**Exhibit 10.24**

 

Conformed Copy

** **

**FamilyDollar Stores, Inc.**

**Family Dollar, Inc.**

 

$169,000,0005.41% Series 2005-A Senior Notes, Tranche A, due September 27, 2015

 

$81,000,0005.24% Series 2005-A Senior Notes, Tranche B, due September 27, 2015

 

 

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**Note Purchase Agreement**

** **

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Dated as of September 27, 2005

 

 

 

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**Tableof Contents**

** **
| **Section**        | ** ** | **Heading**                                                       | ** ** |
|--------------------|------------|-------------------------------------------------------------------|------------|
|               |       |                                                              |       |
| Section 1.    |       | Authorization  of Notes                                           |       |
|               |       |                                                              |       |
| Section 1.1.  |       | Description of Notes                                              |       |
| Section 1.2.  |       | Interest Rate                                                     | 2          |
|               |       |                                                              |       |
| Section 2.    |       | Sale and  Purchase of Notes                                       | 2          |
|               |       |                                                              |       |
| Section 2.1.  |       | Series A Notes                                                    | 2          |
| Section 2.2.  |       | Additional Series of Notes                                        | 2          |
| Section 2.3.       |       | Subsidiary Guaranty                                               | 4          |
|               |       |                                                              |       |
| Section 3.    |       | Closing                                                           | 4          |
|               |       |                                                              |       |
| Section 4.    |       | Conditions  to Closing                                            | 5          |
|               |       |                                                              |       |
| Section 4.1.       |       | Representations and  Warranties                                   | 5          |
| Section 4.2.  |       | Performance; No Default                                           | 5          |
| Section 4.3.  |       | Compliance Certificates                                           | 5          |
| Section 4.4.  |       | Opinions of Counsel                                               | 6          |
| Section 4.5.  |       | Purchase Permitted By  Applicable Law, Etc                        | 6          |
| Section 4.6.  |       | Sale of Other Notes                                               | 6          |
| Section 4.7.  |       | Payment of Special Counsel  Fees                                  | 6          |
| Section 4.8.  |       | Private Placement Number                                          | 6          |
| Section 4.9.  |       | Changes in Corporate  Structure                                   | 6          |
| Section 4.10.      |       | Subsidiary Guaranty                                               | 7          |
| Section 4.11. |       | Funding Instructions                                              | 7          |
| Section 4.12. |       | Proceedings and Documents                                         | 7          |
|               |       |                                                              |       |
| Section 5.    |       | Representations  and Warranties of the Obligors                   | 7          |
|               |       |                                                              |       |
| Section 5.1.  |       | Organization; Power and  Authority                                | 7          |
| Section 5.2.  |       | Authorization, Etc                                                | 7          |
| Section 5.3.  |       | Disclosure                                                        | 8          |
| Section 5.4.  |       | Organization and Ownership  of Shares of Subsidiaries; Affiliates | 8          |
| Section 5.5.  |       | Financial Statements;  Material Liabilities                       | 9          |
| Section 5.6.  |       | Compliance with Laws, Other  Instruments, Etc                     | 9          |
| Section 5.7.  |       | Governmental Authorizations,  Etc                                 | 9          |
| Section 5.8.  |       | Litigation; Observance of  Agreements, Statutes and Orders        | 9          |
| Section 5.9.  |       | Taxes                                                             | 10         |
| Section 5.10. |       | Title to Property; Leases                                         | 10         |
| Section 5.11. |       | Licenses, Permits, Etc                                            | 10         |
| Section 5.12. |       | Compliance with ERISA                                             | 11         |

 

i

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| Section 5.13. |   | Private Offering by the  Obligors                       | 11     |
|--------------------|--------|---------------------------------------------------------|--------|
| Section 5.14. |   | Use of Proceeds; Margin  Regulations                    | 12     |
| Section 5.15. |   | Existing Debt; Future Liens                             | 12     |
| Section 5.16. |   | Foreign Assets Control  Regulations, Etc                | 12     |
| Section 5.17. |   | Status under Certain  Statutes                          | 13     |
| Section 5.18. |   | Environmental Matters                                   | 13     |
| Section 5.19. |   | Notes Rank Pari Passu                                   | 14     |
|               |   |                                                    |   |
| Section 6.    |   | Representations  of the Purchaser                       | 14     |
|               |   |                                                    |   |
| Section 6.1.  |   | Purchase for Investment                                 | 14     |
| Section 6.2.  |   | Accredited Investor                                     | 14     |
| Section 6.3.  |   | Source of Funds                                         | 14     |
|               |   |                                                    |   |
| Section 7.    |   | Information  as to Obligors                             | 16     |
|               |   |                                                    |   |
| Section 7.1.  |   | Financial and Business  Information                     | 16     |
| Section 7.2.  |   | Officer’s Certificate                              | 18     |
| Section 7.3.  |   | Visitation                                              | 19     |
|               |   |                                                    |   |
| Section 8.    |   | Payment of  the Notes                                   | 19     |
|               |   |                                                    |   |
| Section 8.1.  |   | Required Prepayments of  Series A Notes                 | 19     |
| Section 8.2.  |   | Optional Prepayments with Make-Whole  Amount            | 20     |
| Section 8.3.  |   | Allocation of Partial  Prepayments                      | 20     |
| Section 8.4.  |   | Maturity; Surrender, Etc.                               | 20     |
| Section 8.5.  |   | Purchase of Notes                                       | 20     |
| Section 8.6.  |   | Make-Whole Amount for the  Series A Notes               | 21     |
| Section 8.7.  |   | Change in Control                                       | 22     |
|               |   |                                                    |   |
| Section 9.    |   | Affirmative  Covenants                                  | 24     |
|               |   |                                                    |   |
| Section 9.1.  |   | Compliance with Law                                     | 24     |
| Section 9.2.  |   | Insurance                                               | 25     |
| Section 9.3.  |   | Maintenance of Properties                               | 25     |
| Section 9.4.  |   | Payment of Taxes and Claims                             | 25     |
| Section 9.5.  |   | Corporate Existence, Etc                                | 25     |
| Section 9.6.       |   | Designation of Subsidiaries                             | 26     |
| Section 9.7.  |   | Notes to Rank Pari Passu                                | 26     |
| Section 9.8.  |   | Additional Subsidiary Guarantors                        | 26     |
| Section 9.9.  |   | Books and Records                                       | 26     |
|               |   |                                                    |   |
| Section 10.   |   | Negative  Covenants                                     | 27     |
|               |   |                                                    |   |
| Section 10.1. |   | Consolidated Debt to  Consolidated Total Capitalization | 27     |
| Section 10.2. |   | Fixed Charges Coverage Ratio                            | 27     |
| Section 10.3.      |   | Priority Debt                                           | 27     |
| Section 10.4. |   | Limitation on Liens                                     | 27     |
| Section 10.5. |   | Sales of Asset                                          | 29     |

 

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| Section 10.6.  |   | Merger and Consolidation                                      | 30     |
|---------------------|--------|---------------------------------------------------------------|--------|
| Section 10.7.  |   | Restricted Subsidiaries                                       | 31     |
| Section 10.8.  |   | Transactions with Affiliates                                  | 31     |
| Section 10.9.  |   | Terrorism Sanctions Regulations                               | 31     |
| Section 10.10. |   | Line of Business                                              | 31     |
|                |   |                                                          |   |
| Section 11.    |   | Events of  Default                                            | 31     |
|                |   |                                                          |   |
| Section 12.    |   | Remedies on  Default, Etc                                     | 34     |
|                |   |                                                          |   |
| Section 12.1.  |   | Acceleration                                                  | 34     |
| Section 12.2.  |   | Other Remedies                                                | 34     |
| Section 12.3.  |   | Rescission                                                    | 35     |
| Section 12.4.  |   | No Waivers or Election of  Remedies, Expenses, Etc            | 35     |
|                |   |                                                          |   |
| Section 13.    |   | Registration;  Exchange; Substitution of Notes                | 35     |
|                |   |                                                          |   |
| Section 13.1.  |   | Registration of Notes                                         | 35     |
| Section 13.2.  |   | Transfer and Exchange of Notes                                | 36     |
| Section 13.3.  |   | Replacement of Notes                                          | 36     |
|                |   |                                                          |   |
| Section 14.    |   | Payments on  Notes                                            | 37     |
|                |   |                                                          |   |
| Section 14.1.  |   | Place of Payment                                              | 37     |
| Section 14.2.  |   | Home Office Payment                                           | 37     |
|                |   |                                                          |   |
| Section 15.    |   | Expenses, Etc                                                 | 37     |
|                |   |                                                          |   |
| Section 15.1.  |   | Transaction Expenses                                          | 37     |
| Section 15.2.  |   | Survival                                                      | 38     |
|                |   |                                                          |   |
| Section 16.    |   | Survival of  Representations and Warranties; Entire Agreement | 38     |
|                |   |                                                          |   |
| Section 17.    |   | Amendment and  Waiver                                         | 38     |
|                |   |                                                          |   |
| Section 17.1.  |   | Requirements                                                  | 38     |
| Section 17.2.  |   | Solicitation of Holders of Notes                              | 39     |
| Section 17.3.  |   | Binding Effect, Etc                                           | 39     |
| Section 17.4.  |   | Notes Held by Obligors, Etc                                   | 40     |
|                |   |                                                          |   |
| Section 18.    |   | Notices                                                       | 40     |
|                |   |                                                          |   |
| Section 19.    |   | Reproduction  of Documents                                    | 41     |
|                |   |                                                          |   |
| Section 20.    |   | Confidential  Information                                     | 41     |

 

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| Section 21.   |   | Substitution  of Purchaser                             | 42     |
|--------------------|--------|--------------------------------------------------------|--------|
|               |   |                                                   |   |
| Section 22.   |   | Miscellaneous                                          | 42     |
|               |   |                                                   |   |
| Section 22.1. |   | Successors and Assigns                                 | 42     |
| Section 22.2. |   | Payments Due on Non-Business  Days                     | 43     |
| Section 22.3. |   | Accounting Terms                                       | 43     |
| Section 22.4. |   | Severability                                           | 43     |
| Section 22.5. |   | Construction                                           | 43     |
| Section 22.6. |   | Counterparts                                           | 43     |
| Section 22.7. |   | Governing Law                                          | 43     |
| Section 22.8. |   | Jurisdiction and Process; Waiver  of Jury Trial        | 44     |
|               |   |                                                   |   |
| Section 1.    |   | Guaranty                                               | 2      |
|               |   |                                                   |   |
| Section 2.    |   | Representations  and Warranties                        | 3      |
|               |   |                                                   |   |
| Section 3.    |   | Subsidiary  Guarantor’s Obligations Unconditional | 5      |
|               |   |                                                   |   |
| Section 4.    |   | Full  Recourse Obligations; Pari Passu Ranking         | 10     |
|               |   |                                                   |   |
| Section 5.    |   | Waiver                                                 | 10     |
|               |   |                                                   |   |
| Section 6.         |   | Waiver of  Subrogation                                 | 11     |
|               |   |                                                   |   |
| Section 7.    |   | Subordination                                          | 12     |
|               |   |                                                   |   |
| Section 8.    |   | Effect of  Bankruptcy Proceedings, Etc                 | 12     |
|               |   |                                                   |   |
| Section 9.    |   | Term  of Guaranty                                      | 13     |
|               |   |                                                   |   |
| Section 10.   |   | Contribution                                           | 13     |
|               |   |                                                   |   |
| Section 11.   |   | Limitation  of Liability                               | 14     |
|               |   |                                                   |   |
| Section 12.   |   | Negative  Pledge                                       | 14     |
|               |   |                                                   |   |
| Section 13.   |   | Supplemental  Agreement                                | 14     |
|               |   |                                                   |   |
| Section 14.   |   | Definitions  and Terms Generally                       | 15     |

 

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| Section  15.     |   | Notices                                      | 15     |
|------------------|--------|----------------------------------------------|--------|
|             |   |                                         |   |
| Section  16.     |   | Amendments,  Etc                             | 16     |
|             |   |                                         |   |
| Section 17.      |   | Consent to  Jurisdiction; Service of Process | 16     |
|             |   |                                         |   |
| Section 18. |   | Waiver of Jury  Trial                        | 17     |
|             |   |                                         |   |
| Section 19. |   | Survival                                     | 17     |
|             |   |                                         |   |
| Section 20. |   | Severability                                 | 18     |
|             |   |                                         |   |
| Section 21. |   | Successors  and Assigns                      | 18     |
|             |   |                                         |   |
| Section 22. |   | Table of  Contents; Headings                 | 18     |
|             |   |                                         |   |
| Section 23. |   | Counterparts                                 | 18     |
|             |   |                                         |   |
| Section 24. |   | Governing  Law                               | 18     |
|             |   |                                         |   |
| Section 25. |   | Covenant  Compliance                         | 18     |

 

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| Schedule A     |   | — | Information Relating to Purchasers                                                    |   |
|---------------------|--------|--------|---------------------------------------------------------------------------------------|--------|
|                |   |   |                                                                                  |   |
| Schedule B     |   | — | Defined Terms                                                                         |   |
|                |   |   |                                                                                  |   |
| Schedule 4.9   |   | — | Changes in  Corporate Structure                                                       |   |
|                |   |   |                                                                                  |   |
| Schedule 5.4   |   | — | Subsidiaries  of the Obligors, Ownership of Subsidiary Stock, Affiliates              |   |
|                |   |   |                                                                                  |   |
| Schedule 5.5   |   | — | Financial Statements                                                                  |   |
|                |   |   |                                                                                  |   |
| Schedule 5.11  |   | — | Licenses, Permits, Etc.                                                               |   |
|                |   |   |                                                                                  |   |
| Schedule 5.15  |   | — | Existing Debt                                                                         |   |
|                |   |   |                                                                                  |   |
| Schedule 10.4  |   | — | Existing Liens                                                                        |   |
|                |   |   |                                                                                  |   |
| Exhibit 1-(a)  |   | — | Form of 5.41%  Series 2005-A Senior Notes, Tranche A due September 27, 2015 |   |
|                |   |   |                                                                                  |   |
| Exhibit 1-(b)  |   | — | Form of 5.24%  Series 2005-A Senior Notes, Tranche B due September 27, 2015 |   |
|                |   |   |                                                                                  |   |
| Exhibit 2.3    |   | — | Form of Subsidiary  Guaranty                                                          |   |
|                |   |   |                                                                                  |   |
| Exhibit 4.4(a) |   | — | Form of  Opinion of General Counsel to the Obligors                                   |   |
|                |   |   |                                                                                  |   |
| Exhibit 4.4(b) |   | — | Form of  Opinion of Special Counsel to the Obligors                                   |   |
|                |   |   |                                                                                  |   |
| Exhibit 4.4(c) |   | — | Form of  Opinion of Special Counsel to the Purchasers                                 |   |
|                |   |   |                                                                                  |   |
| Exhibit S      |   | — | Form of Supplement to Note Purchase  Agreement                                        |   |

 

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**FamilyDollar Stores, Inc.**

**Family Dollar, Inc.**

**10401 Monroe Road**

**Charlotte, North Carolina  28201**

 

**$169,000,000 5.41% Series 2005-ASenior Notes, Tranche Adue September 27, 2015$81,000,000 5.24% Series 2005-A Senior Notes, Tranche Bdue September 27, 2015**

** **

Dated as ofSeptember 27, 2005

 

To the Purchasers listed in

theattached Schedule A:

 

Ladiesand Gentlemen:

 

Family Dollar Stores, Inc.,a Delaware corporation (*“FDSI”*), and Family Dollar, Inc., a North Carolinacorporation (*“FDI”* and, together with FDSI,the *“Obligors”*) jointly and severally agreewith the Purchasers listed in the attached Schedule A (the *“Purchasers”*) to this Note Purchase Agreement (this *“Agreement”*) as follows:

 

Section 1.                Authorizationof Notes.

 

*Section 1.1.**           Descriptionof Notes*.  The Obligors willauthorize the issue and sale of the following Senior Notes:

 
| **Issue**    | ** ** | **Series and/or  Tranche**     | ** ** | **Aggregate Principal  Amount** | ** **  | **Interest Rate** | ** ** | **Maturity Date** | ** **              |
|--------------|------------|--------------------------------|------------|---------------------------------|-------------|-------------------|------------|-------------------|-------------------------|
| Senior Notes |       | Series 2005-A,  Tranche A |       | $                               | 169,000,000 |              | 5.41       | %                 | September 27, 2015 |   |
| Senior Notes |       | Series 2005-A,  Tranche B |       | $                               | 81,000,000  |              | 5.24       | %                 | September 27, 2015 |   |

 

TheSeries 2005-A, Tranche A Senior Notes (the *“Tranche ANotes”*) and the Series 2005-A, Tranche B Senior Notes (the*“Tranche B Notes”*) described above(collectively, the *“Series A Notes”*)together with each Series of Additional Notes which may from time to time beissued pursuant to the provisions of Section 2.2 are collectively referred toas the

 

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*“Notes”* (such term shall alsoinclude any such notes issued in substitution therefor pursuant to Section 13of this Agreement).  The Tranche A Notesand Tranche B Notes shall be substantially in the form set out in Exhibit 1(a)and Exhibit 1(b), respectively, with such changes therefrom, if any, as may beapproved by the Purchasers and the Obligors. Certain capitalized terms used in this Agreement are defined inSchedule B; references to a “Schedule” or an “Exhibit” are, unlessotherwise specified, to a Schedule or an Exhibit attached to this Agreement.

 

*Section 1.2.**           InterestRate. *The Series A Notes shall bearinterest (computed on the basis of a 360-day year of twelve 30-day months) onthe unpaid principal thereof from the date of issuance at their respectivestated rate of interest payable semi-annually in arrears on the 27th day ofMarch and September in each year and at maturity, commencing on March 27, 2006,until such principal sum shall have become due and payable (whether atmaturity, upon notice of prepayment or otherwise) and interest (so computed) onany overdue principal, interest or Make-Whole Amount from the due date thereof(whether by acceleration or otherwise) at the Default Rate until paid.

 

Section 2.                Sale andPurchase of Notes.

 

*Section 2.1.**           SeriesA Notes.*  Subject to the terms andconditions of this Agreement, the Obligors will issue and sell to eachPurchaser and each Purchaser will purchase from the Obligors, at the Closingprovided for in Section 3, the Series A Notes in the principal amountspecified opposite such Purchaser’s name in Schedule A at the purchase price of100% of the principal amount thereof. The obligations of each Purchaser hereunder are several and not jointobligations and each Purchaser shall have no obligation and no liability to anyPerson for the performance or nonperformance by any other Purchaser hereunder.

 

*Section 2.2.**           AdditionalSeries of Notes*.  The Obligors may,from time to time, in their sole discretion but subject to the terms hereof,issue and sell one or more additional Series of their unsecured promissorynotes under the provisions of this Agreement pursuant to a supplement (a *“Supplement”*) substantially in the form of Exhibit S(with such amendments or modifications thereto as may be agreed to by theparties).  Each additional Series ofNotes (the *“Additional Notes”*) issued pursuant to aSupplement shall be subject to the following terms and conditions:

 

(i)            eachSeries of Additional Notes, when so issued, shall be differentiated from allprevious Series by sequential alphabetical designation inscribed thereon;

 

(ii)           AdditionalNotes of the same Series may consist of more than one different and separatetranches and may differ with respect to outstanding principal amounts, maturitydates, interest rates and premiums, if any, and price and terms of redemptionor payment prior to maturity, but all such different and separate tranches ofthe same Series shall vote as a single class and constitute one Series;

 

(iii)          eachSeries of Additional Notes shall be dated the date of issue, bear interest atsuch rate or rates, mature on such date or dates, be subject to such mandatoryand optional prepayment on the dates and at the premiums, if any, have suchadditional or

 

2

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different conditions precedent to closing, suchrepresentations and warranties and such additional covenants as shall bespecified in the Supplement under which such Additional Notes are issued andupon execution of any such Supplement, this Agreement shall be amended (a) toreflect such additional covenants without further action on the part of theholders of the Notes outstanding under this Agreement, *provided*,that any such additional covenants shall inure to the benefit of all holders ofNotes so long as any Additional Notes issued pursuant to such Supplement remainoutstanding, and (b) to reflect such representations and warranties as arecontained in such Supplement for the benefit of the holders of such AdditionalNotes in accordance with the provisions of Section 16;

 

(iv)          eachSeries of Additional Notes issued under this Agreement shall be insubstantially the form of Exhibit 1 to Exhibit S hereto with suchvariations, omissions and insertions as are necessary or permitted hereunder;

 

(v)           theminimum principal amount of any Note issued under a Supplement shall be$100,000, except as may be necessary to evidence the outstanding amount of anyNote originally issued in a denomination of $100,000 or more;

 

(vi)          allAdditional Notes shall constitute Senior Debt of the Obligors and shall rank *pari passu* with all other outstanding Notes; and

 

(vii)         noAdditional Notes shall be issued hereunder if at the time of issuance thereofand after giving effect to the application of the proceeds thereof, any Defaultor Event of Default shall have occurred and be continuing.

 

The obligations of the Additional Purchasers topurchase any Additional Notes shall be subject to the following conditionsprecedent, in addition to the conditions specified in the Supplement pursuantto which such Additional Notes may be issued:

 

(a)           *Compliance Certificate*. A duly authorized Senior Financial Officer shall execute and deliver toeach Additional Purchaser and each holder of Notes an Officer’s Certificatedated the date of issue of such Series of Additional Notes stating that suchofficer has reviewed the provisions of this Agreement (including anySupplements hereto) and setting forth the information and computations (insufficient detail) required in order to establish whether after giving effectto the issuance of the Additional Notes and after giving effect to theapplication of the proceeds thereof, the Obligors are in compliance with therequirements of Section 10.1 on such date (based upon the financialstatements for the most recent fiscal quarter ended prior to the date of suchcertificate).

 

(b)           *Execution and Delivery of Supplement.*  The Obligors and each such AdditionalPurchaser shall execute and deliver a Supplement substantially in the form ofExhibit S hereto  (with suchamendments or modifications thereto as may be agreed to by the parties).

 

(c)           *Representations of Additional Purchasers*.  Each Additional Purchaser shall haveconfirmed in the Supplement that the representations set forth inSection 6 are

 

3

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true with respect to such Additional Purchaser on andas of the date of issue of the Additional Notes.

 

(d)           *Execution and Delivery of Guaranty Ratification. *Provided a Collateral Releaseshall not have occurred, each Subsidiary Guarantor shall execute and deliver aGuaranty Ratification in the form attached to the Subsidiary Guaranty.

 

*Section 2.3.**           SubsidiaryGuaranty. *(a) The payment bythe Obligors of all amounts due with respect to the Notes and the performanceby the Obligors of their obligations under this Agreement will be absolutelyand unconditionally guaranteed by the Subsidiary Guarantors pursuant to theSubsidiary Guaranty Agreement dated as of even date herewith, which shall besubstantially in the form of Exhibit 2.3 attached hereto, and otherwise inaccordance with the provisions of Section 9.6 hereof (the *“SubsidiaryGuaranty”*).

 

(b)           Theholders of the Notes agree to discharge and release any Subsidiary Guarantorfrom the Subsidiary Guaranty upon the written notice of the Obligors, *provided* that (i) such Subsidiary Guarantor has beenreleased and discharged (or will be released and discharged concurrently withthe release of such Subsidiary Guarantor under the Subsidiary Guaranty) as anobligor and guarantor under and in respect of the Bank Credit Agreement and theObligors so certify to the holders of the Notes in a certificate of aResponsible Officer, (ii) at the time of such release and discharge, theObligors shall deliver a certificate of a Responsible Officer to the holders ofthe Notes stating that no Default or Event of Default exists, and (iii) ifany fee or other form of consideration is given to any holder of Debt of theObligors expressly for the purpose of such release, holders of the Notes shallreceive equivalent consideration (a *“Collateral Release”*).

 

Section 3.                Closing.

 

The sale and purchase of the Series A Notes to bepurchased by each Purchaser shall occur at the offices of Chapman and CutlerLLP, 111 West Monroe Street, Chicago, Illinois 60603 at 10:00 a.m. Centraltime, at a closing (the “*Closing Date*”)on September 27, 2005 or on such other Business Day thereafter on or priorto September 27, 2005 as may be agreed upon by the Obligors and thePurchasers.   On the Closing Date, theObligors will deliver to each Purchaser the Series A Notes to be purchased bysuch Purchaser in the form of a single Tranche A Note or Tranche BNote, as applicable (or such greater number of Tranche A or Tranche BNotes, as applicable, in denominations of at least $100,000 as such Purchasermay request) dated the date of the Closing Date and registered in suchPurchaser’s name (or in the name of such Purchaser’s nominee), against deliveryby such Purchaser to the Obligors or its order of immediately available fundsin the amount of the purchase price therefor by wire transfer of immediatelyavailable funds for the account of the Obligors to Account Number                                 ,at Bank of America, NA, 11170 N. Central Expressway, Dallas, Texas, ABA Number                                 ,in the Account Name of “Family Dollar Stores, Inc.”  If, on the Closing Date, the Obligors shallfail to tender such Series A Notes to any Purchaser as provided above in thisSection 3, or any of the conditions specified in Section 4 shall nothave been fulfilled to any Purchaser’s satisfaction, such Purchaser shall, atsuch Purchaser’s election, be

 

4

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relieved of all further obligations under this Agreement, withoutthereby waiving any rights such Purchaser may have by reason of such failure orsuch nonfulfillment.

 

Section 4.                Conditions toClosing.

 

Each Purchaser’s obligation to purchase and pay forthe Series A Notes to be sold to such Purchaser at the Closing is subject tothe fulfillment to such Purchaser’s satisfaction, prior to or at the Closing,of the following conditions applicable to the Closing Date:

 

*Section 4.1.**           Representationsand Warranties*.

 

(a)           *Representations and Warranties of the Obligors. *The representations and warrantiesof each Obligor in this Agreement shall be correct when made and at the time ofthe Closing.

 

(b)           *Representations and Warranties of the Subsidiary Guarantors.*Therepresentations and warranties of the Subsidiary Guarantors in the SubsidiaryGuaranty shall be correct when made and at the time of the Closing.

 

*Section 4.2.**           Performance;No Default*.**** Each Obligor and each Subsidiary Guarantorshall have performed and complied with all agreements and conditions containedin this Agreement and the Subsidiary Guaranty required to be performed orcomplied with by the Obligors and each such Subsidiary Guarantor prior to or atthe Closing, and after giving effect to the issue and sale of the Series ANotes (and the application of the proceeds thereof as contemplated bySection 5.14), no Default or Event of Default shall have occurred and becontinuing.  Neither any Obligor nor anySubsidiary shall have entered into any transaction since the date of theMemorandum that would have been prohibited by Section 10 hereof had suchSections applied since such date.

 

*Section 4.3.**           ComplianceCertificates*.

 

(a)           *Officer’s Certificate of the Obligors.*  The Obligors shall have delivered to suchPurchaser an Officer’s Certificate, dated the Closing Date, certifying that theconditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

 

(b)           *Secretary’s Certificate of the Obligors.*  Each Obligor shall have delivered to suchPurchaser a certificate, dated the Closing Date, certifying as to theresolutions attached thereto and other corporate proceedings relating to the authorization,execution and delivery of the Series A Notes and this Agreement.

 

(c)           *Officer’s Certificate of the Subsidiary Guarantors. *Each Subsidiary Guarantor shallhave delivered to such Purchaser an Officer’s Certificate, dated the ClosingDate, certifying that the conditions specified in Sections 4.1(b), 4.2 and 4.9have been fulfilled.

 

(d)           *Secretary’s Certificate of the Subsidiary Guarantors. *Each Subsidiary Guarantor shallhave delivered to such Purchaser a certificate, dated the Closing Date, certifyingas to the

 

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resolutions attached thereto and other corporate proceedings relatingto the authorization, execution and delivery of the Subsidiary Guaranty.

 

*Section 4.4.**           Opinionsof Counsel*.** **Such Purchaser shall have receivedopinions in form and substance satisfactory to such Purchaser, dated theClosing Date (a) from Janet G. Kelley, General Counsel of the Obligors,covering the matters set forth in Exhibit 4.4(a) and covering such othermatters incident to the transactions contemplated hereby as such Purchaser orits counsel may reasonably request (and the Obligors hereby instruct theircounsel to deliver such opinion to the Purchasers), (b) from Alston &Bird LLP, special counsel for the Obligors, covering the matters set forth inExhibit 4.4(b) and covering such other matters incident to thetransactions contemplated hereby as such Purchaser or its counsel mayreasonably request (and the Obligors hereby instruct their counsel to deliversuch opinion to the Purchasers), and (c) from Chapman and Cutler LLP, thePurchasers’ special counsel in connection with such transactions, substantiallyin the form set forth in Exhibit 4.4(c) and covering such other mattersincident to such transactions as such Purchaser may reasonably request.

 

*Section 4.5.**           PurchasePermitted By Applicable Law, Etc*.** **On the date of the Closing suchPurchaser’s purchase of Series A Notes shall (a) be permitted by the lawsand regulations of each jurisdiction to which such Purchaser is subject,without recourse to provisions (such as section 1405(a)(8) of the New YorkInsurance Law) permitting limited investments by insurance companies withoutrestriction as to the character of the particular investment, (b) notviolate any applicable law or regulation (including, without limitation,Regulation T, U or X of the Board of Governors of the Federal ReserveSystem) and (c) not subject such Purchaser to any tax, penalty orliability under or pursuant to any applicable law or regulation, which law orregulation was not in effect on the date hereof.  If requested by such Purchaser, suchPurchaser shall have received an Officer’s Certificate certifying as to suchmatters of fact as such Purchaser may reasonably specify to enable suchPurchaser to determine whether such purchase is so permitted.

 

*Section 4.6.**           Saleof Other Notes*.**** Contemporaneously with the Closing theObligors shall sell to each other Purchaser and each other Purchaser shallpurchase the Series A Notes to be purchased by it at the Closing as specifiedin Schedule A.

 

*Section 4.7.**           Paymentof Special Counsel Fees*.  Withoutlimiting the provisions of Section 15.1, the Obligors shall have paid onor before the Closing Date, the reasonable fees, reasonable charges andreasonable disbursements of the Purchasers’ special counsel referred to inSection 4.4 to the extent reflected in a statement of such counselrendered to the Obligors at least one Business Day prior to the Closing Date.

 

*Section 4.8.**           PrivatePlacement Number*.** **A Private Placement Number issuedby Standard & Poor’s CUSIP Service Bureau (in cooperation with theSecurities Valuation Office of the National Association of InsuranceCommissioners) shall have been obtained for the Series A Notes.

 

*Section 4.9.**           Changesin Corporate Structure*.***** *Neither any Obligornor any Subsidiary Guarantor shall have changed its jurisdiction oforganization or, except as reflected in Schedule 4.9, been a party to anymerger or consolidation, or shall have succeeded to all or any substantial

 

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part of the liabilities of any other entity, at any time following thedate of the most recent financial statements referred to in Schedule 5.5.

 

*Section 4.10.**        SubsidiaryGuaranty. *The Subsidiary Guaranty shallhave been duly authorized, executed and delivered by each Subsidiary Guarantor,shall constitute the legal, valid and binding contract and agreement of eachSubsidiary Guarantor and such Purchaser shall have received a true, correct andcomplete copy thereof.

 

*Section 4.11.**        FundingInstructions*.** **At least three Business Days priorto the date of the Closing, each Purchaser shall have received writteninstructions signed by a Responsible Officer on letterhead of an Obligorconfirming the information specified in Section 3 including (i) thename and address of the transferee bank, (ii) such transferee bank’s ABAnumber and (iii) the account name and number into which the purchase pricefor the Series A Notes is to be deposited.

 

*Section 4.12.**        Proceedingsand Documents*.** **All corporate and otherorganizational proceedings in connection with the transactions contemplated bythis Agreement and all documents and instruments incident to such transactionsshall be satisfactory to such Purchaser and its special counsel, and suchPurchaser and its special counsel shall have received all such counterpartoriginals or certified or other copies of such documents as such Purchaser orsuch special counsel may reasonably request.

 

Section 5.           Representations and Warranties ofthe Obligors.

 

Each Obligor represents and warrants to each Purchaseron the date hereof and the Closing Date that:

 

*Section 5.1.**           Organization;Power and Authority*.  Each Obligor isa corporation duly organized, validly existing and in good standing under thelaws of its jurisdiction of incorporation, and is duly qualified as a foreigncorporation and is in good standing in each jurisdiction in which suchqualification is required by law, other than those jurisdictions as to whichthe failure to be so qualified or in good standing would not, individually orin the aggregate, reasonably be expected to have a Material AdverseEffect.  Each Obligor has the corporatepower and authority to own or hold under lease the properties it purports toown or hold under lease, to transact the business it transacts and proposes totransact, to execute and deliver this Agreement and the Series A Notes and toperform the provisions hereof and thereof.

 

*Section 5.2.**           Authorization,Etc*.** **This Agreement and the Notes to beissued on the Closing Date have been duly authorized by all necessary corporateaction on the part of each Obligor, and this Agreement constitutes, and uponexecution and delivery thereof each such Note upon issuance will constitute, alegal, valid and binding obligation of each Obligor enforceable against eachObligor in accordance with its terms, except as such enforceability may belimited by (i) applicable bankruptcy, insolvency, reorganization,moratorium or other similar laws affecting the enforcement of creditors’ rightsgenerally and (ii) general principles of equity (regardless of whethersuch enforceability is considered in a proceeding in equity or at law).

 

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*Section 5.3.**           Disclosure*.** **The Obligors, through their agent, Banc of America SecuritiesLLC, have delivered to each Purchaser a copy of a Private Placement Memorandum,dated August, 2005 (the *“Memorandum”*),relating to the transactions contemplated hereby.  The Memorandum fairly describes, in allmaterial respects, the general nature of the business and principal propertiesof the Obligors and their Restricted Subsidiaries.  This Agreement, the Memorandum, thedocuments, certificates or other writings delivered to the Purchasers by or onbehalf of an Obligor in connection with the transactions contemplated herebyand the financial statements listed in Schedule 5.5, in each case,delivered to the Purchasers prior to September 6, 2005 (this Agreement,the Memorandum and such documents, certificates or other writings and suchfinancial statements being referred to, collectively, as the **“Disclosure Documents”**), taken as a whole, do not containany untrue statement of a material fact or omit to state any material factnecessary to make the statements therein not misleading in light of thecircumstances under which they were made. Except as disclosed in the Disclosure Documents, since August 28,2004, there has been no change in the financial condition, operations, businessor properties of the Obligors or any of their Restricted Subsidiaries exceptchanges that individually or in the aggregate would not reasonably be expectedto have a Material Adverse Effect.  Thereis no fact known to any Obligor that would reasonably be expected to have aMaterial Adverse Effect that has not been set forth herein or in the DisclosureDocuments.

 

*Section 5.4.**           Organizationand Ownership of Shares of Subsidiaries; Affiliates*.** **(a) Schedule 5.4contains (except as noted therein) complete and correct lists (i) of theObligors’ Restricted and Unrestricted Subsidiaries, showing, as to eachSubsidiary, the correct name thereof, the jurisdiction of its organization, andthe percentage of shares of each class of its capital stock or similar equityinterests outstanding owned by the Obligors and each other Subsidiary, and allother Investments of the Obligors and their Restricted Subsidiaries,(ii) of the Obligors’ Affiliates, other than Subsidiaries, and(iii) of the Obligors’ directors and senior officers.

 

(b)           All of theoutstanding shares of capital stock or similar equity interests of eachSubsidiary shown in Schedule 5.4 as being owned by the Obligors and theirSubsidiaries have been validly issued, are fully paid and nonassessable and areowned by the Obligors or another Subsidiary free and clear of any Lien (exceptas otherwise disclosed in Schedule 5.4).

 

(c)           EachSubsidiary identified in Schedule 5.4 is a corporation or other legalentity duly organized, validly existing and in good standing under the laws ofits jurisdiction of organization, and is duly qualified as a foreigncorporation or other legal entity and is in good standing in each jurisdictionin which such qualification is required by law, other than those jurisdictionsas to which the failure to be so qualified or in good standing would not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect.  Each such Subsidiary hasthe corporate or other power and authority to own or hold under lease theproperties it purports to own or hold under lease and to transact the businessit transacts and proposes to transact.

 

(d)           NoSubsidiary is a party to, or otherwise subject to, any legal restriction or anyagreement (other than this Agreement, the agreements listed onSchedule 5.4 and customary limitations imposed by corporate law statutes)restricting the ability of such Subsidiary to pay dividends out of profits ormake any other similar distributions of profits to any Obligor or any of

 

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its Subsidiaries that owns outstanding shares of capital stock orsimilar equity interests of such Subsidiary.

 

*Section 5.5.**           FinancialStatements; Material Liabilities*.** **The Obligors have delivered toeach Purchaser copies of the financial statements of FDSI and its Subsidiarieslisted on Schedule 5.5.  All of saidfinancial statements (including in each case the related schedules and notes)fairly present in all material respects the consolidated financial position ofthe FDSI and its Subsidiaries as of the respective dates specified in suchSchedule and the consolidated results of their operations and cash flows forthe respective periods so specified and have been prepared in accordance withGAAP consistently applied throughout the periods involved except as set forthin the notes thereto (subject, in the case of any interim financial statements,to normal year-end adjustments).  TheObligors and its Subsidiaries do not have any Material liabilities that are notdisclosed on such financial statements or otherwise disclosed in the DisclosureDocuments.

 

*Section 5.6.**           Compliancewith Laws, Other Instruments, Etc*.** **The execution, delivery andperformance by any Obligor of this Agreement and the Series A Notes will not(a) contravene, result in any breach of, or constitute a default under, orresult in the creation of any Lien in respect of any property of any Obligor orany Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase orcredit agreement, lease, corporate charter or by-laws, or any other agreementor instrument to which any Obligor or any Subsidiary is bound or by which anyObligor or any Subsidiary or any of their respective properties may be bound oraffected, (b) conflict with or result in a breach of any of the terms,conditions or provisions of any order, judgment, decree, or ruling of anycourt, arbitrator or Governmental Authority applicable to any Obligor or anySubsidiary, or (c) violate any provision of any statute or otherrule or regulation of any Governmental Authority applicable to theObligors or any Subsidiary.

 

*Section 5.7.**           GovernmentalAuthorizations, Etc*.** **No consent, approval orauthorization of, or registration, filing or declaration with, any GovernmentalAuthority is required in connection with the execution, delivery or performanceby any Obligor of this Agreement or the Series A Notes (other than the filingof a Form 8-K with the Securities and Exchange Commission pursuant to theSecurities and Exchange Act of 1934 (as amended)).

 

*Section 5.8.**           Litigation;Observance of Agreements, Statutes and Orders*.** **(a) Except forthe FLSA Litigation, there are no actions, suits, investigations or proceedingspending or, to the knowledge of any Obligor, threatened against or affectingany Obligor or any Restricted Subsidiary or any property of any Obligor or anyRestricted Subsidiary in any court or before any arbitrator of any kind orbefore or by any Governmental Authority that, individually or in the aggregate,would reasonably be expected to have a Material Adverse Effect.

 

(b)           TheFLSA Litigation, individually or in the aggregate, would not reasonably beexpected to have a Limited Material Adverse Effect.

 

(c)           Neitherany Obligor nor any Restricted Subsidiary is in default under any term of anyagreement or instrument to which it is a party or by which it is bound, or anyorder, judgment, decree or ruling of any court, arbitrator or GovernmentalAuthority or is in violation of any applicable law, ordinance, rule orregulation (including without limitation Environmental

 

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Laws or the USA Patriot Act) of any Governmental Authority, whichdefault or violation, individually or in the aggregate, would reasonably beexpected to have a Material Adverse Effect.

 

*Section 5.9.**           Taxes*.** **Each Obligor and its Subsidiaries have filed all Material taxreturns that are required to have been filed in any jurisdiction, and have paidall taxes shown to be due and payable on such returns and all other taxes andassessments levied upon them or their properties, assets, income or franchises,to the extent such taxes and assessments have become due and payable and beforethey have become delinquent, except for any taxes and assessments (a) theamount of which is not individually or in the aggregate Material or(b) the amount, applicability or validity of which is currently beingcontested in good faith by appropriate proceedings and with respect to which anObligor or a Subsidiary, as the case may be, has established adequate reservesin accordance with GAAP.  No Obligorknows of any basis for any other tax or assessment that would reasonably beexpected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Obligors andtheir Subsidiaries in respect of federal, state or other taxes for all fiscalperiods are adequate in all Material respects. The federal income tax liabilities of the Obligors and theirSubsidiaries have been finally determined (whether by reason of completed auditsor the statute of limitations having run, other than for allegations of fraud)for all fiscal years up to and including the fiscal year ended September 1,2001.

 

*Section 5.10.**        Titleto Property; Leases*.** **Each Obligor and its RestrictedSubsidiaries have good and sufficient title to their respective propertieswhich the Obligors and their Restricted Subsidiaries own or purport to own thatindividually or in the aggregate are Material, including all such propertiesreflected in the most recent audited balance sheet referred to inSection 5.5 or purported to have been acquired by the Obligors or anyRestricted Subsidiary after said date (except as sold or otherwise disposed ofin the ordinary course of business), in each case free and clear of Liensprohibited by this Agreement.  All leasesthat individually or in the aggregate are Material are valid and subsisting andare in full force and effect in all material respects.

 

*Section 5.11.**        Licenses,Permits, Etc*.  Except as disclosed inSchedule 5.11,

 

(a)           theObligors and their Restricted Subsidiaries own or possess all licenses,permits, franchises, authorizations, patents, copyrights, proprietary software,service marks, trademarks and trade names, or rights thereto, that individuallyor in the aggregate are Material, without known conflict with the rights ofothers;

 

(b)           tothe best knowledge of each Obligor, no product of such Obligor or any of itsRestricted Subsidiaries infringes in any respect any license, permit,franchise, authorization, patent, copyright, proprietary software, servicemark, trademark, trade name or other right owned by any other Person that,individually or in the aggregate, would reasonably be expected to have aMaterial Adverse Effect; and

 

(c)           tothe best knowledge of each Obligor, there is no violation by any Person of anyright of such Obligor or any of its Restricted Subsidiaries with respect to anypatent, copyright, proprietary software, service mark, trademark, trade name orother right

 

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owned or used by such Obligor or any of its RestrictedSubsidiaries that, individually or in the aggregate, would reasonably beexpected to have a Material Adverse Effect.

 

*Section 5.12.**        Compliancewith ERISA*.** **(a) Each Obligor and eachERISA Affiliate have operated and administered each Plan in compliance with allapplicable laws except for such instances of noncompliance as have not resultedin and would not reasonably be expected to result in a Material AdverseEffect.  Neither any Obligor nor anyERISA Affiliate has incurred any liability pursuant to Title I or IV ofERISA or the penalty or excise tax provisions of the Code relating to employeebenefit plans (as defined in section 3 of ERISA), and no event,transaction or condition has occurred or exists that would reasonably be expectedto result in the incurrence of any such liability by any Obligor or any ERISAAffiliate, or in the imposition of any Lien on any of the rights, properties orassets of any Obligor or any ERISA Affiliate, in either case pursuant toTitle I or IV of ERISA or to such penalty or excise tax provisions or tosection 401(a)(29) or 412 of the Code or section 4068 of ERISA, other thansuch liabilities or Liens as would not be individually or in the aggregateMaterial.

 

(b)           Thepresent value of the aggregate benefit liabilities under each of the Plans(other than Multiemployer Plans), determined as of the end of such Plan’s mostrecently ended plan year on the basis of the actuarial assumptions specifiedfor funding purposes in such Plan’s most recent actuarial valuation report, didnot exceed the aggregate current value of the assets of such Plan allocable tosuch benefit liabilities.  The term *“benefit liabilities”* has the meaning specified in section4001 of ERISA and the terms *“current value”*and *“present value”* have the meaningspecified in section 3 of ERISA.

 

(c)           No Obligornor any of its ERISA Affiliates has incurred any withdrawal liabilities (andare not subject to contingent withdrawal liabilities) under section 4201or 4204 of ERISA in respect of Multiemployer Plans that individually or in theaggregate are Material.

 

(d)           Theexpected post-retirement benefit obligation (determined as of the last day ofFDSI’s most recently ended fiscal year in accordance with Financial AccountingStandards Board Statement No. 106, without regard to liabilitiesattributable to continuation coverage mandated by section 4980B of theCode) of FDSI and its Subsidiaries is not Material.

 

(e)           Theexecution and delivery of this Agreement and the issuance and sale of theSeries A Notes hereunder will not involve any transaction that is subject tothe prohibitions of Section 406 of ERISA or in connection with which a taxwould be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code.  The representation by each Obligor in the firstsentence of this Section 5.12(e) is made in reliance upon and subject tothe accuracy of each Purchaser’s representation in Section 6.3 as to thesources of the funds to be used to pay the purchase price of the Series A Notesto be purchased by such Purchaser.

 

*Section 5.13.**        PrivateOffering by the Obligors*.** **Neither any Obligor nor anyoneacting on any Obligor’s behalf has offered the Series A Notes or any similarsecurities for sale to, or solicited any offer to buy any of the same from, orotherwise approached or negotiated in respect thereof with, any Person otherthan the Purchasers and not more than 45 other Institutional Investors, each ofwhich has been offered the Series A Notes in connection with a private sale for

 

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investment.  Neither any Obligornor anyone acting on its behalf has taken, or will take, any action that wouldsubject the issuance or sale of the Series A Notes to the registrationrequirements of Section 5 of the Securities Act or to the registrationrequirements of any securities or blue sky laws of any applicable jurisdiction.

 

*Section 5.14.**        Useof Proceeds; Margin Regulations*.** **The Obligors will apply theproceeds of the sale of the Series A Notes to repurchase shares of common stockof FDSI, which shares will be retired upon such repurchase, and for othergeneral corporate purposes of the Obligors. No part of the proceeds from the sale of the Series A Notes hereunderwill be used, directly or indirectly, for the purpose of buying or carrying anymargin stock within the meaning of Regulation U of the Board of Governorsof the Federal Reserve System (12 CFR 221), or for the purpose ofbuying or carrying or trading in any securities under such circumstances as to involveany Obligor in a violation of Regulation X of said Board (12 CFR 224)or to involve any broker or dealer in a violation of Regulation T of saidBoard (12 CFR 220).  Margin stockdoes not constitute more than 5% of the value of the consolidated assets ofFDSI and its Subsidiaries and no Obligor has any present intention that marginstock will constitute more than 5% of the value of such assets.  As used in this Section, the terms *“margin stock”* and *“purpose of buying orcarrying”* shall have the meanings assigned to them in saidRegulation U.

 

*Section 5.15.**        ExistingDebt; Future Liens*.  (a) Exceptas described therein, Schedule 5.15 sets forth a complete and correct listof all outstanding Debt of the Obligors and their Restricted Subsidiaries as ofJune 30, 2005, since which date there has been no Material change in theamounts, interest rates, sinking funds, installment payments or maturities ofthe Debt of the Obligors or their Restricted Subsidiaries.  Neither any Obligor nor any RestrictedSubsidiary is in default and no waiver of default is currently in effect, inthe payment of any principal or interest on any Debt of an Obligor or suchRestricted Subsidiary, and no event or condition exists with respect to anyDebt of an Obligor or any Restricted Subsidiary, that would permit (or thatwith notice or the lapse of time, or both, would permit) one or more Persons tocause such Debt to become due and payable before its stated maturity or beforeits regularly scheduled dates of payment.

 

(b)           Except asdisclosed in Schedule 5.15, neither an Obligor nor any RestrictedSubsidiary has agreed or consented to cause or permit in the future (upon thehappening of a contingency or otherwise) any of its property, whether now ownedor hereafter acquired, to be subject to a Lien not permitted bySection 10.4.

 

(c)           Neitherany Obligor nor any Subsidiary is a party to, or otherwise subject to anyprovision contained in, any instrument evidencing Debt of an Obligor or suchSubsidiary, any agreement relating thereto or any other agreement (including,but not limited to, its charter or other organizational document) which limitsthe amount of, or otherwise imposes restrictions on the incurring of, Debt ofan Obligor, except as specifically indicated in Schedule 5.15.

 

*Section 5.16.**        ForeignAssets Control Regulations, Etc*.** **(a) Neither the sale of theSeries A Notes by any Obligor hereunder nor its use of the proceeds thereofwill violate the Trading with the Enemy Act, as amended, or any of the foreignassets control regulations of the United

 

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States Treasury Department (31 CFR, Subtitle B, Chapter V, asamended) or any enabling legislation or executive order relating thereto.

 

(b)           Neitherany Obligor nor any Subsidiary is a Person described or designated in theSpecially Designated Nationals and Blocked Persons List of the Office ofForeign Assets Control or in Section 1 of the Anti-Terrorism Order.  Each Obligor and its Subsidiaries are incompliance, in all material respects, with the USA Patriot Act.

 

(c)           No part ofthe proceeds from the sale of the Series A Notes hereunder will be used,directly or indirectly, for any payments to any governmental official oremployee, political party, official of a political party, candidate for politicaloffice, or anyone else acting in an official capacity, in order to obtain,retain or direct business or obtain any improper advantage, in violation of theUnited States Foreign Corrupt Practices Act of 1977, as amended, assuming inall cases that such Act applies to the Obligors.

 

*Section 5.17.**        Statusunder Certain Statute*s.** **Neither any Obligor nor anyRestricted Subsidiary is an “investment company” registered or required to beregistered under the Investment Company Act of 1940, as amended, or is subjectto regulation under the Public Utility Holding Company Act of 1935, as amended,the ICC Termination Act of 1995, as amended, or the Federal Power Act, asamended.

 

*Section 5.18.**        EnvironmentalMatters*.  (a) Neither anyObligor nor any Restricted Subsidiary has knowledge of any liability or hasreceived any notice of any liability, and no proceeding has been institutedraising any liability against any Obligor or any of its Restricted Subsidiariesor any of their respective real properties now or formerly owned, leased oroperated by any of them, or other assets, alleging any damage to theenvironment or violation of any Environmental Laws, except, in each case, suchas would not reasonably be expected to result in a Material Adverse Effect.

 

(b)           Neitherany Obligor nor any Restricted Subsidiary has knowledge of any facts whichwould give rise to any liability, public or private, of violation ofEnvironmental Laws or damage to the environment emanating from, occurring on orin any way related to real properties now or formerly owned, leased or operatedby any of them or to other assets or their use, except, in each case, such aswould not reasonably be expected to result in a Material Adverse Effect.

 

(c)           Neitherany Obligor nor any of its Restricted Subsidiaries has stored any HazardousMaterials on real properties now or formerly owned, leased or operated by anyof them or has disposed of any Hazardous Materials in each case in a mannercontrary to any Environmental Laws in each case in any manner that wouldreasonably be expected to result in a Material Adverse Effect.

 

(d)           Allbuildings on all real properties now owned, leased or operated by the Obligorsor any of their Restricted Subsidiaries are in compliance with applicableEnvironmental Laws, except where failure to comply would not reasonably beexpected to result in a Material Adverse Effect.

 

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*Section 5.19.**        NotesRank Pari Passu.*  The obligations ofthe Obligors under this Agreement and the Notes rank *pari passu*in right of payment with all other senior unsecured Debt (actual or contingent)of the Obligors, including, without limitation, all senior unsecured Debt ofthe Obligors described in Schedule 5.15 hereto.

 

Section 6.                Representationsof the Purchaser.

 

*Section 6.1.**           Purchasefor Investment*.** **Each Purchaser severallyrepresents that it is purchasing the Series A Notes for its own account or forone or more separate accounts maintained by it or for the account of one ormore pension or trust funds and not with a view to the distribution thereof(other than any Notes purchased by Banc of America Securities LLC on theClosing Date which are intended to be resold to a “qualified institutionalbuyer” pursuant to Rule 144A of the Securities Act), *provided*that the disposition of such Purchaser’s or such pension or trust funds’property shall at all times be within such Purchaser’s or such pension or trustfunds’ control.  Each Purchaserunderstands that the Series A Notes have not been registered under theSecurities Act and may be resold only if registered pursuant to the provisionsof the Securities Act or if an exemption from registration is available, exceptunder circumstances where neither such registration nor such an exemption isrequired by law, and that the Obligors are not required to register the SeriesA Notes.

 

*Section 6.2.**           AccreditedInvestor*.  Each Purchaser representsthat it is an “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or(7) of Regulation D under the Securities Act acting for its own account (andnot for the account of others) or as a fiduciary or agent for others (whichothers are also “accredited investors”).  Each Purchaser further represents that such Purchaser has had theopportunity to ask questions of the Obligors and received answers concerningthe terms and conditions of the sale of the Series A Notes.

 

*Section 6.3.**           Sourceof Funds*.  Each Purchaser severallyrepresents that at least one of the following statements is an accuraterepresentation as to each source of funds (a *“Source”*)to be used by such Purchaser to pay the purchase price of the Series A Notes tobe purchased by such Purchaser hereunder:

 

(a)           theSource is an “insurance company general account” (as the term is defined in theUnited States Department of Labor’s Prohibited Transaction Exemption (*“PTE”*) 95-60) in respect of which the reserves andliabilities (as defined by the annual statement for life insurance companiesapproved by the National Association of Insurance Commissioners (the *“NAIC Annual Statement”*)) for the general accountcontract(s) held by or on behalf of any employee benefit plan together with theamount of the reserves and liabilities for the general account contract(s) heldby or on behalf of any other employee benefit plans maintained by the sameemployer (or affiliate thereof as defined in PTE 95-60) or by the same employeeorganization in the general account do not exceed 10% of the total reserves andliabilities of the general account (exclusive of separate account liabilities)plus surplus as set forth in the NAIC Annual Statement filed with suchPurchaser’s state of domicile; or

 

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(b)           theSource is a separate account that is maintained solely in connection with suchPurchaser’s fixed contractual obligations under which the amounts payable, orcredited, to any employee benefit plan (or its related trust) that has anyinterest in such separate account (or to any participant or beneficiary of suchplan (including any annuitant)) are not affected in any manner by theinvestment performance of the separate account; or

 

(c)           theSource is either (i) an insurance company pooled separate account, within themeaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaningof the PTE 91-38 and, except as disclosed by such Purchaser to an Obligor inwriting pursuant to this clause (c), no employee benefit plan or group of plansmaintained by the same employer or employee organization beneficially owns morethan 10% of all assets allocated to such pooled separate account or collectiveinvestment fund; or

 

(d)           theSource constitutes assets of an “investment fund” (within the meaning of Part Vof PTE 84-14 (the *“QPAM Exemption”*)) managed by a “qualifiedprofessional asset manager” or “QPAM” (within the meaning of Part V of the QPAMExemption), no employee benefit plan’s assets that are included in suchinvestment fund, when combined with the assets of all other employee benefitplans established or maintained by the same employer or by an affiliate (withinthe meaning of Section V(c)(1) of the QPAM Exemption) of such employer or bythe same employee organization and managed by such QPAM, exceed 20% of thetotal client assets managed by such QPAM, the conditions of Part I(c) and (g)of the QPAM Exemption are satisfied, neither the QPAM nor a person controllingor controlled by the QPAM (applying the definition of “control” in Section V(e)of the QPAM Exemption) owns a 5% or more interest in an Obligor and (i) theidentity of such QPAM and (ii) the names of all employee benefit plans whoseassets are included in such investment fund have been disclosed to an Obligorin writing pursuant to this clause (d); or

 

(e)           theSource constitutes assets of a “plan(s)” (within the meaning of Section IV ofPTE 96-23 (the *“INHAM Exemption”*)) managed by an“in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAMexemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption aresatisfied, neither the INHAM nor a person controlling or controlled by theINHAM (applying the definition of “control” in Section IV(d) of the INHAMExemption) owns a 5% or more interest in an Obligor and (i) the identity ofsuch INHAM and (ii) the name(s) of the employee benefit plan(s) whose assetsconstitute the Source have been disclosed to an Obligor in writing pursuant tothis clause (e); or

 

(f)            theSource is a governmental plan; or

 

(g)           theSource is one or more employee benefit plans, or a separate account or trustfund comprised of one or more employee benefit plans, each of which has beenidentified to any Obligor in writing pursuant to this clause (g); or

 

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(h)           theSource does not include assets of any employee benefit plan, other than a planexempt from the coverage of ERISA.

 

Asused in this Section 6.3, the terms *“employee benefit plan,”**“governmental plan,”* and *“separate account”* shall have the respective meaningsassigned to such terms in section 3 of ERISA.

 

Section 7.                Information asto Obligors.

 

*Section 7.1.**           Financialand Business Information*.  TheObligors shall deliver to each holder of Notes that is an InstitutionalInvestor:

 

(a)           *Quarterly Statements* — within 60 days after the end of eachquarterly fiscal period in each fiscal year of FDSI (other than the lastquarterly fiscal period of each such fiscal year),

 

(i)            aconsolidated balance sheet of FDSI and its Subsidiaries as at the end of suchquarter, and

 

(ii)           consolidatedstatements of income, changes in shareholders’ equity and cash flows of FDSIand its Subsidiaries, for such quarter and (in the case of the second and thirdquarters) for the portion of the fiscal year ending with such quarter,

 

setting forth in each case in comparative form thefigures for the corresponding periods in the previous fiscal year, all inreasonable detail, prepared in accordance with GAAP applicable to quarterlyfinancial statements generally, and certified by a Senior Financial Officer asfairly presenting, in all material respects, the financial position of thecompanies being reported on and their results of operations and cash flows,subject to changes resulting from year-end adjustments, *provided*that filing with the Securities and Exchange Commission within the time periodspecified above FDSI’s Quarterly Report on Form 10-Q prepared incompliance with the requirements therefor shall be deemed to satisfy therequirements of this Section 7.1(a);

 

(b)           *Annual Statements* — within 105 days after the end of eachfiscal year of FDSI,

 

(i)            aconsolidated balance sheet of FDSI and its Subsidiaries, as at the end of suchyear, and

 

(ii)           consolidatedstatements of income, changes in shareholders’ equity and cash flows of FDSIand its Subsidiaries, for such year,

 

setting forth in each case in comparative form thefigures for the previous fiscal year, all in reasonable detail, prepared inaccordance with GAAP, and accompanied by an opinion thereon of independentcertified public accountants of recognized national standing,

 

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which opinion shall state that such financialstatements present fairly, in all material respects, the financial position ofthe companies being reported upon and their results of operations and cashflows and have been prepared in conformity with GAAP, and that the examinationof such accountants in connection with such financial statements has been madein accordance with generally accepted auditing standards, and that such auditprovides a reasonable basis for such opinion in the circumstances, *provided* that filing with the Securities and ExchangeCommission within the time period specified above of FDSI’s Annual Report onForm 10-K for such fiscal year (together with FDSI’s annual report toshareholders, if any, prepared pursuant to Rule 14a-3 under the ExchangeAct) prepared in accordance with the requirements therefor shall be deemed tosatisfy the requirements of this Section 7.1(b);

 

(c)           *SEC and Other Reports* — except for filings referred to inSection 7.1(a) and (b) above, promptly upon their becoming available and,to the extent applicable, one copy of (i) each financial statement,report, notice or proxy statement sent by FDSI or any Subsidiary to publicsecurities holders generally, and (ii) each regular or periodic report,each registration statement (without exhibits except as expressly requested bysuch holder), and each prospectus and all amendments thereto filed by FDSI orany Subsidiary with the Securities and Exchange Commission and of all pressreleases and other statements made available generally by FDSI or anySubsidiary to the public concerning developments that are Material; providedthat filing of Form 8-K with the Securities and Exchange Commission within thetime periods required by the Securities and Exchange Act of 1934 (as amended)and the posting of press releases on FDSI’s website shall satisfy theobligations under this Section 7.1(c);

 

(d)           *Notice of Default or Event of Default* — promptly, and in anyevent within five Business Days after a Responsible Officer becomes aware ofthe existence of any Default or Event of Default or that any Person has givenany notice or taken any action with respect to a claimed default hereunder orthat any Person has given any notice or taken any action with respect to a claimeddefault of the type referred to in Section 11(f), a written noticespecifying the nature and period of existence thereof and what action theObligors are taking or proposes to take with respect thereto;

 

(e)           *ERISA Matters* — promptly, and in any event within fiveBusiness Days after a Responsible Officer becomes aware of any of the followingthat would reasonably be expected to have a Material Adverse Effect, a writtennotice setting forth the nature thereof and the action, if any, that an Obligoror an ERISA Affiliate proposes to take with respect thereto:

 

(i)            withrespect to any Plan, any reportable event, as defined in Section 4043(c)of ERISA and the regulations thereunder, for which notice thereof has not beenwaived pursuant to such regulations as in effect on the date thereof; or

 

(ii)           thetaking by the PBGC of steps to institute, or the threatening by the PBGC of theinstitution of, proceedings under Section 4042 of ERISA for the

 

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termination of, or the appointment of a trustee toadminister, any Plan, or the receipt by any Obligor or any ERISA Affiliate of anotice from a Multiemployer Plan that such action has been taken by the PBGCwith respect to such Multiemployer Plan; or

 

(iii)          anyevent, transaction or condition that would result in the incurrence of anyliability by any Obligor or any ERISA Affiliate pursuant to Title I or IVof ERISA or the imposition of a penalty or excise tax under the provisions ofthe Code relating to employee benefit plans, or the imposition of any Lien onany of the rights, properties or assets of any Obligor or any ERISA Affiliatepursuant to Title I or IV of ERISA or such penalty or excise taxprovisions, if such liability or Lien, taken together with any other suchliabilities or Liens then existing;

 

(f)            *Notices from Governmental Authority*— promptly, and in anyevent within 30 days of receipt thereof, copies of any notice to any Obligor orany Subsidiary from any federal or state Governmental Authority relating to anyorder, ruling, statute or other law or regulation that would reasonably beexpected to have a Material Adverse Effect;

 

(g)           *Supplements *—promptly and in any event within 10 Business Days after the execution anddelivery of any Supplement, a copy thereof; and

 

(h)           *Requested Information* — with reasonable promptness, suchother data and information relating to the business, operations, affairs,financial condition, assets or properties of any Obligor or any of itsSubsidiaries or relating to the ability of any Obligor to perform itsobligations hereunder and under the Notes as from time to time may bereasonably requested by any such holder of Notes.

 

Notwithstanding the foregoing, in the event that oneor more Unrestricted Subsidiaries shall either (i) own more than 10% of thetotal consolidated assets of FDSI and its Subsidiaries, or (ii) account formore than 10% of the consolidated gross revenues of FDSI and its Subsidiaries,determined in each case in accordance with GAAP, then, within the respectiveperiods provided in Section 7.1(a) and (b) above, the Obligors shall deliver toeach holder of Notes that is an Institutional Investor, unaudited financialstatements of the character and for the dates and periods as in said Sections7.1(a) and (b) covering such group of Unrestricted Subsidiaries (on aconsolidated basis), together with a consolidating statement reflectingeliminations or adjustments required to reconcile the financial statements ofsuch group of Unrestricted Subsidiaries to the financial statements deliveredpursuant to Sections 7.1(a) and (b).

 

*Section 7.2.**           Officer’sCertificate*.  Each set of financialstatements delivered to a holder of Notes pursuant to Section 7.1(a) orSection 7.1(b) hereof shall be accompanied by a certificate of a SeniorFinancial Officer setting forth:

 

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(a)           *Covenant Compliance* — the information required in order toestablish whether the Obligors were in compliance with the requirements ofSection 10.1 through Section 10.7****hereof,inclusive, during the quarterly or annual period covered by the statements thenbeing furnished (including with respect to each such Section, where applicable,the calculations of the maximum or minimum amount, ratio or percentage, as thecase may be, permissible under the terms of such Sections, and the calculationof the amount, ratio or percentage then in existence); and

 

(b)           *Event of Default* — a statement that such officer hasreviewed the relevant terms hereof such review shall not have disclosed theexistence during the quarterly or annual period covered by the statements thenbeing furnished of any condition or event that constitutes a Default or anEvent of Default or, if any such condition or event existed or exists,specifying the nature and period of existence thereof and what action theObligors shall have taken or proposes to take with respect thereto.

 

*Section 7.3.**           Visitation*.  Each Obligor shall permit the representativesof each holder of Notes that is an Institutional Investor:

 

(a)           *No Default* — if no Default or Event of Default then exists,at the expense of such holder and upon reasonable prior notice to an Obligor,to visit the principal executive office of any Obligor, to discuss the affairs,finances and accounts of any Obligor and its Subsidiaries with any Obligor’sofficers, and (with the consent of the Obligors, which consent will not beunreasonably withheld) its independent public accountants, and (with theconsent of the Obligors, which consent will not be unreasonably withheld) tovisit the other offices and properties of any Obligor and each RestrictedSubsidiary, all at such reasonable times and as often as may be reasonablyrequested in writing; and

 

(b)           *Default* — if a Default or Event of Default then exists, atthe expense of the Obligors, to visit and inspect any of the offices orproperties of any Obligor or any Restricted Subsidiary, to examine all theirrespective books of account, records, reports and other papers, to make copiesand extracts therefrom, and to discuss their respective affairs, finances andaccounts with their respective officers and independent public accountants (andby this provision any Obligor authorizes said accountants to discuss theaffairs, finances and accounts of any Obligor and its Subsidiaries), all atsuch times and as often as may be requested.

 

Section 8.                Payment of theNotes.

 

*Section 8.1.**           RequiredPrepayments of Series A Notes. *(a) Theentire unpaid principal amount of the Tranche A Notes shall become due andpayable on September 27, 2015.

 

(b)           OnSeptember 27, 2011 and on each September 27 thereafter to andincluding September 27, 2015 the Obligors will prepay $16,200,000principal amount (or such lesser principal amount as shall then be outstanding)of the Tranche B Notes at par and without payment of the Make-Whole Amountor any premium, *provided* that upon any partial

 

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prepayment of the Notes pursuant to Section 8.2 or Section 8.7,the principal amount of each required prepayment of the Tranche B Notesbecoming due under this Section 8.1(b) on and after the date of suchprepayment shall be reduced in the same proportion as the aggregate unpaidprincipal amount of the Notes is reduced as a result of such prepayment

 

*Section 8.2.**           OptionalPrepayments with Make-Whole Amoun*t. The Obligors may, at their option, upon notice as provided below, prepayat any time all, or from time to time any part of, the Notes, in an amount notless than 10% of the original aggregate principal amount of the Notes thenoutstanding in the case of a partial prepayment (or such lesser amount as shallbe required to effect a partial prepayment resulting from an offer ofprepayment pursuant to Section 10.5, which is without any Make-WholeAmount), at 100% of the principal amount so prepaid, together with interestaccrued thereon to the date of such prepayment, plus the Make-Whole Amountdetermined for the prepayment date with respect to such principal amount ofeach Note then outstanding.  The Obligorswill give each holder of Notes written notice of each optional prepayment underthis Section 8.2 not less than 20 days and not more than 60 days prior tothe date fixed for such prepayment.  Eachsuch notice shall specify such date, the aggregate principal amount of theNotes to be prepaid on such date, the principal amount of each Note held bysuch holder to be prepaid (determined in accordance with Section 8.3), andthe interest to be paid on the prepayment date with respect to such principalamount being prepaid, and shall be accompanied by a certificate of a SeniorFinancial Officer as to the estimated respective Make-Whole Amount due inconnection with such prepayment (calculated as if the date of such notice werethe date of the prepayment), setting forth the details of suchcomputation.  Two Business Days prior tosuch prepayment, the Obligors shall deliver to each holder of Notes acertificate of a Senior Financial Officer specifying the calculation of eachsuch Make-Whole Amount as of the specified prepayment date.

 

*Section 8.3.**           Allocationof Partial Prepayments*.  In the caseof each partial prepayment of the Notes pursuant to the provisions ofSection 8.2, the principal amount of the Notes to be prepaid shall beallocated among all of the Notes at the time outstanding in proportion, asnearly as practicable, to the respective unpaid principal amounts thereof.  All regularly scheduled partial prepaymentsmade with respect to any Series of Additional Notes pursuant to any Supplementshall be allocated as provided therein.

 

*Section 8.4.**           Maturity;Surrender, Etc.*  In the case of eachprepayment of Notes pursuant to this Section 8, the principal amount ofeach Note to be prepaid shall mature and become due and payable on the datefixed for such prepayment, together with interest on such principal amountaccrued to such date and the applicable Make-Whole Amount.  From and after such date, unless the Obligorsshall fail to pay such principal amount when so due and payable, together withthe interest and Make-Whole Amount as aforesaid, interest on such principalamount shall cease to accrue.  Any Notepaid or prepaid in full shall be surrendered to an Obligor and cancelled andshall not be reissued, and no Note shall be issued in lieu of any prepaidprincipal amount of any Note.

 

*Section 8.5.**           Purchaseof Notes*.  No Obligor will or willpermit any Affiliate to purchase, redeem, prepay or otherwise acquire, directlyor indirectly, any of the outstanding Notes of any Series except (a) upon thepayment or prepayment of the Notes of any Series in

 

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accordance with the terms of this Agreement (including any Supplementhereto) and the Notes or (b) pursuant to a written offer to purchase anyoutstanding Notes of any Series made by the Obligors or an Affiliate pro ratato the holders of the Notes of such Series upon the same terms and conditions(except that if such Series has more than one separate tranche, such writtenoffer shall be allocated among all of the separate tranches of such Series atthe time outstanding in proportion, as nearly as practicable, to the respectiveunpaid principal amounts thereof but such written offer may otherwise differamong such separate tranches and such written offer shall be made pro rata tothe holders of the same tranches of such Series upon the same terms andconditions).  The Obligors will promptlycancel all Notes acquired by it or any Affiliate pursuant to any payment,prepayment or purchase of Notes pursuant to any provision of this Agreement andno Notes may be issued in substitution or exchange for any such Notes.

 

*Section 8.6.**           Make-WholeAmount for the Series A Notes*.  Theterm *“Make-Whole Amount”* means with respectto any Series A Note an amount equal to the excess, if any, of theDiscounted Value of the Remaining Scheduled Payments with respect to the CalledPrincipal of such Series A Note, *minus* theamount of such Called Principal, *provided* thatthe Make-Whole Amount may in no event be less than zero.  For the purposes of determining the Make-WholeAmount, the following terms have the following meanings with respect to theCalled Principal of such Series A Note:

 

*“Called Principal”* means, theprincipal of the Series A Note that is to be prepaid pursuant toSection 8.2 or has become or is declared to be immediately due and payablepursuant to Section 12.1, as the context requires.

 

*“Discounted Value”* means, theamount obtained by discounting all Remaining Scheduled Payments from theirrespective scheduled due dates to the Settlement Date with respect to suchCalled Principal, in accordance with accepted financial practice and at adiscount factor (applied on the same periodic basis as that on which intereston such Series A Note is payable) equal to the Reinvestment Yield.

 

*“Reinvestment Yield”* means, 0.50%plus the yield to maturity calculated by using (i) the yields reported, asof 10:00 A.M. (New York City time) on the second Business Daypreceding the Settlement Date on screen “PX-1” on the Bloomberg FinancialMarket Service (or such other information service as may replace Bloomberg) foractively traded U.S. Treasury securities having a maturity equal to theRemaining Average Life of such Called Principal as of such Settlement Date, or(ii) if such yields are not reported as of such time or the yieldsreported as of such time are not ascertainable, the Treasury Constant MaturitySeries Yields reported, for the latest day for which such yields have been soreported as of the second Business Day preceding the Settlement Date, in FederalReserve Statistical Release H.15 (519) (or any comparable successorpublication) for actively traded U.S. Treasury securities having a constantmaturity equal to the Remaining Average Life of such Called Principal as ofsuch Settlement Date.  In either case,the yield will be determined, if necessary, by (a) converting U.S.Treasury bill quotations to bond-equivalent yields in accordance with acceptedfinancial practice and (b) interpolating linearly on a straight line basisbetween (1) the actively traded U.S. Treasury security with the maturityclosest to and greater than the Remaining Average

 

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Life and (2) theactively traded U.S. Treasury security with the maturity closest to and lessthan the Remaining Average Life.

 

*“Remaining Average Life”* means,the number of years (calculated to the nearest one-twelfth year) obtained bydividing (i) such Called Principal into (ii) the sum of the productsobtained by multiplying (a) the principal component of each RemainingScheduled Payment by (b) the number of years (calculated to the nearestone-twelfth year) that will elapse between the Settlement Date and thescheduled due date of such Remaining Scheduled Payment.

 

*“Remaining Scheduled Payments”*means, all payments of such Called Principal and interest thereon that would bedue after the Settlement Date if no payment of such Called Principal were madeprior to its scheduled due date, *provided* thatif such Settlement Date is not a date on which interest payments are due to bemade under the terms of such Series A Note, then the amount of the nextsucceeding scheduled interest payment will be reduced by the amount of interestaccrued to such Settlement Date and required to be paid on such Settlement Datepursuant to Section 8.2 or 12.1.

 

*“Settlement Date”* means, the dateon which such Called Principal is to be prepaid pursuant to Section 8.2 orhas become or is declared to be immediately due and payable pursuant toSection 12.1, as the context requires.

 

*Section 8.7.**           Changein Control*.   (a) *Notice of Change in Control or Control Event.* The Obligors will, within 15 BusinessDays after any Responsible Officer has knowledge of the occurrence of anyChange in Control or Control Event, give written notice of such Change inControl or Control Event to each holder of Notes *unless*notice in respect of such Change in Control (or the Change in Controlcontemplated by such Control Event) shall have been given pursuant tosubparagraph (b) of this Section 8.7. If a Change in Control has occurred, such notice shall contain andconstitute an offer to prepay Notes of each Series as described in subparagraph(c) of this Section 8.7 and shall be accompanied by the certificatedescribed in subparagraph (g) of this Section 8.7.

 

(b)           *Condition to Obligor Action.* The Obligors will not take any action that consummates or finalizes aChange in Control unless (i) at least 15 Business Days prior to suchaction it shall have given to each holder of Notes written notice containingand constituting an offer to prepay Notes as described in subparagraph (c) ofthis Section 8.7, accompanied by the certificate described in subparagraph(g) of this Section 8.7, and (ii) contemporaneously with such action,it prepays all Notes required to be prepaid in accordance with thisSection 8.7.

 

(c)           *Offer to Prepay Notes.* The offer to prepay Notes contemplated by subparagraphs (a) and (b) ofthis Section 8.7 shall be an offer to prepay, in accordance with andsubject to this Section 8.7, all, but not less than all, the Notes held byeach holder (in this case only, *“holder”* inrespect of any Note registered in the name of a nominee for a disclosedbeneficial owner shall mean such beneficial owner) on a date specified in suchoffer (the *“Proposed Prepayment Date”*).  If such Proposed Prepayment Date is inconnection with an offer contemplated by subparagraph (a) of thisSection 8.7, such date shall be not less than 20 days and not morethan

 

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30 days after the date of such offer (if the Proposed PrepaymentDate shall not be specified in such offer, the Proposed Prepayment Date shallbe the 20th day after the date of such offer).

 

(d)           *Acceptance.*  A holderof Notes may accept the offer to prepay made pursuant to this Section 8.7by causing a notice of such acceptance to be delivered to any Obligor at least5 Business Days prior to the Proposed Prepayment Date.  A failure by a holder of Notes to respond toan offer to prepay made pursuant to this Section 8.7 shall be deemed toconstitute a rejection of such offer by such holder.

 

(e)           *Prepayment.* Prepayment of the Notes to be prepaid pursuant to this Section 8.7shall be at 100% of the principal amount of such Notes, together with intereston such Notes accrued to the date of prepayment and without any Make-WholeAmount.  The prepayment shall be made onthe Proposed Prepayment Date except as provided in subparagraph (f) of thisSection 8.7.

 

(f)            *Deferral Pending Change in Control.*  The obligation of the Obligors to prepayNotes pursuant to the offers required by subparagraph (b) and accepted inaccordance with subparagraph (d) of this Section 8.7 is subject tothe occurrence of the Change in Control in respect of which such offers andacceptances shall have been made.  In theevent that such Change in Control does not occur on the Proposed PrepaymentDate in respect thereof, the prepayment shall be deferred until and shall bemade on the date on which such Change in Control occurs.  The Obligors shall keep each holder of Notesreasonably and timely informed of (i) any such deferral of the date ofprepayment, (ii) the date on which such Change in Control and theprepayment are expected to occur, and (iii) any determination by theObligors that efforts to effect such Change in Control have ceased or beenabandoned (in which case the offers and acceptances made pursuant to thisSection 8.7 in respect of such Change in Control shall be deemedrescinded).

 

(g)           *Officer’s Certificate.* Each offer to prepay the Notes pursuant to thisSection 8.7 shall be accompanied by a certificate, executed by a SeniorFinancial Officer of an Obligor and dated the date of such offer, specifying:(i) the Proposed Prepayment Date; (ii) that such offer is madepursuant to this Section 8.7; (iii) the principal amount of each Noteoffered to be prepaid; (iv) the interest that would be due on each Noteoffered to be prepaid, accrued to the Proposed Prepayment Date; (v) thatthe conditions of this Section 8.7 have been fulfilled; and (vi) inreasonable detail, the nature and date or proposed date of the Change inControl.

 

(h)           *Effect on Required Payments.* The amount of each payment of the principal of the Notes made pursuantto this Section 8.7 shall be applied against and reduce each of the thenremaining principal payments due pursuant to Section 8.7 by a percentageequal to the aggregate principal amount of the Notes so paid divided by theaggregate principal amount of the Notes outstanding immediately prior to suchpayment.

 

(i)            *“Change in Control” Defined.* *“Change in Control”* means (1) any sale,lease, exchange or other transfer (in a single transaction or a series ofrelated transactions) of all or substantially all of the assets of FDSI to anyPerson or “group” (within the meaning of the Exchange Act and the rules of theSecurities and Exchange Commission thereunder in effect on

 

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the date hereof) other than a Restricted Subsidiary in accordance withclause (4) below; (2) the acquisition of ownership, directly orindirectly, beneficially or of record, by any Person or “group” (within themeaning of the Exchange Act and the rules of the Securities and ExchangeCommission thereunder as in effect on the date hereof) of 51% or more of theoutstanding shares of the voting capital stock of FDSI; (3) the first day onwhich a majority of the members of the Board of Directors of FDSI are notContinuing Directors; or (4) a merger, consolidation or sale of all orsubstantially all of the assets of FDSI in respect of which FDSI is not thesuccessor corporation (other than a Restricted Subsidiary which assumes theobligations under this Agreement and the Notes).

 

(j)            *“Control Event” Defined.* *“Control Event”* means:

 

(i)            the execution by FDSI or any of itsSubsidiaries or Affiliates of any agreement or letter of intent with respect toany proposed transaction or event or series of transactions or events which,individually or in the aggregate, may reasonably be expected to result in aChange in Control,

 

(ii)           the execution of any writtenagreement which, when fully performed by the parties thereto, would result in aChange in Control, or

 

(iii)          the making of any written offer by anyperson (as such term is used in section 13(d) and section 14(d)(2) of theExchange Act as in effect on the date of the Closing) or related personsconstituting a group (as such term is used in Rule 13d-5 under the Exchange Actas in effect on the date of the Closing) to the holders of the voting capitalstock of FDSI, which offer, if accepted by the requisite number of holders,would result in a Change in Control.

 

(k)           *“Continuing Director” Defined.*  *“Continuing Director”*means, as of any date of determination, any member of the board of directors ofFDSI who: (i) was a member of such board of directors on the date hereof; or(ii) was nominated for election or elected to such board of directors with theapproval of a majority of the Continuing Directors who were members of suchboard at the time of such nomination or election.

 

Section 9.                                                 AffirmativeCovenants.

 

Each Obligorcovenants that so long as any of the Notes are outstanding:

 

*Section 9.1.           Compliancewith Law*.  Withoutlimiting Section 10.8, each Obligor will, and will cause each of itsSubsidiaries to, comply with all laws, ordinances or governmental rules orregulations to which each of them is subject, including, without limitation,ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintainin effect all licenses, certificates, permits, franchises and othergovernmental authorizations necessary to the ownership of their respectiveproperties or to the conduct of their respective businesses, in each case tothe extent necessary to ensure that non-compliance with such laws, ordinancesor governmental rules or regulations or failures to obtain or maintain ineffect such licenses,

 

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certificates, permits, franchises and other governmental authorizationswould not, individually or in the aggregate, reasonably be expected to have aMaterial Adverse Effect.

 

*Section 9.2.           Insurance*.  Each Obligor will, and will cause each of itsRestricted Subsidiaries to, maintain, with financially sound and reputableinsurers, insurance with respect to their respective properties and businessesagainst such casualties and contingencies, of such types, on such terms and insuch amounts (including deductibles, co-insurance and self-insurance, ifadequate reserves are maintained with respect thereto) as is customary in thecase of entities of established reputations engaged in the same or a similarbusiness and similarly situated except for any non-maintenance that would notreasonably be expected to have a Material Adverse Effect.

 

*Section 9.3.           Maintenanceof Properties*.  EachObligor will, and will cause each of its Restricted Subsidiaries to, maintainand keep, or cause to be maintained and kept, their respective properties ingood repair (similar to other comparable retailers), working order andcondition (other than ordinary wear and tear), so that the business carried onin connection therewith may be properly conducted at all times, *provided* that this Section shall not prevent an Obligoror any Restricted Subsidiary from discontinuing the operation and themaintenance of any of its properties if such discontinuance is desirable in theconduct of its business and the Obligors have concluded that suchdiscontinuance would not, individually or in the aggregate, reasonably beexpected to have a Material Adverse Effect.

 

*Section 9.4.           Paymentof Taxes and Claims*. Each Obligor will, and will cause each of its Subsidiaries to, file alltax returns required to be filed in any jurisdiction and to pay and dischargeall taxes shown to be due and payable on such returns and all other taxes,assessments, governmental charges, or levies imposed on them or any of theirproperties, assets, income or franchises, to the extent such taxes andassessments have become due and payable and before they have become delinquentand all claims for which sums have become due and payable that have or mightbecome a Lien on properties or assets of any Obligor or any Subsidiary notpermitted by Section 10.4, *provided* thatneither any Obligor nor any Subsidiary need pay any such tax or assessment orclaims if (i) the amount, applicability or validity thereof is contestedby any Obligor or such Subsidiary on a timely basis in good faith and inappropriate proceedings, and such Obligor or a Subsidiary has establishedadequate reserves therefor in accordance with GAAP on the books of such Obligoror such Subsidiary or (ii) the non-filing or nonpayment, as the case maybe, of all such taxes and assessments in the aggregate would not reasonably beexpected to have a Material Adverse Effect.

 

*Section 9.5.           CorporateExistence, Etc*. Subject to Sections** **10.5 and10.6, each Obligor will at all times preserve and keep in full force and effectits corporate existence, and will at all times preserve and keep in full forceand effect the corporate existence of each of its Restricted Subsidiaries(unless such Restricted Subsidiary is merged into an Obligor or a RestrictedSubsidiary) and all rights and franchises of the Obligors and their RestrictedSubsidiaries unless, in the good faith judgment of the Obligors, thetermination of or failure to preserve and keep in full force and effect suchcorporate existence, right or franchise would not, individually or in the aggregate,to have a Material Adverse Effect.

 

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*Section 9.6.           Designationof Subsidiaries. *TheObligors may from time to time cause any Subsidiary (other than a SubsidiaryGuarantor) to be designated as an Unrestricted Subsidiary or any UnrestrictedSubsidiary to be designated a Restricted Subsidiary; *provided,however,* that at the time of such designation and immediately aftergiving effect thereto, (a) no Default or Event of Default would exist under theterms of this Agreement, and (b) the Obligors and their Restricted Subsidiarieswould be in compliance with all of the covenants set forth in this Section 9and Section 10 (including, without limitation, Section 10.5) if tested onthe date of such action and *provided, further,*that once a Subsidiary has been designated an Unrestricted Subsidiary, it shallnot thereafter be redesignated as a Restricted Subsidiary on more than oneoccasion.  Within ten (10) days followingany designation described above, the Obligors will deliver to the holders ofthe Notes a notice of such designation accompanied by a certificate signed by aSenior Financial Officer of the Obligors certifying compliance with allrequirements of this Section 9.6 and setting forth all information required inorder to establish such compliance.

 

*Section 9.7.           Notesto Rank Pari Passu.*The Notes and all other obligations underthis Agreement of the Obligors are and at all times shall remain direct andunsecured obligations of the Obligors ranking *pari passu*as against the assets of the Obligors with all other Notes from time to timeissued and outstanding hereunder without any preference among themselves and *pari passu* with all other present and future unsecured Debt(actual or contingent) of the Obligors which is not expressed to be subordinateor junior in rank to any other unsecured Debt of the Obligors.

 

*Section 9.8.           AdditionalSubsidiary Guarantors*. * *The Obligors will cause anySubsidiary which is required by the terms of the Bank Credit Agreement tobecome a party to, or otherwise guarantee, Debt in respect of the Bank CreditAgreement, to enter into the Subsidiary Guaranty and deliver to each of theholders of the Notes (concurrently with the incurrence of any such obligationpursuant to the Bank Credit Agreement) the following items:

 

(a)           a joinder agreement in respect of theSubsidiary Guaranty;

 

(b)           a certificate signed by an authorizedResponsible Officer of the Obligors making representations and warranties tothe effect of those contained in Sections 5.4, 5.6 and 5.7, with respectto such Subsidiary and the Subsidiary Guaranty, as applicable; and

 

(c)           an opinion of counsel (who may bein-house counsel for an Obligor) addressed to each of the holders of the Notessatisfactory to the Required Holders, to the effect that the SubsidiaryGuaranty by such Person has been duly authorized, executed and delivered andthat the Subsidiary Guaranty constitutes the legal, valid and binding contractand agreement of such Person enforceable in accordance with its terms, exceptas an enforcement of such terms may be limited by bankruptcy, insolvency,fraudulent conveyance and similar laws affecting the enforcement of creditors’rights generally and by general equitable principles.

 

*Section 9.9.           Booksand Records.*Each Obligor will, and will cause each of itsRestricted Subsidiaries to, maintain proper books of record and account inconformity with GAAP and all

 

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applicable requirements of any Governmental Authority having legal orregulatory jurisdiction over such Obligor or such Restricted Subsidiary, as thecase may be.

 

Section 10.                                           NegativeCovenants.

 

Each Obligor covenants that so long as any of theNotes are outstanding:

 

*Section 10.1.        ConsolidatedDebt to Consolidated Total Capitalization.* The Obligors willnot at any time permit the ratio of Consolidated Debt to Consolidated TotalCapitalization to exceed 60%.

 

*Section 10.2.        FixedCharges Coverage Ratio.* The Obligors will not permit the ratio of Consolidated EBITDAR toConsolidated Fixed Charges for each period of four consecutive fiscal quarters(calculated as at the end of each fiscal quarter of FDSI for the fourconsecutive fiscal quarters then ended) to be less than 2.00 to 1.00.

 

*Section 10.3.        PriorityDebt.* The Obligors will not at any time permit the aggregateamount of all Priority Debt to exceed 20% of Consolidated Net Worth, determinedas of the end of the then most recently ended fiscal quarter of FDSI.

 

*Section 10.4.        Limitationon Liens*.    The Obligorswill not, and will not permit any of their Restricted Subsidiaries to, directlyor indirectly create, incur, assume or permit to exist (upon the happening of acontingency or otherwise) any Lien on or with respect to any property or asset(including, without limitation, any document or instrument in respect of goodsor accounts receivable) of any Obligor or any such Restricted Subsidiary,whether now owned or held or hereafter acquired, or any income or profitstherefrom, or assign or otherwise convey any right to receive income or profits(unless the Obligors make, or cause to be made, effective provision whereby theNotes will be equally and ratably secured with any and all other obligationsthereby secured, such security to be pursuant to an agreement reasonablysatisfactory to the Required Holders and, in any such case, the Notes shallhave the benefit, to the fullest extent that, and with such priority as, theholders of the Notes may be entitled under applicable law, of an equitable Lienon such property), except:

 

(a)           Liens for taxes, assessments or othergovernmental charges that are not yet due and payable or the payment of whichis not at the time required by Section 9.4;

 

(b)           any attachment or judgment Lien, ifthe judgment it secures shall either (i) have been discharged, bonded orexecution thereof stayed pending appeal within 60 days after the entry thereofor shall have been discharged within 60 days after the expiration of any suchstay or (ii) be covered by insurance and the insurer has acknowledged inwriting that it is obligated to pay such judgment;

 

(c)           (i) Liens incidental to theconduct of business or the ownership of properties and assets (includinglandlords’, carriers’, warehousemen’s, mechanics’, materialmen’s and othersimilar Liens for sums not yet due and payable), (ii) Liens, deposits andpledges to secure the performance of bids, tenders, leases, or trade contracts,

 

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or, (iii) Liens to secure statutory obligations (including obligationsunder workers compensation, unemployment insurance and other social securitylegislation) and under liability insurance, (iv) Liens to secure surety orappeal bonds or performance bonds, (v) other Liens incurred in theordinary course of business and not in connection with the borrowing of moneyor (vi) Liens securing letters of credit that are issued to secure any ofthe foregoing obligations described in this Section 10.4(c);

 

(d)           leases or subleases granted toothers, easements, rights-of-way, restrictions and other similar charges orencumbrances, in each case incidental to the ownership of property or assets orthe ordinary conduct of the business of an Obligor or any of its RestrictedSubsidiaries, on Liens incidental to minor survey exceptions and the like, *provided* that such Liens do not, in the aggregate,materially detract from the value of such property;

 

(e)           Liens securing Debt or otherobligations of a Restricted Subsidiary to an Obligor or to a RestrictedSubsidiary;

 

(f)            Liens existing as of the date ofClosing and reflected in Schedule 10.4;

 

(g)           Liens incurred after the date ofClosing given to secure the payment of the purchase price incurred inconnection with the acquisition, construction or improvement of property (otherthan accounts receivable but including inventory) useful and intended to beused (or sold as inventory) in carrying on the business of an Obligor or aRestricted Subsidiary, including Liens existing on such property at the time ofacquisition or construction thereof or Liens incurred within 365 days of suchacquisition or completion of such construction or improvement, *provided*that (i) the Lien shall attach solely to theproperty acquired, purchased, constructed or improved and the proceeds thereof;(ii) at the time of acquisition, construction or improvement of suchproperty (or, in the case of any Lien incurred within three hundred sixty-five(365) days of such acquisition or completion of such construction orimprovement, at the time of the incurrence of the Debt secured by such Lien),the aggregate amount remaining unpaid on all Debt secured by Liens on suchproperty, whether or not assumed by an Obligor or a Restricted Subsidiary,shall not exceed the lesser of (y) the cost of such acquisition, constructionor improvement or (z) the Fair Market Value of such property (asdetermined in good faith by one or more officers of an Obligor to whomauthority to enter into the transaction has been delegated by the board ofdirectors of such Obligor); and (iii) at the time of such incurrence andafter giving effect thereto, no Default or Event of Default would exist;

 

(h)           any Lien existing on property of aPerson immediately prior to its being consolidated with or merged into anObligor or a Restricted Subsidiary or its becoming a Restricted Subsidiary, orany Lien existing on any property acquired by an Obligor or any RestrictedSubsidiary at the time such property is so acquired (whether or not the Debtsecured thereby shall have been assumed), *provided* that(i) no such Lien shall have been created or assumed in contemplation ofsuch consolidation or merger or such Person’s becoming a Restricted Subsidiaryor such acquisition of property, (ii) each such Lien shall extend solelyto the item or items of property so acquired and, if required by the

 

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terms of the instrument originally creating such Lien,other property which is an improvement to or is acquired for specific use inconnection with such acquired property, and (iii) at the time of suchincurrence and after giving effect thereto, no Default or Event of Defaultwould exist;

 

(i)            any extensions, renewals orreplacements of any Lien permitted by the preceding subparagraphs (e), (f) and(g) of this Section 10.4, *provided*that(i) no additional property shall be encumbered by such Liens,(ii) the unpaid principal amount of the Debt or other obligations securedthereby shall not be increased on or after the date of any extension, renewalor replacement, and (iii) at such time and immediately after giving effectthereto, no Default or Event of Default shall have occurred and be continuing;and

 

(j)            in addition to the Liens describedabove, any other Liens securing Debt or other obligations not permitted above,including Liens securing Priority Debt of an Obligor or any RestrictedSubsidiary, *provided* that such Priority Debt doesnot exceed the limitations set forth in Section 10.3.

 

*Section 10.5.        Salesof Assets. *TheObligors will not, and will not permit any Restricted Subsidiary to, sell,lease or otherwise dispose of any substantial part (as defined below) of theassets of the Obligors and their Restricted Subsidiaries; *provided,however,* that an Obligor or any Restricted Subsidiary may sell,lease or otherwise dispose of assets constituting a substantial part of theassets of the Obligors and their Restricted Subsidiaries if such assets aresold in an arms length transaction and, at such time and after giving effectthereto, no Default or Event of Default shall have occurred and be continuingand an amount equal to the net proceeds received from such sale, lease or otherdisposition (but only with respect to that portion of such assets that exceedsthe definition of “substantial part” set forth below) shall be used within 365days of such sale, lease or disposition, in any combination:

 

(1)           to acquire productive assets used oruseful in carrying on the business of the Obligors and their RestrictedSubsidiaries and having a value at least equal to the value of such assets sold,leased or otherwise disposed of (or FDSI or any Restricted Subsidiary iscontractually obligated to acquire such productive assets pursuant to a bindingcontract entered into within such 365 day period so long as such productiveassets shall have been acquired within 60 days following such 365 day period);and/or

 

(2)           to prepay or retire Senior Debt ofany Obligor and/or its Restricted Subsidiaries, *provided*that**(i) the Obligors shall offer to prepayeach outstanding Note ratably with all such Senior Debt prepaid or retired, and(ii) any such prepayment of the Notes shall be made in accordance with theterms of Section 8.2 (at par and without the payment of any Make-WholeAmount or any other premium).  If anyholder of a Note fails to accept such offer of prepayment, then, for purposesof the preceding sentence only, the Obligors nevertheless will be deemed tohave paid Senior Debt in an amount equal to the ratable portion for such Note.

 

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As used in this Section 10.5, a sale, lease orother disposition of assets shall be deemed to be a *“substantialpart”* of the assets of the Obligors and their RestrictedSubsidiaries if the book value of such assets, when added to the book value ofall other assets sold, leased or otherwise disposed of by the Obligors andtheir Restricted Subsidiaries during any fiscal year, exceeds 15% of the bookvalue of Consolidated Total Assets, determined as of the end of the fiscalquarter immediately preceding such sale, lease or other disposition;*provided* that there shall be excluded from anydetermination of a “substantial part” any (i) sale or disposition ofassets in the ordinary course of business of the Obligors and their RestrictedSubsidiaries, (ii) any transfer of assets from an Obligor to any otherObligor or a Restricted Subsidiary or from any Restricted Subsidiary to anObligor or another Restricted Subsidiary and (iii) any sale or transfer ofproperty acquired by any Obligor or any Restricted Subsidiary after the date ofthis Agreement to any Person within 365 days following the acquisition orconstruction of such property by such Obligor or any Restricted Subsidiary ifan Obligor or a Restricted Subsidiary shall concurrently with such sale ortransfer, lease such property, as lessee.

 

For purposes of this Agreement, at any time aRestricted Subsidiary is designated an Unrestricted Subsidiary in accordancewith Section 9.6 of this Agreement, the book value of all of the assets of suchSubsidiary shall be deemed to be sold for purposes of this Section 10.5 asof the effective date of such designation and such sale of assets shall besubject to the provisions set forth in this Section 10.5.

 

*Section 10.6.        Mergerand Consolidation.*  TheObligors will not, and will not permit any of its Restricted Subsidiaries to,consolidate with or merge with any other Person or convey, transfer or leasesubstantially all of its assets in a single transaction or series oftransactions to any Person; *provided* that:

 

(1)           any Restricted Subsidiary of anObligor may (x) consolidate with or merge with, or convey, transfer orlease substantially all of its assets in a single transaction or series oftransactions to, (i) an Obligor or a Restricted Subsidiary so long as in anymerger or consolidation involving an Obligor, such Obligor shall be thesurviving or continuing corporation or (ii) any other Person so long as thesurvivor is the Restricted Subsidiary, or (y) convey, transfer or leaseall of its assets in compliance with the provisions of Section 10.5; and

 

(2)           the foregoing restriction does notapply to the consolidation or merger of any Obligor with, or the conveyance,transfer or lease of substantially all of the assets of any Obligor in a singletransaction or series of transactions to, any Person so long as:

 

                (a)           the successor formed by suchconsolidation or the survivor of such merger or the Person that acquires byconveyance, transfer or lease substantially all of the assets of an Obligor asan entirety, as the case may be (the *“Successor Corporation”*),shall be a solvent entity organized and existing under the laws of the UnitedStates of America, any State thereof or the District of Columbia;

 

(b)           if such Obligor is not the SuccessorCorporation, such Successor Corporation shall have executed and delivered toeach holder of Notes its

 

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assumption of the due and punctual performance andobservance of each covenant and condition of this Agreement (and eachSupplement thereto) and the Notes (pursuant to such assumption agreements andinstruments as shall be reasonably satisfactory to the Required Holders), andthe Successor Corporation shall have caused to be delivered to each holder ofNotes (A) an opinion of nationally recognized independent counsel, to theeffect that all agreements or instruments effecting such assumption areenforceable in accordance with their terms and (B) an acknowledgment fromeach Subsidiary Guarantor that the Subsidiary Guaranty continues in full forceand effect; and

 

(c)           immediately after giving effect tosuch transaction no Default or Event of Default would exist.

 

Nosuch conveyance, transfer or lease of substantially all of the assets of anyObligor shall have the effect of releasing any Obligor or any successor entityfrom its liability under this Agreement or the Notes.

 

*Section 10.7.        RestrictedSubsidiaries*.  FDSI andits Restricted Subsidiaries shall at all times account for 75% of theconsolidated total assets of FDSI and all of its Subsidiaries and 75% of theconsolidated gross revenues of the FDSI and all of its Subsidiaries.

 

*Section 10.8.        Transactionswith Affiliates*.  TheObligors will not and will not permit any Restricted Subsidiary to enter intodirectly or indirectly any Material transaction or Material group of relatedtransactions (including without limitation the purchase, lease, sale orexchange of properties of any kind or the rendering of any service) with anyAffiliate (other than an Obligor or another Restricted Subsidiary), except inthe ordinary course and upon fair and reasonable terms that are not materiallyless favorable to the Obligors or such Restricted Subsidiary, taken as a whole,than would be obtainable in a comparable arm’s-length transaction with a Personnot an Affiliate.

 

*Section 10.9.*        *Terrorism******Sanctions******Regulations*.  No Obligor will or will permit any Subsidiaryto (a) become a Person described or designated in the Specially DesignatedNationals and Blocked Persons List of the Office of Foreign Assets Control orin Section 1 of the Anti-Terrorism Order or (b) engage in anydealings or transactions with any such Person.

 

*Section 10.10.      Lineof Business*.  TheObligors will not and will not permit any Restricted Subsidiary to engage inany business if, as a result, the general nature of the business in which theObligors and the Restricted Subsidiaries, taken as a whole, would then beengaged would be substantially changed from the general nature of the businessin which the Obligors and the Restricted Subsidiaries, taken as a whole, areengaged on the date of this Agreement.

 

Section 11.                                           Events ofDefault.

 

An *“Event of Default”* shall exist if any of the followingconditions or events shall occur and be continuing:

 

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(a)           any Obligor defaults in the paymentof any principal or Make-Whole Amount, if any, on any Note when the samebecomes due and payable, whether at maturity or at a date fixed for prepaymentor by declaration or otherwise; or

 

(b)           any Obligor defaults in the paymentof any interest on any Note for more than five Business Days after the samebecomes due and payable; or

 

(c)           any Obligor defaults in theperformance of or compliance with any term contained in Section 10 or anycovenant in a Supplement which specifically provides that it shall have thebenefit of this paragraph (c) or any Subsidiary Guarantor defaults in theperformance of or compliance with any term of the Subsidiary Guaranty beyondany period of grace or cure period provided with respect thereto; or

 

(d)           any Obligor defaults in theperformance of or compliance with any term contained herein or in anySupplement (other than those referred to in paragraphs (a), (b) and (c) of thisSection 11) and such default is not remedied within 30 days after the earlierof (i) a Responsible Officer obtaining actual knowledge of such default or(ii) any Obligor receiving written notice of such default from any holderof a Note (any such written notice to be identified as a “notice of default”and to refer specifically to this paragraph (d) of Section 11); or

 

(e)           any Subsidiary Guaranty of a MaterialSubsidiary ceases to be a legally valid, binding and enforceable obligation orcontract of a Subsidiary Guarantor (other than upon a release of any SubsidiaryGuarantor from a Subsidiary Guaranty in accordance with the terms ofSection 2.3(b) hereof), or any Subsidiary Guarantor that is a MaterialSubsidiary or any party by, through or on account of any such Person,challenges the validity, binding nature or enforceability of any suchSubsidiary Guaranty of a Material Subsidiary; or

 

(f)            any representation or warranty madein writing by or on behalf of any Obligor or Subsidiary Guarantor that is aMaterial Subsidiary in this Agreement or any Subsidiary Guaranty or by anyofficer of any Obligor or any Subsidiary Guarantor that is a MaterialSubsidiary in any writing furnished in connection with the transactionscontemplated hereby or by any Subsidiary Guaranty proves to have been false orincorrect in any material respect on the date as of which made; or

 

(g)           (i) any Obligor or anyRestricted Subsidiary is in default (as principal or as guarantor or othersurety) in the payment of any principal of or premium or make-whole amount orinterest (in the payment amount of at least $100,000) on any Debt other thanthe Notes that is outstanding in an aggregate principal amount of at least$25,000,000 beyond any period of grace provided with respect thereto, or(ii) any Obligor or any Restricted Subsidiary is in default in theperformance of or compliance with any term of any instrument, mortgage,indenture or other agreement relating to any Debt other than the Notes in anaggregate principal amount of at least $25,000,000 or any other conditionexists, and as a consequence of such default or condition such Debt has become,or has been declared, due and payable, or (iii) as a consequence of theoccurrence or

 

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continuation of any event or condition (other than thepassage of time or the right of the holder of Debt to convert such Debt intoequity interests), any Obligor or any Restricted Subsidiary has becomeobligated to purchase or repay Debt other than the Notes before its regularmaturity or before its regularly scheduled dates of payment in an aggregateoutstanding principal amount of at least $25,000,000; or

 

(h)           any Obligor or any MaterialSubsidiary (i) is generally not paying, or admits in writing its inabilityto pay, its debts as they become due, (ii) files, or consents by answer orotherwise to the filing against it of, a petition for relief or reorganizationor arrangement or any other petition in bankruptcy, for liquidation or to takeadvantage of any bankruptcy, insolvency, reorganization, moratorium or othersimilar law of any jurisdiction, (iii) makes an assignment for the benefitof its creditors, (iv) consents to the appointment of a custodian,receiver, trustee or other officer with similar powers with respect to it orwith respect to any substantial part of its property, (v) is adjudicatedas insolvent or to be liquidated, or (vi) takes corporate action for thepurpose of any of the foregoing; or

 

(i)            a court or governmental authority ofcompetent jurisdiction enters an order appointing, without consent by anObligor or any of its Material Subsidiaries, a custodian, receiver, trustee orother officer with similar powers with respect to it or with respect to anysubstantial part of its property, or constituting an order for relief orapproving a petition for relief or reorganization or any other petition inbankruptcy or for liquidation or to take advantage of any bankruptcy orinsolvency law of any jurisdiction, or ordering the dissolution, winding-up orliquidation of any Obligor or any of its Material Subsidiaries, or any such petitionshall be filed against any Obligor or any of its Material Subsidiaries and suchpetition shall not be dismissed within 60 days; or

 

(j)            a final judgment or judgments at anyone time outstanding for the payment of money aggregating in excess of $25,000,000(except to the extent of any third party insurance policies in which theinsurer has agreed in writing that it is obligated to pay for the amount ofsuch judgment) and which are rendered against one or more of any Obligor, itsRestricted Subsidiaries or any Subsidiary Guarantor and which judgments arenot, within 60 days after entry thereof, bonded, discharged or stayed pendingappeal, or are not discharged within 60 days after the expiration of such stay;or

 

(k)           if (i) any Plan shall fail tosatisfy the minimum funding standards of ERISA or the Code for any plan year orpart thereof or a waiver of such standards or extension of any amortizationperiod is sought or granted under Section 412 of the Code, (ii) anotice of intent to terminate any Plan shall have been or is reasonablyexpected to be filed with the PBGC or the PBGC shall have institutedproceedings under Section 4042 of ERISA to terminate or appoint a trusteeto administer any Plan or the PBGC shall have notified any Obligor or any ERISAAffiliate that a Plan may become a subject of any such proceedings,(iii) the aggregate “amount of unfunded benefit liabilities” (within themeaning of Section 4001(a)(18) of ERISA) under all Plans, determined inaccordance with Title IV of ERISA, shall exceed $25,000,000, (iv) anyObligor or any ERISA Affiliate shall have incurred or is reasonably expected toincur any liability pursuant to

 

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Title I or IV of ERISA or the penalty or excise taxprovisions of the Code relating to employee benefit plans, (v) any Obligoror any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) anyObligor or any Subsidiary establishes or amends any employee welfare benefitplan that provides post-employment welfare benefits in a manner that couldincrease the liability of any Obligor or any Subsidiary thereunder; and anysuch event or events described in clauses (i) through (vi) above, eitherindividually or together with any other such event or events, could reasonablybe expected to have a Material Adverse Effect.

 

Asused in Section 11**(**k**)**, the terms *“employee benefit plan”*and *“employee welfare benefit plan”* shallhave the respective meanings assigned to such terms in Section 3 of ERISA.

 

Section 12.                                           Remedies on Default,Etc.

 

*Section 12.1.        Acceleration*.  (a) If an Event of Default with respectto any Obligor described in paragraph (h) or (i) of Section 11 (other thanan Event of Default described in clause (i) of paragraph (h) or described inclause (vi) of paragraph (h) by virtue of the fact that such clause encompassesclause (i) of paragraph (h)) has occurred, all the Notes of every Series thenoutstanding shall automatically become immediately due and payable.

 

(b)           Ifany other Event of Default has occurred and is continuing, any holder orholders of more than 50% in aggregate principal amount of the Notes of anySeries at the time outstanding may at any time at its or their option, bynotice or notices to any Obligor, declare all the Notes of such Series then outstandingto be immediately due and payable.

 

(c)           Ifany Event of Default described in paragraph (a) or (b) of Section 11 hasoccurred and is continuing with respect to any Notes, any holder or holders ofNotes at the time outstanding affected by such Event of Default may at anytime, at its or their option, by notice or notices to the Obligors, declare allthe Notes held by such holder or holders to be immediately due and payable.

 

Upon any Note’sbecoming due and payable under this Section 12.1, whether automatically orby declaration, such Note will forthwith mature and the entire unpaid principalamount of such Note, plus (i) all accrued and unpaid interest thereon(including, but not limited to, interest accrued thereon at the Default Rate)and (ii) the Make-Whole Amount determined in respect of such principalamount (to the full extent permitted by applicable law), shall all beimmediately due and payable, in each and every case without presentment,demand, protest or further notice, all of which are hereby waived.  Each Obligor acknowledges, and the partieshereto agree, that each holder of a Note has the right to maintain itsinvestment in the Notes free from repayment by any Obligor (except as hereinspecifically provided for) and that the provision for payment of a Make-WholeAmount by the Obligors in the event that the Notes are prepaid or areaccelerated as a result of an Event of Default, is intended to providecompensation for the deprivation of such right under such circumstances.

 

*Section 12.2.        OtherRemedies*.  If anyDefault or Event of Default has occurred and is continuing, and irrespective ofwhether any Notes have become or have been declared

 

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immediately due and payable under Section 12.1, the holder of anyNote at the time outstanding may proceed to protect and enforce the rights ofsuch holder by an action at law, suit in equity or other appropriateproceeding, whether for the specific performance of any agreement containedherein or in any Note, or for an injunction against a violation of any of theterms hereof or thereof, or in aid of the exercise of any power granted herebyor thereby or by law or otherwise.

 

*Section 12.3.        Rescission*.  At any time after the Notes have beendeclared due and payable pursuant to clause (b) or (c) ofSection 12.1, the holders of not less than 51% in aggregate principalamount of the Notes of any Series then outstanding, by written notice to theObligors, may rescind and annul any such declaration and its consequences if(a) the Obligors have paid all overdue interest on the Notes of suchSeries, all principal of and Make-Whole Amount on any Notes of such Series thatare due and payable and are unpaid other than by reason of such declaration,and all interest on such overdue principal and Make-Whole Amount and (to theextent permitted by applicable law) any overdue interest in respect of theNotes of such Series, at the Default Rate, (b) neither any Obligor nor anyother Person shall have paid any amounts which have become due solely by reasonof such declaration, (c) all Events of Default and Defaults, other thannon-payment of amounts that have become due solely by reason of suchdeclaration, have been cured or have been waived pursuant to Section 17,and (d) no judgment or decree has been entered for the payment of anymonies due pursuant hereto or to any Notes of such Series.  No rescission and annulment under thisSection 12.3 will extend to or affect any subsequent Event of Default orDefault or impair any right consequent thereon.

 

*Section 12.4.        NoWaivers or Election of Remedies, Expenses, Etc*.  No course of dealing and no delay on the partof any holder of any Note in exercising any right, power or remedy shalloperate as a waiver thereof or otherwise prejudice such holder’s rights, powersor remedies.  No right, power or remedyconferred by this Agreement or by any Note upon any holder thereof shall beexclusive of any other right, power or remedy referred to herein or therein ornow or hereafter available at law, in equity, by statute or otherwise.  Without limiting the obligations of theObligors under Section 15, the Obligors will pay to the holder of eachNote on demand such further amount as shall be sufficient to cover all costsand expenses of such holder incurred in any enforcement or collection underthis Section 12, including, without limitation, reasonable attorneys’fees, expenses and disbursements.

 

Section 13.                                                              Registration;Exchange; Substitution of Notes.

 

*Section 13.1.        Registrationof Note*s.  The Obligorsshall keep at their principal executive office a register for the registrationand registration of transfers of Notes. The name and address of each holder of one or more Notes, each transferthereof and the name and address of each transferee of one or more Notes shallbe registered in such register.  Prior todue presentment for registration of transfer, the Person in whose name any Noteshall be registered shall be deemed and treated as the owner and holder thereoffor all purposes hereof, and the Obligors shall not be affected by any noticeor knowledge to the contrary.  TheObligors shall give to any holder of a Note that is an Institutional Investorpromptly upon request therefor, a complete and correct copy of the names andaddresses of all registered holders of Notes.

 

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*Section 13.2.        Transferand Exchange of Notes*. Upon surrender of any Note to any Obligor at the address and to theattention of the designated officer (all as specified in Section 18(iv)),for registration of transfer or exchange (and in the case of a surrender forregistration of transfer accompanied by a written instrument of transfer dulyexecuted by the registered holder of such Note or such holder’s attorney dulyauthorized in writing and accompanied by the relevant name, address and otherinformation for notices of each transferee of such Note or part thereof),within ten Business Days thereafter, the Obligors shall execute and deliver, atthe Obligors’ expense (except as provided below), one or more new Notes (asrequested by the holder thereof) of the same Series (and of the same tranche ifsuch Series has separate tranches) in exchange therefor, in an aggregateprincipal amount equal to the unpaid principal amount of the surrenderedNote.  Each such new Note shall bepayable to such Person as such holder may request and shall be substantially inthe form of the Note of such Series originally issued hereunder or pursuant toany Supplement.  Each such new Note shallbe dated and bear interest from the date to which interest shall have been paidon the surrendered Note or dated the date of the surrendered Note if nointerest shall have been paid thereon. The Obligors may require payment of a sum sufficient to cover any stamptax or governmental charge imposed in respect of any such transfer ofNotes.  Notes shall not be transferred indenominations of less than $500,000, *provided* thatif necessary to enable the registration of transfer by a holder of its entireholding of Notes, one Note may be in a denomination of less than $500,000.  Any transferee, by its acceptance of a Noteregistered in its name (or the name of its nominee), shall be deemed to havemade the representation set forth in Section 6.3, *provided*,that in lieu thereof such holder may (in reliance upon information provided bythe Obligors, which shall not be unreasonably withheld) make a representationto the effect that the purchase by any holder of any Note will not constitute anon-exempt prohibited transaction under section 406(a) of ERISA.

 

The Notes have notbeen registered under the Securities Act or under the securities laws of anystate and the holders of the Notes agree that such Notes may not be transferredor resold unless registered under the Securities Act and all applicable statesecurities laws or unless an exemption from the requirement for suchregistration is available.

 

*Section 13.3.        Replacementof Notes*.  Upon receiptby an Obligor at the address and to the attention of the designated officer(all as specified in Section 18(iv)) of evidence reasonably satisfactoryto it of the ownership of and the loss, theft, destruction or mutilation of anyNote (which evidence shall be, in the case of an Institutional Investor, noticefrom such Institutional Investor of such ownership and such loss, theft,destruction or mutilation), and

 

(a)           in the case of loss, theft ordestruction, of indemnity reasonably satisfactory to it (*provided*that if the holder of such Note is, or is a nominee for, an original Purchaseror another holder of a Note with a minimum net worth of at least $50,000,000 ora Qualified Institutional Buyer, such Person’s own unsecured agreement ofindemnity shall be deemed to be satisfactory), or

 

(b)           in the case of mutilation, upon surrenderand cancellation thereof,

 

theObligors at its own expense shall execute and deliver not more than fiveBusiness Days following satisfaction of such conditions, in lieu thereof, a newNote of the same Series (and of

 

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thesame tranche if such Series has separate tranches), dated and bearing interestfrom the date to which interest shall have been paid on such lost, stolen,destroyed or mutilated Note or dated the date of such lost, stolen, destroyed ormutilated Note if no interest shall have been paid thereon.

 

Section 14.                                           Payments onNotes.

 

*Section 14.1.        Placeof Payment*.  Subject toSection 14.2, payments of principal, Make-Whole Amount and interestbecoming due and payable on the Notes shall be made in New York,New York at the principal office of Bank of America, N.A. in suchjurisdiction.  The Obligors may at anytime, by notice to each holder of a Note, change the place of payment of theNotes so long as such place of payment shall be either the principal office ofan Obligor in such jurisdiction or the principal office of a bank or trustcompany in such jurisdiction.

 

*Section 14.2.        HomeOffice Payment*.  Solong as any Purchaser or Additional Purchaser or such Purchaser’s nominee orsuch Additional Purchaser’s nominee shall be the holder of any Note, andnotwithstanding anything contained in Section 14.1 or in such Note to thecontrary, the Obligors will pay all sums becoming due on such Note forprincipal, Make-Whole Amount and interest by the method and at the addressspecified for such purpose for such Purchaser on Schedule A hereto or, inthe case of any Additional Purchaser, Schedule A attached to any Supplementpursuant to which such Additional Purchaser is a party, or by such other methodor at such other address as such Purchaser or Additional Purchaser shall havefrom time to time specified to the Obligors in writing for such purpose,without the presentation or surrender of such Note or the making of anynotation thereon, except that upon written request of the Obligors madeconcurrently with or reasonably promptly after payment or prepayment in full ofany Note, such Purchaser or Additional Purchaser shall surrender such Note forcancellation, reasonably promptly after any such request, to FDSI at itsprincipal executive office or at the place of payment most recently designatedby the Obligors pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by any Purchaseror Additional Purchaser or such Person’s nominee, such Person will, at itselection, either endorse thereon the amount of principal paid thereon and thelast date to which interest has been paid thereon or surrender such Note to theObligors in exchange for a new Note or Notes pursuant to Section 13.2.  The Obligors will afford the benefits of thisSection 14.2 to any Institutional Investor that is the direct or indirecttransferee of any Note.

 

Section 15.                                           Expenses, Etc.

 

*Section 15.1.        TransactionExpenses*.  Whether ornot the transactions contemplated hereby are consummated, the Obligors will payreasonable attorneys’ fees of one special counsel referred to inSection 4.7 for the Purchasers or any Additional Purchasers and, ifreasonably required by any Additional Purchasers, one local counsel selected bysuch Additional Purchasers.  In addition,the Obligors will pay all fees and expenses of the Purchasers, any AdditionalPurchasers and any other holder of a Note, including reasonable attorneys’ feesof one special counsel for the holders of the Notes and, if reasonably requiredby the Required Holders, one local counsel for the Holders of the Notesselected by such Required Holders, in connection with any amendments, waiversor consents under or in respect of this Agreement (including any

 

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Supplement) or the Notes (whether or not such amendment, waiver orconsent becomes effective), including, without limitation: (a) the costsand expenses incurred in enforcing or defending (or determining whether or howto enforce or defend) any rights under this Agreement (including anySupplement) or the Notes or in responding to any subpoena or other legalprocess or informal investigative demand issued in connection with thisAgreement (including any Supplement) or the Notes, or by reason of being aholder of any Note, and (b) the costs and expenses, incurred in connectionwith the insolvency or bankruptcy of an Obligor or any Subsidiary or inconnection with any work-out or restructuring of the transactions contemplatedhereby and by the Notes.  The Obligorswill pay, and will save each Purchaser, each Additional Purchaser and eachother holder of a Note harmless from, all claims in respect of any fees, costsor expenses if any, of brokers and finders (other than those, if any, retainedby a Purchaser or other holder in connection with its purchase of the Notes).

 

*Section 15.2.        Survival*.  The obligations of the Obligors under thisSection 15 will survive the payment or transfer of any Note, theenforcement, amendment or waiver of any provision of this Agreement, anySupplement or the Notes, and the termination of this Agreement or anySupplement.

 

Section 16.                                           Survival ofRepresentations and Warranties; Entire Agreement.

 

Allrepresentations and warranties contained herein or in any Supplement shallsurvive the execution and delivery of this Agreement, such Supplement and theNotes, the purchase or transfer by any Purchaser or any Additional Purchaser ofany such Note or portion thereof or interest therein and the payment of anyNote may be relied upon by any subsequent holder of any such Note, regardlessof any investigation made at any time by or on behalf of any Purchaser or anyAdditional Purchaser or any other holder of any such Note.  All statements contained in any certificateor other instrument delivered by or on behalf of the Obligors pursuant to thisAgreement or any Supplement shall be deemed representations and warranties ofthe Obligors under this Agreement; *provided,*thatthe representations and warranties contained in any Supplement shall only bemade for the benefit of the Additional Purchasers which are party to suchSupplement and the holders of the Notes issued pursuant to such Supplement,including subsequent holders of any Note issued pursuant to such Supplement,and shall not require the consent of the holders of existing Notes.  Subject to the preceding sentence, thisAgreement (including every Supplement) and the Notes embody the entireagreement and understanding between the Purchasers and the AdditionalPurchasers and the Obligors and supersede all prior agreements andunderstandings relating to the subject matter hereof.

 

Section 17.                                           Amendment andWaiver.

 

*Section 17.1.        Requirements*.  (a) This Agreement (including any Supplement)and the Notes may be amended, and the observance of any term hereof or of theNotes may be waived (either retroactively or prospectively), with (and onlywith) the written consent of the Obligors and the Required Holders, except that(i) no amendment or waiver of any of the provisions of Section 1, 2,3, 4, 5, 6 or 21 hereof or the corresponding provision of any Supplement, orany defined term (as it is used in any such Section or such correspondingprovision of any Supplement), will be effective as to any holder of Notes unlessconsented to by such holder of

 

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Notes in writing, and (ii) no such amendment or waiver may,without the written consent of all of the holders of Notes at the timeoutstanding affected thereby, (A) subject to the provisions ofSection 12 relating to acceleration or rescission, change the amount ortime of any prepayment or payment of principal of, or reduce the rate or changethe time of payment or method of computation of interest (if such change resultsin a decrease in the interest rate) or of the Make-Whole Amount on, the Notes,(B) change the percentage of the principal amount of the Notes the holdersof which are required to consent to any such amendment or waiver, or(C) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

 

(b)           *Supplements. *Notwithstandinganything to the contrary contained herein, the Obligors may enter into anySupplement providing for the issuance of one or more Series of Additional Notesconsistent with Sections 2.2 and 4.14 hereof without obtaining the consent ofany holder of any other Series of Notes.

 

*Section 17.2.        Solicitationof Holders of Notes*.

 

(a)           *Solicitation.*  TheObligors will provide each holder of the Notes (irrespective of the amount ofNotes then owned by it) with sufficient information, sufficiently far inadvance of the date a decision is required, to enable such holder to make aninformed and considered decision with respect to any proposed amendment, waiveror consent in respect of any of the provisions hereof, any Supplement or of theNotes.  The Obligors will deliverexecuted or true and correct copies of each amendment, waiver or consenteffected pursuant to the provisions of this Section 17 to each holder of outstandingNotes promptly following the date on which it is executed and delivered by, orreceives the consent or approval of, the requisite holders of Notes.

 

(b)           *Payment.*  No Obligorwill directly or indirectly pay or cause to be paid any remuneration, whetherby way of supplemental or additional interest, fee or otherwise, or grant anysecurity or provide other credit support, to any holder of Notes asconsideration for or as an inducement to the entering into by any holder ofNotes of any waiver or amendment of any of the terms and provisions hereof orany Supplement unless such remuneration is concurrently paid, or security isconcurrently granted or other credit support is concurrently provided, on thesame terms, ratably to each holder of Notes then outstanding even if suchholder did not consent to such waiver or amendment.

 

(c)           *Consent in Contemplationof Transfer*.  Any consent madepursuant to this Section 17 by a holder of Notes that has transferred or hasagreed to transfer its Notes to any Obligor, any Subsidiary or any Affiliate ofany Obligor and has provided or has agreed to provide such written consent as acondition to such transfer shall be void and of no force or effect exceptsolely as to such holder, and any amendments effected or waivers granted or tobe effected or granted that would not have been or would not be so effected orgranted but for such consent (and the consents of all other holders of Notesthat were acquired under the same or similar conditions) shall be void and ofno force or effect except solely as to such holder.

 

*Section 17.3.        BindingEffect, Etc*.  Anyamendment or waiver consented to as provided in this Section 17 appliesequally to all holders of Notes and is binding upon them and upon each futureholder of any Note and upon the Obligors without regard to whether such Notehas been

 

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marked to indicate such amendment or waiver.  No such amendment or waiver will extend to oraffect any obligation, covenant, agreement, Default or Event of Default notexpressly amended or waived or impair any right consequent thereon.  No course of dealing between any Obligor andthe holder of any Note nor any delay in exercising any rights hereunder orunder any Note shall operate as a waiver of any rights of any holder of suchNote.  As used herein, the term “thisAgreement” and references thereto shall mean this Agreement as it may from timeto time be amended or supplemented.

 

*Section 17.4.        NotesHeld by Obligors, Etc*. Solely for the purpose of determining whether the holders of therequisite percentage of the aggregate principal amount of Notes thenoutstanding approved or consented to any amendment, waiver or consent to begiven under this Agreement or the Notes, or have directed the taking of anyaction provided herein or in the Notes to be taken upon the direction of theholders of a specified percentage of the aggregate principal amount of Notesthen outstanding, Notes directly or indirectly owned by any Obligor or any ofits Affiliates shall be deemed not to be outstanding.

 

Section 18.                                           Notices.

 

All notices andcommunications provided for hereunder shall be in writing and sent (a) bytelecopy if the sender on the same day sends a confirming copy of such noticeby a recognized overnight delivery service (charges prepaid), or (b) by arecognized overnight delivery service (with charges prepaid).  Any such notice must be sent:

 

(i)            if to a Purchaser or such Purchaser’snominee, to such Purchaser or such Purchaser’s nominee at the address specifiedfor such communications in Schedule A to this Agreement, or at such otheraddress as such Purchaser or such Purchaser’s nominee shall have specified toany Obligor in writing pursuant to this Section 18;

 

(ii)           if to an Additional Purchaser or suchAdditional Purchaser’s nominee, to such Additional Purchaser or such AdditionalPurchaser’s nominee at the address specified for such communications inSchedule A to any Supplement, or at such other address as such AdditionalPurchaser or such Additional Purchaser’s nominee shall have specified to anyObligor in writing,

 

(iii)          if to any other holder of any Note, tosuch holder at such address as such other holder shall have specified to anyObligor in writing pursuant to this Section 18, or

 

(iv)          if to any Obligor, to such Obligor atits address set forth at the beginning hereof to the attention of ChiefFinancial Officer, with a copy to the General Counsel, or at such other addressas such Obligor shall have specified to the holder of each Note in writing.

 

Noticesunder this Section 18 will be deemed given only when actually received.

 

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Section 19.                                           Reproduction ofDocuments.

 

This Agreement andall documents relating thereto, including, without limitation,(a) consents, waivers and modifications that may hereafter be executed,(b) documents received by any Purchaser at the Closing or by anyAdditional Purchaser (except the Notes themselves), and (c) financialstatements, certificates and other information previously or hereafter furnishedto any Purchaser or any Additional Purchaser, may be reproduced by suchPurchaser or such Additional Purchaser by any photographic, photostatic,electronic, digital, or other similar process and such Purchaser or suchAdditional Purchaser may destroy any original document so reproduced.  Each Obligor agrees and stipulates that, tothe extent permitted by applicable law, any such reproduction shall beadmissible in evidence as the original itself in any judicial or administrativeproceeding (whether or not the original is in existence and whether or not suchreproduction was made by such Purchaser or such Additional Purchaser in theregular course of business) and any enlargement, facsimile or furtherreproduction of such reproduction shall likewise be admissible inevidence.  This Section 19 shall notprohibit any Obligor or any other holder of Notes from contesting any suchreproduction to the same extent that it could contest the original, or fromintroducing evidence to demonstrate the inaccuracy of any such reproduction.

 

Section 20.                                           ConfidentialInformation.

 

For the purposes of this Section 20, *“Confidential Information*” means information delivered toany Purchaser or any Additional Purchaser by or on behalf of any Obligor or anySubsidiary in connection with the transactions contemplated by or otherwisepursuant to this Agreement that is proprietary in nature and that was clearlymarked or labeled or otherwise adequately identified when received by suchPurchaser as being confidential information of an Obligor or such Subsidiary, *provided* that such term does not include information that(a) was publicly known or otherwise known to such Purchaser or suchAdditional Purchaser prior to the time of such disclosure,(b) subsequently becomes publicly known through no act or omission by suchPurchaser or such Additional Purchaser or any Person acting on such Purchaser’sor such Additional Purchaser’s behalf, (c) otherwise becomes known to suchPurchaser or such Additional Purchaser other than through disclosure by an Obligoror any Subsidiary or (d) constitutes financial statements delivered tosuch Purchaser or such Additional Purchaser under Section 7.1 that areotherwise publicly available.  EachPurchaser and each Additional Purchaser will maintain the confidentiality ofsuch Confidential Information in accordance with procedures adopted by suchPurchaser or such Additional Purchaser in good faith to protect confidentialinformation of third parties delivered to such Purchaser or such AdditionalPurchaser, *provided* that such Purchaser or suchAdditional Purchaser may deliver or disclose Confidential Information to(i) such Purchaser’s or such Additional Purchaser’s directors, trustees,officers, employees, agents, attorneys and affiliates (to the extent suchdisclosure reasonably relates to the administration of the investmentrepresented by such Purchaser’s or such Additional Purchaser’s Notes),(ii) such Purchaser’s or such Additional Purchaser’s financial advisorsand other professional advisors who agree to hold confidential the ConfidentialInformation substantially in accordance with the terms of this Section 20,(iii) any other holder of any Note, (iv) any Institutional Investorto which such Purchaser or such Additional Purchaser sells or offers to sellsuch Note or any part thereof or any participation therein (if such Person hasagreed in writing prior to its receipt of such Confidential Information to bebound by the

 

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provisions of this Section 20), (v) any Person from whichsuch Purchaser or such Additional Purchaser offers to purchase any security ofan Obligor (if such Person has agreed in writing prior to its receipt of suchConfidential Information to be bound by the provisions of thisSection 20), (vi) any federal or state regulatory authority havingjurisdiction over such Purchaser or such Additional Purchaser, (vii) theNational Association of Insurance Commissioners or any similar organization, orany nationally recognized rating agency that requires access to informationabout such Purchaser’s or such Additional Purchaser’s investment portfolio, or(viii) any other Person to which such delivery or disclosure may benecessary or appropriate (w) to effect compliance with any law, rule,regulation or order applicable to such Purchaser or such Additional Purchaser,(x) in response to any subpoena or other legal process, (y) inconnection with any litigation to which such Purchaser or such AdditionalPurchaser is a party or (z) if an Event of Default has occurred and iscontinuing, to the extent such Purchaser or such Additional Purchaser mayreasonably determine such delivery and disclosure to be necessary orappropriate in the enforcement or for the protection of the rights and remediesunder such Purchaser’s or such Additional Purchaser’s Notes, the SubsidiaryGuaranty and this Agreement.  Each holderof a Note, by its acceptance of a Note, will be deemed to have agreed to bebound by and to be entitled to the benefits of this Section 20 as thoughit were a party to this Agreement.  Onreasonable request by an Obligor in connection with the delivery to any holderof a Note of information required to be delivered to such holder under thisAgreement or requested by such holder (other than a holder that is a party tothis Agreement or its nominee), such holder will enter into an agreement withan Obligor embodying the provisions of this Section 20.

 

Section 21.                                           Substitution ofPurchaser.

 

Each Purchaser and each Additional Purchaser shallhave the right to substitute any one of its Affiliates as the purchaser of theNotes that it has agreed to purchase hereunder, by written notice to anObligor, which notice shall be signed by both such Purchaser or such AdditionalPurchaser and such Affiliate, shall contain such Affiliate’s agreement to bebound by this Agreement and shall contain a confirmation by such Affiliate ofthe accuracy with respect to it of the representations set forth in Section6.  Upon receipt of such notice, anyreference to such Purchaser or such Additional Purchaser in this Agreement(other than in this Section 21), shall be deemed to refer to such Affiliate inlieu of such original Purchaser or such original Additional Purchaser.  In the event that such Affiliate is sosubstituted as a Purchaser or an Additional Purchaser hereunder and suchAffiliate thereafter transfers to such original Purchaser or such originalAdditional Purchaser all of the Notes then held by such Affiliate, upon receiptby an Obligor of notice of such transfer, any reference to such Affiliate as a “Purchaser”or an “Additional Purchaser” in this Agreement (other than in this Section 21),shall no longer be deemed to refer to such Affiliate, but shall refer to suchoriginal Purchaser or such original Additional Purchaser, and such originalPurchaser or such original Additional Purchaser shall again have all the rightsof an original holder of the Notes under this Agreement.

 

Section 22.                                           Miscellaneous.

 

*Section 22.1.        Successorsand Assigns*.  Allcovenants and other agreements contained in this Agreement (including allcovenants and other agreements contained in any Supplement) by

 

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or on behalf of any of the parties hereto bind and inure to the benefitof their respective successors and assigns (including, without limitation, anysubsequent holder of a Note) whether so expressed or not.

 

*Section 22.2.        PaymentsDue on Non-Business Days*. Anything in this Agreement or the Notes to the contrary notwithstanding(but without limiting the requirement in Section 8.4 that the notice ofany optional prepayment specify a Business Day as the date fixed for suchprepayment), any payment of principal of or Make-Whole Amount or interest onany Note that is due on a date other than a Business Day shall be made on thenext succeeding Business Day without including the additional days elapsed inthe computation of the interest payable on such next succeeding Business Day;provided that if the maturity date of any Note is a date other than a Business Day,the payment otherwise due on such maturity date shall be made on the nextsucceeding Business Day and shall include the additional days elapsed in thecomputation of interest payable on such next succeeding Business Day.

 

*Section 22.3.        AccountingTerms*.  All accountingterms used herein which are not expressly defined in this Agreement have themeanings respectively given to them in accordance with GAAP.  Except as otherwise specifically providedherein, (i) all computations made pursuant to this Agreement shall be madein accordance with GAAP, and (ii) all financial statements shall beprepared in accordance with GAAP.

 

*Section 22.4.        Severability*.  Any provision of this Agreement that isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall (to the full extent permitted bylaw) not invalidate or render unenforceable such provision in any otherjurisdiction.

 

*Section 22.5.        Construction*.  Each covenant contained herein shall beconstrued (absent express provision to the contrary) as being independent ofeach other covenant contained herein, so that compliance with any one covenantshall not (absent such an express contrary provision) be deemed to excusecompliance with any other covenant. Where any provision herein refers to action to be taken by any Person,or which such Person is prohibited from taking, such provision shall beapplicable whether such action is taken directly or indirectly by such Person.

 

For the avoidance of doubt, all Schedules and Exhibitsattached to this Agreement shall be deemed to be a part hereof.

 

*Section 22.6.        Counterparts*.  This Agreement may be executed in any numberof counterparts, each of which shall be an original but all of which togethershall constitute one instrument.  Eachcounterpart may consist of a number of copies hereof, each signed by less thanall, but together signed by all, of the parties hereto.

 

*Section 22.7.        GoverningLaw*.  This Agreementshall be construed and enforced in accordance with, and the rights of theparties shall be governed by, the law of the State of New York excludingchoice-of-law principles of the law of such State that would permit theapplication of the laws of a jurisdiction other than such State.

 

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*Section 22.8.        Jurisdictionand Process; Waiver of Jury Trial*.  (a) Each Obligor irrevocably submits tothe non-exclusive jurisdiction of any New York State or federal court sittingin the Borough of Manhattan, The City of New York, over any suit, action orproceeding arising out of or relating to this Agreement or the Notes.  To the fullest extent permitted by applicablelaw, each Obligor irrevocably waives and agrees not to assert, by way ofmotion, as a defense or otherwise, any claim that it is not subject to thejurisdiction of any such court, any objection that it may now or hereafter haveto the laying of the venue of any such suit, action or proceeding brought inany such court and any claim that any such suit, action or proceeding broughtin any such court has been brought in an inconvenient forum.

 

(b)           EachObligor consents to process being served by or on behalf of any holder of Notesin any suit, action or proceeding of the nature referred to inSection 22.8(a) by mailing a copy thereof by registered or certified mail(or any substantially similar form of mail), postage prepaid, return receiptrequested, to it at its address specified in Section 18 or at such otheraddress of which such holder shall then have been notified pursuant to saidSection.  Each Obligor agrees that suchservice upon receipt (i) shall be deemed in every respect effectiveservice of process upon it in any such suit, action or proceeding and(ii) shall, to the fullest extent permitted by applicable law, be takenand held to be valid personal service upon and personal delivery to it.  Notices hereunder shall be conclusivelypresumed received as evidenced by a delivery receipt furnished by the UnitedStates Postal Service or any reputable commercial delivery service.

 

(c)           Nothingin this Section 22.8 shall affect the right of any holder of a Note toserve process in any manner permitted by law, or limit any right that theholders of any of the Notes may have to bring proceedings against any Obligorin the courts of any appropriate jurisdiction or to enforce in any lawfulmanner a judgment obtained in one jurisdiction in any other jurisdiction.

 

(d)           The parties hereto hereby waive trial by juryin any action brought on or with respect to this Agreement, the Notes or anyother document executed in connection herewith or therewith.

 

*   *  *   *   *

 

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The execution hereof by the Purchasers shallconstitute a contract among the Obligors and the Purchasers for the uses andpurposes hereinabove set forth.  ThisAgreement may be executed in any number of counterparts, each executedcounterpart constituting an original but all together only one agreement.

 

 
|   | Very truly yours,                                                               |
|--------|---------------------------------------------------------------------------------|
|   |                                                                            |
|   | Family Dollar Stores, Inc.                                                      |
|   |                                                                            |
|   |                                                                            |
|   | By                                                                              |  /s/ R. James  Kelly |   |
|   | Name: R. James Kelly                                                            |
|   | Title: Vice Chairman, Chief Financial  Officer and Chief Administrative Officer |
|   |                                                                            |
|   |                                                                            |
|   | Family Dollar, Inc.                                                             |
|   |                                                                            |
|   |                                                                            |
|   | By                                                                              |  /s/ R. James  Kelly |   |
|   | Name: R. James Kelly                                                            |
|   | Title: Vice Chairman, Chief Financial  Officer and Chief Administrative Officer |
|        |                                                                                 |  |  |  |

 

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Accepted as of the datefirst written above.

 
|   | The Prudential Insurance  Company of  America         |
|--------|-------------------------------------------------------|
|   |                                                  |   |
|   |                                                  |   |
|   | By                                                    |  /s/ Billy  Green |   |
|   | Name: Billy Green                                     |
|   | Title: Senior Vice President                          |
|   |                                                  |   |
|   |                                                  |   |
|   | Gibraltar Life Insurance  Co., Ltd.                   |
|   |                                                  |   |
|   | By:                                                   | Prudential Private Placement Investors, L.P.  (as Investment Advisor) |
|   |                                                  |   |   |   |
|   | By:                                              | Prudential Private Placement Investors, Inc.  (as its General Partner) |
|   |                                                  |   |
|   |                                                  |   |
|   |                                                  | By |  /s/ Billy  Green |   |
|   |                                                  | Name: Billy Green |
|   |                                                  | Title: Senior Vice President |
|   |                                                  |   |
|   |                                                  |   |
|   | American Bankers Insurance  Company of  Florida, Inc. |
|   |                                                  |   |
|   |                                                  |   |
|   | By:                                                   | Prudential Private Placement Investors, L.P. (as  Investment Advisor) |
|   |                                                  |   |
|   | By:                                                   | Prudential Private Placement Investors, Inc. (as its  General Partner) |
|   |                                                  |   |
|   |                                                  |   |
|   |                                                  | By |  /s/ Billy  Green |   |
|   |                                                  | Name: Billy Green |
|   |                                                  | Title: Senior Vice President |
|        |                                                       |  |  |  |  |  |  |  |  |

 

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|   | American Memorial Life  Insurance  Company |
|--------|--------------------------------------------|
|   |                                       |   |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, L.P.  (as Investment Advisor) |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, Inc.  (as its General Partner) |
|   |                                       |   |
|   |                                       |   |
|   |                                       | By |  /s/ Billy  Green |   |
|   |                                       | Name: Billy Green |
|   |                                       | Title: Senior Vice President |
|   |                                       |   |
|   |                                       |   |
|   | Union Security Insurance  Company          |
|   |                                       |   |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, L.P. (as  Investment Advisor) |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, Inc. (as its  General Partner) |
|   |                                       |   |
|   |                                       |   |
|   |                                       | By | /s/ Billy Green |   |
|   |                                       | Name: Billy Green |
|   |                                       | Title: Senior Vice President |
|   |                                       |   |
|   |                                       |   |
|   | Time Insurance Company                     |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, L.P. (as  Investment Advisor) |
|   |                                       |   |
|   | By:                                        | Prudential Private Placement Investors, Inc. (as its  General Partner) |
|   |                                       |   |
|   |                                       |   |
|   |                                       | By |  /s/ Billy  Green |   |
|   |                                       | Name: Billy Green |
|   |                                       | Title: Senior Vice President |
|        |                                            |  |  |  |  |  |  |

 

47

----

 
|   | ING USA Annuity and Life  Insurance  Company |
|--------|----------------------------------------------|
|   | ReliaStar Life Insurance  Company            |
|   | ING Life Insurance and  Annuity Company      |
|   | Security Life of Denver  Insurance  Company  |
|   |                                         |   |
|   |                                         |   |
|   | By:                                          | ING Investment Management LLC, as  Agent |
|   |                                         |   |
|   |                                         |   |
|   |                                         | By |  /s/  Christopher P. Lyons |   |
|   |                                         | Name: Christopher P. Lyons |
|   |                                         | Title: Senior Vice President |
|   |                                         |   |
|   |                                         |   |
|   | Allstate Insurance Company                   |
|   |                                         |   |
|   |                                         |   |
|   | By                                           |  /s/ Carrie A.  Cazolas |   |
|   | Name: Carrie A. Cazolas                      |
|   |                                         |   |
|   |                                         |   |
|   | By                                           |  /s/ Jerry D.  Zinkula |   |
|   | Name: Jerry D. Zinkula                       |
|   | Authorized Signatories                       |
|   |                                         |   |
|   |                                         |   |
|   | Allstate Life Insurance  Company             |
|   |                                         |   |
|   |                                         |
|   | By                                           |  /s/ Carrie A.  Cazolas |   |
|   | Name: Carrie A. Cazolas                      |
|   |                                         |   |
|   |                                         |
|   | By                                           |  /s/ Jerry D.  Zinkula |   |
|   | Name: Jerry D. Zinkula                       |
|   | Authorized Signatories                       |
|        |                                              |  |  |  |  |  |

 

48

----

 
|   | Allstate Life Insurance  Company of New  York          |
|--------|--------------------------------------------------------|
|   |                                                   |   |
|   |                                                   |
|   | By                                                     |  /s/ Carrie A.  Cazolas |   |
|   | Name: Carrie A. Cazolas                                |
|   |                                                   |   |
|   |                                                   |
|   | By                                                     |  /s/ Jerry D.  Zinkula |   |
|   | Name: Jerry D. Zinkula                                 |
|   | Authorized Signatories                                 |
|   |                                                   |   |
|   |                                                   |   |
|   | Midland National Life  Insurance Company               |
|   |                                                   |   |
|   |                                                   |
|   | By                                                     |  /s/ Michael  Damaso |   |
|   | Name: Michael Damaso                                   |
|   | Title: Director                                        |
|   |                                                   |   |
|   |                                                   |   |
|   | North American Company for  Life and  Health Insurance |
|   |                                                   |   |
|   |                                                   |
|   | By                                                     |  /s/ Michael  Damaso |   |
|   | Name: Michael Damaso                                   |
|   | Title: Director                                        |
|   |                                                   |   |
|   |                                                   |   |
|   | Transamerica Life Insurance  and Annuity Company       |
|   |                                                   |   |
|   |                                                   |
|   | By                                                     |  /s/ Debra R.  Thompson |   |
|   | Name: Debra R. Thompson                                |
|   | Title: Vice President                                  |
|        |                                                        |  |  |  |  |  |  |  |

 

49

----

 
|   | Transamerica Occidental  Life Insurance Company |
|--------|-------------------------------------------------|
|   |                                            |   |
|   |                                            |
|   | By                                              |  /s/ Debra R.  Thompson |   |
|   | Name: Debra R. Thompson                         |
|   | Title: Vice President                           |
|   |                                            |   |
|   |                                            |   |
|   | Thrivent Financial for Lutherans                |
|   |                                            |   |
|   |                                            |
|   | By                                              |  /s/ Glen J.  Vanic |   |
|   | Name: Glen J. Vanic                             |
|   | Title: Portfolio Manager                        |
|   |                                            |   |
|   |                                            |   |
|   | United of Omaha Life  Insurance Company         |
|   |                                            |   |
|   |                                            |
|   | By                                              |  /s/ Edwin H.  Garrison, Jr. |   |
|   | Name: Edwin H. Garrison, Jr.                    |
|   | Title: First Vice President                     |
|   |                                            |   |
|   |                                            |   |
|   | Banc of America Securities  LLC                 |
|   |                                            |   |
|   |                                            |
|   | By                                              |  /s/ John J.  DeCoursey |   |
|   | Name: John J. DeCoursey                         |
|   | Title: Principal                                |
|   |                                            |   |
|   |                                            |   |
|   | Modern Woodmen of America                       |
|   |                                            |   |
|   |                                            |
|   | By                                              |  /s/ G.P.  Odean |   |
|   | Name: G.P. Odean                                |
|   | Title: National Secretary                       |
|        |                                                 |  |  |  |  |  |

 

50

----

 
|   | Security Financial Life  Insurance Co. |
|--------|----------------------------------------|
|   |                                   |   |
|   |                                   |
|   | By                                     |  /s/ Kevin W.  Hammond |   |
|   | Name: Kevin W. Hammond                 |
|   | Title: Senior Director - Investments   |
|   |                                   |   |
|   |                                   |   |
|   | Assurity Life Insurance  Company       |
|   |                                   |   |
|   |                                   |
|   | By                                     |  /s/ Victor  Weber |   |
|   | Name: Victor Weber                     |
|   | Title: Senior Director - Investments   |
|        |                                        |  |  |  |  |

 

51

----

 

**Schedule A**

 
| **Name  of Purchaser**                                                                                                                                                                                        | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                    | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **ING USA ANNUITY AND LIFE INSURANCE COMPANY**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia 30327-4349  Attention: Private Placements  Fax Number: (770) 690-5057 |       | A           |       | $12,000,000                                    |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

BFN:                          (for scheduled principal and interest payments) OR

BFN:                          (for all payments other than scheduled principal and interest)

ABA #                

Ref.:  ING USA Annuity and Life Company, Acct. No.                and PPN 30704@ AA 2

 

Notices

 

Allnotices with respect to payments and written confirmation of each such paymentto be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

Allother notices and communications to be addressed as follows with a copy to theaddress first provided above:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, Minnesota 55401-2121

Attention:  JenWilson

Phone Number: (612) 342-7156

Fax Number: (612) 372-5368

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  41-0991508

 

SCHEDULE A

(to Note PurchaseAgreement)

 

----

 
| **Name  of Purchaser**                                                                                                                                                                                                | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                            | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **RELIASTAR LIFE INSURANCE COMPANY**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |       | A           |       | $12,000,000                                    |       |

 

Payments

 

All paymentson or in respect of the Notes to be by bank wire transfer of Federal or otherimmediately available funds (identifying each payment as “Family Dollar Stores,Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes, Tranche A dueSeptember 27, 2015 PPN 30704@ AA 2, principal, premium or interest”) to:

 

The Bank of New York

BFN:                          (for scheduled principal and interest payments) OR

BFN:                          (forall payments other than scheduled principal and interest)

ABA #                       

Ref.:  ReliaStar Life Insurance Company, Acct. No.                 and PPN 30704@ AA 2

 

Notices

 

Allnotices with respect to payments and written confirmation of each such paymentto be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

Allother notices and communications to be addressed as follows with a copy to theaddress first provided above:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, Minnesota 55401-2121

Attention:  JenWilson

Phone Number: (612) 342-7156

Fax Number: (612) 372-5368

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  41-0451140

 

A-2

----

 
| **Name  of Purchaser**                                                                                                                                                                                                      | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                  | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **ING LIFE INSURANCE AND ANNUITY COMPANY**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |       | A           |       | $12,000,000                                    |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

BFN:                         (for scheduled principal and interest payments) OR

BFN:                         (for all payments other than scheduled principal and interest)

ABA #                        

Attention:  P&I Department

Ref.: ING Life Insuranceand Annuity Company, Acct. No.                    and PPN 30704@ AA 2

 

Notices

 

Allnotices with respect to payments and written confirmation of each such paymentto be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

Allother notices and communications to be addressed as follows with a copy to theaddress first provided above:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, Minnesota 55401-2121

Attention:  JenWilson

Phone Number: (612) 342-7156

Fax Number: (612) 372-5368

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  71-0294708

 

A-3

----

 
| **Name  of Purchaser**                                                                                                                                                                                                         | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                     | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **SECURITY LIFE OF DENVER INSURANCE COMPANY**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |       | A           |       | $4,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

BFN:                          (for scheduled principal and interest payments) OR

BFN:                          (for all payments other than scheduled principal and interest)

ABA #                      

Attention: P&I Department

Reference: Security Life of Denver Insurance Company, Account No.                andPPN 30704@ AA 2

 

Notices

 

Allnotices with respect to payments and written confirmation of each such paymentto be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

Allother notices and communications to be addressed as follows with a copy toaddress first provided above:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, Minnesota 55401-2121

Attention:  JenWilson

Phone:  (612)342-7156

Fax Number: (612) 372-5368

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  84-0499703

 

A-4

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                 | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                             | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **ALLSTATE LIFE INSURANCE COMPANY**3075 Sanders Road, STE G5D  Northbrook, Illinois  60062-7127  Attention:  Private Placements  Department  Telephone Number:  (847) 402-7117  Telecopier Number:  (847) 402-3092 |       | A           |       | $5,000,000  $5,000,000  $2,400,000             |       |

 

Payments

 

Allpayments by Fedwire transfer of immediately available funds or ACH payments,identifying the name of the Issuer, the Private Placement Number and thepayment as principal, interest or premium in the format as follows:

 

Bank:

ABA#:

Account name:

Account #:

Reference:             OBIPPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.41Series 2005-A Senior Notes, Tranche A due September 27, 2015, Payment Due Date(09/27/2015) and the type and amount of payment being made.

For Example:

P            (enter “P” and the amount of principal being remitted, for example,P5000000.00)

I            (enter “I” and the amount of interest being remitted, for example, I225000.00)

 

Notices

 

Allnotices of scheduled payments and written confirmation of each such payment, tobe addressed:

 

Allstate InsuranceCompany

InvestmentOperations—Private Placements

3075 Sanders Road, STEG4A

Northbrook, Illinois  60062-7127

Telephone:  (847) 402-6672 Private Placements

Telecopy:  (847) 326-7032

 

Allfinancial reports, compliance certificates and all other writtencommunications, including notice of prepayments to be sent by email(privatecompliance@allstate.com) or hard copy addressed as first providedabove.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D. Number:  36-2554642

 

A-5

----

 
| **Name  of Purchaser**                                                                                                                                                                                                 | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                             | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **ALLSTATE INSURANCE COMPANY**c/o Allstate Investments LLC  Attention: Private Placements Department  3075 Sanders Road, STE G5D  Northbrook, Illinois 60062-7127  Telephone: (847) 402-7117  Telecopy: (847) 402-3092 |       | A           |       | $2,600,000                                     |       |

 

Payments

 

Allpayments by Fedwire transfer of immediately available funds or ACH payments,identifying the name of the Issuer, the Private Placement Number and thepayment as principal, interest or premium in the format as follows:

 

Bank:

ABA#:

Account name:

Account #:

Reference:             OBIPPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.41Series 2005-A Senior Notes, Tranche A due September 27, 2015, Payment Due Date(09/27/2015) and the type and amount of payment being made.

For Example:

P               (enter “P” and the amount of principal being remitted, for example,P5000000.00)

I               (enter “I” and the amount of interest being remitted, for example, I225000.00)

 

Notices

 

All notices of scheduled payments and writtenconfirmation of such wire transfer to be sent to:

 

Allstate Investments LLC

InvestmentOperations—Private Placements

3075 Sanders Road, STEG4A

Northbrook, Illinois  60062-7127

Telephone:  (847) 402-6672 Private Placements

Telecopy:  (847) 326-7032

Email:  PrivateIOD@allstate.com

 

Allfinancial reports, compliance certificates and all other writtencommunications, including notice of prepayments to be sent by email(privatecompliance@allstate.com) or hard copy addressed as first providedabove.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  36-0719665

 

A-6

----

 
| **Name  of Purchaser**                                                                                                                                                                                                    | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **MIDLAND NATIONAL LIFE INSURANCE COMPANY**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $10,000,000                                    |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                        

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref:  PPN 30704@AA 2, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-ASenior Notes, Tranche A due September 27, 2015

 

Notices

 

Allnotices of payment on or in respect of the Notes and written confirmation ofeach such payment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to beaddressed as first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

A-7

----

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  46-0164570

 

A-8

----

 
| **Name  of Purchaser**                                                                                                                                                                                                    | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **MIDLAND NATIONAL LIFE INSURANCE COMPANY**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $10,000,000                                    |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                         

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref: PPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar,Inc., 5.41 Series 2005-A Senior Notes, Tranche A due September 27, 2015

 

Notices

 

Allnotices of payment on or in respect of the Notes and written confirmation ofeach such payment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to beaddressed as first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

A-9

----

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D. Number:  46-0164570

 

A-10

----

 
| **Name  of Purchaser**                                                                                                                                                                                                    | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **MIDLAND NATIONAL LIFE INSURANCE COMPANY**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $6,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                          

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref: PPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar,Inc., 5.41 Series 2005-A Senior Notes, Tranche A due September 27, 2015

 

Notices

 

Allnotices of payment on or in respect of the Notes and written confirmation ofeach such payment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to beaddressed as first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

A-11

----

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  46-0164570

 

A-12

----

 
| **Name  of Purchaser**                                                                                                                                                                                                    | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **MIDLAND NATIONAL LIFE INSURANCE COMPANY**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $3,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                       

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref: PPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar,Inc., 5.41 Series 2005-A Senior Notes, Tranche A due September 27, 2015

 

Notices

 

Allnotices of payment on or in respect of the Notes and written confirmation ofeach such payment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to beaddressed as first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  46-0164570

 

A-13

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                  | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                              | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **NORTH AMERICAN COMPANY FOR LIFE AND  HEALTH INSURANCE**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $3,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                      

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref: PPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar,Inc., 5.41 Series 2005-A Senior Notes, Tranche A due September 27, 2015

 

Notices

 

All noticesof payment on or in respect of the Notes and written confirmation of each suchpayment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to beaddressed as first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

A-14

----

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  36-2428931

 

A-15

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                  | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                              | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **NORTH AMERICAN COMPANY FOR LIFE AND  HEALTH INSURANCE**c/o Midland Advisors Company  200 East 10th Street, Suite 301  Sioux Falls, SD 57104  Attention;  Melissa Carlson  Phone:  (605) 782-1943  Fax:  (605) 782-1929 |       | A           |       | $3,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                        

BNF:

100 Church Street, 7th Floor

New York, NY 10286

Attn:  Principal& Interest Dept.

Ref: PPN 30704@ AA 2, Family Dollar Stores, Inc. and Family Dollar,Inc., 5.41 Series 2005-A Senior Notes, Tranche A due September 27, 2015

 

Notices

 

Allnotices of payment on or in respect of the Notes and written confirmation ofeach such payment to be addressed as first provided above with a copy to:

 

The Bank of New York

F/A/O:

P.O. Box 19266

Newark, NJ 07195

Attention: Principal & Interest Department

 

Allnotices and communications other than those in respect to payments to be addressedas first provided above.

 

Settlementsand documentation:

 

Guggenheim Partners

135 East 57th Street, 23rd Floor

New York, New York 10022

Attention: Kaitlin Trinh/John Nelson

Phone:  (212)651-0840 / (212) 381-7559

Fax:  (212)644-8396

 

A-16

----

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  36-2428931

 

A-17

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                      | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                  | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **TRANSAMERICA LIFE INSURANCE AND   ANNUITY COMPANY**c/o AEGON USA Investment Management, LLC  4333 Edgewood Road, N.E.  Cedar Rapids, Iowa  52499-5335  Attention:  Director of Private  Placements  Phone:  (319) 369-2432  Fax:  (319) 369-2666 |       | A           |       | $30,000,000                                    |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41% Series 2005-A SeniorNotes, Tranche A due September 27, 2015 PPN 30704@ AA 2, principal,premium or interest”) to:

 

Boston Safe Deposit Trust

ABA #                         

Credit DDA Account #

Attention:

Custody Account:

 

Notices

 

Allnotices and confirmation of Paymentinformation with respect of the Notes should be sent to:

 

Email: paymentnotifications@aegonusa.com

AEGON USA Investment Management, LLC

Attention: Custody Operations-Privates

4333 Edgewood Road N.E.

Cedar Rapids, Iowa 52499-7013

 

Allother notices and communications (including financial statement and reporting)to be addressed as first provided above with a copy to:

 

AEGON USA Investment Management, LLC

Attention: Debbie Thompson – Private Placements

400 West Market Street, 10th Floor

Louisville, Kentucky 40202

Phone:  (502)560-2961

Fax:  (502)560-2030

 

Nameof Nominee in which Notes are to be issued: None

 

TaxpayerI.D. Number:  95-6140222

 

A-18

----

 
| **Name  of Purchaser**                                                                                                                                                  | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                              | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **THRIVENT FINANCIAL FOR LUTHERANS**625 Fourth Avenue South  Minneapolis, Minnesota  55415  Attention:  Investment Division  Fax Number:  (612) 340-5776 |       | A           |       | $15,000,000                                    |       |

 

Payments

 

Allpayments of principal, premium or interest on the account of the Notes shall bemade by bank wire transfer (in immediately available funds) to:

 

ABA #                    

State Street Bank & Trust Co.

DDA # A/C —

Fund Number:

Fund Name: Thrivent Financial for Lutherans

 

All payments must include the following information:Family Dollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A SeniorNotes, Tranche A due September 27, 2015 PPN 30704@ AA 2, Reference Purposeof Payment and Interest and/or Principal Breakdown

 

Notices

 

Allnotices and communications to be addressed as first provided above, exceptnotices with respect to payment and written confirmation of each such payment,to be addressed:

 

Thrivent Financial for Lutherans

625 Fourth Avenue South

Minneapolis, Minnesota 55415

Attention: Investment Division

Fax:  (612)340-5776

 

with a copy to:

 

Thrivent Accounts

State Street Kansas City

801 Pennsylvania

Kansas City, Missouri 64105

Attention:  BartWoodson

Fax:  (816)691-3610

 

Nameof Nominee in which Notes are to be issued: Swanbird & Co.

 

TaxpayerI.D. Number for Swanbird & Co.: 04-3475606

Taxpayer I.D. Number forThrivent Financial for Lutherans: 39-0123480

 

A-19

----

 
| **Name  of Purchaser**                                                                                                                                | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                            | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **UNITED OF OMAHA LIFE INSURANCE COMPANY**Mutual of Omaha Plaza  Omaha, Nebraska  68175-1011  Attention:  4-Investment Loan  Administration |       | A           |       | $16,000,000                                    |       |

 

Payments

 

Allprincipal and interest payments on or in respect of the Notes shall be made bywire transfer of immediately available funds to:

 

JPMorgan Chase Bank

ABA #                      

Private Income Processing

 

For credit to: United of Omaha Life Insurance Company

Account Number

a/c

PPN:  30704@ AA2

Interest Amount:                                                            

Principal Amount:                                                         

 

Notices

 

Allnotices of payments of principal and interest, on or in respect of the Notesand written confirmation of each such payment, corporate actions and reorganizationnotifications to:

 

JPMorgan Chase Bank

14201 Dallas Parkway, 13th Floor

Dallas, Texas 75254-2917

Attention: Income Processing - G. Ruiz

a/c:

 

Allother notices and communications (*i.e.,*quarterly/annual reports, tax filings, modifications, waivers regarding theindenture) to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  47-0322111

 

A-20

----

 
| **Name  of Purchaser**                                                                                                                                     | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                 | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **BANC OF AMERICA SECURITIES LLC**214 North Tryon Street  NC1-027-14-01  Charlotte, NC 28255  Phone:  (704) 386-4534  Facsimile:  (704) 388-9269 |       | A           |       | $5,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium or interest”)to:

 

The Bank of New York

ABA #                         

A/C:

FFC:

Ref:  FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2

 

Notices

 

Allnotices and communications to be addressed as first provided above with a copyto:

 

John J. DeCoursey

Banc of America Securities, LLC

9 W. 57th Street

NY1-302-02-01

New York, NY 10019

Phone:  (212)933-3115

Facsimile: (212) 583-8570

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  56-2058405

 

A-21

----

 
| **Name  of Purchaser**                                                                                                                                     | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                 | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **BANC OF AMERICA SECURITIES LLC**214 North Tryon Street  NC1-027-14-01  Charlotte, NC 28255  Phone:  (704) 386-4534  Facsimile:  (704) 388-9269 |       | A           |       | $4,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Bank of New York

ABA #                       

A/C:

FFC:

Ref:  FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2

 

Notices

 

Allnotices and communications to be addressed as first provided above with a copyto:

 

John J. DeCoursey

Banc of America Securities, LLC

9 W. 57th Street

NY1-302-02-01

New York, NY 10019

Phone:  (212)933-3115

Facsimile: (212) 583-8570

 

Nameof Nominee in which Notes are to be issued: Hare & Co.

Taxpayer I.D.Number:  56-2058405

 

A-22

----

 
| **Name  of Purchaser**                                                                                                                                              | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                                                                          | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **MODERN WOODMEN OF AMERICA**1701 First Avenue  Rock Island, Illinois  61201  Attention:  Investment Department  Investment.Department@Modern-Woodmen.org |       | A           |       | $6,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

The Northern Trust Company

50 South LaSalle Street

Chicago, Illinois 60675

ABA #                         

Account Name: Modern Woodmen of America

Account Number

 

Notices

 

Allnotices and communications to be addressed as first provided above, exceptnotices with respect to payments and written confirmation of each such payment,to be addressed Attention:  InvestmentAccounting Department

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  36-1493430

 

A-23

----

 
| **Name  of Purchaser**                                                                                            | ** ** | **Tranche** | ** ** | **Principal Amount of Notes  to be Purchased** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| ** **                                                                                                        | ** ** | ** **  | ** ** | ** **                                     | ** ** |
| **SECURITY FINANCIAL LIFE INSURANCE CO.**4000 Pine Lake Road  P. O. Box 82248  Lincoln, Nebraska  68501-2248 |       | A           |       | $2,000,000                                     |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.41 Series 2005-A Senior Notes,Tranche A due September 27, 2015 PPN 30704@ AA 2, principal, premium orinterest”) to:

 

Union Bank & Trust Company

4732 Calvert Street

Lincoln, Nebraska 68501-2535

ABA #                           

Account of: Security Financial Life Insurance Co.

Account Number:

 

Notices

 

Allnotices and communications to be addressed as first provided above, exceptnotices with respect to payments and written confirmation of each such paymentto be addressed:

 

Security Financial Life Insurance Co.

4000 Pine Lake Road

Lincoln, Nebraska 68516

Attention: Investment Division

Fax:  (402)458-2170

Phone:  (402)437-3600

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  47-0293990

 

A-24

----

 
| **Name  of Purchaser**                                                                                                | ** ** | **Tranche** | ** ** | **Principal Amount to be   Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|----------------------------------------|------------|
| ** **                                                                                                            | ** ** | ** **  | ** ** | ** **                             | ** ** |
| **ASSURITY LIFE INSURANCE COMPANY**Attention: Investment Division  4000 Pine Lake Road  Lincoln, Nebraska  68516 |       | A           |       | $1,000,000                             |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds to:

 

US Bank National Association

13th and M Street

Lincoln, Nebraska 68508

ABA #                        

For credit to Assurity Life Insurance Company

Account Number:

 

With sufficient notation to identify the source of thefunds.

 

Allnotices of payments on or in respect of the Notes and written confirmation ofeach such payment to be addressed to:

 

Assurity Life Insurance Company

Attention: Investment Division

**Overnight Mailing Address:**

4000 Pine Lake Road

Lincoln, Nebraska 68516

**Regular Mailing Address:**

P.O. Box 82248

Lincoln, Nebraska 68501-2248

 

All notices and communications other than those inrespect to payments to be addressed to:

 

Assurity Life Insurance Company

Attention:  VicWeber

P.O. Box 82248

Lincoln, Nebraska 68501-2248

Phone:  (402)437-3682

Fax: (402) 458-2170

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  38-1843471

 

A-25

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                                                               | ** ** | **Tranche** | ** ** | **Principal Amount of  Series B Notes to be  Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                           | ** ** | ** **  | ** ** | ** **                                                    | ** ** |
| **GIBRALTAR LIFE INSURANCE CO., LTD.**c/o Prudential Capital Group  Gateway Center 3, 18th Floor  100 Mulberry Street  Newark, New Jersey  07102-4077  Attention:  Albert Trank, Managing Director  Phone:  (973) 802-8608  Facsimile:  (973) 367-3234  Email:  albert.trank@prudential.com |       | B           |       | $21,500,000                                                   |       |

 

Payments

 

Allpayments on account of Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

JPMorgan Chase Bank

New York, New York

ABA No.:                      

Account No.:

Account Name:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

Allnotices with respect to payments, and written confirmation of each suchpayment, to be addressed to:

 

The Gibraltar Life Insurance Co., Ltd.

2-13-10, Nagatacho

Chiyoda-ku, Tokyo 100-8953, Japan

Attention: Yoshiki Saito, Vice President of Investment Operations Team

Telephone: 81-3-5501-6680

Facsimile: 81-3-5501-6432

Email: yoshiki.saito@gib-life.co.jp

 

Allother notices and communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  98-0408643

 

A-26

----

 
| **Name  of Purchaser**                                                                                                                                                   | ** ** | **Tranche** | ** ** | **Principal Amount of  Series B Notes to be  Purchased** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                                                               | ** ** | ** **  | ** ** | ** **                                                    | ** ** |
| **THE  PRUDENTIAL INSURANCE COMPANY  OF AMERICA**

c/o Prudential Capital  Group  1170 Peachtree Street, Suit 500  Atlanta, GA 30309  Attention:  Managing Director |       | B           |       | $12,100,000                                                   |       |

 

Payments

 

Allpayments on account of Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

Account No.:

Account Name:

JPMorgan Chase Bank

New York, New York

ABA No.:                               

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

Allnotices with respect to payments, and written confirmation of each suchpayment, to be addressed to:

 

The Prudential Insurance Company of America

c/o Investment Operations Group

Gateway Center Two, 10th Floor

100 Mulberry Street

Newark, New Jersey 07102-4077

Attention: Manager, Billings and Collections

 

Recipient of telephonic prepayment notices:

 

Manager, Trade Management Group

Telephone: (973) 367-3141

Facsimile:  (800)224-2278

 

Allother notices and communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  22-1211670

 

A-27

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                                                         | ** ** | **Tranche** | ** ** | **Principal Amount of  Series B Notes to be  Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                     | ** ** | ** **  | ** ** | ** **                                                    | ** ** |
| **AMERICAN  BANKERS INSURANCE COMPANY  OF FLORIDA, INC.**

c/o Prudential Private  Placement Investors, L.P.  Gateway Center 3, 18th Floor  100 Mulberry Street  Newark, New Jersey  07102  Attention:  Albert Trank, Managing  Director  Telephone:  (973) 802-8608  Facsimile: (973) 624-6432 |       | B           |       | $4,000,000                                                    |       |

 

Payments

 

Allpayments on account of the Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

JP Morgan Chase Bank

ABA No.:                   

Account No.:

Account Name: JP Morgan Chase

For further credit to Account No.:

Account Name:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

All notices of payments and written confirmations ofsuch wire transfers:

 

JP Morgan Chase Bank

Investor Services

3 Chase Metrotech Center

North America Insurance, 5S5

Brooklyn, New York 11245

Attention:  AnnaMarie Mazza

Telephone: (718) 242-5399

Facsimile: (718) 242-8328

 

and

 

A-28

----

 

Fortis, Inc.

One Chase Manhattan Plaza

New York, New York 10005

Attention: Kevin P. Mahoney

   AVP,Investment Accounting & Treasury Operations

Telephone: (212) 859-7184

Facsimile: (212) 859-7043

 

Addressfor all other communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

 

TaxpayerI.D. Number:  59-0593886

 

A-29

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                       | ** ** | **Tranche** | ** ** | **Principal Amount of  Series B Notes to be  Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                   | ** ** | ** **  | ** ** | ** **                                                    | ** ** |
| **TIME INSURANCE COMPANY**c/o Prudential Private Placement Investors, L.P.  Gateway Center 3, 18th Floor  100 Mulberry Street  Newark, New Jersey  07102  Attention:  Albert Trank, Managing  Director  Telephone:  (973) 802-8608  Facsimile: (973) 624-6432 |       | B           |       | $4,000,000                                                    |       |

 

Payments

 

Allpayments on account of the Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

M&I Marshall & Ilsley Bank

Milwaukee, WI

ABA No.:

DDA Account No.:

Account Name:

For further credit to Account No.:

Account Name:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

All notices of payments and written confirmations ofsuch wire transfers:

 

Marshall & Ilsley Trust Company

1000 North Water Street

Milwaukee, WI 53202

Attention:  KimPalleon

Telephone: (414) 287-7084

Facsimile: (414) 287-7125

 

and

 

Fortis, Inc.

One Chase Manhattan Plaza

New York, New York 10005

Attention: Kevin P. Mahoney

    AVP,Investment Accounting & Treasury Operations

Telephone: (212) 859-7184

Facsimile: (212) 859-7043

 

A-30

----

 

Addressfor all other communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

 

TaxpayerI.D. Number:  39-0658730

 

A-31

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                                 | ** ** | **Tranche** | ** ** | **Principal Amount of   SERIES B Notes to be   Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                             | ** ** | ** **  | ** ** | ** **                                                 | ** ** |
| **UNION SECURITY INSURANCE COMPANY**c/o Prudential Private Placement Investors, L.P.  Gateway Center 3, 18th Floor  100 Mulberry Street  Newark, New Jersey  07102  Attention:  Albert Trank, Managing  Director  Telephone:  (973) 802-8608  Facsimile: (973) 624-6432 |       | B           |       | $1,400,000                                                 |       |

 

Payments

 

Allpayments on account of the Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

M&I Marshall & Ilsley Bank

Milwaukee, WI

ABA No.:

DDA Account No.:

Account Name:

For further credit to Account No.:

Account Name:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

All notices of payments and written confirmations ofsuch wire transfers:

 

Marshall & Ilsley Trust Company

1000 North Water Street

Milwaukee, WI 53202

Attention:  KimPalleon

Telephone: (414) 287-7084

Facsimile: (414) 287-7125

 

and

 

Fortis, Inc.

One Chase Manhattan Plaza

New York, New York 10005

 

A-31

----

 

Attention: Kevin P. Mahoney

   AVP,Investment Accounting & Treasury Operations

Telephone: (212) 859-7184

Facsimile: (212) 859-7043

 

Addressfor all other communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

 

TaxpayerI.D. Number:  81-0170040

 

A-32

----

 
| **Name  of Purchaser**                                                                                                                                               | ** ** | **Tranche** | ** ** | **Principal Amount of   SERIES B Notes to be   Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------------------|------------|
| ** **                                                                                                                                                           | ** ** | ** **  | ** ** | ** **                                                 | ** ** |
| **THE PRUDENTIAL INSURANCE COMPANY OF AMERICA**c/o Prudential Capital Group  1170 Peachtree Street, Suite 500  Atlanta, GA 30309  Attention:  Managing Director |       | B           |       | $1,000,000                                                 |       |

 

Payments

 

Allpayments on account of Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

Account No.:

Account Name:

JPMorgan Chase Bank

New York, New York

ABA No.:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

Allnotices with respect to payments, and written confirmation of each suchpayment, to be addressed to:

 

The Prudential Insurance Company of America

c/o Investment Operations Group

Gateway Center Two, 10th Floor

100 Mulberry Street

Newark, New Jersey 07102-4077

Attention: Manager, Billings and Collections

 

Recipient of telephonic prepayment notices:

 

Manager, Trade Management Group

Telephone: (973) 367-3141

Facsimile: (800) 224-2278

 

Allother notices and communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

 

Taxpayer I.D.Number:  22-1211670

 

A-33

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                                         | ** ** | **Tranche** | ** ** | **Principal Amount of   SERIES B Notes to be   Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                     | ** ** | ** **  | ** ** | ** **                                                 | ** ** |
| **AMERICAN MEMORIAL LIFE INSURANCE COMPANY**c/o Prudential Private Placement Investors, L.P.  Gateway Center 3, 18th Floor  100 Mulberry Street  Newark, New Jersey  07102  Attention:  Albert Trank, Managing  Director  Telephone:  (973) 802-8608  Facsimile: (973) 624-6432 |       | B           |       | $1,000,000                                                 |       |

 

Payments

 

Allpayments on account of the Notes held by such purchaser shall be made by wiretransfer of immediately available funds for credit to:

 

M&I Marshall & Ilsley Bank

Milwaukee, WI

ABA No.:

DDA Account No.:

Account Name:

For further credit to Account No.:

Account Name:

 

Eachsuch wire transfer shall set forth the name of the Company, a reference to “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0” and the due dateand application (as among principal, interest and Make-Whole Amount) of thepayment being made.

 

Notices

 

All notices of payments and written confirmations ofsuch wire transfers:

 

Marshall & Ilsley Trust Company

1000 North Water Street

Milwaukee, WI 53202

Attention:  KimPalleon

Telephone: (414) 287-7084

Facsimile: (414) 287-7125

 

and

 

Fortis, Inc.

One Chase Manhattan Plaza

 

A-34

----

 

New York, New York 10005

Attention: Kevin P. Mahoney

   AVP,Investment Accounting & Treasury Operations

Telephone: (212) 859-7184

Facsimile: (212) 859-7043

 

Addressfor all other communications to be addressed as first provided above.

 

Nameof Nominee in which Notes are to be issued: None

 

TaxpayerI.D. Number:  46-0260270

 

A-35

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| **Name  of Purchaser**                                                                                                                                                                                                                 | ** ** | **Tranche** | ** ** | **Principal Amount of Notes   to be Purchased** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                             | ** ** | ** **  | ** ** | ** **                                      | ** ** |
| **ALLSTATE LIFE INSURANCE COMPANY**3075 Sanders Road, STE G5D  Northbrook, Illinois  60062-7127  Attention:  Private Placements  Department  Telephone Number:  (847) 402-8922  Telecopier Number:  (847) 402-3092 |       | B           |       | $5,000,000  $5,000,000  $5,600,000              |       |

 

Payments

 

Allpayments by Fedwire transfer of immediately available funds or ACH payments,identifying the name of the Issuer, the Private Placement Number and thepayment as principal, interest or premium in the format as follows:

 

Bank:

ABA#:

Account name:

Account #:

Reference:      OBIPPN 30704@ AB 0, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.24%Series 2005-A Senior Notes, Tranche B due September 27, 2015, PaymentDue Date (09/27/2015) and the type and amount of payment being made.

For Example:

P           (enter “P” and the amount of principal being remitted, for example,P5000000.00)

I           (enter “I” and the amount of interest being remitted, for example, I225000.00)

 

Notices

 

Allnotices of scheduled payments and written confirmation of each such payment, tobe addressed:

 

Allstate InsuranceCompany

InvestmentOperations—Private Placements

3075 Sanders Road, STEG4A

Northbrook, Illinois  60062-7127

Telephone:  (847) 402-6672 Private Placements

Telecopy:  (847) 326-7032

 

Allfinancial reports, compliance certificates and all other writtencommunications, including notice of prepayments to be sent by email(privatecompliance@allstate.com) or hard copy addressed as first providedabove.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  36-2554642

 

A-36

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| **Name  of Purchaser**                                                                                                                                                                                                                                                               | ** ** | **Tranche** | ** ** | **Principal Amount of Notes   to be Purchased** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                           | ** ** | ** **  | ** ** | ** **                                      | ** ** |
| **ALLSTATE  LIFE INSURANCE COMPANY OF NEW YORK**c/o Allstate Investments LLC  3075 Sanders Road, STE G5D  Northbrook, Illinois  60062-7127  Attention:  Private Placements  Department  Telephone Number:  (847) 402-7117  Telefacsimile Number:  (847) 402-3092 |       | B           |       | $5,000,000                                      |       |

 

Payments

 

Allpayments on or in respect of the Notes to be made by Fedwire transfer ofimmediately available funds or ACH Payment, identifying the name of the Issuer,the Private Placement Number and the payment as principal, interest or premium,in the format as follows:

 

Bank:

ABA #:

Account Name:

Account #:

Reference:        OBIPPN 30704@ AB 0, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.24%Series 2005-A Senior Notes, Tranche B due September 27, 2015, PaymentDue Date (09/27/2015) and the type and amount of payment being made.

For Example:

P        (enter “P” and the amount of principal being remitted, for example,P5000000.00)

I        (enter “I” and the amount of interest being remitted, for example, I225000.00)

 

Notices

 

Allnotices of scheduled payments and written confirmation of each such payment, tobe addressed:

 

Allstate Investments LLC

InvestmentOperations—Private Placements

3075 Sanders Road, STEG4A

Northbrook, IL  60062-7127

Telephone:  (847) 402-6672 Private Placements

Telecopy:  (847) 326-7032

Email:  PrivateIOD@allstate.com

 

Allfinancial reports, compliance certificates and all other writtencommunications, including notice of prepayments to be sent by email(privatecompliance@allstate.com) or hard copy addressed as first providedabove.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  36-2608394

 

A-37

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                           | ** ** | **Tranche** | ** ** | **Principal Amount of Notes   to be Purchased** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                       | ** ** | ** **  | ** ** | ** **                                      | ** ** |
| **ALLSTATE  INSURANCE COMPANY**c/o Allstate Investments LLC  Attention:  Private Placements  Department  3075 Sanders Road, STE G5D  Northbrook, Illinois  60062-7127  Telephone:  (847) 402-7117  Telecopy:  (847) 402-3092 |       | B           |       | $4,400,000                                      |       |

 

Payments

 

Allpayments by Fedwire transfer of immediately available funds or ACH payments,identifying the name of the Issuer, the Private Placement Number and thepayment as principal, interest or premium in the format as follows:

 

Bank:

ABA#:

Account name:

Account #:

Reference:       OBIPPN 30704@ AB 0, Family Dollar Stores, Inc. and Family Dollar, Inc., 5.24%Series 2005-A Senior Notes, Tranche B due September 27, 2015, PaymentDue Date (09/27/2015) and the type and amount of payment being made.

For Example:

P        (enter “P” and the amount of principal being remitted, for example,P5000000.00)

I        (enter “I” and the amount of interest being remitted, for example, I225000.00)

 

Notices

 

All notices of scheduled payments and writtenconfirmation of such wire transfer to be sent to:

 

Allstate Investments LLC

InvestmentOperations—Private Placements

3075 Sanders Road, STEG4A

Northbrook, Illinois  60062-7127

Telephone:  (847) 402-6672 Private Placements

Telecopy:  (847) 326-7032

Email:  PrivateIOD@allstate.com

 

All financialreports, compliance certificates and all other written communications,including notice of prepayments to be sent by email(privatecompliance@allstate.com) or hard copy addressed as first providedabove.

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  36-0719665

 

A-38

----

 
| **Name  of Purchaser**                                                                                                                                                                                                                                                | ** ** | **Tranche** | ** ** | **Principal Amount of Notes   to be Purchased** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                            | ** ** | ** **  | ** ** | ** **                                      | ** ** |
| **TRANSAMERICA OCCIDENTAL LIFE  INSURANCE COMPANY**

c/o AEGON USA Investment Management, LLC  4333 Edgewood Road N.E.  Cedar Rapids, Iowa  52499-5335  Attention:  Director of Private  Placements  Phone:  (319) 369-2432  Fax:  (319) 369-2666 |       | B           |       | $5,000,000                                      |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds (identifying each payment as “FamilyDollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A Senior Notes,Tranche B due September 27, 2015, PPN 30704@ AB 0, principal, premiumor interest”) to:

 

Boston Safe Deposit Trust

ABA             

Credit DDA Account:

Attention:  MBSIncome

Custody Account No. 

 

Notices

 

Allnotices and confirmation of Paymentinformation with respect of the Notes should be sent to:

 

Email: paymentnotifications@aegonusa.com

AEGON USA Investment Management, LLC

Attention: Custody Operations-Privates

4333 Edgewood Road N.E.

Cedar Rapids, Iowa 52499-7013

 

Allother notices and communications (including financial statement and reporting)to be addressed as first provided above with a copy to:

 

AEGON USA Investment Management, LLC

Attention: Debbie Thompson — Private Placements

400 West Market Street, 10th Floor

Louisville, Kentucky 40202

Phone:  (502)560-2961

Fax:  (502)560-2030

 

Nameof Nominee in which Notes are to be issued:  None

 

Taxpayer I.D. Number: 95-1060502

 

A-39

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| **Name  of Purchaser**                                                                                                                                                   | ** ** | **Tranche** | ** ** | **Principal Amount of Notes   to be Purchased** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                               | ** ** | ** **  | ** ** | ** **                                      | ** ** |
| **THRIVENT  FINANCIAL FOR LUTHERANS**625 Fourth Avenue South  Minneapolis, Minnesota  55415  Attention:  Investment Division  Fax Number:  (612) 340-5776 |       | B           |       | $5,000,000                                      |       |

 

Payments

 

Allpayments of principal, premium or interest on the account of the Notes shall bemade by bank wire transfer (in immediately available funds) to:

 

ABA #

State Street Bank & Trust Co.

DDA # A/C —

Fund Number:

Fund Name: Thrivent Financial for Lutherans

 

All payments must include the following information:Family Dollar Stores, Inc. and Family Dollar, Inc., 5.24% Series 2005-A SeniorNotes, Tranche B due September 27, 2015, PPN 30704@ AB 0, ReferencePurpose of Payment and Interest and/or Principal Breakdown

 

Notices

 

Allnotices and communications to be addressed as first provided above, exceptnotices with respect to payment and written confirmation of each such payment,to be addressed:

 

Thrivent Financial for Lutherans

625 Fourth Avenue South

Minneapolis, Minnesota 55415

Attention: Investment Division

Fax:  (612)340-5776

 

with a copy to:

 

Thrivent Accounts

State Street Kansas City

801 Pennsylvania

Kansas City, Missouri 64105

Attention:  BartWoodson

Fax:  (816)691-3610

 

Nameof Nominee in which Notes are to be issued: Swanbird & Co.

 

TaxpayerI.D. Number for Swanbird & Co.: 04-3475606

Taxpayer I.D. Number forThrivent Financial for Lutherans: 39-0123480

 

A-40

----

 
| **Name  of Purchaser**                                                                                                 | ** ** | **Tranche** | ** ** | **Principal Amount to be  Purchased** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|---------------------------------------|------------|
| ** **                                                                                                             | ** ** | ** **  | ** ** | ** **                            | ** ** |
| **ASSURITY  LIFE INSURANCE COMPANY**Attention: Investment Division  4000 Pine Lake Road  Lincoln, Nebraska  68516 |       | B           |       | $1,000,000                            |       |

 

Payments

 

Allpayments on or in respect of the Notes to be by bank wire transfer of Federalor other immediately available funds to:

 

US Bank National Association

13th and M Street

Lincoln, Nebraska 68508

ABA #

For credit to Assurity Life Insurance Company

Account Number:

 

With sufficient notation to identify the source of thefunds.

 

Allnotices of payments on or in respect of the Notes and written confirmation ofeach such payment to be addressed to:

 

Assurity Life Insurance Company

Attention: Investment Division

**Overnight Mailing Address:**

4000 Pine Lake Road

Lincoln, Nebraska 68516

**Regular Mailing Address:**

P.O. Box 82248

Lincoln, Nebraska 68501-2248

 

All notices and communications other than those inrespect to payments to be addressed to:

 

Assurity Life Insurance Company

Attention:  VicWeber

P.O. Box 82248

Lincoln, Nebraska 68501-2248

Phone:  (402)437-3682

Fax: (402) 458-2170

 

Nameof Nominee in which Notes are to be issued: None

Taxpayer I.D.Number:  38-1843471

 

A-41

----

 

**Defined Terms**

** **

As used herein, the following terms have therespective meanings set forth below or set forth in the Section hereoffollowing such term:

 

*“Additional Notes”*is defined inSection 2.2.

 

*“Additional Purchasers”*meanspurchasers of Additional Notes.

 

*“Administrative Agent”* means Bankof America, N.A. in its capacity as administrative agent under the Bank CreditAgreement, together with its successors and assigns in such capacity.

 

*“Affiliate”* means, at any time,and with respect to any Person, (a) any other Person that at such timedirectly or indirectly through one or more intermediaries Controls, or isControlled by, or is under common Control with, such first Person, and(b) any Person beneficially owning or holding, directly or indirectly, 10%or more of any class of voting or equity interests of an Obligor or anySubsidiary or any Person of which an Obligor and its Subsidiaries beneficiallyown or hold, in the aggregate, directly or indirectly, 10% or more of any classof voting or equity interests.  As usedin this definition, *“Control”* meansthe possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of a Person, whether through theownership of voting securities, by contract or otherwise.  Unless the context otherwise clearlyrequires, any reference to an *“Affiliate”* isa reference to an Affiliate of an Obligor.

 

*“Anti-Terrorism Order”* meansExecutive Order No. 13,224 of September 24, 2001, Blocking Property andProhibiting Transactions with Persons Who Commit, Threaten to Commit or SupportTerrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

 

*“Bank Credit Agreement”* means theAmended and Restated Credit Agreement dated as of May 31, 2001 by andamong the Obligors, certain Subsidiaries of the Obligors named therein, Bank ofAmerica, N.A., as administrative agent, and the other financial institutionsparty thereto, as amended, restated, joined, supplemented or otherwise modifiedfrom time to time, and any renewals, extensions or replacements thereof, whichconstitute the primary bank credit facility of the Obligors and itsSubsidiaries.

 

*“Bank Lenders”* means the banksand financial institutions party to the Bank Credit Agreement.

 

*“Business Day”* means any dayother than a Saturday, a Sunday or a day on which commercial banks in New York,New York are required or authorized to be closed.

 

*“Capital Lease”* means, at anytime, a lease with respect to which the lessee is required concurrently torecognize the acquisition of an asset and the incurrence of a liability inaccordance with GAAP.

 

SCHEDULE B

(to Note PurchaseAgreement)

 

----

 

*“Capital Lease Obligation”* means,with respect to any Person and a Capital Lease, the amount of the obligation ofsuch Person as the lessee under such Capital Lease which would, in accordancewith GAAP, appear as a liability on a balance sheet of such Person.

 

*“Change of Control”* is defined inSection 8.7.

 

*“Closing”* is defined inSection 3.

 

*“Code”* means the Internal RevenueCode of 1986, as amended from time to time, and the rules and regulationspromulgated thereunder from time to time.

 

*“Confidential Information”* isdefined in Section 20.

 

*“Consolidated Debt”* means as ofany date of determination the total amount of all Debt of the Obligors andtheir Restricted Subsidiaries determined on a consolidated basis in accordancewith GAAP.

 

*“Consolidated EBITDAR”* shallmean, for any period, Consolidated Net Income for such period plus (to theextent deducted or added in computing such Consolidated Net Income and withoutduplication) (a) depreciation, depletion, if any, and amortization expensefor such period, (b) income tax expense for such period, (c) othernon-cash items for such period, including without limitation, charges associatedwith store closings, (d) Consolidated Interest Expense and Lease Rentalsfor such period, and (e) non-recurring items, all as determined on aconsolidated basis in accordance with GAAP.

 

*“Consolidated Fixed Charges”*shall mean, for any period, the Consolidated Interest Expense for such periodplus Lease Rentals for such period, determined on a consolidated basis inaccordance with GAAP.

 

*“Consolidated Interest Expense”*shall mean, for any period, the gross interest expense of FDSI and itsRestricted Subsidiaries deducted in the calculation of Consolidated Net Incomefor such period, determined on a consolidated basis in accordance with GAAP.

 

*“Consolidated Net Income”* shallmean, for any period, the consolidated net income (or loss) of FDSI and itsRestricted Subsidiaries for such period, exclusive of “extraordinary items” (asdefined by GAAP), determined on a consolidated basis in accordance with GAAP.

 

*“Consolidated Net Worth”*shallmean the consolidated stockholder’s equity of FDSI and its RestrictedSubsidiaries, as defined according to GAAP.

 

*“Consolidated Total Assets”*means, as of any date of determination, the total amount of all assets of FDSIand its Restricted Subsidiaries, determined on a consolidated basis inaccordance with GAAP.

 

“*Consolidated TotalCapitalization”*means, at any time, the sum of (i) Consolidated NetWorth and (ii) Consolidated Debt.

 

B-2

----

 

*“Continuing Directors”* is definedin Section 8.7.

 

*“Control Event”* is defined inSection 8.7.

 

*“Debt”* means, with respect to anyPerson, without duplication,

 

(a)           itsliabilities for borrowed money;

 

(b)           itsliabilities for the deferred purchase price of property acquired by such Person(excluding accounts payable and other accrued liabilities arising in the ordinarycourse of business but including, without limitation, all liabilities createdor arising under any conditional sale or other title retention agreement withrespect to any such property);

 

(c)           itsCapital Lease Obligations;

 

(d)           itsliabilities for borrowed money secured by any Lien with respect to any propertyowned by such Person (whether or not it has assumed or otherwise become liablefor such liabilities); and

 

(e)           Guaranteesby such Person with respect to liabilities of a type described in any ofclauses (a) through (d) hereof.

 

Debt of any Person shall include all obligations ofsuch Person of the character described in clauses (a) through (e) to the extentsuch Person remains legally liable in respect thereof notwithstanding that anysuch obligation is deemed to be extinguished under GAAP.

 

For purposes of this Agreement, Debt shall not includereimbursement obligations under trade letters of credit incurred in connectionwith the acquisition of inventory in the ordinary course of business, providedthat any draws under such trade letters of credit are reimbursed within 30 daysthereof.

 

*“Default”* means an event orcondition the occurrence or existence of which would, with the lapse of time orthe giving of notice or both, become an Event of Default.

 

*“Default Rate”* means with respectto the Notes of any Series that rate of interest that is 2% per annum above therate of interest stated in clause (a) of the first paragraph of the Notes ofsuch Series (and of such tranche if such Series has separate tranches).

 

*“Environmental Laws”* means anyand all federal, state, local, and foreign statutes, laws, regulations,ordinances, rules, judgments, orders, decrees, permits, concessions, grants,franchises, licenses, agreements or governmental restrictions relating topollution and the protection of the environment or the release of any materialsinto the environment, including but not limited to those related to hazardoussubstances or wastes, air emissions and discharges to waste or public systems.

 

B-3

----

 

*“ERISA”* means the EmployeeRetirement Income Security Act of 1974, as amended from time to time, and therules and regulations promulgated thereunder from time to time in effect.

 

*“ERISA Affiliate”* means any tradeor business (whether or not incorporated) that is treated as a single employertogether with any Obligor under section 414 of the Code.

 

*“Event of Default”* is defined inSection 11.

 

*“Exchange Act”* means theSecurities Exchange Act of 1934, as amended.

 

*“Fair Market Value”*means, at anytime and with respect to any property, the sale value of such property thatwould be realized in an arm’s-length sale at such time between an informed andwilling buyer and an informed and willing seller (neither being under acompulsion to buy or sell), as reasonably determined in the good faith opinionof the Obligors’ board of directors.

 

*“FDSI”* means Family DollarStores, Inc., a Delaware corporation.

 

*“FDI”* means Family Dollar, Inc.,a North Carolina corporation.

 

*“FLSA Litigation”* means anyexisting or future litigations regarding whether any employees of FDSI or anyof its Subsidiaries are “exempt employees” (such that such employees are notentitled to receive overtime compensation) under the Fair Labor Standards Act(as amended) or any other similar federal or state law, including but notlimited to the litigation as further described in the Memorandum.

 

*“GAAP”* means those generallyaccepted accounting principles as in effect from time to time in the UnitedStates of America.

 

*“Governmental Authority”* means

 

(a)           thegovernment of

 

(i)            theUnited States of America or any state or other political subdivision thereof,or

 

(ii)           anyjurisdiction in which any Obligor or any Restricted Subsidiary conducts all orany part of its business, or which has jurisdiction over any properties of anyObligor or any Restricted Subsidiary, or

 

(b)           anyentity exercising executive, legislative, judicial, regulatory oradministrative functions of, or pertaining to, any such government.

 

*“Guaranty”* means, with respect toany Person, any obligation (except the endorsement in the ordinary course ofbusiness of negotiable instruments for deposit or collection) of such Personguaranteeing or in effect guaranteeing any Debt, dividend or other obligationof any other 

 

B-4

----

 

Person in any manner, whether directly or indirectly, including(without limitation) obligations incurred through an agreement, contingent orotherwise, by such Person:

 

(a)           topurchase such Debt or obligation or any property constituting security thereforprimarily for the purpose of assuring the owner of such Debt or obligation ofthe ability of any other Person to make payment of the Debt or obligation;

 

(b)           toadvance or supply funds (i) for the purchase or payment of such Debt orobligation, or (ii) to maintain any working capital or other balance sheetcondition or any income statement condition of any other Person or otherwise toadvance or make available funds for the purchase or payment of such Debt orobligation;

 

(c)           tolease properties or to purchase properties or services primarily for thepurpose of assuring the owner of such Debt or obligation of the ability of anyother Person to make payment of the Debt or obligation; or

 

(d)           otherwiseto assure the owner of such Debt or obligation against loss in respect thereof.

 

In any computation of the Debt or other liabilities ofthe obligor under any Guaranty, the Debt or other obligations that are thesubject of such Guaranty shall be assumed to be direct obligations of suchobligor, *provided* that the amount of such Debtoutstanding for purposes of this Agreement shall not exceed the maximum amountof Debt that is the subject of such Guaranty.

 

*“Hazardous Material”* means any andall pollutants, toxic or hazardous wastes or other substances that might pose ahazard to health and safety, the removal of which may be required or thegeneration, manufacture, refining, production, processing, treatment, storage,handling, transportation, transfer, use, disposal, release, discharge,spillage, seepage or filtration of which is or shall be restricted, prohibitedor penalized by any applicable law including, but not limited to, asbestos,urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum,petroleum products, lead based paint, radon gas or similar restricted,prohibited or penalized substances.

 

*“holder”* means, with respect toany Note, the Person in whose name such Note is registered in the registermaintained by the Obligors pursuant to Section 13.1.

 

*“Institutional Investor”* means(a) any original purchaser of a Note, (b) any holder of more than$2,000,000 of the aggregate principal amount of the Notes then outstanding, and(c) any bank, trust company, savings and loan association or otherfinancial institution, any pension plan, any investment company, any insurancecompany, any broker or dealer, or any other similar financial institution orentity, regardless of legal form.

 

*“Investments”* shall mean allinvestments, in cash or by delivery of property made, directly or indirectly inany Person, whether by acquisition of shares of capital stock, Debt or otherobligations or securities or by loan, advance, capital contribution orotherwise.

 

B-5

----

 

*“Lease Rentals”*shall mean, forany period, the aggregate amount of fixed rental or operating lease expensepayable by FDSI and its Restricted Subsidiaries with respect to leases of realand personal property (excluding Capital Lease Obligations) determined inaccordance with GAAP.

 

*“Lien”* means, with respect to anyPerson, any mortgage, lien, pledge, charge, security interest or otherencumbrance, or any interest or title of any vendor, lessor, lender or othersecured party to or of such Person under any conditional sale or other titleretention agreement (other than an operating lease) or Capital Lease, upon orwith respect to any property or asset of such Person (including, in the case ofstock, shareholder agreements, voting trust agreements and all similararrangements).

 

*“Limited Material Adverse Effect”*means a material adverse effect on (a) the ability of the Obligors and theSubsidiary Guarantors to perform their obligations under this Agreement(including any Supplement), the Notes or the Subsidiary Guaranties, taken as awhole or (b) the validity or enforceability of this Agreement (includingany Supplement), the Notes or the Subsidiary Guaranty, taken as a whole.

 

*“Make-Whole Amount”* shall havethe meaning (i) set forth in Section 8.6 with respect to any Series A Noteand (ii) set forth in the applicable Supplement with respect to any otherSeries of Notes.

 

*“Material”* means material inrelation to the business, operations, affairs, financial condition, assets orproperties of the Obligors and their Restricted Subsidiaries taken as a whole.

 

*“Material Adverse Effect”* means amaterial adverse effect on (a) the business, operations, affairs,financial condition, assets or properties of the Obligors and their RestrictedSubsidiaries taken as a whole, or (b) the ability of the Obligors and theSubsidiary Guarantors to perform their obligations under this Agreement(including any Supplement), the Notes or the Subsidiary Guaranties, taken as awhole or (c) the validity or enforceability of this Agreement (includingany Supplement), the Notes or the Subsidiary Guaranty, taken as a whole.

 

*“Material Subsidiary”*means, atany time, any Restricted Subsidiary of FDSI which, together with all otherRestricted Subsidiaries of such Restricted Subsidiary, accounts for more than(i) 5% of the consolidated assets of the Obligors and their RestrictedSubsidiaries or (ii) 5% of consolidated revenue of the Obligors and theirRestricted Subsidiaries.

 

*“Memorandum”* is defined inSection 5.3.

 

*“Moody’s”* shall mean MoodyInvestors Service, Inc.

 

*“Multiemployer Plan”* means anyPlan that is a “multiemployer plan” (as such term is defined inSection 4001(a)(3) of ERISA).

 

*“Notes”* is defined inSection 1.

 

B-6

----

 

*“Officer’s Certificate”* means acertificate of a Senior Financial Officer or of any other officer of an Obligorwhose responsibilities extend to the subject matter of such certificate.

 

*“PBGC”* means the Pension BenefitGuaranty Corporation referred to and defined in ERISA or any successor thereto.

 

*“Person”* means an individual,partnership, corporation, limited liability company, association, trust,unincorporated organization, or a government or agency or political subdivisionthereof.

 

*“Plan”* means an “employee benefitplan” (as defined in Section 3(3) of ERISA) that is or, within thepreceding five years, has been established or maintained, or to whichcontributions are or, within the preceding five years, have been made orrequired to be made, by any Obligor or any ERISA Affiliate or with respect towhich any Obligor or any ERISA Affiliate may have any liability.

 

*“Priority Debt”* means (withoutduplication), as of the date of any determination thereof, the sum of(i) all unsecured Debt of Restricted Subsidiaries (including allGuaranties of Debt of any Obligor but excluding (w) Debt owing to any Obligoror any other Restricted Subsidiary, (x) Debt outstanding at the time suchPerson became a Restricted Subsidiary (other than an Unrestricted Subsidiarywhich is designated as a Restricted Subsidiary pursuant to Section 9.6hereof), provided that such Debt shall have not been incurred in contemplationof such person becoming a Restricted Subsidiary, (y) all Guaranties ofDebt of any Obligor by any Restricted Subsidiary which has also guaranteed theNotes, and (z) Debt of FDI in which FDI is a co-obligor with FDSI underthe agreement or instrument pursuant to which such Debt is incurred (includingwithout limitation the Bank Credit Agreement), and (ii) all Debt or otherobligations of the Obligors and their Restricted Subsidiaries secured by Liensother than Debt or obligations secured by Liens permitted bysubparagraphs (a) through (i), inclusive, of Section 10.4.

 

*“property”* or *“properties”* means, unless otherwise specifically limited,real or personal property of any kind, tangible or intangible, choate orinchoate.

 

*“Purchasers”* means the purchasersof the Notes named in Schedule A hereto.

 

*“QPAM Exemption”* means ProhibitedTransaction Class Exemption 84-14 issued by the United States Department ofLabor.

 

*“Qualified Institutional Buyer”*meansany Person who is a qualified institutional buyer within the meaning of suchterm as set forth in Rule 144(a)(1) under the Securities Act.

 

*“Required Holders”* means, at anytime, the holders of not less than 51% in principal amount of the Notes of eachSeries at the time outstanding (exclusive of Notes then owned by any Obligor orany of its Affiliates and any Notes held by parties who are contractuallyrequired to abstain from voting with respect to matters affecting the holdersof the Notes).

 

B-7

----

 

*“Responsible Officer”* means anySenior Financial Officer and any other officer of an Obligor withresponsibility for the administration of the relevant portion of thisAgreement.

 

*“Restricted Subsidiary”* means anySubsidiary in which: (i) at least a majority of the voting securities are ownedby any Obligor and/or one or more Restricted Subsidiaries and (ii) theObligors have not designated an Unrestricted Subsidiary by notice in writinggiven to the holders of the Notes; *provided* thatFDI shall at all times remain a Restricted Subsidiary.

 

*“S&P”* means Standard &Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc.

 

*“Securities Act”* means theSecurities Act of 1933, as amended from time to time.

 

*“Senior Debt”* means, as of thedate of any determination thereof, all Consolidated Debt, other thanSubordinated Debt.

 

*“Senior Financial Officer”* meansthe chief financial officer or principal accounting officer of an Obligor.

 

*“Series”*means any series ofNotes issued pursuant to this Agreement or any Supplement hereto.

 

*“Series A Notes”*is defined inSection 1 of this Agreement.

 

*“Subordinated Debt”* means allunsecured Debt of an Obligor that shall contain or have applicable theretosubordination provisions providing for the subordination thereof to other Debtof such Obligor (including, without limitation, subordinated to the obligationsof such Obligor under this Agreement, any Supplement or the Notes).

 

*“Subsidiary”* means, as to anyPerson, any corporation, association or other business entity in which suchPerson or one or more of its Subsidiaries or such Person and one or more of itsSubsidiaries owns sufficient equity or voting interests to enable it or them(as a group) ordinarily, in the absence of contingencies, to elect a majorityof the directors (or Persons performing similar functions) of such entity, andany partnership or joint venture if more than a 50% interest in the profits orcapital thereof is owned by such Person or one or more of its Subsidiaries orsuch Person and one or more of its Subsidiaries (unless such partnership canand does ordinarily take major business actions without the prior approval of suchPerson or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary”is a reference to a Subsidiary of an Obligor.

 

*“Subsidiary Guarantor”* means eachSubsidiary which is party to the Subsidiary Guaranty.

 

*“Subsidiary Guaranty”*is definedin Section 2.3 of this Agreement.

 

*“Supplement”* is defined inSection 2.2 of this Agreement.

 

B-8

----

 

*“tranche”* means all Notes of aSeries having the same maturity, interest rate and schedule for mandatoryprepayments.

 

*“Unrestricted Subsidiary”*meansany Subsidiary so designated by the Obligors.

 

*“USA Patriot Act”* means UnitedStates Public Law 107-56, Uniting and Strengthening America by ProvidingAppropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOTACT) Act of 2001, as amended from time to time, and the rules and regulationspromulgated thereunder from time to time in effect.

 

B-9

----

 

**[FORM OF SERIES 2005-A,TRANCHE A NOTE]**

 

**Family Dollar Stores, Inc.Family Dollar, Inc.**

** **

**5.41% Series 2005-A Senior Note,Tranche A due September 27, 2015**

 
| No.  [        ]                           | [Date]          |
|-----------------------------------------------------------------------------------|-----------------|
| $[             ] | PPN 30704@ AA 2 |

 

For Value Received,each of the undersigned, Family DollarStores, Inc. (herein called *“FDSI”*), acorporation organized and existing under the laws of the State of Delaware, andFamily Dollar, Inc., acorporation organized and existing under the laws of the State of NorthCarolina, jointly and severally hereby promises to pay to [                      ]or registered assigns, the principal sum of [                    ]Dollars (or so much thereof asshall not have been prepaid) on September 27, 2015 with interest (computedon the basis of a 360-day year of twelve 30-day months) (a) on the unpaidbalance hereof at the rate of 5.41% per annum from the date hereof, payablesemi-annually, on the 27th day of March and September in each year and atmaturity, commencing on March 27, 2006, until the principal hereof shall havebecome due and payable, and (b) to the extent permitted by law, at theDefault Rate, on any overdue payment of interest and, during the continuance ofan Event of Default, on the unpaid balance hereof and on any overdue payment ofany Make-Whole Amount, payable semiannually as aforesaid (or, at the option ofthe registered holder hereof, on demand).

 

Payments of principal of, interest on and anyMake-Whole Amount with respect to this Note are to be made in lawful money ofthe United States of America at the principal office of Bank of America, N.A.in New York, New York.

 

This Note is one of a series of Senior Notes (hereincalled the *“Notes”*) issued pursuant to the NotePurchase Agreement, dated as of September 27, 2005 (as from time to timeamended, supplemented or modified, the *“Note Purchase Agreement”*),between the Obligors and the respective Purchasers named therein and isentitled to the benefits thereof.  Eachholder of this Note will be deemed, by its acceptance hereof, to have(i) agreed to the confidentiality provisions set forth in Section 20of the Note Purchase Agreement and (ii) made the representations set forthin Sections 6.2 and 6.3 of the Note Purchase Agreement, *provided*, that in lieu thereof such holder may (in relianceupon information provided by the Obligors, which shall not be unreasonablywithheld) make a representation to the effect that the purchase by any holderof any Note will not constitute a non-exempt prohibited transaction undersection 406(a) of ERISA.  Unlessotherwise indicated, capitalized terms used in this Note shall have therespective meanings ascribed to such terms in the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in theNote Purchase Agreement, upon surrender of this Note for registration oftransfer, duly endorsed, or accompanied by a written instrument of transferduly executed, by the registered holder hereof or such holder’s attorney dulyauthorized in writing, a new Note for a like principal amount will be issuedto, and registered in the name of, the transferee.  Prior to due presentment for registration oftransfer, the 

 

EXHIBIT 1(a)

(to Note PurchaseAgreement)

 

----

 

Obligors may treat the person in whose name this Note is registered asthe owner hereof for the purpose of receiving payment and for all otherpurposes, and the Obligors will not be affected by any notice to the contrary.

 

This Note is subject to optional prepayment, in wholeor from time to time in part, at the times and on the terms specified in theNote Purchase Agreement, but not otherwise.

 

Pursuant to the Subsidiary Guaranty Agreement dated asof September 27, 2005 (as amended, restated or otherwise modified fromtime to time, the *“Subsidiary Guaranty”*), certainSubsidiaries of the Obligors have absolutely and unconditionally guaranteedpayment in full of the principal of, Make-Whole Amount, if any, and interest onthis Note and the performance by the Obligors of its obligations contained inthe Note Purchase Agreement all as more fully set forth in said SubsidiaryGuaranty.

 

If an Event of Default, as defined in the NotePurchase Agreement, occurs and is continuing, the principal of this Note may bedeclared or otherwise become due and payable in the manner, at the price(including any applicable Make-Whole Amount) and with the effect provided inthe Note Purchase Agreement.

 

This Note shall be construed and enforced inaccordance with, and the rights of the issuer and holder hereof shall begoverned by, the law of the State of New York excluding choice-of-law principlesof the law of such State that would require the application of the laws of ajurisdiction other than such State.

 

 
|   | Family Dollar Stores, Inc. |
|--------|----------------------------|
|   |                       |   |
|   |                       |   |
|   | By                         |   |
|   |                       | Name: R. James Kelley |
|   |                       | Title: Vice Chairman, Chief Financial  Officer and Chief Administrative Officer |
|   |                       |   |
|   |                       |   |
|   | Family Dollar, Inc.        |
|   |                       |   |
|   |                       |   |
|   | By                         |   |
|   |                       | Name: R. James Kelley |
|   |                       | Title: Vice Chairman, Chief Financial  Officer and Chief Administrative Officer |

 

2

----

 

**[FORM OF SERIES 2005-A, TRANCHE B NOTE]**

 

FAMILY DOLLAR STORES, INC.FAMILY DOLLAR, INC.

 

**5.24% SERIES 2005-A SENIOR NOTE, TRANCHE B DUE SEPTEMBER 27,2015**

 
| No. [                 ]                            |   | [Date]          |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|
| $[                      ] |   | PPN 30704@ AB 0 |

 

For Value Received, eachof the undersigned, Family DollarStores, Inc. (herein called *“FDSI”*), acorporation organized and existing under the laws of the State of Delaware, andFamily Dollar, Inc., acorporation organized and existing under the laws of the State of North Carolina,jointly and severally hereby promises to pay to[                               ]or registered assigns, the principal sum of[                        ]Dollars (or so much thereof asshall not have been prepaid) on September 27, 2015 with interest (computedon the basis of a 360-day year of twelve 30-day months) (a) on the unpaidbalance hereof at the rate of 5.24% per annum from the date hereof, payablesemi-annually, on the 27th day of March and September in each year and atmaturity, commencing on March 27, 2006, until the principal hereof shall havebecome due and payable, and (b) to the extent permitted by law, at theDefault Rate, on any overdue payment of interest and, during the continuance ofan Event of Default, on the unpaid balance hereof and on any overdue payment ofany Make-Whole Amount, payable semiannually as aforesaid (or, at the option ofthe registered holder hereof, on demand).

 

Payments of principal of, interest on and anyMake-Whole Amount with respect to this Note are to be made in lawful money ofthe United States of America at the principal office of Bank of America, N.A.in New York, New York.

 

This Note is one of a series of Senior Notes (hereincalled the *“Notes”*) issued pursuant to the NotePurchase Agreement, dated as of September 27, 2005 (as from time to timeamended, supplemented or modified, the *“Note Purchase Agreement”*),between the Obligors and the respective Purchasers named therein and isentitled to the benefits thereof.  Eachholder of this Note will be deemed, by its acceptance hereof, to have(i) agreed to the confidentiality provisions set forth in Section 20of the Note Purchase Agreement and (ii) made the representations set forthin Sections 6.2 and 6.3 of the Note Purchase Agreement, *provided*, that in lieu thereof such holder may (in relianceupon information provided by the Obligors, which shall not be unreasonablywithheld) make a representation to the effect that the purchase by any holderof any Note will not constitute a non-exempt prohibited transaction undersection 406(a) of ERISA.  Unlessotherwise indicated, capitalized terms used in this Note shall have therespective meanings ascribed to such terms in the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in theNote Purchase Agreement, upon surrender of this Note for registration oftransfer, duly endorsed, or accompanied by a written instrument of transferduly executed, by the registered holder hereof or such holder’s attorney dulyauthorized in writing, a new Note for a like principal amount will be issuedto, and 

 

EXHIBIT 1(b)

(to Note Purchase Agreement)

 

----

 

registered in the name of, thetransferee.  Prior to due presentment forregistration of transfer, the Obligors may treat the person in whose name thisNote is registered as the owner hereof for the purpose of receiving payment andfor all other purposes, and the Obligors will not be affected by any notice tothe contrary.

 

The Obligors will make required prepayments ofprincipal on the date and in the amounts specified in the Note Agreement.  This Note is subject to optional prepayment,in whole or from time to time in part, at the times and on the terms specifiedin the Note Purchase Agreement, but not otherwise.

 

Pursuant to the Subsidiary Guaranty Agreement dated asof September 27, 2005 (as amended, restated or otherwise modified fromtime to time, the *“Subsidiary Guaranty”*), certainSubsidiaries of the Obligors have absolutely and unconditionally guaranteedpayment in full of the principal of, Make-Whole Amount, if any, and interest onthis Note and the performance by the Obligors of its obligations contained inthe Note Purchase Agreement all as more fully set forth in said SubsidiaryGuaranty.

 

If an Event of Default, as defined in the NotePurchase Agreement, occurs and is continuing, the principal of this Note may bedeclared or otherwise become due and payable in the manner, at the price(including any applicable Make-Whole Amount) and with the effect provided inthe Note Purchase Agreement.

 

This Note shall be construed and enforced inaccordance with, and the rights of the issuer and holder hereof shall begoverned by, the law of the State of New York excluding choice-of-lawprinciples of the law of such State that would require the application of thelaws of a jurisdiction other than such State.

 

 
|   | FAMILY  DOLLAR STORES, INC. |
|--------|-----------------------------|
|   |                        |
|   |                        |
|   | By                          |   |   |
|   |                        | Name:  R.  James Kelley |
|   |                        | Title:  Vice  Chairman, Chief Financial  Officer and Chief Administrative Officer |
|   |                        |
|   |                        |
|   | FAMILY  DOLLAR, INC.        |
|   |                        |
|   |                        |
|   | By                          |   |   |
|   |                        | Name:  R.  James Kelley |
|   |                        | Title:  Vice  Chairman, Chief Financial  Officer and Chief Administrative Officer |
|        |                             |  |  |  |  |

 

2

----

 

 

FAMILY DOLLAR STORES, INC.

FAMILY DOLLAR, INC.

 

[NUMBER] SUPPLEMENT TO NOTE PURCHASE AGREEMENT

 

Dated as of                               

 

 
| Re:                                                                                                 |   | $                                    % Series                 Senior Notes |
|-----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Due                 |

 

 

EXHIBIT S

(to Note Purchase Agreement)

 

----

 

**FamilyDollar Stores, Inc.**

**Family Dollar, Inc.**

**10401 Monroe Road**

**Charlotte, North Carolina 28201**

 
| Dated as of                   |
|-------------------------------|
|                          |
|                          |                                          ,  20    |
|                          |
| To the  Purchaser(s) named in |
| Schedule A  hereto       |

 

Ladiesand Gentlemen:

 

This [Number] Supplement to Note Purchase Agreement(the *“Supplement”*) is between Family Dollar Stores, Inc., a Delawarecorporation (the *“FDSI”*), and Family Dollar, Inc., a North Carolinacorporation (the *“FDI”* and collectively withFDSI,, the *“Obligors”*), and the institutionalinvestors named on Schedule A attached hereto (the *“Purchasers”*).

 

Reference is hereby made to that certain Note PurchaseAgreement dated as of September 27, 2005 (the *“NotePurchase Agreement”*) between the Obligors and the purchasers listedon Schedule A thereto.  Allcapitalized terms not otherwise defined herein shall have the same meaning asspecified in the Note Purchase Agreement. Reference is further made to Section 4.14 of the Note PurchaseAgreement which requires that, prior to the delivery of any Additional Notes,the Obligors and each Additional Purchaser shall execute and deliver aSupplement.

 

Each Obligor hereby agrees with the Purchaser(s) asfollows:

 

1.                                       TheObligors have authorized the issue and sale of $                    aggregate principal amount of its                %Series                Senior Notes due                          ,             (the *“Series*                    *Notes”*).  The Series        Notes, together with the Series ANotes [and theSeries           Notes]initially issued pursuant to the Note Purchase Agreement [and the                       Supplement] and each series of Additional Notes which may from time to timehereafter be issued pursuant to the provisions of Section 2.2 of the NotePurchase Agreement, are collectively referred to as the “Notes*”* (such term shall also include any such notes issued insubstitution therefor pursuant to Section 13 of the Note PurchaseAgreement).  TheSeries            Notesshall be substantially in the form set out in Exhibit 1 hereto with suchchanges therefrom, if any, as may be approved by the Purchaser(s) and theObligors.

 

2.                                       Subjectto the terms and conditions hereof and as set forth in the Note PurchaseAgreement and on the basis of the representations and warranties hereinafterset forth, the Obligors agree to issue and sell to each Purchaser, and eachPurchaser agrees to purchase from the Obligors, Series            Notes in theprincipal amount set forth opposite such Purchaser’s

 

----

 

name on Schedule A hereto at a price of 100% ofthe principal amount thereof on the closing date hereinafter mentioned.

 

3.                                       Thesale and purchase of theSeries                  Notes to be purchased by each Purchaser shall occur at the offices of [                                           ]at 10:00 a.m. Chicago time, at aclosing (the *“Closing”*) on       ,         or on such other Business Daythereafter on or prior to             ,             as maybe agreed upon by the Obligors and the Purchasers.  At the Closing, the Obligors will deliver to eachPurchaser the Series             Notes to be purchased by such Purchaser in the form of a singleSeries             Note (or such greater number of Series                  Notes in denominations of at least $100,000 as such Purchaser may request)dated the date of the Closing and registered in such Purchaser’s name (or inthe name of such Purchaser’s nominee), against delivery by such Purchaser tothe Obligors or their order of immediately available funds in the amount of thepurchase price therefor by wire transfer of immediately available funds for theaccount of the Obligors to account number [                                                  ]at                         Bank, [*Insert Bank address, ABA number for wire transfers,and any other relevant wire transfer information*].  If, at the Closing, the Obligors shall failto tender suchSeries                Notes to any Purchaser as provided above in this Section 3, or any of theconditions specified in Section 4 shall not have been fulfilled to anyPurchaser’s satisfaction, such Purchaser shall, at such Purchaser’s election,be relieved of all further obligations under this Agreement, without therebywaiving any rights such Purchaser may have by reason of such failure or suchnonfulfillment.

 

4.                                       Theobligation of each Purchaser to purchase and pay for theSeries                 Notes to be sold to such Purchaser at the Closing is subject to the fulfillmentto such Purchaser’s satisfaction, prior to the Closing, of the conditions setforth in Section 4 of the Note Purchase Agreement with respect to theSeries                  Notes to be purchased at the Closing, and to the following additionalconditions:

 

(a)                                  Exceptas supplemented, amended or superceded by the representations and warrantiesset forth in Exhibit A hereto, each of the representations and warranties ofthe Obligors set forth in Section 5 of the Note Purchase Agreement shall becorrect as of the date of Closing and the Obligors shall have delivered to eachPurchaser an Officer’s Certificate, dated the date of the Closing certifying thatsuch condition has been fulfilled.

 

(b)                                 Contemporaneouslywith the Closing, the Obligors shall sell to each Purchaser, and each Purchasershall purchase, theSeries                  Notes to be purchased by such Purchaser at the Closing as specified in ScheduleA.

 

5.                                       [Hereinsert special provisions forSeries                 Notes including prepayment provisions applicable to Series               Notes (including Make-Whole Amount) and closing conditions applicable to Series            Notes].

 

6.                                       EachPurchaser represents and warrants that the representations and warranties setforth in Section 6 of the Note Purchase Agreement are true and correct onthe date hereof with respect to the purchase of the Series             Notes by such Purchaser.

 

2

----

 

7.                                       EachObligor and each Purchaser agree to be bound by and comply with the terms andprovisions of the Note Purchase Agreement as fully and completely as if suchPurchaser were an original signatory to the Note Purchase Agreement.

 

The execution hereof shall constitute a contractbetween the Obligors and the Purchaser(s) for the uses and purposes hereinaboveset forth, and this agreement may be executed in any number of counterparts,each executed counterpart constituting an original but all together only oneagreement.

 

 
|                                                                                                                                                                                                           | FAMILY  DOLLAR STORES, INC. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           | By                          |   |   |
|                                                                                                                                                                                                           |                        | Name: |   |   |
|                                                                                                                                                                                                           |                        | Title: |   |   |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           | FAMILY  DOLLAR, INC.        |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           | By                          |   |   |
|                                                                                                                                                                                                           |                        | Name: |   |   |
|                                                                                                                                                                                                           |                        | Title: |   |   |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           |                        |
| Accepted as  of                       ,             |                        |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           | [VARIATION]                 |
|                                                                                                                                                                                                           |                        |
|                                                                                                                                                                                                           | By                          |   |   |
|                                                                                                                                                                                                           |                        | Name: |   |   |
|                                                                                                                                                                                                           |                        | Title: |   |   |
|                                                                                                                                                                                                                |                             |  |  |  |  |  |  |  |

 

3

----

 

**SupplementalRepresentations**

** **

EachObligor represents and warrants to each Purchaser that except as hereinafterset forth in this Exhibit A, each of the representations and warranties setforth in Section 5 of the Note Purchase Agreement is true and correct in allmaterial respects as of the date hereof with respect to the Series             Notes with the same force and effect as if each reference to “Series A Notes”set forth therein was modified to refer the “Series             Notes” and each reference to “this Agreement” therein was modified to refer tothe Note Purchase Agreement as supplemented by the             Supplement.  The Section references hereinafterset forth correspond to the similar sections of the Note Purchase Agreementwhich are supplemented hereby:

 

*Section 5.3.**                                Disclosure*.  The Obligors, through their agent, Banc ofAmerica Securities LLC has delivered to each Purchaser a copy of a PrivatePlacement Memorandum, dated                          (the *“Memorandum”*), relating to thetransactions contemplated by the             Supplement.  The Memorandum fairlydescribes, in all material respects, the general nature of the business andprincipal properties of the Obligors and their Restricted Subsidiaries.  The Note Purchase Agreement, the Memorandum,the documents, certificates or other writings delivered to each Purchaser by oron behalf of the Obligors in connection with the transactions contemplated bythe Note Purchase Agreement and the                  Supplement and the financial statements listed in Schedule 5.5 to the             Supplement, taken as a whole, do not contain any untrue statement of a materialfact or omit to state any material fact necessary to make the statementstherein not misleading in light of the circumstances under which they weremade.  Since                              ,there has been no change in the financial condition, operations, business,properties or prospects of the Obligors or any Restricted Subsidiary exceptchanges that individually or in the aggregate would not reasonably be expectedto have a Material Adverse Effect.  Thereis no fact known to any Obligor that would reasonably be expected to have aMaterial Adverse Effect that has not been set forth herein or in the Memorandumor in the other documents, certificates and other writings delivered to eachPurchaser by or on behalf of any Obligor specifically for use in connectionwith the transactions contemplated hereby.

 

*Section 5.4.**                                Organizationand Ownership of Shares of Subsidiaries*. (a) Schedule 5.4 to the            Supplement contains (except as noted therein) complete and correct lists of(i) the Obligors’ Restricted and Unrestricted Subsidiaries, and showing,as to each Subsidiary, the correct name thereof, the jurisdiction of itsorganization, and the percentage of shares of each class of its capital stockor similar equity interests outstanding owned by the Obligors and each otherSubsidiary, and all other Investments of the Obligors and their RestrictedSubsidiaries, (ii) the Obligors’ Affiliates, other than Subsidiaries, and (iii)the Obligors’ directors and senior officers.

 

*Section 5.13.**                         Private Offering by the Obligors*. Neither any Obligor nor anyone acting on its behalf has offered theSeries       Notes or any similar securities forsale to, or solicited any offer to buy any of the same from, or otherwiseapproached or negotiated in respect thereof with, any Person other than thePurchasers and not more than [            ]other Institutional Investors, each of which has been offered the Series             Notes at a private sale for investment. Neither any Obligor nor anyone acting on its behalf has taken, or willtake, any action that would subject

 

EXHIBIT A

(to Supplement)

 

----

 

the issuance or sale of the Notes to the registration requirements ofSection 5 of the Securities Act.

 

*Section 5.14.**                         Useof Proceeds; Margin Regulations*.  TheObligors will apply the proceeds of the sale of the Series         Notes to                                                           and for general corporate purposes. No part of the proceeds from the sale ofthe Series                 Notes pursuant to the                 Supplement will be used, directly or indirectly, for the purpose of buying orcarrying any margin stock within the meaning of Regulation U of the Board ofGovernors of the Federal Reserve System (12 CFR 221), or for the purpose ofbuying or carrying or trading in any securities under such circumstances as toinvolve any Obligor in a violation of Regulation X of said Board (12 CFR224) or to involve any broker or dealer in a violation of Regulation T of saidBoard (12 CFR 220).  Margin stock doesnot constitute more than 2% of the value of the consolidated assets of anyObligor and its Subsidiaries and no Obligor has any present intention thatmargin stock will constitute more than 2% of the value of such assets.  As used in this Section, the terms*“margin stock”* and*“purpose of buying orcarrying”*shall have the meanings assigned to them in saidRegulation U.

 

*Section 5.15.**                         ExistingDebt; Future Liens*. (a) Schedule 5.15 to the                 Supplement sets forth a complete and correct list of all outstanding Debt ofthe Obligors and their Restricted Subsidiaries as of                                 ,since which date there has been no Material change in the amounts, interestrates, sinking funds, installment payments or maturities of the Debt of theObligors or its Restricted Subsidiaries. Neither any Obligor nor any Restricted Subsidiary is in default and nowaiver of default is currently in effect, in the payment of any principal orinterest on any Debt of any Obligor or such Subsidiary and no event orcondition exists with respect to any Debt of any Obligor or any RestrictedSubsidiary that would permit (or that with notice or the lapse of time, orboth, would permit) one or more Persons to cause such Debt to become due andpayable before its stated maturity or before its regularly scheduled dates ofpayment.

 

[Add any additional Sections as appropriate at thetime the Series                 Notes are issued]

 

2

----

 

**[FORM OF SERIES          NOTE]**

 

FAMILY DOLLAR STORES, INC.

 

      % SERIES             SENIOR NOTE DUE                     

 
| No. [                      ]                            |   | [Date]                                                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
| $[                           ] |   | PPN [                     ] |

 

For Value Received,each of the undersigned, Family Dollar Stores, Inc., a corporation organized and existing under the laws of theState of Delaware (herein called the *“FDSI”*), andFamily Dollar, Inc., acorporation organized and existing under the laws of the State of NorthCarolina (herein called the *“FDI”*), herebypromises to pay to [                                        ],or registered assigns, the principal sum of [                                       ]Dollars (or so much thereof asshall not have been prepaid) on                                        ,with interest (computed on the basis of a 360-day year of twelve 30-day months)(a) on the unpaid balance hereof at the rate of            % per annumfrom the date hereof, payable semiannually, on the            day of            and           in each year,commencing on the first of such dates after the date hereof, until theprincipal hereof shall have become due and payable, and (b) to the extentpermitted by law, at a rate per annum from time to time equal to [2% above thestated rate], on any overdue payment of interest and, during the continuance ofan Event of Default, on the unpaid balance hereof and on any overdue payment ofany Make-Whole Amount, payable [semiannually] as aforesaid (or, at the optionof the registered holder hereof, on demand).

 

Payments of principal of, interest on and anyMake-Whole Amount with respect to this Note are to be made in lawful money ofthe United States of America at Bank of America, N.A. in New York.

 

This Note is one of a series of Senior Notes (the *“Notes”*) issued pursuant to a Supplement to the NotePurchase Agreement dated as ofSeptember        , 2005 (as from timeto time amended, supplemented or modified, the *“NotePurchase Agreement”*), between the Obligors, the Purchasers namedtherein and Additional Purchasers of Notes from time to time issued pursuant toany Supplement to the Note Purchase Agreement. This Note and the holder hereof are entitled equally and ratably withthe holders of all other Notes of all series from time to time outstandingunder the Note Purchase Agreement to all the benefits provided for thereby orreferred to therein.  Each holder of thisNote will be deemed, by its acceptance hereof, to have (i) agreed to theconfidentiality provisions set forth in Section 20 of the Note PurchaseAgreement and (ii) made the representations set forth in Sections 6.2and 6.3 of the Note Purchase Agreement, *provided* thatsuch holder may (in reliance upon information provided by the Obligors, whichshall not be unreasonably withheld) make a representation to the effect thatthe purchase by such holder of any Note will not constitute a non-exemptprohibited transaction under Section 406(a) of ERISA.  Unless otherwise indicated, capitalized termsused in this Note shall have the respective meanings ascribed to such terms inthe Note Purchase Agreement.

 

EXHIBIT 1

(to Supplement)

 

----

 

This Note is registered with the Obligors and, asprovided in the Note Purchase Agreement, upon surrender of this Note forregistration of transfer, duly endorsed, or accompanied by a written instrumentof transfer duly executed, by the registered holder hereof or such holder’sattorney duly authorized in writing, a new Note of the same series for a likeprincipal amount will be issued to, and registered in the name of, thetransferee.  Prior to due presentment forregistration of transfer, the Obligors may treat the person in whose name thisNote is registered as the owner hereof for the purpose of receiving payment andfor all other purposes, and the Obligors will not be affected by any notice tothe contrary.

 

[The Obligors will make required prepayments ofprincipal on the dates and in the amounts specified in the Note PurchaseAgreement.]  [This Note is not subject toregularly scheduled prepayments of principal.] This Note is [also] subject tooptional prepayment, in whole or from time to time in part, at the times and onthe terms specified in the Note Purchase Agreement, but not otherwise.

 

Pursuant to the Subsidiary Guaranty Agreement dated asof September      , 2005 (as amended or modifiedfrom time to time, the *“Subsidiary Guaranty”*),certain Subsidiaries of the Obligors have absolutely and unconditionallyguaranteed payment in full of the principal of, Make-Whole Amount, if any, andinterest on this Note and the performance by the Obligors of its obligationscontained in the Note Purchase Agreement all as more fully set forth in saidSubsidiary Guaranty.

 

If an Event of Default, as defined in the NotePurchase Agreement, occurs and is continuing, the principal of this Note may bedeclared or otherwise become due and payable in the manner, at the price(including any applicable Make-Whole Amount) and with the effect provided inthe Note Purchase Agreement.

 

This Note shall be construed and enforced inaccordance with, and the rights of the parties shall be governed by, the law ofthe State of New York excluding choice-of-law principles of the law of suchState that would require the application of the laws of a jurisdiction otherthan such State.

 

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|   | FAMILY  DOLLAR STORES, INC. |
|--------|-----------------------------|
|   |                        |
|   |                        |
|   | By                          |   |   |
|   |                        |
|   |                        | Name: |   |   |
|   |                        | Title: |   |   |
|   |                        |
|   |                        |
|   | FAMILY  DOLLAR, INC.        |
|   |                        |
|   |                        |
|   | By                          |
|   |                        | Name: |   |   |
|   |                        | Title: |   |   |

 

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CONFORMED COPY

 

SUBSIDIARYGUARANTY AGREEMENT

 

 

Datedas of September 27, 2005

 

 

from

 

 

THESUBSIDIARY GUARANTORS NAMED HEREIN

 

 

forthe benefit of

 

 

THEHOLDERS OF THE NOTES

 

RE:

 

$169,000,0005.41% SERIES 2005-A SENIOR NOTES, TRANCHE A, DUE SEPTEMBER 27, 2015

 

$81,000,0005.24% SERIES 2005-A SENIOR NOTES, TRANCHE B, DUE SEPTEMBER 27, 2015

 

OF

 

FAMILYDOLLAR STORES, INC.ANDFAMILY DOLLAR, INC.

 

 

----

 

**Table of Contents**

 
| **SECTION**      | ** ** | **HEADING**                                           |   |
|------------------|------------|-------------------------------------------------------|--------|
|             |       |                                                  |   |
| Section 1.  |       | Guaranty                                              | 2      |
|             |       |                                                  |   |
| Section 2.  |       | Representations and Warranties                        | 3      |
|             |       |                                                  |   |
| Section 3.  |       | Subsidiary Guarantor’s Obligations Unconditional | 5      |
|             |       |                                                  |   |
| Section 4.  |       | Full Recourse Obligations; Pari Passu Ranking         | 10     |
|             |       |                                                  |   |
| Section 5.  |       | Waiver                                                | 10     |
|             |       |                                                  |   |
| Section 6.       |       | Waiver of Subrogation                                 | 11     |
|             |       |                                                  |   |
| Section 7.  |       | Subordination                                         | 12     |
|             |       |                                                  |   |
| Section 8.  |       | Effect of Bankruptcy Proceedings, Etc                 | 12     |
|             |       |                                                  |   |
| Section 9.  |       | Term of Guaranty                                      | 13     |
|             |       |                                                  |   |
| Section 10. |       | Contribution                                          | 13     |
|             |       |                                                  |   |
| Section 11. |       | Limitation  of Liability                              | 14     |
|             |       |                                                  |   |
| Section 12. |       | Negative  Pledge                                      | 14     |
|             |       |                                                  |   |
| Section 13. |       | Supplemental  Agreement                               | 14     |
|             |       |                                                  |   |
| Section 14. |       | Definitions  and Terms Generally                      | 15     |
|             |       |                                                  |   |
| Section  15.     |       | Notices                                               | 15     |
|             |       |                                                  |   |
| Section  16.     |       | Amendments,  Etc                                      | 16     |
|             |       |                                                  |   |
| Section 17.      |       | Consent to  Jurisdiction; Service of Process          | 16     |

 

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| Section 18. |   | Waiver of Jury Trial        | 17     |
|------------------|--------|-----------------------------|--------|
|             |   |                        |   |
| Section 19. |   | Survival                    | 17     |
|             |   |                        |   |
| Section 20. |   | Severability                | 18     |
|             |   |                        |   |
| Section 21. |   | Successors and Assigns      | 18     |
|             |   |                        |   |
| Section 22. |   | Table of Contents; Headings | 18     |
|             |   |                        |   |
| Section 23. |   | Counterparts                | 18     |
|             |   |                        |   |
| Section 24. |   | Governing Law               | 18     |
|             |   |                        |   |
| Section 25. |   | Covenant Compliance         | 18     |

 

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Subsidiary Guaranty Agreement,dated as of September 27, 2005 (the *“Guaranty”*),from each of:

 

(i)                                   FamilyDollar Services, Inc., a North Carolina corporation;

(ii)                                FamilyDollar Operations, Inc., a North Carolina corporation;

(iii)                             FamilyDollar Trucking, Inc., a North Carolina corporation; and

(iv)                            suchSubsidiaries as shall become parties hereto in accordance with Section 13hereof (each a *“Subsidiary Guarantor”* and collectivelythe *“Subsidiary Guarantors”*),

 

forthe benefit of the holders from time to time of the Notes (as defined below)(the *“Holders”*).  Capitalized terms used herein are defined inSection 14 hereof or the Note Purchase Agreement referred to below.

 

Whereas, Family DollarStores, Inc., a Delaware corporation, and Family Dollar, Inc., a North Carolinacorporation (each individually an *“Obligor”* and,collectively, the *“Obligors”*) will authorize theissue and sale of (i) $169,000,000 5.41% Series 2005-A Senior Notes, Tranche Adue September 27, 2015 (the *“Tranche A Notes”*),and (ii) $81,000,000 5.24% Series 2005-A Senior Notes, Tranche B dueSeptember 27, 2015 (the *“Tranche B Notes”*and, together with the Tranche A Notes, the *“Series2005-A Notes”*), pursuant to a Note Purchase Agreement, dated as ofthe date hereof (as amended, modified or supplemented from time to time, the *“Note Purchase Agreement”*) among the Obligors and thepurchasers named therein.

 

Whereas, the Obligorsare authorized to issue Additional Notes (as such term is defined in the NotePurchase Agreement) of one or more separate series from time to time pursuantto Section 2.2 of the Note Purchase Agreement.

 

Whereas, theAdditional Notes together with the Series 2005-A Notes are collectivelyreferred to as the *“Notes”*.

 

Whereas, each of theSubsidiary Guarantors is a Subsidiary of the Obligors.

 

Whereas, the Obligorshave agreed that their Subsidiaries will guarantee their respective obligationsunder the Notes and the Note Purchase Agreement.

 

Whereas, theSubsidiary Guarantors each acknowledge that they will derive substantialbenefits from the issuance of the Notes.

 

Now, Therefore, inconsideration of the premises and to induce the Holders to purchase the Notes,each of the Subsidiary Guarantors, intending to be legally bound, hereby agreesfor the benefit of the Holders, as follows:

 

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Section 1.                                                 Guaranty.

 

Each Subsidiary Guarantor with all other SubsidiaryGuarantors, hereby absolutely,unconditionally and irrevocably guarantees, jointly and severally, as a primaryobligor and not merely as a surety, to each Holder and its successors andassigns, the full and punctual payment and performance when due, whether atstated maturity, by acceleration or otherwise, of the principal of and Make-WholeAmount, Prepayment Premium, LIBOR Breakage Amount, and interest on (including,without limitation, interest, whether or not an allowable claim, accruing afterthe date of filing of any petition in bankruptcy, or the commencement of anybankruptcy, insolvency or similar proceeding relating to any Obligor) the Notesand all other amounts under the Note Purchase Agreement and all otherobligations, agreements and covenants of the Obligors now or hereafter existingunder the Note Purchase Agreement whether for principal, Make-Whole Amount,Prepayment Premium, LIBOR Breakage Amount, interest (including interestaccruing or becoming owing both prior to and subsequent to the commencement ofany proceeding against or with respect to any Obligor under any chapter of theBankruptcy Code), indemnification payments, expenses (including reasonableattorneys’ fees and expenses) or otherwise, and all reasonable costs andexpenses, if any, incurred by any Holder in connection with enforcing anyrights under this Guaranty (all such obligations being the *“GuaranteedObligations”*), and agrees to pay any and all reasonable expensesincurred by each Holder in enforcing this Guaranty; *provided*that, notwithstanding anything contained herein or in the Note PurchaseAgreement to the contrary, the maximum liability of each Subsidiary Guarantorhereunder and under the Note Purchase Agreement shall in no event exceed suchGuarantor’s Maximum Guaranteed Amount, and *provided further,*each Subsidiary Guarantor shall be unconditionally required to pay all amountsdemanded of it hereunder prior to any determination of such Maximum GuaranteedAmount and the recipient of such payment, if so required by a finalnon-appealable order of a court of competent jurisdiction, shall then be liablefor the refund of any excess amounts.  Ifany such rebate or refund is ever required, all other Subsidiary Guarantors(and the Obligors) shall be fully liable for the repayment thereof to themaximum extent allowed by applicable law. This Guaranty is an absolute, unconditional, present and continuingguaranty of payment and not of collectibility and is in no way conditioned uponany attempt to collect from the Obligors or any other action, occurrence orcircumstance whatsoever.  Each SubsidiaryGuarantor agrees that the Guaranteed Obligations may at any time and from totime exceed the Maximum Guaranteed Amount of such Subsidiary Guarantor withoutimpairing this Guaranty or affecting the rights and remedies of the Holdershereunder.

 

Notwithstanding any stay, injunction or otherprohibition preventing such action against any Obligor, if for any reasonwhatsoever any Obligor shall fail or be unable duly, punctually and fully toperform and (in the case of the payment of Guaranteed Obligations) pay such amountsas and when the same shall become due (subject to any applicable grace periodsunder the Note Purchase Agreement) and (in the case of the payment ofGuaranteed Obligations) payable or to perform or comply with any otherGuaranteed Obligation, whether or not such failure or inability shallconstitute an “Event of Default” under the Note Purchase Agreement or theNotes, each Subsidiary Guarantor will forthwith (in the case of the payment ofGuaranteed Obligations) pay or cause to be paid such amounts to the Holders, inlawful money of the United States of America, at the place specified in theNote Purchase Agreement, or perform or comply with such Guaranteed Obligationsor cause such Guaranteed Obligations to be performed or

 

2

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complied with, (in the case of the payment ofGuaranteed Obligations) together with interest (in the amounts and to theextent required under such Notes) on any amount due and owing.

 

Section 2.                                                 Representationsand Warranties.

 

Each Subsidiary Guarantor hereby represents andwarrants as follows:

 

(a)                                  Allrepresentations and warranties contained in the Note Purchase Agreement thatrelate to such Subsidiary Guarantor are true and correct in all respects andare incorporated herein by reference with the same force and effect as thoughset forth herein in full.

 

(b)                                 SuchSubsidiary Guarantor acknowledges that, any default in the due observance orperformance by such Subsidiary Guarantor of any covenant, condition oragreement contained herein (if, after the running of any applicable notice andopportunity to cure periods provided in the Note Purchase Agreement, suchdefault or event of default remains uncured) shall constitute an Event ofDefault.

 

(c)                                  Thereare no conditions precedent to the effectiveness of this Guaranty that have notbeen satisfied or expressly waived.

 

(d)                                 SuchSubsidiary Guarantor has, independently and without reliance upon the Holdersand based on such documents and information as it has deemed appropriate, madeits own credit analysis and decision to enter into this Guaranty.  Such Subsidiary Guarantor has investigatedfully the benefits and advantages which will be derived by it from execution ofthis Guaranty, and the Board of Directors of such Subsidiary Guarantor hasdecided that a direct and/or an indirect benefit will accrue to such SubsidiaryGuarantor by reason of the execution of this Guaranty.

 

(e)                                  (i) ThisGuaranty is not given with actual intent to hinder, delay or defraud any Personto which such Subsidiary Guarantor is or will become, on or after the datehereof, indebted; (ii) such Subsidiary Guarantor has received at least areasonably equivalent value in exchange for the giving of this Guaranty;(iii) such Subsidiary Guarantor is not insolvent on the date hereof andwill not become insolvent as a result of the giving of this Guaranty;(iv) such Subsidiary Guarantor is not engaged in a business ortransaction, nor is about to engage in a business or transaction, for which anyproperty remaining with such Subsidiary Guarantor constitutes an unreasonablysmall amount of capital; and (v) such Subsidiary Guarantor does not intendto incur debts that will be beyond such Subsidiary Guarantor’s ability to payas such debts mature.

 

(f)                                    EachSubsidiary Guarantor is a corporation**or other legalentity duly organized and validly existing under the laws of its state oforganization, and has the requisite power, authority and legal right under thelaws of its state of organization to conduct its business as presentlyconducted and to execute,  deliver andperform its obligations under this Guaranty.

 

(g)                                 Theexecution, delivery and performance of this Guaranty have been duly authorizedby all necessary corporate****action on thepart of each Subsidiary Guarantor, and does

 

3

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not require any consentor approval of, or the giving of notice to, or the taking of any other actionin respect of, any stockholder or trustee or holder of any indebtedness orobligations of such Subsidiary Guarantor. This Guaranty constitutes a legal, valid and binding obligation of eachSubsidiary Guarantor, enforceable against****suchSubsidiary Guarantor in accordance with its terms, except that suchenforceability is subject to any limitations arising from bankruptcy,insolvency, liquidation, moratorium, reorganization and other similar laws ofgeneral application relating to or affecting the rights of creditors orpledgees and to general principles of equity (regardless of whether suchenforceability is considered in a proceeding in equity or at law).

 

(h)                                 Theexecution, delivery and performance of this Guaranty does not and will notconflict with or result in any violation of or default under any provision ofthe Articles of Incorporation or by-laws or partnership agreement, as the casemay be, of any Subsidiary Guarantor, or any indenture, mortgage, deed of trust,instrument, law, rule or regulation binding on any Subsidiary Guarantor or towhich a Subsidiary Guarantor is a party.

 

(i)                                     Theexecution, delivery and performance of this Guaranty does not and will notresult in violation of any judgment or order applicable to any SubsidiaryGuarantor or result in the creation or imposition of any Lien on any of theproperties or revenues of any Subsidiary Guarantor pursuant to any requirementof law or any indenture, mortgage, deed of trust or other instrument to whichsuch Subsidiary Guarantor is a party.

 

(j)                                     Theexecution, delivery and performance of this Guaranty do not and will notconflict with and do not and will not require any consent, approval orauthorization of, or registration or filing with, any governmental authority oragency of the state of organization of any Subsidiary Guarantor or of theUnited States or any State.

 

(k)                                  Thereare no pending or, to the knowledge of any Subsidiary Guarantor, threatenedactions or proceedings against or affecting such Subsidiary Guarantor or any ofits properties by or before any court or administrative agency or arbiter thatwould adversely affect the ability of such Subsidiary Guarantor to perform itsobligations hereunder or call into question the validity or enforceability ofthis Guaranty.

 

(l)                                     EachSubsidiary Guarantor’s obligations under this Guaranty are at least *pari passu*in right of payment with all other unsecuredclaims against the general creditors of such Subsidiary Guarantor.

 

(m)                               EachSubsidiary Guarantor has validly and irrevocably submitted to the jurisdictionof the Supreme Court of the State of New York, New York County, and the UnitedStates District Court for the Southern District of New York.

 

(n)                                 Thechoice of the laws of the State of New York to govern this Guaranty is validand binding.

 

(o)                                 NoSubsidiary Guarantor is in breach of or default under or with respect to anyinstrument, document or agreement binding upon such Subsidiary Guarantor whichbreach or default is reasonably probable to have a Material Adverse Effect orresult in the creation of a

 

4

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Lien on any property ofsuch Subsidiary Guarantor other than Liens permitted under Section 10.4 ofthe Note Purchase Agreement.  EachSubsidiary Guarantor is in compliance with all applicable requirements of lawexcept such non-compliance as would not have a Material Adverse Effect.

 

(p)                                 Theexecution, delivery and performance by each Subsidiary Guarantor of thisGuaranty will not render such Subsidiary Guarantor insolvent, nor is it beingmade in contemplation of such Subsidiary Guarantor’s insolvency, and theSubsidiary Guarantor does not have an unreasonably small capital.

 

Section 3.                                                 SubsidiaryGuarantor’s Obligations Unconditional.

 

(a)                                  ThisGuaranty shall constitute a guarantee of payment, performance and complianceand not of collection, and each Subsidiary Guarantor specifically agrees thatit shall not be necessary, and that such Subsidiary Guarantor shall not beentitled to require, before or as a condition of enforcing the liability ofsuch Subsidiary Guarantor under this Guaranty or requiring payment orperformance of the Guaranteed Obligations by any Subsidiary Guarantorhereunder, or at any time thereafter, that any Holder:  (a) file suit or proceed to obtain orassert a claim for personal judgment against any Obligor or any other Personthat may be liable for or with respect to any Guaranteed Obligation;(b) make any other effort to obtain payment or performance of anyGuaranteed Obligation from any Obligor or any other Person that may be liablefor or with respect to such Guaranteed Obligation, except for the making of thedemands, when appropriate, described in Section 1; (c) forecloseagainst, or seek to realize upon security now or hereafter existing for suchGuaranteed Obligations; (d) except to the extent set forth in Section 1,exercise or assert any other right or remedy to which such Holder is or may beentitled in connection with any Guaranteed Obligation or any security or otherguaranty therefor; or (e) assert or file any claim against the assets ofany Obligor or any other Person liable for any Guaranteed Obligation.  Each Subsidiary Guarantor agrees that thisGuaranty shall be continuing, and that the Guaranteed Obligations will be paidand performed in accordance with their terms and the terms of this Guaranty,and are the primary, absolute and unconditional obligations of such SubsidiaryGuarantor, irrespective of the value, genuineness, validity, legality,regularity or enforceability or lack thereof of any part of the GuaranteedObligations or any agreement or instrument relating to the GuaranteedObligations or this Guaranty, or the existence of any indemnities with respectto the existence of any other guarantee of or security for any of theGuaranteed Obligations, or any substitution, release or exchange of any otherguarantee of or security for any of the Guaranteed Obligations, and, to thefullest extent permitted by applicable law, irrespective of any othercircumstance whatsoever that might otherwise constitute a legal or equitabledischarge or defense of a surety or guarantor, it being the intent of this Section3 that the obligations of each Subsidiary Guarantor hereunder shall beirrevocable, primary, absolute and unconditional under any and allcircumstances.

 

(b)                                 EachSubsidiary Guarantor hereby expressly waives notice of acceptance of andreliance upon this Guaranty, diligence, presentment, demand of payment orperformance, protest and all other notices (except as otherwise provided for inSection 1) whatsoever, any requirement that the Holders exhaust any right,power or remedy or proceed against the Obligors or against any other Personunder any other guarantee of, or security for, or any other agreement,regarding

 

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any of the Guaranteed Obligations.  Each Subsidiary Guarantor further agreesthat, subject solely to the requirement of making demands under Section 1, theoccurrence of any event or other circumstance that****mightotherwise vary the risk of the Obligors or such Subsidiary Guarantor orconstitute a defense****(legal orequitable) available to, or a discharge of, or a counterclaim or right of set-offby, any Obligor or such Subsidiary Guarantor (other than the full andindefeasible due payment and performance of the Guaranteed Obligations), shallnot affect the liability of the Subsidiary Guarantor hereunder.

 

(c)                                  Theobligations of each Subsidiary Guarantor under this Guaranty are not subject toany counterclaim, set-off, deduction, diminution, abatement, recoupment,suspension, deferment or defense based upon any claim such Subsidiary Guarantoror any other Person may have against any Obligor, any Holder or any otherPerson, and shall remain in full force and effect without regard to, and shallnot be released, discharged or in any way affected by, any circumstances orcondition whatsoever (whether or not such Subsidiary Guarantor or any Obligorshall have any knowledge or notice thereof), including:

 

(i)                                     anyrenewal, extension, modification, increase, decrease, alteration orrearrangement of all or any part of the Guaranteed Obligations or any instrumentexecuted in connection therewith, or any contract or understanding with anyObligor, the Holders, or any of them, or any other Person, pertaining to theGuaranteed Obligations;

 

(ii)                                  anyadjustment, indulgence, forbearance or compromise that might be granted orgiven by any Holder to any Obligor or any other Person liable on the GuaranteedObligations, or the failure of any Holder to assert any claim or demand or toexercise any right or remedy against any Obligor or any other Person under theprovisions of the Note Purchase Agreement, the Notes or otherwise; or anyrescission, waiver, amendment or modification of, or any release from any ofthe terms or provisions of, the Note Purchase Agreement, the Notes, anyguarantee or any other agreement;

 

(iii)                               theinsolvency, bankruptcy arrangement, adjustment, composition, liquidation,disability, dissolution or lack of power of any Obligor or any other Person atany time liable for the payment of all or part of the Guaranteed Obligations;or any dissolution of any Obligor or any other such Person, or any change,restructuring or termination of the partnership structure or existence of anyObligor or any other such Person, or any sale, lease or transfer of any or allof the assets of any Obligor or any other such Person, or any change in theshareholders, partners, or members of any Obligor or any other such Person; orany default, failure or delay, willful or otherwise, in the performance of theGuaranteed Obligations;

 

(iv)                              theinvalidity, illegality or unenforceability of all or any part of the GuaranteedObligations, or any document or agreement executed in connection with theGuaranteed Obligations, for any reason whatsoever, including the fact that theGuaranteed Obligations, or any part thereof, exceed the amount permitted bylaw, the act of creating the Guaranteed Obligations or any part is *ultra vires*, the officers or representatives executing thedocuments or otherwise creating the Guaranteed Obligations acted in excess oftheir authority, the Guaranteed Obligations violate 

 

6

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applicable usury laws, any Obligor or any other Personhas valid defenses, claims or offsets (whether at law, in equity or byagreement) which render the Guaranteed Obligations wholly or partiallyuncollectible from any Obligor or any other Person, the creation, performanceor repayment of the Guaranteed Obligations (or the execution, delivery andperformance of any document or instrument representing part of the GuaranteedObligations or executed in connection with the Guaranteed Obligations or givento secure the repayment of the Guaranteed Obligations) is illegal,uncollectible, legally impossible or unenforceable, or the documents orinstruments pertaining to the Guaranteed Obligations have been forged orotherwise are irregular or not genuine or authentic;

 

(v)                                 anyfull or partial release of the liability of any Obligor on the GuaranteedObligations or any part thereof, of any co-guarantors, or of any other Personnow or hereafter liable, whether directly or indirectly, jointly, severally, orjointly and severally, to pay, perform, guarantee or assure the payment of theGuaranteed Obligations or any part thereof, it being recognized, acknowledgedand agreed by each Subsidiary Guarantor that such Subsidiary Guarantor may berequired to pay the Guaranteed Obligations in full without assistance orsupport of any other Person, and such Subsidiary Guarantor has not been inducedto enter into this Guaranty on the basis of a contemplation, belief,understanding or agreement that any parties other than the Obligors will beliable to perform the Guaranteed Obligations, or that the Holders will look toother parties to perform the Guaranteed Obligations;

 

(vi)                              thetaking or accepting of any other security, collateral or guaranty, or otherassurance of payment, for all or any part of the Guaranteed Obligations;

 

(vii)                           anyrelease, surrender, exchange, subordination, deterioration, waste, loss orimpairment (including negligent, unreasonable or unjustifiable impairment) ofany collateral, property or security, at any time existing in connection with,or assuring or securing payment of, all or any part of the GuaranteedObligations;

 

(viii)                        thefailure of any Holder or any other Person to exercise diligence or reasonablecare in the preservation, protection, enforcement, sale or other handling ortreatment of all or any part of such collateral, property or security;

 

(ix)                                thefact that any collateral, security, security interest or lien contemplated orintended to be given, created or granted as security for the repayment of theGuaranteed Obligations shall not be properly perfected or created, or shallprove to be unenforceable or subordinate to any other security interest orlien, it being recognized and agreed by each Subsidiary Guarantor that suchSubsidiary Guarantor is not entering into this Guaranty in reliance on, or incontemplation of the benefits of, the validity, enforceability, collectibilityor value of any of the collateral;

 

(x)                                   anypayment by any Obligor to any Holder being held to constitute a preferenceunder any Fraudulent Conveyance Law, or for any reason any Holder beingrequired to refund such payment or pay such amount to any Obligor or someoneelse;

 

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(xi)                                anyother action taken or omitted to be taken with respect to the GuaranteedObligations, or the security and collateral therefor, whether or not suchaction or omission prejudices such Subsidiary Guarantor or increases the likelihoodthat such Subsidiary Guarantor will be required to pay the GuaranteedObligations pursuant to the terms hereof, it being the unambiguous andunequivocal intention of such Subsidiary Guarantor that it shall be obligatedto pay the Guaranteed Obligations when due, notwithstanding any occurrence,circumstance, event, action or omission whatsoever, whether or notcontemplated, and whether or not otherwise or particularly described herein,except for the full and final payment and satisfaction of the GuaranteedObligations in cash;

 

(xii)                             thefact that all or any of the Guaranteed Obligations cease to exist by operationof law, including by way of a discharge, limitation or tolling thereof underapplicable bankruptcy laws;

 

(xiii)                          anyother circumstance (including any statute of limitations) that might in anymanner or to any extent otherwise constitute a defense available to, vary therisk of, or operate as a discharge of, any Obligor or any Person as a matter oflaw or equity;

 

(xiv)                         anymerger or consolidation of any Obligor or any Subsidiary Guarantor into or withany other Person or any sale, lease or transfer of any of the assets of anyObligor to any other Person;

 

(xv)                            anychange in the ownership of any shares of capital stock of any Obligor, or anychange in the relationship between any Obligor and such Subsidiary Guarantor orany termination of any such relationship;

 

(xvi)                         anydefault, failure or delay, willful or otherwise, in the performance by anyObligor, any Subsidiary Guarantor or any other Person of any obligations of anykind or character whatsoever under the Note Purchase Agreement or any otheragreement;

 

(xvii)                      anymerger or consolidation of any Obligor or any Subsidiary Guarantor or any otherPerson into or with any other Person or any sale, lease, transfer or otherdisposition of any of the assets of any Obligor, any Subsidiary Guarantor orany other Person to any other Person, or any change in the ownership of anyshares or partnership interests of any Obligor, any Subsidiary Guarantor or anyother Person;

 

(xviii)                   inrespect of any Obligor, any Subsidiary Guarantor or any other Person, anychange of circumstances, whether or not foreseen or foreseeable, whether or notimputable to any Obligor, any Subsidiary Guarantor or any other Person, orother impossibility of performance through fire, explosion, accident, labordisturbance, floods, droughts, embargoes, wars (whether or not declared), civilcommotion, acts of God or the public enemy, delays or failure of suppliers orcarriers, inability to obtain materials, action of any Federal or stateregulatory body or agency, change of law or any other causes affectingperformance, or any other *force majeure*,whether or not beyond the

 

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control of any Obligor, any Subsidiary Guarantor orany other Person and whether or not of the kind hereinbefore specified; or

 

(xix)                           anyother occurrence, circumstance, or event whatsoever, whether similar ordissimilar to the foregoing, whether foreseen or unforeseen, and any othercircumstance which might otherwise constitute a legal or equitable defense ordischarge of the liabilities of a guarantor or surety or which might otherwiselimit recourse against such Subsidiary Guarantor;

 

*provided*thatthe specific enumeration of the above-mentioned acts, failures or omissionsshall not be deemed to exclude any other acts, failures or omissions, thoughnot specifically mentioned above, it being the purpose and intent of thisGuaranty and the parties hereto that the obligations of each SubsidiaryGuarantor shall be absolute and unconditional and shall not be discharged,impaired or varied except by the payment and performance of all obligations ofthe Obligors under the Note Purchase Agreement and the Notes in accordance withtheir respective terms as each may be amended or modified from time totime.  Without limiting the foregoing, itis understood that repeated and successive demands may be made and recoveriesmay be had hereunder as and when, from time to time, any Obligor or anySubsidiary Guarantor shall default under or in respect of the terms of the NotePurchase Agreement and that notwithstanding recovery hereunder for or inrespect of any given default or defaults by any Obligor or any SubsidiaryGuarantor under the Note Purchase Agreement, this Guaranty shall remain in fullforce and effect and shall apply to each and every subsequent default.  All waivers herein contained shall be withoutprejudice to the Holders at their respective options to proceed against any Obligor,any Subsidiary Guarantor or other Person, whether by separate action or byjoinder.

 

(d)                                 EachSubsidiary Guarantor hereby consents and agrees that any Holder or Holders fromtime to time, with or without any further notice to or assent from any otherSubsidiary Guarantor may, without in any manner affecting the liability of anySubsidiary Guarantor under this Guaranty, and upon such terms and conditions asany such Holder or Holders may deem advisable:

 

(i)                                     extendin whole or in part (by renewal or otherwise), modify, change, compromise,release or extend the duration of the time for the performance or payment ofany debt, liability or obligation of any Obligor or any Subsidiary Guarantor orof any other Person secondarily or otherwise liable for any debt, liability orobligations of any Obligor on the Note Purchase Agreement or the Notes, orwaive any Default or Event of Default with respect thereto, or waive, modify,amend or change any provision of any other agreement or waive this Guaranty; or

 

(ii)                                  sell,release, surrender, modify, impair, exchange or substitute any and allproperty, of any nature and from whomsoever received, held by, or for thebenefit of, any such Holder as direct or indirect security for the payment orperformance of any debt, liability or obligation of any Obligor, any SubsidiaryGuarantor or of any other Person secondarily or otherwise liable for any debt,liability or obligation of any Obligor on the Note Purchase Agreement or theNotes; or

 

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(iii)                               settle,adjust or compromise any claim of any Obligor or any Subsidiary Guarantoragainst any other Person secondarily or otherwise liable for any debt,liability or obligation of any Obligor on the Note Purchase Agreement or theNotes; or

 

(iv)                              purchaseAdditional Notes form time to time from the Obligors pursuant to the terms andprovisions of the Note Purchase Agreement.

 

Each Subsidiary Guarantorhereby ratifies and confirms any such extension, renewal, change, sale,release, waiver, surrender, exchange, modification, amendment, impairment,substitution, settlement, adjustment, compromise or purchase Additional Notesand that the same shall be binding upon it, and hereby waives, to the fullestextent permitted by law, any and all defenses, counterclaims or offsets whichit might or could have by reason thereof, it being understood that suchSubsidiary Guarantor shall at all times be bound by this Guaranty and remainliable hereunder.

 

(e)                                  Allrights of any Holder may be transferred or assigned at any time in accordancewith the Note Purchase Agreement and shall be considered to be transferred orassigned at any time or from time to time upon the transfer of such Note inaccordance with the Note Purchase Agreement without the consent of or notice tothe Subsidiary Guarantors under this Guaranty.

 

(f)                                    NoHolder shall be under any obligation: (i) to marshal any assets in favor of the Subsidiary Guarantors orin payment of any or all of the liabilities of any Obligor or any SubsidiaryGuarantor under or in respect of the Notes or the obligations of any Obligorand the Subsidiary Guarantors under the Note Purchase Agreement or (ii) topursue any other remedy that the Subsidiary Guarantors may or may not be ableto pursue themselves and that may lighten the Subsidiary Guarantors’ burden,any right to which each Subsidiary Guarantor hereby expressly waives.

 

Section 4.                                                 Full RecourseObligations; Pari Passu Ranking.

 

Subject to the Maximum Guaranteed Amount specifiedabove, the obligations of each Subsidiary Guarantor set forth herein constitutethe full recourse obligations of such Subsidiary Guarantor enforceable againstit to the full extent of all its assets and properties.

 

The respective obligations under this Guaranty of theSubsidiary Guarantors are and at all times shall remain direct and unsecuredobligations of the Subsidiary Guarantors ranking *pari passu*as against the assets of the Subsidiary Guarantors without any preference amongthemselves and *pari passu* with all other presentand future unsecured Debt (actual or contingent) of the Subsidiary Guarantorswhich is not expressed to be subordinate or junior in rank to any otherunsecured Debt of the Subsidiary Guarantors.

 

Section 5.                                                 Waiver.

 

Each Subsidiary Guarantor unconditionally waives, tothe extent permitted by applicable law:

 

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(a)                                  noticeof any of the matters referred to in Section 3;

 

(b)                                 noticeto such Subsidiary Guarantor of the incurrence of any of the GuaranteedObligations, notice to such Subsidiary Guarantor of any breach or default byany Obligor or such Subsidiary Guarantor with respect to any of the GuaranteedObligations or any other notice that may be required, by statute, rule of lawor otherwise, to preserve any rights of any Holder against such SubsidiaryGuarantor;

 

(c)                                  presentmentto any Obligor or such Subsidiary Guarantor or of payment from any Obligor orsuch Subsidiary Guarantor with respect to any Note or other GuaranteedObligation or protest for nonpayment or dishonor;

 

(d)                                 anyright to the enforcement, assertion, exercise or exhaustion by any Holder ofany right, power, privilege or remedy conferred in any Note, the Note PurchaseAgreement or otherwise;

 

(e)                                  anyrequirement of diligence on the part of any Holder;

 

(f)                                    anyrequirement to mitigate the damages resulting from any default under the Notesor the Note Purchase Agreement;

 

(g)                                 anynotice of any sale, transfer or other disposition of any right, title to orinterest in any Note or other Guaranteed Obligation by any Holder, assignee orparticipant thereof, or in the Note Purchase Agreement;

 

(h)                                 anyrelease of any Subsidiary Guarantor from its obligations hereunder resultingfrom any loss by it of its rights of subrogation hereunder; and

 

(i)                                     anyother circumstance whatsoever which might otherwise constitute a legal orequitable discharge, release or defense of a guarantor or surety or which mightotherwise limit recourse against such Subsidiary Guarantor.

 

Section 6.                                                 Waiver ofSubrogation.

 

Notwithstanding any payment or payments made by anySubsidiary Guarantor hereunder, or any application by any Holder of anysecurity or of any credits or claims, no Subsidiary Guarantor will assert orexercise any rights of any Holder or of such Subsidiary Guarantor against anyObligor to recover the amount of any payment made by such Subsidiary Guarantorto any Holder hereunder by way of any claim, remedy or subrogation,reimbursement, exoneration, contribution, indemnity, participation or otherwisearising by contract, by statute, under common law or otherwise, and suchSubsidiary Guarantor shall not have any right of recourse to or any claimagainst assets or property of any Obligor, in each case unless and until theGuaranteed Obligations have been paid in full. Until such time (but not thereafter), each Subsidiary Guarantor herebyexpressly waives any right to exercise any claim, right or remedy which suchSubsidiary Guarantor may now have or hereafter acquire against any Obligor orany other Subsidiary Guarantor that arises under the Notes, the Note PurchaseAgreement or from the

 

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performance by any Subsidiary Guarantor of theguaranty hereunder including any claim, remedy or right of subrogation,reimbursement, exoneration, contribution, indemnification or participation inany claim, right or remedy of any Holder against any Obligor or any SubsidiaryGuarantor, or any security that any Holder now has or hereafter acquires,whether or not such claim, right or remedy arises in equity, under contract, bystatute, under common law or otherwise. If any amount shall be paid to a Subsidiary Guarantor by any Obligor oranother Subsidiary Guarantor after payment in full of the Guaranteed Obligations,and all or any portion of the Guaranteed Obligations shall thereafter bereinstated in whole or in part and any Holder is required to repay any sumsreceived by any of them in payment of the Guaranteed Obligations, this Guarantyshall be automatically reinstated and such amount shall be held in trust forthe benefit of the Holders and shall forthwith be paid to the Holders to becredited and applied to the Guaranteed Obligations, whether matured orunmatured.  The provisions of thisparagraph shall survive the termination of this Guaranty, and any satisfactionand discharge of the Obligors by virtue of any payment, court order or anyFederal or state law.

 

Section 7.                                                 Subordination.

 

If any Subsidiary Guarantor is or becomes the holderof any indebtedness payable by any Obligor or another Subsidiary Guarantor,each Subsidiary Guarantor hereby subordinates all indebtedness owing to it fromany Obligor or such other Subsidiary Guarantor to all indebtedness of theObligors to the Holders, and agrees that, during the continuance of any Event ofDefault, it shall not accept any payment on the same until payment in full ofthe Guaranteed Obligations and shall in no circumstance whatsoever attempt toset-off or reduce any obligations hereunder because of such indebtedness.  If any amount shall nevertheless be paid inviolation of the foregoing to a Subsidiary Guarantor by any Obligor or anotherSubsidiary Guarantor prior to payment in full of the Guaranteed Obligations,such amount shall be held in trust for the benefit of the Holders and shall forthwithbe paid to the Holders to be credited and applied to the GuaranteedObligations, whether matured or unmatured.

 

Section 8.                                                 Effect ofBankruptcy Proceedings, Etc.

 

(a)                                  Ifafter receipt of any payment of, or proceeds of any security applied (orintended to be applied) to the payment of all or any part of, the GuaranteedObligations, any Holder is for any reason compelled to surrender or voluntarilysurrenders (under circumstances in which it believes it could reasonably beexpected to be so compelled if it did not voluntarily surrender), such paymentor proceeds to any Person (i) because such payment or application ofproceeds is or may be avoided, invalidated, declared fraudulent, set aside,determined to be void or voidable as a preference, fraudulent conveyance,fraudulent transfer, impermissible set-off or a diversion of trust funds or(ii) for any other similar reason, including, without limitation,(x) any judgment, decree or order of any court or administrative bodyhaving jurisdiction over any Holder or any of their respective properties or(y) any settlement or compromise of any such claim effected by any Holderwith any such claimant (including any Obligor), then the Guaranteed Obligationsor part thereof intended to be satisfied shall be reinstated and continue, andthis Guaranty shall continue in full force as if such payment or proceeds hadnot been received, notwithstanding any revocation thereof or the cancellationof any Note or any other instrument evidencing any

 

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Guaranteed Obligations or otherwise, and the Subsidiary Guarantors,jointly and severally, shall be liable to pay the Holders, and hereby doindemnify the Holders and hold them harmless for, the amount of such payment orproceeds so surrendered and all expenses (including reasonable attorneys’ fees,court costs and expenses attributable thereto) incurred by any Holder indefense of any claim made against any of them that any payment or proceedsreceived by any Holder in respect of all or part of the Guaranteed Obligationsmust be surrendered.  The provisions ofthis paragraph shall survive the termination of this Guaranty, and anysatisfaction and discharge of any Obligor by virtue of any payment, court orderor any Federal or state law.

 

(b)                                 Ifan event permitting the acceleration of the maturity of any of the GuaranteedObligations shall at any time have occurred and be continuing, and suchacceleration shall at such time be prevented by reason of the pendency againstany Obligor or any other Person of any case or proceeding contemplated bySection 8(a) hereof, then, for the purpose of defining the obligation ofany Subsidiary Guarantor under this Guaranty, the maturity of the principalamount of the Guaranteed Obligations shall be deemed to have been acceleratedwith the same effect as if an acceleration had occurred in accordance with theterms of such Guaranteed Obligations, and such Subsidiary Guarantor shallforthwith pay such principal amount, all accrued and unpaid interest thereon,and all other Guaranteed Obligations, due or that would have become due but forsuch case or proceeding, without further notice or demand.

 

Section 9.                                                 Term ofGuaranty.

 

This Guaranty and all guarantees, covenants andagreements of each Subsidiary Guarantor contained herein shall continue in fullforce and effect and shall not be discharged until such time as all of theprincipal of and interest on the Notes, the other Guaranteed Obligations andother independent payment obligations of such Subsidiary Guarantor under thisGuaranty shall be paid in cash and performed in full, and all of the agreementsof each of the other Subsidiary Guarantors hereunder shall be duly paid in cashand performed in full.

 

Section 10.                                           Contribution.

 

In order to provide for just and equitablecontribution among the Subsidiary Guarantors, each Subsidiary Guarantor agreesthat, to the extent any Subsidiary Guarantor makes any payment hereunder on anydate which, when added to all preceding payments made by such Subsidiary Guarantorhereunder, would result in the aggregate payments by such Subsidiary Guarantorhereunder exceeding its Percentage (as defined below) of all payments then ortheretofore made by all Subsidiary Guarantors hereunder, such SubsidiaryGuarantor shall have a right of contribution against each other SubsidiaryGuarantor whose aggregate payments then or theretofore made hereunder are lessthan its Percentage of all payments by all Subsidiary Guarantors then ortheretofore made hereunder, in an amount such that, after giving effect to anysuch contribution rights, each Subsidiary Guarantor will have paid only itsPercentage of all payments by all Subsidiary Guarantors then or theretoforemade hereunder.  A Subsidiary Guarantor’s“Percentage” on any date shall mean the percentage obtained by dividing(a) the Adjusted Net Assets of such Subsidiary Guarantor on such date by(b) the sum of the Adjusted Net Assets of all Subsidiary Guarantors onsuch date.  *“AdjustedNet Assets”* means, for each

 

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Subsidiary Guarantor on any date, the lesser of(i) the amount by which the fair value of the property of such SubsidiaryGuarantor exceeds the total amount of liabilities, including contingentliabilities, but excluding liabilities under this Guaranty, of such SubsidiaryGuarantor on such date and (ii) the amount by which the present fairsalable value of the assets of such Subsidiary Guarantor on such date exceedsthe amount that will be required to pay the probable liability of suchSubsidiary Guarantor on its debts, excluding debt in respect of this Guaranty,as they become absolute and matured.

 

Section 11.                                           Limitation ofLiability.

 

Each Subsidiary Guarantor hereby confirms that it isthe intention of such Subsidiary Guarantor that the guarantee by suchSubsidiary Guarantor pursuant to this Guaranty not constitute a fraudulenttransfer or conveyance for purposes of Title 11 of the United States Code,the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act orany similar applicable Federal or state law (all such statutes and laws arecollectively referred to as *“Fraudulent ConveyanceLaws”*).  To effectuate theforegoing intention, each Subsidiary Guarantor hereby irrevocably agrees thatthe obligations of such Subsidiary Guarantor under this Guaranty shall belimited to the amount as will, after giving effect to all rights to receive anycollections from or payments by or on behalf of any other Subsidiary Guarantorin respect of the obligations of such other Subsidiary Guarantor pursuant toSection 10 hereof, result in the obligations of such Subsidiary Guarantorunder this Guaranty not constituting such a fraudulent transfer orconveyance.  In the event that the liabilityof any Subsidiary Guarantor hereunder is limited pursuant to thisSection 11 to an amount that is less than the total amount of theGuaranteed Obligations, then it is understood and agreed that the portion ofthe Guaranteed Obligations for which such Subsidiary Guarantor is liable hereundershall be the last portion of the Guaranteed Obligations to be repaid.

 

Section 12.                                           NegativePledge.

 

Except as permitted under Section 10.4 of theNote Purchase Agreement, no Subsidiary Guarantor will create any Lien on itsassets to any other Person during the pendency of this Guaranty except forLiens permitted by Section 10.4 of the Note Purchase Agreement.

 

Section 13.                                           SupplementalAgreement.

 

Upon execution and delivery by a Subsidiary of aSupplemental Agreement substantially in the form of Exhibit A hereto, suchSubsidiary shall become a Subsidiary Guarantor hereunder with the same forceand effect as if originally named as a Subsidiary Guarantor herein.  The execution and delivery of any suchinstrument shall not require the consent of any other Subsidiary Guarantorhereunder.  The rights and obligations ofeach Subsidiary Guarantor hereunder shall remain in full force and effectnotwithstanding the addition of any new Subsidiary Guarantor as a party to thisGuaranty.

 

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Section 14.                                           Definitions andTerms Generally.

 

(a)                                  Unlessotherwise defined herein, capitalized terms defined in the Note PurchaseAgreement are used herein as defined therein. In addition, the following terms shall have the following meanings.

 

*“Adjusted Net Assets”*has themeaning specified in Section 10 hereof.

 

*“Fraudulent Conveyance Laws”*hasthe meaning specified in Section 11 hereof.

 

*“Guaranteed Obligations”*has themeaning specified in Section 1 hereof.

 

*“Guaranty”*has the meaningspecified in the introduction hereto.

 

*“Holders”*has the meaningspecified in the introduction hereto.

 

*“Material Adverse Effect”* means amaterial adverse effect (a) on the business, financial condition,operations or Properties of a Subsidiary Guarantor taken as a whole or(b) on its ability to perform its obligations hereunder.

 

*“Maximum Guaranteed Amount”* shallmean, for each Subsidiary Guarantor, the maximum amount which any SubsidiaryGuarantor could pay under this Guaranty without having such payment set asideas a fraudulent transfer or conveyance or similar action under FraudulentConveyance Law.

 

*“Note Purchase Agreement”*has themeanings specified in the Recitals hereto.

 

*“Notes”* has the meaningsspecified in the Recitals hereto.

 

*“Percentage”* has the meaningspecified in Section 10 hereof.

 

*“Required Holders”*is has themeaning specified in the Note Purchase Agreement.

 

*“Subsidiary Guarantor”*has themeaning specified in the introduction hereto.

 

(b)                                 Wheneverthe context may require, any pronoun shall include the corresponding masculine,feminine and neuter forms.  The words“include,” “includes” and “including” shall be deemed to be followed by thephrase “without limitation.”  Allreferences herein to Articles, Sections, Exhibits and Schedules shall be deemedreferences to Articles and Sections of, and Exhibits and Schedules to, thisGuaranty unless the context shall otherwise require.

 

Section 15.                                           Notices.

 

All notices under the terms and provisions hereofshall be in writing (with charges prepaid), and shall be delivered or sent byhand, by telecopy, by express courier service or by registered or certifiedmail, return receipt requested, postage prepaid, addressed,

 

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(a)                                  ifto any Holder, at the address set forth in the Note Purchase Agreement, or atsuch other address as any such Holder shall from time to time designate to theObligors,

 

(b)                                 ifto a Subsidiary Guarantor, at the address of such Subsidiary Guarantor setforth on the signature pages hereto or at such other address as such SubsidiaryGuarantor shall from time to time designate in writing to each Holder.

 

Anotice or communication shall be deemed to have been duly given and effective:

 

(a)                                  whendelivered (whether or not accepted), if personally delivered;

 

(b)                                 fivebusiness days after being deposited in the mail, postage prepaid, if deliveredby first-class mail (whether or not accepted);

 

(c)                                  whensent, if sent via facsimile;

 

(d)                                 whendelivered if sent by registered or certified mail (whether or not accepted);and

 

(e)                                  onthe next Business Day if timely delivered by an overnight air courier, withcharges prepaid (whether or not accepted).

 

Section16.                                           Amendments,Etc.

 

No amendment, alteration, modification or waiver ofany term or provision of this Guaranty, nor consent to any departure by anySubsidiary Guarantor therefrom, shall in any event be effective unless the sameshall be in writing and consented to by the Required Holders *provided*, *however*, thatany amendment, alteration, modification or waiver of the terms and conditionscontained in Section 1 hereof shall require consent from all Holders, and thensuch waiver or consent shall be effective only in the specific instance and forthe specific purpose for which given.

 

Section 17.                                           Consent to Jurisdiction;Service of Process..

 

(a)                                  EachSubsidiary Guarantor irrevocably submits to the nonexclusive *in personam* jurisdiction of any New York State or federalcourt sitting in New York City, over any suit, action or proceeding arising outof or relating to this Guaranty or the Notes. To the fullest extent it may effectively do so under applicable law,each Subsidiary Guarantor irrevocably waives and agrees not to assert, by wayof motion, as a defense or otherwise, any claim that it is not subject to the *in personam* jurisdiction of any such court, any objectionthat it may now or hereafter have to the laying of the venue of any such suit,action or proceeding brought in any such court and any claim that any suchsuit, action or proceeding brought in any such court has been brought in aninconvenient forum.

 

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(b)                                 EachSubsidiary Guarantor agrees, to the fullest extent it may effectively do sounder applicable law, that a final judgment in any suit, action or proceedingof the nature referred to in paragraph (a) of this Section 17 brought inany such court shall be conclusive and binding upon such party, subject torights of appeal and may be enforced in the courts of the United States of Americaor the State of New York (or any other courts to the jurisdiction of which suchparty is or may be subject) by a suit upon such judgment.

 

(c)                                  EachSubsidiary Guarantor consents to process being served in any suit, action orproceeding of the nature referred to in paragraph (a) of this Section 17by mailing a copy thereof by registered or certified mail, postage prepaid,return receipt requested, to the address of each Subsidiary Guarantor specifiedin Section 15 or at such other address of which you shall then have beennotified pursuant to said Section or to any agent for service of processappointed pursuant to the provisions of Section 27.  Each Subsidiary Guarantor agrees that suchservice upon receipt (i) shall be deemed in every respect effective service ofprocess upon it in any such suit, action or proceeding and (ii) shall, tothe full extent permitted by law, be taken and held to be valid personalservice upon and personal delivery to such party.  Notices hereunder shall be conclusively presumedreceived as evidenced by a delivery receipt furnished by the United StatesPostal Service or any reputable commercial delivery service.

 

(d)                                 Nothingin this Section 17 shall affect the right of any holder of Notes to serveprocess in any manner permitted by law, or limit any right that the holders ofany of the Notes may have to bring proceedings against any Subsidiary Guarantorin the courts of any appropriate jurisdiction or to enforce in any lawfulmanner a judgment obtained in one jurisdiction in any other jurisdiction.

 

Section 18.                                           Waiver of JuryTrial.

 

**Each Subsidiary Guarantor and byits acceptance hereof each holder, to the fullest extent permitted byapplicable law, irrevocably and unconditionally waives the right to trial byjury in any legal or equitable action, suit or proceeding arising out of orrelating to this Guaranty or the Note Purchase Agreement or any transactioncontemplated hereby or thereby or the subject matter of any of the foregoing.**

 

Section 19.                                           Survival.

 

All warranties, representations and covenants made byeach Subsidiary Guarantor herein or in any written certificate or otherinstrument required to be delivered by it or on its behalf hereunder or underthe Note Purchase Agreement shall be considered to have been relied upon by theHolders and shall survive the execution and delivery of this Guaranty,regardless of any investigation made by any Holder or on such Holder’sbehalf.  All statements in any suchcertificate or other instrument shall constitute warranties and representationsby such Subsidiary Guarantor hereunder.

 

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Section 20.                                           Severability.

 

Any provision of this Guaranty which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction, be ineffectiveto the extent of such prohibition or unenforceability without invalidating theremaining provisions hereof, and any such prohibition or unenforceability inany jurisdiction shall not invalidate or render unenforceable such provision inany other jurisdiction.  To the extentpermitted by applicable law, each Subsidiary Guarantor hereby waives anyprovision of law that renders any provisions hereof prohibited or unenforceablein any respect.

 

Section 21.                                           Successors andAssigns.

 

The terms of this Guaranty shall be binding upon eachSubsidiary Guarantor and its successors and assigns and shall inure to thebenefit of the Holders and their respective successors and assigns.

 

Section 22.                                           Table ofContents; Headings.

 

The section and paragraph headings in this Guarantyand the table of contents are for convenience of reference only and shall notmodify, define, expand or limit any of the terms or provisions hereof, and allreferences herein to numbered sections, unless otherwise indicated, are tosections in this Guaranty.

 

Section 23.                                           Counterparts.

 

This Guaranty may be executed in any number ofcounterparts, each of which shall be an original, but all of which togethershall constitute one instrument.

 

Section 24.                                           Governing Law.

 

This Guaranty shall in all respects be governed by,and construed and interpreted in accordance with, the laws of the State of NewYork, without regard to the conflicts of laws principles of such state.

 

Section 25.                                           CovenantCompliance.

 

Each Subsidiary Guarantor agrees to comply with eachof the covenants contained herein and in the Note Purchase Agreement thatimposes or purports to impose, by reference to such Subsidiary Guarantor,express or otherwise, through agreements with the Obligors, restrictions orobligations on such Subsidiary Guarantor.

 

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In Witness Whereof, eachparty hereto has caused this Subsidiary Guaranty Agreement to be duly executedas of the date first above written.

 
|   | Family Dollar Services, Inc.,  a North  Carolina corporation   |
|--------|----------------------------------------------------------------|
|   |                                                           |
|   |                                                           |
|   | By:                                                            |  /s/ R.  James Kelly |   |
|   |                                                           | Name:  R.  James Kelly |
|   |                                                           | Title:  Vice  Chairman, Chief Financial  Officer and Chief Administrative Officer |
|   |                                                           |
|   |                                                           |
|   | Family Dollar Operations, Inc.,  a North  Carolina corporation |
|   |                                                           |
|   |                                                           |
|   | By:                                                            |  /s/ R.  James Kelly |   |
|   |                                                           | Name:  R.  James Kelly |
|   |                                                           | Title:  Vice  Chairman, Chief Financial  Officer and Chief Administrative Officer |
|   |                                                           |
|   |                                                           |
|   | Family Dollar Trucking, Inc., a North  Carolina corporation    |
|   |                                                           |
|   |                                                           |
|   | By:                                                            |  /s/ R.  James Kelly |   |
|   |                                                           | Name:  R.  James Kelly |
|   |                                                           | Title:  Vice  Chairman, Chief Financial  Officer and Chief Administrative Officer |
|        |                                                                |  |  |  |  |

 

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**ExhibitA**

**Formof Supplemental Agreement**

 

Supplemental Agreementdated as of                           ,           from                           ,a                 corporation (the *“New Subsidiary”*), for thebenefit of the Holders (as defined in the Guaranty referred to below).  Capitalized terms used herein withoutdefinition shall have the respective meanings ascribed thereto in theSubsidiary Guaranty Agreement, dated as of September 27, 2005 (the *“Guaranty”*), from: (i) [names of guarantors](        ) such other Subsidiaries (asdefined below) as shall become parties thereto in accordance therewith, for thebenefit of the Holders (as such term is defined in such Guaranty).

 

Whereas, Family DollarStores, Inc., a Delaware corporation, and Family Dollar, Inc., a North Carolinacorporation (each individually an *“Obligor”* and,collectively, the *“Obligors”*) has authorized theissue and sale of (i) $169,000,000 5.41% Series 2005-A Senior Notes, Tranche Adue September 27, 2015 (the *“Tranche A Notes”*),and (ii) $81,000,000 5.24% Series 2005-A Senior Notes, Tranche B dueSeptember 27, 2015 (the *“Tranche B Notes”*and, together with the Tranche A Notes, the *“Series2005-A Notes”*), pursuant to a Note Purchase Agreement, dated as ofSeptember 27, 2005 (as amended, modified or supplemented from time totime, the *“Note Purchase Agreement”*) among theObligors and the purchasers named therein.

 

Whereas, the Obligorsare authorized to issue Additional Notes (as such term is defined in the NotePurchase Agreement) of one or more separate series from time to time pursuantto Section 2.2 of the Note Purchase Agreement.

 

Whereas, theAdditional Notes together with the Series 2005-A Notes are collectivelyreferred to as the *“Notes”*.

 

Whereas, the NewSubsidiary is a Subsidiary of the Obligors.

 

Whereas, the existingSubsidiaries of the Obligors have entered into the Guaranty.

 

Whereas, the NotePurchase Agreement requires that certain Subsidiaries become party to theGuaranty (as a Subsidiary Guarantor).

 

Whereas, the NewSubsidiary acknowledges that it has derived or will derive substantial benefitsfrom the issuance of the Notes.

 

Whereas, the Guarantyspecifies that additional Subsidiaries may become Subsidiary Guarantors undersuch Guaranty by execution and delivery of an instrument in the form of thisAgreement.  The undersigned Subsidiary isexecuting this Agreement in accordance with the requirements of the NotePurchase Agreement in order to become a Subsidiary Guarantor under the Guarantyas consideration for the Notes previously purchased.

 

Now, Therefore, theNew Subsidiary Guarantor agrees as follows:

 

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*Section 1.**                                          Guaranty*.  In accordance with Section 13 of theGuaranty, the New Subsidiary by its signature hereto shall become a SubsidiaryGuarantor under such Guaranty with the same force and effect as if originallynamed therein as a Subsidiary Guarantor and the New Subsidiary hereby(a) agrees to all the terms and provisions of such Guaranty applicable toit as a Subsidiary Guarantor thereunder, (b) represents and warrants that therepresentations and warranties made by it as a Subsidiary Guarantor underSection 2 of the Subsidiary Guaranty are true and correct on and as of thedate hereof, (c) acknowledges receipt of a copy of and agrees to be obligatedand bound by the terms of such Guaranty, and (d) agrees that each reference toa *“Subsidiary Guarantor”* in such Guarantyshall be deemed to include the New Subsidiary.

 

*Section 2.**                                          Enforceability*.  The New Subsidiary hereby represents andwarrants that this Agreement has been duly authorized, executed and deliveredby the New Subsidiary and constitutes a legal, valid and binding obligation ofthe New Subsidiary enforceable against it in accordance with its terms, exceptas such enforceability may be limited by bankruptcy, insolvency,reorganization, moratorium or similar laws affecting the applicability ofcreditors’ rights generally and by equitable principles of generalapplicability (regardless of whether such enforceability is considered in aproceeding in equity or at law).

 

*Section 3.**                                          Effecton Guaranty*.  Except as expresslysupplemented hereby, the Guaranty shall continue in full force and effect.

 

*Section 4.**                                          Governing Law*.  ThisAgreement shall in all respects be governed by, and construed and interpretedin accordance with, the laws of the State of New York, without regard to theconflicts of laws principles of such state.

 

*Section 5.**                                          SavingsClause*.  To the fullest extentpermitted under applicable law, in the event any one or more of the provisionscontained in this Agreement should be held invalid, illegal or unenforceable inany respect with respect to the New Subsidiary, no party hereto shall berequired to comply with such provision for so long as such provision is held tobe invalid, illegal or unenforceable, and the validity, legality andenforceability of the remaining provisions contained herein shall not in anyway be affected or impaired.  The partiesshall endeavor in good-faith negotiations to replace any invalid, illegal orunenforceable provisions with valid provisions, the economic effect of whichcomes as close as possible to that of the invalid, illegal or unenforceableprovisions.

 

*Section 6.**                                          Notices*.  All communications to the New Subsidiaryshall be given to it at the address or telecopy number set forth under itssignature hereto.

 

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In Witness Whereof, the New Subsidiary has duly executedthis Agreement as of the day and year first above written.

 

 
|   | [NEW  SUBSIDIARY] |
|--------|-------------------|
|   |              |
|   |              |
|   | By:               |   |   |
|   |              | Name: |
|   |              | Title: |
|   |              | Address: |
|   |              |   |
|   |              |   |
|   |              | Telecopy: |

 

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