UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended February 26, 2011
Or
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 1-6807
FAMILY DOLLAR STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 56-0942963 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
P.O. Box 1017, 10401 Monroe Road Charlotte, North Carolina |
28201-1017 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (704) 847-6961
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
Outstanding at March 25, 2011 | |||
Common Stock, $0.10 par value | 122,301,066 shares |
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
INDEX
Page No. | ||||
Part I - Financial Information |
||||
Item 1 - Consolidated Condensed Financial Statements (unaudited): |
||||
Consolidated Condensed Balance Sheets |
3 | |||
Consolidated Condensed Statements of Income |
4 | |||
5 | ||||
6 | ||||
7 | ||||
Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations |
16 | |||
Item 3 - Quantitative and Qualitative Disclosures About Market Risk |
23 | |||
23 | ||||
Part II - Other Information |
||||
24 | ||||
24 | ||||
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds |
24 | |||
25 | ||||
26 |
2
PART I FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except per share and share amounts) |
February 26, 2011 |
August 28, 2010 |
||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 195,357 | $ | 382,754 | ||||
Investment securities |
242,400 | 120,325 | ||||||
Merchandise inventories |
1,060,212 | 1,028,022 | ||||||
Deferred income taxes |
65,271 | 66,102 | ||||||
Prepayments and other current assets |
77,503 | 63,005 | ||||||
Total current assets |
1,640,743 | 1,660,208 | ||||||
Property and equipment, net |
1,146,782 | 1,111,966 | ||||||
Investment securities |
142,664 | 147,108 | ||||||
Other assets |
73,055 | 62,775 | ||||||
Total assets |
$ | 3,003,244 | $ | 2,982,057 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt |
$ | 16,200 | $ | | ||||
Accounts payable |
602,806 | 676,975 | ||||||
Accrued liabilities |
358,354 | 359,065 | ||||||
Income taxes |
34,549 | 18,447 | ||||||
Total current liabilities |
1,011,909 | 1,054,487 | ||||||
Long-term debt |
532,294 | 250,000 | ||||||
Other liabilities |
220,877 | 203,857 | ||||||
Deferred income taxes |
48,360 | 52,159 | ||||||
Commitments and contingencies (Note 6) |
||||||||
Shareholders equity: |
||||||||
Preferred stock, $1 par; authorized and unissued 500,000 shares |
||||||||
Common stock, $.10 par; authorized 600,000,000 shares; issued 147,231,268 shares at February 26, 2011, and 146,496,237 shares at August 28, 2010, and outstanding 122,928,927 shares at February 26, 2011, and 130,452,959 shares at August 28, 2010 |
14,723 | 14,650 | ||||||
Capital in excess of par |
265,746 | 243,831 | ||||||
Retained earnings |
1,821,566 | 1,665,646 | ||||||
Accumulated other comprehensive loss |
(9,251 | ) | (7,046 | ) | ||||
2,092,784 | 1,917,081 | |||||||
Less: common stock held in treasury, at cost (24,932,341 shares at February 26, 2011, and 16,043,278 shares at August 28, 2010) |
902,980 | 495,527 | ||||||
Total shareholders equity |
1,189,804 | 1,421,554 | ||||||
Total liabilities and shareholders equity |
$ | 3,003,244 | $ | 2,982,057 | ||||
See notes to the consolidated condensed financial statements.
3
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended | ||||||||
(in thousands, except per share amounts) |
February 26, 2011 |
February 27, 2010 |
||||||
Net sales |
$ | 2,263,169 | $ | 2,090,230 | ||||
Cost and expenses: |
||||||||
Cost of sales |
1,455,802 | 1,349,399 | ||||||
Selling, general and administrative |
607,002 | 559,480 | ||||||
Cost of sales and operating expenses |
2,062,804 | 1,908,879 | ||||||
Operating profit |
200,365 | 181,351 | ||||||
Interest income |
422 | 269 | ||||||
Interest expense |
4,582 | 3,368 | ||||||
Income before income taxes |
196,205 | 178,252 | ||||||
Income taxes |
73,025 | 66,043 | ||||||
Net income |
$ | 123,180 | $ | 112,209 | ||||
Net income per common share basic |
$ | 0.99 | $ | 0.82 | ||||
Weighted average shares basic |
124,619 | 137,480 | ||||||
Net income per common share diluted |
$ | 0.98 | $ | 0.81 | ||||
Weighted average shares diluted |
125,701 | 138,142 | ||||||
Dividends declared per common share |
$ | 0.180 | $ | 0.155 | ||||
See notes to the consolidated condensed financial statements.
4
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
First Half Ended | ||||||||
(in thousands, except per share amounts) |
February 26, 2011 |
February 27, 2010 |
||||||
Net sales |
$ | 4,260,110 | $ | 3,913,136 | ||||
Cost and expenses: |
||||||||
Cost of sales |
2,733,178 | 2,514,083 | ||||||
Selling, general and administrative |
1,204,985 | 1,108,031 | ||||||
Cost of sales and operating expenses |
3,938,163 | 3,622,114 | ||||||
Operating profit |
321,947 | 291,022 | ||||||
Interest income |
809 | 664 | ||||||
Interest expense |
8,100 | 6,703 | ||||||
Income before income taxes |
314,656 | 284,983 | ||||||
Income taxes |
117,161 | 105,153 | ||||||
Net income |
$ | 197,495 | $ | 179,830 | ||||
Net income per common share basic |
$ | 1.56 | $ | 1.30 | ||||
Weighted average shares basic |
126,302 | 138,083 | ||||||
Net income per common share diluted |
$ | 1.55 | $ | 1.30 | ||||
Weighted average shares diluted |
127,421 | 138,707 | ||||||
Dividends declared per common share |
$ | 0.335 | $ | 0.290 | ||||
See notes to the consolidated condensed financial statements.
5
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
First Half Ended | ||||||||
(in thousands) |
February 26, 2011 |
February 27, 2010 |
||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 197,495 | $ | 179,830 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
88,937 | 84,368 | ||||||
Deferred income taxes |
4,222 | 14,139 | ||||||
Excess tax benefits from stock-based compensation |
(4,165 | ) | (435 | ) | ||||
Stock-based compensation |
8,904 | 8,496 | ||||||
Loss on disposition of property and equipment, including impairment |
3,455 | 4,875 | ||||||
Changes in operating assets and liabilities: |
||||||||
Merchandise inventories |
(32,190 | ) | 58,492 | |||||
Income tax refund receivable |
| 8,618 | ||||||
Prepayments and other current assets |
(14,497 | ) | 1,264 | |||||
Other assets |
(4,252 | ) | (817 | ) | ||||
Accounts payable and accrued liabilities |
(55,079 | ) | (60,543 | ) | ||||
Income taxes |
16,102 | 18,747 | ||||||
Other liabilities |
15,439 | (445 | ) | |||||
224,371 | 316,589 | |||||||
Cash flows from investing activities: |
||||||||
Purchases of investment securities |
(296,299 | ) | (37,006 | ) | ||||
Sales of investment securities |
174,827 | 5,300 | ||||||
Capital expenditures |
(139,001 | ) | (82,851 | ) | ||||
Proceeds from dispositions of property and equipment |
546 | 616 | ||||||
(259,927 | ) | (113,941 | ) | |||||
Cash flows from financing activities: |
||||||||
Revolving credit facility borrowings |
46,000 | | ||||||
Repayment of revolving credit facility borrowings |
(46,000 | ) | | |||||
Issuance of long-term debt |
298,482 | | ||||||
Payment of debt issuance costs |
(6,585 | ) | (651 | ) | ||||
Repurchases of common stock |
(407,998 | ) | (166,002 | ) | ||||
Change in cash overdrafts |
(15,032 | ) | 55,792 | |||||
Proceeds from exercise of employee stock options |
14,909 | 8,890 | ||||||
Excess tax benefits from stock-based compensation |
4,165 | 435 | ||||||
Payment of dividends |
(39,782 | ) | (37,419 | ) | ||||
(151,841 | ) | (138,955 | ) | |||||
Net change in cash and cash equivalents |
(187,397 | ) | 63,693 | |||||
Cash and cash equivalents at beginning of period |
382,754 | 438,890 | ||||||
Cash and cash equivalents at end of period |
$ | 195,357 | $ | 502,583 | ||||
See notes to the consolidated condensed financial statements.
6
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. | General Information |
In the opinion of management, the accompanying Unaudited Consolidated Condensed Financial Statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Companys financial position as of February 26, 2011; the results of operations for the second quarter and first half ended February 26, 2011 (second quarter and first half of fiscal 2011), and February 27, 2010 (second quarter and first half of fiscal 2010); and the cash flows for the first half of fiscal 2011 and first half of fiscal 2010. For further information, refer to the Consolidated Financial Statements and Footnotes included in the Companys Annual Report on Form 10-K for the fiscal year ended August 28, 2010 (fiscal 2010).
The results of operations for the second quarter and first half of fiscal 2011 are not necessarily indicative of the results to be expected for the full year.
Certain adjustments and reclassifications of the amounts on the Consolidated Condensed Statements of Cash Flows for the first half of fiscal 2010 have been made to conform to the presentation for the first half of fiscal 2011. The adjustments and reclassifications are not material.
The preparation of the Companys Consolidated Condensed Financial Statements, in conformity with generally accepted accounting principles in the United States of America (GAAP), requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the first half of fiscal 2011, or which are expected to impact future periods, that were not already adopted and disclosed in prior periods.
2. | Fair Value Measurements |
Fair value accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value into three levels, with Level 1 being of the highest priority.
¡ | Level 1 Quoted prices in active markets for identical assets or liabilities. |
¡ | Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
¡ | Level 3 Inputs that are unobservable for the asset or liability. |
The unobservable inputs in Level 3 can only be used to measure fair value to the extent that observable inputs in Level 1 and Level 2 are not available. The following table represents the Companys fair value hierarchy as of February 26, 2011, and August 28, 2010, for items that are required to be measured at fair value on a recurring basis:
7
February 26, 2011 | ||||||||||||||||
(in thousands) |
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ | 130,947 | $ | 130,947 | $ | | $ | | ||||||||
Investment securities: |
||||||||||||||||
Auction rate securities |
142,664 | | | 142,664 | ||||||||||||
Variable rate demand notes |
191,974 | 191,974 | | | ||||||||||||
Municipal debt securities |
46,205 | | 46,205 | | ||||||||||||
Corporate debt securities |
2,009 | | 2,009 | | ||||||||||||
Equity securities |
2,212 | 2,212 | | | ||||||||||||
Other assets: |
||||||||||||||||
Mutual funds(1) |
14,976 | 14,976 | | | ||||||||||||
August 28, 2010 | ||||||||||||||||
(in thousands) |
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ | 287,003 | $ | 287,003 | $ | | $ | | ||||||||
Investment securities: |
||||||||||||||||
Auction rate securities |
154,158 | | 7,050 | 147,108 | ||||||||||||
Variable rate demand notes |
27,490 | 27,490 | | | ||||||||||||
Municipal debt securities |
44,224 | | 44,224 | | ||||||||||||
Corporate debt securities |
14,575 | 11,996 | 2,579 | | ||||||||||||
US government agency debt securities |
25,017 | 25,017 | | | ||||||||||||
Equity securities |
1,969 | 1,969 | | | ||||||||||||
Other assets: |
||||||||||||||||
Mutual funds(1) |
11,402 | 11,402 | | |
(1) | Represents assets held pursuant to a deferred compensation plan for certain key management employees. |
During the second quarter of fiscal 2011, the Company re-evaluated its fair value hierarchy, specifically as it relates to a portion of its investment securities. Although the Company believes these investments trade in active markets and prices could be obtained for identical assets, the Company believed that the classification of these investments as Level 2 was more appropriate because these investments are valued by a third-party pricing service where matrix pricing is used. Additionally, the classification of Level 2 versus Level 1 does not indicate a change in fair value or deterioration in the market where these investments are traded; it is a classification change based only on how the fair values were derived for these assets. As a result, the Company has adjusted the classification of these investments where matrix pricing is used to Level 2 for all periods presented.
On a non-recurring basis, the Company adjusts certain property and equipment to fair value through impairment charges. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of the property and equipment is determined based on a discounted cash flow analysis using Level 3 inputs. The Company estimates future cash flows based on historical experience and its expectations of future performance. Impairment charges were not material during the second quarter or first half of fiscal 2011.
Auction Rate Securities
The Companys investment securities include student loan auction rate securities that are measured at fair value using Level 3 inputs. The auction rate securities are tax-exempt bonds that are collateralized by federally guaranteed student loans. While the underlying securities generally have long-term nominal maturities that exceed one year, the interest rates reset periodically in scheduled auctions (generally every 7-35 days). The Company generally has the opportunity to sell its investments during such periodic auctions subject to the availability of buyers.
Beginning in the second quarter of fiscal 2008, issues in the global credit and capital markets led to failed auctions with respect to substantially all of the Companys auction rate securities. A failed auction typically occurs when the number of securities
submitted
8
for sale in the auction exceeds the number of purchase bids. As of February 26, 2011, all of the Companys $157.3 million par value investments were subject to failed auctions. As a result of the failed auctions, the interest rates on the investments reset to the established rates per the applicable investment offering statements. The Company will not be able to liquidate the investments until a successful auction occurs, a buyer is found outside the auction process, the securities are called or refinanced by the issuer, the securities are repurchased by the broker dealers, or the underlying securities mature.
The Company does not currently expect to liquidate any auction rate securities going forward through the normal auction process. However, the Company does expect to be able to liquidate substantially all of its remaining auction rate securities at par through issuer calls or refinancings, repurchases by the broker dealers, or upon maturity. During the second quarter and first half of fiscal 2011, the Company liquidated $1.2 million and $8.3 million, respectively, of auction rate securities at par as a result of issuer calls. As of February 26, 2011, the Companys auction rate securities were classified as long-term assets due to the continued failure of the auction process and the continued uncertainty regarding the timing of future liquidity, and were measured at fair value using Level 3 inputs, as discussed below.
Historically, the carrying value (par value) of the auction rate securities approximated fair market value due to the resetting rates, and the Company had no cumulative gross unrealized or realized gains or losses from these investments prior to fiscal 2008. However, due to the liquidity issues noted above, the Company had a temporary gross unrealized loss of $14.6 million ($9.2 million, net of taxes) and $11.4 million ($7.2 million, net of taxes) with respect to these investments as of February 26, 2011, and August 28, 2010, respectively. Changes in the unrealized loss are included in Accumulated Other Comprehensive Loss within Shareholders Equity on the Consolidated Condensed Balance Sheets. Because there is no active market for the Companys auction rate securities, the fair value of each security was determined through the use of a discounted cash flow analysis using Level 3 inputs. The terms used in the analysis were based on managements estimate of the timing of future liquidity, which assumes that the securities will be called or refinanced by the issuer or repurchased by the broker dealers prior to maturity. The discount rates used in the analysis were based on market rates for similar liquid tax-exempt securities with comparable ratings and maturities. Due to the uncertainty surrounding the timing of future liquidity, the discount rates were adjusted further to reflect the illiquidity of the investments. The Companys valuation is sensitive to market conditions and managements judgment and can change significantly based on the assumptions used. A 100 basis point increase or decrease in the discount rate along with a 12-month increase or decrease in the term could result in a gross unrealized loss ranging from $5.7 million to $26.4 million.
The Company evaluated each of its auction rate securities for other-than-temporary impairment. The Company determined that there was no material other-than-temporary impairment as of February 26, 2011. The Companys evaluation was based on an analysis of the credit rating and parity ratio of each security. The parity ratio is the ratio of trust assets available for distribution to creditors to the trust obligations to those creditors. The credit quality of the Companys auction rate securities portfolio remains high (80% AAA rated, 13% AA rated, and 7% A rated) and the securities had a weighted average parity ratio of 110% as of February 26, 2011.
The following table summarizes the change in the fair value of the Companys auction rate securities measured using Level 3 inputs during the second quarter and first half of fiscal 2011 and the second quarter and first half of fiscal 2010:
Quarter Ended | ||||||||
(in thousands) |
February 26, 2011 |
February 27, 2010 |
||||||
Beginning Balance |
$ | 145,064 | $ | 163,141 | ||||
Net unrealized gains (losses) included in other comprehensive income |
(1,225 | ) | (1,479 | ) | ||||
Sales |
(1,175 | ) | (150 | ) | ||||
Transfers out of Level 3 |
| (50 | ) | |||||
Ending Balance |
$ | 142,664 | $ | 161,462 | ||||
First Half Ended | ||||||||
(in thousands) |
February 26, 2011 |
February 27, 2010 |
||||||
Beginning Balance |
$ | 147,108 | $ | 163,545 | ||||
Net unrealized gains (losses) included in other comprehensive income |
(3,169 | ) | 267 | |||||
Sales |
(1,275 | ) | (2,000 | ) | ||||
Transfers out of Level 3 |
| (350 | ) | |||||
Ending Balance |
$ | 142,664 | $ | 161,462 |
9
Additional Fair Value Disclosures
The estimated fair value of the Companys current and long-term debt was $569.7 million as of February 26, 2011, and $277.8 million as of August 28, 2010. The significant increase in the fair value is primarily due to the issuance of $300 million of senior unsecured notes on January 28, 2011, as discussed in Note 3 below. The fair value for these new notes is determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. Because a portion of the Companys debt was a private placement and there are no quoted prices in active markets, the fair value of that portion was determined through the use of a discounted cash flow analysis using Level 3 inputs. The discount rate used in the analysis was based on borrowing rates available to the Company for debt of the same remaining maturities, issued in the same private placement debt market. The fair value of the Companys current and long-term debt was greater than the carrying value of the debt by $21.2 million as of February 26, 2011, and $27.8 million as of August 28, 2010.
3. | Current and Long-Term Debt |
The Companys current and long-term debt consisted of the following as of February 26, 2011, and August 28, 2010:
(in thousands) |
February 26, 2011 |
August 28, 2010 |
||||||
5.24% Notes |
$ | 81,000 | $ | 81,000 | ||||
5.41% Notes |
169,000 | 169,000 | ||||||
5.00% Notes |
298,494 | | ||||||
548,494 | 250,000 | |||||||
Less: current portion |
16,200 | | ||||||
Long-term portion |
$ | 532,294 | $ | 250,000 |
Notes
On January 28, 2011, the Company issued $300 million of 5.00% unsecured senior notes due February 1, 2021 (the 2021 Notes), through a public offering. The Companys proceeds were approximately $298.5 million and were net of an issuance discount of $1.5 million. In addition, the Company incurred issuance costs of approximately $3.3 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2021 Notes. Interest on the 2021 Notes is payable semi-annually in arrears on the 1st day of February and August of each year, commencing on August 1, 2011. The 2021 Notes rank pari passu in right of payment with the Companys other unsecured senior indebtedness and will be senior in right of payment to other subordinated indebtedness. The Company may redeem the 2021 Notes in whole at any time or in part from time to time, at the option of the Company, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 2021 Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase.
On September 27, 2005, the Company obtained $250 million through a private placement of unsecured senior notes due September 27, 2015 (the 2015 Notes), to a group of institutional accredited investors. The 2015 Notes were issued in two tranches at par and rank pari passu in right of payment with the Companys other unsecured senior indebtedness. The first tranche has an aggregate principal amount of $169 million, is payable in a single installment on September 27, 2015, and bears interest at a rate of 5.41% per annum from the date of issuance. The second tranche has an aggregate principal amount of $81 million, matures on September 27, 2015, with amortization commencing on September 27, 2011, and bears interest at a rate of 5.24% per annum from the date of issuance. The second tranche has a required principal payment of $16.2 million on September 27, 2011, and on each September 27 thereafter to and including September 27, 2015. Interest on the 2015 Notes is payable semi-annually in arrears on the 27th day of March and September of each year. The 2015 Notes contain certain restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of February 26, 2011, the Company was in compliance with all such covenants.
On November 17, 2010, the Company amended the 2015 Notes to remove the subsidiary co-borrower and all subsidiary guarantors, consistent with the credit facility changes noted below.
Credit Facilities
On November 17, 2010, the Company entered into a new four-year unsecured revolving credit facility with a syndicate of lenders for borrowings of up to $400 million. The credit facility matures on November 17, 2014, and provides for two one-year extensions that require lender consent. Any borrowings under the credit facility accrue interest at a variable rate based on short-term market interest rates.
10
On November 17, 2010, the Company amended its existing five-year $350 million unsecured revolving credit facility maturing on August 24, 2011, and terminated its 364-day $250 million unsecured revolving credit facility maturing on December 15, 2010. The amendment of the five-year facility reduces the borrowing capacity from $350 million to $200 million and limits its usage to stand-by letters of credit only ($137.0 million as of February 26, 2011). The amendment also eliminates the Companys ability to extend the facility beyond its current maturity date of August 24, 2011, and removes the subsidiary co-borrower and all subsidiary guarantors.
During the second quarter and first half of fiscal 2011, the Company borrowed $10.0 million and $46.0 million, respectively, under the credit facilities at a weighted-average rate of 4.2% and 1.3%, respectively. As of February 26, 2011, and August 28, 2010, the Company had no outstanding borrowings under the credit facilities. The credit facilities contain certain restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of February 26, 2011, the Company was in compliance with all such covenants.
4. | Stock Repurchases |
On October 5, 2010, the Company entered into an accelerated share repurchase agreement with a large financial institution. In connection with the agreement, the Company made a prepayment of $250.0 million to the financial institution and immediately received 4.4 million shares (80% of the prepayment amount). The financial institution purchased shares of the Companys common stock in the open market over an averaging period in order to cover its position with respect to shares it borrowed for the initial delivery and for any shares payable upon settlement. Upon settlement in the second quarter of fiscal 2011, another 0.9 million shares were delivered to the Company.
During the first half of fiscal 2011, the Company purchased 8.9 million shares of its common stock at a cost of $408.0 million, including the accelerated share repurchase agreement noted above. During the first half of fiscal 2010, the Company purchased 3.8 million shares of its common stock at a cost of $116.0 million.
All shares are purchased pursuant to share repurchase authorizations approved by the Board of Directors. On November 18, 2009, the Board of Directors authorized the Company to purchase up to $400 million of the Companys outstanding common stock from time to time as market conditions warrant. On September 29, 2010, the Company announced that the Board of Directors authorized the Company to purchase up to $750 million of the Companys outstanding common stock. The remaining amount under the previous authorization was cancelled. As of February 26, 2011, the Company had $349.8 million remaining under the new authorization.
There is no expiration date related to the above referenced authorization. Shares purchased under the share repurchase authorizations are generally held in treasury or are cancelled and returned to the status of authorized but unissued shares.
5. | Earnings Per Share |
Basic net income per common share is computed by dividing net income by the weighted average number of shares outstanding during each period. Diluted net income per common share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period. Certain stock options and performance share rights were excluded from the calculation of diluted net income per common share because their effects were antidilutive (0.4 million shares and 0.3 million shares for the quarter and first half ended February 26, 2011, respectively, and 0.7 million shares and 1.1 million shares for the quarter and first half ended February 27, 2010). In the calculation of diluted net income per common share, the denominator includes the number of additional common shares that would have been outstanding if the Companys outstanding dilutive stock options and performance share rights had been exercised, as determined pursuant to the treasury stock method.
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The following table sets forth the computation of basic and diluted net income per common share:
Quarter Ended | First Half Ended | |||||||||||||||
(in thousands, except per share amounts) |
February 26, 2011 |
February 27, 2010 |
February 26, 2011 |
February 27, 2010 |
||||||||||||
Basic Net Income Per Share: |
||||||||||||||||
Net income |
$ | 123,180 | $ | 112,209 | $ | 197,495 | $ | 179,830 | ||||||||
Weighted average number of shares outstanding |
124,619 | 137,480 | 126,302 | 138,083 | ||||||||||||
Net income per common share basic |
$ | 0.99 | $ | 0.82 | $ | 1.56 | $ | 1.30 | ||||||||
Diluted Net Income Per Share: |
||||||||||||||||
Net income |
$ | 123,180 | $ | 112,209 | $ | 197,495 | $ | 179,830 | ||||||||
Weighted average number of shares outstanding |
124,619 | 137,480 | 126,302 | 138,083 | ||||||||||||
Effect of dilutive securities stock options |
653 | 287 | 672 | 249 | ||||||||||||
Effect of dilutive securities performance share rights |
429 | 375 | 447 | 375 | ||||||||||||
Weighted average shares diluted |
125,701 | 138,142 | 127,421 | 138,707 | ||||||||||||
Net income per common share diluted |
$ | 0.98 | $ | 0.81 | $ | 1.55 | $ | 1.30 | ||||||||
6. | Litigation |
Since 2004, individuals who have held the position of Store Manager for the Company have filed lawsuits alleging that the Company violated the Fair Labor Standards Act (FLSA), and/or similar state laws, by classifying them as exempt employees who are not entitled to overtime compensation. The majority of the complaints in each action also request that the cases proceed as collective actions under the FLSA or as class actions under state laws and request recovery of overtime pay, liquidated damages, and attorneys fees and court costs. The Company currently has 24 such cases pending against it.
Grace v. Family Dollar Stores, Inc. and Ward v. Family Dollar Stores, Inc. are both pending in the U.S. District Court for the Western District of North Carolina, Charlotte Division (the N.C. Federal Court). In those cases, the court has returned orders finding that the plaintiffs were not similarly situated and, therefore, that neither nationwide notice nor collective treatment under the FLSA is appropriate. Hence, the Grace and Ward cases are proceeding as 43 individual plaintiff cases.
On July 9, 2009, the Court granted summary judgment against Irene Grace on the merits of her misclassification claim under the FLSA. The Company has filed summary judgment motions related to each of the remaining 42 plaintiffs in the Grace and Ward cases. The plaintiffs appealed certain rulings of the N.C. Federal Court to the United States Court of Appeals for the Fourth Circuit including the courts summary judgment order against Irene Grace. On March 22, 2011, the Fourth Circuit affirmed the district courts decision finding that Ms. Grace was exempt from overtime compensation under the FLSA. The Fourth Circuit did not address the class certification issue since Ms. Graces lawsuit would be dismissed on the merits.
Including Grace and Ward, a total of nineteen class and/or collective or single plaintiff misclassification cases are now pending before the N.C. Federal Court. The N.C. Federal Court has stayed all discovery in these cases pending the outcome of the Grace and Ward appeals. Presently, there are a total of 70 named plaintiffs and/or opt-ins in these cases.
The Company has been sued in five additional class action lawsuits alleging that Store Managers should be non-exempt employees under various state laws. The plaintiffs in these cases seek recovery of overtime pay, liquidated damages, and attorneys fees and court costs. Twila Walters et. al. v. Family Dollar Stores of Missouri, Inc., alleging violations of the Missouri Minimum Wage Law, was originally filed on January 26, 2010, and is pending in the Circuit Court of Jackson County, Missouri. The parties have completed briefing on class certification and arguments on class certification will be held before the Circuit Court on April 29, 2011. Hegab v. Family Dollar Stores, Inc. was filed in the United States District Court for the District of New Jersey on March 3, 2011. Plaintiff seeks recovery for himself and allegedly similarly situated Store Managers under New Jersey law. Barker v. Family Dollar, Inc., alleging violations of the Kentucky Wages and Hours Law, was filed in Circuit Court in Jefferson County, Kentucky on February 17, 2010, and removed to the United States District Court for the Western District of Kentucky. On March 11, 2011, the district court denied the Companys partial motion to dismiss the overtime claim under Kentucky law requesting more discovery on that claim. Youngblood, et al. v. Family Dollar Stores, Inc., Family Dollar, Inc., Family Dollar Stores of New York, Inc. et al., was filed in the United States District Court for the Southern District of New York on April 2, 2009. Rancharan v. Family Dollar Stores, Inc., was filed in the Supreme Court of the State of New York, Queens County on March 4, 2009, was removed to the United States District Court for the Eastern District of New York on May 6, 2009, and was subsequently transferred to the Southern District of New York and has been consolidated with Youngblood. Class certification briefing will be completed by May 4, 2011.
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In general, the Company continues to believe that its Store Managers are exempt employees under the FLSA and have been and are being properly compensated under both federal and state laws. The Company further believes that these actions are not appropriate for collective or class action treatment. The Company intends to vigorously defend the claims in these actions. While the N.C. Federal Court has previously found that the Grace and Ward actions are not appropriate for collective action treatment, at this time it is not possible to predict whether one or more of the remaining cases may be permitted to proceed collectively on a nationwide or other basis. No assurances can be given that the Company will be successful in the defense of these actions, on the merits or otherwise. The Company cannot reasonably estimate the possible loss or range of loss that may result from these actions.
If at some point in the future the Company determines that a reclassification of some or all of its Store Managers as non-exempt employees under the FLSA is required, such action could have a material adverse effect on the Companys financial position, liquidity or results of operation. At this time, the Company cannot quantify the impact of such a determination.
One putative state law class action has been filed on behalf of store Team Members who are paid on an hourly basis. McCauley et al. v. Family Dollar, Inc., was filed on April 27, 2010, in Circuit Court in Jefferson County, Kentucky, and was removed to the United States District Court for the Western District of Kentucky. The plaintiffs allege that they and a putative class of similarly situated store Team Members throughout Kentucky were required to work off the clock and without breaks in violation of the Kentucky Wages and Hours Law. The plaintiffs seek the value of their unpaid wages (off-the-clock time and statutory breaks), liquidated damages in an equal amount, attorneys fees and costs, and pre- and post-judgment interest. On February 16, 2011, the Company sought dismissal of this matter. On March 23, 2011, The Court granted the Companys dismissal without prejudice. The Company maintains strict policies prohibiting off-the-clock work and requiring employees to take all breaks required by applicable law.
On October 14, 2008, a complaint was filed in the U.S. District Court in Birmingham, Alabama, captioned Scott, et al. v. Family Dollar Stores, Inc., alleging discriminatory pay practices with respect to the Companys female store managers. This case was pled as a putative class action or collective action under applicable statutes on behalf of all Family Dollar female store managers. The plaintiffs seek recovery of compensatory and punitive money damages, recovery of attorneys fees and equitable relief. The case has been transferred to the N.C. Federal Court. Presently, there are 48 named plaintiffs in the Scott case, with no additional opt-ins. The Company is vigorously defending the allegations in the Scott case. The Company cannot reasonably estimate the possible loss or range of loss that may result from this action.
On March 16, 2011, a purported class action complaint relating to the rejection of the proposal by Trian Group to acquire the Company and the adoption of a stockholders rights plan was filed in North Carolina State Court, Mecklenberg County, and later removed to the North Carolina Business Court, against our Board of Directors by Ronald Rothenberg, individually and on behalf of all of the Companys stockholders other than defendants and their affiliates. The case is styled Ronald Rothenberg v. Howard Levine, et al., and alleges, among other allegations, that the Companys directors breached their fiduciary duties by not agreeing to sell the Company and by adopting a stockholders rights plan. The complaint seeks various forms of relief, including damages and an order that the Board of Directors enter into negotiations to sell the Company to Trian Group and redeem or rescind the stockholders rights plan. The Company believes that the complaint is without merit and intends to vigorously defend against it.
The Company is involved in numerous other legal proceedings and claims incidental to its business, including litigation related to alleged failures to comply with various state and federal employment laws, some of which are or may be pled as class or collective actions, and litigation related to alleged personal or property damage, as to which the Company carries insurance coverage and/or has established accrued liabilities as set forth in the Companys financial statements. While the ultimate outcome cannot be determined, the Company currently believes that these proceedings and claims, both individually and in the aggregate, should not have a material adverse effect on the Companys financial position, liquidity or results of operations. However, the outcome of any litigation is inherently uncertain and, if decided adversely to the Company, or, if the Company determines that settlement of such actions is appropriate, the Company may be subject to liability that could have a material adverse effect on the Companys financial position, liquidity or results of operations.
7. | Comprehensive Income |
The following table provides a reconciliation of net income to comprehensive income. The unrealized gains and losses on investment securities are shown net of tax ($0.3 million income tax benefit and $1.1 million income tax benefit for the second quarter and first half ended February 26, 2011, respectively, and $0.5 million income tax benefit and $0.0 million income tax benefit for the second quarter and first half ended February 27, 2010, respectively).
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Quarter Ended | First Half Ended | |||||||||||||||
(in thousands) |
February 26, 2011 |
February 27, 2010 |
February 26, 2011 |
February 27, 2010 |
||||||||||||
Net income |
$ | 123,180 | $ | 112,209 | $ | 197,495 | $ | 179,830 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized gains (losses) on investment securities |
(460 | ) | (878 | ) | (1,908 | ) | (35 | ) | ||||||||
Other |
(297 | ) | | (297 | ) | | ||||||||||
Comprehensive income |
$ | 122,423 | $ | 111,331 | $ | 195,290 | $ | 179,795 | ||||||||
8. | Segment Information |
The Company operates a chain of more than 6,800 general merchandise retail discount stores in 44 states, serving the basic needs of customers primarily in the low- and middle-income brackets. The stores are supported by nine distribution centers and one corporate headquarters. All of the stores operate under the Family Dollar name and are substantially the same in terms of size, merchandise, customers, distribution and operations. The Company has no franchised locations or other lines of business. All of the Companys operations are located in the United States with the exception of certain sourcing entities located in Asia. The foreign operations are not material. The Company manages the business on the basis of one operating segment and therefore has only one reportable segment. The following table presents net sales by classes of similar products.
Quarter Ended | First Half Ended | |||||||||||||||
(in thousands) |
February 26, 2011 |
February 27, 2010 |
February 26, 2011 |
February 27, 2010 |
||||||||||||
Classes of similar Products: |
||||||||||||||||
Consumables |
$ | 1,406,969 | $ | 1,271,121 | $ | 2,762,422 | $ | 2,492,978 | ||||||||
Home Products |
328,633 | 318,910 | 581,669 | 554,207 | ||||||||||||
Apparel and Accessories |
218,887 | 214,358 | 411,699 | 396,657 | ||||||||||||
Seasonal and Electronics |
308,680 | 285,841 | 504,320 | 469,294 | ||||||||||||
Net sales |
$ | 2,263,169 | $ | 2,090,230 | $ | 4,260,110 | $ | 3,913,136 | ||||||||
The following table describes the Companys product categories in more detail:
Consumables |
Household chemicals | |
Paper products | ||
Food, including candy and snacks | ||
Health and beauty aids | ||
Hardware and automotive supplies | ||
Pet food and supplies | ||
Home Products |
Domestics, including blankets, sheets and towels | |
Housewares | ||
Giftware | ||
Home décor | ||
Apparel and Accessories |
Mens clothing | |
Womens clothing | ||
Boys and girls clothing | ||
Infants clothing | ||
Shoes | ||
Fashion accessories | ||
Seasonal and Electronics |
Toys | |
Stationery and school supplies | ||
Seasonal goods | ||
Personal electronics, including pre-paid cellular phones and services |
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9. | Subsequent Events |
On March 2, 2011, the Company adopted a stockholders rights plan whereby the Board of Directors of the Company authorized and declared a dividend distribution of one right for each outstanding share of common stock of the Company to stockholders of record at the close of business on March 2, 2011. Each right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, at a price of $250.00 per unit, subject to adjustment. The rights are not presently exercisable and remain attached to the shares of common stock until the occurrence of certain triggering events. Subject to certain exceptions, the rights will separate from the shares of common stock and a distribution date will be deemed to occur on the earlier of (i) the 10th business day after a person or group becomes a beneficial owner of at least 10% of the Companys outstanding common stock or (ii) the 10th business day after the date that a tender or exchange offer is launched that would, if completed, result in a person or group becomes a beneficial owner of at least 10% of the Companys outstanding common stock. The rights will expire on March 2, 2012, unless exercised, redeemed or exchanged prior that time. The board may terminate the rights plan before the expiration date or extend the expiration date. The rights have no voting or dividend privileges, and, unless and until they become exercisable, have no dilutive effect on the earnings of the Company.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the significant factors affecting our consolidated results of operations and financial condition for the thirteen-week periods ended February 26, 2011, and February 27, 2010 (second quarter of fiscal 2011 and second quarter of fiscal 2010, respectively), and the twenty-six-week periods ended February 26, 2011, and February 27, 2010 (first half of fiscal 2011 and first half of fiscal 2010, respectively). This discussion should be read in conjunction with, and is qualified by, the financial statements included in this Report, the financial statements for the fiscal year ended August 28, 2010 (fiscal 2010), and Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contained in our Annual Report on Form 10-K for fiscal 2010. This discussion also should be read in conjunction with the Cautionary Statement Regarding Forward Looking Statements set forth following this MD&A, and the Risk Factors set forth in Part I - Item 1A of our Annual Report on Form 10-K for fiscal 2010.
Executive Overview
We operate a chain of more than 6,800 general merchandise retail discount stores in 44 states, providing primarily low- and middle-income consumers with a selection of competitively priced merchandise in convenient neighborhood stores. Our merchandise assortment includes Consumables, Home Products, Apparel and Accessories, and Seasonal and Electronics. We sell merchandise at prices that generally range from less than $1 to $10.
During the first half of fiscal 2011, as compared with the first half of fiscal 2010, our net sales increased 8.9% to $4.3 billion, our net income increased 9.8% to $197.5 million, and our diluted net income per common share increased 19.2% to $1.55. Comparable store sales (stores open more than 13 months) for the first half of fiscal 2011 increased 6.0% compared with the first half of fiscal 2010.
During the second quarter of fiscal 2011, as compared with the second quarter of fiscal 2010, our net sales increased 8.3% to $2.3 billion, our net income increased 9.8% to $123.2 million, and our diluted net income per common share increased 21.0% to $0.98. Comparable store sales for the second quarter of fiscal 2011 increased 5.1% compared with the second quarter of fiscal 2010.
Our performance during the second quarter and first half of fiscal 2011 was driven primarily by our strong sales performance, particularly in the Consumables category. Many of the initiatives we launched over the past several years continue to deliver results as well, including the expansion of key consumable categories, improved store operating standards, and the expansion of our operating hours in fiscal 2010. During fiscal 2011, we remain focused on driving revenue growth and strengthening our value and convenience proposition through the acceleration of new store growth, our comprehensive store renovation program, enhanced marketing, and better merchandise in-stocks. Over the last several years, we have accelerated capability-building investments and increased our efforts to improve the in-store shopping experience, which has allowed for a successful launch of these programs.
During the first half of fiscal 2011, we opened 146 stores and closed 43 stores for a net addition of 103 stores, compared with the opening of 86 stores and closing of 52 stores for a net addition of 34 stores during the first half of fiscal 2010. During the second quarter of fiscal 2011, we opened 61 stores and closed 25 stores for a net addition of 36 stores, compared with the opening of 43 stores and closing of 19 stores for a net addition of 24 stores during the second quarter of fiscal 2010. We plan to open approximately 300 new stores during fiscal 2011, a 50% increase over fiscal 2010 openings.
Leveraging our concept renewal efforts, enhanced merchandising and supply chain capabilities, a refreshed store technology platform, and a better trained and more productive workforce, we have initiated a comprehensive store renovation program intended to re-energize the Family Dollar brand. During the second quarter and first half of fiscal 2011, we renovated 140 and 313 stores, respectively. We plan to renovate more than 800 stores by the end of fiscal 2011, at a projected cost of $100,000 to $130,000 per store. The renovations address both the interior and exterior of the stores and create more customer-focused assortments and layouts and more customer-centric teams.
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Results of Operations
Our results of operations for the second quarter and first half of fiscal 2011 and the second quarter and first half of fiscal 2010 are highlighted in the table below and discussed in the following paragraphs:
Quarter Ended | First Half Ended | |||||||||||||||
(in thousands) |
February 26, 2011 | February 27, 2010 | February 26, 2011 | February 27, 2010 | ||||||||||||
Net sales |
$ | 2,263,169 | $ | 2,090,230 | $ | 4,260,110 | $ | 3,913,136 | ||||||||
Cost and expenses: |
||||||||||||||||
Cost of sales |
1,455,802 | 1,349,399 | 2,733,178 | 2,514,083 | ||||||||||||
% of net sales |
64.3% | 64.6% | 64.2% | 64.2% | ||||||||||||
Selling, general and administrative |
607,002 | 559,480 | 1,204,985 | 1,108,031 | ||||||||||||
% of net sales |
26.8% | 26.8% | 28.3% | 28.3% | ||||||||||||
Cost of sales and operating expenses |
2,062,804 | 1,908,879 | 3,938,163 | 3,622,114 | ||||||||||||
% of net sales |
91.1% | 91.3% | 92.4% | 92.6% | ||||||||||||
Operating profit |
200,365 | 181,351 | 321,947 | 291,022 | ||||||||||||
% of net sales |
8.9% | 8.7% | 7.6% | 7.4% | ||||||||||||
Interest income |
422 | 269 | 809 | 664 | ||||||||||||
% of net sales |
0.0% | 0.0% | 0.0% | 0.0% | ||||||||||||
Interest expense |
4,582 | 3,368 | 8,100 | 6,703 | ||||||||||||
% of net sales |
0.2% | 0.2% | 0.2% | 0.2% | ||||||||||||
Income before income taxes |
196,205 | 178,252 | 314,656 | 284,983 | ||||||||||||
% of net sales |
8.7% | 8.5% | 7.4% | 7.3% | ||||||||||||
Income taxes |
73,025 | 66,043 | 117,161 | 105,153 | ||||||||||||
% of net sales |
3.2% | 3.2% | 2.8% | 2.7% | ||||||||||||
Net Income |
$ | 123,180 | $ | 112,209 | $ | 197,495 | $ | 179,830 | ||||||||
% of net sales |
5.4% | 5.4% | 4.6% | 4.6% | ||||||||||||
Second Quarter Results
Net Sales
Net sales increased 8.3% in the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010. The net sales increase in the second quarter of fiscal 2011 reflects an increase in comparable store sales of 5.1%, with the balance of the increase due primarily to sales from new stores opened as part of our store growth program. Comparable store sales includes stores that have been open more than 13 months. Stores that have been renovated, relocated or expanded are included in the comparable store sales calculation to the extent that they had sales during comparable weeks in each year. The method of calculating comparable store sales varies across the retail industry. As a result, our comparable store sales calculation may not be comparable to similarly titled measures reported by other companies.
The 5.1% increase in comparable store sales in the second quarter of fiscal 2011 resulted primarily from an increase in customer traffic, as measured by the number of register transactions in comparable stores. The dollar value of the average customer transaction increased slightly over the second quarter of fiscal 2010. Sales during the second quarter of fiscal 2011, on a comparable store basis, were strongest in the Consumables and Seasonal and Electronics categories.
The average number of stores in operation during the second quarter of fiscal 2011 was 2.8% higher than the average number of stores in operation during the second quarter of fiscal 2010. We had 6,888 stores in operation at the end of the second quarter of fiscal 2011 compared with 6,689 stores in operation at the end of the second quarter of fiscal 2010, representing an increase of 3.0%. As of February 26, 2011, we had, in the aggregate, approximately 49.0 million square feet of selling space compared to 47.5 million as of February 27, 2010.
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Cost of Sales
Cost of sales increased 7.9% in the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010. The increase was due primarily to additional sales volume. Cost of sales, as a percentage of net sales, was 64.3% in the second quarter of fiscal 2011 and 64.6% in the second quarter of fiscal 2010. The decrease in cost of sales, as a percentage of net sales, was due primarily to lower inventory shrinkage, partially offset by an increase in freight expense. We believe that inventory shrinkage benefited from continued workforce stabilization in our stores and improved analytics and monitoring processes while freight costs were negatively impacted by higher diesel costs. The impact of stronger sales of lower margin consumables was offset by the effect of higher purchase markups in many categories. We continue to focus on improving our purchase mark-ups through our price management work, the continued development of our private label offering, and our global sourcing efforts.
Selling, General and Administrative Expenses
SG&A expenses increased 8.5% in the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010. The increases in these expenses were due in part to additional sales volume and additional costs arising from the continued growth in the number of stores in operation. SG&A expenses, as a percentage of net sales, were 26.8% in both the second quarter of fiscal 2011 and fiscal 2010. Many costs in the second quarter of fiscal 2011, including occupancy costs (approximately 0.3% of net sales), were leveraged as a result of a 5.1% increase in comparable store sales and continued productivity improvements, which more than offset an increase in store payroll expense (approximately 0.3% of net sales) and increased insurance expense (approximately 0.4% of net sales). The increase in store payroll expense was due primarily to the expansion of our store operating hours and store renovation program. While we continue to be pleased with our workers compensation and general liability trends, significant reductions in workers compensation and general liability costs in the prior year led to a year-over-year increase in insurance expense.
Interest Income
The change in interest income in the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010 was not material.
Interest Expense
On January 28, 2011, we issued $300 million in senior unsecured notes with a coupon rate of 5.00% maturing in 2021 (the 2021 Notes). During the second quarter of fiscal 2011, we incurred $1.2 million in interest expense related to the 2021 Notes. We did not incur any interest expense during the second quarter of fiscal 2010 related to the 2021 Notes.
Income Taxes
The effective tax rate was 37.2% for the second quarter of fiscal 2011 compared with 37.1% for the second quarter of fiscal 2010. The increase in effective tax rate was due primarily to an increase in state income taxes offset slightly by higher tax exempt interest income and changes in our liabilities for uncertain tax positions.
Year-to-date Results
Net Sales
Net sales increased 8.9% in the first half of fiscal 2011 compared to the first half of fiscal 2010. The net sales increase in the first half of fiscal 2011 reflects an increase in comparable store sales of 6.0%, with the balance of the increase due primarily to sales from new stores opened as part of our store growth program.
The 6.0% increase in comparable store sales in the first half of fiscal 2011 resulted primarily from an increase in customer traffic, as measured by the number of register transactions in comparable stores. The dollar value of the average customer transaction increased slightly over the first half of fiscal 2010. Sales during the first half of fiscal 2011, on a comparable store basis, were strongest in the Consumables category.
The average number of stores in operation during the first half of fiscal 2011 was 2.6% higher than the average number of stores in operation during the first half of fiscal 2010.
Cost of Sales
Cost of sales increased 8.7% in the first half of fiscal 2011 compared to the first half of fiscal 2010. The increase was due primarily to additional sales volume. Cost of sales, as a percentage of net sales, was 64.2% in both the first half of fiscal 2011 and
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fiscal 2010. Cost of sales, as a percentage of net sales, was positively impacted by lower inventory shrinkage, offset by an increase in freight expense and the impact of stronger sales of lower margin consumables merchandise. We believe that inventory shrinkage benefited from continued workforce stabilization in our stores and improved analytics and monitoring processes. Freight costs were negatively impacted by higher diesel costs. The impact of stronger sales of lower margin consumables was partially offset by the effect of higher purchase markups on many categories. We continue to focus on improving our purchase mark-ups through our price management work, the continued development of our private label offering, and our global sourcing efforts.
Selling, General and Administrative Expenses
SG&A expenses increased 8.8% in the first half of fiscal 2011 compared to the first half of fiscal 2010. The increases in these expenses were due in part to additional sales volume and additional costs arising from the continued growth in the number of stores in operation. SG&A expenses, as a percentage of net sales, were 28.3% in both the first half of fiscal 2011 and fiscal 2010. Many costs in the first half of fiscal 2011, including occupancy costs (approximately 0.3% of net sales), were leveraged as a result of a 6.0% increase in comparable store sales and continued productivity improvements, which more than offset an increase in store payroll expense (approximately 0.3% of net sales) and increased insurance expense (approximately 0.2% of net sales). The increase in store payroll expense was due primarily to the expansion of our store operating hours and store renovation program. While we continue to be pleased with our workers compensation and general liability trends, significant reductions in workers compensation and general liability costs in the prior year led to a year-over-year increase in insurance expense.
Interest Income
The change in interest income in the first half of fiscal 2011 compared to the first half of fiscal 2010 was not material.
Interest Expense
On January 28, 2011, we issued $300 million in senior unsecured notes with a coupon rate of 5.00% maturing in 2021. During the first half of fiscal 2011, we incurred $1.2 million in interest expense related to the 2021 Notes. We did not incur any interest expense during the first half of fiscal 2010 related to the 2021 Notes.
Income Taxes
The effective tax rate was 37.2% for the first half of fiscal 2011 compared with 36.9% for the first half of fiscal 2010. The increase in the effective tax rate was due primarily to an increase in state income taxes and a decrease in federal jobs tax credits, offset partially by changes in our liabilities for uncertain tax positions.
Liquidity and Capital Resources
General
We have consistently maintained a strong liquidity position, and our operating cash flows are generally sufficient to fund our regular operating needs, share repurchases, capital expenditure program, cash dividend payments, and interest payments. Cash provided by operating activities during the first half of fiscal 2011 was $224.4 million, compared to $316.6 million in the first half of fiscal 2010. We believe operating cash flows and existing credit facilities will provide sufficient liquidity for our ongoing operations and growth initiatives.
Credit Facilities
On November 17, 2010, we entered into a new four-year unsecured revolving credit facility with a syndicate of lenders for borrowings of up to $400 million. The credit facility matures on November 17, 2014, and provides for two one-year extensions that require lender consent. Any borrowings under the credit facility accrue interest at a variable rate based on short-term market interest rates.
On November 17, 2010, we also amended our existing five-year $350 million unsecured revolving credit facility maturing on August 24, 2011, and terminated our 364-day $250 million unsecured revolving credit facility maturing on December 15, 2010. The amendment of the five-year facility reduces the borrowing capacity from $350 million to $200 million and limits its usage to stand-by letters of credit only ($137.0 million as of February 26, 2011). The amendment also eliminates our ability to extend the facility beyond its current maturity date of August 24, 2011, and removes all subsidiary co-borrowers and guarantors.
During the first half of fiscal 2011, we borrowed $46.0 million under the credit facilities at a weighted-average rate of 1.3%. As of February 26, 2011, we had no outstanding borrowings under the credit facilities. The credit facilities contain certain restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority
19
debt to consolidated net worth ratio. As of February 26, 2011, we were in compliance with all such covenants.
Notes
On January 28, 2011, we issued $300 million of 5.00% unsecured senior notes due February 1, 2021 (the 2021 Notes), through a public offering. Our proceeds were approximately $298.5 million and were net of an issuance discount of $1.5 million. In addition, we incurred issuance costs of approximately $3.3 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2021 Notes. Interest on the 2021 Notes is payable semi-annually in arrears on the 1st day of February and August of each year, commencing on August 1, 2011. The 2021 Notes rank pari passu in right of payment with our other unsecured senior indebtedness and will be senior in right of payment to any subordinated indebtedness. We may redeem the 2021 Notes in whole at any time or in part from time to time, at our option, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the 2021 Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The proceeds of the issuance are available to fund our $750 million share repurchase program and for general corporate purposes.
On September 27, 2005, we obtained $250 million through a private placement of unsecured senior notes due September 27, 2015 (the 2015 Notes), to a group of institutional accredited investors. The 2015 Notes were issued in two tranches at par and rank pari passu in right of payment with our other unsecured senior indebtedness. The first tranche has an aggregate principal amount of $169 million, is payable in a single installment on September 27, 2015, and bears interest at a rate of 5.41% per annum from the date of issuance. The second tranche has an aggregate principal amount of $81 million, matures on September 27, 2015, with amortization commencing on September 27, 2011, and bears interest at a rate of 5.24% per annum from the date of issuance. The second tranche has a required principal payment of $16.2 million on September 27, 2011, and on each September 27 thereafter to and including September 27, 2015. Interest on the 2015 Notes is payable semi-annually in arrears on the 27th day of March and September of each year. The 2015 Notes contain certain restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of February 26, 2011, we were in compliance with all such covenants.
On November 17, 2010, we amended the 2015 Notes to remove the subsidiary co-borrower and all subsidiary guarantors, consistent with the credit facility changes noted above.
Other Considerations
Our merchandise inventories at the end of the first half of fiscal 2011 were $1,060.2 million, as compared to $935.3 million at the end of the first half of fiscal 2010, an increase of 13.4%. Inventory per store at the end of the first half of fiscal 2011 was approximately 10.1% higher than inventory per store at the end of the first half of fiscal 2010. The increases in inventory were driven primarily by an increased focus on improving the in-stock levels in our stores and the investments we are making to support the expansion of our consumable merchandise assortments, including our comprehensive store renovation program.
Capital expenditures for the first half of fiscal 2011 were $139.0 million compared with $82.9 million for the first half of fiscal 2010. The increase in capital expenditures during the first half of fiscal 2011 was due primarily to the investments we are making related to our comprehensive store renovation program and new store growth. We also purchased more of our existing stores from our landlords during the first half of fiscal 2011 as compared to the first half of fiscal 2010. Capital expenditures for fiscal 2011 are expected to be between $300 and $350 million and relate primarily to the investments we are making to drive revenue growth, including the acceleration of our new store growth and the launch of our comprehensive store renovation program. The remaining expected expenditures relate primarily to technology-related projects and costs to begin construction of our tenth distribution center.
In the first half of fiscal 2011, we opened 146 stores, closed 43 stores, relocated 8 stores, expanded 8 stores, and renovated 313 stores. The renovations are part of a comprehensive store renovation program intended to re-energize the Family Dollar brand. During fiscal 2011, we plan to renovate more than 800 stores. The renovations address both the interior and exterior of the stores and create more customer-focused assortments and layouts and more customer-centric teams. We occupy most of our stores under operating leases. Store opening, closing, relocation, expansion, and renovation plans, as well as overall capital expenditure plans, are continually reviewed and may change.
On November 18, 2009, we announced that the Board of Directors authorized the purchase of up to $400 million of our outstanding common stock from time to time as market conditions warrant. On September 29, 2010, we announced that the Board of Directors authorized the purchase of up to $750 million of our outstanding common stock. The remaining amount under the previous authorization was cancelled. During the first half of fiscal 2011, we purchased 8.9 million shares of our common stock at a cost of $408.0 million, including the accelerated share repurchase agreement we entered into during the first quarter of fiscal 2011. During the first half of fiscal 2010, we purchased 3.8 million shares at a cost of $116.0 million. See Note 4 to the Consolidated Condensed Financial Statements in this Report for more information on our share repurchases. As of February 26, 2011, we had outstanding authorizations to purchase a total of $349.8 million of our common stock.
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The timing and amount of any shares repurchased have been and will continue to be determined by management based on its evaluation of market conditions and other factors. Our share repurchase program does not have a stated expiration date, and purchases may be made through open market purchases, private market transactions or other structured transactions.
Our wholly-owned captive insurance subsidiary maintains certain balances in cash and cash equivalents and investment securities that are used in connection with our retained workers compensation, general liability and automobile liability risks and are not designated for general corporate purposes. As of February 26, 2011, these cash and cash equivalents and investment securities balances were $27.4 million and $95.3 million, respectively.
Cash Flows From Operating Activities
Cash provided by operating activities decreased $92.2 million during the first half of fiscal 2011 as compared to the first half of fiscal 2010. The decrease was due primarily to an increase in merchandise inventories in the current year as noted above as well as increases in prepayments and other current assets, offset partially by higher net income and changes in other liabilities, all in the ordinary course of business.
Cash Flows From Investing Activities
During the first half of fiscal 2011, we had a cash outflow of $259.9 million compared to a cash outflow of $113.9 million in the first half of fiscal 2010. The change was due primarily to a net increase in purchases of investment securities during the first half of fiscal 2011 related to the proceeds of the issuance of $300 million of senior notes during the second quarter of 2011. Additionally, during the first half of fiscal 2011, we had capital expenditures totaling $139.0 million, compared to $82.9 million in the first half of fiscal 2010 as a result of accelerating our new store growth and continuing to execute our comprehensive store renovation program.
Cash Flows From Financing Activities
During the first half of fiscal 2011, we had a cash outflow from financing activities of $151.8 million compared to a cash outflow of $139.0 million during the first half of fiscal 2010. During the first half of fiscal 2011, we issued $300 million of 5.00% unsecured senior notes, creating a significant cash inflow from financing activities as compared to the first half of fiscal 2010. This cash inflow was offset by increased share repurchases of $242.0 million in the first half of fiscal 2011 as compared to the first half of fiscal 2010. We purchased $408.0 million of our common stock during the first half of fiscal 2011 compared to $166.0 million in the first half of fiscal 2010.
Contractual Obligations
The Company presented its contractual obligations in its Annual Report on Form 10-K for the fiscal year ended August 28, 2010. Except as discussed below, there have been no significant changes in those obligations during the second quarter or first half of fiscal 2011.
During the quarter ended February 26, 2011 the Company issued $300 million of 5.00% senior notes due February 1, 2021. The additional commitments related to the 2021 Notes are as follows:
Payments Due During the Period Ending | ||||||||||||||||||||||||||||
(in thousands) Contractual Obligations |
Total | August 2011 |
August 2012 |
August 2013 |
August 2014 |
August 2015 |
Thereafter | |||||||||||||||||||||
Long-term debt |
$ | 300,000 | $ | | $ | | $ | | $ | | $ | | $ | 300,000 | ||||||||||||||
Interest |
150,000 | 7,500 | 15,000 | 15,000 | 15,000 | 15,000 | 82,500 | |||||||||||||||||||||
Total |
$ | 450,000 | $ | 7,500 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 382,500 | ||||||||||||||
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Recent Accounting Pronouncements
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the first half of fiscal 2011, or which are expected to impact future periods, that were not already adopted and disclosed in prior periods.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting policies generally accepted in the United States of America. Our discussion and analysis of our financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ from these estimates.
There have been no material changes to the critical accounting policies disclosed in our Annual Report on Form 10-K for fiscal 2010.
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Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Report, or in other public filings, press releases, or other written or oral communications made by Family Dollar or our representatives, which are not historical facts, are forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things, our plans, activities or events which we expect will or may occur in the future and may include express or implied projections of revenue or expenditures; statements of plans and objectives for future operations, growth or initiatives; statements of future economic performance, including, but not limited to, investment and financing plans, net sales, comparable store sales, cost of sales, SG&A expenses, earning per diluted share, dividends and share repurchases; or statements regarding the outcome or impact of pending or threatened litigation. These forward-looking statements may be identified by the use of the words believe, plan, estimate, expect, anticipate, probably, should, project, intend, continue, and other similar terms and expressions. Various risks, uncertainties and other factors may cause our actual results to differ materially from those expressed or implied in any forward-looking statements. Factors, uncertainties and risks that may result in actual results differing from such forward-looking information include, but are not limited to, those listed in Part I - Item 1A of our Annual Report on Form 10-K for fiscal 2010, as well as other factors discussed throughout this Report, including, without limitation, the factors described under Critical Accounting Policies in Part I - Item 2 above, or in other filings or statements made by us. All of the forward-looking statements in this Report and other documents or statements are qualified by these and other factors, risks and uncertainties.
You should not place undue reliance on the forward-looking statements included in this Report. We assume no obligation to update any forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time to time in our other reports and documents filed with the Securities and Exchange Commission (SEC).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We maintain unsecured revolving credit facilities at variable rates of interest to meet the short-term needs of our expansion program and seasonal inventory increases. During the first half of fiscal 2011 and the first half of fiscal 2010, we did not incur any material interest expense related to our credit facilities. Our $548.5 million of current and long-term debt bears interest at fixed rates ranging from 5.00% to 5.41%.
We are also subject to market risk from exposure to changes in the fair value of our investment securities. Our investment securities currently include auction rate securities that are subject to failed auctions and are not currently liquid. As of February 26, 2011, we had a $14.6 million unrealized loss ($9.2 million net of taxes) related to these investments. We believe that we will be able to liquidate our auction rate securities at par at some point in the future as a result of issuer calls or refinancings, repurchases by the broker dealers, or upon maturity of the underlying security. However, volatility in the credit markets could continue to negatively impact the timing of future liquidity related to these investments and lead to additional adjustments to their carrying value. See Note 2 to the Consolidated Condensed Financial Statements included in this Report for more information on our auction rate securities.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our periodic reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We evaluated the design and operating effectiveness of our disclosure controls and procedures as of February 26, 2011. This evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of February 26, 2011.
There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
The information in Note 6 to the Consolidated Condensed Financial Statements contained in Part I, Item 1 of the Form 10-Q is incorporated herein by reference.
There have been no material changes in the risk factors disclosed in our Annual Report on Form 10-K for fiscal 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information with respect to purchases of shares of our common stock made during the quarter ended February 26, 2011, by us, on our behalf, or by any affiliated purchaser as defined by Rule 10b-18(a)(3) of the Securities Exchange Act of 1934.
Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) (2) |
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1) (3) |
||||||||||||
December (11/28/10 - 1/1/11) |
| $ | | | 10,058,338 | |||||||||||
January (1/2/11 - 1/29/11) |
3,809,943 | 44.56 | 3,809,943 | 8,733,818 | ||||||||||||
February (1/30/11 - 2/26/11) |
500,000 | 42.45 | 500,000 | 6,920,975 | ||||||||||||
Total |
4,309,943 | $ | 44.32 | 4,309,943 | 6,920,975 | |||||||||||
(1) | On November 18, 2009, we announced that the Board of Directors authorized the purchase of up to $400 million of our outstanding common stock from time to time as market conditions warrant. On September 29, 2010, we announced that the Board of Directors authorized the purchase of up to $750 million of our outstanding common stock. The remaining amount under the previous authorization was cancelled. There was $349.8 million remaining under the new authorization as of February 26, 2011. |
(2) | The total number of shares purchased includes 0.9 million shares related to the final settlement of the accelerated share repurchase agreement initiated in the first quarter of fiscal 2011. See Note 4 to the Consolidated Condensed Financial Statements included in this Report for more information on our share repurchases. |
(3) | Remaining dollar amounts under the authorization are converted to shares using the closing stock price as of the end of the fiscal month. |
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(a) Exhibits incorporated by reference: | ||||
3.2 | Bylaws of Family Dollar Stores, Inc., as amended through March 2, 2011 (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on March 3, 2011) | |||
4.1 | Rights Agreement, dated as of March 2, 2011, between Family Dollar Stores, Inc. and American Stock Transfer & Trust Company, LLC, which includes the Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as Exhibit A and the Form of Right Certificate as Exhibit B (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on March 3, 2011) | |||
4.2 | First Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee, dated as of January 28, 2011 (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on January 28, 2011) | |||
4.3 | Form of Global Note 5.00% Senior Note due 2021 (included as part of Exhibit 4.2 above) (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on January 28, 2011) | |||
(b) Exhibits filed herewith: | ||||
3.1 | Certificate of Designation Preferences, and Rights of Series A Junior Participating Preferred Stock | |||
4.4 | Indenture between Family Dollar Stores, Inc. and U.S. Bank National Association, as trustee, dated as of January 28, 2011 | |||
31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
32 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
101 | Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended February 26, 2011, filed on April 6, 2011, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FAMILY DOLLAR STORES, INC. | ||
(Registrant) | ||
Date: April 6, 2011 |
/s/ Kenneth T. Smith | |
Kenneth T. Smith | ||
Senior Vice President Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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Exhibit 3.1
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
FAMILY DOLLAR STORES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Howard R. Levine, Chairman of the Board and Chief Executive Officer, and James C. Snyder, Jr., Senior Vice President, General Counsel and Secretary, of Family Dollar Stores, Inc., a Delaware corporation (hereinafter called the Corporation), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, do hereby make this Certificate of Designation and do hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Restated Certificate of Incorporation, the Board of Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Section FOURTH, B. of the Restated Certificate of Incorporation (which authorizes 500,000 shares of preferred stock, $1.00 par value per share (Preferred Stock) of which none have already been designated), the Board of Directors hereby fixes the designations, powers, preferences and rights, and the qualifications, limitations and restrictions, of a series of Preferred Stock;
RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Certificate of Incorporation, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be designated as Series A Junior Participating Preferred Stock and the number of shares constituting such series shall be 200,000.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 1st day of March, June, September and December in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of
(i) $0.10 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock of the Corporation since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after March 2, 2011 (the Rights Declaration Date) (A) declare any dividend on Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in Section 2(a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.10 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
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(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to 6 quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a default period) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to 6 quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect 2 directors.
(ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to Section 3(c)(iii) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board of Directors as may then exist up to 2 directors or, if such right is exercised at an annual meeting, to elect 2 directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock.
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(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Section 3(c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at its last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding. Notwithstanding the foregoing provisions of this Section 3(c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect 2 directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Section 3(c)(ii)) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant. References in this Section 3(c) to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the certificate of incorporation or by-laws of the Corporation irrespective of any increase made pursuant to the provisions of Section 3(c)(ii) (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors.
(d) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
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Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued
5
as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to $1.00 per share of Series A Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the Series A Liquidation Preference). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the Common Adjustment) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in Section 6(c) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the Adjustment Number). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same
6
time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporations Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series A Junior Participating Preferred Stock are outstanding, the Restated Certificate of Incorporation of the Corporation shall not be amended (whether by merger or otherwise) in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
Section 12. Certain Definitions. As used herein with respect to the Series A Junior Participating Preferred Stock, the term Common Stock means the common stock, par value $0.10 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes or reclassification of the common stock.
7
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 2nd day of March, 2011.
/s/ Howard R. Levine |
Howard R. Levine |
Chairman of the Board and Chief Executive Officer |
/s/ James C. Snyder, Jr. |
James C. Snyder, Jr. |
Senior Vice President, General Counsel and Secretary |
8
Exhibit 4.4
FAMILY DOLLAR STORES, INC.,
Company
AND
U.S. BANK NATIONAL ASSOCIATION,
Trustee
INDENTURE
Dated as of January 28, 2011
CROSS-REFERENCE TABLE*
Section of Trust Indenture Act of 1939, as amended |
Section of Indenture | |
310(a) |
7.09 | |
310(b) |
7.08 | |
7.10 | ||
310(c) |
Inapplicable | |
311(a) |
713(a) | |
311(b) |
713(b) | |
311(c) |
Inapplicable | |
312(a) |
5.01 | |
5.02(a) | ||
312(b) |
5.02(b) | |
312(c) |
5.02(c) | |
313(a) |
5.04(a) | |
313(b) |
5.04(b) | |
313(c) |
5.04(a) | |
5.04(b) | ||
313(d) |
5.04(c) | |
314(a) |
5.03 | |
314(b) |
Inapplicable | |
314(c) |
Inapplicable | |
314(d) |
Inapplicable | |
314(e) |
Inapplicable | |
314(f) |
Inapplicable | |
315(a) |
7.01(a) | |
7.02 | ||
315(b) |
6.07 | |
315(c) |
7.01 | |
315(d) |
7.01(b) | |
7.01(c) | ||
315(e) |
6.07 | |
316(a) |
6.06 | |
8.04 | ||
316(b) |
6.04 | |
316(c) |
8.01 | |
317(a) |
6.02 | |
317(b) |
4.03 | |
318(a) |
14.06 |
* | This Cross-Reference Table does not constitute part of the Indenture and shall not have any bearing on the interpretation of any of its terms or provisions. |
TABLE OF CONTENTS
PAGE | ||||||
ARTICLE 1 | ||||||
DEFINITIONS | ||||||
Section 1.01. | Definitions of Terms | 1 | ||||
ARTICLE 2 |
| |||||
ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES | ||||||
Section 2.01. | Designation and Terms of Securities | 6 | ||||
Section 2.02. | Form of Securities and Trustees Certificate | 8 | ||||
Section 2.03. | Denominations; Provision for Payment | 8 | ||||
Section 2.04. | Execution and Authentications | 10 | ||||
Section 2.05. | Registration of Transfer and Exchange | 11 | ||||
Section 2.06. | Temporary Securities | 12 | ||||
Section 2.07. | Mutilated, Destroyed, Lost or Stolen Securities | 13 | ||||
Section 2.08. | Cancellation | 13 | ||||
Section 2.09. | Benefits of Indenture | 14 | ||||
Section 2.10. | Authenticating Agent | 14 | ||||
Section 2.11. | Global Securities | 15 | ||||
Section 2.12. | CUSIP Numbers | 16 | ||||
ARTICLE 3 | ||||||
REDEMPTION OF SECURITIES AND SINKING FUND PROVISIONS | ||||||
Section 3.01. | Redemption | 16 | ||||
Section 3.02. | Notice of Redemption | 16 | ||||
Section 3.03. | Payment Upon Redemption | 18 | ||||
Section 3.04. | Sinking Fund | 18 | ||||
Section 3.05. | Satisfaction of Sinking Fund Payments with Securities | 18 | ||||
Section 3.06. | Redemption of Securities for Sinking Fund | 19 | ||||
ARTICLE 4 | ||||||
CERTAIN COVENANTS | ||||||
Section 4.01. | Payment of Principal, Premium and Interest | 19 | ||||
Section 4.02. | Maintenance of Office or Agency | 19 | ||||
Section 4.03. | Paying Agents | 20 | ||||
Section 4.04. | Appointment to Fill Vacancy in Office of Trustee | 21 | ||||
Section 4.05. | Compliance with Consolidation Provisions | 21 | ||||
Section 4.06. | Trustees Obligations with Respect to the Covenants | 21 | ||||
Section 4.07. | Compliance Certificate | 21 |
i
ARTICLE 5 | ||||||
SECURITYHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE | ||||||
Section 5.01. | Company to Furnish Trustee Names and Addresses of Securityholders | 22 | ||||
Section 5.02. | Preservation of Information; Communications with Securityholders | 22 | ||||
Section 5.03. | Reports by the Company | 22 | ||||
Section 5.04. | Reports by the Trustee | 23 | ||||
ARTICLE 6 | ||||||
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT | ||||||
Section 6.01. | Events of Default | 24 | ||||
Section 6.02. | Collection of Indebtedness and Suits for Enforcement by Trustee | 26 | ||||
Section 6.03. | Application of Moneys Collected | 28 | ||||
Section 6.04. | Limitation on Suits | 28 | ||||
Section 6.05. | Rights and Remedies Cumulative; Delay or Omission not Waiver | 29 | ||||
Section 6.06. | Control by Securityholders | 30 | ||||
Section 6.07. | Undertaking to Pay Costs | 30 | ||||
ARTICLE 7 | ||||||
CONCERNING THE TRUSTEE | ||||||
Section 7.01. | Certain Duties and Responsibilities of Trustee | 31 | ||||
Section 7.02. | Certain Rights of Trustee | 32 | ||||
Section 7.03. | Trustee not Responsible for Recitals or Issuance or Securities | 34 | ||||
Section 7.04. | May Hold Securities | 34 | ||||
Section 7.05. | Moneys Held in Trust | 34 | ||||
Section 7.06. | Compensation and Reimbursement | 34 | ||||
Section 7.07. | Reliance on Officers certificate | 35 | ||||
Section 7.08. | Disqualification; Conflicting Interests | 35 | ||||
Section 7.09. | Corporate Trustee Required; Eligibility | 36 | ||||
Section 7.10. | Resignation and Removal; Appointment of Successor | 36 | ||||
Section 7.11. | Acceptance of Appointment by Successor | 37 | ||||
Section 7.12. | Merger, Conversion, Consolidation or Succession to Business | 39 | ||||
Section 7.13. | Preferential Collection of Claims Against the Company | 39 | ||||
ARTICLE 8 | ||||||
CONCERNING THE SECURITYHOLDERS | ||||||
Section 8.01. | Evidence of Action by Securityholders | 39 | ||||
Section 8.02. | Proof of Execution by Securityholders | 40 | ||||
Section 8.03. | Who May be Deemed Owners | 40 | ||||
Section 8.04. | Certain Securities Owned by Company Disregarded | 41 | ||||
Section 8.05. | Actions Binding on Future Securityholders | 41 |
ii
ARTICLE 9 | ||||||
SUPPLEMENTAL INDENTURES | ||||||
Section 9.01. | Supplemental Indentures Without the Consent of Securityholders | 42 | ||||
Section 9.02. | Supplemental Indentures With Consent of Securityholders | 43 | ||||
Section 9.03. | Effect of Supplemental Indentures | 43 | ||||
Section 9.04. | Securities Affected by Supplemental Indentures | 43 | ||||
Section 9.05. | Execution of Supplemental Indentures | 44 | ||||
Section 9.06. | Conformity with Trust Indenture Act | 44 | ||||
ARTICLE 10 | ||||||
SUCCESSOR CORPORATION | ||||||
Section 10.01. |
Company May Consolidate, Etc., Only on Certain Terms | 44 | ||||
Section 10.02. | Successor Substitute | 45 | ||||
ARTICLE 11 |
| |||||
DEFEASANCE AND DISCHARGE | ||||||
Section 11.01. |
Discharge of Companys Obligations | 45 | ||||
Section 11.02. | Legal Defeasance | 46 | ||||
Section 11.03. | Covenant Defeasance | 47 | ||||
Section 11.04. | Application of Trust Money | 48 | ||||
Section 11.05. | Repayment to Company | 49 | ||||
ARTICLE 12 | ||||||
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS | ||||||
Section 12.01. |
No Recourse | 49 | ||||
ARTICLE 13 | ||||||
SUBSIDIARY GUARANTEES | ||||||
Section 13.01. |
Subsidiary Guarantees | 50 | ||||
Section 13.02. | Release of Subsidiary Guarantees | 50 | ||||
ARTICLE 14 | ||||||
MISCELLANEOUS PROVISIONS | ||||||
Section 14.01. |
Effect on Successors and Assigns | 51 | ||||
Section 14.02. | Actions by Successor | 51 | ||||
Section 14.03. | Notices | 51 | ||||
Section 14.04. | Governing Law | 51 | ||||
Section 14.05. | Compliance Certificates and Opinions | 51 | ||||
Section 14.06. | Payments on Business Days | 52 | ||||
Section 14.07. | Conflict with Trust Indenture Act | 52 |
iii
Section 14.08. | Counterparts | 52 | ||||
Section 14.09. | Separability | 52 | ||||
Section 14.10. | Assignment | 52 | ||||
Section 14.11. | Waiver of Jury Trial | 53 | ||||
Section 14.12. | Force Majeure | 53 | ||||
Exhibit A | Form of Supplemental Indenture to add Subsidiary Guarantee |
iv
INDENTURE, dated as of January 28, 2011, between Family Dollar Stores, Inc., a Delaware corporation (the Company) and U.S. Bank National Association as trustee (the Trustee):
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of unsecured debt securities (hereinafter referred to as the Securities), in an unlimited aggregate principal amount to be issued from time to time in one or more series as in this Indenture provided, as registered Securities without coupons, to be authenticated by the certificate of the Trustee;
WHEREAS, to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the Securities by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the Securityholders:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions of Terms.
The terms defined in this Section (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act or that are by reference in such Act defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this instrument.
Authenticating Agent means an authenticating agent with respect to all or any of the series of Securities appointed with respect to all or any series of the Securities by the Trustee pursuant to Section 2.10.
Authorized Newspaper means a newspaper in the English language or in an official language of the country of publication, customarily printed on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the place in connection with which the term is used or in
the financial community of such place. If, because of temporary suspension of publication or general circulation of any newspaper or for any other reason, it is impossible or impracticable to make any publication of any notice required by this Indenture in the manner herein provided, such publication or other notice in lieu thereof which is made at the written direction of the Company by the Trustee shall constitute a sufficient publication of such notice.
Bankruptcy Law means Title 11, U.S. Code, or any similar Federal or State law for the relief of debtors.
Board of Directors means the Board of Directors of the Company or any duly authorized committee of such Board.
Board Resolution means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
Business Day means, with respect to any series of Securities, any day other than a day on which Federal or State banking institutions in the Borough of Manhattan, The City of New York, are authorized or obligated by law, executive order or regulation to close.
Commission means the United States Securities and Exchange Commission and any successor thereto.
Company means Family Dollar Stores, Inc., a corporation duly organized and existing under the laws of the State of Delaware, and, subject to the provisions of Article 10, shall also include its successors and assigns.
Corporate Trust Office means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office is located at 60 Livingston Avenue, St. Paul, MN 55107-1419, Attention: Corporate Trust Services, or such other address as the Trustee may designate from time to time by notice to the Securityholders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Securityholders and the Company).
Custodian means any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law.
Default means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
Defaulted Interest has the meaning assigned to such term in Section 2.03.
2
Depositary means, with respect to Securities of any series, for which the Company shall determine that such Securities will be issued as a Global Security, The Depository Trust Company, New York, New York, another clearing agency, or any successor registered as a clearing agency under the Exchange Act or other applicable statute or regulation, which, in each case, shall be designated by the Company pursuant to either Section 2.01 or Section 2.11.
Event of Default means, with respect to Securities of a particular series, any event specified in Section 6.01, continued for the period of time, if any, therein designated.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Global Security means, with respect to any series of Securities, a Security executed by the Company and delivered by the Trustee to the Depositary or pursuant to the Depositarys instruction, all in accordance with the Indenture, which shall be registered in the name of the Depositary or its nominee.
Governmental Obligations means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from any amount payable to the holder of such depositary receipt, or from any amount received by the custodian in respect of the Governmental Obligation, or from any specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt.
herein, hereof and hereunder, and other words of similar import, refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Indenture means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof.
Interest Payment Date, when used with respect to any installment of interest on a Security of a particular series, means the date specified in such Security or in an Officers certificate pursuant to a Board Resolution or in an indenture supplemental hereto with respect to such series as the fixed date on
3
which an installment of interest with respect to Securities of that series is due and payable.
Material Subsidiary means, at any time, any Subsidiary of the Company that together with all other Subsidiaries of such Subsidiary, accounted for more than (a) five percent (5%) of the consolidated assets of the Company and its Subsidiaries as of the most recent date for which the Company has filed financial statements in an annual report on Form 10-K or (b) five percent (5%) of the consolidated revenues of the Company and its Subsidiaries for the most recent year for which the Company has filed financial statements on Form 10-K.
Officers certificate means a certificate, signed by the Chief Financial Officer of the Company that is delivered to the Trustee in accordance with the terms hereof. Each such certificate shall include the statements provided for in Section 14.05, if and to the extent required by the provisions thereof.
Opinion of Counsel means an opinion in writing of legal counsel, who may be an employee of or counsel for the Company, that is delivered to the Trustee in accordance with the terms hereof. Each such opinion shall include the statements provided for in Section 14.05, if and to the extent required by the provisions thereof.
Outstanding, when used with reference to Securities of any series, means, subject to the provisions of Section 8.04, as of any particular time, all Securities of that series theretofore authenticated and delivered by the Trustee under this Indenture, except: (a) Securities theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or that have previously been canceled; (b) Securities or portions thereof for the payment or redemption of which moneys or Governmental Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent), provided, however, that if such Securities or portions of such Securities are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as specified in Article 3 or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered, or securities which shall have been paid, pursuant to the terms of Section 2.07.
Person means any individual, corporation, partnership, joint-venture, joint-stock company, limited liability company or other unincorporated organization or government or any agency or political subdivision thereof.
Predecessor Security of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security
4
authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security.
Responsible Officer when used with respect to the Trustee means any officer in its corporate trust department, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
Securities Act means the Securities Act of 1933, as amended.
Securities means the debt securities authenticated and delivered under this Indenture.
Securityholder, holder of Securities, registered holder, or other similar term, means the Person or Persons in whose name or names a particular Security shall be registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture.
Security Register has the meaning assigned to such term in Section 2.05(b).
Security Registrar has the meaning assigned to such term in Section 2.05(b).
Subsidiary means, with respect to any Person, any corporation, partnership, joint venture, limited liability company, association or other business entity of which more than 50% of the outstanding voting stock (or equivalent equity interest) is owned, directly or indirectly, by such Person or one or more Subsidiaries of such Person (or a combination thereof). Unless otherwise specified, the term Subsidiary means a direct or indirect Subsidiary of the Company.
Subsidiary Guarantee as the meaning assigned to such term in Section 13.01.
Subsidiary Guarantor as the meaning assigned to such term in Section 13.01.
Trustee means U.S. Bank National Association, and, subject to the provisions of Article 7, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, Trustee shall mean each such Person. The term Trustee as used with respect to a particular series of the Securities shall mean the trustee with respect to that series.
5
Trust Indenture Act means the Trust Indenture Act of 1939, as amended, subject to the provisions of Section 9.01 and Section 9.02, as in effect at the date of execution of this instrument.
UCC means the Uniform Commercial Code, as in effect in each applicable jurisdiction.
ARTICLE 2
ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES
Section 2.01. Designation and Terms of Securities.
The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series up to the aggregate principal amount of Securities of that series from time to time authorized by or pursuant to a Board Resolution or pursuant to one or more indentures supplemental hereto. Prior to the initial issuance of Securities of any series, there shall be established in or pursuant to a Board Resolution, and set forth in an Officers certificate, or established in one or more indentures supplemental hereto:
(a) the title of the Security of the series (which shall distinguish the Securities of the series from all other Securities);
(b) any limit upon the aggregate principal amount of the Securities of that series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of that series);
(c) the date or dates on which the principal of the Securities of the series is payable;
(d) the rate or rates at which the Securities of the series shall bear interest or the manner of calculation of such rate or rates, if any;
(e) the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest will be payable or the manner of determination of such Interest Payment Dates and the record date for the determination of Securityholders to whom interest is payable on any such Interest Payment Dates;
(f) the right, if any, to extend the interest payment periods and the duration of such extension;
6
(g) the period or periods within which, the price or prices at which and the terms and conditions upon which, Securities of the series may be redeemed, in whole or in part, at the option of the Company;
(h) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions (including payments made in cash in participation of future sinking fund obligations) or at the option of a holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
(i) the form of the Securities of the series including the form of the certificate of authentication for such series;
(j) if other than denominations of one thousand U.S. dollars ($1,000) or any integral multiple thereof, the denominations in which the Securities of the series shall be issuable;
(k) any and all other terms with respect to such series (which terms shall not be inconsistent with the terms of this Indenture) including any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Securities of that series;
(l) whether the Securities are issuable as a Global Security and, in such case, the identity of the Depositary for such series;
(m) whether the Securities will be convertible into shares of common stock or other securities of the Company and, if so, the terms and conditions upon which such Securities will be so convertible, including the conversion price and the conversion period;
(n) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.01;
(o) any additional or different Events of Default or restrictive covenants provided for with respect to the Securities of the series;
(p) any provisions granting special rights to Securityholders when a specified event occurs; and
(q) any special tax implications of the Securities of the series, including provisions for an original issue discount, if offered.
All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to any such Board Resolution or in any indentures supplemental hereto.
7
If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers certificate setting forth the terms of the series.
Securities of any particular series may be issued at various times, with different dates on which the principal or any installment of principal is payable, with different rates of interest, if any, or different methods by which rates of interest may be determined, with different dates on which such interest may be payable and with different redemption dates.
Section 2.02. Form of Securities and Trustees Certificate.
The Securities of any series and the Trustees certificate of authentication to be borne by such Securities shall be substantially of the tenor and purport as set forth in one or more indentures supplemental hereto or as provided by or pursuant to a Board Resolution and set forth in an Officers certificate, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Securities of that series may be listed, or to conform to usage.
Section 2.03. Denominations; Provision for Payment.
The Securities shall be issuable as registered Securities without coupons and in the denominations of one thousand U.S. dollars ($1,000) or any integral multiple thereof, subject to Section 2.01(j). The Securities of a particular series shall bear interest payable on the dates and at the rate or rates specified with respect to that series. The principal of and the interest on the Securities of any series, as well as any premium thereon in case of redemption thereof prior to maturity, shall be payable in the coin or currency of the United States of America that at the time is legal tender for public and private debt, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City and State of New York. Each Security shall be dated the date of its authentication. Interest on the Securities shall be computed on the basis of a 360-day year composed of twelve 30-day months.
The interest installment on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Securities of that series shall be paid to the Person in whose name said Security (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment. In the event that any Security of a particular series or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and
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prior to such Interest Payment Date, interest on such Security will be paid upon presentation and surrender of such Security as provided in Section 3.03.
Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date for Securities of the same series (herein called Defaulted Interest) shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such registered holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on Securities to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Security Register (as hereinafter defined), not less than 10 days prior to such special record date. Following such mailing of notice of the proposed payment of such Defaulted Interest and the special record date, such Defaulted Interest shall be paid to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest on any Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
Unless otherwise set forth in or pursuant to a Board Resolution or one or more indentures supplemental hereto establishing the terms of any series of Securities pursuant to Section 2.01 hereof, the term regular record date as used in this Section with respect to a series of Securities with respect to any Interest
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Payment Date for such series shall mean either the fifteenth day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the first day of a month, or the first day of the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the fifteenth day of such month, whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each Security of a series delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security of such series shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security.
Section 2.04. Execution and Authentications.
The Securities shall be signed on behalf of the Company by the Chief Financial Officer and attested by its Secretary or one of its Assistant Secretaries. Signatures may be in the form of a manual or facsimile signature. The Company may use the facsimile signature of any Person who shall have been the Chief Financial Officer thereof, or of any Person who shall have been a Secretary or Assistant Secretary thereof, notwithstanding the fact that at the time the Securities shall be authenticated and delivered or disposed of such Person shall have ceased to be the Chief Financial Officer, or the Secretary or an Assistant Secretary, of the Company. The Securities may contain such notations, legends or endorsements as are required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication by the Trustee.
A Security shall not be valid until authenticated manually by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the holder of such Security is entitled to the benefits of this Indenture.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Securities, signed by its Chief Financial Officer and its Secretary or any Assistant Secretary, and the Trustee in accordance with such written order shall authenticate and deliver such Securities.
In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be given, and (subject to Section 7.01) shall be fully protected in relying upon (i) an Officers certificate or executed supplemental indenture setting forth the form and terms of the Securities as required pursuant to Section 2.01, (ii) an Opinion of Counsel stating that the form and terms thereof have been established
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in conformity with the provisions of this Indenture and that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will be valid and binding obligations of the Company entitled to the benefits of this Indenture, and enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws now or hereafter in effect relating to creditors rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and (iii) a copy of the chief financial officers certificate pursuant to which the terms and form of the Securities were established.
The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustees own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee.
Section 2.05. Registration of Transfer and Exchange.
(a) Securities of any series may be exchanged upon presentation thereof at the office or agency of the Company designated for such purpose in the Borough of Manhattan, the City and State of New York, for other Securities of such series of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section. In respect of any Securities so surrendered for exchange, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange therefor the Security or Securities of the same series that the Securityholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose in the Borough of Manhattan, the City and State of New York, or such other location designated by the Company a register or registers (herein referred to as the Security Register) in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Securities and the transfers of Securities as provided in this Section and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Securities and transfers of Securities as herein provided shall be appointed as authorized by Board Resolution (the Security Registrar).
Upon surrender for transfer of any Security at the office or agency of the Company designated for such purpose, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Security or Securities of the same series as the Security presented for a like aggregate principal amount.
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All Securities presented or surrendered for exchange or registration of transfer, as provided in this Section, shall be accompanied (if so required by the Company or the Security Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Security Registrar, duly executed by the registered holder or by such registered holders duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration of transfer of Securities, or issue of new Securities in case of partial redemption of any series, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.06, Section 3.03(b) and Section 9.04 not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or register the transfer of any Securities during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the Outstanding Securities of the same series and ending at the close of business on the day of such mailing, nor (ii) to register the transfer of or exchange any Securities of any series or portions thereof called for redemption. The provisions of this Section 2.05 are, with respect to any Global Security, subject to Section 2.11 hereof.
Section 2.06. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company may execute, and the Trustee shall authenticate and deliver, temporary Securities (printed, lithographed or typewritten) of any authorized denomination. Such temporary Securities shall be substantially in the form of the definitive Securities in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Company. Every temporary Security of any series shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities of such series. Without unnecessary delay the Company will execute and will furnish definitive Securities of such series and thereupon any or all temporary Securities of such series may be surrendered in exchange therefor (without charge to the holders thereof), at the office or agency of the Company designated for the purpose in the Borough of Manhattan, the City and State of New York, and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Securities an equal aggregate principal amount of definitive Securities of such series, unless the Company advises the Trustee in writing to the effect that definitive Securities need not be executed and furnished until further notice from the Company. Until so exchanged, the temporary Securities of such series shall be entitled to the same benefits under this Indenture as definitive Securities of such series authenticated and delivered hereunder.
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Section 2.07. Mutilated, Destroyed, Lost or Stolen Securities.
In case any temporary or definitive Security shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon the Companys request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Security of the same series, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substituted Security shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicants Security and of the ownership thereof. The Trustee may authenticate any such substituted Security and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Security) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Security and of the ownership thereof.
Every replacement Security issued pursuant to the provisions of this Section shall constitute an additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Security shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of the same series duly issued hereunder. All Securities shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
Section 2.08. Cancellation.
All Securities surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be cancelled by it, and no Securities shall be issued in lieu thereof
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except as expressly required or permitted by any of the provisions of this Indenture. On written request of the Company at the time of such surrender, the Trustee shall deliver to the Company canceled Securities held by the Trustee. In the absence of such request the Trustee may dispose of canceled Securities in accordance with its standard procedures. If the Company shall otherwise acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation.
Section 2.09. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Securities any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Securities.
Section 2.10. Authenticating Agent.
So long as any of the Securities of any series remain Outstanding there may be an Authenticating Agent for any or all such series of Securities which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Securities by the Trustee shall be deemed to include authentication by an Authenticating Agent for such series. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by Federal or State authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon written request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder,
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shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto.
Section 2.11. Global Securities.
(a) If the Company shall establish pursuant to Section 2.01 that the Securities of a particular series are to be issued as a Global Security, then the Company shall execute and the Trustee shall, in accordance with Section 2.04, authenticate and deliver, a Global Security that (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all of the Outstanding Securities of such series, (ii) shall be registered in the name of the Depositary or its nominee, (iii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositarys instruction and (iv) shall bear a legend substantially to the following effect: Except as otherwise provided in Section 2.11 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor Depositary or to a nominee of such successor Depositary.
(b) Notwithstanding the provisions of Section 2.05, the Global Security of a series may be transferred, in whole but not in part and in the manner provided in Section 2.05, only to another nominee of the Depositary for such series, or to a successor Depositary for such series selected or approved by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary for a series of the Securities notifies the Company that it is unwilling or unable to continue as Depositary for such series or if at any time the Depositary for such series shall no longer be registered or in good standing under the Exchange Act or other applicable statute or regulation, and a successor Depositary for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, this Section 2.11 shall no longer be applicable to the Securities of such series and the Company will execute, and subject to Section 2.05, the Trustee will authenticate and deliver the Securities of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security of such series in exchange for such Global Security. In addition, the Company may at any time determine that the Securities of any series shall no longer be represented by a Global Security and that the provisions of this Section 2.11 shall no longer apply to the Securities of such series. In such event the Company will execute and, subject to Section 2.05, upon receipt of an Officers certificate evidencing such determination by the Company, will authenticate and deliver the Securities of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security of such series in exchange for such Global Security. Upon the exchange of the Global Security for such Securities in definitive registered form without coupons, in authorized denominations, the Global Security shall be canceled by the Trustee. Such Securities in definitive
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registered form issued in exchange for the Global Security pursuant to this Section 2.11(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Depositary for delivery to the Persons in whose names such Securities are so registered.
Section 2.12. CUSIP Numbers.
The Company in issuing the Securities may use CUSIP numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION OF SECURITIES AND SINKING FUND PROVISIONS
Section 3.01. Redemption.
The Company may redeem the Securities of any series issued hereunder on and after the dates and in accordance with the terms established for such series pursuant to Section 2.01 hereof.
Section 3.02. Notice of Redemption.
(a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Securities of any series in accordance with the right reserved so to do, the Company shall, or shall give such notice information to the Trustee and cause the Trustee to, give notice of such redemption to holders of the Securities of such series to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption of that series to such holders at their last addresses as they shall appear upon the Security Register unless a shorter period is specified in the Securities to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Security of any series designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Securities of such series or any other series. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in
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the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers certificate evidencing compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which Securities of that series are to be redeemed, and shall state that payment of the redemption price of such Securities to be redeemed will be made at the office or agency of the Company in the Borough of Manhattan, the City and State of New York, upon presentation and surrender of such Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that from and after such date interest will cease to accrue and that the redemption is for a sinking fund, if such is the case. If less than all the Securities of a series are to be redeemed, the notice to the holders of Securities of that series to be redeemed in whole or in part shall specify the particular Securities to be so redeemed. In case any Security is to be redeemed in part only, the notice that relates to such Security shall state the portion of the principal amount thereof to be redeemed, and shall state that on and after the redemption date, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued.
(b) If the Trustee is to provide notice to the holders of Securities in accordance with clause (a) above, for a partial or full redemption, the Company shall give the Trustee at least 45 days notice in advance of the date fixed for redemption as to the aggregate principal amount of Securities of the series to be redeemed, and thereupon, in the case of a partial redemption, the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to one thousand U.S. dollars ($1,000) or any integral multiple thereof) of the principal amount of such Securities of a denomination larger than $1,000, the Securities to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Securities to be redeemed, in whole or in part.
The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by its Chief Financial Officer, instruct the Trustee or any paying agent to call all or any part of the Securities of a particular series for redemption and to give notice of redemption in the manner set forth in this Section, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Security Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section.
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Section 3.03. Payment Upon Redemption.
(a) If the giving of notice of redemption shall have been completed as above provided, the Securities or portions of Securities of the series to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and interest on such Securities or portions of Securities shall cease to accrue on and after the date fixed for redemption; except that interest shall continue to accrue on any such Security or portion thereof with respect to which the Company defaults in the payment of such redemption price and accrued interest. On presentation and surrender of such Securities on or after the date fixed for redemption at the place of payment specified in the notice, said Securities shall be paid and redeemed at the applicable redemption price for such series, together with interest accrued thereon to the date fixed for redemption (but if the date fixed for redemption is an interest payment date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 2.03).
(b) Upon presentation of any Security of such series that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Security is presented shall deliver to the holder thereof, at the expense of the Company, a new Security of the same series of authorized denominations in principal amount equal to the unredeemed portion of the Security so presented.
Section 3.04. Sinking Fund.
The provisions of this Section 3.04, Section 3.05 and Section 3.06 shall be applicable to any sinking fund for the retirement of Securities of a series, except as otherwise specified as contemplated by Section 2.01 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a mandatory sinking fund payment, and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an optional sinking fund payment. If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 3.05. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
Section 3.05. Satisfaction of Sinking Fund Payments with Securities.
The Company (i) may deliver Outstanding Securities of a series (other than any Securities previously called for redemption) and (ii) may apply as a credit Securities of a series that have been redeemed either at the election of the
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Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series, provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the redemption price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
Section 3.06. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of the series, the portion thereof, if any, that is to be satisfied by delivering and crediting Securities of that series pursuant to Section 3.05 and the basis for such credit and will, together with such Officers certificate, deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 3.02 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.02. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Section 3.03.
ARTICLE 4
CERTAIN COVENANTS
Section 4.01. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on the Securities of that series at the time and place and in the manner provided herein and established with respect to such Securities.
Section 4.02. Maintenance of Office or Agency.
So long as any series of the Securities remain Outstanding, the Company agrees to maintain an office or agency in the Borough of Manhattan, the City and State of New York, with respect to each such series and at such other location or locations as may be designated as provided in this Section 4.02, where (i) Securities of that series may be presented for payment, (ii) Securities of that series may be presented as hereinabove authorized for registration of transfer and exchange, and (iii) notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be given or served, such
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designation to continue with respect to such office or agency until the Company shall, by written notice signed by its Chief Financial Officer, Secretary or an Assistant Secretary and delivered to the trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands.
Section 4.03. Paying Agents.
(a) If the Company shall appoint one or more paying agents for all or any series of the Securities, other than the Trustee, the Company will cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section:
(i) that it will hold all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on the Securities of that series (whether such sums have been paid to it by the Company or by any other obligor of such Securities) in trust for the benefit of the Persons entitled thereto;
(ii) that it will give the Trustee notice of any failure by the Company (or by any other obligor of such Securities) to make any payment of the principal of (and premium, if any) or interest on the Securities of that series when the same shall be due and payable;
(iii) that it will, at any time during the continuance of any failure referred to in the preceding paragraph (a)(ii) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and
(iv) that it will perform all other duties of paying agent as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect to any series of the Securities, it will on or before each due date of the principal of (and premium, if any) or interest on Securities of that series, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due on Securities of that series until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Securities) to take such action. Whenever the Company shall have one or more paying agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with the paying agent a sum
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sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such paying agent is the Trustee) the Company will promptly notify the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i) the agreement to hold sums in trust as provided in this Section is subject to the provisions of Section 11.05, and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money.
Section 4.04. Appointment to Fill Vacancy in Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee hereunder.
Section 4.05. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain Outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other company unless the provisions of Article 10 hereof are complied with.
Section 4.06. Trustees Obligations with Respect to the Covenants.
The Trustee shall not be obligated to monitor or confirm, on a continuing basis or otherwise, the Companys compliance with the covenants contained in this Article 4 or with respect to reports or other documents filed under the Indenture; provided, however, that nothing herein shall relieve the Trustee of any obligations to monitor the Companys timely delivery of all reports and certificates required under Section 5.01 and Section 5.03 of the Indenture and to fulfill its obligations under Article 7 hereof.
Section 4.07. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the end of each of the Companys fiscal years, a certificate executed by its principal executive officer, principal financial officer or principal accounting officer, stating as to his or her knowledge the Companys compliance (without regard to periods of grace or notice requirements) with all conditions and covenants under this Indenture, and if the Company shall not be in compliance, specifying such
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non-compliance and the nature and status thereof of which such officer may have knowledge.
ARTICLE 5
SECURITYHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01. Company to Furnish Trustee Names and Addresses of Securityholders.
The Company will furnish or cause to be furnished to the Trustee (a) on each regular record date (as defined in Section 2.03) a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of each series of Securities as of such regular record date, provided that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company and (b) at such other times as the Trustee may request in writing within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, in either case, no such list need be furnished for any series for which the Trustee shall be the Security Registrar.
Section 5.02. Preservation of Information; Communications with Securityholders.
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Securities contained in the most recent list furnished to it as provided in Section 5.01 and as to the names and addresses of holders of Securities received by the Trustee in its capacity as Security Registrar (if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Securityholders with respect to their rights under this Indenture or under the Securities.
Section 5.03. Reports by the Company.
(a) The Company covenants and agrees to file with the Trustee, within 30 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) that the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information,
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documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports that may be required pursuant to Section 13 of the Exchange Act, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations.
(c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustees receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Companys compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers certificates).
(d) The Company covenants and agrees to transmit by mail, first class postage prepaid, or reputable over-night delivery service that provides for evidence of receipt, to the Securityholders, as their names and addresses appear upon the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.
(e) The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.
Section 5.04. Reports by the Trustee.
(a) On or before May 15 in each year in which any of the Securities are Outstanding, the Trustee shall transmit by mail, first class postage prepaid, to the Securityholders, as their names and addresses appear upon the Security Register, a brief report dated as of the preceding May 15, if and to the extent required under Section 313(a) of the Trust Indenture Act.
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(b) The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Trustee with the Company, with each stock exchange upon which any Securities are listed (if so listed) and also with the Commission. The Company agrees to reasonably promptly notify the Trustee in writing when any Securities become listed on any stock exchange, and of any delisting thereof.
ARTICLE 6
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
Section 6.01. Events of Default.
(a) Whenever used herein with respect to Securities of a particular series, Event of Default means any one or more of the following events that has occurred and is continuing:
(i) the Company defaults in the payment of any installment of interest upon any of the Securities of that series, as and when the same shall become due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of any indenture supplemental hereto, shall not constitute a default in the payment of interest for this purpose;
(ii) the Company defaults in the payment of the principal of (or premium, if any, on) any of the Securities of that series as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to that series; provided, however, that a valid extension of the maturity of such Securities in accordance with the terms of any indenture supplemental hereto shall not constitute a default in the payment of principal or premium, if any;
(iii) the Company fails to observe or perform any other of its covenants or agreements with respect to that series contained in this Indenture or otherwise established with respect to that series of Securities pursuant to Section 2.01 hereof (other than a covenant or agreement that has been expressly included in this Indenture solely for the benefit of one or more series of Securities other than such series) for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a Notice of Default hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the
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holders of at least 25% in aggregate principal amount of the Securities of all series affected by such failure at the time Outstanding;
(iv) the Company or a Material Subsidiary of the Company pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property or (D) makes a general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order under any Bankruptcy Law that (A) is for relief against the Company or a Material Subsidiary of the Company in an involuntary case, (B) appoints a Custodian of the Company for all or substantially all of their respective property, or (C) orders the liquidation of the Company or a Material Subsidiary of the Company, and the order or decree remains unstayed and in effect for 90 days; or
(vi) any other Event of Default provided for with respect to the Securities of such series in accordance with Section 2.01.
(b) If an Event of Default described other than in clauses (a)(iv) and (a)(v) of this Section 6.01 with respect to the Securities of any series then Outstanding hereunder occurs and is continuing, then, unless the principal of the Securities of such series shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding, by notice in writing to the Company (and to the Trustee if given by such Securityholders), may declare the principal of all the Securities of such series and interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Indenture or in the Securities of such series or established with respect to such series pursuant to Section 2.01 to the contrary. If an Event of Default described in clauses (a)(iv) or (a)(v) of this Section 6.01 occurs, the principal and interest accrued thereon of the Securities of any series shall be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of Securities of that series.
(c) At any time after the principal of the Securities of any series shall have been declared due and payable as provided in Section 6.01(b), and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of such series and the principal of (and premium, if any, on) any and all Securities of
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such series that shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that such payment is enforceable under applicable law, upon overdue installments of interest, applied to the Securities of each such series at the rate per annum expressed in the Securities of each such series, respectively, to the date of such payment or deposit) and the amount payable to the Trustee under Section 7.06, and (ii) any and all Events of Default under the Indenture with respect to such series, other than the nonpayment of principal on Securities of that series that shall not have become due by their terms, shall have been remedied or waived as provided in Section 6.06.
No such rescission and annulment shall extend to or shall affect any subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with respect to Securities of any such series under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken.
Section 6.02. Collection of Indebtedness and Suits for Enforcement by Trustee.
(a) The Company covenants that (i) in case it shall default in the payment of any installment of interest on any of the Securities of a series, as and when the same shall have become due and payable, and such default shall have continued for a period of 30 days, or (ii) in case it shall default in the payment of the principal of (or premium, if any, on) any of the Securities of a series when the same shall have become due and payable, whether upon maturity of the Securities of a series or upon redemption or upon declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to that series, then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Securities of that series, the whole amount that then shall have been become due and payable on all such Securities for principal (and premium, if any) or interest, or both, as the case may be, with interest upon the overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon overdue installments of interest at the rate per annum expressed in the Securities of that series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 7.06.
(b) If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be
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entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon the Securities of that series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or other obligor upon the Securities of that series, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or judicial proceedings affecting the Company, or its creditors or property, the Trustee shall have power to intervene in such proceedings and take any action therein that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of Securities of such series allowed for the entire amount due and payable by the Company under the Indenture at the date of institution of such proceedings and for any additional amount that may become due and payable by the Company after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable to the Trustee under Section 7.06; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the holders of Securities of such series to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Securityholders, to pay to the Trustee any amount due it under Section 7.06.
(d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Securities of that series, may be enforced by the Trustee without the possession of any of such Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for payment to the Trustee of any amounts due under Section 7.06, be for the ratable benefit of the holders of the Securities of such series.
In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in the Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
When the Trustee incurs expenses or renders services in connection with an Event of Default, the expenses (including the reasonable fees and expenses of its counsel) and the compensation for the services are intended to constitute
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expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section 6.02 shall survive the termination of this Indenture.
Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of that series or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.
Section 6.03. Application of Moneys Collected.
Any moneys collected by the Trustee pursuant to this Article with respect to a particular series of Securities shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal (or premium, if any) or interest, upon presentation of the Securities of that series, and notation thereon the payment, if only partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 7.06;
SECOND: To the payment of the amounts then due and unpaid upon Securities of such series for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively;
THIRD: Any remainder to the Company.
Section 6.04. Limitation on Suits.
No holder of any Security of any series shall have any right by virtue or by availing itself of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Securities of such series specifying such Event of Default, as hereinbefore provided; (b) the holders of not less than 25% in aggregate principal amount of the Outstanding Securities of such series (in the case of an Event of Default described in clauses (a)(i) or (a)(ii) of Section 6.01, each such series voting as a separate class, and in the case of an Event of Default described in clauses (a)(iii), (a)(iv), (a)(v) or (a)(vi) of Section 6.01, all affected series voting together as a
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single class) shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee hereunder; (c) such holder or holders shall have offered to the Trustee such indemnity reasonably satisfactory to the Trustee as it may require against the costs, expenses and liabilities to be incurred therein or thereby; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action, suit or proceeding; and (e) during such 60 day period, the holders of a majority in principal amount of the Securities of such series (voting as provided in clause (b) above) do not give the Trustee a direction inconsistent with the request.
Notwithstanding anything contained herein to the contrary, any other provisions of this Indenture, the right of any holder of any Security to receive payment of the principal of (and premium, if any) and interest on such Security, as therein provided, on or after the respective due dates expressed in such Security (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such holder and by accepting a Security hereunder it is expressly understood, intended and covenanted by the taker and holder of every Security of such series with every other such taker and holder and the Trustee, that no one or more holders of Securities of such series shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities of such series. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
Section 6.05. Rights and Remedies Cumulative; Delay or Omission not Waiver.
(a) Except as otherwise provided in Section 2.07, all powers and remedies given by this Article to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Securities.
(b) No delay or omission of the Trustee or of any holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or on acquiescence therein; and, subject to the provisions of Section 6.04, every power and remedy given by this Article or by law to the Trustee or the Securityholders may be exercised from
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time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.
Section 6.06. Control by Securityholders.
The holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding affected thereby (all such series voting together as a single class except with respect to an Event of Default described in clauses (a)(i) or (a)(ii) of Section 6.01, in which case, each such affected series voting as a separate class), determined in accordance with Section 8.04, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such series; provided, however, that such direction shall not be in conflict with any rule of law or with this Indenture or be unduly prejudicial to the rights of holders of Securities of any other series at the time Outstanding determined in accordance with Section 8.04. Subject to the provisions of Section 7.01, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding affected thereby (all such series voting together as a single class), determined in accordance with Section 8.04, may on behalf of the holders of all of the Securities of such series waive any past default in the performance of any of the covenants contained herein or established pursuant to Section 2.01 with respect to such series and its consequences, except a default in the payment of the principal of, or premium, if any, or interest on, any of the Securities of any such series as and when the same shall become due by the terms of such Securities otherwise than by acceleration (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal and any premium has been deposited with the Trustee (in accordance with Section 6.01(c)). Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
Section 6.07. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Securities by such holders acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in such suit, having due regard to the merits and good
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faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding more than 10% in aggregate principal amount of the Outstanding Securities of any series, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security of such series, on or after the respective due dates expressed in such Security or established pursuant to this Indenture.
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a series and after the curing of all Events of Default with respect to the Securities of that series that may have occurred, shall undertake to perform with respect to the Securities of such series such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Securities of a series has occurred (that has not been cured or waived), the Trustee shall exercise with respect to Securities of that series such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default with respect to the Securities of a series and after the curing or waiving of all such Events of Default with respect to that series that may have occurred:
(A) the duties and obligations of the Trustee shall with respect to the Securities of such series be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Securities of such series except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(B) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to the Securities of such series conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any
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certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Securityholders provided to the Trustee in accordance with Section 6.06 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Securities of such series;
(iv) none of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or indemnity reasonably satisfactory to the Trustee against such risk is not reasonably assured to it; and
(v) whether or not therein expressly so provided, every provision of this Indenture relating to the conduct of or affecting the liability of or affording protection to the Trustee shall be subject to the requirements of the Trust Indenture Act.
Section 7.02. Certain Rights of Trustee.
Except as otherwise provided in Section 7.01:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company, by any two of the Chief Financial Officer,
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the Secretary and an Assistant Secretary thereof (unless other evidence in respect thereof is specifically prescribed herein);
(c) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon;
(d) subject to Section 7.01, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture;
(i) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified in connection with the performance of its duties under this Indenture shall extend to the Trustees officers, directors, agents and employees. Such immunities and protections and right to indemnification, together with the Trustees right to compensation, shall survive the Trustees resignation or removal and final payment of the Securities;
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(j) the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture; and
(k) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
Section 7.03. Trustee not Responsible for Recitals or Issuance or Securities.
(a) The recitals contained herein and in the Securities shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities.
(c) The Trustee shall not be accountable for the use or application by the Company of any of the Securities or of the proceeds of such Securities, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture or established pursuant to Section 2.01, or for the use or application of any moneys received by any paying agent other than the Trustee.
Section 7.04. May Hold Securities.
The Trustee or any paying agent or Security Registrar, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not Trustee, paying agent or Security Registrar.
Section 7.05. Moneys Held in Trust.
Subject to the provisions of Section 11.05, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company in writing to pay thereon.
Section 7.06. Compensation and Reimbursement.
(a) The Company covenants and agrees to pay to the Trustee, and the Trustee shall be entitled to, such compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), as the Company, and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the
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exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its own negligence or willful misconduct. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability, claim, damage or expense incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises.
(b) The obligations of the Company under this Section to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Securities. The benefits of this Section shall survive the termination of this Indenture.
Section 7.07. Reliance on Officers certificate.
Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof.
Section 7.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire any conflicting interest within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.
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Section 7.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee with respect to the Securities issued hereunder which shall at all times be a corporation or national association organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial, or District of Columbia authority. If such corporation or national association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation or national association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10.
Section 7.10. Resignation and Removal; Appointment of Successor.
(a) The Trustee or any successor hereafter appointed, may at any time resign with respect to the Securities of one or more series by giving written notice thereof to the Company and by transmitting notice of resignation by mail, first class postage prepaid, to the Securityholders of such series, as their names and addresses appear upon the Security Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to Securities of such series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Securities of such series, or any Securityholder of that series who has been a bona fide holder of a Security or Securities for at least six months may on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section 7.08 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Security or Securities for at least six months;
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(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee with respect to all Securities and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, unless the Trustees duty to resign is stayed as provided herein, any Securityholder who has been a bona fide holder of a Security or Securities for at least six months may, on behalf of that holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding may at any time remove the Trustee with respect to such series by so notifying the Trustee and the Company and may appoint a successor Trustee for such series with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Securities of a series pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11.
(e) Any successor trustee appointed pursuant to this Section may be appointed with respect to the Securities of one or more series or all of such series, and at any time there shall be only one Trustee with respect to the Securities of any particular series.
Section 7.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor trustee with respect to all Securities, every such successor trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers,
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trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates, (ii) shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust, that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and that no Trustee shall be responsible for any act or failure to act on the part of any other Trustee hereunder; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein, such retiring Trustee shall with respect to the Securities of that or those series to which the appointment of such successor trustee relates have no further responsibility for the exercise of rights and powers or for the performance of the duties and obligations vested in the Trustee under this Indenture, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates; but, on request of the Company or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor trustee, to the extent contemplated by such supplemental indenture, the property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor trustee relates.
(c) Upon request of any such successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
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(d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article.
(e) Upon acceptance of appointment by a successor trustee as provided in this Section, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Securityholders, as their names and addresses appear upon the Security Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company.
Section 7.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation or national association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or national association resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or national association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
Section 7.13. Preferential Collection of Claims Against the Company.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE 8
CONCERNING THE SECURITYHOLDERS
Section 8.01. Evidence of Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Securities of one or more series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the
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fact that at the time of taking any such action the holders of such majority or specified percentage of such series have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Securities of the relevant series in person or by agent or proxy appointed in writing.
If the Company shall solicit from the Securityholders of one or more series any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers certificate, fix in advance a record date for such series for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of Outstanding Securities of the relevant series have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Securities of the relevant series shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
Section 8.02. Proof of Execution by Securityholders.
Subject to the provisions of Section 7.01, proof of the execution of any instrument by a Securityholder (such proof will not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Securities shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Securities shall be proved by the Security Register of such Securities or by a certificate of the Security Registrar thereof.
(c) The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.
Section 8.03. Who May be Deemed Owners.
Prior to the due presentment for registration of transfer of any Security, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the Person in whose name such Security shall be registered upon the books of the Company as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notice of ownership or
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writing thereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal of, premium, if any, and (subject to Section 2.03) interest on such Security and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary.
Section 8.04. Certain Securities Owned by Company Disregarded.
In determining whether the holders of the requisite aggregate principal amount of Securities of one or more series have concurred in any direction, consent or waiver under this Indenture, the Securities of such series that are owned by the Company or any other obligor on the Securities of that series or by any Person directly or indirectly controlling or controlled by or under common control with the Company or any other obligor on the Securities of that series shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Securities of such series that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. The Securities so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section, if the pledgee shall establish to the satisfaction of the Trustee the pledgees right so to act with respect to such Securities and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
Section 8.05. Actions Binding on Future Securityholders.
At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Securities of one or more series specified in this Indenture in connection with such action, any holder of a Security of any such series that is shown by the evidence to be included in the Securities the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the holder of any Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Security, and of any Security issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Security. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Securities of one or more series specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the holders of all the Securities of such series.
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ARTICLE 9
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without the Consent of Securityholders.
In addition to any supplemental indenture otherwise authorized by this Indenture, the Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Securityholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, in the Securities of any series;
(b) to comply with Article 10;
(c) to provide for uncertificated Securities in addition to or in place of certificated Securities;
(d) to add to the covenants of the Company for the benefit of the holders of all or any Series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication, and delivery of Securities, as herein set forth;
(f) to make any change that does not adversely affect the rights of any Securityholder in any material respect;
(g) to provide for the issuance of and establish the form and terms and conditions of the Securities of any series as provided in Section 2.01, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or any series of Securities, or to add to the rights of the holders of any series of Securities; or
(h) to add a Subsidiary Guarantee as provided in Article 13.
The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustees own rights, duties or immunities under this Indenture or otherwise.
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Any supplemental indenture authorized by the provisions of this Section may be executed by the Company and the Trustee without the consent of the holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 9.02.
Section 9.02. Supplemental Indentures With Consent of Securityholders.
With the consent (evidenced as provided in Section 8.01) of the holders of not less than a majority in aggregate principal amount of the Securities of all of the series affected by such supplemental indenture or indentures at the time Outstanding (all such series voting together as a single class), the Company, when authorized by Board Resolutions, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner not covered by Section 9.01 the rights of the holders of the Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the holders of each Security then Outstanding and affected thereby, (i) extend the fixed maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof or (ii) reduce the aforesaid percentage of Securities, the holders of which are required to consent to any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders of the series affected thereby under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
Section 9.03. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture pursuant to the provisions of this Article or of Section 10.01, this Indenture shall, with respect to the relevant series, be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Securities of the series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 9.04. Securities Affected by Supplemental Indentures.
Following the execution, authentication and delivery of a supplemental indenture pursuant to the provisions of this Article or of Section 10.01, the
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Securities of any series affected thereby may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which such series may be listed, as to any matter provided for in such supplemental indenture. If the Company shall determine that it is necessary or desirable, new Securities of such series so modified as to conform, in the opinion of the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Securities of that series then Outstanding.
Section 9.05. Execution of Supplemental Indentures.
Upon the request of the Company, accompanied by its Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders required to consent thereto as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustees own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Section 7.01, shall receive an Officers certificate and Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article and that it is proper for the Trustee under the provisions of this Article to join in the execution thereof;
Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall prepare and transmit, a notice, setting forth in general terms the substance of such supplemental indenture, to the Securityholders of all series affected thereby as their names and addresses appear upon the Security Register. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
Section 9.06. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
ARTICLE 10
SUCCESSOR CORPORATION
Section 10.01. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or convey, transfer or lease all or substantially all of its properties and assets to any
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Person, and the Company shall not permit any Person to consolidate with or merge into the Company, unless:
(a) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing;
(b) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease all or substantially all of its properties and assets to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all of the properties and assets of the Company shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; and
(c) the Company has delivered to the Trustee an Officers certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
Section 10.02. Successor Substitute.
Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all of the properties and assets of the Company in accordance with Section 10.01 above, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under the Indenture and the Securities.
ARTICLE 11
DEFEASANCE AND DISCHARGE
Section 11.01. Discharge of Companys Obligations. Except as otherwise provided in this Section 11.01, the Company may terminate its obligations under
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the Securities of any series and this Indenture with respect to the Securities of such series if:
(a) all Securities of such series previously authenticated and delivered (other than destroyed, lost or wrongfully taken Securities of such series that have been replaced or Securities of such series that are paid pursuant to Section 2.07 or Securities of such series for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 11.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or
(b) (i) the Securities of such series are scheduled to mature within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (ii) the Company irrevocably deposit in trust with the Trustee, as trust funds solely for the benefit of the holders of such Securities, money or Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment and after payment of all Federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the principal of (and premium, if any) and interest on the Securities of such series to maturity or redemption, as the case may be, and to pay all other sums payable by the Company hereunder, and (iii) the Company deliver to the Trustee an Officers certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture with respect to the Securities of such series have been complied with.
With respect to the foregoing clause (a), only the Companys obligations under Sections 7.06 and 11.05 in respect of the Securities of such series shall survive. With respect to the foregoing clause (b), only the Companys obligations in Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10 in respect of the Securities of such series shall survive until such Securities of such series are no longer outstanding. Thereafter, only the Companys obligations in Sections 7.06 and 11.05 in respect of the Securities of such series shall survive such satisfaction and discharge. After any such irrevocable deposit, the Trustee shall acknowledge in writing the discharge of the Companys obligations under the Securities of such series and this Indenture with respect to the Securities of such series except for those surviving obligations specified above.
Section 11.02. Legal Defeasance. Except as provided below, the Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Securities of any series and the provisions of this Indenture (and the Trustee, at the expense of the Company, shall execute instruments in form and substance satisfactory to the Company and the Trustee acknowledging the same) if the following conditions shall have been satisfied:
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(a) the Company has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the holders of the Securities of such series, for payment of the principal of (and premium, if any) and interest on the Securities of such series, money or Government Obligations or a combination thereof sufficient (unless such funds consist solely of money), in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) without consideration of any reinvestment and after payment of all Federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the principal of (and premium, if any) and interest on the outstanding Securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be;
(b) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound;
(c) no Default or Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit;
(d) the Company has delivered to the Trustee (i) either (x) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the Companys exercise of its option under this Section 11.02 and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x) above and based upon a change in law and (ii) an Opinion of Counsel, subject to customary assumptions and qualifications, to the effect that the holders of the Securities of such series have a valid security interest in the trust funds subject to no prior liens under the UCC; and
(e) the Company has delivered to the Trustee an Officers certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 11.02 of the Securities of such series have been complied with.
The Companys obligations in Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10 with respect to the Securities of such series shall survive until such Securities are no longer outstanding. Thereafter, only the Companys obligations in Sections 6.02, 7.06, and 11.05 shall survive such discharge.
Section 11.03. Covenant Defeasance. The Company may omit to comply with any term, provision or condition set forth in Sections 4.05, 4.07 (or any other specific covenant relating to the Securities of any series provided for in a Board Resolution or supplemental indenture pursuant to Section 2.01 which may by its
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terms be defeased pursuant to this Section 11.03), and such omission shall be deemed not to be an Event of Default under clause (a)(iii) of Section 6.01, with respect to the outstanding Securities of such series if:
(a) the Company has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the holders of Securities of such series, for payment of the principal of (and premium, if any) and interest on the Securities of such series, money or Government Obligations or a combination thereof in an amount sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) without consideration of any reinvestment and after payment of all Federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the principal of (and premium, if any) and accrued interest on the outstanding Securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be;
(b) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound;
(c) no Default or Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit;
(d) the Company has delivered to the Trustee an Opinion of Counsel, subject to customary assumptions and qualifications, to the effect that (i) the holders of the Securities of such series have a valid security interest in the trust funds subject to no prior liens under the UCC and (ii) such holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and
(e) the Company has delivered to the Trustee an Officers certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the covenant defeasance contemplated by this Section 11.03 of the Securities of such series have been complied with.
Section 11.04. Application of Trust Money. Subject to Section 11.05, the Trustee or paying agent shall hold in trust money or Government Obligations deposited with it pursuant to Section 11.01, 11.02 or 11.03, as the case may be, in respect of the Securities of any series and shall apply the deposited money and the proceeds from deposited Government Obligations in accordance with the Securities of such series and this Indenture to the payment of principal of (and premium, if any) and interest on the Securities of such series; but such money need not be segregated from other funds except to the extent required by law. The
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Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 11.01, 11.02 or 11.03, as the case may be, or the principal and interest received in respect thereof, other than any such tax, fee or other charge that by law is for the account of the Securityholders.
Section 11.05. Repayment to Company. Subject to Sections 7.06, 11.01, 11.02 and 11.03, the Trustee and the paying agent shall promptly pay to the Company upon request set forth in an Officers certificate any money held by them at any time and not required to make payments hereunder and thereupon shall be relieved from all liability with respect to such money. Subject to applicable escheat or abandoned property laws, the Trustee and the paying agent shall pay to the Company upon written request any money held by them and required to make payments under this Indenture that remains unclaimed for two years; provided that the Trustee or such paying agent before being required to make any such payment to the Company shall cause to be published at the expense of the Company once in an Authorized Newspaper or mail to each Securityholder entitled to such money at such Securityholders address (as set forth in the register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to such money must look to the Company for payment as unsecured general creditors unless an abandoned property law designates another Person, and all liability of the Trustee and such paying agent with respect to such money shall cease.
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01. No Recourse.
No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatsoever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or
49
implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Securities.
ARTICLE 13
SUBSIDIARY GUARANTEES
Section 13.01. Subsidiary Guarantees.
Without limiting the obligations of the Company, the Company may, from time to time at its discretion and without written notice from the Company to the Securityholders, cause any of its Subsidiaries to guarantee, on a joint and several basis, the full and prompt payment of the principal and interest on the Securities of any series and all other obligations relating to such series under this Indenture on the same terms and conditions as set forth in the Indenture by entering into a supplemental indenture substantially in the form of Exhibit A hereto (with such modifications as may be required to reflect the legal requirements of the jurisdiction of incorporation of the relevant Subsidiary) (a Subsidiary Guarantee). A Subsidiary that enters into a Subsidiary Guarantee shall be referred to as a Subsidiary Guarantor.
Section 13.02. Release of Subsidiary Guarantees.
Except as otherwise provided with respect to a series in a supplemental indenture, the Company may, from time to time at its discretion and upon written notice from the Company to the Trustee referring to this Section 13.02, terminate a Subsidiary Guarantee issued by a Subsidiary Guarantor with effect from the date of such notice so long as (i) no Default or Event of Default shall have occurred and then be continuing or shall result therefrom and (ii) no payment by such Subsidiary Guarantor is due under such Subsidiary Guarantors Subsidiary Guarantee. The written notice to the Trustee shall be accompanied by an Officers certificate and Opinion of Counsel certifying as to the matters set forth in clauses (i) and (ii) above, provided that the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers certificates of the Company.
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ARTICLE 14
MISCELLANEOUS PROVISIONS
Section 14.01. Effect on Successors and Assigns.
All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not.
Section 14.02. Actions by Successor.
Any act or proceeding which by any provision of this Indenture is authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful successor of the Company.
Section 14.03. Notices.
Except as otherwise expressly provided herein any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Securities to or on the Company may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: Family Dollar Stores, Inc., PO Box 1017, Charlotte, North Carolina 28201-1017. Any notice, election, request or demand by the Company or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee.
Section 14.04. Governing Law.
This Indenture and each Security shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State.
Section 14.05. Compliance Certificates and Opinions.
(a) Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.
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(b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant in this Indenture shall include (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.
Section 14.06. Payments on Business Days.
Except as provided pursuant to Section 2.01 pursuant to a Board Resolution, and as set forth in an Officers certificate or established in one or more indentures supplemental to this Indenture, in any case where the date of maturity of interest or principal of any Security or the date of redemption of any Security shall not be a Business Day, then payment of interest or principal (and premium, if any) may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date.
Section 14.07. Conflict with Trust Indenture Act.
If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control.
Section 14.08. Counterparts.
This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section 14.09. Separability.
In case any one or more of the provisions contained in this Indenture or in the Securities of any series shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Securities, but this Indenture and such Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
Section 14.10. Assignment.
The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary
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of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, the Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.
Section 14.11. Waiver of Jury Trial.
EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.
Section 14.12. Force Majeure.
In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
FAMILY DOLLAR STORES, INC. | ||||
By: | /S/ Kenneth T. Smith | |||
Name: | Kenneth T. Smith | |||
Title: | Senior Vice President Chief Financial Officer | |||
U.S. BANK NATIONAL ASSOCIATION, as Trustee | ||||
By: | /S/ Raymond S. Haverstock | |||
Name: | Raymond S. Haverstock | |||
Title: | Vice President |
EXHIBIT A
[FORM OF SUPPLEMENTAL INDENTURE TO ADD A SUBSIDIARY GUARANTEE]
SUPPLEMENTAL INDENTURE, dated as of [ , 20 ] (this Supplemental Indenture or Subsidiary Guarantee) among [Name of Subsidiary Guarantor], a [ ] organized under the laws of [ ] (the Subsidiary Guarantor), Family Dollar Stores, Inc. (together with its successors and assigns, the Company)[, each other then existing Subsidiary Guarantor under the Indenture referred to below (the Security Guarantors)] and U.S. Bank National Association as Trustee under the Indenture referred to below:
WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of January [ ], 2011 (as amended, supplemented, waived or otherwise modified, the Indenture), and a supplemental indenture providing for the issuance of [title of issue] (the Notes) by the Company;
WHEREAS, Section 13.01 of the Indenture provides that the Company may cause any of its Subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary shall unconditionally guarantee, on a joint and several basis, the full and prompt payment of the principal and interest on the Notes and all other obligations under the Indenture on the same terms and conditions as set forth in the Indenture;
WHEREAS, pursuant to Section 9.01(h) of the Indenture, the Company and the Trustee are authorized to execute and deliver this Supplemental Indenture to amend or supplement the Indenture, without the consent of the holders of the Notes (the Noteholders); and
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the Noteholders.
Except as otherwise specifically provided herein, capitalized terms used herein shall have the same meanings ascribed to such terms as are set forth in the Indenture.
ARTICLE 1
Guarantee, Etc.
Section 1.01. Guarantee. The Subsidiary Guarantor hereby guarantees to each holder of any Note or Notes at any time outstanding (a) the prompt payment
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in full, in U.S. dollars when due (whether at stated maturity, by acceleration, by mandatory or optional prepayment or otherwise) of the principal of and interest on the Notes, together with all other amounts from time to time owing by the Company and such other Security Guarantors (collectively, the Obligors) under the Indenture and under the Notes (including without limitation all other costs, expenses and taxes), which shall include interest (including, to the extent permitted by applicable law, post-petition interest in bankruptcy) on any of the foregoing amount that are overdue, and (b) the prompt performance and observance by the Obligors of all covenants, agreements and conditions on their respective part to be performed and observed hereunder, in each case strictly in accordance with the terms thereof (such payments and other obligations being herein collectively called the Guaranteed Obligations). The Subsidiary Guarantor hereby further agrees that if an Obligor shall default in the payment or performance of any of the Guaranteed Obligations, the Subsidiary Guarantor will (x) promptly pay or perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration, by mandatory or optional prepayment or otherwise) in accordance with the terms of such extension or renewal and (y) pay to the holder of any Notes such amounts, to the extent lawful, as shall be sufficient to pay the costs and expenses of collection or of otherwise enforcing any of such holders rights under the Indenture, including, without limitation, reasonable counsel fees.
All obligations of the Subsidiary Guarantor under this Subsidiary Guarantee shall survive the transfer of any Note, and any obligations of the Subsidiary Guarantor under this Subsidiary Guarantee with respect to which the underlying obligation of any Obligor is expressly stated to survive payment of any Note shall also survive payment of such Note.
Section 1.02. Obligations Unconditional. (a) The obligations of the Subsidiary Guarantor under Section 1.01 constitute a present and continuing guaranty of payment and not collectability and are absolute, unconditional and irrevocable, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of any Obligor under the Indenture, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any Guaranty of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 1.02 that the obligations of the Subsidiary Guarantor hereunder shall be absolute, unconditional and irrevocable, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or
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impair the liability of the Subsidiary Guarantor hereunder which shall remain absolute, unconditional and irrevocable as described above:
(i) any amendment or modification of any provision of the Indenture or any of the Notes or any assignment or transfer thereof, including without limitation the renewal or extension of the time of payment of any of the Notes or the granting of time in respect of such payment thereof, increasing the principal amount of the Notes or any interest rate payable with respect thereto or of any furnishing or acceptance of security or any additional guarantee or any release of any security or guarantee so furnished or accepted for any of the Notes;
(ii) any waiver, consent, extension, granting of time, forbearance, indulgence or other action or inaction under or in respect of the Indenture or the Notes, or any exercise or non-exercise of any right, remedy or power in respect hereof or thereof;
(iii) any bankruptcy, receivership, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceedings with respect to any Obligor or any other Person or the properties or creditors of any of them;
(iv) the occurrence of any Default or Event of Default under, or any invalidity or any unenforceability of, or any misrepresentation, irregularity or other defect in, the Indenture, the Notes or any other agreement;
(v) any transfer of any assets to or from any Obligor, including without limitation any transfer or purported transfer to any Obligor from any Person, any invalidity, illegality of, or inability to enforce, any such transfer or purported transfer, any consolidation or merger of any Obligor with or into any Person, any change in the ownership of any shares of capital stock of any Obligor, or any change whatsoever in the objects, capital structure, constitution or business of any Obligor;
(vi) any default, failure or delay, willful or otherwise, on the part of any Obligor or any other Person to perform or comply with, or the impossibility or illegality of performance by the Company or any other Person of, any term of the Indenture, the Notes or any other agreement;
(vii) any suit or other action brought by, or any judgment in favor of, any beneficiaries or creditors of, any Obligor or any other Person for any reason whatsoever, including without limitation any suit or action in any way attacking or involving any issue, matter or thing in respect of the Indenture, the Notes or any other agreement;
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(viii) any lack or limitation of status or of power, incapacity or disability of any Obligor or any trustee or agent thereof; or
(ix) any other thing, event, happening, matter, circumstance or condition whatsoever, not in any way limited to the foregoing.
(b) The Subsidiary Guarantor hereby unconditionally waives notice of acceptance of this Subsidiary Guarantee, diligence, presentment, demand of payment, protest and all notices whatsoever and any requirement that any holder of Notes exhaust any right, power or remedy against any Obligor under the Indenture or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.
(c) In the event that the Subsidiary Guarantor shall at any time pay any amount on account of the Guaranteed Obligations or take any other action in performance of its obligations hereunder, the Subsidiary Guarantor shall not exercise any subrogation or other rights hereunder or under the Notes and the Subsidiary Guarantor hereby waives all rights it may have to exercise any such subrogation or other rights, and all other remedies that it may have against any Obligor, in respect of any payment made hereunder unless and until the Guaranteed Obligations shall have been indefeasibly paid in full. If any amount shall be paid to the Subsidiary Guarantor on account of any such subrogation rights or other remedy, notwithstanding the waiver thereof, such amount shall be received in trust for the benefit of the holders of Notes and shall forthwith be paid to such holders to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. The Subsidiary Guarantor agrees that its obligations under this Subsidiary Guarantee shall be automatically reinstated if and to the extent that for any reason any payment (including payment in full) by or on behalf of any Obligor is rescinded or must be otherwise restored by any holder of Notes, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid.
(d) If an event permitting the acceleration of the maturity of the principal amount of the Notes shall at any time have occurred and be continuing and such acceleration (and the effect thereof on the Guaranteed Obligations) shall at such time be prevented by reason of the pendency against any Obligor or any other Person of a case or proceeding under a bankruptcy or insolvency law, the Subsidiary Guarantor agrees that, for purposes of the Subsidiary Guarantors obligations under this Subsidiary Guarantee, the maturity of the principal amount of the Notes shall be deemed to have been accelerated (with a corresponding effect on the Guaranteed Obligations) with the same effect as if the holders of Notes had accelerated the same in accordance with the terms of this Subsidiary Guarantee, and the Subsidiary Guarantor shall forthwith pay such principal
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amount, any interest thereon, and any other amounts guaranteed hereunder without further notice or demand.
(e) The guarantee of the Subsidiary Guarantor under this Subsidiary Guarantee is a continuing guarantee and shall apply to the Guaranteed Obligations whenever arising. Each default in the payment or performance of any of the Guaranteed Obligations shall give rise to a separate claim and cause of action hereunder, and separate claims or suits may be made and brought, as the case may be, hereunder as each such default occurs.
Section 1.03. Limitation. Anything herein to the contrary notwithstanding, the liability of the Subsidiary Guarantor hereunder shall in no event exceed an amount equal to the maximum amount which can be guaranteed by the Subsidiary Guarantor under applicable laws relating to the insolvency of debtors, fraudulent conveyance, state insurance regulations or any other applicable law.
Section 1.04. Solvency. The Subsidiary Guarantor represents and warrants that as of the date hereof there are no reasonable grounds to suspect (taking into account the likelihood of any contingency occurring) that the Subsidiary Guarantor is unable to pay its debts as and when they become due and payable, including upon entering into this Subsidiary Guarantee or the doing of any act for the purpose of giving effect to this Subsidiary Guarantee.
ARTICLE 2
Miscellaneous
Section 2.01. Successors and Assigns. All the covenants, stipulations, promises and agreements in this Supplemental Indenture contained by or on behalf of the Subsidiary Guarantor shall bind its successors and assigns, whether so expressed or not.
Section 2.02. Notices. Except as otherwise expressly provided herein any notice or demand that by any provision of this Supplemental Indenture is required or permitted to be given or served by the Trustee or by the holders of Notes to or on the Subsidiary Guarantor may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: [Subsidiary Guarantor] c/o Family Dollar Stores, Inc., PO Box 1017, Charlotte, North Carolina 28201-1017. Any notice, election, request or demand by the Subsidiary Guarantor, the Company or any Noteholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee.
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Section 2.03. Governing Law. This Supplemental Indenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State.
Section 2.04. Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section. 2.05. Severability. In case any one or more of the provisions contained in this Supplemental Indenture shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture, but this Supplemental Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
Section 2.06. Ratification of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Noteholder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.
[SUBSIDIARY GUARANTOR] | ||||
By: |
| |||
Name: | ||||
Title: |
FAMILY DOLLAR STORES, INC. | ||||
By: |
| |||
Name: | ||||
Title: | ||||
U.S. BANK NATIONAL ASSOCIATION, as Trustee | ||||
By: |
| |||
Name: | ||||
Title: |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Howard R. Levine, certify that:
1. | I have reviewed this Report on Form 10-Q of Family Dollar Stores, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 6, 2011
/s/ Howard R. Levine | ||
Howard R. Levine | ||
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth T. Smith, certify that:
1. | I have reviewed this Report on Form 10-Q of Family Dollar Stores, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 6, 2011
/s/ Kenneth T. Smith | ||
Kenneth T. Smith | ||
Senior Vice President Chief Financial Officer | ||
(Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report on Form 10-Q of Family Dollar Stores, Inc. (the Company) for the quarterly period ended February 26, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Form 10-Q), Howard R. Levine, as Chief Executive Officer of the Company and Kenneth T. Smith, as Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 6, 2011
/s/ Howard R. Levine | ||
Howard R. Levine | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Kenneth T. Smith | ||
Kenneth T. Smith | ||
Senior Vice President Chief Financial Officer | ||
(Principal Financial Officer and Principal Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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