Exhibit 10.3
SECURITIES PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
DE&S HOLDING CO.
DOLLAR EXPRESS, INC.
XXXXXXX SPAIN
XXXXXX SPAIN
GLOBAL PRIVATE EQUITY III LIMITED PARTNERSHIP
ADVENT PGGM GLOBAL LIMITED PARTNERSHIP
ADVENT PARTNERS GPE III LIMITED PARTNERSHIP
ADVENT PARTNERS (NA) GPE III LIMITED PARTNERSHIP
ADVENT PARTNERS LIMITED PARTNERSHIP
GUAYACAN PRIVATE EQUITY FUND LIMITED PARTNERSHIP
and
DOLLAR EXPRESS INVESTMENT, LLC
Dated as of February 3, 1999
SECURITIES PURCHASE AND CONTRIBUTION AGREEMENT
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TABLE OF CONTENTS
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BACKGROUND................................................................................................. 1
ARTICLE I - DEFINITIONS.................................................................................... 3
ARTICLE II - PURCHASE, SALE AND CONTRIBUTION...............................................................11
2.1. Sale, Purchase and Delivery of Stock...........................................................11
2.2. Purchase Price.................................................................................11
2.3. Contribution...................................................................................11
ARTICLE III - THE CLOSING..................................................................................12
3.1. Closing Date...................................................................................12
3.2. Deliveries by the Company to the Purchaser.....................................................12
3.3. Deliveries by Dollar Express to the Purchaser..................................................13
3.4. Deliveries by the Purchaser to the Company.....................................................13
3.5. Deliveries by the Management Shareholders to the Company.......................................14
3.6. Deliveries by the Company to the Management Shareholders.......................................14
3.7. Deliveries by Dollar Express to the Management Shareholders....................................14
3.8. Additional Deliveries..........................................................................14
3.9. Purchase Price Adjustment......................................................................14
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
DOLLAR EXPRESS AND THE MANAGEMENT SHAREHOLDERS.............................................................16
4.1. Organization and Good Standing.................................................................16
4.2. Authorization..................................................................................16
4.3. Capitalization.................................................................................17
4.4. Sale of Shares of Capital Stock; Offering Exemption............................................18
4.5. Subsidiaries...................................................................................19
4.6. Consents.......................................................................................19
4.7. Litigation.....................................................................................19
4.8. Compliance with Law............................................................................19
4.9. Title to Assets................................................................................20
4.10. Other Representations Regarding Dollar Express' Assets and Liabilities.........................20
4.11. Financial Statements...........................................................................22
4.12. No Undisclosed Liabilities.....................................................................22
4.13. Absence of Certain Developments................................................................22
4.14. Material Contracts.............................................................................25
4.15. Product Warranties.............................................................................27
4.16. Product Liabilities............................................................................27
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4.17. Insurance......................................................................................27
4.18. Transactions with Affiliates...................................................................27
4.19. Employee Relations.............................................................................28
4.20. ERISA Matters..................................................................................29
4.21. Environmental Laws.............................................................................32
4.22. Brokers........................................................................................34
4.23. Substantial Suppliers..........................................................................34
4.24. No Illegal Payments............................................................................34
4.25. Year 2000 Compliance...........................................................................35
4.26. The Company's Activities.......................................................................35
4.27. Disclosure.....................................................................................35
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................35
5.1. Organization and Good Standing.................................................................36
5.2. Authorization..................................................................................36
5.3. Consents.......................................................................................37
5.4. Litigation.....................................................................................37
5.5. Brokers........................................................................................37
5.6. Investment Intent of the Purchaser.............................................................37
5.7. Disclosure.....................................................................................38
ARTICLE VI - CERTAIN COVENANTS AND OTHER MATTERS...........................................................38
6.1. Confidentiality Agreement......................................................................38
6.2. Restriction on Certain Discussions and Actions.................................................38
6.3. Conduct of Business............................................................................39
6.4. Conduct of the Company. ......................................................................41
6.5. Notice of Certain Events. ....................................................................42
6.6. Cooperation; Access to Books and Records.......................................................42
6.7. Best Efforts...................................................................................43
6.8. Amendment to Articles of Incorporation.........................................................43
6.9. Offer of Employment............................................................................44
6.10. Restructuring..................................................................................44
ARTICLE VII - TAX RELATED MATTERS..........................................................................44
7.1. S Elections....................................................................................44
7.2. Tax Liability in Year of Closing...............................................................46
7.3. Covenants Regarding Distributions..............................................................46
7.4. 1998 Tax Distribution..........................................................................46
7.5. Purchaser Indemnifications. ...................................................................46
7.6. Management Shareholders' Indemnifications......................................................47
7.7. Tax Contest....................................................................................48
ARTICLE VIII - CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS.........................................48
8.1. Representations, Warranties and Covenants......................................................49
8.2. Opinion of the Company's Counsel...............................................................49
8.3. Delivery of Documents..........................................................................49
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8.4. Bank Debt......................................................................................49
8.5. Other Conditions Precedent to the Purchaser's Obligations......................................50
ARTICLE IX - CONDITIONS PRECEDENT TO THE COMPANY'S, DOLLAR
EXPRESS' AND THE MANAGEMENT SHAREHOLDERS' OBLIGATIONS......................................................51
9.1. Representations, Warranties and Covenants......................................................51
9.2. Bank Debt......................................................................................52
9.3. Other Conditions Precedent to the Company's Obligations........................................52
ARTICLE X - INDEMNIFICATION AND RELATED MATTERS............................................................52
10.1. By the Management Shareholders.................................................................52
10.2. By the Purchaser...............................................................................53
10.3. Limitation on Indemnification Liabilities......................................................53
10.4. Survival of Representations, Warranties and Covenants..........................................54
10.5. Notice of Indemnification......................................................................54
10.6. Indemnification Procedure for Third-Party Claims...............................................54
10.7. Payment of Indemnification Amounts.............................................................55
10.8. Management Shareholders' Claims Against the Company............................................56
10.9. Indemnity by Purchaser Entities................................................................56
ARTICLE XI - TERMINATION...................................................................................56
11.1. Termination....................................................................................56
11.2. Effect of Termination..........................................................................57
11.3. Expenses If No Closing.........................................................................57
ARTICLE XII - MISCELLANEOUS................................................................................57
12.1. Appointment of Directors.......................................................................57
12.2. Additional Restructuring.......................................................................58
12.3. Entire Agreement...............................................................................58
12.4. Specific Performance. ........................................................................58
12.5. Governing Law..................................................................................58
12.6. Transfer Taxes.................................................................................58
12.7. Expenses.......................................................................................58
12.8. Public Announcements...........................................................................59
12.9. Notices........................................................................................59
12.10. Severability...................................................................................61
12.11. Binding Effect; Successors and Assigns.........................................................61
12.12. Entire Agreement...............................................................................61
12.13. Interpretation.................................................................................61
12.14. Amendments.....................................................................................61
12.15. Counterparts...................................................................................62
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SECURITIES PURCHASE AND CONTRIBUTION AGREEMENT
THIS SECURITIES PURCHASE AND CONTRIBUTION AGREEMENT (this
"Agreement") is made and entered into as of the 3rd day of February, 1999, by
and among the following parties:
o DE&S Holding Co., a Pennsylvania corporation (the
"Company");
o Dollar Express, Inc., a Pennsylvania corporation ("Dollar
Express");
o Bernard Spain and Xxxxxx Spain (collectively, the
"Management Shareholders");
o Global Private Equity III Limited Partnership, a Delaware
limited partnership ("GPE III");
o Advent PGGM Global Limited Partnership, a Delaware limited
partnership ("AG-PGGM");
o Advent Partners GPE III Limited Partnership, a Delaware
limited partnership ("AP-GPEIII");
o Advent Partners (NA) GPE III Limited Partnership, a Delaware
limited partnership ("AP-NA");
o Advent Partners Limited Partnership, a Delaware limited
partnership ("APLP" and together with GPEIII, AG-PGGM, AP-GPEIII and AP-NA, the
"Advent Entities");
o Guayacan Private Equity Fund Limited Partnership, a Delaware
limited partnership ("Guayacan"); and
o Dollar Express Investment, LLC, a North Carolina limited
liability company ("DEI" and together with the Advent Entities and Guayacan, the
"Purchaser," in the proportions described in Exhibit A hereto).
BACKGROUND
A. Dollar Express operates large format dollar stores in the
eastern United States (the "Dollar Express Stores") and traditional card and
gift shops in the Philadelphia region (the "Spain's Cards Stores", and with the
Dollar Express Stores, collectively, the "Business"). The Company is a holding
company which was incorporated by the Management Shareholders to effectuate the
Contemplated Transactions. As of the date of this Agreement, the Management
Shareholders collectively own all of the issued and outstanding shares of stock
of the Company and Dollar Express.
B. Prior to Closing, the Management Shareholders desire (i) to
recapitalize the Company and Dollar Express through a distribution to
shareholders by Dollar Express and the repayment of existing debt and (ii) to
reorganize the entities by contributing all of the stock of Dollar Express to
the Company in exchange for an aggregate of 6,470,000 shares of the Company's
issued and outstanding Common Stock, $.01 par value per share (the "Company
Common Stock") in a transaction intended to qualify under Section 351 of the
Code (as defined in Article I) (collectively, the "Restructuring").
C. The Purchaser desires to acquire a minority interest in the
Company, and the Company and the Management Shareholders desire that the
Purchaser acquire such interest, substantially in accordance with the procedures
set forth in this Background Section and upon the terms and conditions set forth
in this Agreement.
D. On January 1, 1999, Dollar Express declared and paid by
means of two (2) promissory notes (the "Notes") a dividend to the Management
Shareholders, pro rata with their ownership interest, in an amount equal to, in
the aggregate, Fifty-Five Million Dollars ($55,000,000) plus one- half (1/2) of
Dollar Express' cash available on January 15, 1999 after payment of certain
expenses.
E. At Closing, the Company and Dollar Express will enter into
a credit facility for up to Forty Million Dollars ($40,000,000) from a syndicate
of senior lenders and will use a portion of the proceeds therefrom (the
"Borrowings"), together with all or a portion of the Purchase Price set forth
herein, to (i) satisfy the Notes, (ii) to repay the Company's existing
indebtedness for borrowed money (approximately Four Million Dollars ($4,000,000)
as of the date hereof), (iii) pay costs associated with the Contemplated
Transactions, and (iv) provide for general working capital for the Company and
Dollar Express.
F. At Closing, the Purchaser will purchase from the Company an
aggregate of 3,530,000 shares of newly issued Series A convertible preferred
stock of the Company for an aggregate purchase price of Thirty-Four Million
Dollars ($34,000,000), such stock having the designations set forth on the
Designation Statement attached hereto as Exhibit B and to be convertible into
shares of the Company Common Stock (the "Series A Preferred Shares"), such
Series A Preferred Shares to be issued in the proportions set forth in Exhibit A
hereto.
G. At Closing, the Purchaser will also purchase from the
Company for an aggregate purchase price of One Million Dollars ($1,000,000)
warrants to purchase, in the aggregate, up to four percent (4%) of the
outstanding shares of Company Common Stock (as calculated therein) each in the
form of Exhibit C attached hereto, such warrants to be issued in the proportions
set forth in Exhibit A hereto (the "Liquidity Event Warrants").
NOW, THEREFORE, in consideration of the promises and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, and upon the terms and subject to the conditions hereinafter set forth,
the Company, Dollar Express, the Management Shareholders and the Purchaser,
intending to be legally bound, hereby agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Accounting Referee" has the meaning set forth in Section
3.9(c) hereof.
"Adjustment Percentage" means that percentage of the
outstanding Company Common Stock, determined on a fully-diluted basis, ("x"),
determined by the following formula:
126.15 - [(12.5-A) x 10.09] - B
x = 100 / [ ------------------------------------- ] - 35.3
35
Where:
A = Final Closing EBITDA divided by 1,000,000
B = The amount of the Borrowings drawn on the Closing Date divided
by 1,000,000
"Advent Entities" has the meaning set forth in the recitals
hereof.
"Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to elect a
majority of the board of directors (or other governing body) or to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise and, in any
event and without limiting the generality of the foregoing, any Person owning
ten percent (10%) or more of the voting securities of another Person shall be
deemed to control that Person.
"Agreement" has the meaning set forth in the recitals hereof.
"Benefit Plan" means any Plan established by Dollar Express,
or any predecessor of Dollar Express, to which Dollar Express contributes or has
contributed on behalf of any Employee, or under which any Employee, or any
beneficiary thereof, is covered, is eligible for coverage or has benefit rights,
or for which Dollar Express has any Liability.
"Borrowings" has the meaning set forth in the recitals hereof.
"Business" has the meaning set forth in the recitals hereof.
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"C Year" means the taxable period or periods on and after the
Closing Date when Dollar Express and the Company are taxable as C corporations.
"Claim" means any written demand, claim, complaint, suit,
action, cause of action, proceeding or notice by any Person, including any
Environmental Claim, alleging actual or potential Liability for any Loss,
including any Environmental Loss, or alleging any Default under any Law,
Contract, License, Permit, or Benefit Plan.
"Closing" means the consummation of the securities purchase
contemplated by this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Closing EBITDA" means the EBITDA of the Company as of
December 31, 1998, as shown in the Purchaser's calculation delivered pursuant to
Section 3.9(a).
"Closing Financial Statements" has the meaning set forth in
Section 3.9(a) hereof.
"COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, as set forth in Section 4980B of the Code and Part 6 of
Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the recitals hereof.
"Company Articles Amendment" means the amendment to the
Company's articles of incorporation necessary to authorize the issuance of the
Series A Preferred Shares, effective upon acceptance for filing by the Secretary
of State of the Commonwealth of Pennsylvania.
"Company Common Stock" has the meaning set forth in the
recitals hereof.
"Company Documents" means each agreement, document, instrument
or certificate contemplated by this Agreement or to be executed by the Company,
Dollar Express or the Management Shareholders in connection with the
consummation of the Contemplated Transactions other than this Agreement.
"Confidential Information" shall mean (i) with respect to any
party to this Agreement, all financial, technical, commercial or other
information disclosed by a party (the "Discloser") to another party (the
"Recipient") in connection with the Contemplated Transactions and (ii) each of
the terms, conditions and other provisions contained in this Agreement and the
agreements or documents to be delivered pursuant to this Agreement.
Notwithstanding the preceding sentence, the definition of Confidential
Information shall not include any information that (A) is in the public domain
at the time of disclosure to the Recipient or becomes part of the public domain
after such disclosure through no fault of the Recipient, (B) is already in the
possession of the Recipient at the time of disclosure to such Recipient, (C) is
disclosed to a party by any Person other than a party to this Agreement;
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provided, that the party to whom such disclosure has been made does not have
actual knowledge that such Person is prohibited from disclosing such information
(either by reason of contract or legal or fiduciary obligation), (D) is
developed independently by any party without the use of any Confidential
Information or (E) is required to be disclosed under Law or Court Order
(provided that prompt notice of such disclosure will be given as far in advance
as reasonably possible to Discloser).
"Contemplated Transactions" means the transactions
contemplated by this Agreement and all documents to be executed pursuant to this
Agreement.
"Contract" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sale contract, mortgage, guarantee,
license, franchise, insurance policy, commitment or other arrangement or
agreement, and all rights and remedies thereunder.
"Damages" means all claims, actions, losses, damages, costs,
expenses, taxes, interest, penalties, fines, suits, judgments, orders, liens,
obligations and liabilities (including, without limitation, reasonable
attorneys' fees and reasonable consultants, accountants and expert witnesses'
fees incident to the foregoing).
"Default" means (a) a violation, breach or default, (b) the
occurrence of an event which with the passage of time or the giving of notice or
both would constitute a violation, breach or default, or (c) the occurrence of
an event that (with or without the passage of time or the giving of notice or
both) would give rise to a right of damages, specific performance, termination,
renegotiation or acceleration (including the acceleration of payment).
"DEI" has the meaning set forth in the recitals hereof.
"Designation Statement" means the Designation Statement for
the Series A Preferred Shares attached hereto as Exhibit B.
"Dollar Express Articles Amendment" means the amendment to
Dollar Express' articles of incorporation necessary to redesignate the Dollar
Express Stock, effective upon acceptance for filing by the Secretary of State of
the Commonwealth of Pennsylvania.
"Dollar Express Stock" has the meaning set forth in Section
4.3 hereof.
"Dollar Express Stores" has the meaning set forth in the
recitals hereof.
"EBITDA" means the amount of earnings before interest, taxes,
depreciation and amortization, each determined in accordance with GAAP.
"Effective Date" means close of business on the day prior to
the Closing Date.
"Employee Benefit Plan" has the meaning set forth in Section
3(3) of ERISA.
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"Employees" means all persons employed in the Business on the
day immediately prior to the Closing Date, including any persons on disability,
sick leave or authorized leave of absence from the Business.
"Environmental Claim" means any Claim arising out of, related
to or in connection with the use, treatment, removal, storage, disposal,
presence, migration, transport, handling, manufacture, possession, distribution,
or the actual or threatened emission, injection, escape, dumping, spill, leak,
discharge or release of Hazardous Materials.
"Environmental Laws" means all federal, state and local laws
and regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), including the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A. xx.xx. 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C.A. xx.xx. 6901 et seq., the
Clean Water Act, 33 U.S.C.A. xx.xx. 1251 et seq., the Clean Air Act 42 U.S.C.A.
xx.xx. 7401 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss. 651
et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., and laws
and regulations relating to emissions, spills, leaks, discharges, releases or
threatened releases of Hazardous Materials, or otherwise relating to the
manufacture, possession, distribution, use, treatment, storage, disposal,
presence, transport or handling of Hazardous Materials.
"Environmental Loss" means any Liability arising out of,
related to or in connection with the use, treatment, removal, storage, disposal,
presence, migration, transport, handling, manufacture, possession, distribution,
or the actual or threatened emission, injection, escape, dumping, spill, leak,
discharge or release of Hazardous Materials, including potential or actual
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries or penalties.
"Equipment" means the furniture, fixtures, machinery,
equipment, motor vehicles, office equipment, computers and replacement parts
currently used in the operation of the Business.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, as to any person, any trade or
business, whether or not incorporated, which together with such person would be
deemed, at any time through the Closing Date, a single employer within the
meaning of Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.
"Exhibit" means any of the lettered exhibits to this
Agreement.
"Final Closing EBITDA" means Closing EBITDA (a) as shown in
the Purchaser's calculation delivered pursuant to Section 3.9(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
3.9(b); or (b) if such a notice of disagreement is delivered, (i) as agreed by
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the Purchaser and the Management Shareholders pursuant to Section 3.9(c) or (ii)
in the absence of such agreement, as shown in the Accounting Referee's
calculation delivered pursuant to Section 3.9(c).
"Financial Statements" has the meaning set forth in Section
4.11 hereof.
"Financial Statement Date" means December 31, 1997.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Group Health Plan" means a group health plan, as defined in
Section 5000(b)(1) of the Code.
"Guayacan" has the meaning set forth in the recitals hereof.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder.
"Hazardous Materials" means all explosive or regulated
radioactive materials or substances, hazardous or toxic substances, reactive,
corrosive, carcinogenic, flammable or hazardous pollutant or other substance,
wastes or chemicals, petroleum or petroleum distillates, natural gas or
synthetic gas, asbestos or asbestos containing materials and all other materials
or chemicals regulated pursuant to any Environmental Laws, including any
"hazardous substance" or "hazardous waste" as defined in Environmental Laws,
materials listed in 49 C.F.R. ss.172.101, materials defined as hazardous
pursuant to Section 101(14) of CERCLA, and special nuclear or by-product
material as defined by the Atomic Energy Act of 1954, 42 U.S.C.A. ss. 3011 et
seq. and the regulations promulgated thereto.
"Indemnitee" has the meaning set forth in Section 10.5 hereof.
"Indemnitor" has the meaning set forth in Section 10.5 hereof.
"Initial Balance Sheet" means the audited balance sheet of the
Business at the Financial Statement Date, attached hereto as a part of Schedule
4.11.
"Intangible Assets" means (i) all patents, copyrights, trade
names, trademarks, service marks and names (registered and unregistered), and
applications and registrations therefor; (ii) all research, development and
commercially practiced processes, trade secrets, know-how, inventions, and
engineering and other technical information; (iii) all computer programs,
software and data bases, in each case, owned by or licensed to Dollar Express;
and (iv) all information, drawings, specifications, designs, plans, financial,
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marketing and business data and plans, other proprietary, confidential or
intellectual information or property and all copies and embodiments thereof in
whatever form or medium.
"Inventory" means all inventories of goods held for sale by
Dollar Express.
"Issued Dollar Express Shares" has the meaning set forth in
Section 4.3 hereof.
"Labor Act" means the Labor Management Relations Act, and the
rules and regulations promulgated thereunder.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement or guideline.
"Legal Proceeding" means any judicial, administrative or
arbitral action, suit, proceeding (public or private), claim or governmental
proceeding.
"Lender" means the lender of the Borrowings.
"Liabilities" means all indebtedness, obligations and other
liabilities, whether direct or indirect, and any loss, damage (including direct,
incidental, consequential and special damages), cost, deficiency, Lien, penalty,
fine, cost or expense (including any litigation expenses), or any diminution in
value of any real or personal property, or contingent liability, loss
contingency, unpaid expense, claim, guaranty or endorsement (other than
endorsements for deposits or collection of checks in the ordinary course of
business) of or by any Person whether or not ascertainable.
"Licenses" means all licenses, permits, authorizations,
approvals, franchises, rights, orders, variances (including zoning variances),
easements, rights of way, and similar consents or certificates granted or issued
by any Person, other than a Governmental Body, relating to the Business.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Liquidity Event Warrants" has the meaning set forth in the
recitals hereof.
"Management Shareholders" has the meaning set forth in the
recitals hereof.
"Material Adverse Effect" means any material adverse effect
on, or any effect, condition, event, or circumstance that has resulted or could
reasonably be expected to result in a material and adverse change in, the
business, properties, assets, condition (financial or otherwise), results of
operations or Liabilities of the Company and Dollar Express, taken as a whole.
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"Material Contracts" has the meaning set forth in Section 4.14
hereof.
"Maximum Amount" has the meaning set forth in Section 10.3
hereof.
"1998 Distribution" has the meaning set forth in Section 7.3
hereof.
"Notes" has the meaning set forth in the recitals hereof.
"Order" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award issued, granted, imposed or promulgated by
a Governmental Body.
"Outside Closing Date" has the meaning set forth in Section
11.1(b) hereof.
"Pension Plan" means any employee pension benefit plan as
defined in Section 3(2) of ERISA.
"Permit" means any written approval, authorization, consent,
franchise, license, permit, variance, registration or certificate issued or
granted by any Governmental Body.
"Permitted Exceptions" means (i) statutory Liens for current
taxes, assessments or other governmental charges not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings; (ii) mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the ordinary course of business that are not in the
aggregate material to the Business or the assets of Dollar Express; (iii)
zoning, entitlement and other land use regulations by Governmental Bodies,
provided that such regulations have not been violated; (iv) Liens set forth in
Schedule 4.9 hereto; (v) Liens in favor of the Lender; (vi) deposits under
workers compensation, unemployment insurance, social security or similar Laws;
and (vii) such other imperfections in title, charges, easements, restrictions
and encumbrances of public record which do not in the aggregate have a Material
Adverse Effect or do not materially interfere with the ownership, use, value,
operation or marketability of the affected property.
"Person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation or holiday pay, day or dependent care, legal services,
cafeteria, life, health, accident, sickness, disability, workmen's compensation,
medical, life, dental or other insurance, severance, separation or other
employee benefit, fringe benefit, plan, program, trust, contract, practice,
policy or arrangement of any kind, whether written or oral, including any
"employee benefit plan" within the meaning of Section 3(3) of ERISA whether or
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not in the nature of formal or informal understandings and whether or not
included in or described in any employment manual or handbook.
"Prohibited Transaction" means a transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA respectively.
"Purchaser" has the meaning set forth in the recitals hereof.
"Purchaser Documents" means each agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
the Purchaser in connection with the consummation of the Contemplated
Transactions other than this Agreement.
"Purchaser Representatives" has the meaning forth in Section
6.2 hereof.
"Restructuring" has the meaning set forth in the recitals
hereof.
"S Election Date" has the meaning set forth in Section 7.1
hereof.
"S Year" means the taxable period or periods prior to the
Closing Date when Dollar Express was taxable for federal income tax purposes as
an S corporation.
"Schedule" means any of the numbered schedules to this
Agreement.
"Securities" has the meaning set forth in Section 4.3 hereof.
"Series A Preferred Shares" has the meaning set forth in the
recitals hereof.
"Spain's Cards Stores" has the meaning set forth in the
recitals hereof.
"Taxes" means all federal, state, local and foreign income,
property and sales taxes and tariffs and all charges, fees, levies or other
assessments whether federal, state, local or foreign based upon or measured by
income, capital, net worth or gain and any other tax including but not limited
to all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, withholding, payroll, employment, social security,
unemployment, FICA, FUTA, excise, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever including all
interest and penalties thereon, and additions to tax or additional amounts
imposed or charged by any Governmental Body.
"Third Party Leased Real Property" means real property
occupied by Dollar Express as a store which is owned or leased by a Person not
related to or an Affiliate of either of the Management Shareholders or a family
member thereof.
"Threshold Amount" has the meaning set forth in Section 10.3
hereof.
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"WARN" means the federal Worker Adjustment and Retraining
Notification Act.
ARTICLE II
PURCHASE, SALE AND CONTRIBUTION
2.1. Sale, Purchase and Delivery of Stock. On the terms and
subject to the conditions hereinafter set forth in this Agreement, the Company
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, on the Closing Date, the Series A Preferred Shares and the Liquidity
Event Warrants.
2.2. Purchase Price. The aggregate purchase price for the
Series A Preferred Shares shall be Thirty-Four Million Dollars ($34,000,000) and
the aggregate purchase price for the Liquidity Event Warrants shall be One
Million Dollars ($1,000,000), each payable to the Company in cash at the
Closing.
2.3. Contribution. At or prior to Closing, the Management
Shareholders shall contribute all of the stock of Dollar Express to the Company
in exchange for an aggregate of 6,470,000 shares of Company Common Stock.
ARTICLE III
THE CLOSING
3.1. Closing Date. Closing of the Contemplated Transactions
shall be effective as of the Effective Date, and shall take place on the fifth
(5th) business day after the day on which the conditions to Closing set forth
herein have been satisfied or are waived by the party entitled to the benefit of
the condition being waived, at 10:00 a.m. at the offices of Xxxxxx Xxxxxxxx LLP,
3000 Two Xxxxx Square, Philadelphia, PA, or at such other place and at such
other time and date as may be mutually agreed upon by the parties hereto, but in
no event later than the Outside Closing Date.
3.2. Deliveries by the Company to the Purchaser. Subject to
the fulfillment of each of the conditions set forth in Article IX, except such
conditions as may be waived by the parties at the Closing, the Company shall
deliver, or shall cause to be delivered, to the Purchaser the following:
(a) the Company Articles Amendment, authorizing the
issuance of the Series A Preferred Shares in the form of the Designation
Statement, and evidence of filing thereof;
(b) certificates representing the Series A Preferred
Shares and the Liquidity Event Warrants;
(c) the certificates required by Section 8.1(c) hereof;
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(d) the legal opinion required by Section 8.2 hereof;
(e) the Investor Rights Agreement and Registration Rights
Agreement, required by Section 8.3 hereof;
(f) resolutions duly adopted by the Board of Directors of
the Company authorizing the Restructuring and the transactions which are the
subject of this Agreement;
(g) certificates issued by appropriate governmental
authorities evidencing, as of a recent date, the good standing and tax status of
the Company in the states in which it is incorporated and qualified;
(h) a copy of the By-laws, including all amendments
thereto, of the Company, certified by its Secretary;
(i) the consent of any third party required for the
consummation by the Company of the Contemplated Transactions; and
(j) the other agreements, instruments and documents
referred to in Article VIII hereof and such other agreements, instruments and
documents as the Purchaser or its counsel may reasonably request.
3.3. Deliveries by Dollar Express to the Purchaser. Subject to
the fulfillment of each of the conditions set forth in Article IX, except such
conditions as may be waived by the parties at the Closing, Dollar Express shall
deliver, or shall cause to be delivered, to the Purchaser the following:
(a) the Dollar Express Articles Amendment, redesignating
the Dollar Express Stock, and evidence of filing thereof;
(b) the Employment Agreements required by Section 8.3
hereof;
(c) the certificate required by Section 8.1(c) hereof;
(d) the legal opinion required by Section 8.2 hereof;
(e) resolutions duly adopted by the Board of Directors of
Dollar Express authorizing the Restructuring and the transactions which are the
subject of this Agreement;
(f) certificates issued by appropriate governmental
authorities evidencing, as of a recent date, the good standing and tax status of
Dollar Express in the states in which it conducts the Business;
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(g) a copy of the By-laws, including all amendments
thereto, of Dollar Express, certified by its Secretary;
(h) the consent of any third party required for the
consummation by Dollar Express of the Contemplated Transactions; and
(i) the other agreements, instruments and documents
referred to in Article VIII hereof and such other agreements, instruments and
documents as the Purchaser or its counsel may reasonably request.
3.4. Deliveries by the Purchaser to the Company. Subject to
the fulfillment of each of the conditions set forth in Article VIII, except such
conditions as may be waived by the parties at the Closing, the Purchaser shall
deliver, or cause to be delivered, to the Company, Dollar Express and the
Management Shareholders the following:
(a) immediately available funds in the aggregate amount
of Thirty- Five Million Dollars ($35,000,000) by wire transfer as provided in
Section 2.2 hereof;
(b) the certificates referred to in Section 9.l(c) hereof
signed by duly authorized officers of the Purchaser;
(c) the other agreements, instruments and documents
referred to in Article IX hereof and such other agreements, instruments and
documents as the Company, Dollar Express, the Management Shareholders or their
counsel may reasonably request.
3.5. Deliveries by the Management Shareholders to the Company.
Subject to the fulfillment of each of the conditions set forth in Article VIII,
except such conditions as may be waived by the parties at the Closing, the
Management Shareholders shall deliver, or cause to be delivered, to the Company
the following:
(a) stock certificates, representing the Issued Dollar
Express Shares; and
(b) duly executed stock transfer powers, transferring the
Issued Dollar Express Shares to the Company.
3.6. Deliveries by the Company to the Management Shareholders.
Subject to the fulfillment of each of the conditions set forth in Article VIII,
except such conditions as may be waived by the parties at the Closing, the
Company shall deliver, or cause to be delivered, to the Management Shareholders
stock certificates representing, in the aggregate, 6,470,000 shares of Company
Common Stock.
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3.7. Deliveries by Dollar Express to the Management
Shareholders. Immediately following the completion of the deliveries at the
Closing, Dollar Express shall cause the Notes to be satisfied in full.
3.8. Additional Deliveries. At Closing, the Company shall pay
to Advent International Corporation, a Delaware corporation, in immediately
available funds the aggregate amount of Three Hundred and Fifty Thousand Dollars
($350,000) by wire transfer.
3.9. Purchase Price Adjustment.
(a) As promptly as practicable, but no later than sixty
(60) days, after the Closing Date, the Purchaser shall prepare and deliver to
the Management Shareholders an audited income statement and balance sheet of the
Company as of December 31, 1998 (the "Closing Financial Statements"), together
with a certificate, signed by the Purchaser, based on such Closing Financial
Statements setting forth the Purchaser's calculation of Closing EBITDA. The
Management Shareholders and the Company will fully cooperate with the Purchaser
and its accountants, PricewaterhouseCoopers LLP, in connection with the
preparation of the Closing Financial Statements. The Purchaser will, and will
request PricewaterhouseCoopers LLP to, make available to the Management
Shareholders copies of all customary accounting work papers in their respective
possession that were prepared in connection with the preparation of the Closing
Financial Statements and the calculation of Closing EBITDA. The Closing
Financial Statements shall be accompanied by a special purpose report of
PricewaterhouseCoopers LLP and shall fairly present the results of operations of
the Company as of the Effective Date in accordance with GAAP, applied on a basis
consistent with most recent previous application by the Company in audited
financial statements.
(b) If the Management Shareholders disagree with the
Purchaser's calculation of Closing EBITDA, the Management Shareholders may,
within twenty (20) days after delivery of the Closing Financial Statements,
deliver a notice to the Purchaser disagreeing with such calculation and setting
forth the Management Shareholders' calculation of such amount, which calculation
shall be made in accordance with GAAP. Any such notice of disagreement shall
specify those items or amounts as to which the Management Shareholders disagree,
and the Management Shareholders shall be deemed to have agreed with all other
items and amounts contained in the Closing Financial Statements and the
calculation of Closing EBITDA delivered pursuant to subsection (a). The
Management Shareholders and the Company will, and will request Xxxxx Xxxxxxxx
LLP to, make available to the Purchaser copies of all customary accounting work
papers in their respective possession that were prepared in connection with the
preparation of any notice delivered pursuant to this subsection (b) and the
Management Shareholders' calculation of Closing EBITDA.
(c) If a notice of disagreement shall be duly delivered
pursuant to subsection (b), the Purchaser and the Management Shareholders shall,
during the fifteen (15) days following such delivery, use their best efforts to
reach agreement on the disputed items or amounts in order to determine, as may
be required, the amount of Closing EBITDA. If, during such period, the Purchaser
and the Management Shareholders are unable to reach such agreement, they shall
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promptly thereafter cause a firm of nationally recognized independent public
accountants as may be agreed by the Purchaser and the Management Shareholders
(the "Accounting Referee") promptly to review this Agreement and the disputed
items or amounts for the purpose of calculating Closing EBITDA. In making such
calculation, the Accounting Referee shall conduct its review in accordance with
GAAP, applied on a basis consistent with the most recent application by the
Company. The Accounting Referee shall deliver to the Purchaser and the
Management Shareholders, as promptly as practicable, a report setting forth its
calculation of Closing EBITDA. Such report shall be final and binding upon the
Purchaser and the Management Shareholders. The cost of such review and report
shall be borne equally by the Purchaser and the Management Shareholders.
(d) If the Final Closing EBITDA is less than Twelve
Million Two Hundred Fifty Thousand Dollars ($12,250,000), then the Company shall
amend the Designation Statement, and the Management Shareholders shall cause the
Company to amend the Designation Statement, so that the sum of thirty-five and
three-tenths percent (35.3%) plus the Adjustment Percentage, expressed as a
decimal, is substituted for 0.353 in the definition of "Conversion Factor" in
Article 6 of the Designation Statement, and any other changes necessary to
conform provisions in the Designation Statement to the foregoing are also made
at that time. In such event, the Series A Preferred Shares received by the
Purchaser pursuant to the Contemplated Transactions shall be convertible, in the
aggregate, into that number of shares of Company Common Stock equal to 35.3%
plus the Adjustment Percentage.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
DOLLAR EXPRESS AND THE MANAGEMENT SHAREHOLDERS
The Company, Dollar Express and the Management Shareholders,
jointly and severally, hereby represent and warrant to the Purchaser as follows:
4.1. Organization and Good Standing. Each of the Company and
Dollar Express is a corporation duly organized, subsisting and in good standing
under the laws of the Commonwealth of Pennsylvania and has all requisite
corporate power and authority to carry on its business as it is now being
conducted, and to execute, deliver and perform this Agreement and to consummate
the Contemplated Transactions. Each of the Company and Dollar Express is
qualified to do business as a foreign corporation in each state in which the
failure to qualify would constitute a Material Adverse Effect.
4.2. Authorization. Each of the Company and Dollar Express has
full corporate power and authority to execute and deliver this Agreement and
each of the Company Documents and to perform fully its obligations hereunder and
thereunder. This Agreement has been, and each of the Company Documents will be
at the Closing, duly executed and delivered by the Company and Dollar Express,
and (assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and the Company Documents when
so executed and delivered will constitute, legal, valid and binding obligations
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of the Company and Dollar Express, enforceable against the Company and Dollar
Express in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Neither the execution and delivery by the
Company, Dollar Express or the Management Shareholders of this Agreement or the
Company Documents, nor the consummation by the Company, Dollar Express or the
Management Shareholders of the Contemplated Transactions, nor the compliance by
the Company, Dollar Express or the Management Shareholders with any of the
provisions hereof or thereof, does or will (i) conflict with, or result in the
breach of, any provision of the Articles of Incorporation or By-laws of the
Company or any provision of the Articles of Incorporation or Bylaws of Dollar
Express, (ii) subject to the receipt of the consents set forth in Schedule 4.2
hereto, conflict with, violate, result in the breach or termination of, or
constitute a Default (with or without notice or lapse of time, or both) under
any Contract, Permit or Order relating to the Business to which any or the
Company, Dollar Express or the Management Shareholders is a party or by which
any such Person or any of its assets is bound or subject, (iii) constitute a
violation of any Law applicable to the Company, Dollar Express or the Management
Shareholders, or (iv) result in the creation of any Lien upon any of the
Company's or Dollar Express' assets or give rise to any Liability (other than
any Lien in favor of, or Liability to, the Lender).
4.3. Capitalization.
(a) Of the Company. The authorized capital stock of the
Company consists of 75,000,000 shares of Company Common Stock and 25,000,000
shares of preferred stock, of which two (2) shares have been issued and are
outstanding, free and clear, one (1) each to each of the Management Shareholders
as of the date of this Agreement and of which 3,530,000 shares of preferred
stock and 6,470,000 shares of Company Common Stock will be issued and
outstanding as of the Closing Date. The issued shares of Company Common Stock
have been validly issued, fully paid and nonassessable and no share of Company
Common Stock has been issued in violation of any preemptive or similar right.
Except with respect to the Series A Preferred Shares and Liquidity Event
Warrants comprising part of the Contemplated Transactions, (i) the Company has
not issued or agreed to issue any other shares of capital stock, (ii) there are
no outstanding warrants, options or other rights, commitments, agreements or
understandings to purchase or acquire any shares of capital stock or other
equity securities of the Company, (iii) there are no outstanding debt securities
of the Company convertible into equity securities or otherwise containing equity
provisions, (iv) there are no preemptive rights with respect to the issuance or
sale of any of the Company's capital stock, and (v) the Company has not reserved
any of its authorized capital stock for any purpose. There are no restrictions
on the transfer of the capital stock of the Company other than those arising
from federal and state securities laws or those which arise by reason of the
Contemplated Transactions. The Company has no other understandings or agreements
respecting the Company's capital stock or other securities of the Company except
as constitute the Contemplated Transactions. All shares of capital stock,
options, warrants, notes, bonds or other equity or debt securities
("Securities") which have ever been offered or sold by the Company have been
exempt from registration pursuant to the registration provisions of the
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Securities Act of 1993, as amended and applicable state securities laws, and no
such Securities were registered under any such act or laws.
(b) Of Dollar Express. The authorized capital stock of
Dollar Express consists of 75 million shares of Common Stock, par value $.01 per
share, of which 74 million shares have been designated as voting Common Stock
and one million shares have been designated as non-voting Common Stock, and 25
million shares of undesignated Preferred Stock, par value $.01 per share
(collectively, the "Dollar Express Stock"). Of these, only 10,000 shares of
voting Common Stock and 2,500 shares of non-voting Common Stock have been issued
and are outstanding (collectively, the "Issued Dollar Express Shares"). One-half
of all of the Issued Dollar Express Shares currently outstanding is owned of
record and beneficially by each of the Management Shareholders free and clear.
The Issued Dollar Express Shares have been validly issued, fully paid and
nonassessable and none of the Issued Dollar Express Shares has been issued in
violation of any preemptive or similar right. Except as contemplated by the
Restructuring, (i) Dollar Express has not issued or agreed to issue any other
Dollar Express Stock, (ii) there are no outstanding warrants, options or other
rights, commitments, agreements or understandings to purchase or acquire any
shares of Dollar Express Stock or other equity securities of Dollar Express,
(iii) there are no outstanding debt securities of Dollar Express convertible
into equity securities or otherwise containing equity provisions, (iv) there are
no preemptive rights with respect to the issuance or sale of any of the Dollar
Express Stock, and (v) Dollar Express has not reserved any of the authorized
Dollar Express Stock for any purpose. There are no restrictions on the transfer
of the Dollar Express Stock other than those arising from federal and state
securities laws or those which arise by reason of the Contemplated Transactions.
Dollar Express has no other understandings or agreements respecting the Dollar
Express Stock or other securities of Dollar Express except as constitute the
Contemplated Transactions. All Securities which have ever been offered or sold
by Dollar Express have been exempt from registration pursuant to the
registration provisions of the Securities Act of 1993, as amended and applicable
state securities laws, and no such Securities were registered under any such act
or laws. After the Restructuring, all outstanding Dollar Express Stock will be
owned by the Company, free and clear of any and all Liens.
4.4. Sale of Shares of Capital Stock; Offering Exemption.
(a) The Series A Preferred Shares and Liquidity Event
Warrants being sold by the Company to the Purchaser hereunder, will, upon the
issuance thereof following the payment therefor in accordance with the terms of
this Agreement, be (i) validly issued and outstanding, (ii) fully paid and
nonassessable, (iii) not subject to or issued in violation of any preemptive or
other rights of the shareholders of the Company or others, and (iv) free and
clear of any and all Liens.
(b) The Series A Preferred Shares have the designations,
powers, preferences, and relative and other special rights, and the
qualifications, limitations and restrictions contained in the Company Articles
Amendment and the designations set forth in the Designation Statement.
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(c) The Liquidity Event Warrants have the designations,
powers, preferences, and relative and other special rights, and the
qualifications, limitations and restrictions set forth in the Warrant
Certificate attached hereto as Exhibit C.
(d) The offering for sale and the actual sale of the
Series A Preferred Shares and the Liquidity Event Warrants being sold by the
Company to the Purchaser hereunder are each exempt from registration under the
Securities Act of 1933, as amended, and from registration or qualification under
applicable state securities or blue sky laws.
4.5. Subsidiaries. Except as contemplated by the
Restructuring, neither the Company nor Dollar Express has any subsidiaries nor
does either own, or have the right to acquire, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
4.6. Consents. No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of the Company, Dollar Express or
the Management Shareholders in connection with (i) the execution and delivery by
the Company, Dollar Express and the Management Shareholders of this Agreement or
the Company Documents, (ii) the compliance by the Company, Dollar Express and
the Management Shareholders with any of the provisions hereof or thereof, and
(iii) the performance of the Company, Dollar Express and the Management
Shareholders of the Contemplated Transactions, in each case except as set forth
in Schedule 4.6 hereto.
4.7. Litigation. Schedule 4.7 hereto sets forth all pending
Legal Proceedings and all those, to the knowledge of the Company, Dollar Express
or the Management Shareholders, threatened against the Company, Dollar Express
or the Management Shareholders which (i) are not covered by insurance or (ii)
seek in excess of Twenty-Five Thousand Dollars ($25,000) from the Company,
Dollar Express or the Management Shareholders. There is no Legal Proceeding
pending or, to the knowledge of the Company, Dollar Express or the Management
Shareholders, threatened (i) against the Company, Dollar Express or the
Management Shareholders in connection with the operation of the Business which
is not covered by insurance, (ii) that seeks to enjoin or obtain damages in
respect of the consummation of the Contemplated Transactions, or (iii) that
questions the validity of this Agreement, any of the Company Documents or any
action taken or to be taken by the Company, Dollar Express or the Management
Shareholders in connection with the Contemplated Transactions, and there is no
Order outstanding against the Company, Dollar Express or the Management
Shareholders having any such effect or which could reasonably be expected to
have such an effect.
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4.8. Compliance with Law. The Company and Dollar Express have
each complied and currently are in compliance with all applicable Laws and
Orders except for such non-compliance which individually or in the aggregate
will not have a Material Adverse Effect on either the Company or Dollar Express.
Neither the Company nor Dollar Express has received, nor knows of the issuance
of, any notice by any person of any such violation or alleged violation. Dollar
Express has in full force and effect all Permits necessary for it to own, lease
or operate its properties and assets and to carry on the Business as now
conducted, except where the failure to have such Permits will not, individually
or in the aggregate have a Material Adverse Effect, and Dollar Express has
complied, in all material respects, with all of the terms and conditions of such
Permits, and there is no Default under any thereof. Dollar Express has not taken
or failed to take any act which act or failure to act has resulted in or
enabled, or could reasonably be expected to result in or enable, with or without
notice or lapse of time or both, the revocation or termination of any such
Permit or the imposition of any restrictions thereon. No litigation is pending,
or to the knowledge of the Company, Dollar Express or the Management
Shareholders, threatened, to revoke, refuse to renew or modify any such Permit.
4.9. Title to Assets. Dollar Express owns and has good and
marketable title to or, in the case of leased properties, valid leasehold
interests in, all of its assets, tangible or intangible, including all of such
assets reflected on the most recent Financial Statements, except assets disposed
of in the ordinary course of business since the Financial Statement Date. Dollar
Express holds title to its assets free and clear of all Liens other than
Permitted Exceptions. The tangible personal property included in the properties
and assets (including all Equipment) owned or used by Dollar Express in the
operation of the Business are in good working order, repair and condition,
reasonable wear and tear excepted. The properties and assets owned, leased or
licensed by Dollar Express are adequate to conduct the Business as now
conducted.
4.10. Other Representations Regarding Dollar Express' Assets
and Liabilities.
(a) Accounts Receivable. Dollar Express has no accounts
receivable, as all sales by Dollar Express are made for cash or by credit card.
(b) Accounts Payable. Neither the Company, Dollar
Express nor the Management Shareholders presently knows of a reason why, nor has
been advised that, the terms and conditions under which it presently does
business with any of its vendors listed in Schedule 4.23 attached hereto will
not continue in all material respects in accordance with the terms and
conditions in existence on the date hereof other than such changes,
modifications or alterations which may occur in the ordinary course of business
consistent with past practices.
(c) Cash Accounts. Schedule 4.10(c) attached hereto sets
forth a true and complete list of (i) name and address of every bank or other
financial institution in which Dollar Express maintains an account (whether
checking, savings, investment or otherwise), lock box or safe deposit box, (ii)
the account number of each account, and (iii) the identity of each natural
person who is a signatory on each such account.
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(d) Inventory. All items of Inventory reflected in the
Financial Statements are in good and merchantable condition and of a quantity
and quality salable in the ordinary course of business at normal xxxx-ups,
subject to customary allowances, consistent with past experience, except for
damaged, defective or obsolete Inventory, which, as of the Closing Date, will
not exceed Five Hundred Thousand Dollars ($500,000) in the aggregate. Such
Inventory is valued by the retail inventory method, applied with an average cost
approach, in accordance with GAAP. Dollar Express does not hold any items of
Inventory on consignment. All Inventory is located at premises owned or leased
by Dollar Express, except for Inventory in transit to Dollar Express.
(e) Leasehold Improvements. All leasehold improvements,
fixtures and appurtenances attached to any leased real property are in good
working order, repair and condition, ordinary wear and tear excepted, and
include all of the leasehold improvements, fixtures and appurtenances used by
Dollar Express in the operation of the Business as currently conducted and as
proposed to be conducted by the Management Shareholders.
(f) Real Property. Dollar Express owns no real property.
Dollar Express has made available to the Purchaser correct and complete copies
of the leases and subleases for all real property leased by Dollar Express. A
list of such leases and subleases is attached hereto as Schedule 4.10(f). With
respect to each such lease and sublease:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately following the Closing;
(iii) Dollar Express has not violated the terms of
and is not in Default under any such lease or sublease, and no event has
occurred which, with or without notice or lapse of time, would constitute, or
could reasonably be expected to constitute, a breach or Default, or permit
termination, modification, or acceleration thereunder;
(iv) to the best knowledge of the Company, Dollar
Express or Management Shareholders, no other party to the lease or sublease is
in breach or Default, and no event has occurred which, with or without notice or
lapse of time, would constitute a breach or Default or permit termination,
modification, or acceleration thereunder;
(v) no party to the lease or sublease has repudiated
any provision thereof in a writing to the Company, Dollar Express or either
Management Shareholder;
(vi) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease; and
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(vii) with respect to each sublease, to the
knowledge of the Company, Dollar Express and the Management Shareholders, the
representations and warranties set forth in subsections (a) through (e) above
are true and correct with respect to the underlying lease.
(g) Intangible Assets. Schedule 4.10(g) hereto sets
forth a list of the material Intangible Assets used in the Business as well as a
list of all registrations of pending applications for any Intangible Asset.
Except as set forth in Schedule 4.10(g) hereto, each of the Intangible Assets is
owned by Dollar Express free and clear of any and all Liens (other than
Permitted Exceptions) and, to the knowledge of the Company, Dollar Express and
the Management Shareholders, no other Person has any Claim of ownership with
respect thereto. Dollar Express has adequate Licenses or other valid rights to
use all of the Intangible Assets which it does not own and which are material to
the conduct of the business as presently conducted. Except as set forth in
Schedule 4.10(g) hereto, Dollar Express' use of the Intangible Assets does not
conflict with, infringe upon, violate or interfere with any intellectual
property rights of any other Person, nor is any other Person infringing upon,
violating or interfering with any rights of Dollar Express in and to ownership
or use of the Intangible Assets.
4.11. Financial Statements. The audited balance sheet and the
statements of income and cash flow of the Business as of and for the fiscal
years ended December 31, 1995, December 31, 1996 and December 31, 1997, together
with the unaudited balance sheet and the statements of income and cash flows of
the Business as of and for the fiscal period ended September 30, 1998, copies of
which are attached hereto as Schedule 4.11A (collectively, the "Financial
Statements"), have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby except as set forth in the notes
thereto, are complete and correct and present fairly the financial position and
results of operations and cash flows of the business at the date and for the
period indicated, except in the case of the unaudited statements, which have
been prepared internally and are subject to normal and recurring audit and year
end adjustments, none of which would have a Material Adverse Effect. The
Financial Statements are in accordance with the applicable books and records of
Dollar Express (which books and records are true and correct in all material
requests). The projections of Dollar Express' operating income, prepared by
Dollar Express and the Management Shareholders and attached hereto as Schedule
4.11B, reflect Dollar Express' and the Management Shareholders' good faith best
estimate at the time such projections were prepared of expected results of
operations in the periods covered thereby.
4.12. No Undisclosed Liabilities. Dollar Express has no
indebtedness or Liabilities (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) except for (i) those reflected or reserved
against (which reserves Dollar Express and Management Shareholders represent are
adequate to cover such Liabilities) in the Financial Statements, (ii) those
incurred, consistent with past practice, since the Financial Statement Date, and
(iii) those which are specifically disclosed in this Agreement or a Schedule
attached hereto. Schedule 4.12 sets forth all guarantees, letters of credit and
reimbursement obligations of Dollar Express. Neither the Company, Dollar Express
nor the Management Shareholders know of any facts which could reasonably be
expected to result in the assertion against Dollar Express of any Liability of
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any nature or in any amount not fully reflected or reserved against in Dollar
Express' Initial Balance Sheet or as disclosed by this Agreement or the
Schedules hereto.
4.13. Absence of Certain Developments. Except as set forth in
Schedule 4.13 hereto or as contemplated by this Agreement, since September 30,
1998, Dollar Express has operated the Business in the ordinary course consistent
with past practice and there has not been:
(a) any Material Adverse Effect;
(b) any event or condition of any nature whatsoever
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect on Dollar Express;
(c) any Claim, other than warranty claims relating to
sales of Inventory none of which, individually or in the aggregate, would have a
Material Adverse Effect on Dollar Express, against Dollar Express not otherwise
disclosed in Schedule 4.7 attached hereto or not covered (except for
deductibles) by applicable policies of insurance within the maximum insurable
limits of such policies;
(d) any amendment to the Articles of Incorporation or
Bylaws of Dollar Express;
(e) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to Dollar Express' capital stock;
(f) any split, combination, reclassification, or other
modification of the terms of the equity interests of Dollar Express;
(g) the creation or attachment, or notice thereof, of
any Lien (other than Permitted Liens) on any of the assets of Dollar Express;
(h) any sale, purchase, transfer, pledge or other
disposition by Dollar Express of any assets or properties relating to the
Business not in the ordinary course of business and consistent with past
practices;
(i) any incurrence of any Liabilities (including
indebtedness) by Dollar Express except in the ordinary course, consistent with
past practice, or any waiver of any rights of substantial value;
(j) any discharge or satisfaction of any Liens, or any
settlement of payment of any Liens or Liabilities, by Dollar Express, except in
the ordinary course of business, consistent with past practice;
(k) any increase in the salary or other compensation
payable by any Dollar Express to any of its Employees or consultants (including
its executive officers or directors), or the declaration, payment, commitment or
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obligation of any kind for the payment by Dollar Express of any bonus, other
additional salary or compensation (including severance, retention, termination
or other similar payments) to any of its Employees or consultants, other than
customary compensation increases awarded to its Employees which have been
awarded in the ordinary course of business consistent with past practices;
(l) any sale, transfer or issuance of any capital stock,
equity security or debt security, or of any option, warrant, right or commitment
or agreement entered into requiring or permitting the purchase, sale, transfer
or issuance of any capital stock, equity security or debt security, by Dollar
Express;
(m) any failure by Dollar Express to make any payments
on material Contracts, Licenses or Permits on a current basis as and when due
under the terms of such Contracts, Licenses or Permits as in effect on the date
of this Agreement, except to the extent Dollar Express has a valid dispute with
respect to such payment and all such disputed amounts have been appropriately
reserved for on Dollar Express' books and records, it being understood that all
such disputes which have arisen since the Financial Statement Date and prior to
the date hereof are set forth in Schedule 4.13(m) attached hereto;
(n) any transfer, grant, License, assignment,
termination or other disposal of, modification, change or cancellation of any
rights or obligations with respect to the Intangible Assets other than Licenses
granted by Dollar Express in the ordinary course of business;
(o) any removal of any fixtures, equipment or personal
property from the real property, whether owned or leased, other than in the
ordinary course of business;
(p) any sale, discount or other disposal by Dollar
Express of any Accounts Receivable, including demurrage, rebates, credits, other
reserves or contra accounts, except by collection in the ordinary course of
business;
(q) any cancellation or compromise of any indebtedness
owed to Dollar Express, or any waiver or release of any rights of material value
by Dollar Express, other than in the ordinary course of business;
(r) any material variance in the levels of items of
Inventory (including finished goods, supplies, packaging and other materials) of
Dollar Express from the levels customarily maintained during such periods;
(s) any change in the accounting methods or practices
(including any change in depreciation or amortization policies or rates) with
respect to the Business or otherwise by Dollar Express;
(t) any sales made with extended terms, deep discounts
or rebates which materially deviate from past practices; or
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(u) any agreement by Dollar Express to do any act which
would render any of the preceding clauses inaccurate, other than the
transactions specifically contemplated to occur pursuant to this Agreement.
4.14. Material Contracts. Schedule 4.14 attached hereto sets
forth a true and complete list of all Contracts presently in effect to which
Dollar Express is a party, or by which Dollar Express or any of its respective
assets or properties is bound, that fall within one or more of the following
categories (collectively, the "Material Contracts"), true and correct copies of
which, to the extent in written form or otherwise reduced to writing, have been
delivered or made available to the Purchaser, its counsel or accounting firm
prior to the date hereof:
(a) Contracts with any present or former shareholder,
director or officer;
(b) Contracts with any labor union or other
representative of Employees;
(c) employment or severance Contracts with any Employee
involving the payment of more than $25,000 individually during any one year,
other than employment contracts which create an "employment at-will"
relationship without any severance other than as expressly described in a
Schedule to this Agreement;
(d) Contracts for the performance of services by a third
party which involves the payment to such third party of (i) more than $50,000 in
the case of a single arrangement or commitment or (ii) more the $150,000 in the
case of a series of related arrangements or commitments and, in any such cases,
which is or are not cancelable by Dollar Express on thirty (30) days' notice or
less without penalty;
(e) other than purchase or sales orders given or
received in the ordinary course of business consistent with past practices,
Contracts to purchase, sell or supply products or to perform services which
obligates Dollar Express to purchase products from, sell products to, or perform
services for, a third party which involves (i) more than $50,000 in the case of
a single arrangement or commitment, or (ii) more than $150,000 in the case of a
series of related arrangements or commitments and, in any such cases, which is
not cancelable by Dollar Express on thirty (30) days' notice or less without
penalty;
(f) distribution Contracts where Dollar Express is
acting as supplier or distributor or any agency Contract where Dollar Express is
acting as principal or agent;
(g) Leases under which Dollar Express is either lessor
or lessee of personal property requiring annual lease payments (including rent
and any other charges) in excess of $25,000;
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(h) Contracts evidencing any indebtedness (including
indebtedness to or from officers, directors, shareholders or any member of their
immediate families);
(i) Contracts for any charitable or political
contribution;
(j) Contracts for any capital expenditure in excess of
$25,000;
(k) Contracts limiting or restraining Dollar Express
from engaging or competing in any lines of business with any Person or from
purchasing any products or inventory from any third parties;
(l) Contracts involving either (i) the purchase or sale
(A) of the capital stock or other equity interests of, or (B) substantially all
or a material portion of the assets of Dollar Express, or (ii) a merger,
consolidation or joint venture with, another Person;
(m) Licenses, franchises, distributorships or other
similar agreements, including those which relate in whole or in part to the
Intangible Assets other than Licenses granted by Dollar Express in the ordinary
course of business;
(n) Contracts with any Governmental Body;
(o) powers of attorney granted by Dollar Express in
favor of any Person;
(p) Contracts or correspondence which, when taken
together, constitute a Contract involving the settlement or other disposition of
litigation; or
(q) other Contracts not made in the ordinary course of
business.
Each of such Material Contracts is in full force and effect, there is no Default
under any such Material Contract by Dollar Express or, to the knowledge of the
Company, Dollar Express or the Management Shareholders, by any of the other
parties thereto, except for such Defaults as will not individually or in the
aggregate, with the giving of notice or the passage of time or both, result in a
Material Adverse Effect on Dollar Express. Except as set forth in Schedule 4.14
attached hereto, there has been no cancellation, termination, limitation or
modification or any notice of cancellation, termination, limitation or material
modification of any such Material Contract. Each of the Material Contracts (i)
constitutes a legal, valid and binding obligation of Dollar Express, and (ii) to
the knowledge of the Company, Dollar Express or the Management Shareholders,
constitutes a legal, valid and binding obligation of such other party thereto.
Dollar Express has not assigned any of its rights or obligations under any such
Material Contract.
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4.15. Product Warranties. Except pursuant to any Dollar
Express standard merchandise return policy, which provides for the replacement
or return for credit of defective or damaged Inventory or other returns for
credit at the request of the customer, Dollar Express has not given or made any
warranties to third parties with respect to any products sold or services
performed by it, except for warranties arising by operation of law and
warranties made in respect of products which are no broader in scope or longer
in duration than the respective warranties on such products given to Dollar
Express by the manufacturers of such products. Except as set forth in Schedule
4.15, other than for the replacement or return for credit of defective or
damaged Inventory, there are no pending or, to the knowledge of the Company,
Dollar Express or the Management Shareholders, threatened warranty Claims,
whether on the basis of warranties offered by Dollar Express, warranties offered
by any manufacturer of items of Inventory or otherwise, or any facts, events or
circumstances which have occurred, in either case which could reasonably be
expected to result in a Liability on the part of Dollar Express.
4.16. Product Liabilities. Schedule 4.16 attached hereto is a
true and complete narrative of Claims under all product warranty plans and
product Liability insurance policies relating to Dollar Express since January 1,
1997, other than Claims that are or have been fully covered by insurance. Dollar
Express is insured under all policies of insurance relating to product Liability
listed in Schedule 4.16 attached hereto for and against any Claim for damage to
person or property based upon defects in any product to the extent a Claim is
made during the policy period.
4.17. Insurance. Schedule 4.17 hereto contains a complete and
correct list in all material respects of all policies of insurance of any kind
or nature covering Dollar Express including, without limitation, policies of
life, fire, theft, workers' compensation, employee fidelity and other casualty
and Liability insurance, and such policies are in full force and effect. All
premiums due on such insurance policies have been paid and there is no Default
(with or without notice or lapse of time, or both) by Dollar Express under any
such insurance policy. Complete and correct copies of each such policy have been
furnished or made available to the Purchaser. Insurance policies providing
substantially similar coverages have been in place since Dollar Express'
inception.
4.18. Transactions with Affiliates. Except as set forth in
Schedule 4.18 attached hereto, neither any director, officer or shareholder of
Dollar Express, nor, to the knowledge of the Company, Dollar Express or the
Management Shareholders, any Employee of Dollar Express or any Affiliate of any
such Person, has during the past two years: (i) received or earned except as a
shareholder, director, officer or employee of Dollar Express, or (ii) had an
ownership interest (whether direct or indirect) in any business, corporate or
otherwise, which has or had any business arrangement or relationship of any kind
under which it has received or earned, payments from or to Dollar Express in
excess of $5,000 in any year (other than salaries, wages and bonuses). Other
than routine, unwritten employment terms, arrangements and policies, there are
no Contracts between Dollar Express and any director, officer, shareholder or
Employee of Dollar Express, or any Affiliate, of any such Person, except for
those identified in Schedule 4.18 or Schedule 4.14 attached hereto, a true and
complete copy of each of which (including, without limitation, all amendments or
modifications thereto) has been delivered to the Purchaser. Except as set forth
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in Schedule 4.18 attached hereto, Dollar Express is not indebted to any
director, officer or shareholder of Dollar Express, nor, to the knowledge of the
Company, Dollar Express or the Management Shareholders, to any Employee of
Dollar Express or any Affiliate of any such Person, and Schedule 4.18 attached
hereto contains a true and complete list of all amounts owed to Dollar Express
by any director, officer or shareholder of Dollar Express or, to the knowledge
of the Company, Dollar Express or the Management Shareholders, by any Employee
of Dollar Express or any Affiliate of any such Person.
4.19. Employee Relations.
(a) Schedule 4.19(a) attached hereto sets forth a true
and complete list of all (i) Employees or commission salespersons of Dollar
Express as of the Financial Statement Date whose then current annual
compensation and bonus was in excess of $50,000, (ii) the then current annual
compensation of, and a description of material fringe benefits (other than those
generally available to Employees of Dollar Express) provided by Dollar Express
to any such Employees or commission salespersons and (iii) any increase,
effective on or after the Financial Statement Date in the rate of compensation
of any Employees or commission salespersons if such increase exceeds 5% of the
previous annual compensation of such Employee or commission salesperson.
(b) Schedule 4.19(b) sets forth a true and correct
summary of all payroll amounts incurred or paid in 1998, including employees'
names and salaries and payroll period totals.
(c) Dollar Express has complied and is in compliance, in
all material respects, with all Laws which relate to wages, hours,
discrimination in employment and collective bargaining, and is not liable for
any arrears of wages, Taxes or penalties for failure to comply, in all material
respects, with any of the foregoing.
(d) Except as described in Schedule 4.19(d), (i) none of
the Employees of Dollar Express is represented for purposes of their employment
by a labor organization, (ii), to the knowledge of the Company, Dollar Express
or the Management Shareholders, no petition has been filed for recognition of a
labor union or association as the exclusive bargaining agent for any and all of
the Employees of Dollar Express, and (iii) to the knowledge of the Company,
Dollar Express or the Management Shareholders, there has not been in the past
five (5) years any general solicitation of representation cards by any union
seeking to represent any or all of the Employees of Dollar Express as their
bargaining agent.
(e) Except as set forth in Schedule 4.19(e) attached
hereto, there is no, and during the past three years there has been no, (i)
unfair labor practice charge, complaint or other proceeding against Dollar
Express pending or, to the knowledge of the Company, Dollar Express or the
Management Shareholders, threatened before the National Labor Relations Board
nor, to the knowledge of the Company, Dollar Express or the Management
Shareholders, any commitment or involvement in the commission of any acts or
omissions which could give rise to any unfair labor practices by Dollar Express,
(ii) Claim or Litigation against Dollar Express or any of the Employees or
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agents of Dollar Express pending or, to the knowledge of the Company, Dollar
Express or the Management Shareholders, threatened under the Labor Act nor, to
the knowledge of the Company, Dollar Express or the Management Shareholders, any
commitment or involvement in the commission of any acts or omissions which could
give rise to any Liability under the Labor Act on the part of Dollar Express,
(iii) labor strike, dispute, slowdown or stoppage pending or, to the knowledge
of the Company, Dollar Express or the Management Shareholders, threatened
against or involving Dollar Express, (iv) labor grievance filed with Dollar
Express which has had or may have a Material Adverse Effect on Dollar Express or
(v) any pending, or to the knowledge of the Company, Dollar Express or the
Management Shareholders, threatened Claim or Litigation which has arisen out of
or under a collective bargaining or other labor Contract.
(f) Except as set forth in Schedule 4.19(f) attached
hereto, there is no Claim or Litigation against Dollar Express (whether under
federal, state or local Law, under any employment Contract, or otherwise)
brought or, to the knowledge of the Company, Dollar Express or the Management
Shareholders, threatened by any Employee on account of or for: (i) overtime pay,
other than overtime pay for work done during the current payroll period; (ii)
wages or salary for any period other than the current payroll period; (iii) any
amount of vacation pay or pay in lieu of vacation time, other than vacation time
or pay in lieu thereof earned in or in respect of the current fiscal year; or
(iv) any violation of any Law relating to minimum wages or maximum hours of
work. Except as set forth in Schedule 4.19(f) attached hereto, there is no Claim
or Litigation against Dollar Express (whether under federal, state or local Law,
under any employment Contract, or otherwise) brought or, to the knowledge of the
Company, Dollar Express or the Management Shareholders, threatened by any Person
(including any Governmental Body) relating to discrimination or occupational
safety in employment or employment practices (including the Occupational Safety
and Health Act of 1970, as amended, The Fair Labor Standards Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, or the Age Discrimination
in Employment Act of 1967, as amended).
4.20. ERISA Matters.
(a) Benefit Plans Generally. Schedule 4.20(a) attached
hereto contains a true and complete list of all Benefit Plans. Neither Dollar
Express nor any ERISA Affiliate is or has ever been a party to any pension plan
or welfare benefit plan that is a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA), a "multiple employer plan" (within the meaning of
Section 413 of the Code) or a "multiple employer welfare arrangement" (within
the meaning of Section 3(40) of ERISA). Neither Dollar Express nor any ERISA
Affiliate maintains, has ever maintained, or has had any obligation under a plan
subject to Title IV of ERISA. Every Benefit Plan which is a "welfare plan"
provides benefits either by making direct payments out of general corporate
assets or through the purchase of insurance.
(b) Qualified Plans; Compliance. With respect to each of
the Benefit Plans intended to qualify under Section 401(a) or 403(a) of the
Code, such Benefit Plan has been maintained and administered at all times in
compliance, in all material respects, with its terms and applicable Laws. With
respect to each such Benefit Plan, the Internal Revenue Service has issued a
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favorable determination notification letter as to its form. Each Benefit Plan
complies, in all material respects, and has been administered, in all material
respects, in accordance with all applicable Laws, including, without limitation,
ERISA and the Code. Dollar Express has timely filed or caused to be timely filed
with the Internal Revenue Service annual reports on form 5500 or 5500C/R, as
applicable, for each Benefit Plan for all years and periods for which such
reports were required. All statements made on documents or forms filed with any
Government Body with respect to any Benefit Plan have been true and complete in
all material respects and have been filed timely. No Benefit Plan has been
assessed any excise tax Liability. To the knowledge of the Company, Dollar
Express or the Management Shareholders, no event, fact or circumstance has
occurred that would likely result in any Benefit Plan incurring such excise tax
Liability.
(c) Contributions. All payments and contributions to all
Benefit Plans have been made on a timely basis as required by the terms of each
such Benefit Plan and any applicable Law. All such payments and contributions
relating to the completed taxable years have been deducted fully by Dollar
Express for federal income tax purposes. Such deductions have not been
challenged or disallowed by any Governmental Body, and Dollar Express has no
reason to believe that such deductions are not properly allowable. Dollar
Express has funded or will fund prior to Closing each Benefit Plan in accordance
with the terms of each such Benefit Plan, any associated insurance contract and
all applicable Laws. Except as set forth in Schedule 4.20(c) attached hereto, no
Benefit Plan is subject to Section 302 of ERISA or Section 412 of the Code.
(d) Prohibited Transactions; etc.. There: (i) has not
occurred any Prohibited Transaction, with respect to any Benefit Plan, for which
no statutory, class or other exemption exists; (ii) is not pending or, to the
knowledge of the Company, Dollar Express or the Management Shareholders,
threatened any civil or criminal Claim or litigation brought pursuant to part 5
of Title I of ERISA against any fiduciary who is an Employee or director of
Dollar Express; (iii) is not, to the knowledge of the Company, Dollar Express or
the Management Shareholders, any civil or criminal Claim or Litigation pending
or threatened pursuant to part 5 of Title I of ERISA against any fiduciary who
is not an Employee or director of Dollar Express; and (iv) has not occurred any
fiduciary violations, as defined in Section 404 of ERISA, with respect to which
Dollar Express could have any material present or future Liability.
(e) Documentation. Dollar Express has provided or made
available to the Purchaser true and complete copies of the following documents:
(i) all plan documents, amendments and trust agreements relating to each Benefit
Plan, including any insurance contracts under which benefits are provided, as
currently in effect; (ii) the most recent annual and periodic accountings of
Benefit Plan assets; (iii) the most recent Internal Revenue Service
determination or notification letters relating to the pension Benefit Plans and
a list identifying all amendments not covered by such determination or
notification letter, including the date such amendments were adopted and
effective; (iv) to the extent such reports were required, all annual reports
filed on form 5500 or 5500C/R, as applicable, for the past three years,
including accompanying schedules; (v) the current summary plan description, if
any was required by ERISA to be prepared and distributed to participants, for
each Benefit Plan; and (vi) all insurance contracts, annuity Contracts,
investment management and advisory Contracts, fidelity bonds and fiduciary
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Liability policies and related applications, and all filings, applications to
and material correspondence with any Governmental Body, written disputed and
unsettled claims made by or against any Benefit Plan, administration Contracts,
service provider Contracts, audit reports, material written legal advice
relating to any Benefit Plan received within the past six (6) years, prohibited
transaction exemption applications, and resolutions of the Board of Directors of
Dollar Express relating to any of the foregoing.
(f) Continuation Coverage. Each Benefit Plan, and each
Plan established, maintained or contributed to by any ERISA Affiliate, that is a
"group health plan" (within the meaning of Section 607 of ERISA) is and has been
operated in compliance, in all material respects, with all requirements of
Sections 601 through 608 of ERISA and either (i) Section 162(i)(2) and (k) of
the Code and the regulations promulgated thereunder (prior to 1989) or (ii)
Section 4980B of the Code and the regulations promulgated thereunder (after
1988), as well as all comparable requirements arising under the Laws of any
state applicable to Dollar Express, relating to the continuation of coverage
under certain circumstances in which coverage would otherwise cease.
(g) Post-Retirement Benefits. No Benefit Plan maintained
by Dollar Express or any ERISA Affiliate provides, at the expense of Dollar
Express or any ERISA Affiliate, post-retirement medical benefits,
post-retirement death benefits or other post-retirement welfare benefits or has
any obligation under any Benefit Plan that provides such benefits, except to the
extent of the continuation coverage provided under the provisions of Section
4980B of the Code and Sections 601 through 608 of ERISA or other applicable
Laws.
(h) Communications. To the knowledge of the Company,
Dollar Express or the Management Shareholders, all communications with respect
to each Benefit Plan by Dollar Express, any ERISA Affiliate or any Employee or
agent of Dollar Express or any ERISA Affiliate reflect and always have reflected
accurately the material terms and conditions of each such Benefit Plan.
(i) Additional Payments. Except as set forth in Schedule
4.20(i) attached hereto, Dollar Express is not a party to any Benefit Plan
pursuant to which the consummation of the Contemplated Transactions, separately
or in the aggregate, have caused or will cause: (i) the entitlement of any
individual to severance pay, or (ii) the acceleration of the time of payment or
vesting of, or an increase in the amount of compensation due to any individual
from Dollar Express or (iii) the payment of an amount subject to the provisions
of Code Section 280G.
(j) Litigation. Except as set forth in Schedule 4.20(j),
there is not, and there has not been at any time within the six years preceding
the date hereof, any pending or, to the knowledge of the Company, Dollar Express
or the Management Shareholders, threatened Litigation concerning or involving
any Benefit Plan. To the knowledge of the Company, Dollar Express or the
Management Shareholders, no Claim to or by any Governmental Body has been filed
at any time within the four years preceding the date hereof or are or were
threatened, or are expected, with respect to any Benefit Plan. Except as set
forth in Schedule 4.20(j), to the knowledge of the Company, Dollar Express or
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the Management Shareholders, no Claims have been made at any time within the
past four years or, are or were threatened, or are expected, with respect to any
bond or any fiduciary Liability or other similar insurance with regard to the
actions of any Person in connection with any Benefit Plan, nor, to the knowledge
of the Company, Dollar Express or the Management Shareholders, is there expected
to be any notice to any insurer under any such bond or policy with regard to any
Benefit Plan. No application for any bond or fiduciary Liability or similar
insurance policy with respect to any Benefit Plan has been rejected at any time
within the past four years, nor is any such bond or policy now subject to any
qualification, condition or exclusion.
4.21. Environmental Laws.
(a) Except as set forth in Schedule 4.21(a) attached
hereto, (i) Dollar Express has complied in all material respects with each, and
is not in violation of any, Environmental Laws, and neither Dollar Express nor
any of its agents or, to the knowledge of the Company, Dollar Express or the
Management Shareholders, its Employees has engaged in any conduct that has or
will give rise to any Environmental Claim, Environmental Loss or other Liability
under any Environmental Laws, (ii) Dollar Express has not received any written
or oral communication from a Governmental Body or any other Person alleging that
Dollar Express is not in compliance in any material respect with, or has a
Liability under (including being a potentially responsible party or allegedly
liable for costs associated for remediation of any site), any Environmental
Laws, (iii) Dollar Express holds, and has complied in all material respects with
and is in compliance with, all necessary Permits required to conduct its
business in compliance with all Environmental Laws, including any Permits
necessary or appropriate to store, treat, dispose of and otherwise handle
Hazardous Materials except for such Permits, the non-compliance with which will
not individually or in the aggregate have a Material Adverse Effect on Dollar
Express, and (iv) neither the Company, Dollar Express nor the Management
Shareholders has any knowledge of any environmental matters or information other
than as set forth in Schedule 4.21(a) attached hereto which could reasonably be
expected to have a Material Adverse Effect on Dollar Express.
(b) From the date upon which Dollar Express acquired an
interest (leasehold or otherwise) in any real property (but, in the case of
leased real property, only during the period such real property was leased by
Dollar Express), there have been no locations on any of such real property where
Hazardous Materials were discharged, leaked, emitted or entered into the
atmosphere, ground, soil, surface water, ground water, any body of water or
sewer system by Dollar Express where such discharge, leak, emission or entrance
could result in an Environmental Claim. Except as set forth in Schedule 4.21(b)
attached hereto, from such date, (i) to the knowledge of the Company, Dollar
Express or the Management Shareholders, there are no and have been no
above-ground or under-ground storage tanks located on or in any Third Party
Leased Real Property currently or formerly leased or used by Dollar Express or
its predecessors in interest and (ii) there are no and have been no above-ground
or under-ground storage tanks located on or in any other real property currently
or formerly owned, leased or used by Dollar Express or its predecessors in
interest.
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(c) There is no on-site or off-site location to which
Dollar Express or any of its agents or Affiliates has transported Hazardous
Materials or arranged for the transportation thereof from Dollar Express'
facilities, which location is the subject of any federal, state or local
enforcement litigation under any Environmental Laws which may lead to Claims
against Dollar Express for clean-up costs, remedial work, damages to natural
resources or for personal injury claims, including Claims under CERCLA.
(d) Except as set forth in Schedule 4.21(d) attached
hereto (i) to the knowledge of the Company, Dollar Express or the Management
Shareholders, no polychlorinated biphenyl or substances containing
polychlorinated biphenyl are present, in use or stored in any Third Party Leased
Real Property, and no asbestos or materials containing asbestos have been
brought upon, kept or used in or about or discharged, leaked, emitted or entered
into or onto any such Third Party Leased Real Property, and (ii) no
polychlorinated biphenyl or substances containing polychlorinated biphenyl are
present, in use or stored in any other real property owned, leased or used by
Dollar Express, and no asbestos or materials containing asbestos have been
brought upon, kept or used in or about or discharged, leaked, emitted or entered
into or onto any such other real property.
(e) Except as set forth in Schedule 4.21(e) attached
hereto, Dollar Express has not, either expressly, by merger or similar
transaction or, to the knowledge of the Company, Dollar Express or the
Management Shareholders, otherwise by operation of law, assumed or undertaken
any Liability including, without limitation, any Liability for corrective
remedial action of any other Person relating to Environmental Law other than any
indemnity obligation by Dollar Express, as a tenant, or any of its agents to a
landlord under any of the leases or sublease set forth in Schedule 4.10(f), and
neither this Agreement nor the consummation of the Contemplated Transactions
will result in any Liability for site investigation or cleanup, or notification
to or consent of any Governmental Body or other Person, pursuant to any of the
so-called "transaction triggered" or "responsible property" transfer
Environmental Laws.
(f) Except as set forth in Schedule 4.21(f) attached
hereto, neither the Company, Dollar Express nor the Management Shareholders has
any knowledge of any past or present actions, activities, facts, circumstances,
conditions, events or incidents, including the release, spill, leak, emission,
injection, escape, dumping, discharge or disposal of any Hazardous Materials,
that form or could reasonably be expected to form the basis for any
Environmental Claim against Dollar Express or against any Person whose Liability
for any Environmental Claim Dollar Express has or may have retained or assumed
either contractually or by operation of Law.
(g) To the knowledge of the Company, Dollar Express or
the Management Shareholders, except as set forth in Schedule 4.21(g) attached
hereto, no actions, activities, incidents, facts, events, circumstances or
conditions relating to the past or present facilities, real property or
operations owned, leased or used by the Company will prevent, hinder or limit
continued compliance in all material respects with Environmental Laws, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental Laws or give rise to any other material Liabilities pursuant to
Environmental Laws, including any relating to material releases or threatened
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releases of Hazardous Materials, personal injury, property damage or natural
resource damage.
4.22. Brokers. Except as set forth in Schedule 4.22, no Person
has acted directly or indirectly as a broker, finder or financial advisor for
the Company, Dollar Express or the Management Shareholders in connection with
the negotiations relating to the Contemplated Transactions. Except as set forth
in Schedule 4.22, no Person is entitled to any fee, commission or like payment
from the Company or Dollar Express in respect thereof based in any way on any
agreement, arrangement or understanding made by or on behalf of the Company or
Dollar Express.
4.23. Substantial Suppliers. Schedule 4.23 lists the names and
dollar volumes of purchases by Dollar Express from its twenty (20) largest
suppliers measured by dollar volume for the year ended December 31, 1997. None
of the suppliers listed in Schedule 4.23 has ceased or, to the knowledge of the
Company, Dollar Express or the Management Shareholders, threatened to cease, to
supply the products, goods or services sold or provided to Dollar Express in the
Business, or has substantially reduced supply of such products, goods or
services, nor do the Company, Dollar Express or the Management Shareholders have
any reason to believe that any Person will do so.
4.24. No Illegal Payments. Neither the Company nor Dollar
Express nor, to the knowledge of the Company, Dollar Express or the Management
Shareholders, any of their officers, directors, employees, agents or other
representatives, has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made or (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books.
4.25. Year 2000 Compliance. All computer software and
computerized systems owned or used by the Company or Dollar Express, or licensed
by the Company or Dollar Express, as licensor or as licensee, other than any
shrinkwrap software available to retail customers, is "Year 2000 Compliant" (as
hereinafter defined), except as disclosed in Schedule 4.25 attached hereto. For
purposes of this Agreement, "Year 2000 Compliant" shall mean (i) all such
software and systems shall operate in 4-digit year format and, in all material
respects, without errors in the recognition, calculation and processing of date
data relating to century recognition, leap years, single and multi-century
formulae, date values and interfaces of date- related functionalities; (ii) all
date processing shall be conducted in a four-digit year format and all date
sorting that includes a "year field" or "year category" shall be based upon a
four-digit year format; and (iii) any date arithmetic programs or calculators in
the software shall operate in all material respects in accordance with the
related user documentation in the Year 2000, and the years following, without
degrading functionality or performance.
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4.26. The Company's Activities. The Company is a newly-formed
corporation which has been formed by the Management Shareholders for the sole
purpose of effecting the Restructuring. Except for its obligations or
liabilities incurred in connection with its organization and the Restructuring,
and except for (a) the Contemplated Transactions, this Agreement and the
Collateral Documents which it is expected to execute at the Closing in order to
consummate the Contemplated Transactions, and (b) the documents and instruments
which it expects to execute, deliver and file prior to the Closing to effect the
Restructuring, the Management Shareholders have not caused and, prior to the
Closing, will not cause or permit, the Company to incur, directly or indirectly,
through any subsidiary or Affiliate, any Liabilities, engage in any business
activities of any type of kind whatsoever, or enter into any arrangements with
any Person of any type or kind whatsoever.
4.27. Disclosure. The representations and warranties of the
Company, Dollar Express and the Management Shareholders set forth in this
Agreement (including without limitation all Exhibits and Schedules hereto) do
not contain any untrue statement of a material fact or omit any material fact
necessary in order to make the statements and information contained herein or
therein, as applicable, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Advent Entities hereby represent and warrant to the
Company, Dollar Express and the Management Shareholders as to the following
matters insofar as they relate to the Advent Entities, Guayacan hereby
represents and warrants to the Company, Dollar Express and the Management
Shareholders as to the following matters insofar as they relate to Guayacan, and
DEI hereby represents and warrants to the Company, Dollar Express and the
Management Shareholders as to the following matters insofar as they relate to
DEI:
5.1. Organization and Good Standing. Each of the Advent
Entities is a limited partnership, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation and has all
requisite power and authority to carry on its business as it is now being
conducted, and to execute, deliver and perform this Agreement and to consummate
the Contemplated Transactions. Guayacan is a limited liability corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform this Agreement
and to consummate the Contemplated Transactions. DEI is a limited liability
corporation, duly organized, validly existing and in good standing under the
laws of the State of North Carolina and has all requisite power and authority to
carry on its business as it is now being conducted, and to execute, deliver and
perform this Agreement and to consummate the Contemplated Transactions.
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5.2. Authorization. Each of the entities comprising the
Purchaser has full power and authority to execute and deliver this Agreement and
the Purchaser Documents and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance by the Purchaser of this
Agreement and each Purchaser Document has been duly authorized by all necessary
action on the part of each of the entities comprising the Purchaser. This
Agreement has been, and the Purchaser Documents will be at the Closing, duly
executed and delivered by each of the entities comprising the Purchaser and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and the Purchaser Documents when
so executed and delivered will constitute, legal, valid and binding obligations
of each of the entities comprising the Purchaser, enforceable against each of
them in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Neither of the execution or delivery by each of
the entities comprising the Purchaser of this Agreement and the Purchaser
Documents, nor the consummation by each of the entities comprising the Purchaser
of the Contemplated Transactions, or compliance by each of the entities
comprising the Purchaser with any of the provisions hereof or thereof, does or
will (i) conflict with, or result in the breach of, any provision of the limited
partnership agreements of any of the entities comprising the Purchaser, (ii)
subject to the receipt of the consents set forth in Schedule 5.2 hereto,
conflict with, violate, result in the breach or termination of, or constitute a
Default (with or without notice or lapse of time, or both) under any Contract or
Order to which any of the entities comprising the Purchaser is a party or by
which it or any of its properties or assets is bound or subject, or (iii)
constitute a violation of any Law applicable to any of the entities comprising
the Purchaser, except, in each case, for violations, conflicts, breaches or
Defaults which individually or in the aggregate will not materially hinder or
impair the Contemplated Transactions.
5.3. Consents. No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of any of the entities comprising
the Purchaser in connection with the execution and delivery of this Agreement or
the Purchaser Documents or the compliance by each of the entities comprising the
Purchaser with any of the provisions hereof or thereof, except for consents,
waivers, approvals, Orders or Permits set forth in Schedule 5.3 hereto.
5.4. Litigation. There is no Legal Proceeding pending or, to
the knowledge of the Purchaser, threatened, that seeks to enjoin or obtain
damages in respect of the consummation of the Contemplated Transactions or that
questions the validity of this Agreement, the Purchaser Documents or any action
taken or to be taken by any of the entities comprising the Purchaser in
connection with the consummation of the Contemplated Transactions.
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5.5. Brokers. No third party unaffiliated with the Purchaser
has acted directly or indirectly as a broker, finder or financial advisor for
the Purchaser in connection with the negotiations relating to this Agreement or
the Contemplated Transactions, and no Person is entitled to any fee or
commission or like payment in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the Purchaser.
5.6. Investment Intent of the Purchaser. The Purchaser
acknowledges that the Class A Preferred Shares and Liquidity Event Warrants
being purchased pursuant to this Agreement have not been registered under the
Securities Act or any state securities laws. The Purchaser is acquiring the
Class A Preferred Shares and Liquidity Event Warrants for its own account and
not with the intent to distribute the shares to an unrelated third party. The
Purchaser has such knowledge and experience in financial and business matters
and investments in general that make it capable of evaluating the merits and
risks of the ownership and acquisition of the Class A Preferred Shares and the
Liquidity Event Warrants. Each of the entities comprising the Purchaser is an
"accredited investor" within the meaning of Rule 501(a) under the 1933 Act. The
Purchaser acknowledges and agrees that the certificates, if any, representing
the Class A Preferred Shares will contain substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER STATE OR FEDERAL SECURITIES STATUTE. NO
REOFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF
MAY BE MADE UNLESS THE INTERESTS ARE REGISTERED UNDER THE ACT
AND ANY OTHER APPLICABLE SECURITIES STATUTE, OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS IS APPLICABLE TO SUCH
TRANSACTION.
5.7. Disclosure. The representations and warranties of the
Purchaser set forth in this Agreement (including without limitation all Exhibits
and Schedules hereto) do not contain any untrue statement of a material fact or
omit any material fact necessary in order to make the statements and information
contained herein or therein, as applicable, not misleading.
ARTICLE VI
CERTAIN COVENANTS AND OTHER MATTERS
6.1. Confidentiality Agreement. Each party hereto shall and
shall cause its counsel, accountant, financial advisors and lenders to: (a) keep
all Confidential Information confidential and not to disclose or reveal any
Confidential Information to any Person other than its officers, directors,
affiliates, employees, attorneys, accountants, other agents and representatives,
including engineers, financial advisors, current and prospective lenders and
debt securities underwriters who are participating in the evaluation of the
Company and Dollar Express and the Contemplated Transactions or who otherwise
need to know the Confidential Information in connection with any investigation
of the Company and Dollar Express or the negotiation, preparation or performance
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of this Agreement or any document to be delivered hereunder or for the purpose
of evaluating the Company and Dollar Express and/or the Contemplated
Transactions; and (b) not to use the Confidential Information for any purpose
other than (i) in connection with the evaluation and/or consummation of the
Contemplated Transactions; (ii) to the extent necessary to obtain the
termination of the waiting period under the HSR Act or to obtain any required
consents; or (iii) to enforce such party's rights and remedies under this
Agreement. The obligations of each party hereto under this Section 6.1 shall
terminate two years from the date of this Agreement. If the Closing is not
consummated, each party upon the request of the other party shall destroy or
return to such party all Confidential Information which is in writing or can
otherwise be destroyed or returned, including without limitation, the Private
Placement Memorandum of the Company prepared by Xxxx Xxxxx Xxxx Xxxxxx and dated
August 1998, and will so certify to the parties hereto.
6.2. Restriction on Certain Discussions and Actions. Until the
Closing Date or earlier if this Agreement is terminated in accordance with its
terms, the Company, Dollar Express and the Management Shareholders will refrain,
and will cause their Affiliates, and each of the respective officers, directors,
employees, attorneys, accountants and other agents and representatives, to
refrain, from taking any action, directly or indirectly, to solicit, encourage,
initiate or participate in any way in discussions or negotiations with, or
furnish any information with respect to the Company and Dollar Express to any
Person (other than the Purchaser and its representatives) in connection with any
possible or proposed sale of capital stock, sale of a substantial portion of the
assets, merger or other business combination involving the Company or Dollar
Express , or the acquisition of an equity interest in the Company or Dollar
Express, or any similar transaction involving the Company or Dollar Express , or
any other transaction (including any recapitalization, refinancing or
reorganization) which could impair the ability of the Company, Dollar Express or
any of the Management Shareholders to consummate the Contemplated Transactions
("Alternative Transaction"). The Company, Dollar Express and each of the
Management Shareholders will cease and cause to be terminated any existing
activities, discussions or negotiations with any other Person conducted
heretofore with respect to any Alternative Transaction and will promptly notify
the Purchaser following receipt of any request by any Person (other than the
Purchaser or its representatives) relating to any possible Alternative
Transaction or information concerning the business, properties, assets,
financial condition, results of operations or prospects of the Company or Dollar
Express. The Company, Dollar Express and each of the Management Shareholders
agree that none of them will (without the Purchaser's prior written consent)
disclose any of the terms of this Agreement or the matters referred to herein to
any other prospective acquiror of the Company or Dollar Express until this
Agreement is terminated in accordance with its terms if at all.
6.3. Conduct of Business. During the period from the date of
this Agreement to the Closing Date or earlier if this Agreement is terminated in
accordance with its terms, the Company, Dollar Express and each of the
Management Shareholders (i) agree to cause the Business to be conducted in the
ordinary course consistent with past practices, (ii) will not cause or permit
any of the events, facts or circumstances described in Sections 4.13 to occur
(except as otherwise expressly permitted by this Agreement), and (iii) with
respect to the Business and Dollar Express, will:
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(a) not acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing any of the equity interests of or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof, or (ii) any assets that are material,
individually or in the aggregate, to Dollar Express, except purchases of
inventory and other assets in the ordinary course of business consistent with
past practice and capital expenditures permitted by subsection (c) below;
(b) not (i) incur any indebtedness involving borrowed
money in excess of $5,000 in the aggregate, including (x) guaranteeing any such
indebtedness of another Person, (y) issuing or selling any debt securities or
warrants or other rights to acquire any debt securities of any of Dollar
Express, or (z) guaranteeing any debt securities of another Person, or (ii) make
any loans, advances or capital contributions to, or investments in, any other
Person, other than in the ordinary course of business consistent with past
practices;
(c) not make or agree to make any capital expenditures
which in the aggregate are in excess of $50,000 other than as may be
contemplated by any capital expenditure commitments or plans described in
Schedule 6.3(c) attached hereto;
(d) not change a corporate name or permit the use thereof
by any other Person;
(e) not (i) cause or voluntarily permit the termination
of any Benefit Plan, (ii) voluntarily permit any Prohibited Transaction
involving any Benefit Plan, (iii) fail to pay to any Benefit Plan any
contribution which they are obligated to pay under the terms of such Benefit
Plan, or (iv) allow or suffer to exist any occurrence of any event or condition,
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any Benefit Plan;
(f) not enter into any new, or amend or otherwise alter
any existing, Benefit Plan;
(g) not, except in the ordinary course of business
consistent with past practices, (i) remove any fixtures, equipment or personal
property from any of the real property; (ii) enter into any Contract which would
be required to be disclosed in Schedule 4.14 attached hereto; (iii) sell,
discount or otherwise dispose of any accounts receivable (except by collection
in the ordinary course of business); (iv) cancel or compromise any indebtedness
or Claim, or waive or release any rights of material value or (v) change, modify
or alter the return policy for merchandise sold by Dollar Express;
(h) not (i) make a material change in the character of
its Business or in the properties or assets of Dollar Express, or enter into any
new business or relocate any of their facilities or acquire any additional
operations or business; and (ii) not terminate, discontinue, close or dispose of
any facility or business operation;
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(i) pay when due all Taxes lawfully levied or assessed
against Dollar Express before any penalty or interest accrues on any unpaid
portion thereof and to file all tax returns when due (including applicable
extensions);
(j) use its best efforts to maintain the facilities,
assets and properties of Dollar Express in good operating repair, order and
condition, reasonable wear and tear and loss by casualty to the extent covered
by insurance excepted, and notify the Purchaser immediately upon any loss of,
damage to, or destruction of any of the facilities, assets or properties of
Dollar Express, whether or not covered by insurance;
(k) maintain in full force and effect insurance coverage
of the types and in the amounts set forth in Schedule 4.17 attached hereto;
(l) promptly advise the Purchaser in writing of the
commencement of, any known threat to commence, and of any material developments
or changes in any, pending or threatened litigation against the Company, Dollar
Express or any of the Management Shareholders of the type and nature which would
be required to be disclosed in Schedule 4.7 attached hereto;
(m) use its best efforts to maintain in full force and
effect each, and not cause or permit to occur any Default by Dollar Express
under any, Contract, License or Permit required to be listed in any Schedule to
this Agreement and, until the Closing Date, pay all accounts payable in the
ordinary course of its business consistent with past practices;
(n) not cause or permit to occur a violation of any Laws
applicable to Dollar Express except for such immaterial violations which
individually or in the aggregate will not have a Material Adverse Effect on
Dollar Express;
(o) not cause, suffer or permit the creation or
attachment of any Lien (other than Permitted Liens) on any of the assets of or
Dollar Express;
(p) use its best efforts to (i) preserve the business
organization of Dollar Express intact (except as contemplated by the
Restructuring), (ii) keep available the services of each of Dollar Express'
Employees except for those Employees hired solely to work for Dollar Express
during the 1998 Christmas season, (iii) preserve the goodwill of the customers
and others having business relations with Dollar Express and (iv) maintain the
corporate existence of Dollar Express;
(q) use its best efforts to not take or voluntarily
permit any action, or voluntarily omit to take any action, that would render
untrue any of Dollar Express' representations or warranties set forth in this
Agreement; and
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(r) advise the Purchaser in writing of any information
which, if known at the time of preparation, would have materially affected the
projections of Dollar Express' operating income attached hereto as Schedule
4.11B.
6.4. Conduct of the Company. Except for the execution of
documents, agreements and instruments at the Closing in order to consummate the
Contemplated Transactions, and except for the execution, delivery and filing of
documents and instruments prior to the Closing to effect the Restructuring,
prior to the Closing, the Management Shareholders will not cause or permit the
Company to incur, directly or indirectly, through any subsidiary or Affiliate,
any Liabilities, engage in any business activities of any type of kind
whatsoever, or enter into any arrangements with any Person of any type or kind
whatsoever other than as contemplated by this Agreement, or to:
(a) cause or permit to occur a violation, in any material
respect, of any Laws applicable to the Company;
(b) fail to maintain its existence as a corporation;
(c) permit any action, or omit to take any action, that
would render untrue any of its representations or warranties set forth in this
Agreement; or
(d) take any action or refrain from taking any action if
the result of such action or inaction, if taken after Closing, would implicate
the approval rights set forth in the amendments to the Company's Bylaws relating
to governance, as the same will be amended on the Closing Date in substantially
the form of Exhibit H hereto, or Section 4 of the Designation Statement.
6.5. Notice of Certain Events.
(a) Prior to the Closing, the Company, Dollar Express and
each of the Management Shareholders, jointly and severally, covenant and agree
to provide the Purchaser with prompt notice of (i) any event, fact or
circumstance known to them which could reasonably be expected to have a Material
Adverse Effect on the Company or Dollar Express, (ii) any representation or
warranty made by any of them contained in this Agreement which has become known
to them to be untrue or inaccurate in any material respect or (iii) the known
failure by any of them to comply with or satisfy in any material respect any
covenant, agreement or condition to be complied with or satisfied under this
Agreement, within the time frame set forth in this Agreement; provided, however,
that such notification shall not excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties, or the conditions to the
obligations of the parties, under this Agreement.
(b) Prior to the Closing, the Purchaser covenants and
agrees to provide the Company, Dollar Express and the Management Shareholders
with prompt notice of (i) any event, fact or circumstance which could reasonably
be expected to have a Material Adverse Effect on the Purchaser, (ii) any
representation or warranty made by it contained in this Agreement which has
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become known to them to be untrue or inaccurate in any material respect or (iii)
the known failure by it to comply with or satisfy in any material respect any
covenant, agreement or condition to be complied with or satisfied by it under
this Agreement, within the time frame set forth in this Agreement; provided,
however, that such notification shall not excuse or otherwise affect the
representations, warranties, covenants or agreements of the parties, or the
conditions to the obligations of the parties, under this Agreement. In addition,
the Purchaser will provide to the Company, Dollar Express and the Management
Shareholders correct and complete copies of all signed commitment letters
received prior to the Closing Date from financing sources, if any.
6.6. Cooperation; Access to Books and Records. The Company,
Dollar Express and each of the Management Shareholders will cooperate generally
with the Purchaser in connection with the Contemplated Transactions and, until
the Closing Date or earlier if this Agreement is terminated in accordance with
its terms, shall afford to the Purchaser, its agents, attorneys, accountants and
other authorized representatives, including engineers, financial advisers,
current and prospective lenders and debt underwriters, reasonable access to all
of the properties, assets, financial condition, operations, books, records,
files, correspondence, computer output, data, files, log books, technical and
operating manuals and other materials of the Company and Dollar Express
(including those in the possession or control or their accountants, attorneys
and any other third party), as the case may be, for the purpose of permitting
the Purchaser to make such due diligence investigation and examination of the
business, assets, properties and Books and Records of the Company and Dollar
Express as the Purchaser, in its discretion, shall deem to be reasonably
necessary or appropriate. Any such investigation, access and examination shall
be conducted during regular business hours and upon reasonable prior notice
under the circumstances and will be conducted in a manner that will not
materially disrupt the operation of the Business. The Company, Dollar Express
and each of the Management Shareholders will cause its and his counsel,
accountants and representatives, and the Company's and Dollar Express'
directors, officers and employees, to cooperate fully with the employees and
representatives of the Purchaser in connection with such investigation, access
and examination. The results of such investigation and examination shall not
relieve the Company, Dollar Express or the Management Shareholders from its or
his obligations with respect to the representations and warranties made in this
Agreement or reduce the Purchaser's right to pursue such remedies at Law or
hereunder, as it would otherwise have in the absence of having conducted such
investigation. The Purchaser will not contact any employee, customer or supplier
of the Company or Dollar Express without the prior consent of the Company or
Dollar Express, as the case may be, which consent will not be unreasonably
withheld, delayed or conditioned. The Purchaser agrees to treat all of the
information learned in connection with any examination performed by it pursuant
to this Section 6.6 as Confidential Information for purposes of Section 6.1
hereof.
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6.7. Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, the parties shall use their good faith
best efforts to take, or cause to be taken, without any party being obligated to
make any payment or payments to any third party or parties which, individually
or in the aggregate, is material and is not otherwise due, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Closing, and the
other Contemplated Transactions, including (a) obtaining all required consents
and the termination of the waiting period under the HSR Act, (b) defending any
litigation or Claims challenging this Agreement or the consummation of any of
the Contemplated Transactions, including, if the circumstances warrant, seeking
to have any stay or temporary restraining court order vacated or reversed, and
(c) the execution and delivery of any additional documents, agreements and
instruments (in form and substance reasonably satisfactory to the parties)
necessary to consummate the Contemplated Transactions by, and to fully carry out
the purposes of, this Agreement.
6.8. Amendment to Articles of Incorporation. The Company
shall take all action necessary, in accordance with applicable law and its
Articles of Incorporation and Bylaws, to effect the Company Articles Amendment,
and Dollar Express shall take all action necessary, in accordance with
applicable law and its Articles of Incorporation and By-laws, to effect the
Dollar Express Articles Amendment.
6.9. Offer of Employment. The Company and Dollar Express
shall, continue to offer employment as of the Closing Date to each Employee in a
substantially similar position and location and, in each case, at a rate of pay
substantially similar to such Employee's rate of pay in effect, and with such
benefits as shall be substantially similar to such Employee's benefits
(including Employee Benefit Plans and Benefit Arrangements) in effect, on the
business day immediately preceding the Closing Date.
6.10. Restructuring. The Company, Dollar Express and the
Management Shareholders shall complete the Restructuring in a manner which
complies with all applicable Laws and so as not to result in any misstatement or
omission from a representation, or a breach of a warranty or covenant of the
Company, Dollar Express or the Management Shareholders contained herein.
ARTICLE VII
TAX RELATED MATTERS
7.1. S Elections. The Company, Dollar Express and the
Management Shareholders, jointly and severally, represent and warrant to the
Purchaser as follows:
(a) Federal. Dollar Express duly and properly filed an
election to be an S corporation and such election is currently in effect (except
to the extent terminated by Closing as of the Effective date), under Section
1362 of the Code and the rules and regulations promulgated thereunder. Such
election has been in effect without interruption, including without limitation
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any inadvertent termination which has been reinstated, since formation of Dollar
Express (the "S Election Date"). Since the S Election Date, each of the
Management Shareholders and each former shareholder of Dollar Express, if any,
has been a permitted shareholder under Section 1361 of the Code and the rules
and regulations promulgated thereunder.
(b) State. In each state in which Dollar Express does
business, either Dollar Express' federal S election is recognized and given
effect or Dollar Express has made an appropriate and timely election to be
treated as an S corporation for state income taxation purposes. Any such
election was made so that the time when Dollar Express was an S corporation for
state taxation purposes coincided with when Dollar Express was an S corporation
for federal taxation purposes.
(c) Corporate Returns. Except as set forth in Schedule
7.1(c),Dollar Express has duly and timely filed all information and tax returns
and reports with any federal, state or local governmental taxing authority, body
or agency, and all Taxes due and payable by Dollar Express, have been paid,
withheld or reserved for or, to the extent they relate to periods on or prior to
the date of the latest Financial Statements, are reflected as a Liability on the
balance sheet included therein.
(d) Management Shareholders' Taxes. The Management
Shareholders have paid all federal, state, local and foreign income and other
taxes due and payable by them with respect to income reported to them by Dollar
Express as attributable to Dollar Express' operations.
(e) Employee Taxes. Dollar Express has properly withheld
all amounts required by law to be withheld for income taxes and unemployment
taxes, including without limitation, with respect to social security and
unemployment compensation, relating to its employees, and has remitted all
withheld amounts required to be remitted to the appropriate taxing authority,
agency or body.
(f) Audit Information. Dollar Express' federal and state
income tax information has never been audited. Except as set forth in Schedule
7.1(f), Dollar Express has not entered into any agreements for the extension of
time for the assessment of any tax or tax delinquency, and neither the Company,
Dollar Express nor any Management Shareholder has received any outstanding and
unresolved notices from the Internal Revenue Service or other state, local or
foreign taxing authority, agency or body of any proposed audit or examination or
of any proposed change in reported information which may result in a deficiency
or assessment against the Company, Dollar Express or the Management Shareholders
and there are no suits, actions, Claims, investigations, inquiries or
proceedings now pending against the Company, Dollar Express or any Management
Shareholders in respect of taxes, governmental charges or assessments.
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(g) Liens. There are no Liens for Taxes upon any of
Dollar Express' assets except Permitted Liens, provided that adequate reserves
have been provided therefor and are reflected in the Financial Statements.
(h) Extensions. Dollar Express has not requested any
extension of time within which to file a Tax or information return, which return
has not since been filed.
(i) Contracts. Dollar Express is not a party to any
Contract or arrangement pursuant to which Dollar Express has any Liability for
taxes arising from operation of the business of such other entity.
(j) Adjustments. Dollar Express has not agreed to make
and is not required to make, any adjustment under Section 481 of the Code for
any period ending after the Closing Date by reason of a change of accounting
method or otherwise.
7.2. Tax Liability in Year of Closing. The Purchaser and the
Management Shareholders acknowledge that after the Closing Date Dollar Express
will no longer be eligible to be an S corporation because the Purchaser is not
eligible to be a shareholder of an S corporation, and agree that they will make
an election under Section 1362(e)(3) of the Code to close the books of account
of Dollar Express as of the Effective Date, and that any tax Liability in
respect of Dollar Express income in the taxable year in which Closing occurs
shall be determined in accordance with such election.
7.3. Covenants Regarding Distributions. From the date hereof
until the Closing Date, neither the Company nor Dollar Express will, and the
Management Shareholders will not cause or permit the Company or Dollar Express
to, make any distributions to the Management Shareholders except as permitted by
this Section 7.3. On January 1, 1999, Dollar Express declared and paid a
distribution in the amount of the Notes. The aggregate original principal amount
of the Notes shall be equal to the sum of Fifty-Five Million Dollars
($55,000,000) plus the product of fifty percent (50%) times Dollar Express'
cash-on-hand at January 15, 1999 (the distribution of available cash hereinafter
referred to as the "1998 Distribution"), provided that all expenses relating to
the Business which were incurred but not paid in 1998 (including, without
limitation, payroll) and the Company's January lease payments shall be paid by
Dollar Express prior to calculating the 1998 Distribution. Notwithstanding the
foregoing, the 1998 Distribution shall only be paid to the extent that Dollar
Express' cash-on- hand less the 1998 Distribution equals or exceeds Two Million
Seven Hundred Fifty Thousand Dollars ($2,750,000). As soon as practicable
following the issuance of the Notes, Dollar Express shall provide to the
Purchaser evidence of the amount of Dollar Express' cash-on-hand at January 15,
1999.
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7.4. 1998 Tax Distribution. Dollar Express and the Management
Shareholders represent and warrant that Dollar Express distributed Two Million
Five Hundred Thousand Dollars ($2,500,000) to the Management Shareholders in
December 1998 (the "1998 Tax Distribution") to fund the tax obligations of the
Management Shareholders attributable to Dollar Express' operations in 1998 (the
"1998 Tax Obligation").
7.5. Purchaser Indemnifications.
(a) The Purchaser agrees that Dollar Express shall
indemnify, defend and hold harmless each Management Shareholder, from and
against any and all Liabilities with respect to Taxes imposed upon a Management
Shareholder as a result of an adjustment or change, including any increase in
items of income or gain or any decrease in items of Loss, deduction or credit
reported to such Management Shareholder by Dollar Express with respect to the
period of time when Dollar Express was an S Corporation, but only to the extent
that such adjustment or change consists of: (i) an increase in the item of
Dollar Express' income or gain with respect to an S Year and a corresponding
decrease in an item of income or gain with respect to a C Year; or (ii) a
decrease in an item of Loss, deduction or credit reported to a Management
Shareholder by Dollar Express with respect to an S Year and a corresponding
increase in an item of Loss, deduction or credit with respect to a C Year. Any
payment with respect to Liability with respect to Taxes shall be paid in cash by
the Purchaser, the Company or Dollar Express no later than ten (10) days prior
to the due date of any payment required to be made by the Management Shareholder
with respect to such taxes.
(b) In the event any Taxes as to which an amount shall
have been paid to a Management Shareholder by the Purchaser, the Company or
Dollar Express pursuant to Section 7.4(a) are subsequently refunded or repaid to
such Management Shareholder, such Management Shareholder agrees to repay to the
Purchaser, the Company or Dollar Express, as the case may be, such refund or
repayment, less any net tax cost incurred by the Management Shareholder with
respect to such amounts.
(c) Each Management Shareholder agrees to prepare his
income tax returns with respect of the taxable year in which the Closing Date
occurs consistent with the manner in which each item of income, loss, deduction
and credit of Dollar Express is reported by Dollar Express to each such
Management Shareholder.
7.6. Management Shareholders' Indemnifications.
(a) Each Management Shareholder, individually on a pro
rata basis in accordance with the number of Issued Dollar Express Shares owned
by each Management Shareholder on the Closing Date agrees to indemnify, defend
and hold harmless Dollar Express, from and against any and all Liabilities with
respect to taxes imposed upon Dollar Express as a result of an adjustment or
change, including any increase in items of income or gain or any decrease in
items of loss, deduction or credit of Dollar Express, whether before, during or
after the period of time when Dollar Express was an S Corporation, but only to
the extent that such adjustment or change (i) results from the invalidity or
termination of Dollar Express' S Corporation election for any reason other than
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the Closing, or (ii) consists of (A) an increase in an item of Dollar Express'
income or gain in any C Year and a corresponding decrease in an item of income
or gain reported to the Management Shareholders by Dollar Express with respect
to an S Year; (B) a decrease in an item of loss, deduction or credit reported by
Dollar Express in any C Year and a corresponding increase in an item of loss,
deduction or credit with respect to an S Year. Any payment with respect to a
Liability with respect to Taxes shall be paid in cash by the Management
Shareholders no later than ten (10) days prior to the due date of any payment
required to be made by Dollar Express with respect to such taxes.
(b) In the event any taxes as to which an amount shall
have been paid to Dollar Express by the Sellers pursuant to Section 7.5(a) are
subsequently refunded or repaid to Dollar Express, Dollar Express agrees to
repay to the Management Shareholders such refund or a payment, less any net tax
costs incurred by Dollar Express with respect to such amounts.
(c) In the event that the S Corporation election of
Dollar Express is terminated prior to the Closing Date for any reason other than
the Closing, each of the Management Shareholders and the Purchaser agrees to, or
to cause Dollar Express to, take such steps as are reasonably necessary to
obtain relief of such termination pursuant to Section 1362(f) of the Code and
the regulations thereunder.
7.7. Tax Contest. Any Management Shareholder (a "Notified
Shareholder") receiving notice of (i) an intention by a taxing authority to
audit any return of the Management Shareholders which includes any item of
income, gain, deduction, loss or credit reported by Dollar Express with respect
to any S Year, shall inform Dollar Express and the Purchaser, in writing, of the
intended audit within fifteen (15) days after receipt of such notice, or (ii) a
proposed adjustment to such an item, shall give notice to Dollar Express of the
proposed adjustment within fifteen (15) days after receipt of a notice of
proposed adjustment from a taxing authority. A failure on the part of a Notified
Shareholder to provide such notice to Dollar Express and the Purchaser on a
timely basis shall not relieve Dollar Express of its obligation of
indemnification under Section 7.4 unless such failure materially prejudices the
ability of Dollar Express or the Purchaser to cause the proposed adjustment to
be contested. Dollar Express may, upon giving written notice to the Notified
Shareholder, request that the Notified Shareholder contest such proposed
adjustment. If Dollar Express shall request that a proposed adjustment be
contested, then the Notified Shareholder shall either, at Dollar Express'
expense, contest (or engage representatives to contest) the proposed adjustment
or permit Dollar Express and its representatives to contest the proposed
adjustment (including pursuing all administrative and judicial appeals and
processes). The Management Shareholders shall not make, accept or enter into a
settlement or other compromise with respect to any Taxes that are the subject of
indemnification under this Agreement, or forego or terminate any proceeding
relating to a proposed adjustment without the consent of the Purchaser, which
shall not be unreasonably withheld or delayed. Procedures similar to those set
forth in this Section 7.6 shall apply to any proposed adjustment with respect to
which the Management Shareholders may be obligated to indemnify Dollar Express
with respect to any Liability for Taxes. Nothing in this Section 7.6 shall limit
Dollar Express' or the Management Shareholders' obligations to indemnify the
Management Shareholders or the Purchaser pursuant to Section 7.4 or 7.5 hereof
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if the indemnifying party decides not to contest, or abandons its prior decision
to contest, a proposed adjustment.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the Contemplated
Transactions on the Closing Date is subject to the satisfaction, on or prior to
the Closing Date and as of the Closing Date, of the following conditions, any of
which may be waived in writing by the Purchaser:
8.1. Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the
Company, Dollar Express and the Management Shareholders contained herein shall
be true and correct on and as of the Closing Date with the same force and effect
as though the same had been made on and as of the Closing Date.
(b) The Company, Dollar Express and the Management
Shareholders shall have performed and complied with the covenants and provisions
of this Agreement required to be performed or complied with by it or them at or
prior to the Closing Date.
(c) The Purchaser shall have received certificates of the
Company and of Dollar Express dated as of the Closing Date and signed by an
officer of each, certifying as to the fulfillment of the conditions set forth in
this Section 8.1.
8.2. Opinion of the Company's Counsel. The Purchaser shall
have received an opinion or opinions of counsel for the Company, dated the
Closing Date, substantially in the form annexed hereto as Exhibit D.
8.3. Delivery of Documents. The Company shall have executed
and delivered to the Purchaser the documents listed in Section 3.3, and Dollar
Express shall have executed and delivered to the Purchaser the documents listed
in Section 3.4. In addition, the Company and/or the Management Shareholders, as
applicable, shall have executed the following documents:
(a) The Liquidity Event Warrant in substantially the form
of Exhibit C hereto;
(b) An Investor Rights Agreement in substantially the
form of Exhibit E hereto; and
(c) A Registration Rights Agreement in substantially the
form of Exhibit F hereto; and
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(d) The Employment Agreements in substantially the form
of Exhibit G hereto.
8.4. Bank Debt. The Borrowings shall be fully funded and
loaned to the Company and Dollar Express at the Closing contemporaneously with
the Closing, pursuant to agreements containing terms and conditions acceptable
to the Purchaser, the Company and Dollar Express.
8.5. Other Conditions Precedent to the Purchaser's
Obligations.
(a) The Management Shareholders shall have completed the
Restructuring in accordance with the terms and conditions of this Agreement.
(b) The Company and Dollar Express shall have obtained or
made all approvals, consents, Permits, Orders, waivers, filings, notices,
registrations and applications set forth in Schedule 4.6 hereto, each of which
shall be in full force and effect.
(c) Neither the Company nor Dollar Express shall not have
discontinued any line of business or changed in any material respect the nature
of its business since the Financial Statement Date. The management of the
Business in place at the Financial Statement Date shall continue to be in the
employment of Dollar Express.
(d) There shall be no injunction, writ, temporary
restraining order or any Order of any nature issued by any Governmental Body
directing that the Contemplated Transactions not be consummated. There shall not
have been any action taken or threatened or proposed to be taken, or any
statute, rule, regulation, judgment, order or injunction proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to this Agreement
or the Contemplated Transactions, by or before any Governmental Body, that in
the reasonable judgment of the Purchaser might prohibit consummation of the
transactions contemplated in this Agreement.
(e) INTENTIONALLY OMITTED.
(f) The Purchaser shall have received in form and
substance reasonably satisfactory to it a letter from the Company to the
Internal Revenue Service and all relevant state taxing authorities terminating
the Company's S election as of the Effective Date, which letter shall be
delivered to the Internal Revenue Service and all relevant state taxing
authorities upon Closing or as soon as practicable thereafter.
(g) The Company Articles Amendment and the Dollar Express
Articles Amendment shall have been approved and adopted by the stockholders of
each of the Company or Dollar Express, as the case may be, as contemplated by
Section 6.6 and shall have been duly filed with the Secretary of State of the
Commonwealth of Pennsylvania, in each case.
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(h) The Bylaws of the Company and Dollar Express shall
have been amended to be in substantially the form of Exhibit H and Exhibit I,
respectively, hereto.
(i) The Stock Option Plan of the Company shall have been
adopted in substantially the form of Exhibit J hereto. The Stock Option Plan of
Dollar Express shall have been terminated.
(j) All proceedings to be taken and all agreements,
instruments and documents to be executed and delivered by the Company, Dollar
Express and the Management Shareholders in connection with the consummation of
the Contemplated Transactions shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel.
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S, DOLLAR EXPRESS'
AND THE MANAGEMENT SHAREHOLDERS' OBLIGATIONS
The obligation of the Company, Dollar Express and the
Management Shareholders to consummate the Contemplated Transactions on the
Closing Date is, at the option of the Company, Dollar Express and the Management
Shareholders, subject to the satisfaction, on or prior to the Closing Date and
as of the Closing Date, of the following conditions, any of which may be waived
in writing by the Company, Dollar Express and the Management Shareholders:
9.1. Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the
Purchaser contained herein, as such may be amended from time to time, shall be
true and correct on and as of the Closing Date with the same force and effect as
though the same had been made on and as of the Closing Date, it being understood
that to the extent that such representations and warranties were made as of a
specified date the same shall continue on the Closing Date to be true and
correct in all material respects as of the specified date.
(b) The Purchaser shall have performed and complied with
the covenants and provisions in this Agreement required herein to be performed
or complied with by it at or prior to the Closing Date.
(c) The Company shall have received a certificate of the
Purchaser, dated as of the Closing Date and signed by an officer of each entity
comprising the Purchaser, certifying as to the fulfillment of the conditions set
forth in this Section 9.1.
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9.2. Bank Debt. The Borrowings shall be fully funded and
loaned to the Company and Dollar Express at the Closing contemporaneously with
the Closing, pursuant to agreements containing terms and conditions acceptable
to the Purchaser, the Company and Dollar Express.
9.3. Other Conditions Precedent to the Company's Obligations.
(a) The Management Shareholders shall have completed the
Restructuring in accordance with the terms and conditions of this Agreement.
(b) The Purchaser shall have obtained or made all
approvals, consents, Permits, Orders, waivers, filings, notices, registrations
and applications set forth in Schedule 5.3 hereto, each of which shall be in
full force and effect.
(c) There shall be no injunction, writ, temporary
restraining order or any Order of any nature issued by any Governmental Body
directing that the Contemplated Transactions not be consummated. There shall not
have been any action taken or threatened or proposed to be taken, or any
statute, rule, regulation, judgment, order or injunction proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to this Agreement
or the Contemplated Transactions, by or before any Governmental Body, that in
the reasonable judgment of the Purchaser might prohibit consummation of the
transactions contemplated in this Agreement.
(d) All proceedings to be taken and all agreements,
instruments and documents to be executed and delivered by the Purchaser in
connection with the consummation of the Contemplated Transactions shall be
reasonably satisfactory in form and substance to the Company and its counsel.
ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1. By the Management Shareholders. Subject to the
provisions of this Article X and notwithstanding the tax indemnifications
provided for in Section 7.5 hereof, the Management Shareholders, jointly and
severally, agree to indemnify, defend and hold the Purchaser, on the one hand,
or the Company and Dollar Express, on the other hand, (as contemplated by
Section 10.7) harmless from and against all Damages resulting from or arising
out of:
(a) the failure of any of the representations or
warranties of the Company, Dollar Express or the Management Shareholders
contained in this Agreement or in any certificate delivered by the Company,
Dollar Express or the Management Shareholders at the Closing pursuant to this
Agreement to have been true and correct when made and on and as of the Closing
Date;
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(b) the failure of the Company, Dollar Express or the
Management Shareholders to comply with any of their respective covenants
contained in this Agreement;
(c) the operation of the Business prior to the Closing
Date; and
(d) any Legal Proceeding arising out of the items
referred to in subsections (a), (b) and (c) above.
10.2. By the Purchaser. Subject to the provisions of this
Article X and notwithstanding the tax indemnifications provided for in Section
7.4 hereof, (i) the Advent Entities, jointly and severally, (ii) Guayacan,
severally and not jointly with the Advent Entities or DEI, and (iii) DEI,
severally and not jointly with the Advent Entities or Guayacan, agree to
indemnify, defend and hold the Company, Dollar Express and the Management
Shareholders harmless from and against all Damages resulting from or arising out
of:
(a) the failure of any of the representations and
warranties made by such entity contained in this Agreement or in any certificate
delivered by such entity at the Closing pursuant to this Agreement to have been
true and correct when made and on and as of the Closing Date;
(b) the failure of such entity to comply with any of the
covenants to be performed or complied by it contained in this Agreement; and
(c) any Legal Proceeding arising out of the items
referred to in subsections (a) or (b) above.
10.3. Limitation on Indemnification Liabilities. No Claim for
indemnification under Sections 10. l (a) or (d) (but only to the extent
subsection (d) relates to a breach of a representation or warranty referred to
in Section 10.1(a)), or under Section 10.2(a) or (c) (but only to the extent
subsection (c) relates to a breach of a representation or warranty referred to
in Section 10.2(a)), may be brought or maintained unless and until the aggregate
dollar amount of all Damages sought to be indemnified against under such
aforesaid Sections exceeds Five Hundred Thousand Dollars ($500,000) (the
"Threshold Amount"), and then such Claim may be brought for the full amount of
such Damages up to, but not exceeding, the aggregate sum of Fifty-Five Million
Dollars ($55,000,000) (the "Maximum Amount"); provided, however, that any
amounts owing in respect of Section 4.22 or Section 5.6 hereof shall not be
included in either the Threshold Amount or the Maximum Amount.
10.4. Survival of Representations, Warranties and Covenants.
The parties hereto agree that the representations and warranties made in this
Agreement shall survive for a period ending on the second anniversary of the
Closing Date; provided, however, that (i) the representations and warranties in
Article VII (Taxes) and Section 4.20 (ERISA Matters) shall survive for the
period of the statute of limitations applicable to the matters represented and
warranted therein, (ii) the representations and warranties in Section 4.25 (Year
2000 Compliance) shall survive for a period ending on the fourth anniversary of
the Closing Date; and (iii) the representations and warranties in Section 4.2
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(Authorization), Section 4.9 (Title to Assets), and Section 5.2 (Authorization)
shall survive indefinitely.
10.5. Notice of Indemnification. In the event any Legal
Proceeding shall be threatened or instituted or any Claim or demand shall be
asserted by any Person in respect of which payment may be sought by one party
hereto from the other party under the provisions of Sections 10.1(a) or (d) (but
only to the extent subsection (d) relates to a breach of a representation or
warranty referred to in Section 10.1(a)), or under Sections 10.2(a) or (c) (but
only to the extent subsection (c) relates to a breach of a representation or
warranty referred to in Section 10.2(a)), for breach of any of the
representations and warranties set forth herein, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of the
commencement of such Legal Proceeding or the assertion of any such Claim, of
which it has knowledge and which is covered by this indemnity, to be forwarded
to the other party (the "Indemnitor"); provided, however, that failure of the
Indemnitee to give the Indemnitor notice promptly as provided in this Section
shall not relieve the Indemnitor of its obligations hereunder except to the
extent that the Indemnitor shall have been prejudiced by such failure. In all
events, notice must be received by the Indemnitor prior to the expiration of the
survival terms of the underlying representations and warranties as described in
Section 10.4 above. Any notice of a Legal Proceeding or a Claim by reason of
breach of any of the representations, warranties or covenants contained in this
Agreement shall state in reasonable detail the representation, warranty or
covenant with respect to which the Claim is made, the facts giving rise to an
alleged basis for the Claim, and the amount of the Liability asserted against
the Indemnitor by reason of the Claim.
10.6. Indemnification Procedure for Third-Party Claims. Except
as otherwise provided herein, in the event of the initiation of any Legal
Proceeding against an Indemnitee by a third party, the Indemnitor shall be
entitled to assume the defense thereof, at the Indemnitor's sole expense. If the
Indemnitor assumes the defense of any Legal Proceeding, it will not settle the
Legal Proceeding without the prior written consent of the Indemnitee (which
shall not be unreasonably withheld or delayed). The Indemnitee shall cooperate
in all reasonable respects with the Indemnitor and its attorneys in the
investigation, trial and defense of any Legal Proceeding and any appeal arising
therefrom (including the filing in the Indemnitee's name of appropriate cross
claims and counterclaims). The Indemnitee may, at its own cost, participate in
any investigation, trial and defense of such Legal Proceeding controlled by the
Indemnitor and any appeal arising therefrom. If after receipt of a written
notice pursuant to Section 10.5 hereof, the Indemnitor does not undertake to
defend any such Legal Proceeding, the Indemnitee may, but shall have no
obligation to, contest or defend against any Legal Proceeding and the Indemnitor
shall be bound by the result obtained with respect thereto by the Indemnitee
(including, without limitation, the settlement thereof without the consent of
the Indemnitor). If there are one or more legal defenses available to the
Indemnitee that conflict with those available to the Indemnitor, the Indemnitee
shall have the right, at the expense of the Indemnitor, to assume the defense of
the Legal Proceeding; provided, however, that the Indemnitee may not settle such
Legal Proceeding without the consent of the Indemnitor, which consent shall not
be unreasonably withheld or delayed.
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10.7. Payment of Indemnification Amounts. Amounts determined
to be owing under Sections 10.1 or 10.2 hereof by an Indemnitor to an Indemnitee
in respect of any Third Party Claim shall be payable by the Indemnitor as
incurred by the Indemnitee. All other amounts owed under Sections 10.1 or 10.2
by an Indemnitor to an Indemnitee shall be paid upon admission or other final
determination of liability under such Sections.
(a) Indemnification owed by the Management Shareholders
under Section 10.1 hereof shall be paid to the Company if payment of such
indemnity meets either of the following criteria:
(i) such indemnity relates to a pre-Closing fact,
circumstance or liability which, had it been known prior to Closing, would not
have been taken into account in determining EBITDA for any period ending on or
prior to December 31, 1998, and payment of the indemnity will put the Company
and the Purchaser in the same position each would have been in had the item
giving rise to the indemnity not occurred; or
(ii) such indemnity involves an extraordinary
non-recurring item and payment of the indemnity will put the Company and the
Purchaser in the same position each would have been in had the item giving rise
to the indemnity not occurred.
(b) Indemnification owed by the Management Shareholders
under Section 10.1 hereof shall be paid in cash to the Purchaser (in which case
such item shall be multiplied by 10.09 and by the Purchaser's fully diluted
percentage ownership of the Company), if such indemnity relates to any other
fact, circumstance or liability which is not an extraordinary non-recurring item
addressed under Section (a)(ii) above and which, had it been known prior to
Closing, would have been taken into account in determining EBITDA for any period
ending on or prior to the Effective Date.
In no event shall any indemnity be paid under this Article X for items taken
into account and adjusted for in the procedures set forth in Section 3.9.
10.8. Management Shareholders' Claims Against the Company. The
Management Shareholders agree that neither of them will seek, nor will either of
them be entitled to, contribution from, or indemnification by, the Company,
under the Company's bylaws, this Agreement, applicable corporate laws or other
laws or otherwise, in respect of amounts due from the Management Shareholders to
the Purchaser under this Article X or otherwise under this Agreement, and each
of the Management Shareholders will hold the Company and the Purchaser harmless
in respect of all such amounts and shall not seek to join the Company in
connection with any suit arising under this Agreement. The Management
Shareholders also agree that they will not make claim against any directors and
officers insurance policy maintained or to be maintained by the Company in
respect of amounts due by the Management Shareholders to the Purchaser under
this Article X or otherwise under this Agreement, if the carrier of such
insurance policy would have any right of subrogation against the Company in
respect of such claim and shall indemnify and hold harmless the Purchaser from
any such action.
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10.9. Indemnity by Purchaser Entities. Each of (i) the Advent
Entities, (ii) Guayacan, and (iii) DEI shall be obligated to pay any
indemnification pursuant to Section 10.2 hereof such that each shall be
responsible for such indemnity only to the extent of its proportionate share
(based on its share of the purchase price paid for the Series A Preferred Shares
and Liquidity Event Warrants pursuant to Exhibit A hereof) of the Loss being
indemnified. Each of the Advent Entities agrees that each Advent Entity shall
have a right of contribution against each such other Advent Entity so that each
Advent Entity shall be responsible to bear an indemnified Loss only to the
extent of its proportionate share thereof (determined as stated above).
ARTICLE XI
TERMINATION
11.1. Termination. This Agreement may be terminated prior to
the Closing Date as follows:
(a) By mutual written consent of the Company, Dollar
Express, the Management Shareholders and the Purchaser;
(b) By either the Purchaser or the Company, Dollar
Express, and the Management Shareholders, so long as the terminating party(ies)
has(have) not breached in any material respect any of its (their) obligations
hereunder, after February 15, 1999 or such later date to which the Closing may
be extended by the parties hereto (such date being herein referred to as the
"Outside Closing Date"), if the Closing shall not have occurred on or before
such date;
(c) By the Company, Dollar Express or the Management
Shareholders, so long as neither the Company, Dollar Express, nor the Management
Shareholders has breached any of its obligations hereunder, if either (i) the
Purchaser fails to perform any covenant in this Agreement when performance
thereof is due and does not cure such failure within twenty (20) business days
after the Company delivers written notice thereof to the Purchaser, or (ii) any
condition in Article IX of this Agreement is not satisfied or capable of being
satisfied on or before the Outside Closing Date;
(d) By the Purchaser, so long as the Purchaser has not
breached any of its obligations hereunder, if either (i) the Company, Dollar
Express or the Management Shareholders fails to perform any covenant in this
Agreement when performance thereof is due, and does not cure the failure within
twenty (20) business days after written notice by the Purchaser thereof to the
non-performing party, or (ii) any condition in Article VIII of this Agreement is
not satisfied or capable of being satisfied on or before the Outside Closing
Date.
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11.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.1, all rights and obligations of the parties hereunder
shall terminate, except for the confidentiality covenants referenced in Section
6.2 and the rights and obligations set forth in Section 12.5 and 12.6 hereof,
and except to the extent that such termination results from the willful or
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
11.3. Expenses If No Closing. If the Closing does not occur
and the Contemplated Transactions are not consummated, then, subject to the
right of a non-defaulting party to pursue all of its remedies, all costs and
expenses incurred in connection with this Agreement shall be paid by the Person
incurring such expenses; provided, however, that if all of the conditions
precedent set forth in Article IX (other than those relating to the delivery of
payments, documents, agreements and instruments required to be made at Closing)
shall have been satisfied, then each of the Company, Dollar Express and the
Management Shareholders, jointly and severally, shall reimburse the Purchaser
for all expenses incurred by it, up to a maximum of $500,000, in connection with
the due diligence investigation of the Company and the negotiation, execution
and delivery of this Agreement and any documents related to the Contemplated
Transactions, which reimbursement shall be made promptly upon demand therefor,
but in no event later than ten (10) business days after delivery of an invoice
with respect thereto.
ARTICLE XII
MISCELLANEOUS
12.1. Appointment of Directors. Immediately upon receipt of
the payments required by Section 3.1 through 3.4 hereof, the Company shall
appoint two individuals selected by the Purchaser to its Board of Directors.
12.2. Additional Restructuring. As soon as practicable
following the Closing Date, the Company shall initiate an additional
restructuring, as a result of which all, or substantially all, of the assets and
liabilities of the Dollar Express Stores will be owned by Dollar Express and
all, or substantially all, of the assets and liabilities of the Spain's Cards
Stores will be owned by another wholly-owned subsidiary of the Company.
12.3. Entire Agreement. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of all of the terms
and the arrangements between the parties hereto with respect to the matters
provided for herein, and supersedes any and all previous agreements and
understandings between the parties hereto with respect to those matters.
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12.4. Specific Performance. The parties hereto agree that, in
the event of any such breach of any representation, warranty or covenant
contained herein or in the Collateral Documents, the parties will be entitled to
seek a decree of specific performance, mandamus or any other appropriate remedy
to enforce such provisions without any requirement that a bond be posted.
12.5. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to the application of the principles of conflicts or choice of laws.
12.6. Transfer Taxes. The Company shall pay all stamp,
transfer and documentary taxes and fees imposed with respect to the transaction
contemplated hereby. The Purchaser or the Company, as the case may be, shall
execute and deliver to the other at the Closing any certificates or other
documents as the other may reasonably request to perfect any exemption from any
such transfer or documentary.
12.7. Expenses. Except as set forth in Section 11.3, Dollar
Express shall pay and be responsible for the payment of all costs (including,
without limitation, fees and disbursements of its counsel, accountants and other
experts) that it, the Company, the Management Shareholders and the Purchaser
have incurred or will incur in connection with the preparation, negotiation,
execution, delivery and performance of this Agreement, each of the other
documents and instruments executed in connection with or contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, fees and disbursements of its counsel,
accountants and other experts).
12.8. Public Announcements. Neither the Company nor Dollar
Express (nor any of their affiliates) nor the Purchaser (nor any of its
affiliates) shall prior to the Closing make any public statement, including,
without limitation, any press release, with respect to this Agreement and the
Contemplated Transactions, without the prior written consent of the other party
(which consent may not be unreasonably withheld), except as may be required by
Law.
12.9. Notices. All notices and other communications hereunder
shall be in writing and shall be given to the Person either by hand delivery or
by United States express mail, postage prepaid, or by overnight courier services
guaranteeing next business day delivery, charges prepaid, to:
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If to the Company or Dollar Express, to:
DE&S Holding Co.
Dollar Express, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Spain
with a copy to:
Fox, Rothschild, O'Brien & Xxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esquire
If to the Management Shareholders, to:
Xxxxxxx Spain
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxx Spain
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
with a copy to:
Fox, Rothschild, O'Brien & Xxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esquire
If to the Advent Entities, to:
c/o Advent International Corporation
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
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with a copy to:
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Xxxxx X. Xxxxxxx, Esquire
If to Guayacan, to:
Advent Morro Equity Partners
Banco Popular Building, Xxxxx 000
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxx Xxxx 00000
Attention: Xxxxx Xxxxxx
If to DEI, to:
Dollar Express Investment, LLC
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx III
with a copy to:
Kennedy, Covington, Xxxxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esquire
If the notice is sent by United States express mail or by overnight courier
services, it shall be deemed to have been given to the Person entitled thereto
one business day after deposited with the post office or the courier service for
delivery to that Person or, in the case of a notice given by hand delivery, when
received. Notice of any change in any such address shall also be given in the
manner set forth above. Whenever the giving of notice is required, the giving of
such notice may be waived by the party entitled to receive such notice.
12.10. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
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12.11. Binding Effect; Successors and Assigns. Nothing in this
Agreement, express or implied, is intended, except as set forth herein, to
confer upon any third party any rights, remedies, obligations or liabilities. No
party can assign its interests herein to any third party, except that any entity
comprising the Purchaser may assign its right to purchase up to 25% of its
interest in the Company without the consent of the Company, Dollar Express or
the Management Shareholders. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, and permitted successors and assigns agreeing to be bound by
all and the terms and conditions of this Agreement.
12.12. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement with regard to the subject
matter hereof and intended to be a complete and exclusive statement of the
agreement and matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
12.13. Interpretation. Unless the context of this Agreement
otherwise requires, (i) words of any gender include each gender and the neuter;
(ii) words using the singular or plural number also include the plural or
singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the term "including" or similar words shall be construed as
to refer to such matter without limitation thereof. Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
business days are specified. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.14. Amendments. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of each of the parties hereto.
12.15. Counterparts. This Agreement may be executed, including
by facsimile signature, in one or more counterparts, each of which when so
executed shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
DE&S HOLDING CO.
By: /s/ Xxxxxx Spain
--------------------------------------------
Name: Xxxxxx Spain
Title: President
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DOLLAR EXPRESS, INC.
By: /s/ Xxxxxxx Spain
--------------------------------------------
Name: Xxxxxxx Spain
Title: Chief Executive Officer
XXXXXXX SPAIN
/s/ Xxxxxxx Spain
------------------------------------------------
XXXXXX SPAIN
/s/ Xxxxxx Spain
------------------------------------------------
GLOBAL PRIVATE EQUITY III LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
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ADVENT PGGM GLOBAL LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
ADVENT PARTNERS GPE III LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
ADVENT PARTNERS (NA) GPE III LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
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GUAYACAN PRIVATE EQUITY FUND
LIMITED PARTNERSHIP
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
Advent International Corporation
DOLLAR EXPRESS INVESTMENT, LLC
By: /s/ Xxxx X. Xxxxx
--------------------------------------------
Name: Xxxx X. Xxxxx
Title: Manager, Dollar Express
Investment, LLC
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EXHIBIT A
PROPORTION OF INTERESTS
Entity Dollar Contribution Interest %
------ ------------------- ----------
Global Private Equity III Limited Partnership $28,210,000 80.600%
Advent PGGM Global Limited Partnership $ 4,323,000 12.351%
Advent Partners GPE III Limited Partnership $ 426,000 1.217%
Advent Partners Limited Partnership $ 185,000 0.529%
Advent Partners (NA) GPE III Limited Partnership $ 126,000 0.360%
Guayacan Private Equity Fund Limited Partnership $ 1,000,000 2.857%
Dollar Express Investment, LLC $ 730,000 2.086%
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EXHIBIT B
DESIGNATION STATEMENT
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EXHIBIT C
FORM OF LIQUIDITY EVENT WARRANT
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EXHIBIT D
FORM OF OPINION OF THE COMPANY'S COUNSEL
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EXHIBIT E
FORM OF INVESTORS RIGHTS AGREEMENT
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EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT
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EXHIBIT G
FORM OF EMPLOYMENT AGREEMENTS
-69-
EXHIBIT H
FORM OF AMENDED AND RESTATED BYLAWS OF THE COMPANY
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EXHIBIT I
FORM OF AMENDED AND RESTATED BYLAWS OF DOLLAR EXPRESS
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EXHIBIT J
FORM OF AMENDED AND RESTATED STOCK OPTION PLAN
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