Exhibit 10.10
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INVESTOR RIGHTS AGREEMENT
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 5, 1999
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INVESTOR RIGHTS AGREEMENT
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THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is made as of this 5th
day of February, 1999, by and among DE&S HOLDING CO., a Pennsylvania corporation
(the "Corporation"), DOLLAR EXPRESS, INC., a Pennsylvania corporation ("Dollar
Express"), XXXXXXX SPAIN, XXXXXX SPAIN (and together with Xxxxxxx Spain, the
"Management Holders"), GLOBAL PRIVATE EQUITY III LIMITED PARTNERSHIP, a Delaware
limited partnership ("GPE III"), ADVENT PGGM GLOBAL LIMITED PARTNERSHIP, a
Delaware limited partnership ("AG-PGGM"), ADVENT PARTNERS GPE III LIMITED
PARTNERSHIP, a Delaware limited partnership ("AP-GPEIII"), ADVENT PARTNERS (NA)
GPE III LIMITED PARTNERSHIP, a Delaware limited partnership ("AP-NA"), ADVENT
PARTNERS LIMITED PARTNERSHIP, a Delaware limited partnership ("APLP" and
together with GPEIII, AG- PGGM, AP-GPEIII and AP-NA, the "Advent Entities"),
GUAYACAN PRIVATE EQUITY FUND LIMITED PARTNERSHIP, a Delaware limited partnership
("Guayacan"), and DOLLAR EXPRESS INVESTMENT, LLC, a North Carolina limited
liability company ("DEI"; and, together with Guayacan and the Advent Entities
and their respective Affiliates, collectively, the "Investors"; and each of the
Investors is, individually, an "Investor").
WHEREAS, as of February 3, 1999, the Corporation, the Investors, and
the Management Holders executed a Securities Purchase and Contribuiont Agreement
(the "Purchase Agreement") (capitalized terms used but not defined herein have
the meanings set forth in the Purchase Agreement);
WHEREAS, pursuant to the Purchase Agreement, the Corporation has filed
an amendment to its charter designating 3,530,000 shares of preferred stock, par
value $0.01 per share, as Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock");
WHEREAS, on the date hereof, the Management Holders own 100% of the
outstanding shares of common stock, par value $.01 per share, of the Corporation
(the "Common Stock") and the Investors own 100% of the outstanding shares of
Series A Preferred Stock of the Corporation, each in the amounts set forth on
Schedule 1 hereto;
WHEREAS, under the terms of the Purchase Agreement, the Investors may
become entitled to exercise certain warrants to purchase shares of Common Stock
(the "Warrants"); and
WHEREAS, as an inducement to completion of the transactions
contemplated by the Purchase Agreement the Corporation, the Management Holders
and the Investors have agreed to provide for certain matters with respect to the
ownership and transfer of the Shares (as defined in Section 1 below) and
Warrants owned by them;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings of the Corporation set forth below, the parties
hereto, intending to be legally bound hereby, agree with each other as follows:
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1. Certain Defined Terms. Capitalized terms used in this
Agreement have the meanings set forth in this Section 1, or are defined in the
provisions of this Agreement identified in this Section 1.
"Advent" shall mean Advent International Corporation, a
Delaware corporation, and any Affiliate of Advent International Corporation.
"Affiliate" of a Person shall mean any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes hereof, only wholly-owned subsidiaries shall be
deemed to be Affiliates of a parent entity and the requisite amount of "control"
shall exist only if the same Person has the power to direct decisions affecting
Securities. For purposes hereof (i) except as otherwise provided herein, the
partners, members or shareholders of an Investor shall be deemed to be
Affiliates of that Investor (but only to the extent of their pro rata interest
therein), and (ii) each Advent Entity shall be deemed to be an Affiliate of each
other Advent Entity and of Advent.
"Commission" shall mean the U.S. Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Equity Percentage" shall mean, as to any
Shareholder, the percentage that (i) the outstanding shares of Common Stock then
owned by such Shareholder plus any shares of Common Stock issuable on the
conversion, exchange or exercise of securities owned by such Shareholder that
are, at the time of determination, convertible into, or exchangeable or
exercisable for, shares of Common Stock, is of (ii) the aggregate outstanding
number of shares of Common Stock then owned by all of the Shareholders plus all
shares of Common Stock issuable on the conversion, exchange or exercise of
securities that are, at the time of determination, convertible into, or
exchangeable or exercisable for, shares of Common Stock.
"Counterpart" shall mean a counterpart to this Agreement in
the form of Exhibit A hereto, pursuant to the execution of which a Person shall
become bound by all of the terms and conditions to this Agreement.
"Excluded Securities" shall mean, collectively: (i) the
Option Shares; (ii) the Warrant Shares; (iii) Shares of any class of the
Corporation's capital stock to be issued in exchange for or in respect of shares
of Common Stock (whether by way of stock split or reverse stock split, dividend
or distribution, subdivision, combination, reclassification, recapitalization,
reorganization or any other means); and (iv) Shares to be issued pursuant to a
Public Offering.
"Management Shares" shall mean and include all issued and
outstanding shares of Common Stock now owned or hereafter acquired by the
Management Holders.
"Options" shall mean incentive stock or non-qualified
options granted pursuant to the an employee benefit plan of the Corporation.
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"Option Shares" shall mean shares of Common Stock issuable
upon the exercise of Options.
"Permitted Transferee" shall mean, with respect to any
Management Shareholder or Permitted Transferee tracing his, her or its chain of
title to Shares from a Management Shareholder (i) any other Management
Shareholder or Permitted Transferee tracing his, her or its chain of title from
a Management Shareholder, (ii) any spouse of the Management Shareholder or any
such Permitted Transferee, (iii) any lineal ancestor or descendant or sibling of
the Management Shareholder or such Permitted Transferee, (iv) spouses of such
lineal descendants, or (v) trusts for the benefit of any such spouse, lineal
descendant or spouse of a lineal descendant.
"Person" shall mean an individual, a sole proprietorship, a
corporation, a partnership, limited liability company, limited liability
partnership, a joint venture, an associa tion, a trust, or any other entity or
organization, including a government or a political subdivision, agency or
instrumentality thereof.
"Pledge Agreement" shall mean that certain pledge agreement
entered into in connection with the Credit Agreement dated as of February 5,
1999, by and among the Corporation, Dollar Express, and any subsidiaries
referred to therein, as borrowers, and the lenders referred to therein (the
"Lenders"), and First Union National Bank, as Administrative Agent
("Administrative Agent").
"Post-QPO Ownership Percentage" shall mean the Investors'
aggregate Common Equity Percentage on the first business day after the
consummation of the Qualified Public Offering.
"Public Offering" shall mean the sale of shares of Common
Stock in an underwritten public offering registered under the Securities Act.
"Qualified Public Offering" shall mean a Public Offering
resulting in gross proceeds of at least $40,000,000 and which results in the
Common Stock being listed on the New York Stock Exchange or being eligible for
quotation on the Nasdaq National Market; provided that the Common Equity Value
of the Corporation immediately prior to such registered public offering must be
at least $150,000,000.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of February 5, 1999, by and among the
Corporation, Dollar Express, the Management Holders, and each of the Investors,
as the same may hereafter be amended or modified.
"Securities" shall mean all shares of capital stock,
options, warrants, notes, bonds or other equity or debt securities of the
Corporation which are offered or sold by the Corporation from time to time on or
after the date hereof.
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"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Shares" shall mean and include (i) all shares of Common
Stock of the Corporation, including without limitation, shares of Common Stock
issued, issuable on the conversion or exchange or exercise of securities
convertible into or exchangeable or exercisable for Common Stock, and (ii) all
other securities of the Corporation which may be issued in exchange for or in
respect of shares of Common Stock (whether by way of stock split or reverse
stock split, dividend or distribution, subdivision, combination,
reclassification, recapitalization, reorganization or any other means).
"Shareholder" shall mean any Person who, from time to time,
holds any Shares and who or which is or becomes a party to this Agreement
pursuant to the terms hereof.
"Subsidiary" means, with respect to the Corporation, any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by the Corporation
and one or more other Subsidiaries of the Corporation.
"Transfer" shall mean any transfer of Shares, whether by
sale, assignment, gift, will, devise, bequest, operation of the laws of descent
and distribution, or in trust, pledge, hypothecation, mortgage, encumbrance or
other disposition. The verb to "Transfer" shall mean to sell, assign, give,
transfer (including by gift, will, devise, bequest, or operation of laws of
descent and distribution, or in trust), pledge, hypothecate, mortgage, encumber
or dispose of.
"Voting Stock" means with respect to any Person, capital
stock of any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the governing body of such
Person.
"Warrant Shares" shall mean shares of Common Stock issuable
upon the exercise of Warrants.
2. Financing Participation Rights.
a. Except in the case of the issuance of Excluded
Securities, if the Corporation shall at any time desire to raise capital, incur
indebtedness for borrowed money, or otherwise engage in a financing transaction
("Financing Transaction"), the Corporation shall first prepare a written offer
setting forth all material terms and conditions for the proposed Financing
Transaction (the "Term Sheet"), including the price and terms and conditions
thereof, the minimum and maximum limits, if any, on the amount of Securities
proposed to be sold by the Corporation, and the Common Equity Percentage
applicable to the Investor receiving such notice. Such notice shall also specify
whether a third party has made an offer to provide the funds for the proposed
Financing Transaction. The Corporation shall promptly transmit a copy of the
Term Sheet to each of the Investors, and thereupon shall be deemed to have
offered in
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writing to engage in the Financing Transaction with the Investors upon the terms
and conditions set forth in the Term Sheet. For a period of 30 days after the
Term Sheet has been received ("Financing Option Period") by the Investors, the
Investors shall have the option, exercisable by written notice to the
Corporation, to accept the Term Sheet as to the proposed Financing Transaction.
Each Investor who exercises this option shall agree, by doing so, to participate
in the Financing Transaction in such other proportions as to the other Investors
as they may agree among themselves and set forth in the notice accepting the
Term Sheet. For a period beginning on the date of the exercise of the option and
continuing until 60 days after date the Term Sheet was received by the Investors
(the "Negotiation Period"), the Corporation and the Investors exercising the
option shall negotiate in good faith the terms and conditions of a definitive
agreement concerning the Financing Transaction.
b. Each Investor may assign to another Investor, or
to an Affiliate of itself or any other Investor, all or any part of its rights
and responsibilities with respect to an offer to engage in the proposed
Financing Transaction upon the terms and conditions set forth in the Term Sheet.
Such Investors or Affiliates which are such assignees shall thereafter be deemed
to be such assigning Investor (to the extent of such assignment) for purposes of
applying this Section 2 to proposed Financing Transactions. In the event of a
purchase of equity securities pursuant to such assignment, each such Affiliate
shall be deemed an Investor and shall agree in writing, as a condition to such
assignment, to execute a Counterpart and a counterpart to the Registration
Rights Agreement.
c. If, at the end of the Negotiation Period, the
Investors and the Corporation have not consummated the Financing Transaction,
then the Corporation shall be free, subject to the preemptive rights set forth
in Section 3 hereof and other applicable limitations, for a period of 180 days
thereafter, to consummate the Financing Transaction upon substantially the same
terms and conditions set forth in the Term Sheet with a third party which is not
an Affiliate of the Corporation, of any director or executive officer of the
Corporation, or of any Management Shareholder ("Third-Party Financing Closing").
The failure of the Investors to accept the Term Sheet shall not be deemed to be
a waiver of the Investors rights under the Corporation's charter or bylaws, or
any other agreement. As a condition to the third party financing, in the event
any equity securities are to be issued in the Financing Transaction, such third
party shall execute a copy of this Agreement as a Shareholder. If the
Third-Party Financing Closing does not occur substantially upon the terms and
conditions set forth in the Term Sheet within the aforesaid 180-day period, then
the Corporation shall not be permitted to engage in a Financing Transaction
without again complying with this Section 2.
d. If at any time, or from time to time, Dollar
Express or any other Subsidiary proposes to raise capital, incur indebtedness
for borrowed money, or otherwise engage in a financing transaction ("Subsidiary
Financing Transaction"), Dollar Express shall, and the Corporation shall cause
any other Subsidiary to, enter into an agreement granting to each of the
Investors and the Management Holders, pro rata based on such party's Common
Equity Percentage, financing participation rights with respect to the Subsidiary
Financing Transaction on terms identical to those set forth in Section 2(a), (b)
and (c) hereof. Such participation rights shall not be applicable to issuances
of securities by a Subsidiary solely to the Corporation and/or
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to any other Subsidiary. If any Investor participates in a Subsidiary Financing
Transaction under this Section 2(d), and as a result of which such Investor
acquires equity securities of a Subsidiary, the Corporation shall cause such
Subsidiary to enter into an agreement granting to such Investor preemptive
rights and, if any Management Holders also purchase securities of such
Subsidiary, tag-along rights with respect to the securities of such Subsidiary
on terms identical to the terms set forth in Section 3 and Section 4 hereof.
e. The rights and obligations set forth in Section 2
shall terminate upon the consummation of a Qualified Public Offering.
3. Preemptive Rights.
a. Except in the case of the issuance of Excluded
Securities, the Corporation shall not, including instances where any Investor
has not exercised its rights under Section 2 above, issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any Securities unless it shall have first offered (the "Preemptive
Offer") to sell such Securities to the Investors on the terms set forth in this
Section 3. Each Investor shall have a preemptive right to purchase up to such
Investor's Common Equity Percentage of such Securities. Each Investor may assign
all or any part of its rights and responsibilities with respect to such Offer
(as defined below) to another Investor, or to an Affiliate of itself or any
other Investor. Such Investors or Affiliates which are such assignees shall
thereafter be deemed to be such assigning Investor (to the extent of such
assignment) for purposes of applying this Section 3 to such Preemptive Offer. In
the event of a purchase of Securities pursuant to such assignment, each such
Affiliate shall be deemed an Investor and shall agree in writing, as a condition
to such assignment, to execute a Counterpart and a counterpart to the
Registration Rights Agreement.
b. The Corporation shall deliver to each Investor
written notice of the Preemptive Offer, specifying the price and terms and
conditions of the offer, including without limitation, the minimum and maximum
limits on the amount of Securities proposed to be sold by the Corporation, and
the Common Equity Percentage applicable to the Investor receiving such notice.
The Preemptive Offer by its terms shall remain open and irrevocable for a period
of 15 days from the date such notice is given (the "15-Day Period").
c. If an Investor desires to purchase Securities
pursuant to the Preemptive Offer, such Investor shall evidence his or its
intention to accept the Preemptive Offer by delivering a written notice to the
Corporation signed by the Investor, setting forth the percentage of the
Securities (not exceeding such Investor's Common Equity Percentage of such
Securities) that the Investor elects to purchase (the "Notice of Acceptance").
Provided the minimum number of Securities set forth in the Preemptive Offer has
been sold after conclusion of all procedures set forth in this Section 3, then,
upon closing of the Preemptive Offer, each Investor shall be obligated to buy
the percentage set forth in such Investor's Notice of Acceptance times the
number of Securities being sold at such closing. The Corporation shall not be
permitted to sell at such closing (or any subsequent closing with respect to
which the procedures set forth in this Section 3 have not again been followed,
except as provided in this Section 3)
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more than the maximum number of Securities set forth in the Preemptive Offer.
The Notice of Acceptance must be given, if at all, prior to the end of the
15-Day Period. Within five days following the end of the 15-Day Period, the
Corporation shall give written notice (the "Notice of Refused Securities") to
the Investors setting forth the percentage of Securities for which a Notice of
Acceptance was not received (the "Refused Securities").
d. If the Investors give Notices of Acceptance to the
Corporation prior to the end of the 15-Day Period indicating their intention to
purchase, in the aggregate, less than the maximum amount of Securities set forth
in the Preemptive Offer, each Investor giving a Notice of Acceptance ("Accepting
Investors") shall be entitled to purchase by an additional Notice of Acceptance
given to the Corporation within 5 days after the date the Notice of Refused
Securities is given (the "5-Day Period"), that proportion of the Refused
Securities which the Common Equity Percentage of such Accepting Investor (prior
to the Offer) bears to the Common Equity Percentage of all Accepting Investors.
e. If the Investors give Notices of Acceptance prior
to the end of the 15-Day Period or 5-Day Period, as applicable, indicating their
intention to purchase, in the aggregate, at least the minimum amount of
Securities set forth in the Preemptive Offer, the Corporation shall schedule a
closing of the sale of the Securities to occur on the same date as the
Third-Party Financing Closing. In no event shall the Accepting Investors be
obligated to purchase the securities prior to the Third-Party Financing Closing.
Upon the closing of the sale of the Securities, each Accepting Investor shall
purchase those Securities for which it tendered a Notice of Acceptance upon the
terms specified in the Offer.
f. Regardless of whether the Investors tender Notices
of Acceptance pursuant to subsection (c) and (d) of this Section 3 for at least
the minimum amount of Securities set forth in the Offer within the 15-Day Period
or the 5-Day Period, as applicable, any remaining Refused Securities may be sold
on the date of the Third-Party Financing Closing to any other Person or Persons
(including without limitation, executive officers of the Corporation) upon terms
and conditions which are in all material respects (including without limitation,
price, form of consideration, payment period and interest rates) the same as
those set forth in the Preemptive Offer. In the event Accepting Investors gave
Notices of Acceptance for less than the minimum number of Securities set forth
in the Preemptive Offer, provided the Refused Securities agreed to be purchased
plus the Securities for which Accepting Investors gave Notices of Acceptance
exceeds such minimum, then at the same time as the closing of the sale of
Refused Securities, each Accepting Investor shall purchase those Securities for
which it tendered a Notice of Acceptance upon the terms specified in the
Preemptive Offer.
g. If at least the minimum amount of the Securities
set forth in the Preemptive Offer and the Outside Offer are not agreed to be
purchased in connection with the Third-Party Financing Closing (including any
securities to be purchased by the Investors and any Refused Securities), the
Corporation may rescind all Notices of Acceptance tendered by Investors by
providing written notice of such rescission to each Accepting Investor and the
Corporation shall not sell any Securities pursuant to the Outside Offer. Any
Securities as to which Notices of Acceptance are rescinded, and any Refused
Securities not purchased in the Outside Offer may not be sold or otherwise
disposed of until they are again offered to the Investors under the procedures
specified in subsections (a) through (g) hereof.
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h. The transferability of Securities purchased by
Person pursuant to this Section 3 shall be subject to the terms and conditions
set forth in this Agreement and any Person who is not then a Shareholder and who
purchases Securities shall execute a Counterpart as a condition precedent to
such purchase. The obligation of any Investor to purchase such Securities is
further conditioned upon the preparation of a purchase agreement embodying the
terms of the Preemptive Offer or Outside Offer which shall be reasonably
satisfactory in form and substance to the Corporation and its counsel, and such
Investor or other purchaser and such Investor's or other purchaser's counsel.
i. The rights and obligations set forth in this
Section 3, including any such similar rights granted with respect to a
Subsidiary pursuant to Section 2(d), shall terminate on such day as the
Investors' Post-QPO Ownership Percentage shall have been reduced by 50%.
4. Proposed Sales by Certain Shareholders.
a. Subject to the provisions of subsection (d) below,
if any Shareholder who is not an Investor shall at any time desire to sell all
or any of such Shareholder's Shares, such Shareholder (the "Selling
Shareholder") shall first prepare a written offer to sell such Shares (the
"Offered Shares") setting forth the proposed date of the sale, the proposed
price per Share, and the other terms and conditions upon which the sale is
proposed to be made (the "Offer"). Such notice shall also specify whether a
Third Party Purchaser (as hereinafter defined) has made an offer to acquire such
Shares at the price and on the terms and conditions set forth in the Offer. The
Selling Shareholder shall then transmit a copy of the Offer to the Corporation
and each of the Investors, and thereupon shall be deemed to have offered in
writing to sell all, but not less than all, of the Offered Shares to the
Investors, as a group, at the price and on the terms and conditions set forth in
the Offer. For a period of 45 days after such Offer to the Investors (the
"Option Period"), each Offeree Shareholder shall have the option, exercisable by
written notice to the Selling Shareholder with a copy to the Corporation and to
each of the other Investors, to accept the Offer as to the Offered Shares. Each
Offeree Shareholder who exercises this option shall agree, by doing so, to
purchase that proportionate part of the Offered Shares which the number of
Shares owned by such Offeree Shareholder bears to the total number of Shares
owned by all Investors accepting the Offer pursuant to this Section 4(a) (or in
such other proportions as the Investors may agree among themselves).
b. If, at the end of the Option Period, the Investors
have not agreed to purchase all of the Offered Shares, then the Selling
Shareholder shall be free, subject to the co-sale provisions of Section 4(c)
hereof, for a period of 180 days thereafter to sell any or all of the Offered
Shares to a third party purchaser (the "Third Party Purchaser") at the price and
upon the terms and conditions set forth in the Offer, and on condition that such
Third Party Purchaser executes a copy of this Agreement as a Shareholder. If the
Offered Shares are not so sold within the aforesaid 180-day period, then the
Selling Shareholder shall not be permitted to sell the Offered Shares without
again complying with this Section 4.
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c. As a condition precedent to any sale made to a
Third Party Purchaser by a Selling Shareholder in accordance with Section 4(b)
("Third Party Sale"), the Selling Shareholder shall notify each Investor of the
terms and conditions of the Third Party Sale ("Co-Sale Offer"). Notice of the
Co-Sale Offer shall be deemed to have been given on the date the notice of the
Offer was given pursuant to Section 4(a). The Co-Sale Offer shall remain open
and irrevocable until 10 days prior to the scheduled closing of the Third Party
Sale (the "Co-Sale Offer Period"). Upon receipt of such notice, each Investor
shall have the right ("Co-Sale Right") to sell to the Third Party Purchaser,
that number of shares of Common Stock equal to the product attained by
multiplying (a) the number of shares of Common Stock the Third Party Purchaser
proposes to purchase, times (b) the quotient derived by dividing (i) the number
of shares of Common Stock held (or deemed to be held) by the Investors
exercising the Co-Sale Right under this Section 4(c) by (ii) the total number of
shares of Common Stock held (or deemed to be held) by the Selling Shareholders
and the Investors exercising the Co-Sale Right under this Section 4(c). Each
Investor's right to sell pursuant to this Section 4(c) can be exercised by
delivery of a written notice to the Selling Shareholders prior to the
termination of the Co-Sale Offer Period. The Selling Shareholder shall deliver
to each Investor notice of the scheduled closing of the Third Party Sale at
least 15, but not more than 20, days prior to such scheduled closing. As a
condition to any Investor's exercise of the Co-Sale Right, such Investor agrees,
immediately prior to the closing of the Third Party Sale, to convert such number
of shares of Series A Preferred Stock as necessary to deliver to the Third Party
Purchase only shares of Common Stock in the Third Party Sale.
d. The provisions of this Section 4 shall not apply
(i) to proposed transfers by a Shareholder to a Permitted Transferee so long as
such Permitted Transferee, as a condition precedent to acquiring Shares,
executes a copy of this Agreement as a Shareholder, or (ii) to sales by a
Shareholder registered under the Securities Act or exempt from registration
pursuant to Rule 144 of the Securities Act.
5. Stock Splits, Etc. If there shall be any change in the
Shares as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination or exchange of Shares,
or otherwise, the provisions of this Agreement shall apply with equal force to
additional and/or substitute Securities, if any, received by each Shareholder in
exchange for or by virtue of its ownership of Shares.
6. Failure to Deliver Shares. If a Shareholder (the
"Transferring Shareholder") becomes obligated to Transfer any Shares to any of
the Corporation or to another Shareholder pursuant to this Agreement (including
a Transfer to another Shareholder for purposes of Transfer to another purchaser
pursuant to Section 6 or otherwise) and fails to deliver such Shares in
accordance with the terms of this Agreement, the Corporation or such other
Shareholder, as the case may be, may, at its or their option, in addition to all
other remedies it may have, either (i) send to the Transferring Shareholder the
purchase price for such Shares as is herein specified, or (ii) deposit such
amount with a trustee or escrow agent for the benefit of the Transferring
Shareholder for release upon delivery of such Shares to the trustee or escrow
agent in accordance with the terms of this Agreement. Thereupon, the Corporation
upon written notice
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to the Transferring Shareholder, (a) shall cancel on its books the certificate
or certificates representing the Shares so required to be transferred by the
Transferring Shareholder and (b) shall issue, in lieu thereof, in the name of
the Corporation, such other Shareholder or purchaser, as the case may be, a new
certificate or certificates representing such Shares; provided, however, the
Corporation shall be under no obligation to so cancel and issue Shares unless
the other Shareholder or purchaser, as the case may be, delivers to the
Corporation its agreement to indemnify, defend and hold harmless the
Corporation, its officers and employees, successors and assigns, from any and
all losses, claims, damages or liabilities (or actions in respect thereof) to
which the Corporation may become subject as a result of, arising out of, or
based upon the Corporation so canceling and issuing Shares, and such other
Shareholder or purchaser, as the case may be, shall reimburse the Corporation
for any legal or other expenses reasonably incurred by the Corporation in
connection therewith. All of the Transferring Shareholder's rights in and to
such Shares shall terminate as of the date of such Notice.
7. Financial Reports and Information. In addition to such
rights as the Investors (or their transferees) have under applicable law as a
Shareholder, at the Corporation's cost and expense, the Corporation shall
provide the Investors, and to any other Person who, as a result of the transfer
of shares of Series A Preferred Stock or Warrants to him, her or it, directly or
indirectly from an Investor, is the beneficial owner (determined in accordance
with Rule 13d-3 promulgated under the Securities Act of 1934, as amended) of at
least 2% of the outstanding shares of Common Stock, the financial reports and
information specified in this Section 7.
a. Within 90 days after the end of each fiscal year of the
Corporation, for so long as this Agreement shall be in effect, the Corporation
shall furnish each of the Investors with audited financial statements of the
Corporation for such fiscal year (showing comparison to the prior fiscal year)
which shall include a statement of income and retainedearnings for each such
fiscal year, a balance sheet as at the last day thereof, and a statement of cash
flows prepared in accordance with generally accepted accounting principles
consistently applied, and accompanied by the report, without qualification, of
the Corporation' independent certified public accountants (which shall be of
recognized national standing), including such accountant's management letters to
the Corporation. In addition, the Corporation shall furnish each of the
Investors with a discussion and analysis of the financial information described
above, prepared by management in accordance with the requirements of Item 303 of
Regulation S-K (or any successor provision) promulgated by the Commission.
b. Within 45 days after the end of each quarter, for so
long as this Agreement shall be in effect, the Corporation shall furnish each of
the Investors with unaudited financial statements of the Corporation for such
quarter (showing comparison to the same month the prior fiscal year) which shall
include, for each such quarter and the year-to-date period, a statement of
income and retained earnings, a balance sheet as at the last day thereof, and a
statement of cash flows prepared in accordance with generally accepted
accounting principles consistently applied, and accompanied by the report,
without qualification, of the Corporation' independent certified public
accountants (which shall be of recognized national standing), including such
accountant's management letters to the Corporation. In addition, the Corporation
shall furnish each of the Investors with a discussion and analysis of the
financial information described above, prepared by management in accordance with
the requirements of Item 303 of Regulation S-K (or any successor provision)
promulgated by the Commission.
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c. Within 30 days after the end of month, for so long as
this Agreement shall be in effect, the Corporation shall furnish each of the
Investors with unaudited financial statements of the Corporation for such month
(showing comparison to the same month the prior fiscal year) which shall
include, for each such month and the year-to-date period, a statement of income
and retained earnings, a balance sheet as at the last day thereof, and a
statement of cash flows prepared in accordance with generally accepted
accounting principles consistently applied, and accompanied by the report,
without qualification, of the Corporation' independent certified public
accountants (which shall be of recognized national standing), including such
accountant's management letters to the Corporation. In addition, the Corporation
shall furnish each of the Investors with a management commentary of the
operating and financial results for the applicable monthly period.
d. If for any period any Corporation shall have any
Subsidiary or Subsidiaries whose accounts are consolidated with those of such
Corporation, then in respect of such period the financial statements delivered
pursuant to the foregoing Section 7(a) and (b) shall be the consolidating and
consolidated financial statements of such Corporation and all such consolidated
Subsidiaries.
e. Promptly upon becoming available, copies of all
financial statements, reports, press releases, notices, proxy statements and
other documents sent by any of the Corporation to their lenders or released to
the public and copies of all regular and periodic reports, if any, filed by the
Corporation with the Commission or any securities exchange.
f. Upon request from any Shareholder, the Corporation shall
disclose to such Shareholder, in writing, the name and address of such
Shareholder (as it then appears on the records of the Corporation) and each
Shareholders Common Equity Percentage.
8. Election of Subsidiary Directors. The Corporation and the
Shareholders hereby agree to cause the board of directors of each Subsidiary,
including, without limitation, Dollar Express, to consist of five individuals
and to cause to be nominated and elected to serve as members of the board of
directors of any Subsidiary two individuals which shall be selected for
nomination by the Investors holding a majority of the outstanding shares of
Series A Preferred Stock, and three individuals which shall be selected for
nomination by the holders of a majority of the outstanding shares of Common
Stock. The Corporation and the Shareholders agree that no director of a
Subsidiary selected for nomination by the Investors may be removed unless such
removal is approved by the holders of a majority of the outstanding shares of
Series A Preferred Stock and that no director of a Subsidiary selected for
nomination by the holders of Common Stock may be removed unless such removal is
approved by the holders of a majority of the outstanding shares of Common Stock.
The Corporation and the Shareholders agree that any vacancy on the board of
directors of any Subsidiary, whether occurring through resignation, removal or
otherwise, shall be filled with an individual selected by the same group of
Shareholders who selected the individual whose resignation, removal or other
action or omission resulted in such vacancy, and that the Corporation and the
Shareholders shall cause such individual to be nominated and elected to serve on
the board of directors of the applicable Subsidiary as soon as practicable.
-11-
9. Specific Performance. Because of the unique character of
the Shares, the Corporation will be irreparably damaged if this Agreement is not
specifically enforced. Should any dispute arise concerning the Transfer of
Shares, an injunction may be issued restraining any Transfer pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to Transfer any such Shares, such right or obligation
shall be enforceable in a court of equity by a decree of specific performance.
Such remedy shall be cumulative and not exclusive, and shall be in addition to
any other remedy which the Corporation or the other Shareholders of the
Corporation may have.
10. Legend. Each certificate evidencing any of the shares of
Common Stock, other than those sold in a registered public offering, shall bear
a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND MAY NOT BE SOLD, EXCHANGED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO ALL THE TERMS AND
CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT DATED AS OF
FEBRUARY 5, 1999, AMONG THE CORPORATION AND CERTAIN OF ITS
SHAREHOLDERS, A COPY OF WHICH THE CORPORATION WILL FURNISH TO
THE HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT
CHARGE."
11. Notices. All notices and other communications hereunder
shall be in writing and shall be given to the person either personally or by
sending a copy thereof by overnight delivery via United States express mail,
postage prepaid, or by a nationally recognized courier service guaranteeing next
business day delivery, charges prepaid, or by telecopier, to such party's
address or to such party's telecopier number. All notices shall be deemed to
have been given to the person entitled thereto one business day after deposited
with the U.S. Postal Service or courier service for delivery to that person or,
in the case of telecopy or hand delivery, when dispatched.
-12-
If to the Corporation or to Dollar Express, to:
DE&S Holding Co.
Dollar Express, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Spain
Telecopy No.: 215.676.1166
with a copy to:
Fox, Rothschild, O'Brien & Xxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esquire
Telecopy No.: 215.299.2150
If to the Management Shareholders, to:
Xxxxxxx Spain
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Telecopy No.: 215.676.1166
Xxxxxx Spain
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Telecopy No.: 215.676.1166
with a copy to:
Fox, Rothschild, O'Brien & Xxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esquire
Telecopy No.: 215.299.2150
If to DEI, to:
Dollar Express Investment, LLC
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx III
Telecopy No.: 704.348.1099
-13-
with a copy to:
Kennedy, Covington, Xxxxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esquire
Telecopy No.: 704.331.7598
If to the Advent Entities or Guayacan, to:
x/x Xxxxxx Xxxxxxxxxxxxx Xxxxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy No.: 617.443.0322
With a copy to:
Xxxxxx Xxxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopy No.: 215.981.4750
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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. Entire Agreement; Amendments; Waiver; Termination. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and neither this Agreement nor any provision hereof may be
waived, modified, amended or terminated except by a writing duly executed by
holders of Shares having an aggregate Common Equity Percentage of at least 80%,
and, if the waiver, modification, amendment or termination would affect the
rights or obligations of a holder of another class of Shares other than Common
Stock, by holders of at least 80% of the outstanding shares of such class of
Shares so affected; provided, however, that for so long as Advent's aggregate
Common Equity Percentage is at least 5%, this Agreement may not be waived,
modified, amended or terminated without the prior written consent of Advent
International Corporation. To the extent any term or other provision of any
other indenture, agreement or instrument by which any party hereto is bound
conflicts with this Agreement, this Agreement shall have precedence over such
conflicting term or provision.
13. Foreclosure Upon Securities. Notwithstanding anything
herein to the contrary, this Agreement shall not apply to any equity securities
of the Corporation, or to any equity securities of Dollar Express or any other
Subsidiary, upon foreclosure on any such equity securities ("Foreclosed
Securities") by the Lenders (or the Administrative Agent on their behalf)
pursuant to the Pledge Agreement, but continuing only for so long as the Lenders
shall hold Foreclosed Securities.
14. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania and
shall be binding upon the parties hereto and their respective successors and
assigns.
15. Waivers. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
16. 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
-15-
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.
17. Captions. Captions are for convenience only and are not
deemed to be part of this Agreement.
18. Counterparts; Facsimile Signatures. 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.
19. Attorney's Fees. In the event of litigation of any dispute
or controversy arising from, in, under or concerning this Agreement or any
amendment hereof, including, without limiting the generality of the foregoing,
any claimed breach hereof or thereof, the prevailing party in such action shall
be entitled to recover from the other party in such action, such sum as the
court shall fix as reasonable attorney's fees incurred by such prevailing party.
20. Parties Benefitted. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
21. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns.
[SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement under seal on the date first above written.
DE&S HOLDING CO.
By: /s/ Xxxxxx Spain
--------------------------------------------
Name: Xxxxxx Spain
Title: President
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
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ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation, General Partner
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice-President
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
-19-
Schedule 1
TO
INVESTOR RIGHTS AGREEMENT
OWNERSHIP INTERESTS
Common Stock
------------
Xxxxxxx Spain 3,235,000 shares
Xxxxxx Spain 3,235,000 shares
Global Private Equity III Limited Partnership warrant to purchase 335,833 shares
Advent PGGM Global Limited Partnership warrant to purchase 51,463 shares
Advent Partners GPE III Limited Partnership warrant to purchase 5,071 shares
Advent Partners (NA) GPE III Limited Partnership warrant to purchase 1,500 shares
Advent Partners Limited Partnership warrant to purchase 2,204 shares
Guayacan Private Equity Fund Limited Partnership warrant to purchase 11,904 shares
Dollar Express Investment, LLC Limited Partnership warrant to purchase 8,692 shares
Preferred Stock
---------------
Global Private Equity III Limited Partnership 2,845,180 shares
Advent PGGM Global Limited Partnership 435,990 shares
Advent Partners GPE III Limited Partnership 42,960 shares
Advent Partners (NA) GPE III Limited Partnership 12,708 shares
Advent Partners Limited Partnership 18,674 shares
Guayacan Private Equity Fund Limited Partnership 100,852 shares
Dollar Express Investment, LLC Limited Partnership 73,636 shares
-20-
Exhibit A
TO
INVESTOR RIGHTS AGREEMENT
COUNTERPART
THIS INSTRUMENT forms part of the Investor Rights Agreement (the
"Agreement") made as of the 5th day of February, 1999, by and among DE&S
Holding Co., a Pennsylvania corporation, Dollar Express, Inc., a Pennsylvania
corporation, Xxxxxxx Spain, Xxxxxx Spain, Global Private Equity III Limited
Partnership, a Delaware limited partnership, Advent PGGM Global Limited
Partnership, a Delaware limited partnership, Advent Partners GPE III Limited
Partnership, a Delaware limited partnership, Advent Partners (NA) GPE III
Limited Partnership, a Delaware limited partnership, Advent Partners Limited
Partnership, a Delaware limited partnership, Guayacan Private Equity Fund
Limited Partnership, a Delaware limited partnership, Dollar Express Investment,
LLC, a North Carolina limited liability company, and any additional Holders (as
defined in the Agreement), from time to time, which Agreement permits execution
(including by facsimile) by counterpart. The undersigned hereby acknowledges
having received a copy of the Agreement (which is annexed hereto as Annex I) and
having read the Agreement in its entirety, and for good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, hereby
agrees that the terms and conditions of the Agreement shall be binding upon the
undersigned as a Holder, and such terms and conditions shall inure to the
benefit of and be binding upon the undersigned, and its successors and permitted
assigns.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this ____ day of _________________, ____.
---------------------------------
(Signature of Holder)
---------------------------------
(Print Name of Person, if an Entity)
---------------------------------
(Print Name & Title of Person Signing)
-21-