among other things:
o possible difficulties in meeting our expansion goals, including
anticipated store openings, growth in same-store sales, and
development of large-format stores;
o dependence on imports and vulnerability to import tariffs and
restrictions, particularly non-renewal of normal trade relations,
the possible imposition of punitive duties, and factors relating
to China;
o adverse economic factors and increases in our costs, including
shipping rate increases, possible increases in the minimum wage,
and general inflation;
o potentially limited availability of low-cost, high-quality
merchandise;
o the capacity and the performance of our distribution system and
its ability to cope with our expansion plans as well as
unforeseen difficulties;
o increasing competition in the discount retail market; and
o the potential failure of the computer systems that support our
business (including systems supporting our vendors and suppliers
both in the United States and abroad) to recognize the year
2000.
For additional discussion of the factors that could affect our actual
results, performance or actions, see "Risk Factors" in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" in the documents incorporated by reference into this
prospectus.
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THE COMPANY
Dollar Tree's principal executive offices are located at 500 Volvo
Parkway, Chesapeake, Virginia 23320. Dollar Tree's telephone number is (757)
321-5000.
RISK FACTORS
An investment in our company involves a high degree of risk. You should
carefully consider the specific risk factors listed below, together with the
cautionary statements on the inside front cover of this prospectus and the other
information included or incorporated in this prospectus before purchasing the
common stock.
We may not be able to meet our aggressive expansion goals
Our continued growth will be jeopardized if we cannot continue to
aggressively and steadily expand the number of our stores and related support
systems in a profitable and efficient manner. We expect to add 230 to 235 stores
during 1999, bringing our total number of stores to 1,386 to 1,391. Management
believes that the Company is well positioned to operate our new stores and
expand our support systems profitably and efficiently. However, we may not
achieve our targets for opening new stores in this or future years and we may
not anticipate all the changing demands that our expanding operations will
impose on our systems and personnel. Our failure to efficiently and profitably
execute our expansion plans could have a material adverse effect on our business
and results of operations.
We expect the primary source of our future revenue growth to be new
store openings. As a fixed $1.00 price point retailer, we cannot increase the
sales price of our merchandise to support revenue growth. Moreover, we believe
that future increases in sales at our existing stores, if any, will be lower
than those experienced in the past, increasing the importance of new store
openings to our growth.
Managing our future growth has become more complex because we are now
operating "large format" stores to supplement our traditional Dollar Tree
stores. The new format includes stores ranging from 7,000 to 14,000 square feet
in size and generally sells more consumable merchandise. Through recent mergers
we have also added sixty-six "98 Cents Clearance Center" stores on the West
Coast and twenty-four "Only $One" stores in New York -- substantially all of
which are large format stores.
In expanding our store base and deploying the larger format, we are
likely to encounter numerous challenges. Some of these challenges may be
difficult to manage in the context of our aggressive growth plans. Still others
may be impossible to manage as they are entirely controlled by outside economic
factors. Our success depends on whether we can, among other things:
o supply an ever increasing number of stores with the proper mix
and amount of merchandise -- a task made even more difficult now
that we operate stores from coast to coast and use two store
formats,
o hire, train and retain an increasing number of qualified
employees -- including associates, managers, and executives -- at
affordable rates of compensation,
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o obtain an increasing quantity of high quality, low cost
merchandise,
o identify, secure leases for, build-out, and open suitable store
sites on a timely basis and on favorable terms,
o successfully locate and operate stores in new geographic markets,
where we have no or only limited store operations, and in our
established geographic markets, where some of our new stores may
compete with our existing stores for customers, and
o expand internal store support systems, such as new distribution
centers, in an efficient, timely and economical manner.
Adverse economic conditions such as inflation could affect our business
Our future success depends on our ability to manage the effect of
future changes in economic conditions both in the United States -- where we sell
merchandise -- and in Asia -- where we buy a large portion of our merchandise.
Inflation, particularly in the areas of operating, labor and merchandise costs,
also affects our business significantly. For example, increases in hourly
minimum wage rate and trans-Pacific shipping rates in recent years have
increased our payroll and shipping costs.
The federally mandated minimum wage increased by $0.50 per hour on
October 1, 1996 and by an additional $0.40 per hour on September 1, 1997. These
changes increased payroll costs by approximately $5 million in 1998. Proposals
now before the U.S. Congress call for increasing the federal minimum wage by an
additional $1.00 an hour over two or three years. We expect that this or any
comparable increase in the minimum wage, if eventually passed into law, would
significantly increase our payroll costs.
In May 1998, a trans-Pacific ocean-shipping cartel imposed a freight
rate increase on U.S. imports from Asia. Effective May 1, 1999, the cartel
imposed a further rate increase. We believe the new rates will increase our
shipping costs by approximately $4 million in 1999.
As a fixed price point retailer, we cannot raise the price of our
merchandise to offset cost increases. Instead, we attempt to offset a cost
increase in one area by finding cost savings or operating efficiencies in
another area. We cannot assure you that we will be able to realize future cost
savings or operating efficiencies that will offset all future cost increases.
Our failure to realize offsetting cost savings or operating efficiencies could
have a material adverse effect on our business and results of operations.
We rely heavily on imported merchandise, especially from China
Our future success also depends on whether we can import an increasing
quantity of quality merchandise at favorable costs. We rely heavily on foreign
direct and indirect imports, which account for a majority of our inventory.
China is the source of a substantial majority of our direct imports and, we
believe, it is also the largest source of our indirect imports. We primarily
import goods from Hong Kong and Taiwan (through which our Chinese imports flow),
Thailand, Mexico, Indonesia, Italy and India.
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Imported goods are less expensive than domestic goods and have
contributed significantly to our profit margins. However, imported goods present
significant risks including:
o disruptions in the sourcing and supply of foreign goods,
o increases in the cost of purchasing or shipping foreign
merchandise, and
o inconsistent compliance by certain foreign manufacturers with
U.S. laws governing the design, manufacture, packaging and
labeling of products.
These risks may arise because of a variety of political and economic factors,
including:
o loss of normal trade relations, formerly known as "most favored
nation" trading status, import duties, import quotas, and other
trade sanctions,
o a lack of preparedness in China and other Asian countries for the
Year 2000 problem, which could result in an unstable supply of
electricity, water, and other utilities and services provided by
foreign governments,
o material shortages, work stoppages and strikes,
o economic crises, such as those experienced by the countries of
Southeast Asia beginning in 1998,
o international disputes, such as the tensions between China and
Taiwan and those which followed NATO's bombing of China's embassy
in Yugoslavia, and
o internal political unrest.
Chinese goods imported into the United States have been subject to
favorable duties because China is granted normal trade relations. The American
government reviews China's trade status on an annual basis and renewed normal
trade relations with China on July 27, 1999 for another year. However, there is
significant political opposition to the extension of normal trade relations with
China because of a variety of issues, including China's trade surplus with the
United States, its failure to open its markets adequately to U.S. businesses,
its human rights record, its alleged interference in U.S. national elections,
and its acquisition and sale of weapons and sensitive U.S. military technology.
U.S. government officials testified in June 1999 that ending normal trade
relations with China would raise tariffs on Chinese products from their current
trade-weighted average of 4% to an estimated 44%, and, depending on the extent
of the tariffs and the nature of the goods affected, such an increase could
impose significantly higher purchasing costs on our company.
In addition, the United States could impose trade sanctions on Chinese
goods. In 1995, the United States threatened to impose punitive trade tariffs on
certain categories of Chinese goods in response to China's failure to protect
the intellectual property of American businesses.
In the event the potential risks described above actually arise, we
believe we could find alternative sources of supply to our imports that become
unavailable or too costly. However, the transition to alternative sources of
supply may not occur in time to meet our demands and products from alternative
sources may be
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of lesser quality and more expensive than those we currently import, which could
have a material adverse effect on our business and results of operations.
We may have difficulty obtaining enough quality, low-cost merchandise
Our future success depends upon our ability to select and purchase
quality merchandise at attractive prices to maintain a balance of regularly
available core products and a changing mix of fresh merchandise at the $1.00
price point. We have historically been able to locate and purchase quality
merchandise, but such merchandise may not be available in the future, or it may
not be available in quantities necessary to accommodate the expansion of our
company. We do not have continuing contracts for the purchase of merchandise and
must continuously seek out buying opportunities from both our existing suppliers
and new sources, for which we compete with wholesalers, discount chains, mass
merchandisers, food markets, drug chains, club stores, other retailers and
various small privately-held companies and individuals. Although we are not
dependent on any single supplier or group of suppliers, our business and results
of operations could be adversely affected by a disruption in the availability of
sufficient quantities of high quality, affordable merchandise.
We could encounter unforeseen disruptions or costs in receiving and distribution
Our future success also depends on whether we obtain inventory from
suppliers and ship them to our stores in a timely and cost efficient manner.
Substantially all of our inventory is shipped or picked-up directly from
suppliers and delivered to our distribution centers in Chesapeake, Virginia,
Olive Branch, Mississippi, North Highlands, California and Chicago, Illinois.
The inventory is then processed and distributed to our stores. The orderly
operation of our receiving and distribution process depends on effective
management of our distribution centers and strict adherence to shipping
schedules (especially those from Asia).
Our rapid growth places significant pressure on our distribution and
receiving systems. Some of the factors that could have an adverse effect on our
distribution and receiving systems are:
o Expansion, replacement and addition of distribution centers. The
distribution center in North Highlands, California is currently
near its maximum capacity. During the first quarter of 2000, we
expect to replace the North Highlands facility with a leased
distribution center now under construction in Stockton,
California. Management expects the Stockton facility will
eventually service 300 to 400 large format stores when it is
fully automated. In the foreseeable future, we will be required
to expand, replace and build other distribution centers on a
tight and demanding time schedule in order to accommodate our
aggressive growth plans.
o Costs associated with replaced distribution center sites. We will
remain liable for rent and pass-through costs under the North
Highlands lease until June 2008, at a current annual cost of
approximately $641,000. We may not be able to secure an
acceptable sublease for this site or other leased sites we may
replace in the future.
o Shipping disruptions. The economic crisis in Southeast Asia
resulted in a shipping container shortage in 1998. We can give no
assurance that shipping disruptions will
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not occur in the future. We may be forced to alter our shipping
schedules in the future to react to shipping disruptions. In
turn, this could create bottlenecks in the receipt of goods by
the distribution centers and adversely affect the orderly and
timely distribution of goods to our stores.
o Unionization of our work force. From time to time, the
International Brotherhood of Teamsters has actively attempted to
organize our employees at our Chesapeake and Chicago distribution
centers. Unionization of a portion of our distribution center
workforce could result in labor disagreements that could cause a
disruption in the receipt or distribution of merchandise.
o Natural or man-made disasters. A fire, explosion, hurricane,
tornado, flood, earthquake or other disaster at our distribution
facilities could result in a significant disruption in the
receipt and distribution of goods. The facilities in California
and Mississippi are susceptible to earthquakes and the facilities
in Mississippi and Virginia are susceptible to hurricanes.
Although we maintain business interruption and property and
casualty insurance, a disaster could significantly disrupt the
distribution of goods to our stores for an extended period of
time.
Although management believes that our receiving and distribution process is
efficient and well-positioned to support our expansion plans, there is little
excess capacity in our current systems. We may not be able to anticipate or
respond to all the changing demands of our expanding operations or to events
beyond our control. Any of the foregoing risks could have a material adverse
effect on our business and results of operations.
We expect to encounter increasing competition
The retail industry is highly competitive. Our competitors include mass
merchandisers (such as Wal-Mart), discount stores (such as Dollar General),
closeout stores (such as Odd Lots and Big Lots) and other variety stores. In
past years, our principal competitors have not been other single price point
retailers. However, we expect that the expansion plans of other single price
point retailers will bring us increasingly into direct competition. Increased
competition could have a material adverse effect on our business and results of
operations.
We may experience disruptions caused by the failure of computers to recognize
the year 2000
Our company and our suppliers use computer software programs for a
variety of essential tasks, such as purchasing, distribution, store management,
financial systems and various administrative functions. Software applications in
these computers may be unable to interpret the upcoming calendar year 2000 and
beyond properly. We are in the process of evaluating and adjusting or replacing
all of our known date-sensitive systems for year 2000 compliance. We believe the
total costs of modifying our current systems will not exceed $275,000 and that
we will not have to defer any information technology projects to address the
year 2000 issue. However, we cannot guarantee that unknown problems will not
arise, resulting in remediation costs or disruptions of our business that could
have a material adverse effect on our business and results of operations.
Additionally, we are continuing to communicate with service providers
and domestic suppliers of
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merchandise to assess their Year 2000 readiness and the extent to which we may
be vulnerable to any third parties' failure to correct their own Year 2000
issues. Many of these parties have stated that their ability to supply us will
not be affected by the Year 2000 issue. However, we cannot be sure of their
timely compliance and our operations could suffer due to the failure of a
significant third part to become Year 2000 compliant.
We feel we are unable to adequately assess the potential effect of Year
2000 problems on our international suppliers, particularly in China. Several
recent studies suggest that the preparedness of China and other Asian countries
is considerably less than that of the United States and Europe, particularly in
the fields of manufacturing and utilities. We cannot predict the duration or
severity of any disruptions which may occur in China or the home countries of
our other overseas suppliers. In addition, we have evaluated the preparedness of
third parties who handle our international merchandise shipping for China. We
believe these third parties are substantially Year 2000 compliant.
Although we anticipate that minimal business disruption will occur as a
result of Year 2000 issues, possible consequences include, but are not limited
to, loss of communications links with store locations, customs delays, loss of
electric power, and the inability to process transactions or engage in similar
normal business activities. In addition, the United States and other world
economies could witness unusual purchasing patterns or other disruptions if
large numbers of consumers believe interruptions in power, communications, water
or food supplies are likely, regardless of the actual risks. Any such
disruptions could affect our business operations. With the substantial
completion of the assessment, implementation and testing phases of our plan, we
are now in the process of analyzing reasonably likely worst-case scenarios in
order to establish appropriate contingency plans. We expect to establish any
needed contingency plans by early in the fourth quarter of 1999.
The Year 2000 problem, particularly a failure in our normal merchandise
supply chain from China or other overseas suppliers, could have a material
adverse effect on our business and results of operations.
Note: This section is a Year 2000 readiness disclosure as defined under
the Year 2000 Information and Readiness Disclosure Act of 1998.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of common stock
in this offering.
PLAN OF DISTRIBUTION
Dollar Tree is registering all 501,600 shares on behalf of certain
selling shareholders. All of the shares were issued by us in connection with our
acquisition of Tehan's Merchandising, Inc. Our wholly-owned subsidiary merged
with Tehan's Merchandising, which as the surviving corporation changed its name
to Dollar Tree New York, Inc. and became our wholly-owned subsidiary. Dollar
Tree will receive no proceeds from this offering. The Selling Shareholders named
in the table below or pledgees, donees, transferees or other
successors-in-interest selling shares received from a named selling security
holder as a gift, partnership distribution or other non-sale-related transfer
after the date of this prospectus (collectively, the "Selling Shareholders") may
sell the shares from time to time. The Selling Shareholders will act
independently of the company in making decisions with respect to the timing,
manner and size of each sale.
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The sales may be made on one or more exchanges or in the over-the-counter market
or otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Selling
Shareholders may effect such transactions by selling the shares to or through
broker-dealers. The shares may be sold by one or more of, or a combination of,
the following:
o a block trade in which the broker-dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
o an exchange distribution in accordance with the rules of such
exchange,
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers, and
o in privately negotiated transactions, including but not limited
to exchange trusts or similar exchange vehicles.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in the resales.
The Selling Shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Shareholders. The
Selling Shareholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Shareholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Shareholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Shareholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Shareholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because Selling
Shareholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the Selling Shareholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this
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prospectus. The Selling Shareholders have advised the company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by Selling Shareholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
Selling Shareholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the Selling Shareholders. The company will make
copies of this prospectus available to the Selling Shareholders and has informed
them of the need for delivery of copies of this prospectus to purchasers at or
prior to the time of any sale of the shares.
The company will file a supplement to this prospectus, if required,
pursuant to Rule 424(b) under the Securities Act upon being notified by a
Selling Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
o the name of each such Selling Shareholder and of the
participating broker-dealer(s),
o the number of shares involved,
o the price at which such shares were sold,
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus, and
o other facts material to the transaction.
In addition, upon being notified by a Selling Shareholder that a donee
or pledgee intends to sell more than 500 shares, the company will file a
supplement to this prospectus.
The company will bear all costs, expenses and fees in connection with
the registration of the shares. The Selling Shareholders will bear all
commissions and discounts, if any, attributable to the sales of the shares. The
Selling Shareholders may agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. The Selling
Shareholders have agreed to indemnify certain persons, including broker-dealers
and agents, against certain liabilities in connection with the offering of the
shares, including liabilities arising
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under the Securities Act.
SELLING SHAREHOLDERS
The following table sets forth the number of shares owned by each of
the Selling Shareholders. None of the Selling Shareholders has had a material
relationship with Dollar Tree within the past three years other than as a result
of the ownership of the shares or other securities of Dollar Tree. No estimate
can be given as to the amount of shares that will be held by the Selling
Shareholders after completion of this offering because the Selling Shareholders
may offer all or some of the shares and because there currently are no
agreements, arrangements or understandings with respect to the sale of any of
the shares. The shares offered by this prospectus may be offered from time to
time by the Selling Shareholders named below.
<TABLE>
<CAPTION>
Number of Shares Percent of Number of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned Shares Sale Hereby(1)
- --------------------------- ---------------- ----------- ----------------
<S> <C> <C> <C>
Basil Tehan (2) 100,320 * 100,320
Fred Tehan (2) 100,320 * 100,320
Richard Tehan (2) 100,320 * 100,320
Robert Tehan (2) 100,320 * 100,320
Steven Tehan (2) 100,320 * 100,320
======= ====== =======
Total 501,600 * 501,600
<FN>
* Represents beneficial ownership of less than 1%.
(1) This registration statement also shall cover any additional shares of
common stock which become issuable in connection with the shares
registered for sale hereby by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without
the receipt of consideration which results in an increase in the number
of Dollar Tree's outstanding shares of common stock.
(2) The figure for each Selling Shareholder includes 5,016 shares held of
record by Steates, Remmell, Steates & Dziekan, a New York partnership,
as escrow agent under an Escrow Agreement dated June 30, 1999. Such
shares held by the escrow agent may be sold under this prospectus for
the benefit of the shareholder, provided the proceeds from such sale
will be held until at least June 30, 2000 as security for the
shareholder's indemnification obligations under the Escrow Agreement
and the Merger Agreement dated June 15, 1999, as amended on June 22,
1999, with Dollar Tree.
</FN>
</TABLE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Dollar Tree by Hofheimer Nusbaum, P.C., Norfolk, Virginia.
EXPERTS
The consolidated financial statements of Dollar Tree Stores, Inc. and
subsidiaries as of December 31, 1997 and 1998 and for each of the years in the
three-year period ended December 31, 1998 have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein
and upon the authority of said firm as experts in accounting and auditing.
12
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at http://www.dollartree.com or at the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
1. Annual Report on Form 10-K for the year ended December 31, 1998,
filed March 25, 1999, including certain information in Dollar
Tree's Definitive Proxy Statement in connection with Dollar
Tree's 1999 Annual Meeting of Shareholders and certain
information in Dollar Tree's Annual Report to Shareholders for
the fiscal year ended December 31, 1998;
2. Dollar Tree's Quarterly Reports on Form 10-Q for the quarter
ended March 31, 1999, filed May 13, 1999 and for the quarter
ended June 30, 1999, filed August 10, 1999;
3. Dollar Tree's Current Reports on Form 8-K filed April 27, 1999,
June 10, 1999, and July 22, 1999; and
4. The description of Dollar Tree common stock contained in its
registration statement on Form 8-A filed February 28, 1995,
including any amendments or reports filed for the purpose of
updating such descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Dollar Tree Stores, Inc.
Shareholder Services
500 Volvo Parkway
Chesapeake, Virginia 23320
(757) 321-5000
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. You also should not assume that
the information in this prospectus or the prospectus supplement is accurate as
of any date other than the date on the front of the document.
13
<PAGE>
==================================== ====================================
501,600 Shares
-------------------------------
Dollar Tree Stores, Inc.
TABLE OF CONTENT
------------------------------- Common Stock
Page
---- ------------
PROSPECTUS
Certain Introductory Matters 2
------------
A Warning about Forward-Looking
Statements 3
The Company 4 August , 1999
Risk Factors 4
Use of Proceeds 9
Plan of Distribution 9
Selling Shareholders 12
Legal Matters 12
Experts 12
Where You Can Find More Information 13
==================================== =====================================
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Dollar Tree in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee $ 5,655.00
Legal fees and expenses 30,000.00
Accounting fees and expenses 10,000.00
Miscellaneous 11,845.00
=========
Total $57,500.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the full extent permitted by the Virginia Stock Corporation Act, the
Articles of Incorporation require Dollar Tree to indemnify its officers and
directors. Article V of the Articles of Incorporation provides that any director
or officer who was or is a party to any proceeding shall be indemnified by
Dollar Tree against any liability incurred by him in connection with such
proceeding unless he engaged in willful misconduct or a knowing violation of the
criminal law. Dollar Tree is also required to promptly pay for or reimburse all
reasonable expenses, including attorneys' fees, incurred by a director or
officer in advance of final disposition of the proceeding if the director or
officer furnishes Dollar Tree with a written statement of his good faith belief
that he has met the standard of conduct that is a prerequisite to his
entitlement to indemnification and agrees to repay the advance if it is
ultimately determined that he did not meet such standard of conduct. Dollar Tree
is authorized to purchase and maintain insurance to insure Dollar Tree against
its indemnification obligation, or insure any person who is or was a director,
officer, employee, or agent of Dollar Tree against any liability asserted
against or incurred by him in any such capacity or arising from his status as
such, whether or not Dollar Tree has the power to indemnify him against such
liability. Dollar Tree has directors and officers liability insurance. Dollar
Tree is also empowered, by a majority vote of a quorum of disinterested
directors, to enter into a contract to indemnify any director or officer against
liability, whether occurring before or after the execution of the contract.
Except to the extent contrary to the Articles of Incorporation or Virginia Stock
Corporation Act, Dollar Tree is not prevented or restricted from making or
providing for indemnities in addition to those provided in the Articles of
Incorporation.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number Exhibit Title
------- ----------
2.1 Merger Agreement by and among Dollar Tree Stores, Inc., Dollar
Tree New York, Inc., Tehan's Merchandising, Inc. ("Tehan's") and
the Shareholders of Tehan's ("Shareholders") dated June 15, 1999
(incorporated by reference from Dollar Tree's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999, filed
August 10, 1999)
2.2 Amendment to Merger Agreement dated June 22, 1999 by and among
Dollar Tree Stores, Inc., Dollar Tree New York, Inc., Tehan's and
the Shareholders
5.1 Opinion of Hofheimer Nusbaum, P.C.
10.1 Escrow Agreement by and among Dollar Tree Stores, Inc., Steates,
Remmell, Steates & Dziekan, Richard J. Tehan, and the
Shareholders dated June 28, 1999
10.2 Registration Rights Agreement by and among Dollar Tree Stores,
Inc. and the Shareholders dated June 28, 1999
23.1 Consent of KPMG LLP
23.2 Consent of Hofheimer Nusbaum, P.C. (included in the Opinion of
Hofheimer Nusbaum, P.C. filed as Exhibit 5.1 hereto)
24.1 Power of Attorney (included on page II-4 of this registration
statement)
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement, or the most
recent post-effective amendment thereof, which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, 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 SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is 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 director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding is asserted by such director, 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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act, that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chesapeake, Commonwealth of Virginia, on the 18th day
of August, 1999.
DOLLAR TREE STORES, INC.
By /s/ Macon F. Brock, Jr.
-----------------------
Macon F. Brock, Jr.
President and Chief Executive Officer
The registrant and each person whose signature appears below
constitutes and appoints Macon F. Brock, Jr. and H. Ray Compton, and any agent
for service named in this registration statement and each of them, his, her or
its true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him, her or it and in his, her, or its
name, place and stead, in any and all capacities, to sign and file (i) any and
all amendments (including post-effective amendments) to this registration
statement and (ii) any registration statement relating to the offering covered
by this registration statement deemed effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933 and any and all amendments (including
post-effective amendments) thereto, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he, she, or it might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ J. Douglas Perry Chairman of the Board; Director August 18, 1999
______________________________
J. Douglas Perry
/s/ Macon F. Brock, Jr. President and Chief Executive August 18, 1999
______________________________ Officer; Director (principal
Macon F. Brock, Jr. executive officer)
/s/ H. Ray Compton Executive Vice President; Director August 18, 1999
______________________________
H. Ray Compton
/s/ Frederick C. Coble Senior Vice President - Chief August 18, 1999
______________________________ Financial Officer (principal
Frederick C. Coble financial and accounting officer)
/s/ John F. Megrue Vice Chairman; Director August 18, 1999
______________________________
John F. Megrue
/s/ Richard G. Lesser Director August 18, 1999
______________________________
Richard G. Lesser
______________________________ Director August __, 1999
Thomas A. Saunders, III
/s/ Alan L. Wortzel Director August 18, 1999
______________________________
Alan L. Wurtzel
______________________________ Director August __, 1999
Frank Doczi
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit Title
------- ----------
2.1 Merger Agreement by and among Dollar Tree Stores, Inc., Dollar
Tree New York, Inc., Tehan's Merchandising, Inc. ("Tehan's") and
the Shareholders of Tehan's ("Shareholders") dated June 15, 1999
(incorporated by reference from Dollar Tree's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999, filed
August 10, 1999)
2.2 Amendment to Merger Agreement dated June 22, 1999 by and among
Dollar Tree Stores, Inc., Dollar Tree New York, Inc., Tehan's and
the Shareholders
5.1 Opinion of Hofheimer Nusbaum, P.C.
10.1 Escrow Agreement by and among Dollar Tree Stores, Inc., Steates,
Remmell, Steates & Dziekan, Richard J. Tehan, and the
Shareholders dated June 28, 1999
10.2 Registration Rights Agreement by and among Dollar Tree Stores,
Inc. and the Shareholders dated June 28, 1999
23.1 Consent of KPMG LLP
23.2 Consent of Hofheimer Nusbaum, P.C. (included in the Opinion of
Hofheimer Nusbaum, P.C. filed as Exhibit 5.1 hereto)
24.1 Power of Attorney (included on page II-4 of this registration
statement)
II-6
AMENDMENT TO MERGER AGREEMENT
THIS AMENDMENT TO MERGER AGREEMENT ("Amendment") dated June
22, 1999, by and among DOLLAR TREE STORES, INC., a Virginia corporation
("Parent"), DOLLAR TREE NEW YORK, INC., a New York corporation and a wholly
owned subsidiary of Parent ("Sub"), TEHAN'S MERCHANDISING, INC., a New York
corporation ("Company"), and RICHARD J. TEHAN, STEVEN A. TEHAN, BASIL L. TEHAN,
ROBERT J. TEHAN, and FREDERICK J. TEHAN, the sole shareholders of the Company
(each may be referred to herein as a "Shareholder" or collectively as the
"Shareholders"). The capitalized terms used herein shall have the meanings given
such terms in the Merger Agreement dated June 15, 1999 by and among the parties
hereto ("Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement, the Average Closing Price
is defined to be the arithmetic average of the closing price per share of Parent
Common Stock, as reported on the Nasdaq for each of the four (4) consecutive
trading days ending with the trading day which occurs immediately prior to the
Closing Date; and
WHEREAS, the Agreement contemplates that the Closing may take
place as late as August 31, 1999 before either party has the right to terminate
the Agreement; and
WHEREAS, prior to Closing, Parent is subject to the risk that
the Average Closing Price may fall, resulting in an increase in the Merger
Consideration, and Shareholders are subject to the risk that the Average Closing
Price may rise, resulting in a decrease in Merger Consideration; and
WHEREAS, the parties desire to modify the Agreement at this
time to fix the dates for determining the Average Closing Price as if the
Closing under the Agreement had occurred on the date hereof in order to arrive
at a known Average Closing Price, thus eliminating the risks to both parties
described above.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements set forth herein, the parties hereby amend the
Agreement and agree as follows:
1. Amendment to Agreement. The definition of "Average Closing Price"
shall be amended by restating the second sentence of Section 2.1(a) to read as
follows:
The "Merger Consideration" shall be a number of shares of Parent Common
Stock equal to $20,000,000 divided by the arithmetic average of the
closing price per share of Parent Common Stock, as reported on the
Nasdaq National Market System (the "Nasdaq"), for each of the following
four (4) consecutive trading days: June 16, June 17, June 18 and June
21, 1999 (the "Average Closing Price").
Amendment - 1
<PAGE>
2. Determination of Average Closing Price. The parties hereby agree
that the effect of the amendment to the Agreement contained in Section 1 of this
Amendment is to fix the Average Closing Price for all purposes of the Agreement
at THIRTY-NINE and SEVEN/EIGHTHS DOLLARS ($39 7/8ths) per share, which amount
shall not be subject to challenge by any party hereto for any reason.
3. Miscellaneous. The original Agreement, as amended hereby, shall
remain in full force and effect and embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein in conformity with Section 12.2 of the Agreement. This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument, and, when signed by all of the parties hereto, shall become legally
binding on such parties effective as of the date set forth at the beginning of
this Amendment.
IN WITNESS WHEREOF, the parties have executed or caused to be
executed this Agreement effective as of the day and year first above written.
COMPANY: TEHAN'S MERCHANDISING, INC. [SEAL]
By: /s/ Richard J. Tehan
--------------------
Richard J. Tehan
President
PARENT: DOLLAR TREE STORES, INC. [SEAL]
By: /s/ H. Ray Compton
------------------
H. Ray Compton
Executive Vice President
SUB: DOLLAR TREE NEW YORK, INC. [SEAL]
By: /s/ H. Ray Compton
------------------
H. Ray Compton
Executive Vice President
Amendment - 2
<PAGE>
SHAREHOLDERS:
/s/ Richard J. Tehan [SEAL]
--------------------
RICHARD J. TEHAN
/s/ Robert J. Tehan [SEAL]
-------------------
ROBERT J. TEHAN
/s/ Steven A. Tehan [SEAL]
-------------------
STEVEN A. TEHAN
/s/ Basil L. Tehan [SEAL]
------------------
BASIL L. TEHAN
/s/ Frederick J. Tehan [SEAL]
----------------------
FREDERICK J. TEHAN
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Richard J. Tehan, President of Tehan's Merchandising, Inc., on behalf
of the corporation.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) Virginia, City/County of Chesapeake, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by H. Ray Compton, Executive Vice President of Dollar Tree Stores, Inc.,
on behalf of the corporation.
/s/ Brenda S. Cox
------------------------------------
Notary Public
My commission expires: Aug. 31, 1999
Amendment - 3
<PAGE>
State of (Commonwealth of) Virginia, City/County of Chesapeake, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by H. Ray Compton, Executive Vice President of Dollar Tree New York, Inc.,
on behalf of the corporation.
/s/ Brenda S. Cox
------------------------------------
Notary Public
My commission expires: Aug. 31, 1999
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Richard J. Tehan.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Robert J. Tehan.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Steven A. Tehan.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
Amendment - 4
<PAGE>
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Basil L. Tehan.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
State of (Commonwealth of) New York, City/County of Oneida, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of June,
1999, by Frederick J. Tehan.
/s/ Carl S. Dziekan
------------------------------------
Notary Public
My commission expires: May 5, 2000
Amendment - 5
<PAGE>
August 18, 1999
Dollar Tree Stores, Inc.
500 Volvo Parkway
Virginia Beach, VA 23320
Re: Public Offering
Ladies and Gentlemen:
We have acted as counsel to you in connection with the filing of a
Registration Statement on Form S-3 on August 18, 1999 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), with
respect to the registration of 501,600 shares of Common Stock of Dollar Tree
Stores, Inc., a Virginia corporation (the "Shares"). We have examined such
documents, records, and matters of law as we have deemed necessary for purposes
of this opinion and, based thereon, we are of the opinion that the Shares are
duly and validly authorized, issued, fully paid, and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our name under the heading "Legal Matters" in
the Prospectus. In giving such consent, we do not hereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Act or the Rules and Regulations of the Securities and Exchange Commission
promulgated under the Act.
Very truly yours,
/s/ HOFHEIMER NUSBAUM, P.C.
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of June 28, 1999 (the "Escrow
Agreement"), by and among DOLLAR TREE STORES, INC., a Virginia corporation
("Parent"); RICHARD J. TEHAN, STEVEN A. TEHAN, BASIL L. TEHAN, ROBERT J. TEHAN,
and FREDERICK J. TEHAN, (each a "Shareholder" and, collectively, the
"Shareholders"); RICHARD J. TEHAN, as representative of the Shareholders (the
"Shareholder Representative"); and STEATES, REMMELL, STEATES & DZIEKAN, a New
York partnership acting solely as escrow agent hereunder and not in its
individual capacity ("Escrow Agent"). The Parent and the Shareholders are
sometimes referred to herein as the "Interested Parties." Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in the Merger Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to a certain Merger Agreement, dated as of June 15,
1999, as amended by Amendment dated June 22, 1999, (the "Merger Agreement") by
and among Parent, Dollar Tree New York, Inc., a New York corporation and
wholly-owned subsidiary of Parent ("Sub") and Tehan's Merchandising, Inc., a New
York corporation (the "Company"), the capital stock of the Company owned by the
Shareholders has been (simultaneously with the execution hereof) converted into
the right to receive shares of Parent Common Stock;
WHEREAS, pursuant to Article 7 of the Merger Agreement, the
Shareholders have agreed to indemnify Parent and its subsidiaries and Affiliates
(including Dollar Tree New York, Inc., Tehan's Merchandising, Inc., and the
surviving corporation in the Merger), each of their respective officers,
directors, employees, agents and representatives and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Parent Indemnified Parties") for Parent Losses;
WHEREAS, as security for the Shareholders' obligations under the Merger
Agreement but without limiting the other remedies of the Parent Indemnified
Parties thereunder, the Merger Agreement also contemplates a surrender of Escrow
Shares (as defined below) and related funds to the extent Parent Indemnified
Parties suffer Parent Losses, including without limitation any Deficit Amount
under Section 2.4 of the Merger Agreement;
Escrow Agreement -- Page 1
<PAGE>
WHEREAS, pursuant to Section 6.9 of the Merger Agreement, the
Shareholders have appointed the Shareholder Representative to act on their
behalf with respect to the execution and delivery of this Escrow Agreement and
the performance on behalf of such Shareholder under the terms and provisions of
this Escrow Agreement; and
WHEREAS, Escrow Agent is willing to act as escrow agent hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1 Delivery of Escrow Shares. Subject and pursuant to the Merger
Agreement, Escrow Shares are hereby delivered to the Escrow Agent by the
Shareholders, in the proportion specified on Schedule A hereto. The Escrow
Shares shall be represented by a stock certificate in the name of Steates
Remmell Steates &Dziekan, as Escrow Agent under the Escrow Agreement, dated June
30, 1999. Notwithstanding the foregoing, during the term of this Escrow
Agreement, title to the Escrow Shares will be in the name of the Escrow Agent
for record holder purposes only. The parties acknowledge that the Shareholders
are the beneficial owners of the Escrow Shares, subject to the terms and
conditions of the Merger Agreement and this Escrow Agreement, and each
Shareholder shall retain all rights to vote the shares of Parent Common Stock
delivered on behalf of such Shareholder to the Escrow Agent that are not
transferred to Parent pursuant to Section 2 hereof.
2 The Escrow Fund. All cash dividends on or proceeds from the permitted
sale of the Escrow Shares shall be deposited directly into an escrow account
created by the Escrow Agent specifically for the purpose of holding such cash
dividends and proceeds (the "Dividend Account"), without any tax or other
withholding or deduction. Shares resulting from stock dividends, stock splits
and other shares or securities issued in respect of the Escrow Shares shall be
issued in the name of the Escrow Agent, and shall be held by the Escrow Agent
subject to the provisions of this Agreement, and upon issuance shall become part
of the Escrow Shares. The Escrow Agent shall invest the Dividend Account at, and
pursuant to, the written direction of the Shareholder Representative in Eligible
Investments and shall not be responsible or liable for any loss accruing from
any investment made in accordance herewith except for losses due to the gross
negligence or wilful misconduct of the Escrow Agent. "Eligible Investments"
shall mean [(i) obligations issued or guaranteed by the United States of America
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii) obligations
(including certificates of deposit and banker's acceptances) of any domestic
commercial bank having capital and surplus in excess of $500,000,000; (iii)
repurchase obligations for underlying securities of the type described in clause
(i); (iv) shares of money market funds at least 95% of the assets of which
constitute obligations of the type described in clause (i) above. No investment
shall have a term of more than ninety (90) days.] Absent its timely receipt of
such specific written investment instruction from the Shareholder
Representative, the Escrow Agent shall have no obligation or duty to invest (or
otherwise pay interest on) the Dividend Account. All earnings received from the
Escrow Agreement -- Page 2
<PAGE>
investment of the Dividend Account shall be credited to, and shall become a part
of, the Dividend Account (and any losses on such investments shall be debited to
the Dividend Account). The Escrow Agent shall have no liability for any
investment losses, including any losses on any investment required to be
liquidated prior to maturity in order to make a payment required hereunder
except for losses due to the gross negligence or wilful misconduct of the Escrow
Agent.
3 Voting and Disposition of Escrow Shares.
(a) The Escrow Shares shall be voted on all matters submitted
to the shareholders of Parent as each Shareholder shall direct with respect to
the number of Escrow Shares allocated to such Shareholder. During the period the
Escrow Shares are held hereunder, Parent shall cause all proxy solicitation
materials, including forms of proxy, to be sent to the Shareholders and Escrow
Agent as and when sent to the shareholders of Parent. In the absence of
direction from any Shareholder, the Escrow Shares contributed into escrow by
such Shareholder shall be voted as the Escrow Agent shall direct.
(b) Following the Restricted Period (as defined below), and
subject to compliance with the requirements of applicable securities laws, the
Escrow Shares may be sold on behalf of the Shareholders pro rata for cash at the
time and in the manner the Shareholder Representative shall direct. No Escrow
Shares may be sold, transferred or otherwise disposed of, nor shall any person
in any other way reduce such person's risk with respect to, any Escrow Shares or
other shares of the capital stock of Parent until after such time as financial
results covering at least 30 days of post merger combined operations of Parent
and the Company have been published (within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies) by Parent, in the form of a
post-effective amendment, issuance of a quarterly earnings report, a Form 10-K,
10-Q or 8-K filing, or any other public issuance which includes the combined
sales and net income (the "Restricted Period"). Proceeds from the permitted sale
of the Escrow Shares shall be deposited in the Dividend Account and allocated
pro rata to the Shareholders in accordance with Schedule A.
4 Application of Escrow Shares and the Dividend Account to
Claims of Parent Indemnified Parties and Deficit Amount.
4.1 In the event a Parent Indemnified Party claims that it is
entitled to indemnification pursuant to the Merger Agreement (including without
limitation a claim for a Deficit Amount pursuant to Section 7.1(vi)), such
Parent Indemnified Party shall give written notice of such claim to the
Shareholder Representative and the Escrow Agent. Subject to compliance by such
Parent Indemnified Party with the applicable indemnification provisions of the
Merger Agreement, the amount of such claim shall be paid to the Parent
Indemnified Party as provided in Section 4.3, unless the Shareholder
Representative shall contest the right of such Parent Indemnified Party to such
payment by delivering to such Parent Indemnified Party and the Escrow Agent
notice of such contest within 15 days after such Parent Indemnified Party shall
have delivered notice to the Shareholder Representative of the claim.
Escrow Agreement -- Page 3
<PAGE>
4.2 If within the 15 day period specified in Section 4.1
above, the Shareholder Representative shall deliver to the Parent Indemnified
Party and the Escrow Agent the notice of contest referred to in Section 4.1
above, no payment shall be made hereunder with respect to the claim involved
until the dispute has been finally settled by agreement of such Parent
Indemnified Party and the Shareholder Representative or, in the absence of such
an agreement, by a binding and final arbitration award if such Parent
Indemnified Party and the Shareholder Representative have agreed to such
arbitration, or otherwise by a binding and final judgment, order or decree of a
court of competent jurisdiction.
4.3 Payments to a Parent Indemnified Party shall be made
(i) first, by cancellation of the number of whole
shares of the Escrow Shares, allocated pro rata among the Shareholders
in accordance with Schedule A hereto, having an aggregate value nearest
to the amount payable to the Parent Indemnified Party, such value per
share to be the [Average Closing Price], subject to appropriate
adjustment to take into account any stock split, stock dividend or
recapitalization subsequent to the Effective Time and not reflected in
such [Average Closing Price] (the "Share Value"); and
(ii) second, if the amount payable to the Parent
Indemnified Party cannot be fully satisfied pursuant to Section 4.3(i),
by payment of a distribution of amounts contained in the Dividend
Account (the "Dividend Amount") shall be made to such Parent
Indemnified Party in an amount equal to any amount remaining payable to
the Parent Indemnified Party.
5 Final Distribution. On the first anniversary of the date hereof (the
"Anniversary"), except as otherwise provided in this Section, the Escrow Shares
and the Dividend Account then remaining in escrow shall be distributed to the
Shareholders pro rata in accordance with Schedule A hereto. If any claim
theretofore asserted by a Parent Indemnified Party shall not have been paid or
finally determined to be without merit or the amount of such claim shall not
have been finally determined, the number of whole shares of the Escrow Shares
having an aggregate value (determined as provided in Section 4.3 above) nearest
to the amount of such claim on the Anniversary (the "Retained Escrow Shares"),
plus, if the Retained Escrow Shares are insufficient to cover the amount of such
claim, an amount from the Dividend Account equal to any amount remaining subject
to such claim, shall be retained in escrow until such claim(s) shall have been
paid or finally determined to be without merit, whereupon such Retained Escrow
Shares and Dividend Account amount shall be distributed to the Shareholders pro
rata in accordance with Schedule A hereto, subject to the remaining provisions
of this Section. Any distribution pursuant hereto shall be net of any required
tax or other withholding or deduction. The parties will make all reasonable
efforts to resolve any claims hereunder as quickly as possible.
Escrow Agreement -- Page 4
<PAGE>
6 Fractional Shares; Distributions. In the event any calculations
required under this Escrow Agreement result in the allocation of a fractional
share amount to a Shareholder, the fraction shall be rounded to the next lower
whole number, and any remainder shares shall be canceled. All deliveries under
this Escrow Agreement shall be made by and to the parties hereto (or their
lawfully appointed attorneys-in-fact) in the United States.
7 Shareholder Representative; Notices and Written Directions. Each
Shareholder represents that he has appointed the Shareholder Representative to
be his, her or its true and lawful attorney for all matters in connection with
this Escrow Agreement, the Escrow Shares and the Dividend Account, including
without limitation the acceptance of any claim by a Parent Indemnified Party,
and the compromise of any disputes relating to the Escrow Shares, Dividend
Amount or other matter under this Escrow Agreement. Notwithstanding the
foregoing, the Shareholder Representative will not act on behalf of the
Shareholders with respect to distributions, voting or tax withholdings.
The Shareholder Representative hereby accepts such appointment.
8 Escrow Agent.
8.1 Duties. Escrow Agent's obligations and duties in
connection herewith are confined to those specifically enumerated in this Escrow
Agreement. Escrow Agent shall not be in any manner liable or responsible for the
sufficiency, correctness, genuineness or validity of any instruments deposited
with it or with reference to the form of execution thereof, or the identity,
authority or rights of any person executing or depositing same, and Escrow Agent
shall not be liable for any loss that may occur by reason of forgery, false
representation or the exercise of its discretion in any particular manner or for
any other reason, except for its own gross negligence or willful misconduct.
8.2 Indemnification. Except in instances of Escrow Agent's own
gross negligence or willful misconduct and except for matters relating to the
prudent investment or protection of the Escrow Fund or the sale of Escrow
Shares, Shareholders and the Company shall each indemnify, defend, and hold
harmless Escrow Agent against fifty percent (50%) of any and all costs, losses,
claims, damages, liabilities, expenses, including reasonable costs of
investigation, court costs, and attorneys' fees, and disbursements, which may be
imposed upon Escrow Agent solely in connection with its actions prudently taken
within the scope of duties specified hereunder as Escrow Agent (and not in its
capacity as counsel for Shareholders), including any litigation arising from
this Escrow Agreement involving the subject matter hereof. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
the Escrow Agreement.
8.3 Disputes. In the event of a dispute between the parties,
in the discretion of Escrow Agent, Escrow Agent shall be entitled to tender into
the registry or custody of any court of competent jurisdiction all money or
property in its hands under this Escrow Agreement, together with such legal
pleadings as it deems appropriate, and thereupon shall be discharged from all
further duties and liabilities under this Escrow Agreement. Any such legal
action may be brought in such
Escrow Agreement -- Page 5
<PAGE>
court as Escrow Agent shall determine to have jurisdiction thereof including
Supreme Court, County of Oneida, State of New York. The filing of any such legal
proceedings shall not deprive Escrow Agent of its compensation earned prior to
such filing.
8.4 Receipt. Escrow Agent shall provide written acknowledgment
to the Parent of receipt of the Escrow Shares.
8.5 Fees. Escrow Agent's fees hereunder shall be as set forth
on the fee schedule attached hereto as Schedule B and incorporated herein by
reference. All fees, expenses and reimbursements shall be paid by the
Shareholders.
9 Transfer of Interests. The interests of the Shareholders in the
Escrow Shares and the rights and obligations of the Shareholders hereunder may
not be transferred except by will, the laws of descent and distribution or by
other operation of law.
10 Miscellaneous.
10.1 Benefits and Burdens; Assignment. This Escrow Agreement
shall inure to the benefit of and shall be binding upon Parent and the
Shareholders and Escrow Agent and their respective heirs, representatives,
successors and assigns. No party to this Escrow Agreement may assign its rights
or obligations hereunder without the prior written consent of each of the other
parties hereto, provided however, that this Escrow Agreement may only be
assigned by Parent to a corporation, all of whose issued and outstanding capital
stock is owned directly or indirectly by Parent, and in such event Parent shall
not be released from its obligations hereunder.
10.2 Governing Law. This Escrow Agreement shall be governed by
the internal laws (ignoring principles of conflicts of laws) of the State of New
York. All deliveries under this Escrow Agreement shall be made by and to the
parties hereto (or their lawfully appointed attorneys-in-fact) in the United
States.
10.3 Headings. The section and paragraph headings contained in
this Escrow Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Escrow Agreement.
10.4 Notices; Wiring Instructions.
(a) Any transmittals, notice or other communications
required or permitted hereunder shall be sufficiently given if sent by
registered or certified mail, postage prepaid, by national overnight courier
service or, in the case of any communication not involving a transmittal of
original documents, by telecopy, addressed as follows:
Escrow Agreement -- Page 6
<PAGE>
If to Parent or, after the Closing, the Company:
Dollar Tree Stores, Inc.
500 Volvo Parkway
Chesapeake, Virginia 23320
Attention: Mr. H. Ray Compton
Telecopier: (757) 321-5111
With a copy to:
Hofheimer Nusbaum, P.C.
999 Waterside Drive, Suite 1700
P. O. Box 3460
Norfolk, Virginia 23514
Attention: William A. Old, Jr., Esquire
Telecopier: (757) 629-0660
If to the Shareholder Representative:
Mr. Richard J. Tehan
4619 Commercial Drive
New Hartford, New York 13413
Telecopier: 315-724-2931
With a copy to:
Steates Remmell Steates & Dziekan
4 Oxford Crossing, Suite 104
New Hartford, New York 13413
Attention: Robert E. Remmell, Esquire
Telecopier: (315) 724-2931
If to Shareholders:
To the addresses stated on Schedule A
If to Escrow Agent:
Steates, Remmell, Steates & Dziekan
Attn: Robert E. Remmell
4 Oxford Crossing, Ste. 104
New Hartford, NY 13413
Escrow Agreement -- Page 7
<PAGE>
or such other addresses as shall be furnished in writing by any of the parties,
and any such notice or communication shall be deemed to have been given as of
the next business day, if delivered by overnight courier service or upon receipt
(as evidenced by proof of transmission), if telecopied when received and three
days after the date so mailed (if mailed).
(b) Any funds to be paid to or by the Escrow Agent
hereunder shall be sent by wire transfer or certified or cashier's check
pursuant to the following instructions (or by such method of payment and
pursuant to such instruction as may have been given in advance and in writing to
or by the Escrow Agent, as the case may be, in accordance with Section 10.4(a)
above):
If to Parent:
Bank: First Union National Bank, N.A.
ABA #: 0514 0054 9
A/C #: 2070000330892
Attn: Theresa Boneske (757) 628-0438
Ref: Dollar Tree/Tehan Escrow
If to Shareholders:
By certified or cashier's check sent via registered or
certified mail, postage prepaid, or by national overnight
courier service to the addresses stated on Schedule A.
If to the Escrow Agent:
By certified or cashier's check sent via registered or
certified mail, postage prepaid, or by national overnight
courier service to the addresses stated in Section 10.4(a).
10.5 Counterparts. This Escrow Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
10.6 Modification. This Escrow Agreement may be modified only
by a written instrument signed by each of the parties hereto, provided however
that Schedule A hereto may be modified to reflect valid transfers of the
Shareholders' interests in the Escrow Shares by a writing signed by Parent and
the Shareholder Representative, upon which Escrow Agent shall be entitled to
rely without further investigation.
Escrow Agreement -- Page 8
<PAGE>
10.7 Cooperation. Shareholders, Parent and the Escrow Agent
shall deliver to each other such information and documents and shall execute and
deliver to each other such further information and documents and shall execute
and deliver such further instruments and agreements as the others may reasonably
request in order to accomplish the purpose of this Escrow Agreement or to assure
to the others the benefits of this Escrow Agreement.
10.8 Entire Understanding. This Escrow Agreement and the
exhibits referred to herein represent the entire understanding of the parties
with respect to the subject matter hereof and supersede all correspondence,
memoranda, conversations or other communications with respect thereto.
10.9 Severability. The invalidity or unenforceability of any
provision of this Escrow Agreement shall not affect the validity or
enforceability of any other provision of this Escrow Agreement.
10.10 Time. Time is of the essence under this Escrow
Agreement.
10.11 Statutes. Any reference herein to any federal, state or
local statute shall include all amendments to such statute through the date of
this Escrow Agreement.
10.12 Interpretation. It is the intention of the parties
hereto and the Shareholders and Company that the Merger qualify as a
"reorganization" under the provisions of Section 368 of the Code, and be
accounted for as a "pooling of interests," and this Escrow Agreement shall be
interpreted and applied in a manner consistent with, and shall be subject to
amendment to conform to, the requirements for such treatment.
10.13 Tax-Related Terms.
(a) Tax Reporting. The Interested Parties agree
that, for tax reporting purposes, all interest or other income earned from the
investment of the Dividend Account in any tax year shall (i) to the extent such
interest or other income is distributed by the Escrow Agent to any person or
entity pursuant to the terms of this Escrow Agreement during such tax year, be
allocated to such person or entity, and (ii) otherwise shall be allocated to the
Shareholders in proportion to their holdings as set forth on Schedule A.
(b) Certification of Tax Identification Number.
If requested by the Escrow Agent, the Shareholder Representative agrees to
obtain the certified tax identification number for each Shareholder on a Form
W-9 (or Form W-8, in case of non-U.S. persons) and deliver the same to the
Escrow Agent prior to the date on which any income earned on the investment of
the Dividend Account is credited to the Dividend Account. In the event that any
tax identification number is not certified to the Escrow Agent, the Internal
Revenue Code, as amended from time to time, may
Escrow Agreement -- Page 9
<PAGE>
require withholding of a portion of any interest or other income earned on the
investment of the Dividend Account.
10.14 Resignation. The Escrow Agent may at any time resign as
Escrow Agent hereunder by giving ten (10) business days' prior written notice of
resignation to the Parent and the Shareholder Representative. Prior to the
effective date of the resignation as specified in such notice, the Parent will
issue to the Escrow Agent a written instruction authorizing redelivery of the
Escrow Shares and Dividend Account to a bank or trust company that it selects as
successor to the Escrow Agent hereunder, subject to the consent of the
Shareholder Representative (which consent shall not be unreasonably withheld).
If, however, the Parent shall fail to name such a successor escrow agent within
five (5) business days after the notice of resignation from the Escrow Agent,
the Shareholder Representative shall be entitled to name such successor escrow
agent. If no successor escrow agent is named by the Parent or the Shareholder
Representative, the Escrow Agent may apply to a court of competent jurisdiction
for appointment of a successor escrow agent.
[The remainder of this page is left intentionally blank.]
Escrow Agreement -- Page 10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the date first written above.
PARENT: DOLLAR TREE STORES, INC.
By /s/ H. Ray Compton
------------------
[Name] H. Ray Compton
[Title] Executive Vice President
SHAREHOLDER /s/ Richard J. Tehan
REPRESENTATIVE: --------------------
Richard J. Tehan, as Shareholder
Representative
SHAREHOLDERS: /s/ Richard J. Tehan
--------------------
Richard J. Tehan
/s/ Steven A. Tehan
-------------------
Steven A. Tehan
/s/ Basil L. Tehan
------------------
Basil L. Tehan
/s/ Robert J. Tehan
-------------------
Robert J. Tehan
/s/ Frederick J. Tehan
----------------------
Frederick J. Tehan
ESCROW AGENT: STEATES, REMMELL, STEATES & DZIEKAN
(Acting solely as Escrow Agent
herein and not in its individual
capacity)
By /s/ F. Paul Steates, Esq.
-------------------------
Name: F. Paul Steates, Esq.
Title: Partner
Escrow Agreement -- Page 11
<PAGE>
<TABLE>
SCHEDULE A
LIST OF SHAREHOLDERS
<CAPTION>
Name and Address Social Security Escrow Shares Pro Rata
of Shareholder Number Contributed Percentage of Total
Escrow Shares
<S> <C> <C> <C>
Richard J. Tehan ###-##-#### 5016 20%
6 Fieldwood Road
New Hartford, NY
13413
Steven A. Tehan ###-##-#### 5016 20%
10 Stonebridge Road
New Hartford, NY
13413
Basil L. Tehan ###-##-#### 5016 20%
1304 Sherman Drive
Utica, NY 13501
Robert J. Tehan ###-##-#### 5016 20%
8 Beckwith Circle
New Hartford, NY
13413
Frederick J. Tehan ###-##-#### 5016 20%
6378 Willow Lane
Marcy, NY 13403
Total 25080 100%
</TABLE>
Escrow Agreement -- Page 12
<PAGE>
SCHEDULE B
FEE SCHEDULE
None.
Escrow Agreement -- Page 13
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of June 28, 1999, by and among Richard J. Tehan, Steven A.
Tehan, Basil L. Tehan, Robert J. Tehan, and Frederick J. Tehan (each of whom may
be referred to herein as a "Holder" or collectively as the "Holders") and Dollar
Tree Stores, Inc., a Virginia corporation (the "Company").
This Agreement is made in connection with the acquisition by the
Company of 100% of the capital stock of Tehan's Merchandising, Inc., a New York
corporation ("TMI"), pursuant to a Merger Agreement, dated June 15, 1999 as
amended by Amendment dated June 22, 1999 (the "Merger Agreement"), under which a
wholly-owned subsidiary of the Company will merge with and into TMI ("Merger").
As a result of the Merger, the Holders will exchange of their interests in TMI
for an aggregate number of shares of common stock, $0.01 par value per share
("Common Stock"), of the Company as determined pursuant to section 2.1 of the
Merger Agreement. As used herein the term "Registrable Shares" shall mean the
shares of Common Stock received by Holders upon the original issuance thereof in
the Merger and any other shares of capital stock of the Company issued in
respect of any such shares of Common Stock as a result of stock splits, stock
dividends, reclassification, exchange offer, recapitalizations, mergers,
consolidations or similar events.
The parties hereby agree as follows:
1. Shelf Registration.
(a) The Company shall prepare or amend and file with the
Securities and Exchange Commission ("Commission"), a registration statement for
an offering to be made on a continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended ("Securities Act"), covering the Registrable
Shares ("Shelf Registration"). The Shelf Registration shall be on Form S-3 or
any similar form adopted by the Commission from and after the date hereof
permitting registration of the Registrable Shares for resale by the Holders in
the manner designated herein. The Company shall use commercially reasonable
efforts (subject in all cases to any procedures and limitations which may be
imposed by the staff of the Commission) to (i) file the Shelf Registration with
the Commission within 14 days following the Effective Time of
Registration Rights Agreement -- Page 1
<PAGE>
the Merger as defined in the Merger Agreement ("Effective Time"), (ii) cause the
Shelf Registration to be declared effective under the Securities Act as soon as
practicable following the Effective Time, and (iii) keep the Shelf Registration
continuously effective under the Securities Act for a period ending on the
soonest of (A) two years from the Effective Time, (B) the date when, in the
opinion of counsel of the Company, all Registrable Shares are disposable without
restriction under any applicable rules and regulations of the Commission, and
(C) the date when all Registrable Shares covered by the Shelf Registration have
been disposed of by Holders; provided, however, that the Company may voluntarily
suspend dispositions of Registrable Shares pursuant to such Shelf Registration
for up to 90 days if the Company's Board of Directors makes a determination
(based upon advice of counsel) that the offering of the Registrable Shares
pursuant to the Shelf Registration would adversely affect or be affected by a
proposed financing, stock offering, reorganization, recapitalization, merger,
consolidation or similar transaction involving the Company, in which case the
Company shall be required to keep such Shelf Registration effective for an
additional period of time equal to the number of days the effectiveness thereof
is suspended pursuant to this clause; provided, that the Company shall not be
permitted to suspend sales pursuant to the Shelf Registration for more than 120
days in any 365-day period. The Company shall amend the registration statement
as necessary to comply with the rules, regulations or instructions applicable to
Form S-3 (or, if different, the form used for the registration statement) or by
the Securities Act or by any other rules and regulations thereunder for "shelf"
registration, and the Company shall furnish to the Holders copies of any such
amendment promptly after its being filed with the Commission. Anything in this
Agreement to the contrary notwithstanding, the Company shall have no obligation
to provide an underwritten registration for the benefit of Holders.
(b) The Registrable Shares proposed to be sold pursuant to the
Shelf Registration effected pursuant to this Section 1, which shall be block
trades if requested by the approved broker-dealer, shall be sold through
broker-dealers selected by the Holders subject to the reasonable approval of
Company.
(c) The Company may include in any such Shelf Registration
referred to in this Section 1 other shares of Common Stock of the Company held
by other security holders of the Company who have registration rights.
(d) Notwithstanding any other provision of this Agreement, the
Company shall not be required to effect a registration of any Common Stock under
this Section 1, or file any post-effective amendment to such a registration
unless the Company has received from Holders all information the Company has
reasonably requested pursuant to Section 3.
2. Company's Obligations. In connection with the Company's obligation
to effect a Shelf Registration pursuant to Section 1, it shall:
Registration Rights Agreement -- Page 2
<PAGE>
(a) Notify the Holders as to the filing thereof and of all
amendments or supplements thereto filed prior to the effective date of such
Shelf Registration;
(b) Notify the Holders, when the Company receives notice
thereof, of the time when such Shelf Registration became effective or any
amendment or supplement to any prospectus forming a part of such Shelf
Registration has been filed;
(c) Notify the Holders of any request by the Commission for
the amending or supplementing of such Shelf Registration or prospectus or for
additional information;
(d) Prepare and file with the Commission any amendments or
supplements to such Shelf Registration and the prospectus which may reasonably
be necessary in the opinion of counsel to the Company to keep such Shelf
Registration effective and to comply with the provisions of the Securities Act
with respect to the offer of the Registrable Shares covered by such Shelf
Registration during the period required for the distribution of such securities;
(e) Prepare and file with the Commission (and promptly notify
the Holders of such filing) any amendment or supplement to such Shelf
Registration and the prospectus as may be necessary in the opinion of counsel to
the Company to correct any statements therein or omission therefrom if, at any
time when a prospectus relating to such Registrable Shares is required to be
delivered under the Securities Act, any event with respect to the Company shall
have occurred as a result of which any prospectus would include an untrue
statement of material fact or omit to state any material fact necessary to make
the statements therein not misleading;
(f) In case the Holders are required to deliver a prospectus,
prepare upon request such amendment or amendments to such Shelf Registration and
such prospectus or prospectuses as may reasonably be necessary in the opinion of
counsel to the Company to permit compliance with the requirements of Section
9(a)(3) of the Securities Act;
(g) Advise the Holders if the Company shall receive notice or
obtain knowledge of the issuance of any stop order by the Commission suspending
the effectiveness of any such Shelf Registration or amendment thereto or of the
initiation or threatening of any proceedings for that purpose;
(h) Use its reasonable efforts to qualify such Registrable
Shares for sale under the securities or blue sky laws of such states within the
United States as the Holders may reasonably designate, except that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business in any such state or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so qualified or subject;
Registration Rights Agreement -- Page 3
<PAGE>
(i) Furnish to the Holders copies of any such Shelf
Registration and each preliminary or final prospectus, or supplement or
amendment required to be prepared thereto, all in such quantities required as
they may from time to time reasonably request (in which case each Holder shall
keep a written record of the distribution of the preliminary or final
prospectuses and shall refrain from delivery of the preliminary or final
prospectuses in any manner or under any circumstances which would violate the
Securities Act or the securities laws of any other jurisdiction, including the
various states of the United States); and
(j) Cause such Registrable Shares to be listed on the
principal securities exchange or quotation system, if any, on which shares of
the Company's Common Stock shall then be listed.
Each Holder of Registrable Shares agrees by acquisition of
such Registrable Shares that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2(e) hereof, such Holder
will forthwith discontinue disposition of Registrable Shares until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2(e) hereof, or until it is advised in writing by the Company that the
use of the prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the prospectus,
and, if so directed by the Company, such Holder will deliver to the Company all
copies then in such Holder's possession of the prospectus covering such
Registrable Shares current at the time of receipt of such notice.
3. Holders' Obligation to Furnish Information. In connection with the
Company's obligation to effect a Shelf Registration pursuant to Section 1, each
Holder shall furnish information to the Company concerning such Holder's
holdings of securities of the Company and the proposed method of sale or other
disposition of the Registrable Shares and such other information and
undertakings as the Company may reasonably request in connection with the
preparation and filing of the Shelf Registration or any post-effective amendment
covering all or part of the Registrable Shares. Each Holder further agrees to
enter into such undertakings and take such other action relating to the conduct
of the proposed offering which the Company may reasonably request as being
necessary, in the opinion of counsel to the Company, to ensure compliance with
the federal and state securities laws and the rules or other requirements of the
National Association of Securities Dealers, Inc. ("NASD") or otherwise to
effectuate the offering.
4. Expenses. The Company shall pay all expenses (the "Registration
Expenses") incident to each registration of the Registrable Shares under Section
1, including, without limitation, all registration, filing and NASD fees, all
fees and expenses of complying with state securities or blue sky laws, all fees
and expenses incurred by the Company in connection with the listing, if any, of
the Registrable Securities on any securities exchange or quotation system, all
word processing, duplicating and printing expenses, all fees and expenses
incurred by the
Registration Rights Agreement -- Page 4
Company in connection with any registration statement, any prospectus, any
amendments or supplements thereto, and other documents relating to the
performance of and compliance with this Agreement by the Company, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including, without limitation, the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of policies of insurance
purchased by the Company at its option against liabilities arising out of the
public offering of such Registrable Shares, but excluding discounts and
commissions and fees and expenses of selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Shares, transfer taxes, fees and disbursements of counsel for any
selling shareholder(s) and other selling expenses of the Holders, if any.
5. Indemnification.
(a) By the Company. In the event of any registration of the
Registrable Shares of the Company under the Securities Act, the Company will,
and hereby does, indemnify and hold harmless the Holders with respect to the
Registrable Shares included in such registration, against any losses, claims,
damages or liabilities which Holders may suffer under the Securities Act,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement of any material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading; PROVIDED HOWEVER that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Holder for use therein; and PROVIDED FURTHER that
the Company shall not be liable to any person in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
person asserting an untrue statement or omission at or prior to written
confirmation of the sale of the Registrable Shares to such person if such
statement or omission was corrected in such final prospectus as amended or
supplemented, and such final prospectus as amended or supplemented was furnished
by the Company to such person.
(b) By the Holders. Each Holder agrees that, as a condition to
including any Registrable Shares in any Shelf Registration filed pursuant to
Section 1, that each such Holder
Registration Rights Agreement -- Page 5
<PAGE>
hereby does, jointly and severally, indemnify and hold harmless against any
losses, claims, damages or liabilities which the Company, each director of the
Company, each officer of the Company, each other person (other than the Holders)
who participates in the offering or sale of such securities and each other
person, if any, who controls the foregoing parties within the meaning of the
Securities Act may suffer under the Securities Act, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, only if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder for use therein; provided that the
obligations of such Holder to indemnify the Company shall be limited to the
proceeds received by the Seller from the sale of such Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such Holder.
The Company shall be entitled to receive indemnities from
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution or sale, to the same extent as provided above
with respect to information so furnished in writing by such persons.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 5,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof, the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
Registration Rights Agreement -- Page 6
<PAGE>
(d) Other Indemnification. Indemnification similar to that
specified in paragraphs (a) through (c) of this Section 5 (with appropriate
modifications) shall be given by the Company and the Holders with respect to any
required registration or other qualification of the Registrable Shares under any
Federal or state law or regulation or any governmental authority other than the
Securities Act.
(e) Indemnification Payment. The indemnification required by
this Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this
Agreement shall for any reason be unavailable or insufficient (other than by
reason of exceptions provided in those sections) to an indemnified party under
paragraphs (a), (b) and (d) of this Section 5 in respect to any loss, claim,
damage or liability, or any action in respect thereof, or referred to therein,
then each indemnifying party shall, in lieu of indemnifying such party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and any Holder on the other, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the 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 such Holder, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5 were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to in this Section 5 shall be deemed to
include, for purposes of this Section 5, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
6. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of Holders of a
majority of the Registrable Shares.
7. Notices. Any notice from one party to the other shall be in writing
and either delivered personally or by certified or registered mail, postage
prepaid, or by telegram, telecopier, or by overnight mail delivery by a
nationally recognized courier, and shall be deemed
Registration Rights Agreement -- Page 7
<PAGE>
given when so delivered personally or, if mailed or given by telegram or
telecopier or overnight mail, upon receipt thereof by the addressees, as
follows:
If to the Company:
Dollar Tree Stores, Inc.
Attention: Mr. H. Ray Compton
500 Volvo Parkway
Chesapeake, Virginia 23320
Telephone: (757) 321-5000
Telecopy: (757) 321-5111
with a copy to:
William A. Old, Jr., Esq.
Hofheimer Nusbaum, P.C.
1700 Dominion Tower
999 Waterside Drive
Norfolk, Virginia 23510
Telephone: (757) 622-3366
Telecopy: (757) 629-0660
If to any Holder, in care of:
Richard J. Tehan
4619 Commerical Drive
New Hartford, NY 13413
Telecopy: (315) 724-2931
With a copy to:
Robert E. Remmell, Esq.
Steates Remmell Steates & Dziekan
4 Oxford Crossing, Suite 104
New Hartford, New York 13413
Telephone: (315) 724-6175
Telecopy: (315) 724-2931
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns as hereinafter set forth in this Section 8.
Provided an express written assumption of the Holder's obligations hereunder and
certain representations in a form reasonably acceptable to Company is
Registration Rights Agreement -- Page 8
<PAGE>
made, the provisions of this Agreement which are for the benefit of the Holders
shall also be for the benefit of and enforceable by any subsequent holder
receiving Registrable Shares by gift or bequest by a Holder ("Subsequent
Holders").
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. The validity of this Agreement and all matters
relating to its interpretation and performance shall be interpreted in
accordance with the laws of the Commonwealth of Virginia applicable to contracts
made and fully performed therein, but without regard to principles of conflicts
of law. The courts in Norfolk, Virginia shall have exclusive jurisdiction over
any controversy arising under this Agreement and venue in Norfolk, Virginia is
appropriate.
11. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
12. Entire Agreement; Amendment. This Agreement contains all of the
terms agreed upon by the parties with respect to the subject matter herein and
there are no representations or understandings between the parties except as
provided in this Agreement. This Agreement may not be amended or modified in any
way except by a written amendment duly executed by each of the parties.
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be executed and delivered as of the date first above
written.
DOLLAR TREE STORES, INC.
By: /s/ H. Ray Compton
------------------
Name: H. Ray Compton
Title: Executive Vice President
[The remainder of this page is left intentionally blank.]
Registration Rights Agreement -- Page 9
<PAGE>
HOLDERS
/s/ Richard J. Tehan
--------------------
Richard J. Tehan
/s/ Steven A. Tehan
-------------------
Steven A. Tehan
/s/ Basil L. Tehan
------------------
Basil L. Tehan
/s/ Robert J. Tehan
-------------------
Robert J. Tehan
/s/ Frederick J. Tehan
----------------------
Frederick J. Tehan
Registration Rights Agreement -- Page 10
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Dollar Tree Stores, Inc.:
We consent to the use of our report dated January 20, 1999, except as to note
13, which is as of March 22, 1999, relating to the consolidated balance sheets
of Dollar Tree Stores, Inc. and subsidiaries as of December 31, 1997 and 1998,
and the related consolidated income statements and statements of shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1998, incorporated by reference in the registration statement (No.
333- ___________), on Form S-3, of Dollar Tree Stores, Inc. which report appears
in the Annual Report on Form 10-K for the year ended December 31, 1998 of Dollar
Tree Stores, Inc. and to the reference to our firm under the heading "Experts"
in the prospectus.
/s/ KPMG LLC
Norfolk, Virginia
August 18, 1999
