Dollar General 2007 Annual Report Download - page 41

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• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
and
• designate our subsidiaries as unrestricted subsidiaries.
Events of Default. The indentures also provide for events of default which, if any of them
occurs, would permit or require the principal of and accrued interest on the notes to become or to
be declared due and payable.
Registration Rights Agreement. On July 6, 2007, we entered into a registration rights
agreement with respect to the notes. In the registration rights agreement, we agreed to use
commercially reasonable efforts to register with the SEC new senior notes having substantially
identical terms as the senior notes and new senior subordinated notes having substantially
identical terms as the senior subordinated notes. We filed this registration statement with the
SEC, and it was declared effective, in the fourth quarter of fiscal 2007. We subsequently
commenced the offer to exchange the new senior notes and the new senior subordinated notes for
each of the outstanding senior notes and the outstanding senior subordinated notes, respectively.
The exchange offer expired on March 17, 2008. All of the outstanding senior notes and senior
subordinated notes were tendered in the exchange offer.
Adjusted EBITDA
Under the New Credit Facilities and the indentures, certain limitations and restrictions
could occur if we are not able to satisfy and remain in compliance with specified financial ratios.
Management believes the most significant of such ratios is the senior secured incurrence test
under the New Credit Facilities. This test measures the ratio of the senior secured debt to
Adjusted EBITDA. This ratio would need to be no greater than 4.25 to 1 to avoid such
limitations and restrictions. As of February 1, 2008, this ratio was 3.4 to 1. Senior secured debt is
defined as our total debt secured by liens or similar encumbrances less cash and cash equivalents.
EBITDA is defined as income (loss) from continuing operations before cumulative effect of
change in accounting principle plus interest and other financing costs, net, provision for income
taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA, further
adjusted to give effect to adjustments required in calculating this covenant ratio under our New
Credit Facilities. EBITDA and Adjusted EBITDA are not presentations made in accordance with
GAAP, are not measures of financial performance or condition, liquidity or profitability, and
should not be considered as an alternative to (1) net income, operating income or any other
performance measures determined in accordance with GAAP or (2) operating cash flows
determined in accordance with GAAP. Additionally, EBITDA and Adjusted EBITDA are not
intended to be measures of free cash flow for management’ s discretionary use, as they do not
consider certain cash requirements such as interest payments, tax payments and debt service
requirements and replacements of fixed assets.
Our presentation of EBITDA and Adjusted EBITDA has limitations as an analytical tool,
and should not be considered in isolation or as a substitute for analysis of our results as reported
under GAAP. Because not all companies use identical calculations, these presentations of
EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of