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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, MAY 30, 2002
To Our Shareholders:
We will hold the annual meeting of the shareholders of Dollar Tree Stores,
Inc. at the Portsmouth Renaissance Hotel, Portsmouth, Virginia, on Thursday, May
30, 2002 at 10:00 a.m. local time. Shareholders will consider and vote on the
following proposals:
o elect two directors; and
o act upon any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 29, 2002 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 22, 2001
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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
April 22, 2001, we began mailing these proxy materials to all stockholders of
record at the close of business on March 29, 2002.
VOTING PROCEDURES
Shareholders of record have one vote per share of stock held. On March 29,
2002, there were 112,707,917 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 two nominees for
director in Class I. 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 2002 Annual Meeting of
Shareholders of Dollar Tree Stores, Inc. will be held on Thursday, May 30, 2002,
at the Portsmouth Renaissance Hotel in Portsmouth, 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.
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 2002 Annual Meeting of Shareholders, the terms of two Class I
directors are expiring. Class I directors elected at this annual meeting will
hold office for a three-year term expiring in 2005. The other directors will
continue in office following this annual meeting and their terms will expire in
2003 (Class II) and 2004 (Class III). Officers are appointed by the Board of
Directors.
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.
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INFORMATION CONCERNING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
NOMINEES
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 60, 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
- --------------------------------------------------------------------------------
RICHARD G. LESSER
Class of Director: I
Principal Occupation: Senior Corporate Adviser
The TJX Companies, Inc.
Recent Business Experience: Mr. Lesser, age 67, 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.
- --------------------------------------------------------------------------------
CONTINUING DIRECTORS
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 54, 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.
However, he still continues his duties as
Chairman Emeritus of the Board. 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
- --------------------------------------------------------------------------------
2
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H. RAY COMPTON
Class of Director: III
Director Since: 1986
Principal Occupation: Executive Vice President, Dollar Tree
Stores, Inc.
Recent Business Experience: Mr. Compton, age 59, has been Executive Vice
President since 1986 when he founded Dollar
Tree with Mr. Perry and Mr. Brock. Mr.
Compton has reduced his day-to-day
responsibilities with the company, but still
remains active in special projects. 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.
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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 65, 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.
- --------------------------------------------------------------------------------
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 43, 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.
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FRANK DOCZI
Class of Director: II
Director Since: 1995
Principal Occupation: President, Dive Quarters, Inc.; private
investor; corporate director
Recent Business Experience: Mr. Doczi, age 64, has been President of
Dive Quarters, Inc. since 1997. He served as
the President and Chief Executive Officer of
Home Quarters Warehouse, Inc. (HQ), a
subsidiary of Hechinger Company, from 1988
until 1995. Mr. Doczi had been with HQ since
it began in 1984. He also served as a member
of the Management Committee for the
Hechinger Company. Prior to 1984, Mr. Doczi
spent seven years with Moore's, a chain of
home centers operated by Evans Products
Company, where he was the Senior Vice
President, General Merchandise Manager.
Other Directorships: None
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ALAN L. WURTZEL
Class of Director: III
Director Since: 1995
Principal Occupation: Private investor; corporate director
Recent Business Experience: Mr. Wurtzel, age 68, 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 41, has been Chief Financial
Officer 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 50, 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.
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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 2001.
Certain filings made in a timely manner were however, amended after the filing
date to correct minor errors.
OWNERSHIP OF COMMON STOCK
The table below shows the number of shares of our common stock
beneficially owned on March 29, 2002 by :
o each of the Directors and nominees for director;
o each of the Executive Officers;
o all Directors and Executive Officers as a group; and
o 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.
<Table>
<Caption>
Beneficial Ownership (1)
------------------------
Directors and Executive Officers Shares Percent
- -------------------------------- ------ -------
J. Douglas Perry................ 2,691,160 (2) 2.4%
Macon F. Brock, Jr.............. 4,078,496 (3) 3.6%
H. Ray Compton.................. 253,259 (4) *
John F. Megrue.................. 109,325 (5) *
Thomas A. Saunders, III......... 1,065,281 (6) *
Alan L. Wurtzel................. 103,969 (7) *
Frank Doczi..................... 99,750 (8) *
Richard G. Lesser............... 56,719 (9) *
Frederick C. Coble.............. 226,294 (10) *
Bob Sasser...................... 180,000 (11) *
All current Directors and Named
Officers (10 persons)........ 8,874,250 7.8%
Other 5% Shareholders
- ---------------------
Putnam Investments, Inc......... 10,607,202 (12) 9.4%
One Post Office Square
Boston, MA 02109
<FN>
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* less than 1%
(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 1,211,246 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 38,250 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.
(3) Includes 1,378,082 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 180,000 shares issuable upon exercise of
certain stock options granted pursuant to The Dollar Tree Stores, Inc.
Stock Incentive Plan, but excludes 938,521 shares owned by Mr. Brock's
wife, Joan P. Brock.
(4) Includes 193,259 shares owned by a trust for the benefit of certain
Compton family members, over which Mr. Compton may indirectly exercise
investment or voting power.
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(5) Includes 19,325 shares owned by trusts for the benefit of certain Megrue
family members, over which Mr. Megrue may indirectly exercise investment
or voting power.
(6) Includes 21,252 shares owned by an irrevocable trust for the benefit of
certain Saunders family members, of which Mr. Saunders is a trustee.
(7) Includes 24,469 shares held in a revocable trust of which Mr. Wurtzel is a
trustee and 79,500 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(8) Represents 99,750 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(9) Represents 56,719 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(10) Includes 165,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(11) Represents 180,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(12) Includes shares held or controlled by Putnam Investments, Inc. and its
affiliates including Marsh & McLennan Companies, Inc., Putnam Investments
parent holding company, and Putnam Investment Management, Inc. and The
Putnam Advisory Company, Inc., investment advisors and subsidiaries of
Putnam Investments, Inc. Based on Schedule 13G/A filed by Putnam
Investments for the period ended December 2001.
</FN>
</Table>
INFORMATION ABOUT THE BOARD OF DIRECTORS
DIRECTOR COMPENSATION
Each Director who is not a founder or an employee of the company or an
affiliate of The SK Equity Fund, L.P., is paid a fee of $15,000 per year and
$1,000 plus expenses for each meeting of the Board of Directors or of any
committee thereof the Director attends. Such Directors also receive options for
shares of common stock under the company's Stock Incentive Plan. Mr. Perry
receives $1,000 per meeting as Chairman Emeritus of the Board. He receives no
annual fee. In 2001, he also received options for shares of common stock under
the company's Stock Incentive Plan comparable to those granted to the outside
Directors, as disclosed above.
On October 1, 1999, the company entered into a consulting agreement with
Mr. Perry, which provides for annual compensation 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 compensation, and in its discretion, shall determine
whether or not to increase such compensation. The agreement automatically renews
each year and is cancelable at the option of Mr. Perry. The annual compensation
of $30,000 was reviewed by the company in 2001 and was not adjusted.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has scheduled four regular meetings in 2002 and
will hold special meetings when company business requires. During 2001, the
Board held four regular meetings and one special meeting. 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.
AUDIT COMMITTEE
The Audit Committee has four members: Thomas Saunders (Chairman), Alan
Wurtzel, Frank Doczi and Richard Lesser. This membership satisfies the rule of
the National Association of Securities Dealers, Inc. (NASD) that governs audit
committee composition, Rule 4350(d)(2)(A), including the requirement that audit
committee members all be "independent directors" as that term is defined by NASD
Rule 4200(a)(14). The functions of this committee include:
o reviewing the company's financial reporting process and internal
control system;
o reviewing the quarterly and annual financial statements of the
company;
o reviewing the audit efforts of the company's independent accountants
and internal finance department;
o reviewing all related party transactions; and
o recommending the selection of the independent public accountants to
the Board of Directors.
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The Audit Committee met formally two times in 2001. In addition, members of the
Audit Committee conducted telephonic reviews of financial results on a quarterly
basis.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's main purpose (in accordance with its written charter
adopted by the Board of Directors) 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.
In connection with these responsibilities, the Audit Committee:
o 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, 2001;
o discussed with KPMG LLP the matters required by Codification of
Statements on Auditing Standards No. 61 (Communication with Audit
Committees);
o discussed with KPMG LLP the quality, not just the acceptability, of
the company's accounting principles;
o 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
o 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, 2001 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:
o meeting as necessary to oversee the company's compensation and
benefit practices;
o recommending to the full Board the compensation arrangements for the
company's senior officers;
o administering the company's executive compensation plans and
Employee Stock Purchase Plan; and
o administering and considering awards under the company's Stock
Incentive Plan.
The Compensation Committee met two times in 2001.
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 has entered into an advisory agreement with the company, as
disclosed below.
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.
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The compensation of our executive officers typically consists of:
o a competitive base salary;
o 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;
o long-term incentive compensation in the form of stock options; and
o 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 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 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, 2001, Mr. Brock received a base salary of $650,000, an increase of
15.6% from the prior year. 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
2001, Mr. Brock received a bonus of $188,000 under the Annual Management
Incentive Compensation Program. In 2002, 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
NOMINATING COMMITTEE
The Nominating Committee has three members: Thomas Saunders (Chairman),
Macon Brock and Alan Wurtzel. The main purpose of this committee is to advise
the Board of Directors on the composition, organization and effectiveness of the
Board and its committees. The function of this committee is to make
recommendations to the Board of Directors regarding:
o the number of standing committees and the duties and
responsibilities of those committees;
o the size and composition of the Board of Directors and its standing
committees;
o procedures for the nomination process;
o candidates for election or re-election to the Board of Directors;
o members of the Board's standing committees; and
o Chairmen for each of the Board's standing committees.
As the Board of Directors did not create the Nominating Committee until the last
quarter of 2001, that committee did not meet in 2001.
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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, 2001, 2000 and 1999:
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- -------------
Securities
Name and Other Underlying All Other
Principal Position Year Salary Bonus Annual (1) Options (2) Compensation (3)
- ------------------ ---- ------ ----- ---------- ----------- ----------------
Macon F. Brock, Jr. 2001 $ 650,000 $ 188,000 --- 60,000 $ 35,050
Chairman and 2000 562,500 255,000 --- 60,000 34,718
Chief Executive Officer 1999 518,750 302,439 --- --- 35,177
H. Ray Compton 2001 $ 125,000 $ --- --- --- $ 22,897
Executive Vice President 2000 125,000 50,000 --- --- 22,566
1999 135,416 50,000 --- --- 23,025
Frederick C. Coble 2001 $ 217,500 $ 45,901 --- 25,000 $ 17,824
Chief Financial Officer 2000 191,250 59,135 --- 30,000 17,493
1999 175,000 71,358 --- 26,250 17,952
Bob Sasser (4) 2001 $ 379,167 $ 87,595 --- 40,000 $ 17,824
President and 2000 306,250 101,801 --- 45,000 17,493
Chief Operating Officer 1999 180,929 125,815 --- 75,000 ---
- ---------------
<FN>
(1) 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.
(2) Stock options were granted pursuant to the company's Stock Incentive Plan.
(3) For 2001, this column includes $17,824 each for Messrs. Brock, Compton,
Coble and Sasser, respectively, for the company's discretionary and
matching contributions allocated to the owners' 401(k) and Profit Sharing
Plan accounts. Also included are $17,226 and $5,073 for Messrs. Brock and
Compton, respectively, for life insurance premiums on policies of which
the officer is the owner.
(4) Mr. Sasser was hired as Chief Operating Officer in April 1999.
</FN>
</Table>
OPTIONS GRANTED IN 2001
Of the Named Executive Officers, only Messrs. Brock, Coble and Sasser
received options under the company's stock compensation plans. The following
table provides information as to options granted to Messrs. Brock, Coble and
Sasser during 2001:
<Table>
<Caption>
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 3.9% $ 17.00 03/20/2011 $ 634,824
Frederick C. Coble 25,000 1.6% $ 17.00 03/20/2011 $ 264,510
Bob Sasser 40,000 2.6% $ 17.00 03/20/2011 $ 423,216
<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 1999
are exercisable in three approximately equal annual installments beginning
one year after grant. Options granted in 2000 and later 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 6 year expected
life of the options; expected volatility for Dollar Tree common stock of
63.0%; and a risk-free rate of return of 4.9%. The company does not pay
dividends.
</FN>
</Table>
9
<Page>
OPTION EXERCISES IN 2001 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,
2001, 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
<Table>
<Caption>
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. --- --- 12,000 108,000 $ 92,420 $1,204,282
Frederick C. Coble --- --- 82,600 57,400 $1,041,443 $ 628,435
Bob Sasser --- --- 31,600 108,400 $ 327,181 $1,203,345
<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, 2001, multiplied by the number of shares
underlying the options. The closing price of Dollar Tree common stock on
December 31, 2001, as reported by Nasdaq, was $30.91.
</FN>
</Table>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
As described below, we lease our former corporate headquarters and
distribution center facility and 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 our
Philadelphia, Pennsylvania office and warehouse and ten stores from lessors
affiliated with the former owners of Dollar Express, Inc.
LEASE ON FORMER HEADQUARTERS AND DISTRIBUTION CENTER: Located in Norfolk,
Virginia, this facility is leased from DMK Associates, a partnership controlled
by Mr. Perry and Mr. Brock; the lease expires in December 2009. Rental payments
under the lease are adjusted every other lease year to reflect certain changes
in a consumer price index. The lease currently provides for an aggregate minimum
annual rental of $656,250. We replaced our Norfolk location with an expanded
facility in Chesapeake, Virginia, in early 1998. In March 1998, we subleased the
Norfolk facility through March 2008 for an amount that exceeds our annual
obligation under the prime lease.
LEASE ON FORMER PHILADELPHIA, PENNSYLVANIA OFFICE AND WAREHOUSE: This
facility is leased from lessors affiliated with the former owners of Dollar
Express, Inc. The lease expires in December 2002 and calls for annual lease
payments of $403,750. 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 $151,000 in 2001. The lease with Suburban
Management expires in August 2005, with two five-year renewal options. The store
leases with DMK Associates expire in November 2003, with two four-year renewal
options, and January 2003, respectively.
In 2001, we leased ten stores from lessors affiliated with the former
owners of Dollar Express, Inc. Rental payments on the ten stores totaled
approximately $291,774 in 2001. Leases for nine of these stores were either
renegotiated in early 2001 or are on month-to-month terms. 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.
10
<Page>
ADVISORY AGREEMENTS
On September 30, 1993, we entered into a financial and management advisory
agreement with Saunders Karp & Megrue, L.P., (the Advisor), a limited
partnership under the control of SKM Partners, L.P., of which Messrs. Saunders
and Megrue are limited partners. In consideration for certain financial advisory
services, the Advisor was entitled to receive an initial annual fee of $250,000,
reduced to $200,000 in 1995, payable quarterly, and is reimbursed for certain of
its out-of-pocket expenses. In addition, we have agreed to indemnify the Advisor
for certain losses arising out of the provision of advisory services. The
agreement is terminable by a majority of the Board of Directors of our company
upon 30 days notice to the Advisor. Payment of the fee was discontinued as of
December 2001.
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.
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 Retail
Composite 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, 1996.
TOTAL SHAREHOLDER RETURNS
[GRAPH OMITTED]
<Table>
<Caption>
Data Points:
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
Dollar Tree 100 162.25 256.99 284.93 216.18 272.74
S&P Retail Composite 100 144.65 233.37 282.77 237.74 259.13
Nasdaq U.S. Index 100 121.64 169.84 315.20 191.36 151.07
</Table>
11
<Page>
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 Bylaws 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:
o the name and address of record of the shareholder who intends to
make the nomination;
o 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;
o the class and number of shares of our capital stock beneficially
owned by the shareholder; and
o 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.
For each person nominated, each such shareholder's notice to the Secretary
must also set forth:
o the name, age, business address and, if known, residence address, of
such person,
o his or her principal occupation or employment,
o the class and number of shares of our capital stock beneficially
owned by such person,
o 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
o 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
2003 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, 2002. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to shareholder
proposals.
12
<Page>
OUR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP has audited our consolidated financial statements since 1986 and
will continue in that capacity during 2002. A representative of KPMG LLP will be
present at the 2002 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 (FOR THE YEAR ENDED DECEMBER 31, 2001)
Audit Fees $396,200
Financial Information Systems
Design and Implementation Fees $0
All Other Fees $364,400 (a)(b)
(a) Includes fees for tax compliance, planning and consulting.
(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.
By order of the Board of Directors,
/s/ Frederick C. Coble
Frederick C. Coble
Chief Financial Officer and Secretary
Chesapeake, Virginia
April 16, 2002
13
<Page>
Our 2001 Annual Report to Shareholders is mailed to our shareholders. It
includes audited financial statements for the years ended December 31, 2001,
2000 and 1999 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. 2001 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
<Page>
DOLLAR TREE STORES, INC. 2002
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.
<Page>
DOLLAR TREE STORES, INC.
500 VOLVO PARKWAY
CHESAPEAKE, VIRGINIA 23320
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING, MAY 30, 2002
The undersigned hereby appoints J. Douglas Perry, 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 Portsmouth Renaissance Hotel,
Portsmouth, Virginia, on Thursday, May 30, 2002 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.
<Page>
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.
1. Election of Directors.
Nominees: Class I - Macon F. Brock, Jr. and Richard G. Lesser
[ ] FOR [ ] WITHHELD [ ] FOR, except withheld from the following
nominees:
---------------------------------------
2. 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: _______________________
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.