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Dollar Tree Stores, Inc.
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[LOGO]
DOLLAR TREE STORES, INC.
500 VOLVO PARKWAY
CHESAPEAKE, VIRGINIA 23320
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
THURSDAY, JUNE 19, 2003
To Our Shareholders:
We will hold the annual meeting of the shareholders of Dollar Tree
Stores, Inc. at the Holiday Inn Select, 1570 North Military Highway, Norfolk,
Virginia, 23502, on Thursday, June 19, 2003 at 10:00 a.m. local time.
Shareholders will consider and vote on the following proposals:
- elect three directors;
- approve the 2003 Equity Incentive Plan;
- approve the 2003 Non-Employee Director Stock Option Plan;
- approve the 2003 Director Deferred Compensation Plan; and
- act upon any other business that may properly come before the
meeting.
Shareholders of record at the close of business on April 21, 2003 will
receive notice of and be allowed to vote at the meeting.
YOUR VOTE IS IMPORTANT TO US. We encourage you to read this Proxy
Statement then sign, date and return your proxy card in the enclosed envelope at
your earliest convenience. Sending in your proxy card will not prevent you from
voting your stock at the meeting if you desire to do so.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Frederick C. Coble
Frederick C. Coble
Chief Financial Officer
and Secretary
Chesapeake, Virginia
April 30, 2003
DOLLAR TREE STORES, INC.
500 VOLVO PARKWAY
CHESAPEAKE, VIRGINIA 23320
PROXY STATEMENT
We sent you this proxy statement and the enclosed proxy card because
Dollar Tree's Board of Directors is soliciting your proxy to vote your shares at
the Annual Meeting. We will bear all costs for this solicitation. On or about
May 9, 2003, we began mailing these proxy materials to all stockholders of
record at the close of business on April 21, 2003.
VOTING PROCEDURES
Shareholders of record have one vote per share of stock held. On April
21, 2003, there were 114,324,162 shares of common stock outstanding.
If you vote by proxy, that is, by signing, dating and returning the
enclosed proxy card, the individuals named on the card (your "proxies") will
vote your shares in the manner you indicate. If you do not indicate instructions
on the card, then your shares will be voted FOR the election of three nominees
for director in Class II, FOR the approval of the 2003 Equity Incentive Plan,
FOR the approval of the 2003 Non-Employee Director Stock Option Plan and FOR the
approval of the 2003 Director Deferred Compensation Plan. If any other matter is
presented, then your proxy will vote in accordance with your proxies' best
judgment. At this time, the Board of Directors is unaware of any other business
to be brought before the meeting. If you send more than one proxy card, then
your shares will be voted in accordance with the proxy card bearing the latest
date.
As shown in the Notice of Annual Meeting, the 2003 Annual Meeting of
Shareholders of Dollar Tree Stores, Inc. will be held on Thursday, June 19,
2003, at the Holiday Inn Select in Norfolk, Virginia, at 10:00 a.m. local time.
A quorum of shareholders is necessary to hold a valid meeting. If holders of a
majority of the outstanding shares of common stock are present in person or by
proxy, a quorum will exist. Abstentions and broker non-votes are counted as
present for establishing a quorum. A broker non-vote occurs when a broker votes
on some matters on the proxy card but not on others because he does not have the
authority to do so.
If you send in your proxy card, you may revoke your proxy by providing
a written notice of revocation to the Secretary of Dollar Tree Stores, Inc.
prior to the Annual Meeting or by attending the annual meeting to cast your vote
in person.
1
TABLE OF CONTENTS
PAGE
PROPOSAL NO. 1 - ELECTION OF DIRECTORS............................................................................3
INFORMATION CONCERNING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS.................................................4
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE...........................................................7
OWNERSHIP OF COMMON STOCK.........................................................................................7
INFORMATION ABOUT THE BOARD OF DIRECTORS..........................................................................8
Director Compensation.............................................................................................8
Meetings of the Board of Directors................................................................................8
Committees of the Board of Directors..............................................................................8
Audit Committee..........................................................................................9
Report of the Audit Committee...................................................................9
Compensation Committee...................................................................................9
Compensation Committee Interlocks and Insider Participation....................................10
Report of the Compensation Committee...........................................................10
Nominating Committee....................................................................................11
COMPENSATION OF EXECUTIVE OFFICERS...............................................................................11
Summary Compensation Table..............................................................................11
Options Granted in 2002.................................................................................12
Option Exercises in 2002 and Year End Option Values.....................................................12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................12
EQUITY COMPENSATION PLAN INFORMATION.............................................................................13
COMPARISON OF SHAREHOLDER RETURNS................................................................................14
PROPOSAL NOS. 2 - 4 - APPROVAL OF PLANS..........................................................................15
2003 Equity Incentive Plan.......................................................................................15
2003 Non-Employee Director Stock Option Plan.....................................................................17
2003 Director Deferred Compensation Plan.........................................................................17
United States Federal Income Tax Consequences of Awards Under the Plans..........................................18
OTHER MATTERS....................................................................................................20
AUDIT COMMITTEE CHARTER.........................................................................................A-1
2003 EQUITY INCENTIVE PLAN......................................................................................B-1
2003 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN....................................................................C-1
2003 DIRECTOR DEFERRED COMPENSATION PLAN........................................................................D-1
2
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
Our Board of Directors is divided into three staggered classes for
purposes of election. One class is elected at each annual meeting of
shareholders to serve for a three-year term.
At the 2003 Annual Meeting of Shareholders, the terms of three Class
II directors are expiring. One of those Class II directors, Frank Doczi, is
retiring from the Board after eight years of service. The Board has nominated
Eileen R. Scott to replace Mr. Doczi. Class II directors elected at this annual
meeting will hold office for a three-year term expiring in 2006. The other
directors will continue in office following this annual meeting and their terms
will expire in 2004 (Class III) and 2005 (Class I). Officers are appointed by
the Board of Directors.
On January 6, 2003, the Board added a ninth seat and provisionally
elected Ms. Scott to serve in that position until the 2003 Annual Meeting. The
Board will revert to eight members as of the 2003 Annual Meeting.
The nominees have indicated their willingness to serve as directors.
If a nominee becomes unable to stand for reelection, the persons named in the
proxy will vote for any substitute nominee proposed by the Board of Directors.
VOTE REQUIRED
A director is elected at the meeting, so long as a quorum is present,
if the votes cast favoring the election of that director exceed those cast in
opposition. Abstentions and broker non-votes are not "cast" for this purpose.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTOR.
3
INFORMATION CONCERNING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
NOMINEES
J. DOUGLAS PERRY
Class of Director: II
Director Since: 1986
Principal Occupation: Chairman Emeritus of the Board of Directors,
Dollar Tree Stores, Inc.
Recent Business Experience: Mr. Perry, age 55, became Chairman Emeritus of the
Board in September 2001. He had been Chairman of
the Board since 1986 when he founded Dollar Tree
with Mr. Brock and Mr. Compton. He retired as an
employee and officer of the company as of March 1,
1999. He also serves on the Board of Old Dominion
Trust Company. Until 1991, he was an executive
officer of K&K Toys, which he, along with Mr.
Brock, Mr. Compton and Mr. Perry's father, built
from the company's original single store to 136
stores.
Other Directorships: None
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THOMAS A. SAUNDERS, III
Class of Director: II
Director Since: 1993
Principal Occupation: Member, Saunders Karp & Megrue Partners, L.L.C.
Recent Business Experience: Mr. Saunders, age 66, has been a member of
Saunders Karp & Megrue Partners, L.L.C., which
serves as the general partner of the general
partner of the SK Equity Fund, L.P., since 1990.
Before founding Saunders Karp & Megrue, he served
as a Managing Director of Morgan Stanley & Co.
from 1974 to 1989. Mr. Saunders is a member of the
Board of Visitors of the University of Virginia.
He is a former Chairman of the University of
Virginia's Darden Graduate School of Business
Administration. Mr. Saunders is Chairman of the
Thomas Jefferson Foundation (Monticello).
Other Directorships: Hibbett Sporting Goods, Inc.
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EILEEN R. SCOTT
Class of Director: II
Principal Occupation: Chief Executive Officer, Pathmark Stores, Inc.
Recent Business Experience: Ms. Scott, age 50, has been Chief Executive
Officer of Pathmark Stores, Inc. since October
2002. She has been employed by Pathmark Stores,
Inc. since 1969. During her years there, she has
served as Executive Vice President of Store
Operations, Executive Vice President of
Merchandising and Distribution, Senior Vice
President of Non-Foods and Pharmacy, and Vice
President of Sales and Advertising.
Other Directorships: Pathmark Stores, Inc.
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4
CONTINUING DIRECTORS
MACON F. BROCK, JR.
Class of Director: I
Director Since: 1986
Principal Occupation: Chairman and Chief Executive Officer, Dollar Tree
Stores, Inc.
Recent Business Experience: Mr. Brock, age 61, has been Chairman of the Board
since September 2001 and Chief Executive Officer
since 1993. From 1986, when he founded Dollar Tree
with Mr. Perry and Mr. Compton, until 2001, he was
a Director and President. He directs the overall
operations of Dollar Tree. Until 1991, he was
employed in a similar role with K&K Toys.
Other Directorships: None
--------------------------------------------------------------------------------
H. RAY COMPTON
Class of Director: III
Director Since: 1986
Principal Occupation: Director
Recent Business Experience: Mr. Compton, age 60, has been a Director since
1986 when he founded Dollar Tree with Mr. Perry
and Mr. Brock. Mr. Compton was Executive Vice
President from 1998 to 2002. From 1986 until 1998,
he also served as Dollar Tree's Chief Financial
Officer. From 1979 until 1991, he was employed in
a similar role with K&K Toys. Prior to 1979, he
was associated for 15 years with a manufacturing
company in various accounting and management
positions.
Other Directorships: Hibbett Sporting Goods, Inc.
--------------------------------------------------------------------------------
RICHARD G. LESSER
Class of Director: I
Director Since: 1999
Principal Occupation: Senior Corporate Adviser, The TJX Companies, Inc.
Recent Business Experience: Mr. Lesser, age 68, has been Senior Corporate
Adviser since February 2002. He was Executive Vice
President of the TJX Companies, Inc. from 1991 to
2001 and President of its Marmaxx Division (TJ
Maxx and Marshalls) from 1995 to 2000. From 1981
to 1991, he held various executive positions
within The TJX Companies, Inc.
Other Directorships: The TJX Companies, Inc.; Reebok International
Ltd.; A.C. Moore Arts & Crafts, Inc.
--------------------------------------------------------------------------------
5
JOHN F. MEGRUE
Class of Director: III
Director Since: 1993
Principal Occupation: Member, Saunders Karp & Megrue Partners, L.L.C.
Recent Business Experience: Mr. Megrue, age 44, has been Vice Chairman of the
Board of Dollar Tree since 1993. He also serves as
Chairman of the Board for Hibbett Sporting Goods,
Inc. Mr. Megrue has been a member of Saunders Karp
& Megrue Partners, L.L.C., which serves as the
general partner of the general partner of the SK
Equity Fund, L.P., since 1992. From 1989 to 1992,
he served as a Vice President and Principal at
Patricof & Co.
Other Directorships: Hibbett Sporting Goods, Inc.; Children's Place
Retail Stores, Inc.
--------------------------------------------------------------------------------
ALAN L. WURTZEL
Class of Director: III
Director Since: 1995
Principal Occupation: Private investor; corporate director
Recent Business Experience: Mr. Wurtzel, age 69, is Chairman Emeritus of
Circuit City Stores, Inc., a large consumer
electronics retailing chain. From 1986 to 1994, he
served as Chairman of the Board of Circuit City.
Prior to 1986, he served in several other
capacities with Circuit City, including Chief
Executive Officer from 1973 to 1986. From 1986 to
1988, he served as President of Operation
Independence, a non-profit organization. Mr.
Wurtzel was a director of Office Depot, Inc. from
1989 to 1996.
Other Directorships: None
--------------------------------------------------------------------------------
EXECUTIVE OFFICERS
(Other than those listed above)
FREDERICK C. COBLE
Principal Occupation: Chief Financial Officer and Secretary, Dollar Tree
Stores, Inc.
Recent Business Experience: Mr. Coble, age 42, has been Chief Financial
Officer and Secretary since 1998. Prior to that,
he served as Senior Vice President, Finance from
1997 and as Vice President, Controller from 1991.
Before joining Dollar Tree in 1989, Mr. Coble
served as Internal Audit Manager with Royster
Company, a manufacturing company, and as Audit
Manager for KPMG LLP.
--------------------------------------------------------------------------------
BOB SASSER
Principal Occupation: President and Chief Operating Officer, Dollar Tree
Stores, Inc.
Recent Business Experience: Mr. Sasser, age 51, has been President since
September 2001 and Chief Operating Officer since
1999. Before joining Dollar Tree, he served as
Senior Vice President, Merchandise and Marketing
of Roses Stores, Inc. from 1997. From 1994 to
1996, he was Vice President, General Merchandise
Manager for Michaels Stores, Inc. Prior to 1994,
he held several positions at Roses Stores, Inc.,
ranging from Store Manager to Vice President,
General Merchandise Manager.
--------------------------------------------------------------------------------
Mr. Brock is married to Mr. Perry's sister. There are no additional family
relationships among the Directors and Executive Officers.
6
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, officers and persons who own more than 10% of our stock to file
reports of ownership and changes in ownership of our stock with the Securities
and Exchange Commission and Nasdaq, and to provide us with copies of these
reports.
SEC regulations require us to identify anyone who filed a required
report late during the most recent fiscal year. Based solely on our review of
the reports and written representations furnished to us, we believe that all of
these reporting persons complied with their filing requirements for 2002 except
for one change-in-ownership report that was filed by Mr. Megrue after its due
date.
OWNERSHIP OF COMMON STOCK
The table below shows the number of shares of our common stock
beneficially owned on April 21, 2003 by :
- each of the Directors and nominees for director;
- each of the Executive Officers;
- all Directors and Executive Officers as a group; and
- each other person who has reported beneficial ownership of more
than five percent of the outstanding common stock.
The address of each Director and Executive Officer of Dollar Tree is c/o Dollar
Tree Stores, Inc., 500 Volvo Parkway, Chesapeake, Virginia 23320.
Beneficial Ownership (1)
------------------------
Directors and Executive Officers Shares Percent
-------------------------------- ------ -------
Macon F. Brock, Jr............................. 3,805,717 (2) 3.3%
H. Ray Compton................................. 203,259 (3) *
Frank Doczi.................................... 105,750 (4) *
Richard G. Lesser.............................. 62,719 (5) *
John F. Megrue................................. 80,325 (6) *
J. Douglas Perry............................... 2,697,160 (7) 2.4%
Thomas A. Saunders, III........................ 1,071,281 (8) *
Eileen R. Scott................................ 6,000 (9) *
Alan L. Wurtzel................................ 99,969 (10) *
Frederick C. Coble............................. 251,294 (11) *
Bob Sasser..................................... 163,777 (12) *
All current Directors and Executive
Officers (11 persons)..................... 8,547,251 7.4%
OTHER 5% SHAREHOLDERS
FMR Corp....................................... 10,148,298 (13) 8.9%
82 Devonshire Street
Boston, MA 02109
Putnam, LLC.................................... 6,547,584 (14) 5.7%
One Post Office Square
Boston, MA 02109
------------
* less than 1%
< fn >
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition
of any security. A person is deemed as of any date to have "beneficial
ownership" of any security that such person has a right to acquire within
60 days after such date. Any security that any person named above has the
right to acquire within 60 days is deemed to be outstanding for purposes of
calculating the ownership percentage of such person, but is not deemed to
be outstanding for purposes of calculating the ownership percentage of any
other person.
(2) Includes 1,197,956 shares owned by trusts for the benefit of certain Brock
family members, of which Mr. Brock is a trustee, 109,064 shares owned by a
private foundation over which Mr. Brock and his wife, Joan P. Brock,
exercise shared control, and 240,000 shares issuable upon exercise of
certain stock options granted pursuant to The Dollar Tree Stores, Inc.
Stock Incentive Plan, but excludes 926,021 shares owned by Mr. Brock's
wife, Joan P. Brock.
(3) Includes 143,259 shares owned by a trust for the benefit of certain Compton
family members, over which Mr. Compton may indirectly exercise investment
or voting power.
7
(4) Represents 105,750 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(5) Represents 62,719 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(6) Includes 6,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(7) Includes 1,211,246 shares owned by trusts for the benefit of certain Perry
family members, of which Mr. Perry is a trustee, 90,900 shares owned by a
private foundation over which Mr. Perry and his wife, Patricia W. Perry,
exercise shared control, and 44,250 shares issuable upon exercise of
certain stock options granted pursuant to The Dollar Tree Stores, Inc.
Stock Incentive Plan, but excludes 150,000 shares owned by a trust of which
Mrs. Perry is a trustee.
(8) Includes 21,252 shares owned by irrevocable trusts for the benefit of
certain Saunders family members, of which Mr. Saunders is a trustee, and
6,000 shares issuable upon exercise of certain stock options granted
pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(9) Represents 6,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(10) Includes 24,469 shares held in a revocable trust of which Mr. Wurtzel is a
trustee and 75,500 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(11) Includes 190,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(12) Includes 161,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(13) Includes shares held or controlled by FMR Corp. and its affiliates
including Fidelity Management & Research Company, Fidelity OTC Portfolio,
Fidelity Management Trust Company, Geode Capital Management, LLC, Edward C.
Johnson 3rd and Abigail P. Johnson. Based on Schedule 13G filed by FMR
Corp. for the period ended December 2002.
(14) Includes shares held or controlled by Putnam, LLC and its affiliates
including Marsh & McLennan Companies, Inc., Putnam's parent holding
company, and Putnam Investment Management, LLC and The Putnam Advisory
Company, LLC, investment advisors and subsidiaries of Putnam, LLC. Based on
Schedule 13G/A filed by Putnam, LLC for the period ended December 2002.
< /fn >
INFORMATION ABOUT THE BOARD OF DIRECTORS
DIRECTOR COMPENSATION
Director compensation is established by the Board of Directors and
periodically reviewed. For 2002, each Director who is not a founder or an
employee of the company received an annual retainer of $16,000 plus $2,000 for
each committee on which they served ($4,000 for the committee chairmen), with an
additional $2,000 paid to each Audit Committee member. Such Directors also may
receive options for shares of common stock under the company's Stock Incentive
Plan (6,000 shares in 2002). For 2002, Mr. Perry, as Chairman Emeritus of the
Board, received a retainer of $16,000 and options for 6,000 shares of common
stock under the company's Stock Incentive Plan, comparable to those granted to
the outside Directors.
On October 1, 1999, the company entered into a consulting agreement
with Mr. Perry, which provides for annual consulting fees of $30,000 over the
term of the agreement. At the request of Mr. Perry on each anniversary date, the
company will review his annual fees, and in its discretion, shall determine
whether or not to increase such fees. The agreement automatically renews each
year and is cancelable at the option of Mr. Perry. The annual consulting fee of
$30,000 was reviewed by the company in 2001 and was not adjusted. In 2002, the
agreement renewed automatically.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has scheduled four regular meetings in 2003 and
will hold special meetings when company business requires. During 2002, the
Board held four regular meetings and undertook actions outside of a Board
meeting by Unanimous Consent on two occasions. Several informational update
calls were conducted during the year. Each member of the Board attended at least
75% of all Board meetings and meetings of Committees of which each was a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently appoints an Audit Committee, a
Compensation Committee and a Nominating Committee. The memberships and functions
of these committees are set forth below. The Board has no standing Executive
Committee.
8
AUDIT COMMITTEE
The Audit Committee has four members: Thomas Saunders (Chairman), Alan
Wurtzel, Frank Doczi and Richard Lesser. This membership satisfies the
independence requirements of the Nasdaq Stock Market, Section 10A(m)(3) of the
Securities and Exchange Act of 1934 and the rules and regulations of the
Securities and Exchange Commission. The functions of this committee include:
- reviewing the company's financial reporting process and internal
control system;
- reviewing the quarterly and annual financial statements of the
company;
- reviewing the audit efforts of the company's independent
accountants and internal finance department;
- reviewing all related party transactions; and
- selecting the independent public accounts and any independent
counsel or other advisers it deems necessary.
The Audit Committee met in conjunction with a Board meeting two times in 2002.
Members of the Audit Committee also conducted scheduled telephonic reviews of
financial results on at least a quarterly basis. In addition, the Chairman of
the Committee conducted routine monthly updates with the independent auditors
and/or financial management.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's main purpose is to assist the Board of Directors
in fulfilling its oversight responsibilities regarding the quality and integrity
of the accounting, auditing and financial reporting practices of the company.
The Committee's written charter, adopted by the Board of Directors in 2001, was
reviewed and revised in March 2003. The charter is attached to this proxy
statement as Exhibit A.
In connection with these responsibilities, the Audit Committee:
- met with management and KPMG LLP, the company's independent
public accountants, to review and discuss the audited financial
statements of the company for the year ended December 31, 2002;
- discussed with KPMG LLP the matters required by Codification of
Statements on Auditing Standards No. 61 (Communication with Audit
Committees);
- discussed with KPMG LLP the quality, not just the acceptability,
of the company's accounting principles;
- received from KPMG LLP written disclosures and the letter
regarding its independence as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees); and
- discussed with KPMG LLP any relationships that may impact their
objectivity and independence.
Based upon the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for the year ended December 31, 2002 be included in the company's
Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission.
SUBMITTED BY THE AUDIT COMMITTEE
Thomas A. Saunders III Alan L. Wurtzel Frank Doczi Richard G. Lesser
THE INFORMATION CONTAINED IN THE ABOVE AUDIT COMMITTEE REPORT SHALL
NOT BE DEEMED TO BE `SOLICITING MATERIAL' OR TO BE `FILED' WITH THE SECURITIES
AND EXCHANGE COMMISSION, NOR SHALL SUCH INFORMATION BE INCORPORATED BY REFERENCE
INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT DOLLAR
TREE SPECIFICALLY INCORPORATES IT BY REFERENCE IN SUCH FILING.
COMPENSATION COMMITTEE
The Compensation Committee has four members: John Megrue (Chairman),
Alan Wurtzel, Frank Doczi and Richard Lesser. The functions of this committee
include:
- meeting as necessary to oversee the company's compensation and
benefit practices;
- recommending to the full Board the compensation arrangements for
the company's senior officers;
- administering the company's executive compensation plans and
Employee Stock Purchase Plan; and
- administering and considering awards under the company's stock-
and equity-based compensation plans.
The Compensation Committee met in conjunction with a Board meeting two times in
2002.
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the company currently serves or has served on
the Compensation Committee. Mr. Megrue is an affiliate of Saunders Karp &
Megrue, L.P., which had entered into an advisory agreement with the company in
1993. As of January 1, 2002, said advisory agreement was terminated.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION POLICY
Our policy is to offer a competitive total compensation package to
attract and retain key personnel. We encourage broad-based employee ownership of
Dollar Tree stock through the Employee Stock Purchase Plan. We also grant stock
options to employees at many levels within the company, aligning the financial
interests of our employees with those of our stockholders.
The compensation of our executive officers typically consists of:
- a competitive base salary;
- annual incentive compensation in the form of a cash bonus based
on the achievement of individual goals and the company goal
expressed as an earnings per share target;
- long-term incentive compensation in the form of stock options;
and
- employee benefits, including company-paid life insurance and
participation in the 401(k)/Profit Sharing plan and Non-Qualified
Deferred Compensation plan.
The Compensation Committee annually reviews and approves individual
executive officers' base salaries. In determining salary levels, the Committee
takes into account the company's operating performance, the skills, experience
and responsibilities of the executives, as well as the salary practices of
comparable retail companies.
The Compensation Committee also reviews and approves the annual
incentive compensation of the company's executive officers. These incentive
bonuses are tied to the attainment of both the company's earnings per share
target and clearly defined individual goals. The bonuses are expressed as a
percentage of base salary. The Committee believes they are competitive when
compared to the retail industry.
Officers and non-officers are granted stock options, typically on an
annual basis, which the Compensation Committee approves. The exercise price is
the fair market value per share of Common Stock on the grant date. The fair
market value is the last per share sale price of the Common Stock reported on
The Nasdaq National Market System on the day preceding the grant date. Options
granted to executive officers vest over five years and may not be exercised
during the first year of the grant. When determining the number of options to
grant, the Compensation Committee takes into account the base salary, level of
responsibility and individual performance of the executive, and stock
compensation practices of comparable retail companies.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews and approves the compensation of
Macon F. Brock, Jr., Dollar Tree's Chief Executive Officer. For the year ended
December 31, 2002, Mr. Brock declined any increase in his base salary, which,
therefore, remained at $675,000, as for 2001. At the beginning of each year, the
Compensation Committee establishes certain operational and managerial goals for
Mr. Brock. In recognition of his achievement of these goals and the company's
performance in 2002, Mr. Brock received a bonus of $344,183 under the Annual
Management Incentive Compensation Program. In 2003, the Committee granted him
the option to purchase 60,000 shares of common stock under the Stock Incentive
Plan.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code imposes a limitation on
the deductibility of non-performance-based compensation in excess of $1 million
paid to executive officers. The Committee believes that we will be able to
continue to manage our executive compensation program to preserve federal income
tax deductions.
SUBMITTED BY THE COMPENSATION COMMITTEE
John F. Megrue Alan L. Wurtzel Frank Doczi Richard G. Lesser
10
NOMINATING COMMITTEE
The Nominating Committee has three members: Thomas Saunders
(Chairman), Alan Wurtzel and Richard Lesser. Mr. Lesser replaced Mr. Brock on
the Committee in 2002. The purpose of this committee is to advise the Board of
Directors on the composition, organization and effectiveness of the Board and
its committees. The Committee's primary duties and responsibilities are to:
- nominate candidates to be placed on the ballot for shareholders
to consider at the annual meeting;
- recommend nominees to be appointed by the Board to fill interim
director vacancies; and
- recommend directors to be selected for membership on the various
board committees.
The Committee will also advise the Board on its composition, committees,
structure, practices and self-evaluation.
The Committee met formally two times during 2002. During 2002, the
Committee, in conjunction with an executive search firm, conducted interviews
for additional Board members, which resulted in the nomination of Eileen Scott
to the Board. The Committee continues to review potential candidates for Board
seats in order to further enhance the Board's effectiveness.
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned by our
executive officers for the years ended December 31, 2002, 2001 and 2000:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- ------------
Securities
Name and Other Underlying All Other
Principal Position Year Salary (1) Bonus Annual (2) Options (3) Compensation (4)
------------------ ---- ---------- ----- ---------- ----------- ----------------
Macon F. Brock, Jr. 2002 $ 675,000 $ 344,183 -- 60,000 $ 28,249
Chairman and 2001 650,000 188,000 -- 60,000 35,050
Chief Executive Officer 2000 562,500 255,000 -- 60,000 34,718
Frederick C. Coble 2002 $ 236,250 $ 84,752 -- 25,000 $ 19,024
Chief Financial Officer 2001 217,500 45,901 -- 25,000 17,824
and Secretary 2000 191,250 59,135 -- 30,000 17,493
Bob Sasser 2002 $ 431,250 $ 161,272 -- 40,000 $ 19,024
President and 2001 379,167 87,595 -- 40,000 17,824
Chief Operating Officer 2000 306,250 101,801 -- 45,000 17,493
----------
< fn >
(1) Represents salary paid in the year indicated. Base salary may differ due to
timing of any salary increase.
(2) The value of perquisites or other personal benefits have been excluded
because they do not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus for any Named Executive Officer. With the consent of our
Board of Directors, Mr. Brock uses Dollar Tree's leased corporate jet for
non-business purposes. He reimburses us for all variable costs but none of
the fixed costs relating to his plane usage. In 2002, Mr. Brock used Dollar
Tree's jet for approximately 47 hours of personal use and reimbursed us
$73,578. In 2001, he used the plane for approximately 64 hours and
reimbursed us $90,177. In 2000, his use was approximately 24 hours and he
reimbursed us $37,362. Because Mr. Brock reimbursed a significant portion
of the costs, exceeding the minimum amounts required by the IRS to avoid
imputed income, no amounts relating to the plane are included in the table
above.
(3) Stock options were granted pursuant to the company's Stock Incentive Plan.
(4) For 2002, this column includes $19,024 each for Messrs. Coble and Sasser,
and $11,024 for Mr. Brock for the Company's discretionary and matching
contributions allocated to the owners' 401(k) and Profit Sharing Plan
accounts. Also included is $17,225 for Mr. Brock for life insurance
premiums on policies of which the officer is the owner.
< /fn >
11
OPTIONS GRANTED IN 2002
The following table provides information as to options granted to
Messrs. Brock, Coble and Sasser during 2002:
Individual Grants Grant Date Value
--------------------------------------------- -------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Per Share Grant Date
Options Employees in Exercise Expiration Present
Name Granted (1) Fiscal Year Price Date Value (2)
---- ----------- ------------- --------- ---------- -----------
Macon F. Brock, Jr. 60,000 3.5% $ 31.62 03/10/2012 $ 1,122,696
Frederick C. Coble 25,000 1.5% $ 31.62 03/10/2012 $ 467,790
Bob Sasser 40,000 2.3% $ 31.62 03/10/2012 $ 748,464
---------------
< fn >
(1) Options to acquire shares of Dollar Tree common stock are granted under the
company's Stock Incentive Plan. The exercise price equals the closing price
of Dollar Tree stock on the day preceding the date of grant, which reflects
fair market value at the date of grant. Options granted in 2000 and
subsequent years are exercisable in five approximately equal annual
installments beginning one year after grant. They expire ten years after
grant.
(2) The fair value of these options at the date of grant was estimated using a
Black-Scholes option-pricing model. The following weighted-average
assumptions were used to estimate the value of options: a 5.7 year expected
life of the options; expected volatility for Dollar Tree common stock of
63.8%; and a risk-free rate of return of 3.0%. The company does not pay
dividends.
< /fn >
OPTION EXERCISES IN 2002 AND YEAR END OPTION VALUES
The following table provides information regarding options exercised
by Messrs. Brock, Coble and Sasser during the calendar year ended December 31,
2002, and the number and value of options held by Messrs. Brock, Coble and
Sasser at the end of the year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Options at Year End Options at Year End (2)
On Value --------------------------- ----------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
Macon F. Brock, Jr. -- -- 36,000 144,000 $ 123,521 $ 412,351
Frederick C. Coble -- -- 102,000 63,000 $ 606,367 $ 175,911
Bob Sasser 69,000 $ 1,229,751 0 111,000 $ 0 $ 339,846
----------
< fn >
(1) The value realized equals the difference between the option exercise price
and the closing price of Dollar Tree common stock on the day prior to
exercise, multiplied by the number of shares to which the exercise relates.
(2) The value of unexercised "in-the-money" options equals the difference
between the option exercise price and the closing price of Dollar Tree
common stock at December 31, 2002, multiplied by the number of shares
underlying the options. The closing price of Dollar Tree common stock on
December 31, 2002, as reported by Nasdaq, was $24.57.
< /fn >
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
As described below, we lease three stores from various lessors who are
affiliated with officers or directors of our company, including leases with a
partnership controlled by the father of Mr. Perry and Mrs. Brock and a
partnership controlled by Mr. Perry and Mr. Brock. In addition, we lease one
store from lessors affiliated with the former owners of Dollar Express, Inc.
LEASE ON FORMER HEADQUARTERS AND DISTRIBUTION CENTER. Located in
Norfolk, Virginia, this facility was leased from DMK Associates, a partnership
controlled by Mr. Perry and Mr. Brock. We replaced our Norfolk location with an
expanded facility in Chesapeake, Virginia, in early 1998. In March 1998, we
subleased the Norfolk facility through
12
March 2008 for an amount that exceeds our annual obligation under the prime
lease. In August 2002, we terminated the lease agreement with DMK Associates and
are no longer obligated for lease payments on this facility. During 2002, we
paid approximately $404,000 under the terms of the lease agreement.
LEASE ON FORMER PHILADELPHIA, PENNSYLVANIA OFFICE AND WAREHOUSE. This
facility was leased from lessors affiliated with the former owners of Dollar
Express, Inc. We terminated the lease in June 2002 and paid approximately
$439,000 under the terms of the lease and related termination. This facility was
replaced by our new Briar Creek distribution center in August 2001.
STORE AND OTHER LEASES. We currently lease three stores from lessors
who are affiliated with officers or directors of our company. We lease a store
from Suburban Management Company, controlled by the father of Mr. Perry and Mrs.
Brock. In addition, we rent two stores from DMK Associates. Rental payments on
the three stores totaled approximately $161,000 in 2002. The lease with Suburban
Management expires in August 2005, with two five-year renewal options. One of
the two store leases with DMK Associates expires in November 2003, with two
four-year renewal options. The other store lease expires in March 2005, with a
five-year and a seven-year renewal option.
In 2002, we leased two stores from lessors affiliated with the former
owners of Dollar Express, Inc. Rental payments on the two stores totaled
approximately $118,500 in 2002. The lease for one of these stores was terminated
in early 2002. As a result, only one store continues on terms negotiated by the
former owners of Dollar Express, Inc.
While we believe that the terms of these leases are fair to us, their
respective terms were not negotiated on an arms-length basis and accordingly the
terms of the leases may not be as favorable to us as those that we could have
obtained from an independent third party.
EMPLOYMENT AGREEMENTS
There are currently no employment or non-competition agreements in
force between the company and Messrs. Brock, Compton or Coble. Under a severance
arrangement, Mr. Sasser is prohibited from competing with the company following
termination, and, if he is terminated without cause before April 2004, we will
be obligated to pay him an amount equal to one year's salary.
DIRECTOR USE OF CORPORATE ASSETS
In 2002, Mr. Megrue used our leased corporate jet for approximately 59
hours of personal use and reimbursed us for all variable costs, which amounted
to $102,459. Mr. Megrue reimbursed more than the minimum amount required by the
IRS to avoid imputed income. With our consent, Mr. Megrue did not reimburse us
for any portion of our fixed costs relating to the plane. Mr. Brock also used
Dollar Tree's leased corporate jet for non-business purposes as described in
footnote (2) to the Summary Compensation Table on page 11.
EQUITY COMPENSATION PLAN INFORMATION
EQUITY COMPENSATION PLAN INFORMATION
Options to purchase Dollar Tree common shares have been granted to
employees and non-employee directors under our stock option plans. The following
table summarizes the number of stock options issued, the weighted-average
exercise price and the number of securities remaining to be issued under our
existing equity compensation plans, including the Amended and Restated Stock
Option Plan, the Stock Incentive Plan and the 1998 Special Stock Option Plan, as
of December 31, 2002.
13
The table does not include information about the proposed 2003 Equity
Incentive Plan or the proposed 2003 Non-Employee Director Stock Option Plan
which are being submitted to shareholders for approval at the 2003 Annual
Meeting of Shareholders. For further information regarding these plans, see page
15.
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Number of Securities to Weighted-Average Compensation Plans
be Issued Upon Exercise Exercise Price of (Excluding Securities
of Outstanding Options, Outstanding Options, Reflected in Column
Plan Category Warrants and Rights Warrants and Rights (a))
------------------------------ ------------------------- ---------------------- ------------------------
(a) (b) (c)
------------------------------ ------------------------- ---------------------- ------------------------
Equity compensation plans
approved by security holders 5,197,547 24.01 2,500,624
------------------------------ ------------------------- ---------------------- ------------------------
Equity compensation plans
not approved by security
holders (1) 243,000 27.38 --
------------------------------ ------------------------- ---------------------- ------------------------
Total 5,440,547 24.17 2,500,624
------------------------------ ------------------------- ---------------------- ------------------------
< fn >
(1) The only equity compensation plan not previously submitted to shareholders
for approval is the 1998 Special Stock Option Plan. We adopted this plan in
1998 to grant options to purchase shares to five former officers of 98 Cent
Clearance Center who were serving as employees or consultants of Dollar
Tree following the merger. The options were granted as consideration for
entering into non-competition agreements and a consulting agreement. The
exercise price of each option equals the market price of our stock at the
date of grant and each option's maximum term is ten years. Options granted
under this plan vest over a five-year period.
< /fn >
COMPARISON OF SHAREHOLDER RETURNS
The following graph shows a comparison of the cumulative total
shareholder returns on our common stock against a cumulative total return of the
S&P 500 Retailing Index and the Nasdaq U.S. Index for the past five years. The
comparison assumes $100 was invested in our common stock and in each of the
indexes on December 31, 1997. In 2001, Standard and Poor's replaced the Retail
Composite with the S&P 500 Retailing Index, due to a reclassification of all of
their U.S. indexes to reflect the Global Industry Classification Standard.
[CHART]
Data Points:
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
---------------------------------------------------------------------------------------------------------------
Dollar Tree 100 158.38 175.60 133.23 168.09 133.61
S&P 500 Retailing Index 100 162.31 223.70 172.02 201.67 154.51
Nasdaq U.S. Index 100 139.63 259.13 157.32 124.20 85.04
14
PROPOSAL NOS. 2 - 4 - APPROVAL OF PLANS
The Board has adopted, subject to shareholder approval, three new
plans under which employees, non-employee directors, and independent contractors
may receive incentives tied to the value of the company's equity:
- Under the 2003 Equity Incentive Plan, the company may award
options, stock appreciation rights, performance units, restricted
stock and other stock to management, employees or independent
contractors.
- The 2003 Non-Employee Directors Option Plan permits the company
to grant stock options to directors who are not employees.
- The 2003 Director Deferred Compensation Plan allows directors who
receive annual directors' fees to accept such payments in the
form of options or deferred cash or stock.
The summaries of these plans provided below are qualified in their
entirety by reference to the full text of the plans, which have been filed in
exhibits to our definitive proxy statement with the SEC.
2003 EQUITY INCENTIVE PLAN
The Equity Incentive Plan is intended to replace our existing Stock
Incentive Plan, under which we currently grant options to company employees and
independent contractors. As of April 1, 2003, less than 725,000 shares remain
available for issuance under the existing plan. This number of shares is
insufficient to achieve the ongoing purposes of the plan. In addition, the Board
wishes to expand the types of equity awards the company may make to include
options, stock appreciation rights, performance units, restricted stock, and
other stock.
Therefore, the Board has adopted the 2003 Equity Incentive Plan under
which 6,000,000 shares may be issued. In addition, any shares available for
future awards under the Stock Incentive Plan shall be rolled into the Equity
Incentive Plan. No additional awards shall be granted under the Stock Incentive
Plan after July 1, 2003, when that plan terminates.
The new plan permits us to grant a variety of equity awards. Its
purpose is to promote our interests and the interests of our shareholders by
motivating key employees to work towards achieving our long-range goals and by
attracting and retaining exceptional employees. By motivating key employees to
share in our long-term growth and financial success, employee interests are more
closely aligned with those of our shareholders.
ADMINISTRATION. The plan is administered by the Compensation Committee
of the Board (the "Committee"). The Committee is authorized to, among other
things:
- determine which employees will be granted awards;
- determine whether awards will be for non-qualified stock options,
incentive stock options (which qualify for special treatment
under Section 422 of the Internal Revenue Code), stock
appreciation rights, performance units, restricted stock and
other stock;
- determine the terms and conditions of each participant's
individual award agreement, including vesting schedules, lapsing
conditions, and transfer restrictions for each award; and
- make all other determinations necessary or advisable to
administer the plan.
STOCK OPTIONS. Options to purchase shares of common stock granted
under the Equity Incentive Plan may be incentive stock options that qualify for
favorable income tax treatment or non-statutory stock options. The purchase
price of common stock covered by an option may not be less than 100% of the fair
market value of the common stock on the date of the option grant. On April 25,
2003, the closing price of the common stock was $23.31 per share. Options may be
exercised only at such times as may be specified by the Committee in the
participant's stock option agreement. If the option so provides, a participant
exercising an option may pay the purchase price through cash payments, by the
delivery of shares of stock, or by such other methods of exercise as may be
approved by the Committee from time to time.
STOCK APPRECIATION RIGHTS. The Compensation Committee may award stock
appreciation rights alone or in tandem with non-statutory stock options, and
impose such conditions upon their exercise as it deems appropriate. When the
stock appreciation right is exercisable, the holder may surrender all or a
portion of his unexercised stock appreciation right and receive in exchange an
amount equal to the excess of (i) the fair market value on the date of exercise
of the common stock covered by the surrendered portion of the stock appreciation
right over (ii) the fair market value of the common stock on the date of grant.
The payment may be in cash or shares of stock. The Committee may limit the
amount that can be received when a stock appreciation right is exercised.
Repricing of options and stock appreciation rights after the date of
grant is not permitted.
15
RESTRICTED STOCK. Restricted stock issued pursuant to the Equity
Incentive Plan is subject to the following general restrictions: (i) none of
such shares may be sold, transferred, pledged, or otherwise encumbered or
disposed of until the restrictions on such shares shall have lapsed or been
removed under the provisions of the plan, and (ii) if a holder of restricted
stock ceases to be employed by the company, such holder will forfeit any shares
of restricted stock on which the restrictions have not lapsed or been otherwise
removed. The Committee establishes as to each share of restricted stock issued
under the Equity Incentive Plan the terms and conditions upon which the
restrictions on such shares shall lapse. Such terms and conditions may include,
without limitation, the lapsing of such restrictions at the end of a specified
period of time, the meeting of performance goals, or as a result of the
disability, death or retirement of the recipient.
STOCK UNITS AND RESTRICTED STOCK UNITS. The Committee may award
participants either the right to receive shares in the future or the right to
receive restricted stock in the future. Any such awards are subject to
conditions, restrictions and contingencies as the Committee may determine.
PERFORMANCE UNITS AND SHARES. The Committee may establish performance
programs with fixed goals and designate employees as eligible to receive either
a number of shares or a dollar amount of shares if the goals are achieved.
Performance units and shares will be issued only in accordance with the program
established by the Committee. More than one performance program may be
established by the Committee. Such programs may operate concurrently or for
varied periods of time, and a participant may participate in more than one
program at the same time. A participant who is eligible to receive performance
units or shares has no rights as a stockholder until shares are received.
AWARD LIMITS. Subject to adjustments that the Committee may make upon
future stock splits, share dividends and certain other transactions:
- Incentive stock options granted under the Equity Incentive Plan
may cover no more than 300,000 shares during the life of the
plan.
- One individual may receive options or stock appreciation rights
to no more than 60,000 shares during any one calendar year
period. However, if an option is in tandem with a stock
appreciation right, then the tandem option and stock appreciation
right shall be counted as covering the same shares.
- One individual may receive awards (other than options or stock
appreciation rights) for no more than 30,000 shares (or $150,000
in value in the case of performance units) during any one
calendar year period, if the awards are intended to be
"performance-based compensation."
OTHER TERMS AND CONDITIONS. All company employees, including our
executive officers, and independent contractors selected by the Committee are
eligible to participate in the plan. As of April 12, 2003, we employed
approximately 26,000 persons. Generally, awards may only be transferred upon
death, but the Committee may provide for broader transferability in the award
agreement. The Committee also has the authority to determine the vesting and
expiration of the awards.
SHARES TO BE ISSUED UNDER THE PLAN. The maximum number of shares of
our common stock that may be granted as awards under the Equity Incentive Plan
is 6,000,000, plus any shares available for future awards under the Stock
Incentive Plan, which terminates on July 1, 2003. (As of April 1, 2003, there
were less than 725,000 shares issuable under the old plan.) The Committee may,
however, adjust this maximum amount to account for any future stock split,
reverse stock split, stock dividend, combination, or reclassification of common
stock or any similar transaction effected for which we do not receive any
payment. When an award is forfeited or lapses, including awards under the old
plan, the shares subject to that award become available for future awards under
the new plan. Also, shares tendered in payment for the exercise price or the
related withholding obligation will increase the number of shares available for
awards under the plan. No awards may be made after July 1, 2013, the tenth
anniversary of the effective date of the plan.
CHANGE OF CONTROL. In the event of a change of control of the company,
the Committee has discretion to accelerate the vesting or exercisability of any
awards and to cash-out any and all outstanding awards, subject to limitations
imposed by the Internal Revenue Code. The Committee also has the right to
substitute or assume awards in connection with mergers, reorganizations, or
other transactions.
AMENDMENT. The Board may amend or terminate the 2003 Equity Incentive
Plan at any time. We must obtain shareholder approval for any change that would
require such approval under listing standards of the Nasdaq Stock Market and any
regulatory or tax requirement with which the Board desires to comply. However,
no rights under an outstanding award may be impaired by such action without the
consent of the holder.
16
2003 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
While the existing Stock Incentive Plan provided a formula for
granting options to "outside directors," the new Equity Incentive Plan is
limited to employees and independent contractors. For non-employee directors,
the Board has adopted a separate plan called the 2003 Non-Employee Director
Stock Option Plan.
ADMINISTRATION. The plan is administered by the company's Board of
Directors. The Board is authorized to, among other things:
- determine which directors are eligible to receive options;
- determine the number of options to be granted, which amount shall
not exceed 9,000 per director per year;
- determine the terms and conditions of each participating
director's individual option agreement, including vesting
schedules (if any) and transfer restrictions for each award; and
- make all other determinations necessary or advisable to
administer the plan.
STOCK OPTIONS. The options that may be awarded under the Non-Employee
Director Stock Option Plan are non-qualified stock options and are functionally
equivalent to such options issued under the 2003 Equity Incentive Plan. The
purchase price of common stock covered by an option may not be less than 100% of
the fair market value of the common stock on the date of the option grant.
Options may be exercised only at such times as may be specified by the Board in
the participant's stock option agreement. If the option so provides, a
participant exercising an option may pay the purchase price through cash
payments, by the delivery of shares of stock, or by such other methods of
exercise as may be approved by the Committee from time to time. Repricing of
options after the date of grant is not permitted.
Non-employee directors who choose to do so may also receive
non-statutory options under this plan in lieu of all or part of their directors'
fees. This election is described under the 2003 Director Deferred Compensation
Plan described below. Options awarded in lieu of fees are not counted against a
director's 9,000-share annual limit.
OTHER TERMS AND CONDITIONS. Only company directors who are not
employees of the company are eligible to participate in the plan. Generally,
awards may only be transferred upon death, but the Board may provide for broader
transferability in the award agreement. Unless otherwise determined by the
Board, options shall vest and become exercisable immediately. The options will
expire ten years after grant or three years after the date the Non-Employee
Director is no longer a director of the company, whichever occurs earlier.
SHARES TO BE ISSUED UNDER THE PLAN. The maximum number of shares of
our common stock that may be granted as options under the Non-Employee Director
Stock Option Plan is 500,000. The Board may, however, adjust this maximum amount
to account for any future stock split, reverse stock split, stock dividend,
combination, or reclassification of common stock or any similar transaction
effected for which we do not receive any payment. No options may be granted
after July 1, 2013, the tenth anniversary of the effective date of the plan.
CHANGE OF CONTROL. In the event of a change of control of the company,
the Board has discretion to accelerate the vesting of any awards and to cash-out
any and all outstanding awards, subject to limitations imposed by the Internal
Revenue Code. The Board also has the right to substitute or assume awards in
connection with mergers, reorganizations, or other transactions.
AMENDMENT. The Board may amend or terminate the Non-Employee Director
Stock Option Plan at any time. We must obtain shareholder approval for any
change that would require such approval under listing standards of the Nasdaq
Stock Market and any regulatory or tax requirement with which the Board desires
to comply. However, no rights under an outstanding award may be impaired by such
action without the consent of the holder.
2003 DIRECTOR DEFERRED COMPENSATION PLAN
The Board has adopted the 2003 Director Deferred Compensation Plan,
subject to shareholder approval. This plan permits any directors who receive a
retainer or other fees for Board or committee service to make an election:
- to defer all or a portion of such fees until a future date, when
they may be paid in either cash or in shares of our common stock
or
- to receive all or a portion of such fees in non-statutory stock
options.
The plan will be administered by the Board, which shall have discretion both to
carry out the plan and to determine the amount and form of payment of the annual
retainer and any additional fees payable by the company to directors for their
17
services. Currently only non-employee directors receive a retainer and fees. For
a discussion of these amounts, see page 8 of this proxy statement.
DEFERRAL ACCOUNTS. Any director who is to receive fees for service may
elect to defer all or a portion of those fees by delivering a deferral election
to the company. Generally, the election must be delivered by December 31 and
will take effect for the next calendar year. The election remains in force until
changed or revoked. Any change or revocation will take effect for the following
calendar year. The election must state:
- the amount or portion of the fees to be deferred;
- whether and to what extent such fees are to be deferred in cash
or in shares;
- whether the pay out shall be in installments or a lump sum; and
- the date on which the pay out shall commence.
Deferred fees which are to be paid out in cash shall earn interest at
the 30-year Treasury Bond Rate. If a director elects to be paid in shares, then
the company will credit the director's deferred account with a book entry for a
number of shares determined by dividing the amount of deferred fees by the
then-current market price of a share.
We will not segregate or earmark any funds or shares with respect to
deferred fees. Rather, we intend to make available, as and when required, a
sufficient number of shares or cash to meet the requirements of the plan.
STOCK OPTIONS. Directors may choose to receive non-statutory stock
options, in lieu of any remaining fees which are not deferred as described
above. The method of making this election, or changing or revoking it, is the
same as for a deferral of fees. The number of options issued to a director will
equal the dollar amount of the portion of his or her fee which is to be paid in
options, divided by thirty-three percent (33%) of the price of a share. The
exercise price of the option may not be less than 100% of the fair market value
of the common stock on the date the option is issued. The options shall be fully
vested when issued and the term of such options shall be ten (10) years.
Non-employee directors electing to receive options in lieu of cash
fees will receive options issued under, and subject to the terms and conditions
of, the 2003 Non-Employee Directors Stock Option Plan. Directors who are company
employees do not currently receive fees and therefore could not take advantage
of the 2003 Director Deferred Compensation Plan. However, should the Board
permit those directors to receive fees in the future, and they elected to
receive options in lieu of cash fees, they would receive non-statutory options
issued under, and subject to the terms and conditions of, the 2003 Equity
Incentive Plan.
SHARES TO BE ISSUED UNDER THE PLAN. The maximum number of shares of
our common stock that may be paid out under the Director Deferred Compensation
Plan is 250,000. (This number does not include options received in lieu of cash
fees, which are subject to the limitations in the 2003 Non-Employee Directors
Stock Option Plan and the 2003 Director Deferred Compensation Plan.) The Board
may adjust the maximum amount to account for any future stock split, reverse
stock split, stock dividend, combination, or reclassification of common stock or
any similar transaction effected for which we do not receive any payment. No
options may be granted after June 19, 2013, the tenth anniversary of the
effective date of the plan.
CHANGE OF CONTROL. In the event of a change of control of the company,
the Board has discretion to pay out any outstanding balance in a director's
deferral account in a lump sum or to arrange to have the surviving corporation
or another entity assume the deferred accounts, making such adjustments as the
Board deems appropriate.
AMENDMENT. The Board may amend or terminate the Director Deferred
Compensation Plan at any time. We must obtain shareholder approval for any
change that would require such approval under listing standards of the Nasdaq
Stock Market and any regulatory or tax requirement with which the Board desires
to comply. However, no rights under an outstanding award may be impaired by such
action without the consent of the holder.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE PLANS
The Federal income tax consequences of participation in the plans we
are submitting for approval are complex and subject to change. The following
discussion, which has been prepared by our counsel, the law firm of Hofheimer
Nusbaum, P.C., is only a summary of the general rules applicable to the plans,
not a complete description of the Federal income tax aspects. The summary is
based on current provisions of the Internal Revenue Code and does not cover any
state or local tax consequences of participation in the plan. Participants
should consult their own tax advisors since a taxpayer's particular situation
could result in some variation of the rules described below.
18
NON-QUALIFIED OPTIONS. The grant of a non-qualified option ("NQO")
will not result in taxable income to the participant. The participant will
realize ordinary income at the time of exercise in an amount equal to the excess
of the fair market value of the shares acquired over the exercise price for
those shares, and the company will be entitled to a corresponding deduction.
Gains or losses realized by the participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of exercise.
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option
("ISO") will not result in taxable income to the participant. The exercise of an
ISO will not result in taxable income to the participant provided that the
participant was, without a break in service, an employee of the company or a
subsidiary during the period beginning on the date of the grant of the option
and ending on the date three months prior to the date of exercise (one year
prior to the date of exercise if the participant is disabled, as that term is
defined in the Internal Revenue Code).
If the participant does not sell or otherwise dispose of the stock
within two years from the date of the grant of the ISO or within one year after
receiving the transfer of such stock, then, upon disposition of such shares, any
amount realized in excess of the exercise price will be taxed to the participant
as capital gain, and the company will not be entitled to any deduction for
Federal income tax purposes.
If the foregoing holding period requirements are not met, the
participant will generally realize ordinary income, and a corresponding
deduction will be allowed to the company, at the time of the disposition of the
shares, in an amount equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price. If the amount realized exceeds the value of the shares on the
date of exercise, any additional amount will be capital gain. If the amount
realized is less than the exercise price, the participant will recognize no
income, and a capital loss will be recognized equal to the excess of the
exercise price over the amount realized upon the disposition of the shares.
Special rules apply if a participant pays the exercise price for a NQO
or ISO in shares previously owned by the optionee rather than in cash.
STOCK APPRECIATION RIGHTS. The grant of an SAR will not result in
taxable income to the participant. Upon exercise of an SAR, the amount of cash
or the fair market value of shares received will be taxable to the participant
as ordinary income, and a corresponding deduction will be allowed to the
company. Gains or losses realized by the participant upon disposition of such
shares will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of exercise.
PERFORMANCE UNITS. A participant who has been granted performance
units will not realize taxable income at the time of grant, and the company will
not be entitled to a deduction at that time. The participant will have
compensation income at the time of distribution equal to the cash and the then
fair market value of the distributed performance shares, and the company will
have a corresponding deduction.
RESTRICTED AND OTHER STOCK. A participant who has been granted a
restricted stock award will not realize taxable income at the time of grant, and
the company will not be entitled to a deduction at that time, assuming that the
restrictions constitute a "substantial risk of forfeiture" for Federal income
tax purposes. Upon the vesting of shares subject to an award, the holder will
realize ordinary income in an amount equal to the then fair market value of
those shares, and the company will be entitled to a corresponding deduction.
Gains or losses realized by the participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of vesting.
A participant may elect, pursuant to Section 83(b) of the Internal
Revenue Code, to have the income recognized and measured at the date of grant of
restricted stock and to have the applicable capital gain holding period commence
as of that date. If a Section 83(b) election is made, the company will be
entitled to a corresponding deduction at the time of grant.
A participant who has been granted a stock award that is not subject
to a substantial risk of forfeiture for Federal income tax purposes (for
example, bonus stock) will realize ordinary income in an amount equal to the
fair market value of the shares at such time, and the company will be entitled
to a corresponding deduction.
ELECTION TO DEFER. An election to defer compensation made by a
participant prior to the calendar year in which services are performed results
in a deferral of federal income tax until such time as the compensation is paid.
The company will have a corresponding deduction when the participant includes
the compensation into income.
LIMITATIONS ON DEDUCTIONS. The company's deductions described above
may also be subject to the limitations of Section 162(m) of the Internal Revenue
Code. The company does not currently expect to be subject to such limitations.
19
CHANGE OF CONTROL. Any acceleration of the vesting or payment of
awards under the plan in the event of a change of control of the company may
cause part or all of the consideration involved to be treated as an "excess
parachute payment" under the Internal Revenue Code, which may subject the
participant to a 20% excise tax and which may not be deductible by the company.
BENEFITS TO EXECUTIVE OFFICERS AND DIRECTORS
Awards under the 2003 Equity Incentive Plan and the 2003 Non-Employee
Director Stock Option Plan are made at the Board or the Committee's discretion
and are based on our company's performance. Eligible directors will determine
how many shares or options they will receive in lieu of directors' fees under
the 2003 Director Deferred Compensation Plan. Accordingly, future awards under
the plans are not determinable at this time. See "Compensation of Executive
Officers" at page 11 for detailed information on awards to certain executive
officers under the company's Stock Incentive Plan during the most recent fiscal
year.
VOTE REQUIRED
The Board has carefully considered the proposed plans and believes
that their approval is in the best interest of the company and its shareholders.
Adoption will require that the number of votes cast in favor for each of these
three plans exceeds the number of votes cast against.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR":
- the 2003 Equity Incentive Plan;
- the 2003 Non-Employee Director Stock Option Plan; and
- the 2003 Director Deferred Compensation Plan.
OTHER MATTERS
COSTS OF THE PROXY SOLICITATIONS
The cost of the solicitation of proxies will be borne by us. Proxies
may be solicited by officers, directors and regular employees of our company or
our affiliates, none of whom will receive any additional compensation for their
services. Such solicitations may be made personally, or by mail, facsimile,
telephone, telegram or messenger. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy material and annual reports to the beneficial owners of stock in
accordance with the schedule of charges approved by the National Association of
Securities Dealers, Inc.
SHAREHOLDER NOMINATIONS FOR ELECTION OF DIRECTORS
Our By-laws provide that any shareholder of record entitled to vote
generally in the election of directors may nominate persons for election as
directors at a meeting if written notice of such shareholder's intent to make
such nomination has been given, either by personal delivery or by United States
certified mail, postage prepaid, to the Secretary of our company. We must
receive the notice not less than 120 days nor more than 150 days before the
first anniversary of the date of our proxy statement in connection with the last
annual meeting of stockholders, or if no annual meeting was held in the previous
year or the date of the applicable annual meeting has been changed by more than
30 days from the date contemplated at the time of the previous year's proxy
statement, not less than 90 days before the date of the applicable annual
meeting.
Each such shareholder's notice to the Secretary of his or her intent
to nominate must set forth:
- the name and address of record of the shareholder who intends to
make the nomination;
- a representation that the shareholder is a shareholder of record
of our company's capital stock and intends to appear in person or
by proxy at such meeting to nominate the person or persons
specified in the notice;
- the class and number of shares of our capital stock beneficially
owned by the shareholder; and
- a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by such shareholder.
20
For each person nominated, each such shareholder's notice to the
Secretary must also set forth:
- the name, age, business address and, if known, residence address,
of such person,
- his or her principal occupation or employment,
- the class and number of shares of our capital stock beneficially
owned by such person,
- any other information relating to such person that is required to
be disclosed in solicitations of proxies for election of
directors or is otherwise required by the rules and regulations
of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934, as amended, and
- the written consent of such person to be named in the proxy
statement as a nominee and to serve as a director if elected.
SHAREHOLDER PROPOSALS
Shareholder proposals for the Annual Meeting of Shareholders to be
held in 2004 will not be included in our Proxy Statement for that meeting unless
received by us at our executive office in Chesapeake, Virginia, on or prior to
December 31, 2003. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to shareholder
proposals.
OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP has audited our consolidated financial statements since 1986
and will continue in that capacity during 2003. A representative of KPMG LLP
will be present at the 2003 Annual Meeting of Shareholders. The representative
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
INDEPENDENT PUBLIC ACCOUNTANTS' FEES
Audit Fees (FOR THE YEAR ENDED DECEMBER 31, 2002) $ 587,650
Audit Fees (FOR THE TRANSITION PERIOD ENDED FEBRUARY 1, 2003) $ 110,000
---------
Total Audit Fees $ 697,650
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees $ 149,442 (a)(b)
< fn >
(a) Includes fees for tax compliance, planning and benefit plan
audit.
(b) The audit committee has considered whether providing these
services is compatible with maintaining the independence of our
principal accountants and has found nothing that would impair
independence.
< /fn >
By order of the Board of Directors,
/s/ Frederick C. Coble
Frederick C. Coble
Chief Financial Officer and Secretary
Chesapeake, Virginia
April 30, 2002
21
A - EXHIBIT
DOLLAR TREE STORES, INC.
AUDIT COMMITTEE CHARTER
(As amended, effective March 17, 2003)
I. PURPOSE OF THE AUDIT COMMITTEE
The purpose of the Dollar Tree Stores, Inc. Audit Committee (the
"Committee") is to assist the Board of Directors (the "Board") in
fulfilling its oversight responsibilities. The Committee's primary duties
and responsibilities are to:
- serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system;
- provide oversight for and participate in the planning of the audit
efforts of the Company's independent auditors, internal auditors, and
the Company's finance department; and
- provide an open avenue of communication among the independent
auditors, internal auditors, financial and senior management, and the
Board of Directors.
The Committee will make regular reports to the Board regarding the results
of its review of:
- the financial reports and periodic financial information provided by
Dollar Tree to the Securities and Exchange Commission or the public;
- Dollar Tree's systems of internal controls regarding finance,
accounting, legal compliance and ethics; and
- Dollar Tree's auditing, accounting and financial reporting processes
generally.
II. COMPOSITION OF THE AUDIT COMMITTEE
The Committee will consist of three or more independent directors.
Directors may be considered to be independent if they meet the independence
requirements of the Nasdaq Stock Market, Section 10A(m)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Commission, as determined by the Board. Committee
members and the chairman are appointed by the Board. All members of the
Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall meet
the definition of "audit committee financial expert" under the Commission's
rules and regulations. Each member should be able to adequately perform the
Committee's Duties and Responsibilities as outlined below and be
knowledgeable of the Company's business and its related risks. Committee
members may request additional training from management or other sources as
desired in order to clarify financial or accounting items.
III. NUMBER AND NATURE OF MEETINGS
The Committee will formally meet at least six times annually, either in
person or via telephone. In addition, on a quarterly basis, prior to the
public release of earnings information and the filing of the Form 10-Q or
Form 10-K, the Committee or Chairman will review results with financial
management, internal auditors and the independent auditors. These reviews
may be in person or via telephone.
At each meeting, the Committee may meet privately with the independent
auditors, legal counsel, internal auditors and/or management. Other special
meetings, whether in executive session or with the Board, management, or
independent auditors, are encouraged in order to address any concerns or
issues that may arise and to enhance communications. Such special meetings
may be called by any member of the Committee upon request to the Chairman.
The Committee shall inform the full Board of issues concerning the
independent auditors, including any intention to replace said auditors. The
Chairman shall require that minutes be kept of all Committee meetings,
which will be made available to all Board members upon their request.
IV. AUTHORITY
The Committee shall have the sole authority to appoint or replace the
independent auditor. The Committee shall be directly responsible for the
compensation and the oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) in preparing or issuing
an audit report or related work. The independent auditor shall report
directly to the Committee.
A-1
The Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed
for the Company by its independent auditor, subject to the de minimis
exceptions for non-audit services described in Section 10A(i)(1)(B) of the
Exchange Act which are approved by the Committee prior to the completion of
the audit. The Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority
to grant pre-approvals of audit and permitted non-audit services, provided
that decisions of such subcommittee to grant pre-approvals shall be
presented to the full Committee at its next scheduled meeting.
The Committee shall have the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors
employed by the Committee.
V. DUTIES AND RESPONSIBILITIES
1. Internal control structure: The Committee is responsible for ensuring
that a receptive and responsive environment exists for internal
controls. Internal controls and material changes to internal controls
should be documented and approved by senior management. The Committee
should ascertain that the CEO, CFO, and independent auditors have
fulfilled their responsibilities in assessing internal controls.
2. Financial reporting practices: The Committee should understand the
Company's financial reporting processes, be knowledgeable about the
Company's critical accounting policies, and review significant
accounting and financial reporting disclosures. The Committee should
evaluate the relationship that senior management, financial
management, independent auditors and internal auditors have to ensure
accurate and timely financial reporting.
3. The audit process: The Committee is responsible for overseeing the
Company's audit controls, including the appointment of and evaluation
of the independent auditors. The Committee is also responsible for the
pre-approval of fees to the independent auditors. The Committee should
review the independent auditors' communications to management and
review the internal audit charter and annual audit plan. The Committee
should create an environment whereby any audit function (such as the
independent auditors, internal auditors, and financial management) has
free and open access to the Committee.
4. Compliance with laws and regulations: The Committee should understand
the Company's compliance process, inquire into key business risks, and
review legal disclosures in public filings. The Committee should
ensure that internal controls exist, where cost beneficial, to comply
with laws and regulations.
5. Ethical conduct: In conjunction with other committees of the Board,
the Audit Committee should understand how conducive the Company's
environment is for effective internal controls, financial reporting,
auditing and compliance with laws and regulations. The Committee
should ensure that appropriate procedures exist so that any concerns
regarding possible non-compliance can be brought to the attention of
the Committee or the Board, as well as policies to protect those who
raise such concerns.
6. Audit committee effectiveness: The Committee is responsible for
evaluating its effectiveness, including the independence and
competence of its members. The Committee should review and reassess
the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. The Committee is also responsible
for communicating its activities in compliance with applicable
Securities and Exchange Commission and relevant stock exchange
requirements.
VI. LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-2
B - EXHIBIT
DOLLAR TREE STORES, INC.
2003 EQUITY INCENTIVE PLAN
ARTICLE I
GENERAL
Section 1.1. PURPOSE. The Dollar Tree Stores, Inc. 2003 Equity Incentive
Plan (the "Plan") has been established by Dollar Tree Stores, Inc. (the
"Company") to (i) attract and retain persons eligible to participate in the
Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve
long-range goals; (iii) provide incentive compensation opportunities that are
competitive with those of other similar companies; and (iv) further identify
Participants' interests with those of the Company's other shareholders through
compensation that is based on the Company's common stock; and thereby promote
the long-term financial interest of the Company and the Subsidiaries, including
the growth in value of the Company's equity and enhancement of long-term
shareholder return.
Section 1.2. PARTICIPATION. Subject to the terms and conditions of the
Plan, the Committee shall determine and designate, from time to time, from among
the Eligible Recipients (including transferees of Eligible Recipients to the
extent the transfer is permitted by the Plan and the applicable Award
Agreement), those persons who will be granted one or more Awards under the Plan,
and thereby become "Participants" in the Plan.
Section 1.3. OPERATION, ADMINISTRATION, AND DEFINITIONS. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Article 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8 of the Plan).
ARTICLE 2
OPTIONS AND SARS
Section 2.1. DEFINITIONS.
(a) The grant of an "Option" entitles the Participant to purchase
shares of Stock at an Exercise Price established by the Committee. Any Option
granted under this Article 2 may be either an incentive stock option (an "ISO")
or a nonqualified option (an "NQO"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in section 422(b) of the
Code. An "NQO" is an Option that is not intended to be an "incentive stock
option" as that term is described in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant
to receive, in cash or Stock (as determined in accordance with Section 2.5),
value equal to (or otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of exercise; over (b) an
Exercise Price established by the Committee. The Committee may limit the amount
that can be received when an SAR is exercised.
Section 2.2. EXERCISE PRICE. The "Exercise Price" of each Option and SAR
granted under this Article 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock on the date of grant (or, if greater,
the par value of a share of Stock). Repricing of Options and SAR Awards granted
under this Article 2 after the date of grant shall not be permitted.
Section 2.3. EXERCISE. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
Section 2.4. PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise
Price of an Option granted under this Article 2 shall be subject to the
following:
(a) Subject to the following provisions of this Section 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the case of
an exercise arrangement approved by the Committee and described in paragraph
2.4(c), payment may be made as soon as practicable after the exercise).
B-1
(b) The Exercise Price shall be payable in cash or by tendering, by
either actual delivery of shares or by attestation, already-owned shares of
Stock acceptable to the Committee, and valued at Fair Market Value as of the day
of exercise, or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise.
Section 2.5. SETTLEMENT OF AWARD. Settlement of Options and SARs is subject
to Section 4.7.
ARTICLE 3
OTHER STOCK AWARDS
Section 3.1. DEFINITIONS.
(a) A "Stock Unit" Award is the grant of a right to receive shares
of Stock in the future.
(b) A "Performance Share" Award is a grant of a right to receive
shares of Stock or Stock Units which is contingent on the achievement of
performance or other objectives during a specified period.
(c) A "Performance Unit" Award is a grant of a right to receive a
designated dollar value amount of Stock which is contingent on the achievement
of performance or other objectives during a specified period.
(d) A "Restricted Stock" Award is a grant of shares of Stock, and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of Stock
in the future, with such shares of Stock or right to future delivery of such
shares of Stock subject to a risk of forfeiture or other restrictions that will
lapse upon the achievement of one or more goals relating to completion of
service by the Participant, or achievement of performance or other objectives,
as determined by the Committee.
Section 3.2. RESTRICTIONS ON AWARDS. Each Stock Unit Award, Restricted
Stock Award, Restricted Stock Unit Award, Performance Share Award, and
Performance Unit Award shall be subject to the following:
(a) Any such Award shall be subject to such conditions, restrictions
and contingencies as the Committee shall determine.
(b) The Committee may designate whether any such Award being granted
to any Participant is intended to be "performance-based compensation" as that
term is used in section 162(m) of the Code. Any such Awards designated as
intended to be "performance-based compensation" shall be conditioned on the
achievement of one or more performance measures, to the extent required by Code
section 162(m). The performance measures that may be used by the Committee for
such Awards shall be based on the attainment of any performance goals, as
selected by the Committee, that are related to profits, profit growth,
profit-related return ratios, cash flow or shareholder returns, where such goals
may be stated in absolute terms or relative to comparison companies or indices
to be achieved during a period of time. For Awards under this Article 3 intended
to be "performance-based compensation," the grant of the Awards and the
establishment of the Performance Measures shall be made during the period
required under Code section 162(m).
ARTICLE 4
OPERATION AND ADMINISTRATION
Section 4.1. EFFECTIVE DATE. Subject to the approval of the shareholders of
the Company at the Company's 2003 annual meeting of its shareholders, the Plan
shall be effective as of July 1, 2003 (the "Effective Date"). The Plan shall be
unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Awards under it are outstanding; provided, however, that
no Awards may be granted under the Plan after the ten year anniversary of the
Effective Date (except for Awards granted pursuant to commitments entered into
prior to such ten-year anniversary).
Section 4.2. SHARES SUBJECT TO PLAN. The shares of Stock for which Awards
may be granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Awards may be made
under the Plan shall be shares currently authorized but unissued or currently
held or subsequently acquired by the Company as treasury shares, including
shares purchased in the open market or in private transactions.
B-2
(b) Subject to the following provisions of this Section 4.2, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to the sum of: (i) six million
(6,000,000) shares of Stock; and (ii) any shares of Stock available for future
awards under any prior stock option or incentive plan of the Company (the "Prior
Plans") as of the Effective Date; and (iii) any shares of Stock that are
represented by awards granted under any Prior Plans which are forfeited, expire
or are canceled without delivery of shares of Stock or which result in the
forfeiture of the shares of Stock back to the Company.
(c) To the extent provided by the Committee, any Award may be
settled in cash rather than Stock. To the extent any shares of Stock covered by
an Award are not delivered to a Participant or beneficiary because the Award is
forfeited or canceled, or the shares of Stock are not delivered because the
Award is settled in cash or used to satisfy the applicable tax withholding
obligation, such shares shall not be deemed to have been delivered for purposes
of determining the maximum number of shares of Stock available for delivery
under the Plan.
(d) If the exercise price of any stock option granted under the Plan
or any Prior Plan is satisfied by tendering shares of Stock to the Company (by
either actual delivery or by attestation), only the number of shares of Stock
issued net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.
(e) Subject to paragraph 4.2(f), the following additional maximums
are imposed under the Plan.
(i) The maximum number of shares of Stock that may be issued
by Options intended to be ISOs shall be three hundred thousand (300,000) shares.
(ii) The maximum number of shares that may be covered by
Awards granted to any one individual pursuant to Article 2 (relating to Options
and SARs) shall be sixty thousand (60,000) shares during any one calendar year
period. If an Option is in tandem with an SAR, such that the exercise of the
Option or SAR with respect to a share of Stock cancels the tandem SAR or Option
right, respectively, with respect to such share, the tandem Option and SAR
rights with respect to each share of Stock shall be counted as covering but one
share of Stock for purposes of applying the limitations of this paragraph (ii).
(iii) The maximum number of shares of Stock that may be issued
in conjunction with Awards granted pursuant to Article 3 (relating to Other
Stock Awards) shall be one million (1,000,000) shares.
(iv) For Stock Unit Awards, Restricted Stock Awards,
Restricted Stock Unit Awards and Performance Share Awards that are intended to
be "performance-based compensation" (as that term is used for purposes of Code
section 162(m)), no more than thirty thousand (30,000) shares of Stock may be
subject to such Awards granted to any one individual during any one calendar
year period. If, after shares have been earned, the delivery is deferred, any
additional shares attributable to dividends during the deferral period shall be
disregarded.
(v) For Performance Unit Awards that are intended to be
"performance-based compensation" (as that term is used for purposes of Code
section 162(m)), no more than $150,000 may be subject to such Awards granted to
any one individual during any one calendar year period. If, after amounts have
been earned with respect to Performance Unit Awards, the delivery of such
amounts is deferred, any additional amounts attributable to earnings during the
deferral period shall be disregarded.
(f) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation, split
up, spin off, combination or exchange of shares), the Committee may adjust
Awards to preserve the benefits or potential benefits of the Awards. Action by
the Committee may include: (i) adjustment of the number and kind of shares which
may be delivered under the Plan; (ii) adjustment of the number and kind of
shares subject to outstanding Awards; (iii) adjustment of the Exercise Price of
outstanding Options and SARs; and (iv) any other adjustments that the Committee
determines to be equitable.
Section 4.3. GENERAL RESTRICTIONS. Delivery of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under the Plan or make
any other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the applicable
requirements of any securities exchange or similar entity.
B-3
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may be
effected on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
Section 4.4. TAX WITHHOLDING. All distributions under the Plan are subject
to withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.
Section 4.5. GRANT AND USE OF AWARDS. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Awards may be granted
as alternatives to or replacement of awards granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary (including
a plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary). Subject to the overall limitation on
the number of shares of Stock that may be delivered under the Plan, the
Committee may use available shares of Stock as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.
Section 4.6. DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award (including
without limitation an Option or SAR Award) may provide the Participant with the
right to receive dividend payments or dividend equivalent payments with respect
to Stock subject to the Award (both before and after the Stock subject to the
Award is earned, vested, or acquired), which payments may be either made
currently or credited to an account for the Participant, and may be settled in
cash or Stock, as determined by the Committee. Any such settlements, and any
such crediting of dividends or dividend equivalents or reinvestment in shares of
Stock, may be subject to such conditions, restrictions and contingencies as the
Committee shall establish, including the reinvestment of such credited amounts
in Stock equivalents.
Section 4.7. SETTLEMENT OF AWARDS. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. In lieu of issuing a fraction of a
share upon any exercise of an Award, resulting from an adjustment of the Award
pursuant to paragraph 4.2(f) of the Plan or otherwise, the Company will be
entitled to pay to the Participant an amount equal to the fair market value of
such fractional share. Satisfaction of any obligations under an Award, which is
sometimes referred to as "settlement" of the Award, may be subject to such
conditions, restrictions and contingencies as the Committee shall determine. The
Committee may permit or require the deferral of any Award payment, subject to
such rules and procedures as it may establish, which may include provisions for
the payment or crediting of interest or dividend equivalents, and may include
converting such credits into deferred Stock equivalents. Each Subsidiary shall
be liable for payment of cash due under the Plan with respect to any Participant
to the extent that such benefits are attributable to the services rendered for
that Subsidiary by the Participant. Any disputes relating to liability of a
Subsidiary for cash payments shall be resolved by the Committee.
Section 4.8. TRANSFERABILITY. Except as otherwise permitted by the
Committee,
(a) Awards under the Plan are not transferable except as designated
by the Participant by will, by the laws of descent and distribution or by a
beneficiary form filed with the Company.
(b) Awards may be exercised or claimed on behalf of a deceased
Participant or other person entitled to benefits under the Plan by the
beneficiary of such Participant or other person if the Company has a valid
designation of such beneficiary on file, or otherwise by the personal legal
representative of such Participant or other person.
Section 4.9. FORM AND TIME OF ELECTIONS. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
Section 4.10. AGREEMENT WITH COMPANY. An Award under the Plan shall be
subject to such terms and conditions, not inconsistent with the Plan, as the
Committee shall, in its sole discretion, prescribe. The terms and conditions of
any Award to any Participant shall be reflected in such form of written document
as is determined by the Committee. A copy of such document shall be provided to
the Participant, and the Committee may, but need not require that the
Participant
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sign a copy of such document. Such document is referred to in the Plan as an
"Award Agreement" regardless of whether any Participant signature is required.
Section 4.11. ACTION BY COMPANY OR SUBSIDIARY. Any action required or
permitted to be taken by the Company or any Subsidiary shall be by resolution of
its board of directors, or by action of one or more members of the board
(including a committee of the board) who are duly authorized to act for the
board, or (except to the extent prohibited by applicable law or applicable rules
of any stock exchange) by a duly authorized officer of such company.
Section 4.12. GENDER AND NUMBER. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
Section 4.13. LIMITATION OF IMPLIED RIGHTS.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company or
any Subsidiary, in its sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right to
the Stock or amounts, if any, payable under the Plan, unsecured by any assets of
the Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee the right to
be retained in the employ of the Company or any Subsidiary, nor any right or
claim to any benefit under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise provided in the Plan,
no Award under the Plan shall confer upon the holder thereof any rights as a
shareholder of the Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
Section 4.14. EVIDENCE. Evidence required of anyone under the Plan may be
by certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
ARTICLE 5
CHANGE OF CONTROL
Subject to the provisions of paragraph 4.2(f) (relating to the adjustment
of shares), and except as otherwise provided in the Plan or the Award Agreement
reflecting the applicable Award, upon the occurrence of a Change of Control the
following provisions shall apply:
Section 5.1. ACCELERATION OF VESTING. If a Change of Control of the Company
shall occur, then with respect to outstanding Awards not already vested and/or
exercisable, the Committee, in its sole discretion, may determine that:
(a) All outstanding Options (regardless of whether in tandem with
SARs) shall become fully exercisable.
(b) All outstanding SARs (regardless of whether in tandem with
Options) shall become fully exercisable.
(c) All Stock Units, Restricted Stock, Restricted Stock Units, and
Performance Shares shall become fully vested.
If the Committee determines to accelerate any such outstanding Awards, then
such Awards shall remain vested and/or exercisable during the remaining term
thereof, regardless of whether the employment or other status of the
Participants with respect to which Awards have been granted shall continue with
the Company or any Subsidiary.
Section 5.2. CASH PAYMENT. Without limiting the generality of Section 4.7,
if a Change of Control of the Company shall occur, then the Committee, in its
sole discretion, and without the consent of any Participant affected thereby,
may determine that some or all Participants holding outstanding Awards shall
receive cash settlements in exchange for redemption of all or a part of such
Awards.
Section 5.3. LIMITATION ON CHANGE OF CONTROL PAYMENTS. Notwithstanding
anything in Section 5.1 or 5.2 above to the contrary, if, with respect to a
Participant, the acceleration of the exercisability and/or vesting of an Award
as
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provided in Section 5.1 or the payment of cash in exchange for all or part of an
Award as provided in Section 5.2 above (which acceleration or payment could be
deemed a "payment" within the meaning of Section 280G(b)(2) of the Code),
together with any other payments which such Participant has the right to receive
from the Company or any corporation which is a member of an "affiliated group"
(as defined in Section 1504(a) of the Code without regard to Section 1504(b) of
the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), then the acceleration
of exercisability and/or vesting and the payments to such Participant pursuant
to Sections 5.1 and 5.2 above shall be reduced to the extent or amount as, in
the sole judgment of the Committee, will result in no portion of such payments
being subject to the excise tax imposed by Section 4999 of the Code.
ARTICLE 6
COMMITTEE
Section 6.1. ADMINISTRATION. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Article 6. The Committee shall be selected
by the Board, and shall consist solely of two or more members of the Board who
are not employees of the Company or any Subsidiary. Unless otherwise determined
by the Board, the Compensation Committee of the Board shall serve as the
Committee for purposes of the Plan. If at any time the Committee does not exist,
or for any other reason determined by the Board, the Board may take any action
under the Plan that would otherwise be the responsibility of the Committee.
Section 6.2. POWERS OF COMMITTEE. The Committee's administration of the
Plan shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have
the authority and discretion to select from among the Eligible Recipients those
persons who shall receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the Awards, to
establish the terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and (subject to the restrictions imposed by Article
7) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the material
purposes of the Awards in jurisdictions outside the United States, the Committee
will have the authority and discretion to modify those restrictions as the
Committee determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, and to make all other determinations that
may be necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of
the Plan, the Committee shall take action in a manner that conforms to the
articles and by-laws of the Company, and applicable state corporate law.
Section 6.3. DELEGATION BY COMMITTEE. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
Section 6.4. INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
ARTICLE 7
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to
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the date such amendment is adopted by the Board; and further provided that
adjustments pursuant to paragraph 4.2(f) shall not be subject to the foregoing
limitations of this Article 7. Amendments to this Plan shall be subject to
shareholder approval to the extent such approval is required by applicable law
or applicable requirements of any securities exchange or similar entity.
ARTICLE 8
DEFINED TERMS
In addition to the other definitions contained herein, the following definitions
shall apply:
(a) Award. The term "Award" shall mean any award or benefit granted
under the Plan, including, without limitation, the grant of Options, SARs, Stock
Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards, Performance
Unit Awards, and Performance Share Awards.
(b) Award Agreement. The term "Award Agreement" has the meaning
assigned in Section 4.10.
(c) Board. The term "Board" shall mean the Board of Directors of the
Company.
(d) Change of Control. The term "Change of Control" shall mean (a)
the sale, lease, exchange or other transfer of all or substantially all of the
assets of the Company (in one transaction or in a series of related
transactions) to a corporation that is not controlled by the Company, (b) the
approval by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company, (c) a successful tender offer for the
Common Stock of the Company, after which the tendering party holds more than 30%
of the issued and outstanding Common Stock of the Company, or (d) a merger,
consolidation, share exchange, or other transaction to which the Company is a
party pursuant to which the holders of all of the shares of the Company
outstanding prior to such transaction do not hold, directly or indirectly, at
least 70% of the outstanding shares of the surviving company after the
transaction.
(e) Code. The term "Code" means the Internal Revenue Code of 1986,
as amended. A reference to any provision of the Code shall include reference to
any successor provision of the Code.
(f) Committee. The term "Committee" has the meaning assigned in
Section 6.1.
(g) Company. The term "Company" has the meaning assigned in Section
1.1.
(h) Effective Date. The term "Effective Date" has the meaning
assigned in Section 4.1.
(i) Eligible Recipient. The term "Eligible Recipient" shall mean any
employee of the Company or a Subsidiary and any of those consultants and
independent contractors of the Company or a Subsidiary who are natural persons.
An Award may be granted to an employee, consultant or independent contractor in
connection with hiring, retention or otherwise, prior to the date he or she
first performs services for the Company or the Subsidiaries, provided that such
Awards shall not become vested prior to the date he or she first performs such
services. An Award may also be granted to an employee, consultant or independent
contractor in connection with the conclusion of such employee, consultant or
independent contractor's performance of services and separation from the Company
or its Subsidiaries. The effect of discontinuity in an Eligible Recipient's
service with the Company or its Subsidiaries on any outstanding Award shall be
at the discretion of the Committee.
(j) Exercise Price. The term "Exercise Price" has the meaning
assigned in Section 2.2.
(k) Fair Market Value. For purposes of determining the "Fair Market
Value" of a share of Stock as of any date, the following rules shall apply:
(i) If the principal market for the Stock is a national
securities exchange or the Nasdaq Stock Market, then the "Fair Market Value" as
of that date shall be the closing sale price of the Stock on the principal
exchange or market on which the Stock is then listed or admitted to trading on
the trading day immediately preceding such date.
(ii) If sale prices are not available or if the principal market
for the Stock is not a national securities exchange and the Stock is not quoted
on the Nasdaq Stock Market, the average between the highest bid and lowest asked
prices for the Stock on such day as reported on the Nasdaq OTC Bulletin Board
Service or by the National Quotation Bureau, Incorporated or a comparable
service.
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(iii) If the day is not a business day, and as a result,
paragraphs (i) and (ii) next above are inapplicable, the Fair Market Value of
the Stock shall be determined as of the next earlier business day. If paragraphs
(i) and (ii) next above are otherwise inapplicable, then the Fair Market Value
of the Stock shall be determined in good faith by the Committee.
(l) ISO. The term "ISO" has the meaning assigned in Section 2.1(a).
(m) NQO. The term "NQO" has the meaning assigned in Section 2.1(a).
(n) Option. The term "Option" has the meaning assigned in Section
2.1(a).
(o) Participant. The term "Participant" has the meaning assigned in
Section 1.2.
(p) Performance Unit. The term "Performance Unit" has the meaning
assigned in Section 3.1(c).
(q) Performance Share. The term "Performance Share" has the meaning
assigned in Section 3.1(b).
(r) Plan. The term "Plan" has the meaning assigned in Section 1.1.
(s) Prior Plan. The term "Prior Plan" has the meaning assigned in
Section 4.2(b).
(t) Restricted Stock. The term "Restricted Stock" has the meaning
assigned in Section 3.1(d).
(u) Restricted Stock Unit. The term "Restricted Stock Unit" has the
meaning assigned in Section 3.1(d).
(v) SAR. The term "SAR" has the meaning assigned in Section 2.1(b).
(w) Subsidiaries. The term "Subsidiary" means any company during any
period in which it is a "subsidiary corporation" (as that term is defined in
Code section 424(f)) with respect to the Company.
(x) Stock. The term "Stock" shall mean shares of common stock of the
Company.
(y) Stock Unit. The term "Stock Unit" has the meaning assigned in
Section 3.1(a).
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C - EXHIBIT
DOLLAR TREE STORES, INC.
2003 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PLAN ADMINISTRATION AND ELIGIBILITY.
1.1. PURPOSE. The purpose of the Dollar Tree Stores, Inc. (the "Company")
2003 Non-Employee Director Stock Option Plan (the "Plan") is to advance the
interests of the Company and its shareholders by attracting and retaining the
highest quality of experienced persons as Non-Employee Directors and to further
align the interests of the Non-Employee Directors with the interests of the
Company's shareholders.
1.2. ADMINISTRATION. The award of Options under the Plan shall be as
described in Section 3. The Plan shall be administered, construed and
interpreted by the Board of Directors of the Company. Pursuant to such
authorization, the Board of Directors shall have the responsibility for carrying
out the terms of the Plan, including but not limited to prescribe the form of
the agreement applicable to evidence the award of Options under the Plan, to
construe the Plan, to determine all questions arising under the Plan, and to
adopt and amend rules and regulations for the administration of the Plan as it
may deem desirable. To the extent permitted under the securities laws applicable
to compensation plans including, without limitation, the requirements of Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
under the Internal Revenue Code of 1986, as amended (the "Code"), a committee of
the Board of Directors, or a subcommittee of any committee, may exercise the
discretion granted to the Board under the Plan, provided that the composition of
such committee or subcommittee shall satisfy the requirements of Rule 16b-3
under the Exchange Act, or any successor rule or regulation. The Board of
Directors may also designate a plan administrator to manage the record keeping
and other routine administrative duties under the Plan.
1.3. PARTICIPATION IN THE PLAN. Individuals who, as of the day following
each year's annual meeting date ("Eligibility Date"), are directors of the
Company and who are not employees of the Company or any of its subsidiaries, are
eligible to receive grants of options in accordance with Section 3.1 of this
Plan ("Eligible Directors"). Grant awards to any Eligible Director who was an
employee of the company or any of its subsidiaries at any time during the same
calendar year as the Eligibility Date shall be at the discretion of the Board.
2. STOCK SUBJECT TO THE PLAN.
2.1. NUMBER OF SHARES. The maximum number of shares of the Company's
$0.01 par value Common Stock ("Common Stock" or "Shares") which may be issued
pursuant to options granted under this Plan shall be 500,000 Shares, subject to
adjustment as provided in Section 4.4.
2.2. NON-EXERCISED SHARES. If any outstanding option under this Plan for
any reason expires or is forfeited or terminated without having been exercised
in full, the Shares allocable to the unexercised portion of the option shall
again become available for issuance under options granted pursuant to this Plan.
2.3. SHARE ISSUANCE. Upon the exercise of an option, the Company may
issue new Shares or reissue Shares previously repurchased by or on behalf of the
Company.
2.4. GENERAL RESTRICTIONS. Delivery of Shares under the Plan shall be
subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any Shares under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the applicable requirements of
any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of Shares, the issuance may be effected on
a non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.
2.5. TAX WITHHOLDING. The Board may condition the delivery of any shares
or other benefits under the Plan on satisfaction of any applicable withholding
obligations. The Board, in its discretion, and subject to such requirements as
the Board may impose prior to the occurrence of such withholding, may permit
such withholding obligations to be satisfied through cash payment by the
participant, through the surrender of Shares which the Participant already owns,
or through the surrender of Shares to which the participant is otherwise
entitled under the Plan.
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3. OPTIONS.
3.1. OPTION GRANT DATES. Unless otherwise determined by the Board, and
subject to shareholder approval, as may be required by law, options shall be
granted automatically to each Eligible Director on the business day following
each year's annual meeting date (the "Grant Date"). Any non-employee director
first elected as a director after the Eligibility Date but before the next
annual meeting shall be granted an option as the Board shall determine in its
sole discretion, but in any case covering no more than twice the number of
shares granted to Eligible Directors on the most recent Grant Date. The Grant
Date for an option granted to a newly elected director hereunder shall be the
date of such director's election to the Board, and the Option Price of such
option shall be determined as of such Grant Date.
3.2. OPTION PRICE. The purchase price per share for the Shares covered by
each option shall be the closing sale price on the last trading date preceding
the Grant Date (the "Option Price") for a share of Common Stock as reported on
the principal exchange or market on which the Common Stock is then listed or
admitted to trading, or, if the Common Stock is not then so listed, as
determined in good faith by the Board. Repricing of options after the date of
grant shall not be permitted.
3.3. NUMBER OF OPTION SHARES. The number of Shares subject to options
granted to each participating director on each Grant Date shall be 9,000;
provided however that the Board of Directors may reduce this amount or adopt a
formula to determine the number of Shares subject to options to be granted,
provided however that the number of such Shares may not be increased over 9,000
without shareholder approval. Options which may be granted to participating
directors pursuant to this Section 3 are in addition to any Options which may be
issued to such directors in lieu of annual fee payments pursuant to other
applicable Company plans.
3.4. PERIOD OF OPTION. Unless otherwise determined by the Board, Options
shall vest and become exercisable immediately, subject to the provisions of the
Plan. The options will expire ten years after the Grant Date or three years
after the date the Non-employee Director is no longer a director of the Company,
whichever occurs earlier.
3.5. DIRECTOR TERMINATIONS. In the event that a Director's service on the
Board ceases due to death, disability or retirement, all outstanding options
then held by the Director shall remain exercisable for a period of three years
following the cessation of service. Except as otherwise provided by the Board,
in the event that a Director's service on the Board ceases due to resignation,
or other voluntary removal, vested and exercisable shares shall remain
exercisable for a period of one year following the cessation of service. In any
event, if a Director is involuntarily removed for breach of duty, dishonesty or
any other cause, all vested and exercisable shares of options awarded under this
plan are immediately forfeit.
3.6. WRITTEN DOCUMENTATION. Each grant of an option under this Plan shall
be evidenced in writing, which shall comply with and be subject to the terms and
conditions contained in this Plan.
3.7. NON-STATUTORY STOCK OPTIONS. Options granted under this Plan shall
not be entitled to special tax treatment under Section 422A of the Internal
Revenue Code of 1986.
3.8. EXERCISE OF OPTIONS. Options may be exercised only by written notice
to the secretary of the Company and payment of the exercise price in (i) cash,
(ii) Shares, or (iii) delivery of an irrevocable written notice instructing the
Company to deliver the Shares being purchased to a broker, who may be selected
by the Company, subject to the broker's written guarantee to deliver cash to the
Company, in each case equal to the full consideration of the Option Price for
the Shares which are being exercised and any required tax withholding. Options
may be exercised in whole or in part. The Board may impose other restrictions or
requirements on the permissible method of exercise.
3.9. OPTIONS NOT TRANSFERABLE. Except as otherwise permitted by the
Board, each option granted under this Plan shall not be transferable by the
optionee other than by will or by the laws of descent and distribution. However,
subject to Board approval, the Board may provide that all or a portion of an
Option may be granted to an optionee upon terms that permit transfer of the
Option in a form and manner determined by the Board. Any person to whom an
Option is transferred pursuant to this Section 3.9 shall agree in writing to be
bound by the terms of the Plan and the stock option agreement for such Option as
if such transferee had been an original signatory thereto, and to execute and/or
deliver to the Board any documents as may be requested by the Board from time to
time.
3.10. EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. A director,
by written notice to the Company, may designate one or more persons (and from
time to time change such designation), including his or her legal
representative, who, by reason of the director's death, shall acquire the right
to exercise all or a portion of an option granted under this Plan. Any exercise
by a representative shall be subject to the provisions of this Plan.
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4. GENERAL PROVISIONS.
4.1 EFFECTIVE DATE OF THIS PLAN. This Plan shall be effective July 1,
2003, subject to approval by the shareholders of the Company. Upon such
approval, this plan shall supercede and replace any previously existing
provision for the grant of options to Directors, including grants allowable in
2003 under such previously existing provisions.
4.2 DURATION OF THIS PLAN. This Plan shall remain in effect until all
Shares subject to option grants have been purchased or all unexercised options
have expired. Notwithstanding the foregoing, no options may be granted pursuant
to this Plan on or after the 10th anniversary of this Plan's effective date.
4.3 AMENDMENT OF THIS PLAN. The Board of Directors may suspend or
discontinue this Plan or revise or amend it in any respect, provided, however,
that, without approval of the Company's shareholders, no revision or amendment
shall (i) change the total number of Shares subject to this Plan (except as
provided in Section 4.4), (ii) change the designation of the class of directors
eligible to participate in the Plan, (iii) change the exercise price of the
options, or (iv) materially increase the benefits accruing to participants under
or the cost of this Plan to the Company. Moreover, in no event may Plan
provisions be amended more than once every 6 months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules and regulations thereunder. No amendment, modification, or
termination of this Plan shall in any manner adversely affect the rights of any
director holding options granted under this Plan without his or her consent.
4.4 CHANGES IN SHARES. In the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, or other change
in the corporate structure or capitalization affecting the Shares, the Board
(whose determination shall be binding on all persons) may take such actions with
respect to the Plan and any outstanding Options as it deems appropriate,
including adjusting appropriately the number and kind of shares of stock or
securities of the Company to be subject to the Plan (including the aggregate
numbers specified in Section 2.1) and to Options then outstanding or to be
granted under the Plan, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and any other relevant provisions.
If the adjustment would produce fractional shares with respect to any
unexercised Option, the Board may adjust appropriately the number of shares
covered by the Option so as to eliminate the fractional shares. Notwithstanding
anything in the Plan to the contrary, the Board may take the foregoing actions
without the consent of any optionee, and the Board's determination shall be
conclusive and binding on all persons for all purposes.
4.5 CHANGE OF CONTROL. If a Change of Control of the Company shall
occur, then the Board may, in its discretion, determine that all outstanding
Options shall become fully exercisable. If the Board determines to accelerate
any such outstanding Options, then such Options shall remain vested and/or
exercisable during the remaining term thereof, regardless of whether the
Director shall continue with the Company or any Subsidiary. The Board, in its
sole discretion, and without the consent of any Director affected thereby, may
determine that some or all Directors holding outstanding Options shall receive
cash settlements in exchange for redemption of all or a part of such Options.
For purposes of the Plan, the term "Change of Control" shall mean (a) the sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company (in one transaction or in a series of related transactions) to a
corporation that is not controlled by the Company, (b) the approval by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company, (c) a successful tender offer for the Common Stock
of the Company, after which the tendering party holds more than 30% of the
issued and outstanding Common Stock of the Company, or (d) a merger,
consolidation, share exchange, or other transaction to which the Company is a
party pursuant to which the holders of all of the shares of the Company
outstanding prior to such transaction do not hold, directly or indirectly, at
least 70% of the outstanding shares of the surviving company after the
transaction.
4.6 LIMITATION OF RIGHTS.
4.6.1 NO RIGHT TO CONTINUE AS A DIRECTOR. Neither this Plan, nor
the granting of an option under this Plan, nor any other action taken pursuant
to this Plan shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a director for any period of
time, or at any particular rate of compensation.
4.6.2 NO SHAREHOLDERS' RIGHTS FOR OPTIONS. An optionee shall have
no rights as a shareholder with respect to the Shares covered by his or her
options until the date of the issuance to him or her of a stock certificate
therefore.
4.7 ASSIGNMENTS. The rights and benefits under this Plan may not be
assigned except as provided in Sections 3.9 and 3.10.
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4.8 NOTICE. Any written notice to the Company required by any of the
provisions of this Plan shall be addressed to the secretary of the Company and
shall become effective when it is received.
4.9 SHAREHOLDER APPROVAL AND REGISTRATION STATEMENT. This Plan shall be
approved by the Board of Directors and submitted to the Company's shareholders
for approval. Any options granted under this Plan prior to effectiveness of a
registration statement filed with the Securities and Exchange Commission
covering the Shares to be issued hereunder shall not be exercisable until, and
are expressly conditional upon, the effectiveness of a registration statement
covering the Shares.
4.10 GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
4.11 SEVERABILITY. If any term or provision of this Plan or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, then the remainder of the Plan, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision hereof shall be valid and be enforced to the fullest extent
permitted by applicable law.
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D - EXHIBIT
DOLLAR TREE STORES, INC.
2003 DIRECTOR DEFERRED COMPENSATION PLAN
1. PLAN ADMINISTRATION AND ELIGIBILITY.
1.1. PURPOSE. The purpose of the Dollar Tree Stores, Inc. (the "Company")
2003 Director Deferred Compensation Plan (the "Plan") is to advance the
interests of the Company and its shareholders by attracting and retaining the
highest quality of experienced persons as Directors and to further align the
interests of the Directors with the interests of the Company's shareholders.
1.2. ELIGIBILITY. Each member of the Board of Directors (an "Eligible
Director") of Dollar Tree Stores, Inc. (the "Company") is eligible to
participate in the Plan.
1.3. ADMINISTRATION. The Plan shall be administered, construed and
interpreted by the Board of Directors of the Company. Pursuant to such
authorization, the Board of Directors shall have the responsibility for carrying
out the terms of the Plan, including but not limited to the determination of the
amount and form of payment of the annual retainer and any additional fees
payable by the Company to an Eligible Director for his or her services as a
director (the "Fees," which shall not include reimbursements or other payments
not for services rendered). To the extent permitted under the securities laws
applicable to compensation plans including, without limitation, the requirements
of Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or under the Internal Revenue Code of 1986, as amended (the
"Code"), a committee of the Board of Directors, or a subcommittee of any
committee, may exercise the discretion granted to the Board under the Plan,
provided that the composition of such committee or subcommittee shall satisfy
the requirements of Rule 16b-3 under the Exchange Act, or any successor rule or
regulation. The Board of Directors may also designate a plan administrator to
manage the record keeping and other routine administrative duties under the
Plan.
2. STOCK SUBJECT TO THE PLAN.
2.1. NUMBER OF SHARES. The maximum number of shares of the Company's
$0.01 par value Common Stock ("Common Stock" or "Shares") which may be issued
pursuant to this Plan shall be 250,000 Shares, subject to adjustment as provided
in Section 5.4. Such amount does not include Shares issuable upon exercise of
stock options which may be granted pursuant to Section 4, which are subject to
the limits contained in the respective plans under which such options are
granted.
2.2. SHARE ISSUANCE. To satisfy the requirements of Section 3, the
Company may issue new Shares or reissue Shares previously repurchased by or on
behalf of the Company.
2.3. GENERAL RESTRICTIONS. Delivery of Shares under Section 3 of the Plan
shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any Shares under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the applicable requirements of
any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of Shares, the issuance may be effected on
a non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.
2.4. TAX WITHHOLDING. The Board may condition the delivery of any shares
or other benefits under the Plan on satisfaction of any applicable withholding
obligations. The Board, in its discretion, and subject to such requirements as
the Board may impose prior to the occurrence of such withholding, may permit
such withholding obligations to be satisfied through cash payment by the
participating Eligible Director ("Participant"), through the surrender of Shares
which the Participant already owns, or through the surrender of Shares to which
the participant is otherwise entitled under the Plan.
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3. DEFERRED COMPENSATION.
3.1. DEFERRAL OF FEES.
(a) Any Eligible Director may elect to defer in either cash or
Shares all or a portion of the Fees for any calendar year by delivering a
deferral election to the Company not later than (i) December 31 of the year
immediately preceding the year to which the deferral election relates, or
(ii) with respect to an Eligible Director's first year or partial year of
service as a director, thirty days following the date on which such director
first became a director. The election form shall specify the amount or
portion of the Fees to be deferred; whether and to what extent such Fees are
to be deferred in cash or in Shares; the manner of payment with respect to
such deferred amounts; and the date on which the deferred amounts shall be
paid and whether paid in a lump sum or in which installment payments shall
commence. Such election shall remain in force for such calendar year and for
each year thereafter until changed or revoked by the director by written
notice to the Company not later than December 31 immediately preceding the
year to which such change or revocation relates. A deferral election may not
be changed or revoked after the beginning of the year to which it relates.
(b) For the year in which the Plan is first implemented, any
Eligible Director may make an election to defer Fees for services to be
performed subsequent to such election within 30 days after the effective date
set forth in Section 5.1.
3.2. ACCOUNTS; INTEREST AND DIVIDEND CREDITS. On the first day of each
calendar quarter (the "Credit Date"), an Eligible Director who elects to defer
his or her Fees shall receive a credit to his or her deferred compensation
accounts (the "Deferred Compensation Accounts") under the Plan as hereinafter
provided. Any portion of a Participant's Fees which are deferred in cash shall
be credited to the Participant's Cash Deferral Account. The amount of the credit
shall equal the amount of Fees deferred in cash by the Participant during the
immediately preceding calendar quarter. Any portion of a Participant's Fees
which are deferred in Shares shall be credited to the Participant's Deferred
Stock Account. The amount of the credit to such Deferred Stock Account shall be
the number of Shares (rounded to the nearest one hundredth of a Share)
determined by dividing the amount of the Participant's Fees deferred in Shares
during the immediately preceding quarter by the closing price of a Share as
reported on the principal stock exchange where the Common Stock is listed on the
trading date immediately preceding the Credit Date.
On the first day of each calendar quarter, an amount shall be credited to
each Participant's Cash Deferral Account equal to the Interest Rate (as
hereinafter defined) on the balance credited to the Cash Deferral Account during
the immediately preceding calendar quarter. Interest shall accrue on the balance
of each Participant's Cash Deferral Account commencing with the date the first
payment is credited thereto and ending with the final payment therefrom. For
this purpose, "Interest Rate" shall mean, with respect to any calendar quarter,
30-year Treasury Bond Rate then in effect.
Each time any dividend is paid on the Stock, a Participant who has a
positive balance in his or her Deferred Stock Account shall receive a credit to
such Account. The amount of the dividend credit shall be the number of Shares
(rounded to the nearest one-hundredth of a Share) determined by multiplying the
dividend amount per Share by the number of Shares credited to the Participant's
Deferred Stock Account as of the record date for the dividend and dividing the
product by the closing price per Share reported on the principal stock exchange
where the Common Stock is listed on the dividend payment date.
3.3. PAYMENT. The balance of an Eligible Director's Deferred Compensation
Accounts shall be paid to the director (or, in the event of death, to his or her
designated beneficiary or estate) as follows: at the director's option, either
(i) in a single lump sum as soon as practicable following the earlier of (x) the
date on which the director ceases to serve as a director of the Company or (y)
the date specified by the director as the distribution date (such earlier date
shall be referred to as the "Distribution Date"), or (ii) in annual installments
over a period, to be specified by the director, not to exceed five years
commencing as soon as practicable after the Distribution Date. If an Eligible
Director's Cash Deferral Account is paid in installments, the amount of each
installment shall be (l) the balance of the Cash Deferral Account on the
Distribution Date divided by the number of installments plus (2) interest
credits. A cash payment will be made with the final installment for any fraction
of a share of Common Stock credited to the Eligible Director's Deferred Stock
Account. Upon the death of an Eligible Director, the Company may elect to pay
any remaining benefits in a single lump sum.
3.4. DESIGNATION OF BENEFICIARY. Each Eligible Director may designate in
writing a beneficiary to receive such portion, if any, of the director's
Deferred Compensation Accounts as remains unpaid at the director's death. In the
absence of a valid beneficiary designation, that portion, if any, of an Account
remaining unpaid at the director's death shall be paid to his or her estate.
3.5. NATURE OF PROMISE. The Company shall not be required to segregate or
earmark any funds or Shares in respect of its obligations under Section 3 of the
Plan. No Eligible Director nor any other person shall have any rights to any
assets of the Company by reason of amounts deferred or benefits accrued under
this Plan, other than as a general unsecured creditor of the Company. The Plan
constitutes a mere promise by the Company to make payments in the future
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and is unfunded for purposes of Title I of ERISA and for tax purposes. The
Company shall make available as and when required a sufficient number of shares
of Common Stock to meet the requirements arising under the Plan.
3.6. NO ASSIGNMENT. Rights to benefits under this Section 3 of the Plan
may not be assigned, sold, transferred, encumbered, pledged or otherwise
alienated, attached, garnished, or anticipated, other than in accordance with
the beneficiary designation provisions of Section 3.4 above.
4. STOCK OPTIONS.
4.1 ELECTION TO RECEIVE OPTIONS. An Eligible Director may elect that any
portion of his or her Fees not deferred under Section 3 above shall be paid in
the form of options to purchase the Company's Common Stock ("Options").
4.2 TIME AND METHOD OF ELECTION, CHANGE OR REVOCATION. An election
pursuant to Section 4.1 or any decision to change or revoke such election shall
be governed by the same timing and other requirements set forth in Section 3
with respect to deferral of Fees.
4.3 OPTION TERMS. Options shall be "non-qualified" stock options made
under, and pursuant to the terms and conditions of, (i) the 2003 Equity
Incentive Plan, for Eligible Directors who are employees of the Company or a
subsidiary, and (ii) the 2003 Non-Employee Director Stock Option Plan, for
all other Eligible Directors. Options shall be issued as of the Credit Date
and reflect an exercise price and other terms established according to the
provisions of such plans. The Options shall be fully vested when issued and
the term of such Options shall be ten (10) years.
4.4 DETERMINATION OF OPTION AMOUNT. The number of Options issued to an
Eligible Director under this Section 4 as of any Credit Date shall equal (i) the
dollar amount of portion of his or her Fee which is to be paid in Options on
such Credit Date divided by (ii) thirty-three percent (33%) of the closing price
of a Share as reported on the principal stock exchange where the Common Stock is
listed on the trading date immediately preceding the Credit Date.
5. GENERAL PROVISIONS.
5.1 EFFECTIVE DATE OF THIS PLAN. This Plan shall be effective June 19,
2003, subject to approval by the shareholders of the Company.
5.2 DURATION OF THIS PLAN. This Plan shall remain in effect, unless
earlier terminated or superceded, until June 30, 2013.
5.3 AMENDMENT OF THIS PLAN. The Board of Directors may suspend or
discontinue this Plan or revise or amend it in any respect, provided, however,
that, without approval of the Company's shareholders, no revision or amendment
shall (i) change the total number of Shares subject to this Plan (except as
provided in Section 5.4), (ii) change the designation of the class of directors
eligible to participate in the Plan, or (iii) materially increase the benefits
accruing to participants under or the cost of this Plan to the Company.
Moreover, in no event may Plan provisions be amended more than once every 6
months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules and regulations
thereunder.
5.4 CHANGES IN SHARES. In the event of a stock dividend, stock split
or combination of Shares, recapitalization or other change in the Company's
capitalization, or other distribution to common stockholders other than
normal cash dividends, after the effective date of the Plan, the Board will
make any appropriate adjustments to the maximum number of Shares that may be
delivered under the Plan and to any Participant. In any event referred to in
this Section 5.4, the Board will also make any appropriate adjustments to any
Eligible Director's Deferred Stock Account. The Board may also make such
adjustments to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions
or similar corporate transactions, or any other event, if it is determined by
the Board that adjustments are appropriate to avoid distortion in the
operation of the Plan. Notwithstanding this Section 5.4, changes to Options
shall be governed by the terms of the appropriate plan.
5.5 CHANGE OF CONTROL. Upon a Change of Control (as defined below), any
outstanding balance in an Eligible Director's Cash Deferral Account shall be
paid in a lump sum and any outstanding balance in an Eligible Director's
Deferred Stock Account shall be distributed in Shares of Common Stock at the
time of the consummation of such Transaction. In the alternative, the Board may
arrange, in lieu of the action described in above, to have an acquiring or
surviving corporation or entity in the Transaction, or an affiliate thereof,
assume the Deferred Compensation Accounts, making such adjustments to the
treatment of Deferred Compensation Accounts as it deems appropriate. For
purposes of the Plan, the term "Change of Control" shall mean (a) the sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company (in one transaction or in a series of related transactions) to a
corporation that is not controlled
D-3
by the Company, (b) the approval by the shareholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company, (c) a successful
tender offer for the Common Stock of the Company, after which the tendering
party holds more than 30% of the issued and outstanding Common Stock of the
Company, or (d) a merger, consolidation, share exchange, or other transaction to
which the Company is a party pursuant to which the holders of all of the shares
of the Company outstanding prior to such transaction do not hold, directly or
indirectly, at least 70% of the outstanding shares of the surviving company
after the transaction. Notwithstanding this Section 5.5, the effect of a Change
of Control upon Options issued under Section 4 shall be governed by the terms of
the appropriate plan.
5.6 LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither this Plan,
nor the granting of an Option under this Plan, nor any other action taken
pursuant to this Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a director for
any period of time, or at any particular rate of compensation.
(b) NO SHAREHOLDERS' RIGHTS. Except as specifically
provided by the Plan, a participant in the Plan shall have no rights as a
shareholder with respect to the Deferred Stock Account until the date of the
issuance to him or her of a stock certificate therefore.
5.7 NOTICE. Any written notice to the Company required by any of the
provisions of this Plan shall be addressed to the secretary of the Company and
shall become effective when it is received.
5.8 SHAREHOLDER APPROVAL AND REGISTRATION STATEMENT. This Plan shall be
approved by the Board of Directors and submitted to the Company's shareholders
for approval. Any options granted under this Plan prior to effectiveness of a
registration statement filed with the Securities and Exchange Commission
covering the Shares to be issued hereunder shall not be exercisable until, and
are expressly conditional upon, the effectiveness of a registration statement
covering the Shares.
5.9 GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
5.10 SEVERABILITY. If any term or provision of this Plan or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, then the remainder of the Plan, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision hereof shall be valid and be enforced to the fullest extent
permitted by applicable law.
D-4
Our 2002 Annual Report to Shareholders is mailed to our shareholders. It
includes audited financial statements for the years ended December 31, 2002,
2001 and 2000 reported on by KPMG LLP, together with the related Management's
Discussion and Analysis of Financial Condition and Results of Operations.
A copy of Dollar Tree Stores, Inc. 2002 Form 10-K will be supplied without
charge upon request. Requests for such annual reports, interim reports, or other
information should be directed to:
Shareholder Services
Dollar Tree Stores, Inc.
500 Volvo Parkway
Chesapeake, Virginia 23320
(757) 321-5000
DOLLAR TREE STORES, INC. 2003
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of Shareholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
To assist us in planning, please indicate in the appropriate block on your proxy
whether you plan to attend the Annual Meeting of Shareholders. We look forward
to seeing you there.
DOLLAR TREE STORES, INC.
500 VOLVO PARKWAY
CHESAPEAKE, VIRGINIA 23320
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING, JUNE 19, 2003
The undersigned hereby appoints Macon F. Brock, Jr. and Frederick C. Coble,
jointly and severally, each with full power of substitution, as proxies to
represent the undersigned at the Annual Meeting of Shareholders of DOLLAR TREE
STORES, INC. to be held at the Holiday Inn Select, Norfolk, Virginia, on
Thursday, June 19, 2003 at 10:00 a.m. local time, and at any adjournment
thereof, on any matters coming before the Meeting.
Please specify your choice by marking the appropriate box for each matter on the
reverse side. Any boxes not marked will be voted in accordance with the
recommendations of the Board of Directors. The Proxies cannot vote your shares
unless you sign and return this card.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
This proxy, when properly executed, will be voted in the manner directed herein
and authorizes the Proxies to take action in their discretion upon other matters
that may properly come before the Meeting. If no direction is made, this proxy
will be voted FOR the election of the directors listed in Proposal 1, FOR the
2003 Equity Incentive Plan in Proposal 2, FOR the 2003 Non-Employee Director
Stock Option Plan in Proposal 3, and FOR the 2003 Director Deferred Compensation
Plan in Proposal 4.
1. Election of Directors.
Nominees: Class II - J. Douglas Perry, Thomas A. Saunders, III and Eileen
R. Scott
/ / FOR / / WITHHELD / / FOR, except withheld from the following
nominees:
_________________________________________
2. Proposal to approve the 2003 Equity Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to approve the 2003 Non-Employee Director Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal to approve the 2003 Director Deferred Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
5. If you will be attending the Annual Meeting, please mark [ ] YES
CHANGE OF ADDRESS:
NAME OF SHAREHOLDER ___________________________________________
STREET ADDRESS ___________________________________________
CITY, STATE AND ZIP CODE ___________________________________________
Signature(s): ____________________________________________ Date: _______________
Signature(s): ____________________________________________ Date: _______________
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.