Dollar General 2007 Annual Report Download - page 167

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issuance or transfer of interests, other special corporate governance provisions (including the
right to approve various corporate actions), the election of managers of Parent’ s general partner,
the election of our Board members, and registration rights (including customary indemnification
provisions).
Monitoring Agreement and Indemnity Agreement. In connection with the Merger, we
and Parent entered into a monitoring agreement, dated July 6, 2007, with an affiliate of KKR and
Goldman, Sachs & Co. pursuant to which such parties have provided and will continue to
provide management and advisory services to us and our affiliates. Under the terms of the
monitoring agreement, among other things, we are obligated to pay an aggregate annual
management fee of $5.0 million, which amount will increase by 5.0% annually, payable
quarterly in arrears at the end of each calendar quarter. The initial annual fee was prorated for
our fiscal 2007. Those entities also are entitled to receive a fee equal to 1% of the gross
transaction value in connection with certain subsequent financing, acquisition or disposition of
assets or equity interests, recapitalization and other similar transactions, as well as a termination
fee in the event of an initial public offering or under certain other circumstances. All such fees
are to be split based upon an agreed upon formula, which results in an initial split of 78.38% of
this fee payable to the KKR affiliate and 21.62% payable to Goldman, Sachs & Co. Under this
agreement, we also are obligated to reimburse all reasonable out-of-pocket expenses incurred by
such entities and their respective affiliates in connection with rendering covered services.
Pursuant to this agreement, we also paid aggregate fees of approximately $75 million in
connection with services provided in connection with the Merger and related transactions,
$58.8 million of which was paid to the KKR affiliate and $16.2 million of which was paid to
Goldman, Sachs & Co.
In connection with entering into the monitoring agreement, on July 6, 2007 we and Parent
also entered into a separate indemnification agreement with the parties to the monitoring
agreement, pursuant to which we agreed to provide customary indemnification to such parties
and their affiliates.
Messrs. Calbert and Agrawal, two of our Board members, serve as a Member and a
Director of KKR, respectively. Mr. Jones, one of our Board members, serves as a Managing
Director of Goldman, Sachs & Co.
Other Relationships. In connection with the Merger, Goldman, Sachs & Co. and
Citigroup Global Markets Inc. and their affiliates participated in several related transactions with
us. Specifically, Goldman Sachs Credit Partners L.P. and Citigroup Global Markets Inc., along
with other institutions, served as joint lead arranger and joint bookrunner with respect to the
credit agreements and related security and other agreements consisting of (i) a $2.3 billion senior
secured term loan facility (affiliates of KKR and Wellington Management Company, LLP are
also lenders under this facility) and (ii) a senior secured asset-based revolving credit facility of
up to $1.125 billion. Goldman Sachs Credit Partners L.P. also served as syndication agent for
each of the new facilities. Citicorp North America, Inc. served as administrative agent, collateral
agent for the senior secured term loan facility. Goldman, Sachs & Co. also is a counterparty to
certain interest rate swaps entered into in connection with these facilities. Pursuant to the swaps,
which became effective on July 31, 2007, we swapped three month LIBOR rates for fixed