STOCK-BASED COMPENSATION PLANS

Fixed Stock Option Compensation Plans

Under the Company's 2011 Omnibus Incentive Plan ("Omnibus Plan"), the Company may grant to the Company’s employees, including executive officers and independent contractors, up to 4.0 million shares of its Common Stock plus any shares available under former plans which were previously approved by the shareholders. The Omnibus Plan permits the Company to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance bonuses, performance units, non-employee director stock options and other equity-related awards. These awards generally vest over a three-year period with a maximum term of 10 years.

Stock appreciation rights may be awarded alone or in tandem with stock options. When the stock appreciation rights are exercisable, the holder may surrender all or a portion of the unexercised stock appreciation right and receive in exchange an amount equal to the excess of the fair market value at the date of exercise over the fair market value at the date of the grant. No stock appreciation rights have been granted to date.

Any restricted stock or RSUs awarded are subject to certain general restrictions. The restricted stock shares or units may not be sold, transferred, pledged or disposed of until the restrictions on the shares or units have lapsed or have been removed under the provisions of the plan. In addition, if a holder of restricted shares or units ceases to be employed by the Company, any shares or units in which the restrictions have not lapsed will be forfeited.

The 2013 Director Deferred Compensation Plan permits any of the Company's directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of the Company's common stock, or receive all or a portion of such fees in non-statutory stock options. Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate. If a director elects to be paid in common stock, the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of the Company's common stock on the date of deferral. The number of options issued to a director will equal the deferred fee amount divided by 33% of the price of a share of the Company's common stock. The exercise price will equal the fair market value of the Company's common stock at the date the option is issued. The options are fully vested when issued and have a term of 10 years.

In conjunction with the Acquisition, the Company assumed the Family Dollar Stores, Inc. 2006 Incentive Plan (the "2006 Plan"). The 2006 Plan permitted the granting of a variety of compensatory award types, including stock options and performance share rights.

The 2003 Non-Employee Director Stock Option Plan (NEDP) provided non-qualified stock options to non-employee members of the Company's Board of Directors. The exercise price of each stock option granted equaled the closing market price of the Company’s stock on the date of grant. The options generally vested immediately. This plan was terminated on June 16, 2011 and replaced with the Omnibus Plan.

Restricted Stock

In connection with the Acquisition, unvested Family Dollar RSUs that were outstanding prior to the Acquisition were converted into unvested Dollar Tree RSUs with the same substantive terms and conditions as were applicable to the Family Dollar RSUs, in respect of a number of shares of common stock of the Company determined by multiplying the number of shares of Family Dollar RSUs by 1.0000 (the "Award Exchange Ratio"). The Company converted approximately 0.1 million unvested Family Dollar RSUs into unvested Dollar Tree RSUs at the date of Acquisition and recognized $0.7 million, $1.8 million and $2.8 million of expense related to these RSUs in 2017, 2016 and 2015, respectively.

The Company granted 0.5 million, 0.5 million and 0.3 million service-based RSUs, net of forfeitures in 2017, 2016 and 2015, respectively, from the Omnibus Plan to the Company’s employees and officers. The fair value of all of these RSUs is being expensed ratably over the three-year vesting periods, or shorter periods based on the retirement eligibility of certain grantees. The fair value was determined using the Company’s closing stock price on the date of grant. The Company recognized $32.2 million, $28.2 million and $22.6 million of expense related to service-based RSUs during 2017, 2016 and 2015, respectively. As of February 3, 2018, there was approximately $35.6 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 20.3 months.

In 2017, the Company granted 0.3 million RSUs from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in 2017. The Company met these performance targets in fiscal 2017; therefore, the fair value of these RSUs of $19.7 million is being expensed over the related three-year service period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $13.7 million of expense related to these RSUs in 2017. The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.

In 2016, the Company granted 0.2 million RSUs from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in 2016. The Company met these performance targets in fiscal 2016; therefore, the fair value of these RSUs of $17.1 million is being expensed over the related three-year service period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $2.0 million and $11.4 million of expense related to these RSUs in 2017 and 2016, respectively. The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.

In 2015, the Company granted 0.1 million RSUs from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in 2015. The Company met these performance targets in fiscal 2015; therefore, the fair value of these RSUs of $11.3 million is being expensed over the related three-year service period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $1.0 million, $1.8 million and $8.7 million of expense related to these RSUs in 2017, 2016 and 2015, respectively. The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.

In 2017, the Company granted RSUs with an estimated fair value of $4.6 million from the Omnibus Plan to certain officers of the Company. Each officer has the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on January 29, 2017 and ending on January 31, 2020. Provided the vesting conditions are satisfied, the awards will vest at the end of the performance period. The estimated fair value of these RSUs is being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $2.6 million of expense related to these RSUs in 2017. The estimated fair value of these RSUs was determined using the Company's closing stock price on the grant date.

In 2016, the Company granted RSUs with an estimated grant date fair value of $3.2 million from the Omnibus Plan to certain officers of the Company. Each officer has the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on January 31, 2016 and ending on February 2, 2019. Provided the vesting conditions are satisfied, the awards will vest at the end of the performance period. The current estimated fair value of these RSUs of $3.2 million is being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $0.5 million and $2.0 million of expense related to these RSUs in 2017 and 2016, respectively. The estimated fair value of these RSUs was determined using the Company's closing stock price on the grant date.

In 2015, the Company granted RSUs with an estimated fair value of $2.3 million from the Omnibus Plan to certain officers of the Company. Each officer had the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on February 1, 2015 and ending on February 3, 2018. The estimated fair value was being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $0.8 million, $2.3 million and $1.4 million of expense related to these RSUs in 2017, 2016 and 2015, respectively. The estimated fair value of these RSUs was determined using the Company's closing stock price on the grant date.

In 2013, the Company granted RSUs ("2013 Grants") with an estimated fair value of $1.7 million from the Omnibus Plan to certain officers of the Company. Each officer had the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on February 3, 2013 and ending on January 30, 2016 ("2013 Goal"). The estimated fair value was being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The estimated fair value of these RSUs was determined using the Company's closing stock price on the grant date. However, because the Acquisition was not yet contemplated as of the grant date, the 2013 Goal did not exclude costs related to the Acquisition or any income that may be attributable to Family Dollar during the performance period. In 2015, the Company concluded that maintaining the 2013 Grants in their original form would undermine the Company's goals and create skewed incentives for the grantees.

Because amending the 2013 Goal would have jeopardized deductibility of the awards under Section 162(m) of the Internal Revenue Service Code, in 2015 the Compensation Committee of the Board of Directors canceled the 2013 Grants and approved new awards ("2015 Supplemental Grants"), with a fair value of $2.2 million and a new operating income goal for the one-year period ending January 30, 2016 ("2015 Supplemental Goal"). The 2015 Supplemental Goal equals the amount remaining in the final year of the 2013 Goal, giving credit for actual Company performance utilizing an operating income definition that excludes both costs related to the Acquisition and income from Family Dollar. As such, the 2015 Supplemental Grants exactly replicate the incentive structure of the 2013 Grants had those awards excluded the effect of the then-unknown and unforeseeable Acquisition when they were granted. The Company recognized a $1.2 million reduction of expense related to the 2013 Grants cancellation in 2015 and recognized $0.2 million and $2.4 million of expense related to the 2015 Supplemental Grants in 2016 and 2015, respectively.

In 2012, the Company granted 0.2 million RSUs with a fair value of $10.0 million from the Omnibus Plan to the Chief Executive Officer of the Company, contingent on the Company meeting certain performance targets for the period beginning July 29, 2012 and ending on August 3, 2013 and the grantee completing a five-year service requirement. The fair value of these RSUs was being expensed ratably over the five-year vesting period. The Company recognized $0.7 million, $2.0 million and $2.0 million of expense related to these RSUs in 2017, 2016 and 2015, respectively. The fair value of these RSUs was determined using the Company's closing stock price on the grant date.

In 2015, the Company granted 0.1 million service-based RSUs with a fair value of $7.9 million from the Omnibus Plan. The estimated fair value of these RSUs is being expensed ratably over the three-year vesting period. The Company recognized $1.6 million, $2.0 million and $1.0 million of expense related to these RSUs in 2017, 2016 and 2015, respectively.

On March 18, 2016, the Company granted approximately 0.1 million RSUs with a fair value of $5.0 million from the Omnibus Plan to the President of the Company, contingent on the Company meeting certain performance targets for the period beginning January 31, 2016 and ending on February 2, 2019 and the grantee completing a five-year service requirement. The fair value of these RSUs is being expensed ratably over the five-year vesting period. The Company recognized $1.0 million and $0.8 million of expense related to these RSUs in 2017 and 2016, respectively. The fair value of these RSUs was determined using the Company's closing stock price on the grant date.

The following table summarizes the status of RSUs as of February 3, 2018, and changes during the year then ended:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at January 28, 2017	1,619,501		$	73.43
Granted	890,371		78.63
Vested	(891,791	)	67.61
Forfeited	(92,829	)	79.21
Nonvested at February 3, 2018	1,525,252		$	79.37

In connection with the vesting of RSUs in 2017, 2016 and 2015, certain employees elected to receive shares net of minimum statutory tax withholding amounts which totaled $27.4 million, $21.9 million and $21.6 million, respectively. The total fair value of the restricted shares vested during the years ended February 3, 2018, January 28, 2017 and January 30, 2016 was $60.3 million, $42.4 million and $36.8 million, respectively.

Stock Options

In 2017, 2016 and 2015, a director elected to defer his compensation into stock options under the 2013 Director Deferred Compensation Plan. These options vest immediately and are expensed on the grant date. In 2016, the Company granted 0.2 million stock options with a fair value of $4.0 million from the Omnibus Plan to an officer of the Company. The fair value of these stock options will be expensed over the five-year vesting period. The Company recognized $1.3 million of expense related to these stock options in 2017. The Company did not recognize any expense related to these stock options in 2016.

In connection with the Acquisition, options to purchase Family Dollar common stock ("Family Dollar Options") that were outstanding prior to the Acquisition were converted into options to purchase, on the same substantive terms and conditions as were applicable to Family Dollar Options, a number of shares of common stock of the Company determined by multiplying the number of shares of Family Dollar common stock subject to such Family Dollar Options by 1.0000 (the "Award Exchange Ratio"), at an exercise price per share equal to the per share exercise price for the shares of Family Dollar common stock otherwise purchasable pursuant to the Family Dollar Options divided by the Award Exchange Ratio. The Company converted approximately 1.5 million Family Dollar vested and unvested options into equivalent options to purchase Dollar Tree Common Stock at the date of Acquisition and recognized $1.3 million, $2.6 million and $6.2 million of expense related to these options in 2017, 2016 and 2015, respectively. Stock options are valued using the Black-Scholes option-pricing model and compensation expense is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period.

The fair value of each option grant was estimated on the Acquisition date using the Black-Scholes option-pricing model. The expected term of the awards granted is based on an analysis of historical and expected future exercise behavior. Expected volatility is derived from an analysis of the historical volatility of the Company’s publicly traded stock. The risk free rate is based on the U.S. Treasury rates on the Acquisition date with maturity dates approximating the expected life of the option on the Acquisition date.

The weighted average assumptions used in the Black-Scholes option pricing model for awards granted to certain officers in 2016 and converted awards in 2015 are as follows:



	Fiscal 2016			Fiscal 2015
Expected term in years	6.50			2.03
Expected volatility	24.51		%	20.77		%
Annual dividend yield	—		%	—		%
Risk free interest rate	2.09		%	0.60		%
Weighted-average fair value of options granted during the period	$	22.10		$	23.15

Amounts for options granted in 2017 and 2015 are immaterial.

The following tables summarize information about options outstanding at February 3, 2018 and changes during the year then ended.



Stock Option Activity
	February 3, 2018
			Weighted
			Average		Weighted	Aggregate
			Per Share		Average	Intrinsic
			Exercise		Remaining	Value
	Shares		Price		Term	(in millions)
Outstanding, beginning of period	1,041,435		$	62.38
Granted	8,525		83.54
Exercised	(494,411	)	53.85
Forfeited	(32,466	)	73.01
Outstanding, end of period	523,083		$	70.14	5.00	$	20.2
Options vested at February 3, 2018	288,698		$	66.56	4.25	$	12.2
Options exercisable at end of period	288,698		$	66.56	4.25	$	12.2



	Options Outstanding				Options Exercisable
	Options				Options
Range of	Outstanding	Weighted Avg.	Weighted Avg.		Exercisable	Weighted Avg.
Exercise	at February 3,	Remaining	Exercise		at February 3,	Exercise
Prices	2018	Contractual Life	Price		2018	Price
$19.93 to $48.30	47,807	3.6	$	32.36	47,807	$	32.36
$48.31 to $68.70	33,030	2.0	57.95		30,108	57.53
$68.71 to $76.86	236,157	1.2	72.90		54,832	69.10
$76.87 to $78.45	185,805	6.7	76.98		138,465	76.98
$78.46 to $107.31	20,284	6.7	84.19		17,486	85.06
$19.93 to $107.31	523,083	5.0	$	70.14	288,698	$	66.56

The intrinsic value of options exercised during 2017, 2016 and 2015 was approximately $18.3 million, $11.8 million and $13.2 million, respectively.

Employee Stock Purchase Plan

Under the Dollar Tree, Inc. Employee Stock Purchase Plan (ESPP), the Company is authorized to issue up to 8,707,692 shares of Common Stock to eligible employees. Under the terms of the ESPP, employees can choose to have up to 10% of their annual base earnings withheld to purchase the Company's common stock. The purchase price of the stock is 85% of the lower of the price at the beginning or the end of the quarterly offering period. Under the ESPP, the Company has sold 5,138,468 shares as of February 3, 2018.

The fair value of the employees' purchase rights is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



	Fiscal 2017		Fiscal 2016		Fiscal 2015
Expected term	3 months		3 months		3 months
Expected volatility	10.9	%	14.6	%	13.2	%
Annual dividend yield	—	%	—	%	—	%
Risk free interest rate	1.1	%	0.4	%	0.2	%

The weighted average per share fair value of purchase rights granted in 2017, 2016 and 2015 was $13.62, $13.43 and $11.65, respectively. Total expense recognized for these purchase rights was $2.0 million, $1.6 million and $1.0 million in 2017, 2016 and 2015, respectively.