Document:

Exhibit
4.1

 

FOURTH
SUPPLEMENTAL INDENTURE

 

FOURTH SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”),
dated as of January 19, 2005 is entered into between Key Energy Services,
Inc., a Maryland corporation (the “Company”), the undersigned guarantors and
U.S. Bank National Association, as trustee under the Indenture referred to
below (the “Trustee”).

 

W I T N E S S E T H

 

WHEREAS, the Company has heretofore executed
and delivered to the Trustee that certain Indenture dated as of May 9,
2003 (as supplemented by the First Supplemental Indenture dated as of
May 14, 2003, the Second Supplemental Indenture dated as of July 12,
2004, and the Third Supplemental Indenture dated as of July 19, 2004, the “Indenture”), pursuant
to which the Company issued an aggregate outstanding principal amount of $150
million of 6 3/8% Senior Notes due 2013 (the “Notes”);

 

WHEREAS, the Indenture requires, among other
things, that the Company shall (i) provide to the Trustee copies of
certain reports filed with the U.S. Securities and Exchange Commission and
(ii) comply with other financial reporting requirements specified in the
Indenture;

 

WHEREAS, the Company has received the consent
of the holders of a majority in principal amount of the Notes as of January 7,
2005 (the “Record Date”),
to waive any and all defaults or events of defaults that may arise from the
Company’s noncompliance with the reporting requirements specified in the
Indenture prior to March 31, 2005; and

 

WHEREAS, the Company and the Trustee are
authorized to enter into this Supplemental Indenture pursuant to the consent of
the holders of the Notes.

 

NOW THEREFORE, in consideration of the
foregoing and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Company and the Trustee mutually covenant and agree
for the equal and ratable benefit of the holders of the Notes as follows:

 

1.     CAPITALIZED TERMS.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.

 

2.     REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.  The Company represents and
warrants to the Trustee as follows:

 

(a)           Pursuant to Section 513
of the Indenture, Holders of a majority in principal amount of the Outstanding
Securities as of the Record Date (or their duly designated proxies) have waived
any past defaults related to the Company’s noncompliance with the reporting
requirements specified in Sections 704 and 1003 of the Indenture;

 

(b)           Holders of a
majority in principal amount of the Outstanding Securities as of the Record
Date have consented to and approved the execution and delivery of this
Supplemental Indenture; and

 

 

(c)           the
execution and delivery of this Supplemental Indenture is authorized and
permitted by the Indenture, and all of the Indenture’s requirements for the
execution and delivery of this Supplemental Indenture have been satisfied.

 

3.     REQUEST TO EXECUTE THIS SUPPLEMENTAL
INDENTURE.  The Company has requested,
and does hereby request, that the Trustee execute this Supplemental Indenture.

 

4.     AMENDMENT TO SECTION 501(C).  Section 501(c) of the Indenture shall be
deleted in its entirety and will be replaced by the following Section 501(c):

 

“(c)         the
Company fails to comply with any of the provisions of Section 801 or Section 1010
hereof and such failure shall have continued for 15 days after notice from the
Company or any Holder of the Notes or the Company or any of its Subsidiaries
fails to comply with the provisions of Section 1007 or Section 1009
hereof, and such failure shall have continued for 30 days after notice from the
Company or any Holder of the Notes or the Company or any of its Restricted
Subsidiaries fails to comply by March 31, 2005, with Section 704 or Section 1003
with respect to the financial reports, information, documents or statements to
be provided, filed or made available for annual or quarterly periods ending
prior to March 31, 2005 and such failure shall have continued for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding.”

 

5.     AMENDMENT TO SECTION 704– REPORTS BY
COMPANY AND THE GUARANTORS.  Section 704
of the Indenture shall be deleted in its entirety and will be replaced by the
following Section 704:

 

“SECTION 704.  Reports by
Company and the Guarantors.

 

The Company
and each of the Guarantors shall (except as provided in the next paragraph)
file with the Trustee, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may from time to time by rules and regulations prescribe)
which the Company or any Guarantor may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, and shall otherwise comply with Section 314(a) of
the Trust Indenture Act.

 

Notwithstanding
any other provision in this Section 704, until March 31, 2005, the
Company and the Guarantors shall not be required to provide, file or make
available financial reports, information, documents or statements that the
Company otherwise would have been required to provide, file or make available
to the Trustee, the Commission, or any other Person pursuant to this Section 704
on any date before March 31, 2005.”

 

2

 

6.     AMENDMENT TO SECTION 1003– REPORTS.  Section 1003 of the Indenture shall be
deleted in its entirety and will be replaced by the following Section 1003:

 

“SECTION 1003.  Reports.

 

Whether or not
required by the rules and regulations of the Commission, so long as any Notes
are outstanding, the Company shall furnish to the Holders of Notes within the
time periods specified in the Commission’s rules and regulations (except as
provided in the next paragraph) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and, with respect to the annual information only, a
report thereon by the Company’s independent public accountants and
(ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. If
the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
this Section 1003 shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company. In
addition, following consummation of the Exchange Offer, whether or not required
by the rules and regulations of the Commission, the Company shall (except as
provided in the next paragraph) file a copy of all such information and reports
with the Commission for public availability within the time periods specified
in the Commission’s rules and regulations (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. The Company shall at all times
comply with TIA § 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee’s
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company’s compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers’ Certificates).

 

Notwithstanding
any other provision in this Section 1003, until March 31, 2005, the
Company and the Guarantors shall not be required to provide, file or make
available financial reports, information, documents or statements that the
Company otherwise would have been required to provide, file or make available
to the Trustee, the Commission, or any other Person pursuant to this Section 1003
on any date before March 31, 2005.”

 

7.     GOVERNING LAW.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS, OTHER THAN THE CHOICE OF LAW
PROVISIONS, OF THE STATE OF NEW YORK.

 

3

 

8.     COUNTERPARTS.  The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.

 

9.     EFFECT OF HEADINGS.  The Section headings herein are for
convenience only and shall not affect the construction hereof.

 

10.   THE TRUSTEE.  The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Company.

 

[SIGNATURES
ON FOLLOWING PAGES]

 

4

 

[SIGNATURE TO FOURTH
SUPPLEMENTAL INDENTURE FOR 6 3/8% NOTES DUE 2013]

 

IN WITNESS WHEREOF, the parties hereto have
caused this Supplemental Indenture to be duly executed and attested, all as of
the date first above written.

 

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  KEY ENERGY SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Royce W. Mitchell

  
	
   

  	
  Name:

  	
  Royce W. Mitchell

  
	
   

  	
  Title:

  	
  Executive Vice President, Chief Financial

  Officer and Chief Accounting Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE TRUSTEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert
  C. Butzier

  
	
   

  	
  Name:

  	
   

  	
  Robert C. Butzier

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  BROOKS WELL SERVICING, INC.

  
	
   

  	
  DAWSON PRODUCTION MANAGEMENT, INC.*

  
	
   

  	
  KALKASKA OILFIELD SERVICES, INC.

  
	
   

  	
  KEY ENERGY DRILLING, INC.

  
	
   

  	
  KEY ENERGY SERVICES-CALIFORNIA, INC.

  
	
   

  	
  KEY ENERGY SERVICES-SOUTH TEXAS, INC.

  
	
   

  	
  KEY FOUR CORNERS, INC.

  
	
   

  	
  KEY ROCKY MOUNTAIN, INC.

  
	
   

  	
  KEY ENERGY SHARED SERVICES, LLC

  
	
   

  	
  MISR KEY ENERGY SERVICES, LLC*

  
	
   

  	
  UNITRAK SERVICES HOLDING, INC.

  
	
   

  	
  WATSON OILFIELD SERVICE & SUPPLY, INC.

  
	
   

  	
  WELL-CO OIL SERVICE, INC.

  
	
   

  	
  WELLTECH EASTERN, INC.

  
	
   

  	
  WELLTECH MID-CONTINENT, INC.

  
								

 

1

 

	
   

  	
  YALE E. KEY, INC.

  
	
   

  	
  Q SERVICES, INC.*

  
	
   

  	
  Q.V. SERVICES, INC

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard J. Alario

  
	
   

  	
  Name:

  	
  Richard J. Alario

  
	
   

  	
  Title:

  	
  Vice President of each corporation listed

  above unless otherwise noted below

  
						

 

*Richard
J. Alario is the President of this entity.

 

 

	
   

  	
  BROOKS WELL SERVICING BENEFICIAL, LP

  
	
   

  	
  by the sole
  general partner, Brooks Well Servicing, Inc.

  
	
   

  	
  DAWSON PRODUCTION PARTNERS, L.P.

  
	
   

  	
  by the sole general partner, Dawson
  Production

  Management, Inc.*

  
	
   

  	
  KEY ENERGY DRILLING BENEFICIAL, LP

  
	
   

  	
  by the sole
  general partner, Key Energy Drilling, Inc.

  
	
   

  	
  UNITRAK SERVICES, L.P.

  
	
   

  	
  by the sole
  general partner, Unitrak Services Holding, Inc.

  
	
   

  	
  WELLTECH MID-CONTINENT BENEFICIAL, LP

  
	
   

  	
  by the sole
  general partner, WellTech Mid-Continent, Inc.

  
	
   

  	
  YALE E. KEY BENEFICIAL, LP

  
	
   

  	
  by the sole
  general partner, Yale E. Key, Inc.

  
	
   

  	
  KEY ENERGY PRESSURE PUMPING, L.P.

  
	
   

  	
  by the sole
  general partner, Q Oil & Gas Services, LLC

  
	
   

  	
  KEY ENERGY FISHING & RENTAL SERVICES,
  L.P.

  
	
   

  	
  by the sole
  general partner, Q Oil & Gas Services, LLC

  
	
   

  	
  QUALITY OIL FIELD SERVICES, L.P.

  
	
   

  	
  by the sole
  general partner, Q Oil & Gas Services, LLC

  
	
   

  	
  Q PRODUCTION SERVICES, L.P.

  
	
   

  	
  by the sole
  general partner, Q Oil & Gas Services, LLC

  

 

2

 

	
   

  	
  Q.V. SERVICES OF TEXAS, L.P.

  
	
   

  	
  by the sole
  general partner, Q Oil & Gas Services, LLC

  
	
   

  	
  Q.V. SERVICES BENEFICIAL, L.P.

  
	
   

  	
  by the sole
  general partner, Q.V. Services, Inc.

  

 

 

	
   

  	
  By:

  	
   

  	
  /s/ Richard J. Alario

  
	
   

  	
  Name:

  	
  Richard J. Alario

  
	
   

  	
  Title:

  	
  Vice President of each corporate general

  partner listed above and Manager of

  each limited liability company general

  partner listed above unless noted

  otherwise below

  

 

*Richard
J. Alario is the President of this corporation.

 

 

	
   

  	
  DAWSON PRODUCTION ACQUISITION CORP.

  
	
   

  	
  DAWSON PRODUCTION TAYLOR, INC.

  

 

 

	
   

  	
  By:

  	
   

  	
  /s/ Royce W. Mitchell

  
	
   

  	
  Name:

  	
  Royce W. Mitchell

  
	
   

  	
  Title:

  	
  Vice President and Treasurer of each

  corporation listed above

  

 

 

	
   

  	
  BROOKS WELL SERVICING, LLC

  
	
   

  	
  KEY ENERGY DRILLING, LLC

  
	
   

  	
  UNITRAK SERVICES, LLC

  
	
   

  	
  YALE E. KEY, LLC

  
	
   

  	
  WELLTECH MID-CONTINENT, LLC

  
	
   

  	
  Q ENERGY SERVICES, L.L.C.

  
	
   

  	
  Q OIL & GAS SERVICES, LLC

  
	
   

  	
  Q.V. SERVICES, LLC

  

 

 

	
   

  	
  By:

  	
   

  	
  /s/ Richard J. Alario

  
	
   

  	
  Name:

  	
  Richard J. Alario

  
	
   

  	
  Title:

  	
  Manager of each limited liability

  company listed above

  

 

3EXHIBIT 10.1

 

FAMILY DOLLAR STORES, INC.

 

1989
NON-QUALIFIED STOCK OPTION PLAN

 

1.  Purpose.  The purpose of the 1989 Non-Qualified Stock
Option Plan (the “Plan”) of Family Dollar Stores, Inc. is to encourage
ownership of a stock interest in Family Dollar Stores, Inc. by certain officers
and other key employees of the Company (as such term is defined below) as an
added incentive to remain in the employ of the Company and to increase their
efforts on its behalf, and in order for the Company to retain and attract
persons of competence, and to gain for the organization the advantages inherent
in key employees having a sense of proprietorship.

 

The term “subsidiary” as used herein, shall mean any business entity in
which Family Dollar Stores, Inc. owns or controls, directly or indirectly
(through one or more business entities), 50 percent or more of the voting,
equity or other ownership interest.  The
term “Company”, as used herein, shall include Family Dollar Stores, Inc. and
any present or future subsidiary thereof.

 

2.  The Stock.  The shares of stock which may be issued and
sold under the Plan shall not, except as such number may be adjusted pursuant
to Article 12 hereof, exceed 20,100,000 shares of Common Stock of Family Dollar
Stores, Inc. which may be either authorized and unissued shares or issued
shares reacquired by Family Dollar Stores, Inc. 
Any shares subjected to an option under the Plan which terminates, is
cancelled or expires for any reason unexercised as to such shares may again be
subjected to an option under the Plan notwithstanding the above limitation.

 

3. Eligibility.  Options
shall be granted only to officers and other key employees (including those who
are also directors) who, at the time of the grant of the option, (a) are
employees of the Company and (b) are primarily responsible for the management
and growth of the Company or who otherwise materially contribute to the conduct
and direction of its business and affairs. 
A person eligible to receive an option under the Plan is hereinafter sometimes
referred to as an “employee” and a person to who an option is granted hereunder
is hereinafter sometimes referred to as an “optionee.”

 

4.  Grant of Options.  The Compensation Committee (the “Committee”)
of the Board of Directors of Family Dollar Stores, Inc. (the “Board”) shall
determine the employees who are to be granted options under the Plan, the
number of shares subject to each option and the consideration to the Company
for the granting of options under the Plan, as well as the conditions, if any,
which it may deem appropriate to insure that such consideration will be
received by, or will accrue to, the Company. 
In the discretion of the Committee, such consideration need not be the
same but may vary for options granted under the Plan at the same time or from
time to time.

 

1

 

The Committee may grant more
than one option to an employee during the life of the plan and such option may
be in addition to, or in substitution for, an option or options, previously granted.  The maximum aggregate number of shares of
Common Stock of Family Dollar Stores, Inc. subject to options which may be
granted under the Plan to any optionee during any twelve-month period is
450,000.  No options shall be granted
under the Plan after November 30, 2008.

 

Each option granted pursuant to the Plan
shall be evidenced by a written option agreement between Family Dollar Stores,
Inc. and the optionee which shall contain such provisions, terms and conditions
(which need not be the same for all options) as the Committee shall in its
discretion determine to be appropriate and within the contemplation of the
Plan.  Each option agreement shall
provide that the option granted thereby will not be treated as an “incentive
stock option” within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

 

5.  Option Price.  (a) The price or prices per share for shares
of Common Stock of Family Dollar Stores, Inc. to be sold pursuant to an option
shall be such as shall be fixed by the Committee, but not less in any case than
100 percent of the fair market value per share for such stock on the date of
the granting of the option, subject to adjustment as provided in Article 12
hereof.

 

For the purpose hereof, the term “fair market
value” per share shall mean the mean between the average high bid and low asked
prices quoted by the National Quotations Bureau Inc. for the over-the-counter
market on the date of the grant of such option or, if no bid and asked prices
are quoted on such day, then on the next preceding day on which there were such
quotations, or if such stock is listed on a national securities exchange, then
the average of the highest price and the lowest price at which the Common Stock
shall have been sold regular way on the national securities exchange on the
date of the grant of such option or, if no sales occur on such day, then on the
next preceding day on which there were such sales of Common Stock or, if any
time the Common Stock shall not be quoted by the National Quotations Bureau
Inc. for the over-the-counter market and the Common Stock shall not be listed
on any national securities exchange, the Committee shall determine the fair
value on the basis of available prices for such stock or in such manner as the
Board may deem reasonable.

 

(b) For the purposes of Articles 5 and 6 hereof, the date of the
granting of an option under the Plan shall be the date fixed by the Committee
as the date for such option for the employee who is to be the recipient
thereof.

 

6.  Period of Option and
Certain Limitations on Right to Exercise. 
Options will be exercisable over the Option Period, which, in the case
of each option, shall be a period of not more than five years from the date of
the grant of such option, as follows:

 

(i)  at any time during the third
year of the Option Period the optionee may purchase up to 40 percent of the
total number of shares to which his option relates (adjusted, if a fraction of
a share would otherwise result thereby, to the nearest full number of shares);

 

(ii) at any time during the Option Period after the end of the third
year the optionee may purchase on a cumulative basis up to 70 percent of the
total number of shares to which his option relates (adjusted, if a fraction of
a share would otherwise result thereby, to the nearest full number of

 

2

 

shares); and

 

(iii) at any time during the Option Period
after the end of the fourth year the optionee may purchase on a cumulative
basis up to 100 percent of the total number of shares to which his option
relates; provided, however, that except as provided in Articles 8, 9 and 10
hereof, no option may be exercised unless the optionee is then in the employ of
the Company and shall have been continuously so employed since the date of the
grant of his option.  Absence on leave
approved by the Committee shall not be considered an interruption of employment
for any purpose of the Plan.  Family
Dollar Stores, Inc. may, if it or its counsel shall deem it necessary or desirable
for any reason, require the optionee (or the purchaser acting under Article 10
hereof) to represent in writing to Family Dollar Stores, Inc. at the time of
the exercise of such option that it is his then intention to acquire the shares
of Common Stock as to which his option is then being exercised for investment
and not with a view to the distribution thereof.

 

7.  Non-Transferability of
Option.  No option granted under the
Plan to an employee shall be transferable by him otherwise than by will or by
the laws of descent and distribution, and such option shall be exercisable,
during his lifetime, only by him or by his guardian or legal representative.

 

8.  Termination of Employment.  If an optionee shall cease to be employed by
the Company for any reason, other than death or discharge for cause (as defined
below), he may, but only within three months after the date he ceases to be an
employee of the Company (and in no event after the expiration of the Option
Period), exercise his option to the extent that he was entitled to exercise it
at the date of such cessation of employment. 
The Plan shall not confer upon any optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company’s right to terminate his employment at any
time.  Notwithstanding any of the
provisions hereinabove set forth, in the event that any optionee shall be
discharged for cause, he shall forthwith forfeit all rights under any options
granted to him under the Plan.  “Cause”
shall be deemed to include, but not be limited to, dishonesty, the proved
commission of crime, disclosure of the Company’s affairs to competitors or
other unfaithfulness to the interests of the Company, continued absence except
on account of the illness or disability, or gross insubordination.

 

9.  Retirement of Optionee.  Notwithstanding the provisions of Article 8
above and subject to the optionee’s compliance with the provisions of Article
11 set forth below, if an optionee voluntarily terminates his employment with
the Company due to Retirement (as defined below), any options held by the
optionee as of the date of such retirement shall continue to vest in accordance
with their original vesting schedule and all vested options may be exercised at
any time within the Option Period; provided, however, that the foregoing
provisions shall not be applicable to any portion of any options which, as of
January 20, 2005 (the effective date of the amendment of the Plan to provide
these retirement benefits), are vested and have an exercise price less than the
fair market value of the Common Stock on such date. “Retirement” shall be
defined for the purposes of the benefit of the provisions of this Article 9 as
the voluntary termination of employment by the retiree upon reaching the age of
sixty (60) years or older and having been an employee of the Company for a
period of at least ten (10) years prior to such termination.  The Committee may, in its sole discretion, modify
the definition of retirement as well as the post-retirement vesting and term
provisions as it deems necessary and in the best interest of the Company.

 

10.  Death of Optionee.  If an optionee dies while in the employ of
the Company, or within three months after the date he ceases to be an employee
of the Company (other than by reason of discharge for cause), the option
theretofore granted to him shall be exercisable by the estate of the optionee,
or by a person who acquired the right to exercise such option by bequest or
inheritance or by

 

3

 

reason of the
death of the optionee, but only within a period of fifteen calendar months next
succeeding such death (and in no event after expiration of the Option Period),
and then only if and to the extent that he was entitled to exercise it at the
date of his death, except as the number of shares may be adjusted in accordance
with the provisions of Article 12 hereof.

 

11.  Stock Option Forfeiture.   If, at any time within five (5) years after
an optionee terminates employment with the Company and receives the vesting and
extended Option Period benefits provided pursuant to Article 9 above, the
optionee engages, directly or indirectly, in any of the following activities:
(i) accepting employment with or serving as a consultant, advisor, officer,
director, controlling shareholder or acting in any other capacity with an
entity that is, at the time of such arrangement, in direct and substantial
competition with or acting against the interest of the Company; (ii)  employing or recruiting any person employed
by the Company (or within six months of the termination of such employment) or
being recruited by the Company for employment; (iii) disclosing or misusing any
confidential information or material concerning the Company; or (iv) publicly
disparaging the Company, its officers, directors or employees, then all
outstanding options that would otherwise benefit from the continued vesting or
extended Option Period under Article 9 shall (a) be immediately forfeited and
(b) any gain realized by the optionee from exercising all or a portion of said
options shall be repaid by the optionee to the Company within thirty days. By
accepting the benefits of Article 9, the optionee acknowledges and agrees that
the above provisions are both fair and reasonable with respect to both parties
to the Plan, are not in the nature of a penalty and are material and important
terms of the Plan.  The optionee further
agrees that if all or any part or application of this Article 11 be held invalid
or unenforceable for any reason whatsoever by a court of competent jurisdiction
in an action between the Company and the optionee, the provisions of Article 9
shall be inapplicable to the optionee and all outstanding options that would
otherwise benefit from the continued vesting or extended Option Period under
Article 9 shall (a) be immediately forfeited and (b) any gain realized by the
optionee from exercising all or a portion of said options shall be repaid by
the optionee to the Company within thirty days.

 

12.  Stock Adjustments.

 

(a)  In the event of a
recapitalization, stock split, reverse stock split, stock dividend,
reclassification, or merger, consolidation, or reorganization in which the
Company is the surviving corporation, or any other change in the corporate
structure or Common Stock of the Company, the Committee shall make such
adjustments, if any, proportionate to such change, as it may deem appropriate
in the number of shares authorized by the Plan, in the number of shares covered
by the options granted, and in the option price.

 

(b)  In the event of dissolution
or liquidation of the Company, or a reorganization, merger or consolidation of
the Company with one or more corporations in which the Company is not the
surviving corporation, or a sale of substantially all the property or more than
eighty percent (80%) of the then outstanding stock of the Company to another
corporation, the Plan shall terminate and any option heretofore granted
pursuant to the Plan shall terminate unless provision be made in writing in
connection with such transaction for the continuance of the Plan and/or for the
assumption of options theretofore granted, or the substitution for such options
of new options covering the stock of a successor employer corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices, in which event the Plan and options theretofore
granted shall continue in the manner and under the terms so provided.

 

(c)  Adjustments under Article 12
hereof shall be made by the Committee whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.  No

 

4

 

fractional
shares of Common Stock shall be issued pursuant to any such adjustment, and any
fraction resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.

 

13.  Administration of the
Plan.  The Plan shall be administered
by the Committee.  The Committee shall
consist of two or more members of the Board who are appointed to the Committee
by the Board, and each of whom is an “outside director” as such term is defined
in Section 162(m) of the Internal Revenue Code and any regulations
thereunder.  If any member of the
Committee does not meet the qualifications for an “outside director,” then that
member shall be replaced with another director meeting such qualifications such
that the Committee shall always be comprised of at least two persons meeting
such qualifications.  The Committee is
authorized to establish such rules and regulations for the proper
administration of the Plan as it may deem advisable and not inconsistent with
the provisions of the Plan.  All
questions arising under the Plan or under any rule or regulation with respect
to the Plan adopted by the Committee, whether such questions involve an
interpretation of the Plan or otherwise, shall be decided by the Committee.

 

14.  Payment for Shares.  Payment for shares purchased shall be made in
full at the time of the exercise of the option. 
No loan or advance shall be made by the Company for the purpose of
financing, in whole or in part, the purchase of optioned shares.  An optionee or his legal representatives shall
have none of the rights of a stockholder with respect to shares subject to
option until such shares shall be issued upon exercise of the option.

 

15.  Amendment and Termination
of Plan.

 

(a) The Board may at any time suspend or terminate the Plan.  The Board may also at any time amend or
revise the terms of the Plan or any option to be granted thereunder, provided
that no such amendment or revision shall affect the determination of officers
and directors to participate in the Plan or of the timing, pricing and amount
of a grant, all of which determinations and amendments and revisions thereof
shall be made by the Committee, and provided further that, without stockholder
approval, no such amendment or revision shall:

 

(i) materially increase the benefits accruing to employees under the
Plan; or

 

(ii) increase the number of shares subject to the Plan (except as
permitted under the provisions of Article 12 

      hereof); or

 

(iii) materially modify the requirements as to eligibility for
participation in the Plan.

 

(b) No amendment, suspension or termination of the Plan shall, without
the consent of the optionee, alter or impair any rights or obligations under
any option theretofore granted under the Plan.

 

16.  Compliance with Law and
Other Conditions.  No shares shall be
issued pursuant to the exercise of any option granted under the Plan prior to
compliance by Family Dollar Stores, Inc. to the satisfaction of its counsel
with any applicable laws.

 

17.  Withholding of Taxes.  Each optionee who exercises an option shall
agree that no later than the date of such exercise or receipt of shares
pursuant thereto he will pay to the Company, or make arrangements satisfactory
to the Committee regarding payment of, any federal, state or local taxes of any
kind required by law to be withheld with respect to the transfer to him of such
shares of Common Stock.

 

5

 

18.  Approval by Stockholders.  The Plan, as amended and as set forth herein
shall become effective January 20, 2005, subject to approval thereof by vote
(in person or by proxy) of the holders of a majority of all outstanding shares
of Common Stock of Family Dollar Stores, Inc. entitled to vote at the annual
meeting of stockholders on January 20, 2005, called to take action thereon.

 

Amended
as of January 20, 2005

 

6

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