0001104659-15-050146.txt : 20150708 0001104659-15-050146.hdr.sgml : 20150708 20150707183855 ACCESSION NUMBER: 0001104659-15-050146 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20150706 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150708 DATE AS OF CHANGE: 20150707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLLAR TREE INC CENTRAL INDEX KEY: 0000935703 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 541387365 STATE OF INCORPORATION: VA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25464 FILM NUMBER: 15977522 BUSINESS ADDRESS: STREET 1: 500 VOLVO PARKWAY STREET 2: N/A CITY: CHESAPEAKE STATE: VA ZIP: 23320 BUSINESS PHONE: (757) 321-5000 MAIL ADDRESS: STREET 1: 500 VOLVO PARKWAY CITY: CHESAPEAKE STATE: VA ZIP: 23320 FORMER COMPANY: FORMER CONFORMED NAME: DOLLAR TREE STORES INC DATE OF NAME CHANGE: 19950117 8-K 1 a15-15183_18k.htm 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 6, 2015

DOLLAR TREE, INC.

(Exact name of registrant as specified in its charter)

VIRGINIA

(State or Other Jurisdiction of Incorporation)

0-25464		26-2018846
(Commission File Number)		(I.R.S. Employer Identification No.)

500 Volvo Parkway

Chesapeake, VA 23320

(Address of Principal Executive Offices and Zip Code)

(757) 321-5000

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

As previously announced, on July 27, 2014, Dollar Tree, Inc. (the “Company”), Family Dollar Stores, Inc. (“Family Dollar”) and Dime Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Original Agreement”), as amended by Amendment No. 1 dated as of September 4, 2014 (“Amendment No.1”) (the Original Agreement and Amendment No.1, together, the “Merger Agreement”). On July 6, 2015 (the “Closing Date”), pursuant to the Merger Agreement, Merger Sub merged with and into Family Dollar, with Family Dollar becoming a direct, wholly owned subsidiary of the Company (the “Merger”). The Merger is more fully described in Item 2.01 below. In connection with the Merger, the Company completed additional corporate and financing activities, which are more fully described in this Item 1.01.

Senior Notes Supplemental Indentures

As previously disclosed, on February 23, 2015, Family Tree Escrow, LLC (the “Escrow Issuer”), a wholly owned subsidiary of the Company, completed an offering of $750,000,000 aggregate principal amount of its 5.250% senior notes due 2020 (the “2020 Notes”) and $2,500,000,000 aggregate principal amount of its 5.750% senior notes due 2023 (the “2023 Notes”, and together with the 2020 notes, the “Notes”). The proceeds of the issuance of the Notes were placed into escrow pending consummation of the Merger.

The 2020 Notes, which mature on March 1, 2020, were issued pursuant to an indenture, dated as of February 23, 2015, between the Escrow Issuer and U.S. Bank National Association, as trustee (the “Initial 2020 Notes Indenture”). The 2023 Notes, which mature on March 1, 2023, were issued pursuant to an indenture, dated as of February 23, 2015, between the Escrow Issuer and U.S. Bank National Association, as trustee (the “Initial 2023 Notes Indenture”, and together with the Initial 2020 Notes Indenture, the “Initial Indentures”). The Initial Indentures are more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2015, which description is incorporated herein by reference.

On July 6, 2015, in connection with the consummation of the Merger, the Escrow Issuer was merged with and into the Company, with the Company as the surviving entity, the net proceeds from the issuance and sale of the Notes were released from escrow and used to fund a portion of the cash consideration for the Merger, and the Company and certain of the Company’s direct and indirect wholly owned domestic subsidiaries, including Family Dollar and certain of its subsidiaries (the “Guarantors”), and U.S. Bank National Association, as trustee, entered into a supplemental indenture to the Initial 2020 Notes Indenture (the “2020 Notes Supplemental Indenture”) and a supplemental indenture to the Initial 2023 Notes Indenture (the “2023 Notes Supplemental Indenture”, and together with the 2020 Notes Supplemental Indenture, the “Supplemental Indentures”; the Supplemental Indentures, together with the Initial Indentures, the “Indentures”), pursuant to which the Company assumed the obligations of the Escrow Issuer under the Notes and the Initial Indentures and the Guarantors jointly and severally, fully and unconditionally guaranteed the Notes on a senior unsecured basis.

The description of the Indentures contained herein is not intended to be complete and is qualified in its entirety by reference to the full texts of the Initial Indentures, which were filed with the SEC as Exhibit 4.1 and Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 23, 2015, and of the Supplemental Indentures, copies of which are attached as Exhibit 4.1 and Exhibit 4.2, each of which are incorporated herein by reference.

Registration Rights

As previously disclosed, on February 23, 2015, the Escrow Issuer and the Company entered into a registration rights agreement related to the 2020 Notes and a registration rights agreement related to the 2023 Notes (together the “Registration Rights Agreements”), each with J.P. Morgan Securities LLC, as representative of the initial purchasers of the Notes, under which they agreed to use commercially reasonable efforts to register with the SEC a registration statement relating to an offer to exchange each of the 2020 Notes and the 2023 Notes for registered notes with substantially identical terms in all material respects, and to have such registration statement

declared effective under the Securities Act on or prior to the 365 days after the consummation of the Merger. Concurrently with the closing of the Merger, the Guarantors executed joinders to each of the Registration Rights Agreements (the “Registration Rights Agreement Joinders”) to become parties thereto.

The foregoing description of the Registration Rights Agreements and the Registration Rights Agreement Joinders is qualified in its entirety by reference to the full text of the Registration Rights Agreements, which are attached as Exhibit 4.3 and Exhibit 4.4 to the Form 8-K filed by the Company with the SEC on February 23, 2015, and the full text of the Registration Rights Agreement Joinders, which are attached as Exhibit 4.3 and Exhibit 4.4 to this Form 8-K, each of which are incorporated herein by reference.

Senior Secured Credit Facilities

As previously disclosed, on March 9, 2015, the Escrow Issuer, entered into a credit agreement, with JPMorgan Chase Bank, N.A., as administrative agent, providing for $6,200 million in senior secured credit facilities (the “New Senior Secured Credit Facilities”) consisting of a $1,250 million revolving credit facility (the “New Revolving Credit Facility”) and $4,950 million of term loan facilities (the “New Term Loan Facilities”). The New Term Loan Facilities initially consisted of a $1,000 million Term Loan A tranche and a $3,950 million Term Loan B tranche. On March 9, 2015, the proceeds of the borrowings under the Term Loan B tranche were deposited in an escrow account and were held in escrow until the Closing Date.

As previously disclosed, on June 11, 2015, the Escrow Issuer amended the terms of the New Senior Secured Credit Facilities to refinance the existing $3,950 million Term Loan B tranche with $3,300 million in aggregate principal amount of floating-rate Term B-1 Loans and $650 million in aggregate principal amount of fixed-rate Term B-2 Loans.

On the Closing Date, the Escrow Issuer merged with and into the Company, with the Company as the surviving entity, the Company became the borrower under the New Senior Secured Credit Facilities and the Guarantors (as defined above) unconditionally guaranteed the Company’s obligations under the New Senior Secured Credit Facilities. In addition, the term loan proceeds that were deposited in escrow were released, and the Company borrowed $1,000 million in term loans under the Term Loan A Facility, which amounts were used, among other things, to finance the Merger and the repayment of various existing debt obligations of the Company and Family Dollar.

The obligations under the New Senior Secured Credit Facilities are secured by substantially all of the assets of the Company and the Guarantors, subject to certain exceptions, pursuant to a collateral agreement, dated as of the Closing Date, among the Company, the Guarantors, and JPMorgan Chase Bank, N.A., as collateral agent (the “Collateral Agreement”). The Collateral Agreement also provides that the assets of the Company and the Guarantors that secure the obligations under the New Senior Secured Credit Facilities shall also equally and ratably secure Family Dollar’s obligations under its $300 million in aggregate principal amount of notes issued pursuant to that certain Indenture, dated as of January 28, 2011, as supplemented by the First Supplemental Indenture, dated as of January 28, 2011, in each case, between Family Dollar and U.S. Bank National Association, as trustee, to the extent required thereby.

The New Senior Secured Credit Facilities are more fully described in the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2015, and the Company’s Current Report on 8-K filed with the SEC on June 12, 2015, which descriptions are incorporated herein by reference.

Item 1.02. Termination of a Material Definitive Agreement.

On the Closing Date, the Company paid in full all amounts owing under that certain Credit Agreement, dated as of June 6, 2012 (the “Existing Dollar Tree Credit Agreement”) by and among the Company, Dollar Tree Stores, Inc., the guarantors party thereto, the several banks and other financial institutions party thereto and Wells

Fargo Bank, National Association, as Administrative Agent and terminated all commitments to extend further credit thereunder.

On the Closing Date, Dollar Tree Stores, Inc. also prepaid in full its $300,000,000 in aggregate principal amount of 4.03% Series A Senior Notes due September 16, 2020, (ii) $350,000,000 in aggregate principal amount of 4.63% Series B Senior Notes due September 16, 2023 and (iii) $100,000,000 in aggregate principal amount of 4.78% Series C Senior Notes due September 16, 2025, issued pursuant to that certain Note Purchase Agreement, dated as of September 16, 2013 (as amended on January 20, 2015, the “Dollar Tree NPA”) among the Company, Dollar Tree Stores, Inc., and the Purchasers party thereto, plus accrued and unpaid interest thereon and a make-whole premium of approximately $89.45 million determined in accordance with the provisions of the Dollar Tree NPA plus additional interest in accordance with the provisions of the First Amendment to the Dollar Tree NPA.

On the Closing Date, Family Dollar paid in full all amounts owing under that certain Amended and Restated 5-Year Credit Agreement, dated as of November 13, 2013 (the “Family Dollar 5-Year Credit Agreement”), by and among Family Dollar, the lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent and that certain Amended and Restated 4-Year Credit Agreement, dated as of November 13, 2013 (the “Family Dollar 4-Year Credit Agreement” and together with the Family Dollar 5-Year Credit Agreement, the “Family Dollar Credit Agreements”), by and among Family Dollar, the lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent and terminated all commitments to extend further credit thereunder.

On the Closing Date, Family Dollar also prepaid in full its outstanding $169,000,000 in aggregate principal amount of 5.41% Series 2005-A Senior Notes due September 27, 2015 and $16,200,000 in aggregate principal amount of 5.24% Series 2005-A Senior Notes due September 27, 2015, issued pursuant to that certain Note Purchase Agreement dated as of September 27, 2005 (as amended on November 17, 2010 and June 19, 2015, the “Family Dollar NPA”), among Family Dollar, Family Dollar, Inc. and the Purchasers party thereto, plus accrued and unpaid interest thereon and a make-whole premium of approximately $2.0 million determined in accordance with the provisions of the Family Dollar NPA plus additional interest in accordance with the provisions of the Second Amendment to the Family Dollar NPA.

Item 2.01. Completion of Acquisition or Disposition of Assets.

As described in Item 1.01, on July 6, 2015, the Company completed the Merger. At the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, par value $0.10 per share, of Family Dollar, other than (i) any shares of Family Dollar common stock held by Family Dollar, the Company or Merger Sub at the Effective Time, which were cancelled and ceased to exist, with no consideration delivered in exchange therefor, and (ii) shares of Family Dollar common stock with respect to which appraisal rights were properly exercised and not withdrawn under Delaware law, was automatically cancelled and converted into the right to receive, without interest (1) $59.60 in cash and (2) 0.2484 of a share of common stock, par value $0.01 per share, of the Company, plus cash in lieu of fractional shares (the “Merger Consideration”).

As of the Effective Time, each outstanding performance share right in respect of shares of Family Dollar common stock (“Family Dollar PSR”) was cancelled in exchange for the right of the holder to receive the Merger Consideration, as determined based on the product of (i) the number of shares of Family Dollar common stock deemed to be earned under the Family Dollar PSR based on the greater of (x) the deemed achievement of all relevant performance goals at target level and (y) the actual level of achievement of all relevant performance goals against target as of Family Dollar’s last fiscal quarter end preceding the Effective Time and (ii) a fraction, (x) the numerator of which is the number of days within the performance period of such Family Dollar PSR that have elapsed prior to the Closing Date and (y) the denominator of which is the total number of days within the performance period of such Family Dollar PSR (the “PSR Payment”). The aggregate amount paid by Dollar Tree for the Merger Consideration and PSR Payment was approximately $6.8 billion in cash and 28.5 million in shares of Dollar Tree common stock, which had a value of approximately $2.2 billion based on the closing price of Dollar Tree common stock on the Nasdaq on July 2, 2015.

In addition, at the Effective Time:

· each option to purchase Family Dollar common stock (“Family Dollar Option”) that was outstanding as of immediately prior to the Merger was converted into an option to purchase, on the same substantive terms and conditions as were applicable to each such Family Dollar Option, 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 Option 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 Option divided by the Award Exchange Ratio; and

· each restricted stock unit (“RSU”) in respect of Family Dollar common stock (“Family Dollar RSU”) that was outstanding as of immediately prior the Merger (other than Family Dollar PSRs) was converted into an RSU, with the same substantive terms and conditions as were applicable to each such Family Dollar RSU, in respect of a number of shares of common stock of the Company determined by multiplying the number of shares of Family Dollar common stock subject to the Family Dollar RSU by the Award Exchange Ratio.

The Company funded the cash portion of the Merger Consideration through cash on hand, the net proceeds of the issuance and sale of the Notes, and initial borrowings under the New Term Loan Facilities.

The foregoing description of the Merger Agreement and the Merger is not intended to be complete and is qualified in its entirety by reference to the Original Agreement and Amendment No.1, which were filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 29, 2014 and September 5, 2014, respectively, and which are incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.

In connection with the Merger, pursuant to the terms of the Merger Agreement, Howard R. Levine, formerly the Chairman of the board and Chief Executive Officer of Family Dollar, was appointed to the Company’s board of directors (the “Board”) effective as of the Effective Time.

Mr. Levine served as a director of Family Dollar from 1997 through the closing of the Merger. He was employed by Family Dollar in various capacities in the merchandising department of Family from 1981 to 1987. From 1988 to 1992, Mr. Levine was President of Best Price Clothing Stores, Inc., a chain of ladies’ apparel stores. From 1992 to April 1996, he was self-employed as an investment manager. He rejoined Family Dollar in April 1996, and was appointed Vice President-General Merchandise Manager: Softlines in April 1996; Senior Vice President-Merchandising and Advertising in September 1996; President and Chief Operating Officer in April 1997; Chief Executive Officer in August 1998; and Chairman of the board of directors of Family Dollar in January 2003.

In connection with the Merger Agreement, on July 27, 2014, the Company, Family Dollar and Mr. Levine entered into a retention letter (the “Retention Letter”) that, contingent on the occurrence of the Effective Time, amends Mr. Levine’s existing employment agreement with Family Dollar, dated as of December 28, 2012 (the “Employment Agreement”).

The Retention Letter provides that, following the Effective Time, Mr. Levine will continue to serve as the Chief Executive Officer of Family Dollar, reporting directly to the Chief Executive Officer of the Company. Pursuant to the Retention Letter, following the Effective Time, Mr. Levine will (a) receive an annual base salary of at least $1,150,000, (b) receive an annual target incentive opportunity under the terms of the Company’s

Management Incentive Compensation Plan of at least 100% of his annual base salary, which will be based in part on performance measures related to Family Dollar, (c) receive, for periods of his employment following August 31, 2015, an annual long-term performance plan grant with a target opportunity of $600,000 and an annual restricted stock unit performance based grant of $2,000,000 (with the first such grants to be made no later than the Company’s regular 2016 grant cycle) and (d) be eligible to participate in the other compensation and employee benefit plans applicable to similarly situated executives of the Company. The Company also agreed that it will, following the Effective Time, reimburse reasonable legal fees incurred by Mr. Levine in connection with the negotiation of the retention letter, up to a maximum of $45,000.

Additionally, Mr. Levine has agreed to waive his right to terminate his employment for good reason under his Employment Agreement based on certain changes to his position as a result of the Merger for the period between the Effective Time until the second anniversary thereof (the “Second Anniversary”). However, pursuant to the Retention Letter, Mr. Levine is still entitled to receive the change in control severance benefits provided under his Employment Agreement and all then outstanding unvested equity awards that were granted to Mr. Levine prior to the Effective Time would vest in full if his employment is terminated by Family Dollar without cause, by him under the clauses of his “Good Reason” definition that he did not waive (including a material breach of Family Dollar’s obligations under the Retention Letter and his ceasing to serve on the Board due to the Company’s failure to nominate him) or by reason of his death or disability during such two-year period.

Mr. Levine has also agreed to waive certain other rights under the Employment Agreement, including a reimbursement for taxes under Section 409A of the Internal Revenue Code, and has agreed that the Employment Agreement will terminate immediately following the Second Anniversary (except in respect of the restrictive covenants contained therein). In consideration for the foregoing, Mr. Levine will be entitled to the change-in-control severance benefits and equity award acceleration described above upon any termination of employment at or following the Second Anniversary, subject to his execution of a release of claims and his continued compliance with the restrictive covenants set forth in his Employment Agreement.

The Retention Letter also provides that, during the 30-month period following the Effective Time, Mr. Levine will not sell, pledge or transfer in any way any shares of common stock of the Company received in the Merger (subject to certain exceptions for corporate transactions approved by the Board and philanthropic or estate planning purposes). Notwithstanding the foregoing, however, on the first anniversary of the Effective Time and on each six-month anniversary thereafter, 25% of the shares of common stock of the Company held by Mr. Levine as of the Effective Time shall cease to be subject to the transfer restrictions described in the previous sentence.

The foregoing description of the Retention Letter is not intended to be complete and is qualified in its entirety by reference to the Retention Letter that is attached hereto as Exhibit 10.1 and incorporated herein by reference. In addition, the Employment Agreement is attached hereto as Exhibit 10.2.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the appointment of Mr. Levine to the Board pursuant to the terms of the Merger Agreement, the Board amended the Company’s Bylaws, effective as of the Effective Time, to expand the size of the Board by one (1) director, from eleven (11) directors to twelve (12) directors. The Bylaws of the Company, as amended, are filed as Exhibit 3.1 to this Form 8-K and incorporated herein by reference.

Item 8.01. Other Events.

On July 6, 2015, the Company issued a press release announcing the completion of the Merger, which is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited consolidated balance sheets of Family Dollar as of August 30, 2014 and August 31, 2013, and the related audited consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the years in the three-year period ended August 30, 2014, and the accompanying notes thereto, are attached hereto as Exhibit 99.2 and incorporated herein by reference.

The unaudited consolidated balance sheets of Family Dollar as of May 30, 2015 and August 30, 2014, and the related unaudited consolidated statements of income and comprehensive income, and cash flows for the nine-month periods ended May 30, 2015 and May 31, 2014, and the accompanying notes thereto, are attached hereto as Exhibit 99.3 and incorporated herein by reference.

(b) Financial Statements of Business Acquired.

Pro forma financial information relative to the acquired business is not included in this Form 8-K report. Such pro forma financial information will be filed within 71 calendar days after the date of filing of this Form 8-K report.

(d) Exhibits

Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of July 27, 2014, among Family Dollar Stores, Inc., Dollar Tree, Inc. and Dime Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of Dollar Tree, Inc.’s Current Report on Form 8-K filed with the SEC on July 29, 2014)

2.2		Amendment No. 1 to the Agreement and Plan of Merger, dated as of September 4, 2014, among Family Dollar Stores, Inc., Dollar Tree, Inc. and Dime Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of Dollar Tree, Inc.’s Current Report on Form 8-K filed with the SEC on September 5, 2014)

3.1		Bylaws of the Dollar Tree, Inc., as amended

4.1		First Supplemental Indenture, dated as of July 6, 2015, among Dollar Tree, Inc., the Guarantors party thereto, and U.S. Bank National Association, as trustee, to the Indenture dated as of February 23, 2015, by and between Family Tree Escrow, LLC and U.S. Bank National Association, as trustee, relating to the 5.250% senior notes due 2020

4.2		First Supplemental Indenture, dated as of July 6, 2015, among Dollar Tree, Inc., the Guarantors party thereto, and U.S. Bank National Association, as trustee, to the Indenture, dated as of February 23, 2015, by and between Family Tree Escrow, LLC and U.S. Bank National Association, as trustee, relating to the 5.750% senior notes due 2023

4.3		Joinder by the Guarantors party thereto, dated as of July 6, 2015, to the Registration Rights Agreement, dated as of February 23, 2015, by and among Dollar Tree, Inc., Family Tree Escrow, LLC and J.P. Morgan Securities LLC, as representative of the initial purchasers, relating to the 5.250% senior notes due 2020

4.4		Joinder by the Guarantors party thereto, dated as of July 6, 2015, to the Registration Rights Agreement, dated as of February 23, 2015, by and among Dollar Tree, Inc., Family Tree Escrow, LLC and J.P. Morgan Securities LLC, as representative of the initial purchasers, relating to the 5.750% senior notes due 2023

10.1		Retention Letter, dated as of July 27, 2014, among Dollar Tree, Inc., Family Dollar Stores, Inc. and Howard R. Levine

10.2		Employment Agreement, dated as of December 28, 2012, between Family Dollar Stores, Inc. and Howard R. Levine

23.1		Consent of PricewaterhouseCoopers LLP

99.1		Press Release, dated July 6, 2015

99.2		Audited consolidated balance sheets of Family Dollar Stores, Inc. as of August 30, 2014 and August 31, 2013, and the related consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for each of the years in the three-year period ended August 30, 2014, as well as the accompanying notes thereto

99.3		The unaudited consolidated balance sheet of Family Dollar Stores, Inc. as of May 30, 2015, and the unaudited consolidated statements of income and comprehensive income, and cash flows for the nine-month periods ended May 30, 2015 and May 31, 2014, and the accompanying notes thereto

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DOLLAR TREE, INC.
	(Registrant)


Date: July 7, 2015	By:	/s/ Kevin S. Wampler
		Kevin S. Wampler
		Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of July 27, 2014, among Family Dollar Stores, Inc., Dollar Tree, Inc. and Dime Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of Dollar Tree, Inc.’s Current Report on Form 8-K filed with the SEC on July 29, 2014)

2.2		Amendment No. 1 to the Agreement and Plan of Merger, dated as of September 4, 2014, among Family Dollar Stores, Inc., Dollar Tree, Inc. and Dime Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of Dollar Tree, Inc.’s Current Report on Form 8-K filed with the SEC on September 5, 2014)

3.1		Bylaws of the Dollar Tree, Inc., as amended

4.1		First Supplemental Indenture, dated as of July 6, 2015, among Dollar Tree, Inc., the Guarantors party thereto, and U.S. Bank National Association, as trustee, to the Indenture dated as of February 23, 2015, by and between Family Tree Escrow, LLC and U.S. Bank National Association, as trustee, relating to the 5.250% senior notes due 2020

4.2		First Supplemental Indenture, dated as of July 6, 2015, among Dollar Tree, Inc., the Guarantors party thereto, and U.S. Bank National Association, as trustee, to the Indenture, dated as of February 23, 2015, by and between Family Tree Escrow, LLC and U.S. Bank National Association, as trustee, relating to the 5.750% senior notes due 2023

4.3		Joinder by the Guarantors party thereto, dated as of July 6, 2015, to the Registration Rights Agreement, dated as of February 23, 2015, by and among Dollar Tree, Inc., Family Tree Escrow, LLC and J.P. Morgan Securities LLC, as representative of the initial purchasers, relating to the 5.250% senior notes due 2020

4.4		Joinder by the Guarantors party thereto, dated as of July 6, 2015, to the Registration Rights Agreement, dated as of February 23, 2015, by and among Dollar Tree, Inc., Family Tree Escrow, LLC and J.P. Morgan Securities LLC, as representative of the initial purchasers, relating to the 5.750% senior notes due 2023

10.1		Retention Letter, dated as of July 27, 2014, among Dollar Tree, Inc., Family Dollar Stores, Inc. and Howard R. Levine

10.2		Employment Agreement, dated as of December 28, 2012, between Family Dollar Stores, Inc. and Howard R. Levine

23.1		Consent of PricewaterhouseCoopers LLP

99.1		Press Release, dated July 6, 2015

99.2		Audited consolidated balance sheets of Family Dollar Stores, Inc. as of August 30, 2014 and August 31, 2013, and the related consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for each of the years in the three-year period ended August 30, 2014, as well as the accompanying notes thereto

99.3		The unaudited consolidated balance sheet of Family Dollar Stores, Inc. as of May 30, 2015, and the unaudited consolidated statements of income and comprehensive income, and cash flows for the nine-month periods ended May 30, 2015 and May 31, 2014, and the accompanying notes thereto

EX-3.1 2 a15-15183_1ex3d1.htm EX-3.1

Exhibit 3.1

DOLLAR TREE, INC.

BY-LAWS

(As amended, effective July 6, 2015)

ARTICLE I.

OFFICES

The principal office of the Corporation shall be in the City of Chesapeake, Commonwealth of Virginia.

ARTICLE II.

STOCKHOLDERS

1. PLACE OF MEETING: Meetings of the stockholders shall be held at the principal office of the Corporation or at such other place which shall be approved by the Board of Directors and designated in the notice of the meeting. Meetings may be held either within or without the Commonwealth of Virginia.

2. ANNUAL MEETING: The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such time as the Board of Directors in its discretion determines.

3. SPECIAL MEETINGS: Unless otherwise provided by law, special meetings of the stockholders may be called only by the Board of Directors, the chairman of the Board or the chief executive officer of the Corporation, whenever deemed necessary.

4. NOTICES: Written notice by mail shall be given in accordance with Article VIII, Section 1, stating the place, date and hour of a meeting of stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, to each stockholder of record entitled to vote at the meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting, by or at the direction of the chief executive officer, the secretary, or the officer or persons calling the meeting. The notice shall be deemed to be given when it is deposited with postage prepaid in the United States mail addressed to the stockholder at the address as it appears on the stock transfer books of the Corporation. Notice of a meeting to act on an amendment of the Articles of Incorporation, a plan of merger, consolidation or share exchange, a proposed sale of all, or substantially all, of the Corporation’s assets, otherwise than in the usual and regular course of business, or the dissolution of the Corporation shall be given in the manner provided above not less than twenty-five (25) nor more than sixty (60) days before the date of the meeting. Such notice shall be accompanied, as appropriate, by a copy of the proposed amendment, plan of merger, consolidation, or exchange, or sale agreement.

Notwithstanding the foregoing, a written waiver of notice signed by the person or person entitled to such notice, either before or after the time stated therein, shall be equivalent to the giving of such notice. A stockholder who attends a meeting shall be deemed to have waived objection to lack of notice or defective notice of the meeting, unless at the beginning of the meeting he objects to holding the meeting or transacting business at the meeting.

5. ORGANIZATION AND ORDER OF BUSINESS:

(a) At all meetings of the stockholders, the chairman of the Board of Directors, or in the absence of the Chairman of the Board, the chief executive officer, or in the absence of such officers, any vice chairman of the Board, shall act as chairman of the meeting. In the absence of all of the foregoing officers (or, if present, with their consent), a majority of the shares entitled to vote at such meeting may appoint any person to act as chairman of the meeting. The secretary of the Corporation or, in the secretary’s absence, an assistant secretary, shall act as secretary at all meetings of the stockholders. In the event that neither the secretary nor any assistant secretary is present, the chairman may appoint any person to act as secretary of the meeting.

(b) The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the determination of the order of business, the establishment of procedures for the dismissal of business not properly presented, the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.

(c) At each annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. Business may only be properly brought before the meeting (a) by or at the direction of the Board of Directors or (b) by a stockholder of record of the Corporation who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 5. Subject to the rights of the holders of Preferred Stock, if any, only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the Board of Directors. Notwithstanding the foregoing, this Section 5 does not apply to the procedures for the nomination and election of directors, which are exclusively governed by Article III, Section 3 hereof.

(d) In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder’s notice must be given, either by personal delivery or by United States certified mail, postage prepaid, and received at the principal executive offices of the Corporation:

(1) not less than one hundred twenty (120) days nor more than one hundred fifty (150) days before the first anniversary of the date of the Corporation’s proxy statement in connection with the last annual meeting of stockholders, or

(2) if no annual meeting was held in the previous year or the date of the applicable annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, not less than ninety (90) days before the date of the applicable annual meeting.

(e) A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting

(1) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting;

(2) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made:

(A) the name and address, as they appear on the Corporation’s stock transfer books, of such stockholder proposing such business;

(B) the name and address of such beneficial owner, if any;

(C) a representation that such stockholder is a stockholder of record and intends to appear in person at such meeting to bring the business before the meeting specified in the notice;

(D) the class and number of shares of stock of the Corporation beneficially owned, directly or indirectly, by the stockholder and by such beneficial owner, if any;

Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by the stockholder or the beneficial owner, if any, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation;

(F) any proxy, contract, arrangement, understanding, or relationship pursuant to which the stockholder has a right to vote any shares of any security of the Corporation;

(G) any short interest in any security of the Corporation (for purposes of this Section 5 a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);

(H) any rights to dividends on the shares of the Corporation owned beneficially by the stockholder or the beneficial owner, if any, that are separated or separable from the underlying shares of the Corporation;

(I) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which the stockholder or the beneficial owner, if any, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner;

(J) any performance-related fees (other than an asset-based fee) that the stockholder or the beneficial owner, if any, is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of the stockholder’s or the beneficial owner’s, if any, immediate family sharing the same household;

(3) a description of all agreements, arrangements and understandings between the stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by the stockholder;

(4) any other information relating to the stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and

(5) any material interest of the stockholder or the beneficial owner, if any, in such business.

(f) In addition, to be timely, the stockholder notice shall be supplemented or updated if necessary by the stockholder and beneficial owner, if any, so that the information shall be true and correct as of the record date of the applicable meeting and as of the date that is ten (10) business days prior to the meeting, including any adjournment thereof, and such supplement or update shall be delivered to the secretary not later than two (2) business days after each respective date.

(g) Without limiting the foregoing provisions of this Section 5, a stockholder seeking to have a proposal included in the Corporation’s proxy statement shall also comply with all other applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 5. The secretary of the Corporation shall deliver each properly delivered stockholder’s notice that has been timely received to the Board of Directors or a committee designated by the Board of Directors for review.

(h) Notwithstanding anything in these By-Laws to the contrary, with the exception of Article III, Section 3 hereof which shall govern nominations, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 5. The chairman of a meeting shall, if the facts warrant, determine that the business was not brought before the meeting in accordance with the procedures prescribed by this Section 5,

declare such determination to the meeting and the business not properly brought before the meeting shall not be transacted.

(i) Subject to Rule 14a-8 under the Exchange Act, nothing in these By-Laws shall be construed to grant any stockholder the right to include or have disseminated or described in the Corporation’s proxy statement any such proposals. Nothing in these By-Laws or in this Section 5 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, or any rights of the holders of any series of Preferred Stock if and to the extent provided for under law, the Articles of Incorporation or these By-Laws.

6. VOTING: A stockholder may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. No stockholder may authorize more than four persons to act for him, and any proxy shall be delivered to the secretary of the meeting at or prior to the time designated by the chairman or in the order of business for so delivering such proxies. No proxy shall be valid after eleven months from its date, unless otherwise provided in the proxy. Each holder of record of stock of any class shall, as to all matters in respect of which stock of such class has voting power, be entitled to such vote as is provided in the Articles of Incorporation for each share of stock of such class standing in his name on the books of the Corporation. Unless required by statute or determined by the chairman to be advisable, the vote on any questions need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting or by such stockholder’s proxy, if there be such proxy.

7. INSPECTORS: At every meeting of the stockholders for election of directors, the proxies shall be received and taken in charge, all ballots shall be received and counted and all questions touching the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided, by one or more inspectors. Each inspector shall be appointed by the chairman of the meeting, shall be sworn faithfully to perform his or her duties and shall certify in writing to the returns. No candidate for election as director shall be appointed or act as inspector.

8. QUORUM: At all meetings of the stockholders, unless a greater number of voting by classes is required by law, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum. Treasury shares and shares held by a corporation of which the Corporation owns a majority of the shares entitled to vote for the directors thereof shall not be entitled to vote or to be counted in determining the total number of outstanding shares entitled to vote. Less than a quorum may adjourn. If a meeting is adjourned for lack of a quorum, any matter which might have properly come before the original meeting may come before the adjourned meeting when reconvened.

9. POSTPONEMENTS; ADJOURNMENTS; CANCELLATIONS: The postponement or adjournment of any meeting of the stockholders shall be held on such date and at such time as the Board of Directors in its discretion determines. The Board of Directors shall also have the power to cancel any special meeting of the stockholders that was called by the Board of Directors, the chairman of the Board or the chief executive officer of the Corporation.

ARTICLE III.

DIRECTORS

1. RESPONSIBILITY OF DIRECTORS: The affairs and business of the Corporation shall be under the management of its Board of Directors and such officers and agents as the Board of Directors may elect and employ.

2. NUMBER OF DIRECTORS: The Board of Directors shall consist of twelve (12) directors. The Board of Directors shall have the power to amend this by-law to the extent permitted by law.

3. NOMINATION AND ELECTION OF DIRECTORS:

(a) At each annual meeting of stockholders, the stockholders entitled to vote shall elect the directors. Except as provided in Article III, Section 4 hereof, each director shall be elected by a vote of the majority of the votes cast with respect to the director nominee at a meeting of stockholders for the election of directors at which a quorum is present; provided, that if the number of director nominees exceeds the number of directors to be elected, the directors shall be elected by a plurality of the votes cast in such election. For purposes of this Section 3, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of shares voted “against” that director.

(b) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who (i) is a stockholder of record at the time of giving of notice of such special meeting and at the time of the special meeting, (ii) is entitled to vote at the meeting, and (iii) complies with the procedures set forth in Article III, Section 3 hereof as to such nomination.

(c) No person shall be eligible for election as a director unless nominated in accordance with the procedures set forth in this Section 3. Nominations of persons for election to the Board of Directors may be made (a) by the Board of Directors or any committee designated by the Board of Directors or (b) by any stockholder of record entitled to vote for the election of directors at the applicable meeting of stockholders who complies with the notice procedures set forth in this Section 3.

(d) For stockholder nominations to be properly brought before a stockholder meeting the nominating stockholder must have given to the secretary of the Corporation a timely written notice thereof containing the information set forth this Section 3. To be timely, a stockholder’s notice must be given, either by personal delivery or by United States certified mail, postage prepaid, and received at the principal executive offices of the Corporation:

(3) with respect to any special meeting of stockholders called for the election of directors, not later than the close of business on the seventh (7th) day following the date on which notice of such meeting is first given to stockholders.

In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(e) Each such stockholder’s notice shall set forth

(1) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made:

(A) the name and address, as they appear on the Corporation’s stock transfer books, of such stockholder;

(B) the name and address of such beneficial owner, if any;

(C) a representation that such stockholder is a stockholder of record and intends to appear in person at such meeting to nominate the person or persons specified in the notice;

(D) the class and number of shares of stock of the Corporation beneficially owned, directly or indirectly, by the stockholder and by such beneficial owner, if any;

(E) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by the stockholder or the beneficial owner, if any, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation;

(F) any proxy, contract, arrangement, understanding, or relationship pursuant to which the stockholder has a right to vote any shares of any security of the Corporation;

(G) any short interest in any security of the Corporation (for purposes of this Section 3 a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);

(2) as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors:

(A) the name, age, business address and, if known, residence address of such person,

(B) the principal occupation or employment of such person,

(D) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and

(E) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material

relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant;

(F) a description of all agreements, arrangements and understandings between the stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the nomination by the stockholder;

(G) any other information relating to the stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and

(H) any material interest of the stockholder or the beneficial owner, if any, in such nomination.

(g) The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

(h) Any person nominated for election as director by the Board of Directors or any committee designated by the Board of Directors shall, upon the request of the Board of Directors or such committee, furnish to the secretary of the Corporation all such information pertaining to such person that is required to be set forth in a stockholder’s notice of nomination.

(i) To be eligible to be a director of the Corporation, a person must deliver, prior to the time such person is to begin service as a director to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request), and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (C) will abide by the requirements of any resignation policy adopted by the Board of Directors in connection with majority voting, if applicable.

(j) Without limiting the other provisions of this Section 3, a stockholder seeking to have a nomination included in the Corporation’s proxy statement shall also comply with all applicable requirements of the Securities

Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 3. The secretary of the Corporation shall deliver each such stockholder’s notice containing the information required by this Section 3 that has been timely received to the Board of Directors or a committee designated by the Board of Directors for review. The chairman of the meeting of stockholders shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 3, declare such determination to the meeting and the defective nomination shall be disregarded.

(k) Nothing in these By-Laws shall be construed to grant any stockholder the right to include or have disseminated or described in the Corporation’s proxy statement any such nomination of director or directors. Nothing in these By-Laws shall be deemed to affect any rights of the holders of any series of Preferred Stock if and to the extent provided for under law, the Articles of Incorporation or these By-Laws.

4. DIRECTORS’ TERMS: No decrease in the number of directors shall have the effect of changing the term of any incumbent director. Unless a director resigns or is removed by no less than a majority of the votes of all shares entitled to be cast at an election of directors as required by the Articles of Incorporation, every director shall hold office for the term elected or until a successor shall have been elected. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors.

5. DIRECTORS’ MEETINGS: The annual meeting of the directors shall be held immediately after the annual meeting of the stockholders. The Board of Directors, as soon as may be convenient after the annual meeting of the stockholders at which such directors are elected, shall elect the officers of the Corporation as provided in Article V, Section 2 hereof. Special meetings may be called by any director by giving notice of the time and place in accordance with Section 7 of this Article. Special meetings of the Board of Directors (or any committee of the Board) may be held by telephone or similar communication equipment whereby all persons participating in the meeting can hear each other, at such time as may be prescribed, upon call of any director.

6. QUORUM AND MANNER OF ACTING: Except where otherwise provided by law, a quorum shall be a majority of the directors, and the act of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of those present may adjourn the meeting from time to time until a quorum be had. Notice of any such adjourned meeting need not be given. Action may be taken by the directors or a committee of the Board of Directors without a meeting if a written consent setting forth the action, shall be signed by all of the directors or committee members either before or after such action. Such consent shall have the same force and effect as a unanimous vote.

7. NOTICE OF MEETING: At the annual meeting of the Board of Directors each year and at any meeting thereafter, the Board shall designate the dates, times and places of regular meetings of the Board for the ensuing calendar year, and no notice of any kind need be given thereafter with respect to such regular meetings. Notice of any special meeting of the Board shall be by oral, telegraphic or written notice duly given to each director not less than forty-eight (48) hours before the date of the proposed meeting.

8. WAIVER OF NOTICE: Whenever any notice is required to be given to a director of any meeting for any purpose under the provisions of law, the Articles of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, either before or after the time stated therein, shall be equivalent to the giving of such notice. A director’s attendance at or participation in a meeting waives any required notice to him of the meeting unless he at the beginning of the meeting or promptly upon his arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

9. COMPENSATION: Directors shall not receive a stated salary for their services, but directors may be paid a fixed sum and expenses for attendance at any regular or special meeting of the Board of Directors or any meeting of any committee and such other compensation as the Board of Directors shall determine. A director may serve or be employed by the Corporation in any other capacity and receive compensation therefor.

10. DIRECTOR EMERITUS: The Board may appoint to the position of Director Emeritus any retiring director who has served not less than three years as a director of the Corporation. Such person so appointed

shall have the title of “Director Emeritus” and shall be entitled to receive notice of, and to attend all meetings of the Board, but shall not in fact be a director, shall not be entitled to vote, shall not be counted in determining a quorum of the Board and shall not have any of the duties or liabilities of a director under law.

11. COMMITTEES: In addition to the executive committee authorized by Article IV of these By-Laws, other committees, consisting of two or more directors, may be designated by the Board of Directors by a resolution adopted by the greater number of a majority of all directors in office at the time the action is being taken or the number of directors required to take action under Article III, Section 6 hereof. Any such committee, to the extent provided in the resolution of the Board of Directors designating the committee, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except as limited by law.

ARTICLE IV.

EXECUTIVE COMMITTEE

1. HOW CONSTITUTED AND POWERS: The Board of Directors, by resolution adopted pursuant to Article III, Section 11 hereof, may designate, in addition to the chairman of the Board of Directors, one or more directors to constitute an executive committee, who shall serve during the pleasure of the Board of Directors. The executive committee, to the extent provided in such resolution and permitted by law, shall have and may exercise all of the authority of the Board of Directors.

2. ORGANIZATION, ETC.: The executive committee may choose a chairman and secretary. The executive committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.

3. MEETINGS: Meetings of the executive committee may be called by any member of the committee. Notice of each such meeting, which need not specify the business to be transacted thereat, shall be mailed to each member of the committee, addressed to his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held or shall be sent to such place by telegraph, telex or telecopy or be delivered personally or by telephone, not later than the day before the day on which the meeting is to be held.

4. QUORUM AND MANNER OF ACTING: A majority of the executive committee shall constitute a quorum for transaction of business, and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the executive committee. The members of the executive committee shall act only as a committee, and the individual members shall have no powers as such.

5. REMOVAL: Any member of the executive committee may be removed, with or without cause, at any time, by the Board of Directors.

6. VACANCIES: Any vacancy in the executive committee shall be filled by the Board of Directors.

ARTICLE V.

OFFICERS

1. NUMBER: The officers of the Corporation shall be a chairman of the Board of Directors, a president and chief executive officer, one or more vice chairmen of the Board of Directors (if elected by the Board of Directors), one or more vice presidents (one or more of whom may be designated executive vice president or senior vice president), a chief financial officer, a treasurer, a controller, a secretary, one or more assistant treasurers, assistant controllers and assistant secretaries and such other officers as may from time to time be chosen by the Board of Directors. Any two or more offices may be held by the same person. The Board of Directors, in its discretion, may also designate “chief officers” of certain functions in addition to chief executive officer and chief financial officer, and such officers shall be deemed to be vice presidents for purposes of these By-Laws.

2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS: All officers of the Corporation shall be chosen annually by the Board of Directors, and each officer shall hold office until his successor shall have been duly chosen and qualified or until he shall resign or shall have been removed in the manner hereinafter provided. The chairman of the Board of Directors, the chief executive officer, and the vice chairman of the Board of Directors (if any) shall be chosen from among the directors.

3. VACANCIES: If any vacancy shall occur among the officers of the Corporation, such vacancy shall be filled by the Board of Directors.

4. OTHER OFFICERS, AGENTS AND EMPLOYEES - THEIR POWERS AND DUTIES: The Board of Directors may from time to time appoint such other officers as the Board of Directors may deem necessary, to hold office for such time as may be designated by it or during its pleasure, and the Board of Directors or the chairman of the Board of Directors may appoint, from time to time, such agents and employees of the Corporation as may be deemed proper, and may authorize any officers to appoint and remove agents and employees. The Board of Directors or the chairman of the Board of Directors may from time to time prescribe the powers and duties of such other officers, agents and employees of the Corporation.

5. REMOVAL: Any officer, agent or employee of the Corporation may be removed, either with or without cause, by a vote of a majority of the Board of Directors or, in the case of any agent or employee not appointed by the Board of Directors, by a superior officer upon whom such power of removal may be conferred by the Board of Directors or the chairman of the Board of Directors.

6. CHAIRMAN OF THE BOARD OF DIRECTORS: The chairman of the Board of Directors shall preside at meetings of the stockholders and of the Board of Directors and shall be a member of the executive committee. The chairman shall be responsible for such management and control of the business and affairs of the Corporation as shall be determined by the Board of Directors. He shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall from time to time report to the Board of Directors on matters within his knowledge which the interests of the Corporation may require be brought to its notice. He shall do and perform such other duties from time to time as may be assigned to him by the Board of Directors.

7. CHIEF EXECUTIVE OFFICER: In the absence of the chairman of the Board of Directors, the chief executive officer shall preside at meetings of the stockholders and of the Board of Directors. He shall be responsible to the Board of Directors and, subject to the Board of Directors, shall be responsible for the general management and control of the business and affairs of the Corporation and shall devote himself to the Corporation’s operations under the basic policies set by the Board of Directors. He shall from time to time report to the Board of Directors on matters within his knowledge which the interests of the Corporation may require be brought to his notice. In the absence of the chairman of the Board of Directors, he shall have all of the powers and the duties of the chairman of the Board of Directors. He shall do and perform such other duties from time to time as may be assigned to him by the Board of Directors.

8. PRESIDENT: The president shall perform such duties and have such powers relative to the business and affairs of the Corporation as may be assigned to him by the Board of Directors. The offices of president and chief executive officer may be held by the same or separate persons, each having the powers and duties hereunder as determined by the Board of Directors. In the event that such offices are held by separate persons, the chief executive officer shall be the more senior ranked officer with respect to exercising the powers and duties under these by-laws.

9. VICE CHAIRMEN OF THE BOARD OF DIRECTORS: In the absence of the chairman of the Board of Directors and the chief executive officer, the vice chairman of the Board of Directors designated for such purpose by the chairman of the Board of Directors shall preside at meetings of the stockholders and of the Board of Directors. Each vice chairman of the Board of Directors shall be responsible to the chairman of the Board of Directors. Each vice chairman of the Board of Directors shall from time to time report to the chairman of the Board of Directors on matters within his knowledge which the interests of the Corporation may require be brought to his notice. In the absence or inability to act of the chairman of the Board of Directors and the chief executive officer, such vice chairman of the Board of Directors as the chairman of the Board of Directors may designate for the purpose shall have the powers and discharge the duties of the chairman of the Board of Directors. The Board of

Directors may designate a vice chairman of the Board of Directors who shall have the powers and discharge the duties of the chairman of the Board of Directors.

10. VICE PRESIDENTS: The vice presidents of the Corporation shall assist the chairman of the Board of Directors, chief executive officer, the president and the vice chairmen of the Board of Directors (if any) in carrying out their respective duties and shall perform those duties which may from time to time be assigned to them.

11. TREASURER: The treasurer shall have charge of the funds, securities, receipts and disbursements of the Corporation. He shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as the Board of Directors may from time to time designate. He shall render to the Board of Directors, the chairman of the Board of Directors, the chief executive officer, the president, the vice chairmen of the Board of Directors (if any), and the chief financial officer, whenever required by any of them, an account of all of his transactions as treasurer. If required, he shall give a bond in such sum as the Board of Directors may designate, conditioned upon the faithful performance of the duties of his office and the restoration to the Corporation at the expiration of his term of office or in case of his death, resignation or removal from office, of all books, papers, vouchers, money or other property of whatever kind in his possession or under his control belonging to the Corporation. He shall perform such other duties as from time to time may be assigned to him.

12. ASSISTANT TREASURERS: In the absence or disability of the treasurer, one or more assistant treasurers shall perform all the duties of the treasurer and, when so acting, shall have all the powers of, and be subject to all restrictions upon, the treasurer. Each assistant treasurer shall also perform such other duties as from time to time may be assigned to him.

13. SECRETARY: The secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in a book or books kept for that purpose and shall be responsible for authenticating records of the Corporation. He shall keep in safe custody the seal of the Corporation, and shall affix such seal to any instrument requiring it. The secretary shall have charge of such books and papers as the Board of Directors may direct. He shall attend to the giving and serving of all notices of the Corporation and shall also have such other powers and perform such other duties as pertain to his office, or as the Board of Directors, the chairman of the Board of Directors, the chief executive officer, the president or any vice chairman of the Board of Directors may from time to time prescribe.

14. ASSISTANT SECRETARIES: In the absence or disability of the secretary, one or more assistant secretaries shall perform all of the duties of the secretary and, when so acting, shall have all of the powers of, and be subject to all the restrictions upon, the secretary. Each assistant secretary shall also perform such other duties as from time to time may be assigned to him.

15. CONTROLLER: The controller shall be administrative head of the controller’s department. He shall be in charge of all functions relating to accounting and the preparation and analysis of budgets and statistical reports and shall establish, through appropriate channels, recording and reporting procedures and standards pertaining to such matters. He shall report to the chief financial officer and shall aid in developing internal corporate policies whereby the business of the Corporation shall be conducted with the maximum safety, efficiency and economy, and he shall be available to all departments of the Corporation for advice and guidance in the interpretation and application of policies which are within the scope of his authority. He shall perform such other duties as from time to time may be assigned to him.

16. ASSISTANT CONTROLLERS: In the absence or disability of the controller, one or more assistant controllers shall perform all of the duties of the controller and, when so acting, shall have all of the powers of, and be subject to all the restrictions upon, the controller. Each assistant controller shall also perform such other duties as from time to time may be assigned to him.

ARTICLE VI.

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

1. CONTRACTS: The chairman of the Board of Directors, the chief executive officer, the president, any vice chairman of the Board of Directors, any vice president, the treasurer and such other persons as the chairman of the Board of Directors may authorize shall have the power to execute any contract or other instrument on behalf of the Corporation; no other officer, agent or employee shall, unless otherwise provided in these By-Laws, have any power or authority to bind the Corporation by any contract or acknowledgement, or pledge its credit or render it liable pecuniarily for any purpose or to any amount.

2. LOANS: The chairman of the Board of Directors, the chief executive officer, the president, any vice chairman of the Board of Directors, the executive vice president, the treasurer and such other persons as the Board of Directors may authorize shall have the power to effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any corporation, firm or individual, and for such loans and advances may make, execute and deliver promissory notes or other evidences of indebtedness of the Corporation, and, as security for the payment of any and all loans, advances, indebtedness and liability of the Corporation, may pledge, hypothecate or transfer any and all stock, securities and other personal property at any time held by the Corporation, and to that end endorse, assign and deliver the same.

3. VOTING OF STOCK HELD: The chairman of the Board of Directors, the chief executive officer, the president, any vice chairman of the Board of Directors, any vice president or the secretary may from time to time appoint an attorney or attorneys or agent or agents of the Corporation to cast the votes that the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose stock or securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by any other such corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation such written proxies, consents, waivers or other instruments as such officer may deem necessary or proper in the premises; or the chairman of the Board of Directors, the chief executive officer, the president, any vice chairman of the Board of Directors, any vice president or the secretary may himself attend any meeting of the holders of stock or other securities of such other corporation and thereat vote or exercise any and all powers of the Corporation as the holder of such stock or other securities of such other corporation.

4. COMPENSATION: The compensation of all officers of the Corporation shall be fixed by the Board of Directors.

ARTICLE VII.

EVIDENCE OF SHARES

1. FORM: Shares of the Corporation’s stock shall, when fully paid, be evidenced by certificates containing such information as is required by law and approved by the Board of Directors. Alternatively, the Board of Directors may authorize the issuance of some or all shares of stock without certificates. In such event, within a reasonable time after issuance, the Corporation shall mail to the shareholder a written confirmation of its records with respect to such shares containing the information required by law. When issued, the certificates of stock of the Corporation shall be numbered and entered in the books of the Corporation as they are issued; they shall be signed manually or by the use of a facsimile signature, i) by the chairman of the Board of Directors, by the chief executive officer, by the president, or by a vice president designated by the Board of Directors and ii) countersigned by the secretary or an assistant secretary; and they shall bear the corporate seal or a facsimile thereof. The Board of Directors of the Corporation may issue scrip in registered or bearer form, which shall entitle the holder to receive a certificate for a full share. Scrip shall not entitle the holder to exercise voting rights or to receive dividends thereon or to participate in any of the assets of the Corporation in the event of liquidation. The Board may cause scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date or subject to any other conditions that it may deem advisable. Fractional may also be issued.

2. LOST CERTIFICATES: The chief executive officer, president or secretary may direct a new certificate or certificates to be issued in place of any lost or destroyed certificate or certificates previously issued by the Corporation if the person or persons who claim the certificate or certificates make an affidavit stating the certificates of stock have been lost or destroyed. When authorizing the issuance of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such

lost or destroyed certificate or certificates, or the legal representative, to advertise the same in such manner as the Corporation shall require and/or to give the Corporation a bond, in such sum as the Corporation may direct, to indemnify the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed.

3. TRANSFER OF STOCK: Upon surrender to the Corporation, or to the transfer agent of the Corporation, if any, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books.

4. REGISTERED STOCKHOLDERS: The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person. The Corporation shall not be liable for registering any transfer of shares which are registered in the name of a fiduciary unless done with actual knowledge of facts which would cause the Corporation’s action in registering the transfer to amount to bad faith.

ARTICLE VIII.

MISCELLANEOUS

1. NOTICES: Each stockholder, director and officer shall furnish in writing to the secretary of the Corporation the address to which notices of every kind may be delivered or mailed. If such person fails to furnish an address, and the Post Office advises the Corporation that the address furnished is no longer the correct address, the Corporation shall not be required to deliver or mail any notice to such person. Whenever notice is required by applicable law, the Articles of Incorporation or these By-Laws, a written waiver of such notice signed before or after the time stated in the waiver or, in the case of a meeting, the attendance, of a stockholder or director (except for the sole purpose of objecting) or, in the case of a unanimous consent, the signing of the consent, shall be deemed a waiver of notice.

2. REGISTERED OFFICE AND AGENT: The Corporation shall at all times have a registered office and a registered agent.

3. CORPORATE RECORDS: The Corporation shall keep correct and complete books and records of accounts and minutes of the stockholders’ and directors’ meetings, and shall keep at its registered office or principal place of business, or at the office of its transfer agent, if any, a record of its stockholders, including the names and addresses of all stockholders and the number, class, and series of the shares held by each. Any person who shall have been a stockholder of record for at least six months immediately preceding demand, or who shall be the holder of record of a least five per cent (5%) of all the outstanding shares of the Corporation, upon written request stating the purpose therefor, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose, the books and records of account of the Corporation, minutes and record of stockholders, and to make copies or extracts therefrom.

4. REQUIREMENT FOR FINANCIAL STATEMENT: Upon the written request of any stockholder, the Corporation shall mail to the stockholder its most recent published financial statement.

5. SEAL: The seal of the Corporation shall be a flat faced circular die containing the word “SEAL” in the center and the name of the Corporation around the circumference.

6. AMENDMENT OF BY-LAWS: The power to alter, amend or repeal the By-Laws or adopt new By-Laws shall be vested in the Board of Directors, but By-Laws made by the Board of Directors may be repealed or changed or new By-Laws adopted by the stockholders and the stockholders may prescribe that any By-Law adopted by them may not be altered, amended or repealed by the Board of Directors.

7. FISCAL YEAR: The fiscal year of the Corporation shall be established by resolution of the Board of Directors and may be changed from time to time.

8. GENERAL: Any matters not specifically covered by these By-Laws shall be governed by the applicable provisions of the Code of Virginia in force at the time.

ARTICLE IX.

EMERGENCY BY-LAWS

If a quorum of the Board of Directors cannot readily be assembled because of a catastrophic event, and only in such event, these By-Laws shall, without further action by the Board of Directors, be deemed to have been amended for the duration of such emergency, as follows:

1. The third sentence of Section 5 of Article III shall read as follows:

Special meetings of the Board of Directors (or any committee of the Board) shall be held whenever called by order of any director or of any person having the powers and duties of the chairman of the Board of Directors, the chief executive officer, the president or any vice chairman of the Board of Directors.

2. Section 6 of Article III shall read as follows:

The directors present at any regular or special meeting called in accordance with these By-Laws shall constitute a quorum for the transaction of business at such meeting, and the action of a majority of such directors shall be the act of the Board of Directors, provided, however, that in the event that only one director is present at any such meeting no action except the election of directors shall be taken until at least two additional directors have been elected and are in attendance.

EX-4.1 3 a15-15183_1ex4d1.htm EX-4.1

Exhibit 4.1

FIRST SUPPLEMENTAL INDENTURE, (this “Supplemental Indenture”), dated as of July 6, 2015, by and among DOLLAR TREE, INC., a Virginia corporation (the “Company”), the other parties that are signatories hereto as Guarantors (each a “New Guarantor”) and U.S. Bank National Association, as trustee (the “Trustee”).

W I T N E S S E T H:

WHEREAS FAMILY TREE ESCROW, LLC, a Virginia limited liability company (the “Issuer”) and the Trustee have heretofore executed an indenture, dated as of February 23, 2015 (as amended, supplemented or otherwise modified, the “Indenture”), providing for the issuance of the Issuer’s 5.250% Senior Notes due 2020 (the “Notes”), initially in the aggregate principal amount of $750,000,000;

WHEREAS Sections 5.01 and 9.01of the Indenture provide that under certain circumstances, the Company may execute and deliver to the Trustee a supplemental indenture pursuant to which the Company shall unconditionally assume all the Issuer’s Obligations under the Notes on the terms and conditions set forth herein;

WHEREAS Sections 4.11 and 12.07 of the Indenture provide that under certain circumstances the Issuer is required to cause the New Guarantors to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantors shall guarantee the Guaranteed Obligations;

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the New Guarantors are authorized to execute and deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:

(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

(2) Agreement to Assume Obligations. The Company hereby agrees to unconditionally assume the Issuer’s Obligations under the Notes and the Indenture on the terms and subject to the conditions set forth in the Indenture and to be bound by all provisions of the Indenture and the Notes applicable to the Issuer and to perform all of the obligations and agreements of the Issuer under the Indenture and the Notes and may exercise every right and power of the Issuer.

(3) Agreement to Guarantee. Each of the New Guarantors hereby agrees to, jointly and severally with all existing Guarantors (if any), guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article XII of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes and to perform all of the obligations and agreements of a Guarantor under the Indenture.

(4) Liability. No director, officer, employee, incorporator, stockholder, member, manager or partner of the Company, or any New Guarantor shall have any liability for any obligations of the Issuer or the Guarantors (including any New Guarantor) under the Notes, any Guarantees, the Indenture or any supplemental indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Guarantees.

(5) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(6) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

(7) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

(8) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and the New Guarantors.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

DOLLAR TREE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


Each as a Guarantor:


DOLLAR TREE SOURCING COMPANY, LLC
DOLLAR TREE STORES, INC.
DT REALTY, LLC
DT RETAIL PROPERTIES, LLC
DTD TENNESSEE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


DOLLAR TREE AIR, INC.
DOLLAR TREE PROPERTIES, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	President

DOLLAR TREE DISTRIBUTION, INC.
DOLLAR TREE MANAGEMENT, INC.
GREENBRIER INTERNATIONAL, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Vice President


DOLLAR TREE OLLIE’S, LLC


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Manager

[2020 Notes — Supplemental Indenture]

	FAMILY DOLLAR, INC.
	FAMILY DOLLAR HOLDINGS, INC.
	FAMILY DOLLAR OPERATIONS, INC.
	FAMILY DOLLAR SERVICES, INC.
	FAMILY DOLLAR STORES, INC.
	FAMILY DOLLAR STORES OF ALABAMA, INC.
	FAMILY DOLLAR STORES OF ARIZONA, INC.
	FAMILY DOLLAR STORES OF ARKANSAS, INC.
	FAMILY DOLLAR STORES OF COLORADO, INC.
	FAMILY DOLLAR STORES OF CONNECTICUT, INC.
	FAMILY DOLLAR STORES OF D.C., INC.
	FAMILY DOLLAR STORES OF DELAWARE, INC.
	FAMILY DOLLAR STORES OF FLORIDA, INC.
	FAMILY DOLLAR STORES OF GEORGIA, INC.
	FAMILY DOLLAR STORES OF IOWA, INC.
	FAMILY DOLLAR STORES OF LOUISIANA, INC.
	FAMILY DOLLAR STORES OF MARYLAND, INC.
	FAMILY DOLLAR STORES OF MASSACHUSETTS, INC.
	FAMILY DOLLAR STORES OF MICHIGAN, INC.
	FAMILY DOLLAR STORES OF MISSISSIPPI, INC.
	FAMILY DOLLAR STORES OF MISSOURI, INC.
	FAMILY DOLLAR STORES OF NEVADA, INC.
	FAMILY DOLLAR STORES OF NEW JERSEY, INC.
	FAMILY DOLLAR STORES OF NEW MEXICO, INC.
	FAMILY DOLLAR STORES OF NEW YORK, INC.
	FAMILY DOLLAR STORES OF NORTH CAROLINA, INC.
	FAMILY DOLLAR STORES OF NORTH DAKOTA, INC.
	FAMILY DOLLAR STORES OF OHIO, INC.
	FAMILY DOLLAR STORES OF OKLAHOMA, INC.
	FAMILY DOLLAR STORES OF PENNSYLVANIA, INC.
	FAMILY DOLLAR STORES OF RHODE ISLAND, INC.
	FAMILY DOLLAR STORES OF SOUTH CAROLINA, INC.
	FAMILY DOLLAR STORES OF SOUTH DAKOTA, INC.
	FAMILY DOLLAR STORES OF TENNESSEE, INC.
	FAMILY DOLLAR STORES OF WEST VIRGINIA, INC.
	FAMILY DOLLAR STORES OF WISCONSIN, INC.
	FAMILY DOLLAR STORES OF WYOMING, INC.
	FAMILY DOLLAR STORES OF VIRGINIA, INC.
	FAMILY DOLLAR STORES OF VERMONT, INC.
	FAMILY DOLLAR TRUCKING, INC.

By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2020 Notes — Supplemental Indenture]

FAMILY DOLLAR STORES OF TEXAS, LLC

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR DISTRIBUTION, LLC
MIDWOOD BRANDS, LLC

By:	FAMILY DOLLAR SERVICES, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR GC, LLC

By:	FAMILY DOLLAR, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR UTAH DC, LLC

By:	FAMILY DOLLAR STORES OF TEXAS, LLC, its managing member

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FD BEACH BLVD, LLC

By:	FAMILY DOLLAR STORES OF FLORIDA, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

[2020 Notes — Supplemental Indenture]

FAMILY DOLLAR IP CO.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2020 Notes — Supplemental Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee


By:	/s/ Wally Jones
	Name:	Wally Jones
	Title:	Vice President

[2020 Notes — Supplemental Indenture]

EX-4.2 4 a15-15183_1ex4d2.htm EX-4.2

Exhibit 4.2

W I T N E S S E T H:

WHEREAS FAMILY TREE ESCROW, LLC, a Virginia limited liability company (the “Issuer”) and the Trustee have heretofore executed an indenture, dated as of February 23, 2015 (as amended, supplemented or otherwise modified, the “Indenture”), providing for the issuance of the Issuer’s 5.750% Senior Notes due 2023 (the “Notes”), initially in the aggregate principal amount of $2,500,000,000;

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the New Guarantors are authorized to execute and deliver this Supplemental Indenture;

(5) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(6) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

(7) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

DOLLAR TREE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


Each as a Guarantor:


DOLLAR TREE SOURCING COMPANY, LLC
DOLLAR TREE STORES, INC.
DT REALTY, LLC
DT RETAIL PROPERTIES, LLC
DTD TENNESSEE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


DOLLAR TREE AIR, INC.
DOLLAR TREE PROPERTIES, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	President


DOLLAR TREE DISTRIBUTION, INC.
DOLLAR TREE MANAGEMENT, INC.
GREENBRIER INTERNATIONAL, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Vice President


DOLLAR TREE OLLIE’S, LLC


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Manager

[2023 Notes — Supplemental Indenture]

	FAMILY DOLLAR, INC.
	FAMILY DOLLAR HOLDINGS, INC.
	FAMILY DOLLAR OPERATIONS, INC.
	FAMILY DOLLAR SERVICES, INC.
	FAMILY DOLLAR STORES, INC.
	FAMILY DOLLAR STORES OF ALABAMA, INC.
	FAMILY DOLLAR STORES OF ARIZONA, INC.
	FAMILY DOLLAR STORES OF ARKANSAS, INC.
	FAMILY DOLLAR STORES OF COLORADO, INC.
	FAMILY DOLLAR STORES OF CONNECTICUT, INC.
	FAMILY DOLLAR STORES OF D.C., INC.
	FAMILY DOLLAR STORES OF DELAWARE, INC.
	FAMILY DOLLAR STORES OF FLORIDA, INC.
	FAMILY DOLLAR STORES OF GEORGIA, INC.
	FAMILY DOLLAR STORES OF IOWA, INC.
	FAMILY DOLLAR STORES OF LOUISIANA, INC.
	FAMILY DOLLAR STORES OF MARYLAND, INC.
	FAMILY DOLLAR STORES OF MASSACHUSETTS, INC.
	FAMILY DOLLAR STORES OF MICHIGAN, INC.
	FAMILY DOLLAR STORES OF MISSISSIPPI, INC.
	FAMILY DOLLAR STORES OF MISSOURI, INC.
	FAMILY DOLLAR STORES OF NEVADA, INC.
	FAMILY DOLLAR STORES OF NEW JERSEY, INC.
	FAMILY DOLLAR STORES OF NEW MEXICO, INC.
	FAMILY DOLLAR STORES OF NEW YORK, INC.
	FAMILY DOLLAR STORES OF NORTH CAROLINA, INC.
	FAMILY DOLLAR STORES OF NORTH DAKOTA, INC.
	FAMILY DOLLAR STORES OF OHIO, INC.
	FAMILY DOLLAR STORES OF OKLAHOMA, INC.
	FAMILY DOLLAR STORES OF PENNSYLVANIA, INC.
	FAMILY DOLLAR STORES OF RHODE ISLAND, INC.
	FAMILY DOLLAR STORES OF SOUTH CAROLINA, INC.
	FAMILY DOLLAR STORES OF SOUTH DAKOTA, INC.
	FAMILY DOLLAR STORES OF TENNESSEE, INC.
	FAMILY DOLLAR STORES OF WEST VIRGINIA, INC.
	FAMILY DOLLAR STORES OF WISCONSIN, INC.
	FAMILY DOLLAR STORES OF WYOMING, INC.
	FAMILY DOLLAR STORES OF VIRGINIA, INC.
	FAMILY DOLLAR STORES OF VERMONT, INC.
	FAMILY DOLLAR TRUCKING, INC.

By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2023 Notes — Supplemental Indenture]

FAMILY DOLLAR STORES OF TEXAS, LLC

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR DISTRIBUTION, LLC
MIDWOOD BRANDS, LLC

By:	FAMILY DOLLAR SERVICES, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

FAMILY DOLLAR GC, LLC

By:	FAMILY DOLLAR, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

FAMILY DOLLAR UTAH DC, LLC

By:	FAMILY DOLLAR STORES OF TEXAS, LLC, its managing member

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

FD BEACH BLVD, LLC

By:	FAMILY DOLLAR STORES OF FLORIDA, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

[2023 Notes — Supplemental Indenture]

FAMILY DOLLAR IP CO.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2023 Notes — Supplemental Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee


By:	/s/ Wally Jones
	Name:	Wally Jones
	Title:	Vice President

[2023 Notes — Supplemental Indenture]

EX-4.3 5 a15-15183_1ex4d3.htm EX-4.3

Exhibit 4.3

JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT
July 6, 2015

Reference is hereby made to the Registration Rights Agreement, dated as of February 23, 2015 (the “Registration Rights Agreement”), by and among Family Tree Escrow, LLC (“Escrow Issuer”), Dollar Tree, Inc. (“Dollar Tree”) and J.P. Morgan Securities LLC, on behalf of itself and the other Initial Purchasers. Unless otherwise defined herein, terms defined in the Registration Rights Agreement and used herein shall have the meanings given them in the Registration Rights Agreement.

1. Joinder of the Guarantor. Each signatory hereto (each, a “Guarantor”) hereby agrees to become bound by the terms, conditions and other provisions of the Registration Rights Agreement applicable to a “Guarantor” with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as “Guarantor” therein and as if such Guarantor executed the Registration Rights Agreement on the date thereof.

2. Governing Law. This Joinder Agreement, and any claim, controversy or dispute arising under or related to this Joinder Agreement, shall be governed by and construed in accordance with the laws of the State of New York.

3. Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Joinder Agreement by facsimile, email or other electronic transmission (i.e., “pdf”) shall be effective as delivery of a manually executed counterpart of this Joinder Agreement.

4. Amendments. No amendment or waiver of any provision of this Joinder Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

5. Headings. The headings in this Joinder Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement as of the date first written above.

AS GUARANTORS:


DOLLAR TREE SOURCING COMPANY, LLC DOLLAR TREE STORES, INC. DT REALTY, LLC DT RETAIL PROPERTIES, LLC DTD TENNESSEE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


DOLLAR TREE AIR, INC.
DOLLAR TREE PROPERTIES, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	President


DOLLAR TREE DISTRIBUTION, INC.
DOLLAR TREE MANAGEMENT, INC.
GREENBRIER INTERNATIONAL, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Vice President


DOLLAR TREE OLLIE’S, LLC


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Manager

[2020 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR, INC. FAMILY DOLLAR HOLDINGS, INC. FAMILY DOLLAR OPERATIONS, INC. FAMILY DOLLAR SERVICES, INC. FAMILY DOLLAR STORES, INC. FAMILY DOLLAR STORES OF ALABAMA, INC. FAMILY DOLLAR STORES OF ARIZONA, INC. FAMILY DOLLAR STORES OF ARKANSAS, INC. FAMILY DOLLAR STORES OF COLORADO, INC. FAMILY DOLLAR STORES OF CONNECTICUT, INC. FAMILY DOLLAR STORES OF D.C., INC. FAMILY DOLLAR STORES OF DELAWARE, INC. FAMILY DOLLAR STORES OF FLORIDA, INC. FAMILY DOLLAR STORES OF GEORGIA, INC. FAMILY DOLLAR STORES OF IOWA, INC. FAMILY DOLLAR STORES OF LOUISIANA, INC. FAMILY DOLLAR STORES OF MARYLAND, INC. FAMILY DOLLAR STORES OF MASSACHUSETTS, INC. FAMILY DOLLAR STORES OF MICHIGAN, INC. FAMILY DOLLAR STORES OF MISSISSIPPI, INC. FAMILY DOLLAR STORES OF MISSOURI, INC. FAMILY DOLLAR STORES OF NEVADA, INC. FAMILY DOLLAR STORES OF NEW JERSEY, INC. FAMILY DOLLAR STORES OF NEW MEXICO, INC. FAMILY DOLLAR STORES OF NEW YORK, INC. FAMILY DOLLAR STORES OF NORTH CAROLINA, INC. FAMILY DOLLAR STORES OF NORTH DAKOTA, INC. FAMILY DOLLAR STORES OF OHIO, INC. FAMILY DOLLAR STORES OF OKLAHOMA, INC. FAMILY DOLLAR STORES OF PENNSYLVANIA, INC. FAMILY DOLLAR STORES OF RHODE ISLAND, INC. FAMILY DOLLAR STORES OF SOUTH CAROLINA, INC. FAMILY DOLLAR STORES OF SOUTH DAKOTA, INC. FAMILY DOLLAR STORES OF TENNESSEE, INC. FAMILY DOLLAR STORES OF WEST VIRGINIA, INC. FAMILY DOLLAR STORES OF WISCONSIN, INC. FAMILY DOLLAR STORES OF WYOMING, INC. FAMILY DOLLAR STORES OF VIRGINIA, INC. FAMILY DOLLAR STORES OF VERMONT, INC. FAMILY DOLLAR TRUCKING, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2020 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR STORES OF TEXAS, LLC

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR DISTRIBUTION, LLC
MIDWOOD BRANDS, LLC

By:	FAMILY DOLLAR SERVICES, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR GC, LLC

By:	FAMILY DOLLAR, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR UTAH DC, LLC

By:	FAMILY DOLLAR STORES OF TEXAS, LLC, its managing member

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FD BEACH BLVD, LLC

By:	FAMILY DOLLAR STORES OF FLORIDA, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

[2020 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR IP CO.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2020 Notes — Registration Rights Agreement Joinder]

EX-4.4 6 a15-15183_1ex4d4.htm EX-4.4

Exhibit 4.4

JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT
July 6, 2015

5. Headings. The headings in this Joinder Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement as of the date first written above.

AS GUARANTORS:


DOLLAR TREE SOURCING COMPANY, LLC DOLLAR TREE STORES, INC. DT REALTY, LLC DT RETAIL PROPERTIES, LLC DTD TENNESSEE, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Chief Financial Officer


DOLLAR TREE AIR, INC.
DOLLAR TREE PROPERTIES, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	President


DOLLAR TREE DISTRIBUTION, INC.
DOLLAR TREE MANAGEMENT, INC.
GREENBRIER INTERNATIONAL, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Vice President


DOLLAR TREE OLLIE’S, LLC


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Manager

[2023 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR, INC. FAMILY DOLLAR HOLDINGS, INC. FAMILY DOLLAR OPERATIONS, INC. FAMILY DOLLAR SERVICES, INC. FAMILY DOLLAR STORES, INC. FAMILY DOLLAR STORES OF ALABAMA, INC. FAMILY DOLLAR STORES OF ARIZONA, INC. FAMILY DOLLAR STORES OF ARKANSAS, INC. FAMILY DOLLAR STORES OF COLORADO, INC. FAMILY DOLLAR STORES OF CONNECTICUT, INC. FAMILY DOLLAR STORES OF D.C., INC. FAMILY DOLLAR STORES OF DELAWARE, INC. FAMILY DOLLAR STORES OF FLORIDA, INC. FAMILY DOLLAR STORES OF GEORGIA, INC. FAMILY DOLLAR STORES OF IOWA, INC. FAMILY DOLLAR STORES OF LOUISIANA, INC. FAMILY DOLLAR STORES OF MARYLAND, INC. FAMILY DOLLAR STORES OF MASSACHUSETTS, INC. FAMILY DOLLAR STORES OF MICHIGAN, INC. FAMILY DOLLAR STORES OF MISSISSIPPI, INC. FAMILY DOLLAR STORES OF MISSOURI, INC. FAMILY DOLLAR STORES OF NEVADA, INC. FAMILY DOLLAR STORES OF NEW JERSEY, INC. FAMILY DOLLAR STORES OF NEW MEXICO, INC. FAMILY DOLLAR STORES OF NEW YORK, INC. FAMILY DOLLAR STORES OF NORTH CAROLINA, INC. FAMILY DOLLAR STORES OF NORTH DAKOTA, INC. FAMILY DOLLAR STORES OF OHIO, INC. FAMILY DOLLAR STORES OF OKLAHOMA, INC. FAMILY DOLLAR STORES OF PENNSYLVANIA, INC. FAMILY DOLLAR STORES OF RHODE ISLAND, INC. FAMILY DOLLAR STORES OF SOUTH CAROLINA, INC. FAMILY DOLLAR STORES OF SOUTH DAKOTA, INC. FAMILY DOLLAR STORES OF TENNESSEE, INC. FAMILY DOLLAR STORES OF WEST VIRGINIA, INC. FAMILY DOLLAR STORES OF WISCONSIN, INC. FAMILY DOLLAR STORES OF WYOMING, INC. FAMILY DOLLAR STORES OF VIRGINIA, INC. FAMILY DOLLAR STORES OF VERMONT, INC. FAMILY DOLLAR TRUCKING, INC.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2023 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR STORES OF TEXAS, LLC

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR DISTRIBUTION, LLC
MIDWOOD BRANDS, LLC

By:	FAMILY DOLLAR SERVICES, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR GC, LLC

By:	FAMILY DOLLAR, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FAMILY DOLLAR UTAH DC, LLC

By:	FAMILY DOLLAR STORES OF TEXAS, LLC, its managing member

By:	FAMILY DOLLAR HOLDINGS, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary


FD BEACH BLVD, LLC

By:	FAMILY DOLLAR STORES OF FLORIDA, INC., its managing member

By:	/s/ William A. Old, Jr.
	Name:	William A. Old, Jr.
	Title:	Senior Vice President - General Counsel and Secretary

[2023 Notes — Registration Rights Agreement Joinder]

FAMILY DOLLAR IP CO.


By:	/s/ Kevin S. Wampler
	Name:	Kevin S. Wampler
	Title:	Executive Vice President - Chief Financial Officer

[2023 Notes — Registration Rights Agreement Joinder]

EX-10.1 7 a15-15183_1ex10d1.htm EX-10.1

Exhibit 10.1

EXECUTION COPY

[Dollar Tree Letterhead]

July 27, 2014

Mr. Howard R. Levine

Dear Howard,

This retention letter (this “Retention Letter”) memorializes our discussions concerning your role at Dollar Tree, Inc. (“Parent”) and its affiliates following the consummation of the merger (the “Merger”) contemplated by the Agreement and Plan of Merger among Parent, Family Dollar Stores, Inc. (the “Company”) and Dime Merger Sub, Inc., dated as of the date hereof (the “Merger Agreement”). We believe that your continued service through, and following the consummation of, the Merger will greatly contribute to the successful integration of Parent and the Company and the future success of the combined enterprise.

This Retention Letter will become effective upon the Effective Time (as defined in the Merger Agreement). If the Effective Time does not occur, this Retention Letter will not become effective and will be null and void ab initio.

Position and Reporting: Following the Effective Time, you will continue serving as the Chief Executive Officer of the Company. You will report directly to the Chief Executive Officer of Parent.

Compensation and Benefits: During your employment following the Effective Time, you will (a) receive an annual base salary of at least $1,150,000, (b) beginning as of the Effective Time, receive an annual target incentive opportunity under the terms of Parent’s Management Incentive Compensation Plan of at least 100% of your annual base salary, which will be based in part on performance measures related to the Company (if any such measure utilizes a metric that is utilized in respect of a component of the Parent CEO’s annual incentive opportunity which is tied solely to the performance of the Company, the performance target for you will not be more rigorous than that applicable to the Parent CEO), (c) receive, for periods of your employment following August 31, 2015, an annual long-term performance plan (“LTTP”) grant with a target opportunity of $600,000 and an annual RSU performance based grant of $2,000,000 (all determined in accordance with Parent’s Omnibus Incentive Plan, in a manner applicable to the senior executives of Parent generally, with the first such grants to be made no later than Parent’s regular 2016 grant cycle for Parent senior executives generally), and (d) be eligible to participate in the other compensation and employee benefit plans (including with respect to indemnification, directors and officers insurance, and travel and expense reimbursement policies) applicable to similarly situated executives of Parent. For the avoidance

of doubt, in the event of the termination of your employment on or following the Effective Time, the compensation contemplated by this paragraph shall be governed by the terms of the applicable benefit plan and not any severance or change-in-control vesting or payment provisions set forth in the employment agreement between you and the Company, dated as of December 28, 2012 (the “Employment Agreement”).

Retention Period: During the period from the Effective Time until the second anniversary thereof (the “Retention Period”), you agree not to (and waive any right to) terminate your employment for “Good Reason” pursuant to Section 2(I)(ii) or 2(I)(iii) of the Employment Agreement (provided, that all other Good Reason provisions shall remain in place), whether under the Employment Agreement or any other agreement between you and the Company or any of its affiliates incorporating such definition, including, without limitation, the agreements governing your equity awards. For the avoidance of doubt, Parent and the Company acknowledge that you will have Good Reason pursuant to Section 2(I)(ii) of the Employment Agreement upon consummation of the Merger and you may provide notice, at any time between the date that is 75 days prior to the expiration of the Retention Period and the date that is 30 days prior to the expiration of the Retention Period, of termination for Good Reason in order to terminate your employment for Good Reason upon the second anniversary of the Effective Time based upon the circumstances arising from the consummation of the Merger without the ability of Parent or the Company to cure. In the event of a material breach of the Company’s obligations under this Retention Letter, such breach shall constitute Good Reason under Section 2(I)(v) of the Employment Agreement, and, notwithstanding the foregoing, you may terminate your employment during the Retention Period for Good Reason within the notice period referenced in said Section 2(I)(v). In the event that you terminate employment for Good Reason (regardless of the circumstances or timing of such termination (it being understood that this parenthetical does not modify the restriction on your terminating employment for Good Reason prior to the second anniversary of the Effective Time pursuant to Section 2(I)(ii) or 2(I)(iii) of the Employment Agreement)), you shall also be entitled to full vesting of all then outstanding and unvested equity awards that were granted to you prior to the Effective Time without regard to any provision to the contrary in any plan under which such equity awards were granted (“Accelerated Equity Vesting”). For the avoidance of doubt, in the event of your death or Disability (as defined in Section 2(G) of the Employment Agreement) while employed by the Company or any of its affiliates or your involuntary termination by the Company or Parent without Cause (as defined in the Employment Agreement), in all cases, on or prior to the second anniversary of the Effective Time, you or your estate (as applicable) shall receive the severance compensation and benefits under Section 7 of the Employment Agreement, and you will also receive the Accelerated Equity Vesting.

Employment Agreement: Other than as expressly set forth herein, the Employment Agreement will be unaffected by this Retention Letter (including your right to receive severance under Section 7 of the Employment Agreement, as modified by this Retention Letter), except (a) references to the “Board” in Section 2(A) of the Employment Agreement shall be deemed to refer to the board of directors of Parent, (b) notwithstanding the terms of Section 4 of the Employment Agreement, subject to the terms of the Merger Agreement, neither

Parent nor the Company shall be required to appoint you to, or as chairman of, its board of directors, provided that you shall be entitled to terminate employment for Good Reason under the Employment Agreement if you cease to serve on the board of directors of Parent because you are not nominated by Parent; (c) the compensation and benefits provisions set forth herein shall supersede Sections 5(A) and (B) of the Employment Agreement; (d) in lieu of the benefits provided under Section 5(F) of the Employment Agreement, you shall be eligible for use of corporate aircraft in accordance with the policies of Parent, as in effect from time to time; (e) for purposes of Section 7(i)(y)(B) of the Employment Agreement, the relevant annual bonuses to be averaged shall be those payable in respect of the three Company fiscal years preceding the fiscal year during which the Effective Time occurs; (f) Section 19(F) of the Employment Agreement is hereby deleted in its entirety and of no further force or effect; and (g) the Employment Agreement shall terminate immediately following the second anniversary of the Effective Time if you remain employed by Parent and its affiliates through such date, except that (x) Sections 8-12 thereof shall survive such termination and (y) upon any termination of your employment for any reason following such termination of the Employment Agreement (a “Post-Retention Period Termination”), you shall receive from the Company a severance payment (in lieu of any other cash severance from the Company and its affiliates) equal to the product of (1) three times (2) the sum of (i) your base salary in effect immediately prior to such termination of employment and (ii) your average bonus determined under the formula set forth in Section 7(i)(y)(B) of the Employment Agreement (as modified above). Such severance payment shall remain subject to the release of claims requirements of the Employment Agreement and shall be paid on the same schedule contemplated by Section 7 of the Employment Agreement, except that the applicable severance payments shall be subject to the timing requirements of Section 409A of the Internal Revenue Code, including, to the extent necessary to avoid the imposition of taxes thereunder, that a portion of the severance compensation equal to the amount that would have been payable pursuant to Section 6 of the Employment Agreement upon a severance-qualifying termination immediately prior to the Effective Date under such Section 6 of the Employment Agreement shall be paid on the schedule set forth in Section 6 of the Employment Agreement (but not subject to any payment reductions in Section 6 of the Employment Agreement) and that the six-month delay contemplated by Section 19(C) of the Employment Agreement shall be imposed if applicable. Upon a Post-Retention Period Termination, if you hold any unvested equity awards granted prior to the Effective Time, you shall receive the Accelerated Equity Vesting.

Transfer Restriction: You agree that during the 30-month period following the Effective Time, you will not, and will cause any trust or other entity controlled by you not to, directly or indirectly, (a) sell, transfer, assign, tender in any tender or exchange offer, pledge, encumber, hypothecate or similarly dispose of (by merger, by testamentary disposition, by operation of law or otherwise) (a “Transfer”), either voluntarily or involuntarily, any shares of common stock of Parent (“Shares”) received in the Merger, or (b) enter into any contract, option or other arrangement or understanding with respect to the Transfer of any such Shares; provided, however, that nothing contained herein shall prevent you from disposing of Shares in connection with a corporate transaction that is approved by the board of directors of Parent or from Transferring Shares for estate planning purposes or to a charitable institution for

philanthropic purposes but only, prior to the effectiveness of such Transfer, if the transferee agrees in writing to be bound by the transfer restrictions set forth herein (except that you may annually transfer a number of Shares equal to the product of the Award Exchange Ratio (as defined in the Merger Agreement) and 100,000 to the Howard R. Levine Foundation Fund in accordance with past practice and without any limitation placed on that Fund with respect to the subsequent disposition of such Shares during the restriction period set forth herein); provided further, that on the first anniversary of the Effective Time and on each six-month anniversary thereafter, 25% of the Shares held by you as of the Effective Time shall cease to be subject to the restrictions on Transfer contained herein. Any Transfer or attempted Transfer of Shares in violation of this Retention Letter shall, to the fullest extent permitted by law, be null and void ab initio, and Parent shall not, and shall instruct its transfer agent and other third parties not to, record or recognize any such purported transaction on its share register.

Parent agrees to reimburse your reasonable legal fees incurred in the negotiation of this Retention Letter within 30 days following the Effective Time, such reimbursements not to exceed $45,000.

You acknowledge that the amendments to the Employment Agreement and the covenants contained herein are material, significant and essential to Parent’s willingness to enter into the Merger Agreement, under which you are receiving good and valuable consideration as a significant stockholder of the Company.

From and after the Effective Time, your employment will continue to be at-will, subject to the severance provisions of the Employment Agreement and of this Retention Letter.

This Retention Letter, together with the Employment Agreement, constitute the entire agreement between the parties hereto with respect to the subject matter hereof. No provision of this Retention Letter may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by you, Parent and the Company, or by you and Parent if the Company ceases to exist as a separate legal entity. This Retention Letter will be governed, construed, and interpreted under the laws of the State of Delaware without giving effect to any conflict of laws provisions.

We look forward to a promising future as a combined entity and believe this opportunity will result in a mutually beneficial and rewarding relationship. Please acknowledge your agreement to the terms of this Retention Letter by your signature below.

Sincerely,

Dollar Tree, Inc.


By:	/s/ Bob Sasser

Bob Sasser
Chief Executive Officer

[Signature Page to Retention Letter]

Family Dollar Stores, Inc.


By:	/s/ James C. Snyder, Jr.

James C. Snyder, Jr.
Senior Vice President
General Counsel and Secretary

[Signature Page to Retention Letter]

Acknowledged and Agreed:


/s/ Howard R. Levine		July 27, 2014
Howard R. Levine		Date

[Signature Page to Retention Letter]

EX-10.2 8 a15-15183_1ex10d2.htm EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is effective this 28th day of December, 2012 (the “Date of this Agreement”), by and between HOWARD R. LEVINE (“Employee”) and Family Dollar Stores, Inc., and its successors, subsidiaries and affiliated companies (collectively, the “Company”). For and in consideration of the premises, the mutual covenants and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Employee, intending to be legally bound, hereby agree and covenant as follows.

1. Recitals. Employee and the Company recite the following:

A. Employee has heretofore been employed by the Company in a position of senior management up to and through the Date of this Agreement, pursuant to a previous contract of employment, effective October 7, 2008, (the “Previous Employment Agreement”), and, understanding and accepting the terms and conditions of Employee’s employment as set forth herein, desires to continue to be employed by the Company under the terms and restrictions as set forth herein.

B. The Company desires to obtain the agreement of Employee to certain restrictive covenants and other provisions as set forth herein in exchange for Employee’s receipt of good and valuable consideration to which Employee was not previously entitled, including without limitation: (i) the Company’s agreement to provide certain severance payments as described herein; (ii) an increase in Employee’s rate of base salary as of the date of this Agreement, retroactively effective as of October 14, 2012; (iii) an award opportunity under the

Company’s Incentive Bonus Plan for the fiscal year beginning August 26, 2012; (iv) an award of Performance Share Rights under the 2006 Incentive Plan for the 3-year performance period commencing August 26, 2012; and (v) an award of stock options under the 2006 Incentive Plan with a grant date of October 9, 2012.

C. Notwithstanding any provision of this Agreement, the Company and Employee agree that Employee’s employment with the Company is “at will” and may be terminated at any time with or without “Cause” without any liability or obligation of the Company except as expressly set forth herein.

D. This Agreement revokes and supersedes all prior or contemporaneous employment agreements, representations, promises and understandings, whether written or oral, between the parties related to the subject matter herein, including without limitation the Previous Employment Agreement.

2. Definitions. When used in this Agreement the following terms and provisions shall have the meanings set forth herein:

A. “Cause” — “Cause” means any of the following acts by Employee: (a) gross neglect of duty that is materially harmful to the business or reputation of the Company; (b) intentionally engaging in any activity that is materially harmful to the business or reputation of the Company; (c) engaging in any action involving moral turpitude; (d) conviction of (or plea of nolo contendere to) a felony, or of a misdemeanor where active imprisonment is imposed; (e) falsification of any Company records or engaging in any misappropriation, fraud, breach of fiduciary duty or dishonesty that is materially harmful to the business or reputation of the Company; (f) disclosure of the Company’s confidential or proprietary information in violation of

this Agreement or applicable law that either is willful or is materially harmful to the business or reputation of the Company; (g) Employee’s failure to comply with reasonable written directives of the Board of Directors of the Company that is not remedied within thirty (30) days after receipt of written notice from the Board of Directors specifying such failure and referring to this Agreement; (h) chronic and unexcused absenteeism that is materially harmful to the business or reputation of the Company; (i) willful or intentional violation of any law or regulations to which the Company is subject; (j) failure to comply with the material terms of this Agreement that is not remedied within thirty (30) days after receipt of written notice from the Board of Directors specifying such failure and referring to this Agreement; (k) the willful and material violation of the Company’s policies, including its Code of Ethics, that is materially harmful to the business or reputation of the Company; and (l) the willful failure to reasonably cooperate with any investigation authorized by the Board of Directors of the Company that is not remedied within thirty (30) days after receipt of written notice from the Board of Directors specifying such failure and referring to this Agreement. Employee’s employment shall not be terminated for Cause until Employee has been provided written notice from the Board specifying the Cause grounds and basis therefor, the Employee has an opportunity to be heard before a quorum of the Board, and, after such hearing, a majority of the full Board has voted to terminate Employee’s employment for Cause. For purposes of this Paragraph 2.A, no conduct shall be considered “willful” if Employee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and had no reasonable cause to believe that his conduct was in violation of the relevant policy, directive, regulation, or law. For purposes of this Paragraph 2.A, conduct (whether by commission or omission) “that is materially harmful to the business or

reputation of the Company” includes but is not limited to conduct constituting a breach of fiduciary duty under applicable law.

B. “Change in Control” — Change in Control shall have the meaning set forth in the last paragraph of Section 2.1(f) of the 2006 Incentive Plan and in Section 409A of the Code.

C. “Code” — Code means the Internal Revenue Code of 1986, as amended from time to time, and includes a reference to the underlying final regulations.

D. “Company’s Business” — The Company’s Business means the operation of multi-merchandise retail stores, the majority of which stores each have 25,000 square feet or less of total selling space, and that sell or that offer for sale basic merchandise for family and home needs, including perishable and non-perishable goods.

E. “Competitor” — Competitor means:

(i) any of the following entities: Dollar General; Dollar Tree; Fred’s; Big Lots; 99 Cent Stores; Walgreens; CVS; Rite Aid; Wal-Mart; Kmart; Five Below; and Target;

(ii) any person or entity who owns or operates multi merchandise retail stores that have 25,000 square feet, or less, of total selling space, and that sell, or offer for sale, merchandise that is the same or substantially similar to merchandise sold or offered for sale by the Company; and/or

(iii) any person or entity who owns or operates or has developed plans to own or operate multi-merchandise retail stores that have 25,000 square feet, or less, of total selling space, and that will sell, or offer for sale, merchandise that is the same as or substantially similar to merchandise offered for sale by the Company.

F. “Confidential Company Information” — Confidential Company Information means, unless otherwise available to the public (provided the information has not become available to the public as a result of any unauthorized action on the part of Employee) (i) any and all information relating to the Company’s methods of operation, source of merchandise supply, organizational details, personnel information (including, but not limited to, information related to employee compensation), marketing plans, marketing assessments, business plans, strategic plans, forecasts, or financial information or data; (ii) any and all information relating to the Company’s real estate activities including, but not limited to, landlords, prospective landlords, and lease data; (iii) the specific terms of the Company’s agreements or arrangements with any officers, directors, employees, vendors, suppliers, or any other entity with which the Company may be affiliated from time to time, including, but not limited to, the value of any consideration provided or received by the Company or the expiration date of any such agreement or arrangement; and (iv) any and all information of a technical or proprietary nature developed by or acquired by the Company or made available to the Company and its employees by vendors, suppliers, contractors, or other employees of the Company, on a confidential basis, including, but not limited to, ideas, concepts, designs, specifications, prototypes, techniques, technical data or know-how, formulae, methods, research and development, and inventions, as such Confidential Company Information may exist from time to

time and whether in electronic, print or other form and all copies, notes, or other reproductions thereof.

G. “Disability” — Disability shall mean any physical or mental impairment that prevents Employee, with or without reasonable accommodation, from performing for a period of 120 days during any twenty-four-month period (whether or not consecutive) the essential functions of his position as Chief Executive Officer, including such reasonable duties and responsibilities commensurate with that position as the Board of Directors of the Company may assign to Employee.

H. “Employee’s Termination Date” — Employee’s Termination Date means the date of Employee’s termination of employment with the Company, regardless of: (i) the date, cause, or manner of such termination of employment; (ii) whether such termination is with or without Cause or is a result of Employee’s resignation; or (iii) whether the Company provides severance benefits to Employee under this Agreement.

I. “Good Reason” — Good Reason means any of the following conditions (each a “Condition”) that arises without the consent of Employee and the condition has not been cured as set out below:

i. A material diminution in Employee’s base compensation.

ii. A material diminution in Employee’s authority, duties, or responsibilities (including the Employee no longer reporting solely and directly to the Board of Directors of the Company).

iii. A material diminution in the budget over which Employee retains authority.

iv. Requiring Employee to relocate his place of employment more than 25 miles from Mecklenburg County, North Carolina.

v. Any other action or inaction that constitutes a material breach by the Company of this Agreement.

Within forty-five (45) days of Employee’s knowledge of the initial existence of the Condition (or the date on which Employee reasonably would be expected to have knowledge of the initial existence of the Condition), Employee must provide notice to the Company of the existence of the Condition, and the Company shall have forty-five (45) days following receipt of such notice to cure the Condition. If the Condition is cured within forty-five (45) days of such notice, Employee is not entitled to any payment as the result of a termination of employment based on that occurrence of the circumstances that would otherwise constitute Good Reason. If the Condition is not cured within forty-five (45) days following such notice, Employee may resign from employment for Good Reason.

J. “Incentive Bonus Plan” — Incentive Bonus Plan means the annual cash incentive bonus plan established pursuant to the Guidelines for Annual Cash Bonus adopted under the 2006 Incentive Plan.

K. “Restricted Territory” — Restricted Territory means any state in the United States of America, or any state in Mexico, in which: (i) the Company is conducting the Company’s Business on Employee’s Termination Date; (ii) the Company is conducting the Company’s Business on the Date of this Agreement; or (iii) the Company has existing plans to conduct the Company’s Business on Employee’s Termination Date and Employee has knowledge, or should have knowledge, of such Company plans. For purposes of this definition,

the District of Columbia and each of any commonwealths, territories, or possessions of the United States shall be regarded as a “state of the United State of America.”

L. “Target Bonus” — Target Bonus means Employee’s “target bonus” for the applicable fiscal year within the meaning of the Incentive Bonus Plan.

M. “Trade Secret” — Trade Secret means any item of Confidential Company Information that constitutes a trade secret under the common law or statutory law of the State of Delaware or the State of North Carolina, namely N.C. Gen. Stat. §§ 66-152 et seq., but such definition of “Trade Secret” shall not alter either the Company’s rights or Employee’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.

N. “2006 Incentive Plan” — 2006 Incentive Plan means the Family Dollar Stores, Inc. 2006 Incentive Plan, as in effect from time to time, as amended, or any successor to such plan.

3. Employment. The Company hereby continues the employment of Employee and under the terms, conditions and restrictions as set forth herein, effective as of the Date of this Agreement, and Employee hereby accepts such employment.

4. Position, Duties and Responsibilities. Employee shall serve as Chairman of the Board and be employed as Chief Executive Officer of the Company and shall perform such reasonable duties and responsibilities commensurate with that position as the Board of Directors of the Company may, from time to time, assign to Employee. Employee agrees to accept this employment and to devote his full working time and attention and his reasonable best efforts, ability and fidelity to the performance of the duties attaching to such employment. In addition, the Company shall nominate Employee for election to the Board of Directors as a member of the

management slate at each annual meeting of stockholders during the of term of Employee’s employment with the Company, and Employee shall serve as a director and officer of the Company or any of its constituent entities, if appropriately elected. During the period of his employment, Employee shall not, for remuneration or profit, directly or indirectly, render any service to, or undertake any employment for, any other person, firm or corporation, whether in an advisory or consulting capacity or otherwise, without first obtaining the approval of the Board of Directors of the Company. Notwithstanding the preceding, it shall not be a violation of this Agreement for Employee to (i) serve on industry trade boards or committees, (ii) deliver lectures or fulfill speaking engagements, or (iii) manage personal investments or engage in community activities, so long as such services or activities do not interfere with Employee’s duties and responsibilities under this Agreement.

5. Compensation.

A. In consideration of the services to be rendered by Employee pursuant to this Agreement, the Company shall pay, or cause to be paid, to Employee a base salary as established by the Board of Directors of the Company. From and after the Date of this Agreement, and retroactively effective as of October 14, 2012, unless otherwise adjusted as provided below, Employee shall be paid an annual base salary of One Million One Hundred and 00/100 Dollars ($1,100,000.00). The base salary shall be reviewed annually by the Board in connection with its annual review of executive compensation, unless Employee’s employment shall have been terminated earlier pursuant to this Agreement, to determine if such base salary should be increased for the following year in recognition of services to the Company. The salary shall be payable at such intervals in conformity with the Company’s prevailing practice as such practice shall be established or modified from time to time. Employee’s salary shall only be

decreased if the decrease is commensurate with a reduction in compensation for the executive management team and is made effective by the Board of Directors following consultation with Employee.

B. In addition, Employee shall be entitled to:

i. Participate in the Company’s Incentive Bonus Plan, as it may be amended or modified in any respect, including achievement of established goals, as Chairman of the Board (if applicable) and Chief Executive Officer. Employee acknowledges that he has received a copy of the form of the Incentive Bonus Plan and related guidelines for the operation of such Plan and is familiar with the terms and conditions thereof. Nothing contained herein shall limit the Company’s right to alter, amend or terminate the Incentive Bonus Plan at any time for any reason.

ii. Participate in any group life insurance plan, group health, disability or accident plan, vacation plan, and retirement plan or other benefit plan or arrangement which the Company has or may from time to time hereafter establish for the benefit of its employees upon satisfaction of all Company policies regarding participation in any such plan or arrangement; provided, however, that such participation by Employee must be permissible under such plan or arrangement and able to be implemented without inordinate expense.

iii. Participate in the Company’s long-term incentive plans and arrangements established for its senior executives, and the Board of Directors (or the appropriate committee of the Board of Directors) shall grant Employee future equity incentives (and other long-term incentives) commensurate with his status as Chief Executive Officer of the Company taking into consideration Employee’s performance, the Company’s performance, and the

Company’s equity incentive grants (and other long-term incentive grants) for other senior executives of the Company.

iv. Participate in or receive benefits under any employee benefit plan or other arrangement made available by the Company to other senior executives of the Company, on terms at least as favorable as those on which any other senior executive of the Company shall participate; provided, however, that Employee shall be entitled to no less than five weeks of paid vacation each calendar year, exclusive of Company holidays, which if not used in a particular year will be forfeited and not carried over or accumulated from year to year and which will be forfeited and not paid out at the end of employment.

C. The Company shall withhold all appropriate income and employment taxes from any compensation or other payments otherwise due to Employee hereunder.

D. Employee shall be expected to incur various reasonable business expenses customarily incurred by persons holding like positions, including but not limited to traveling, entertainment and similar expenses incurred for the benefit of the Company. The Company shall reimburse Employee for such expenses in accordance with and subject to the Company’s policies regarding business expense reimbursement, as they may exist from time to time.

E. The Company shall provide Employee with directors’ and officers’ insurance coverage to the same extent as provided to other senior executives and directors of the Company. The Company shall also indemnify and hold Employee harmless and advance litigation expenses to Employee for acts and omissions in Employee’s capacity as an officer or employee of the Company in the same manner as provided for Directors under the Form of Indemnity Agreement attached as Exhibit 10.1 to the Form 8-K filing signed by the Company on

November 21, 2008, as that Form of Indemnity Agreement may be amended from time to time for the indemnification of Directors. Employee is already, in his capacity as a Director, party to that Agreement. All such rights extended to Employee in his capacity as an officer, employee or Director shall continue as to the Employee even if he has ceased to be an officer, employee or Director of the Company and shall inure to the benefit of Employee’s heirs, executors and administrators.

F. Employee shall have the use of the Company’s airplane(s) for any and all business related travel. In addition, in recognition of the personal security, safety and efficiency issues associated with the use of alternative transportation, Employee shall have the non-exclusive right to use of the Company’s airplane(s) for personal travel for himself and/or his family and guests with such limits and/or conditions as may be reviewed and established from time to time by the Board or its designated committee; provided (1) that any changes from the practice in place for Employee as of the date of this Agreement shall be made only after consultation with Employee, (2) that the Company shall impute income to Employee as taxable compensation as required by the Code with respect to such usage, and (3) that the Company is under no obligation to increase its number of airplanes or to charter additional airplanes for this purpose.

6. Severance Upon Termination Without Cause, Not Within Two Years Following a Change in Control. Subject to the provisions of this Agreement, in the event of the termination of Employee’s employment (a) by the Company without Cause, (b) by Employee for Good Reason, (c) following Employee’s Disability or (d) upon Employee’s death, in each case prior to a Change in Control or more than twenty-four (24) months after a Change in Control, the Company shall provide Employee with the following severance benefits:

(i) The Company shall continue the payment of Employee’s base salary in effect on Employee’s Termination Date for a period of thirty (30) months. Such salary continuation payments shall be paid in a series of substantially equal installments in accordance with the regular payroll practices of the Company as in effect as of Employee’s Termination Date over said period, commencing on the sixtieth (60th) day following Employee’s Termination Date (except as otherwise required by paragraph 19), and the first such payment shall include all of the base salary payments that would otherwise have been paid during the period starting on the Termination Date and ending on the sixtieth (60th) day following the Termination Date. Such salary continuation payments shall not be considered eligible compensation under any of the Company’s employee benefit plans. The salary continuation payments shall not be subject to forfeiture or reduction, except as provided in paragraph 11 and except in the following circumstances:

(a) Salary continuation payments shall be reduced on a dollar-per-dollar basis by amounts earned by Employee for services performed by Employee after the one-year anniversary of the Termination Date if such services would have been prohibited under paragraph 8.A had such services been performed during the first twelve (12) months after the Termination Date;

(b) Salary continuation payments made on account of Employee’s death shall be reduced on a dollar-per-dollar basis by any amounts actually received by Employee’s estate, survivors, or other beneficiaries pursuant to any life insurance contract purchased by the Company and under which all premiums have been paid solely by the Company or its affiliates; and

(c) Salary continuation payments made on account of Employee’s Disability shall be reduced on a dollar-per-dollar basis by any amounts actually received by Employee under a Company-sponsored disability benefit plan for which the cost of Employee’s coverage has been paid solely by the Company or its affiliates, provided that such plan covers a substantial number of the Company’s employees and was established before Employee incurred a Disability. In no event shall the reduction described in this paragraph 6(i)(c) modify in any way the time for payment of the salary continuation payments.

(ii) If Employee’s Termination Date is after the end of the Company’s fiscal year but prior to the payment date of any bonus under the Incentive Bonus Plan for such fiscal year, the Company shall pay Employee the portion of the Target Bonus earned by Employee for such fiscal year according to the terms of the Incentive Bonus Plan (i.e., based on the Company’s applicable performance level), without regard to any requirement in the Incentive Bonus Plan otherwise requiring Employee to remain employed through the bonus payment date. In addition, Employee shall be eligible to receive a pro rated bonus under the Incentive Bonus Plan for the fiscal year of the Company in which such termination of employment occurs, without regard to any requirement in the Incentive Bonus Plan otherwise requiring Employee to remain employed through the bonus payment date, based on the number of completed weeks during the applicable fiscal year through Employee’s Termination Date and further based on the Company’s applicable performance level for the fiscal year. Any such payment shall be made to Employee at the same time the Company makes payments to other participants in the Incentive Bonus Plan. Notwithstanding the preceding or any provision

of the Incentive Bonus Plan to the contrary, any bonus payment pursuant to the Incentive Bonus Plan payable to Employee under the terms of that plan and/or this Agreement shall be paid as soon as administratively practicable following the end of the relevant performance period but in no event later than two and one half (2 1/2) months following the end of the Company’s fiscal year in which the relevant performance period ends.

(iii) The Company shall pay Employee a single lump sum cash payment equal to the total premiums Employee would be required to pay for eighteen (18) months of COBRA continuation coverage under the Company’s health benefit plan (i.e., medical, dental and vision coverage), determined using the COBRA premium rate in effect for the level of coverage that Employee has in place immediately prior to the Employee’s Termination Date (the “COBRA Payment”). Employee shall not be required to purchase COBRA continuation coverage in order to receive the COBRA Payment, nor shall Employee be required to apply the COBRA Payment towards any payment of applicable premiums for COBRA continuation coverage. The payment shall be made on the sixtieth (60th) day following Employee’s Termination Date (except as otherwise required by Paragraph 19).

Such payments and benefits provided by the Company to Employee as set forth in Paragraphs 6(i), (ii), and (iii) are herein called “Termination Compensation” and are subject to forfeiture as set forth below in Paragraphs 8 and 11.

7. Severance Upon Termination Without Cause Within Two Years Following a Change in Control. Subject to the provisions of this Agreement, in the event of the termination of Employee’s employment (a) by the Company without Cause, (b) by Employee for Good

Reason, (c) following Employee’s Disability or (d) upon Employee’s death, in each case within twenty-four (24) months after a Change in Control, the Company shall provide Employee with the following severance benefits:

(i) The Company shall pay to Employee in a lump sum in cash on the sixtieth (60th) day following Employee’s Termination Date (except as otherwise required by Paragraph 19) an amount equal to the product of (x) thirty-six (36) and (y) the sum of (A) Employee’s base monthly salary at the highest annual rate in effect during the period beginning immediately prior to the Change in Control through the date of Employee’s termination of employment and (B) the monthly equivalent of the average of the bonuses, if any, paid or payable to Employee under the Incentive Bonus Plan for each of the three (3) fiscal years preceding the fiscal year in which Employee’s termination of employment occurs (or such fewer number of fiscal years for which Employee was eligible to receive a bonus under the Incentive Bonus Plan).

(ii) The Company shall pay Employee a single lump sum cash payment equal to the total premiums Employee would be required to pay for eighteen (18) months of COBRA continuation coverage under the Company’s health benefit plan (i.e., medical, dental and vision coverage), determined using the COBRA premium rate in effect for the level of coverage that Employee has in place immediately prior to the Employee’s Termination Date. Employee shall not be required to purchase COBRA continuation coverage in order to receive the COBRA Payment, nor shall Employee be required to apply the COBRA Payment towards any payment of applicable premiums for COBRA continuation coverage. The payment shall be made on the sixtieth (60th) day following Employee’s Termination Date (except as otherwise required by Paragraph 19).

Employee’s right in connection with or following a Change in Control to receive a pro rata bonus under the Incentive Bonus Plan or any other incentive compensation program under the 2006 Incentive Plan shall be determined in accordance with the provisions of Section 15.7 or such successor provisions of the 2006 Incentive Plan.

8. Restrictive Covenants; Non-Disclosure Obligations; Forfeiture of Termination Compensation. Employee and the Company understand and agree that the purpose of the provisions of this Paragraph 8 is to protect the legitimate business interests of the Company, especially within the multi-merchandise retail industry, in light of Employee’s leadership position with the Company and exposure and access to Confidential Company Information and Trade Secrets. Employee and the Company further agree and understand that the multi-merchandise retail industry and the Company’s Business are national in scope and that the Company has plans to expand the Company’s Business internationally. Employee acknowledges that the employment and post-employment restrictions set forth in this Paragraph 8 are therefore reasonable to legitimately protect the Company’s Business, and do not, and will not, unduly impair Employee’s ability to earn a living during or after Employee’s employment with the Company. As a result of Employee’s educational background, prior work experience, and Employee’s employment and position with the Company, Employee possesses general skills and knowledge enabling Employee, if need be, to pursue profitable work in businesses not competitive with the Company’s Business.

Therefore, in consideration of good and valuable consideration to which Employee was not previously entitled, including, without limitation, as is set forth in Paragraph 1.B above, Employee agrees as follows:

A. Covenant Not to Compete.

i. Employee agrees that during Employee’s employment with the Company and for the period of twelve (12) months immediately following Employee’s Termination Date (such period not to include any period(s) of violation) (the “Restricted Period”), Employee shall not, without the prior written authorization of the Board of Directors of the Company: (a) accept, obtain, or hold a position as an employee, consultant, agent or contractor or invest in or provide financing to a Competitor within the Restricted Territory; or (b) perform any services within the Restricted Territory for a Competitor that are the same as or substantially similar to any services Employee performed for the Company in the course of Employee’s employment with the Company.

ii. Should Employee violate any of the provisions of Paragraph 8.A(i), the Company shall be entitled to remedies set forth in Paragraph 11 hereof, as well as to all other remedies allowed by law.

iii. Notwithstanding the foregoing, Employee may, solely as a passive investor, own capital stock of a publicly held corporation, which is actively traded in the over-the-counter market or is listed and traded on a national securities exchange, which constitutes or is affiliated with a Competitor, so long as Employee’s ownership is not in excess of five percent (5%) of the total outstanding capital stock of the Competitor.

B. Non-Solicitation of Company Employees.

i. Employee understands and agrees that the relationship between the Company and each of its employees constitutes a valuable asset of the Company and may

not be converted to Employee’s own use or benefit, or for the use or benefit of any other third party. Accordingly, Employee hereby agrees that during Employee’s employment and during the Restricted Period, Employee shall not, without the prior written consent of the Board of Directors, directly or through any other person: (A) solicit or recruit for employment; hire; attempt to solicit or recruit for employment; attempt to hire; or accept as an employee, consultant, contractor, or otherwise, any Company employee; or (B) urge; encourage; induce; or attempt to urge, encourage, or induce, any Company employee to terminate his or her employment with Company (unless such encouragement occurs within the scope of Employee’s duties for the Company and for the Company’s benefit); or (C) otherwise interfere with the Company’s relationship with any Company employee.

ii. Should Employee violate the provisions of Paragraph 8.B(i), the Company shall be entitled to remedies set forth in Paragraph 11 hereof, as well as to all other remedies allowed by law.

C. Non-Disclosure of Confidential Company Information; Trade Secret Protections. Employee recognizes and acknowledges that during the course of Employee’s employment, the Company has provided and will continue to provide Employee with exposure and access to Confidential Company Information and Trade Secrets of the Company, or confidential information belonging to other third parties who may have furnished such information to the Company under obligations of confidentiality. Employee, therefore, agrees that during Employee’s employment with the Company and at all times after Employee’s Termination Date, Employee shall not disclose any such Confidential Company Information or Trade Secrets, or other information subject to an obligation of the Company to keep confidential,

to any third party not employed by or otherwise expressly affiliated with the Company for any reason or purpose whatsoever, and shall not use such Confidential Company Information or Trade Secrets except on behalf of the Company. Notwithstanding the preceding, nothing in this Agreement shall prohibit Employee from any disclosure required by applicable law or regulation or valid legal process, provided Employee, to the fullest extent permitted by applicable law, provides the Company advance notice of any potential disclosure under this sentence and cooperates with the Company, at its expense and to the extent lawful, in seeking appropriate protections from or limitations to such disclosure.

D. Employee Acknowledgement. Employee acknowledges and agrees that (i) the restrictive covenants in this Paragraph 8 are reasonable in time, territory and scope, and in all other respects; (ii) should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement; and (iii) if any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, territory, definition of activities or definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable terms shall be redefined, or a new enforceable term provided, such that the intent of the Company and Employee in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. The restrictive covenants contained herein shall be construed as agreements independent of any other provision in this Agreement and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of this restrictive

covenant. Any decision in one state or jurisdiction invalidating or holding unenforceable any provision of this Paragraph 8 shall not be binding in any other state or jurisdiction.

9. Other Post-Termination Covenants.

A. Employee agrees that Employee shall resign and does resign from all positions as an officer and director of the Company and from any other positions affiliated with the Company, with such resignations to be effective upon Employee’s Termination Date.

B. For a period of 12 months following Employee’s Termination Date, Employee covenants to provide further advice and assistance to the Company as may be reasonably requested from time to time, and to provide all information available to Employee on matters handled by and through Employee while employed by the Company or of which Employee has personal knowledge by making available to the Company at reasonable times and circumstances, upon request by the Company, information pertinent to its operations in Employee’s possession; provided that Employee shall be paid reasonable compensation by the Company in the event Employee is required to expend substantial time in the performance of such services; provided that Employee may perform such services in a manner that does not unreasonably interfere with Employee’s schedule or other employment obtained by Employee; and provided that Employee shall be reimbursed for any expenses reasonably incurred by Employee in the performance of the covenants herein set forth in this Paragraph 9.B.

C. In addition, Employee agrees that he will, following his Termination Date, reasonably cooperate with and provide reasonable assistance to the Company and its legal counsel in connection with any litigation (including arbitration or administrative hearings) or investigation affecting the Company, in which, in the reasonable judgment of the Company’s

counsel, Employee’s assistance or cooperation is needed. Employee shall, when requested by the Company, provide testimony or other reasonable assistance and shall travel at the Company’s request in order to fulfill this obligation. In connection with such litigation or investigation, the Company shall accommodate to the fullest extent practicable Employee’s schedule, shall reimburse Employee (unless prohibited by law) for any actual loss of wages in connection therewith, shall provide Employee with reasonable notice in advance of the times in which Employee’s cooperation or assistance is needed, and shall reimburse Employee for any reasonable expenses incurred in connection with such matters.

10. Delivery of Property upon Termination. Upon Employee’s Termination Date, Employee shall, as soon as possible but no later than two (2) days from Employee’s Termination Date, surrender to the Company all Confidential Company Information and Trade Secrets in Employee’s possession and return to the Company all Company property in Employee’s possession or control, including but not limited to, all paper records and documents, laptop(s) computer disks, flash drives, and access cards and keys to any Company facilities.

11. Enforcement of Restrictions in Paragraphs 8 and 9. Because Employee’s services to the Company are special and unique and because Employee has been exposed to and has had access to Confidential Company Information and Trade Secrets, Employee and the Company agree that any breach or threatened breach of the provisions of Paragraphs 8.A(i), 8.B(i), 8.C, and 9 would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. In the event of a breach or threatened breach of Paragraphs 8.A(i), 8.B(i), 8.C, or 9 of this Agreement, the Company or its successors or assigns may, in addition to any other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance; temporary, preliminary, and permanent

injunctive relief; expedited discovery; or other equitable relief in order to enforce or prevent any violations of any such provisions (without posting a bond or other security). The Company shall be specifically entitled to an injunction restraining Employee from disclosing any Confidential Company Information or Trade Secrets, and, further, from accepting or continuing any employment with or rendering any services, or continuing to render services, to any such third-party to whom any Confidential Company Information or Trade Secret has been disclosed or is threatened to be disclosed by Employee.

In addition to the foregoing and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if Employee violates any provision of Paragraphs 8.A(i), 8.B(i), 8.C, and 9 of this Agreement: (i) any compensation, benefits and/or Termination Compensation then or thereafter due from the Company to Employee under this Agreement shall be terminated forthwith; (ii) the Company’s obligation to pay or provide and Employee’s right to receive such post-separation compensation, benefits and/or Termination Compensation under this Agreement shall terminate and be of no further force or effect; and (iii) upon demand by the Company, Employee shall repay to the Company any such post-separation compensation, benefits and/or Termination Compensation previously paid by the Company under this Agreement; in each case without limiting or affecting Employee’s obligations under such Paragraphs 8.A(i), 8.B(i), 8.C, or 9 or the Company’s other rights and remedies available at law or in equity, and provided that $20,000.00 of such compensation, benefits and/or Termination Compensation shall be retained by Employee representing the consideration Employee received in exchange for Employee’s release and waiver of rights or claims under Paragraph 13 of this Agreement.

12. Employee’s Disclosure Obligation. Employee shall notify any prospective employer with whom Employee seeks to be employed of the restrictive covenants included in this Agreement. Absent such notification by Employee, the Company may provide the prospective employer with notification.

13. Waiver and Release. In consideration for the payments and benefits provided and to be provided hereunder, Employee agrees that Employee will, upon termination of employment, and in no event later than 60 days after Employee’s Termination Date, as a condition to the Company’s obligation to pay any severance benefits under this Agreement, deliver to the Company a fully executed release agreement in the form attached hereto as Appendix A (or as may be modified if required by applicable law to accomplish the purposes of Appendix A, and only to the extent so required) and which shall fully and irrevocably release and discharge the Company, its directors, officers, agents and employees from any and all claims, charges, complaints, liabilities of any kind, known or unknown, owed to Employee; provided, however, that the Company delivers to Employee an execution-ready version of such release no later than the seventh (7th) day following Employee’s Termination Date.

14. Special Provisions. This Agreement shall inure to the benefit of any successor to or assignee of the Company. No waiver by either party of any breach by the other of any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any such or other provision of this Agreement. If any provision of this Agreement shall be declared invalid or unenforceable as a matter of law, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement or of the remainder of this Agreement as a whole.

15. Complete Agreement. This Agreement sets forth all of the terms of the understanding between the parties with reference to the subject matter set forth herein and may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. This Agreement revokes and supersedes all prior or contemporaneous agreements, representations, promises and understandings, whether written or oral, between the parties related to the subject matter herein, including without limitation the Previous Employment Agreement.

16. Choice of Law; Consent to Jurisdiction.

A. This Agreement shall be governed by and construed under the substantive laws of the State of Delaware without regard to its choice of law or conflict of law principles.

B. Employee and the Company hereby expressly and irrevocably consent to the exclusive venue and jurisdiction of the United States District Court for the Western District of North Carolina, or any state court in Mecklenburg County, North Carolina for purposes of any action to enforce the provisions of paragraphs 8 or 9 as contemplated by paragraph 11.

C. Employee and the Company hereby expressly and irrevocably agree that all disputes between them other than those covered by paragraph 16.B (and, correspondingly, by paragraphs 8, 9 or 11) shall be submitted to binding arbitration for resolution in Charlotte, North Carolina in accordance with the rules and procedures of the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association then in effect. The Company and Employee shall each bear 50% of the costs of arbitration. The decision of the arbitrator(s) shall be final and binding upon the parties and shall be rendered pursuant to a written decision that

contains a detailed recital of the arbitrator’s reasoning. Each party shall pay its own attorneys’ fees.

17. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered, if mailed by registered, certified or express mail, postage prepaid, or if delivered to a recognized courier service, addressed to Employee at the address shown on the Company’s records for tax reporting purposes or addressed to the Company as follows (or in either case to such other address as one party shall give the other in the manner provided herein):

Family Dollar Stores, Inc.	Lead Director of the Board
	Post Office Box 1017
	Charlotte, NC 28201-1017

With copy to:	General Counsel
	Family Dollar Stores, Inc.
	Post Office Box 1017
	Charlotte, NC 28201-1017

18. Section 280G Policy. In accordance with the Family Dollar Stores, Inc. Policy Regarding Tax Adjustments for Certain Severance Benefits, dated November 18, 2008, notwithstanding anything in this Agreement or the 2006 Incentive Plan to the contrary, in the event it shall be determined that any payment or distribution of any type to Employee, pursuant to this Agreement or the 2006 Incentive Plan, is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax, such payments shall be reduced (but not below zero) if and to the extent that such reduction would result in Employee retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the excise tax), than if Employee received all of the payments. The Company shall reduce or eliminate the payments, by first reducing or

eliminating the portion of the payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the determination. All determinations concerning the application of this Section shall be made by a nationally recognized firm of independent accountants or any nationally recognized financial planning and benefits consulting company, selected by the Company and reasonably satisfactory to Employee, whose determination shall be conclusive and binding on all parties. The fees and expenses of such accountants shall be borne by the Company. The Company shall hold in confidence and not disclose, without Employee’s prior written consent, any information with regard to Employee’s tax position which the Company obtains pursuant to this provision.

19. Compliance with Code Section 409A. It is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement which is considered to be nonqualified deferred compensation subject to Code Section 409A shall be paid and provided in a manner, and at such time, including without limitation payment and provision of benefits only in connection with the occurrence of a permissible payment event contained in Code Section 409A (e.g. death, disability, separation from service from the Company and its affiliates as defined for purposes of Code Section 409A), and in such form, as complies with the applicable requirements of Code Section 409A to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting such compliance with Code Section 409A, the following shall apply:

A. Notwithstanding any other provision of this Agreement, the Company is authorized to amend this Agreement, to void or amend any election made by Employee under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in

such manner as may be determined by it to be necessary or appropriate to comply, or to evidence or further evidence required compliance, with Code Section 409A (including any transition or grandfather rules thereunder); provided, however, that before the Company may take any of such actions, the Company shall provide notice to Employee reasonably in advance of such actions explaining the basis for its determination that such actions are necessary and appropriate.

B. Neither Employee nor the Company shall take any action to accelerate or delay the payment of any monies and/or provision of any benefits in any manner which would not be in compliance with Code Section 409A (including any transition or grandfather rules thereunder).

C. If Employee is a specified employee for purposes of Code Section 409A(a)(2)(B)(i), any payment or provision of benefits that is nonqualified deferred compensation subject to Code Section 409A and that is made in connection with a separation from service payment event (as determined for purposes of Code Section 409A) shall not be paid prior to the earlier of (x) the expiration of the six-month period measured from the date of Employee’s separation from service or (y) the date of Employee’s death (the “409A Deferral Period”). In the event such payments are otherwise due to be made in installments or periodically during the 409A Deferral Period, the payments which would otherwise have been made in the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payments shall be made as otherwise scheduled. In the event benefits are required to be deferred, any such benefit may be provided during the 409A Deferral Period at Employee’s expense, with Employee having a right to reimbursement from the Company once the 409A Deferral Period ends, and the balance of the benefits shall be provided as otherwise scheduled.

D. For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Code Section 409A. If under this Agreement, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment. In the event any payment payable upon termination of employment would be exempt from Code Section 409A under Treas. Reg. § 1.409A-1(b)(9)(iii) but for the amount of such payment, the determination of the payments to Employee that are exempt under such provision shall be made by applying the exemption to payments of deferred compensation based on chronological order beginning with the payments paid closest in time on or after such termination of employment.

E. For purposes of determining time of (but not entitlement to) payment or provision of deferred compensation under this Agreement under Code Section 409A in connection with a termination of employment, termination of employment will be read to mean a “separation from service” within the meaning of Code Section 409A.

F. With respect to any payments or benefits provided to Employee under this Agreement which are subject either in whole or in part to Code Section 409A, the Company shall discharge its obligations under this Agreement with respect to such payments or benefits in compliance with all applicable requirements of Code Section 409A. If Employee incurs any taxes or interest as a result of failure by the Company or any agent of the Company to discharge its obligations under this Agreement in compliance with the requirements of Code Section 409A, the Company shall reimburse Employee in full for the amount of such taxes and interest (and for the amount of any additional taxes payable with respect to such reimbursement) so that

Employee is restored to the same after-tax position in which Employee would have been in had the noncompliance with Code Section 409A not occurred.

G. With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits that are subject to Code Section 409A, except as permitted by Code Section 409A, (x) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (y) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year of Employee shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Employee, provided that the foregoing clause (y) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with the Company’s reimbursement policies but in no event later than Employee’s taxable year following Employee’s taxable year in which the related expense is incurred.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement all as of the day and year first above written.

	FAMILY DOLLAR STORES, INC.

	By:	/s/ Mark R. Bernstein

	Title:	Lead Director

	EMPLOYEE

	/s/ Howard R. Levine

Appendix A

Form of Release (“Release”)

, (“Executive”), for himself, and his assigns, heirs and executors and for all persons claiming by or through him, does hereby forever and unconditionally release Family Dollar Stores, Inc. (the “Company”) together with its affiliated corporations or entities and their benefit plans, and each of their respective past or present officers, directors, executives, employees, agents and attorneys, from any and all claims or obligations whether known or unknown, arising out of any matter, cause or thing occurring before the date hereof, including without limitation all claims relating to or arising out of Executive’s employment with the Company, alleged discrimination (including age discrimination), retaliation, harassment, compensation, benefits, perquisites, severance, outplacement, vacation pay, automobile expense, business expenses, reimbursements of any kind, attorney’s fees, wages or bonuses owed to him, and all claims or obligations arising out of his departure from the Company. This Release covers any injuries, damages or claims not now known by Executive that arise in any way out of events occurring prior to the date of the execution of this Release. Provided, however, this Release shall not include any claims relating to (i) the obligations of the Company to Executive that expressly continue and survive under the Employment Agreement dated December , 2012 (or any authorized amendment thereto); (ii) the Company’s obligation to indemnify Executive under and pursuant to its existing indemnity policies; (iii) Executive’s vested and accrued rights under the Company’s employee benefit plans; (iv) Executive’s vested and accrued rights under the Company’s long-term and annual incentive plans or (v) any rights or obligations of the Company that cannot be released under applicable law.

Executive is advised of his right to have legal counsel review the terms of this Release, and is provided a period of twenty-one (21) days in which to execute this Release. Executive understands that he may execute this document prior to the expiration of twenty-one (21) days from the date it has been presented to him. This Release will not become effective until seven (7) days after the date signed by Executive. Executive shall have a period of seven (7) days to revoke his agreement to the provisions hereof. In the event that Executive revokes his execution of this Release, all terms hereof will be null and void.

Executive represents that he (i) has had a reasonable amount of time in which to review and consider this Release prior to signature, (ii) has in fact read the terms of this Release, (iii) has the full legal capacity to enter into this Release and has had the opportunity to consult with legal counsel before signing this Release, (iv) fully and completely understands the meaning, intent, and legal effect of this Release, and (v) has knowingly and voluntarily executed this Release.

This Release is being provided by Executive under and pursuant to the terms of the Employment Agreement dated December , 2012 (or any authorized amendment

thereto), as a condition to the receipt of valuable compensation and benefits not otherwise owed by the Company to Executive.

This the day of , 20 .

[Executive’s Signature]

EX-23.1 9 a15-15183_1ex23d1.htm EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (numbers: 333-175121, 333-126286, 333-117337, 333-106886, 333-106884, 333-106883, 333-41248, 033-92812, 033-92816, 033-92814 and 333-38735) of Dollar Tree, Inc. of our report dated October 29, 2014 relating to the financial statements of Family Dollar Stores, Inc., which appears in this Current Report on Form 8-K of Dollar Tree, Inc.

/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
July 7, 2015

EX-99.1 10 a15-15183_1ex99d1.htm EX-99.1

Exhibit 99.1

DOLLAR TREE COMPLETES ACQUISITION OF FAMILY DOLLAR

· Creates combined organization with sales exceeding $19 billion annually with more than 13,600 stores across 48 states and five Canadian provinces

· Gary Philbin named President and Chief Operating Officer of Family Dollar Stores

CHESAPEAKE, Va. — July 6, 2015 — Dollar Tree, Inc. (NASDAQ: DLTR), North America’s leading operator of discount variety stores selling everything for $1 or less, announced today that it has completed the acquisition of Family Dollar Stores, Inc., a leading national discount retailer offering name brands and quality, private brand merchandise.

“We are pleased to announce we have completed our acquisition of Family Dollar and we formally welcome the Family Dollar team to the Dollar Tree organization,” stated Bob Sasser, Chief Executive Officer. “This is a transformational opportunity for our business to offer broader, more compelling merchandise assortments, with greater values, to a wider array of customers. This acquisition will extend our reach to low-income customers, while strengthening and diversifying our footprint. We plan to leverage best practices across both organizations to deliver significant cost synergies. Combined, our growth potential is enhanced with improved opportunities to increase store productivity and to open more stores across multiple banners.”

Under the terms of the merger agreement first announced and unanimously approved by each company’s Board of Directors in July 2014, Family Dollar shareholders are entitled to receive $59.60 in cash and 0.2484 of a share of Dollar Tree common stock for each share of Family Dollar common stock.

The Company also announced that Gary Philbin, age 58, has been named President and Chief Operating Officer of Family Dollar, effective immediately. In his new role, Mr. Philbin will continue to report to Bob Sasser. Mr. Philbin joined Dollar Tree as Senior Vice President of Stores in December 2001, and was later promoted to Chief Operating Officer in March 2007 and to President in June 2013. Prior to joining Dollar Tree, Mr. Philbin held senior-level positions in both merchandising and operations during his thirty years in the retail grocery industry.

“I am very proud to announce that Gary will be taking on his new leadership role of Family Dollar Stores,” Sasser said. “Gary has played an integral role in the success of Dollar Tree over the past fourteen years. Notably, Gary was instrumental in improving the Dollar Tree customer shopping experience and the related customer satisfaction, as well as leading the integration following our Canadian acquisition in 2010.”

Philbin stated, “I am very pleased to have the opportunity to lead the Family Dollar team. Throughout the due diligence and integration planning processes, I have been impressed with the experience, talent and dedication of the Family Dollar team members. Our focus as an organization will be on the customer - by consistently providing great values, affordable prices, and relevant items in a store environment that is convenient, clean, reliable and efficient. We are well-prepared for the integration process, which is now under way.”

Additionally, the Company announced that Howard R. Levine, Chief Executive Officer of Family Dollar, has been appointed to Dollar Tree’s board of directors, effective immediately.

Sasser concluded, “We appreciate the efforts, dedication and teamwork displayed by both Dollar Tree and Family Dollar associates throughout our integration planning processes. We are well-prepared to integrate our two companies.”

Strategic Rationale

· Creates a leading discount retailer in North America. The combined organization will operate more than 13,000 stores in 48 states and five Canadian provinces, with sales exceeding $19 billion annually and over 145,000 associates.

· Complementary business model across fixed- and multi-price point. Dollar Tree is the nation’s leading operator of fixed-price point stores, selling everything for $1 or less, and Family Dollar is a leading national operator of multi-price point stores providing value-conscious consumers with a selection of competitively priced merchandise in convenient neighborhood stores. The Company intends to retain and to grow both banners going forward and will optimize the combined real estate portfolio.

· Targets broader range of customers and geographies. Dollar Tree targets customers within a broad range of Middle America with stores located primarily in suburban areas and Family Dollar targets low- and lower-middle income households through its urban and rural locations. The transaction enables Dollar Tree to serve a broader range of customers and deliver even greater value to them.

· Leverages complementary merchandise expertise. Dollar Tree’s merchandise mix consists of a balance between consumable merchandise and variety/seasonal merchandise. Family Dollar’s assortment consists primarily of consumable merchandise and home products. The complementary offerings enable the Dollar Tree and Family Dollar brands to expand categories and to deliver a broader, more compelling assortment to all customers.

· Generates significant synergy opportunities. Dollar Tree expects to generate significant efficiencies through sourcing and procurement, format optimization, SG&A leverage, and its distribution network. The Company anticipates that the transaction will result in an estimated $300 million of annual run-rate synergies to be fully realized by the end of the third year post-closing.

· Enhanced financial performance and improved growth prospects. Dollar Tree will be better positioned to invest in existing and new markets and channels and to grow its store base across multiple brands. The combined company expects to generate significant free cash flow, enabling it to pay down debt rapidly.

J.P. Morgan Securities LLC acted as exclusive financial advisor to the board of directors of Dollar Tree, and J.P. Morgan Chase Bank, N.A. committed to provide bridge financing for the transaction. Wachtell, Lipton, Rosen & Katz and Williams Mullen acted as legal counsel to Dollar Tree in connection with the transaction. Morgan Stanley & Co. LLC acted as exclusive financial advisor to the board of directors of Family Dollar in connection with the transaction. Cleary Gottlieb Steen & Hamilton LLP acted as legal counsel to Family Dollar in connection with the transaction.

About Dollar Tree, Inc.

Dollar Tree, a Fortune 500 Company, now operates more than 13,600 stores across 48 states and five Canadian provinces. Stores operate under the brands of Dollar Tree, Dollar Tree Canada, Deals and Family Dollar. To learn more about the Company, visit www.DollarTree.com.

Forward Looking Statements

A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, plan, forecast, or estimate. For example, our forward-looking statements include statements regarding the merger with Family Dollar, including the benefits, results and effects of the merger, future financial and operating results, including estimated synergies, expectations concerning the combined company’s plans, objectives, expectations (financial or otherwise) and intentions. Risks and uncertainties related to the proposed merger include, among others, difficulties related to integration of the proposed merger and our ability to obtain cost savings and synergies contemplated by the merger, unexpected costs, charges or expenses resulting from the proposed merger, and the outcome of pending or potential litigation or governmental investigations. For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in our Annual Report on Form 10-K filed March 13, 2015. We are not obligated to release publicly any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this report and you should not expect us to do so.

CONTACT:	Dollar Tree, Inc.
	Randy Guiler, 757-321-5284
	Vice President, Investor Relations
	www.DollarTree.com

EX-99.2 11 a15-15183_1ex99d2.htm EX-99.2

Exhibit 99.2

Report of independent registered public accounting firm

To the Board of Directors and Shareholders of Family Dollar Stores, Inc., and Subsidiaries:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and comprehensive income, of shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of Family Dollar Stores, Inc. and its subsidiaries at August 30, 2014 and August 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended August 30, 2014 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

October 29, 2014

Family Dollar Stores, Inc., and Subsidiaries

Consolidated balance sheets

(in thousands, except per share and share amounts)	August 30, 2014			August 31, 2013
*Assets*
Current assets:
Cash and cash equivalents	$	139,840		$	140,999
Short-term investment securities	8,800			4,000
Restricted cash and investments	31,380			35,443
Merchandise inventories	1,609,932			1,467,016
Deferred income taxes	65,856			34,510
Income tax refund receivable	64,458			13,485
Prepayments and other current assets (Note 5)	181,780			161,552
Total current assets	2,102,046			1,857,005
Property and equipment, net (Note 6)	1,688,213			1,732,544
Investment securities	—			22,977
Other assets	67,036			97,335
Total assets	$	3,857,295		$	3,709,861
*Liabilities and Shareholders’ Equity*
Current liabilities:
Short-term borrowings (Note 7)	$	—		$	—
Current portion of long-term debt (Note 7)	16,200			16,200
Accounts payable	773,021			723,200
Accrued liabilities (Note 9)	335,054			335,854
Income taxes	4,755			4,968
Total current liabilities	1,129,030			1,080,222
Long-term debt (Note 7)	484,226			500,275
Other liabilities (Note 10)	316,382			289,194
Deferred gain (Note 8)	227,080			218,088
Deferred income taxes	34,852			23,027
Commitments and contingencies (Note 13)
Shareholders’ equity (Note 15):
Preferred stock, $1 par; authorized 500,000 shares; no shares issued and outstanding	—			—
Common stock, $0.10 par; authorized 600,000,000 shares; issued 120,749,980 shares at August 30, 2014, and 120,091,158 shares at August 31, 2013, and outstanding 113,986,257 shares at August 30, 2014, and 115,092,113 shares at August 31, 2013	12,077			12,009
Capital in excess of par	333,579			299,865
Retained earnings	1,724,041			1,569,625
Accumulated other comprehensive loss	(489		)	(2,195		)
Common stock held in treasury, at cost (6,763,723 shares at August 30, 2014, and 4,999,045 shares at August 31, 2013)	(403,483		)	(280,249		)
Total shareholders’ equity	1,665,725			1,599,055
Total liabilities and shareholders’ equity	$	3,857,295		$	3,709,861

The accompanying notes are an integral part of the consolidated financial statements.

Family Dollar Stores, Inc., and Subsidiaries

Consolidated statements of income

(in thousands, except per share amounts)	52 weeks ended August 30, 2014		53 weeks ended August 31, 2013		52 weeks ended August 25, 2012
Net sales	$	10,489,330	$	10,391,457	$	9,331,005
Cost and expenses:
Cost of sales	6,946,115		6,836,712		6,071,058
Cost of sales—restructuring	11,930		—		—
Selling, general and administrative	3,022,219		2,866,788		2,584,234
Restructuring	78,180		—		—
Merger fees	9,434		—		—
Litigation charge	—		—		11,500
Cost of sales and operating expenses	10,067,878		9,703,500		8,666,792
Operating profit	421,452		687,957		664,213
Investment income	190		422		927
Interest expense	30,038		25,888		25,090
Other income	31,150		28,206		23,888
Income before income taxes	422,754		690,697		663,938
Income taxes	138,251		247,122		241,698
Net income	$	284,503	$	443,575	$	422,240
Net income per common share—basic	$	2.49	$	3.85	$	3.61
Weighted average shares—basic	114,035		115,252		117,097
Net income per common share—diluted	$	2.49	$	3.83	$	3.58
Weighted average shares—diluted	114,421		115,805		118,058

The accompanying notes are an integral part of the consolidated financial statements.

Family Dollar Stores, Inc., and Subsidiaries

Consolidated statements of comprehensive income

(in thousands)	52 weeks ended August 30, 2014		53 weeks ended August 31, 2013			52 weeks ended August 25, 2012
Net income	$	284,503	$	443,575		$	422,240
Other comprehensive income:
Unrealized net gains/(losses) on investment securities (net of taxes)	1,679		(413		)	4,527
Other	27		59			35
Other comprehensive income/(loss)	$	1,706	$	(354	)	$	4,562
Comprehensive income	$	286,209	$	443,221		$	426,802

There were no material reclassifications from accumulated other comprehensive income into net income.

The accompanying notes are an integral part of the consolidated financial statements.

Family Dollar Stores, Inc., and Subsidiaries

Consolidated statements of cash flows

(in thousands)	52 weeks ended August 30, 2014			53 weeks ended August 31, 2013			52 weeks ended August 25, 2012
Cash flows from operating activities:
Net income	$	284,503		$	443,575		$	422,240
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	265,461			239,485			213,835
Amortization of deferred gain	(18,005		)	(15,123		)	(3,087		)
Impairment on property and equipment—restructuring	19,926			—			—
Lease obligations on closed stores—restructuring	43,689			—			—
Merger fees	9,115			—			—
Deferred income taxes	(14,124		)	3,693			(24,321		)
Excess tax benefits from stock-based compensation	(6,352		)	(13,231		)	(12,345		)
Stock-based compensation	15,363			16,258			15,902
Loss on disposition of property and equipment	9,182			5,826			11,429
Changes in operating assets and liabilities:
Merchandise inventories	(142,916		)	(40,853		)	(271,503		)
Prepayments and other current assets	(20,231		)	(113,920		)	23,838
Other assets	14,601			(449		)	(2,506		)
Accounts payable and accrued liabilities	65,570			(32,656		)	(36,497		)
Income taxes	(51,186		)	(40,374		)	37,209
Other liabilities	(5,434		)	19,742			(4,823		)
Net cash provided by operating activities	469,162			471,973			369,371
Cash flows from investing activities:
Purchases of restricted and unrestricted investment securities	(53,481		)	(44,278		)	(211,142		)
Sales of restricted and unrestricted investment securities	93,647			45,728			334,915
Net change in restricted cash	390			79,924			(80,389		)
Capital expenditures	(436,288		)	(744,428		)	(603,313		)
Net proceeds from sale-leaseback	194,766			345,249			359,663
Proceeds from dispositions of property and equipment	982			3,214			1,955
Net cash used in investing activities	(199,984		)	(314,591		)	(198,311		)
Cash flows from financing activities:
Short-term borrowings	2,208,000			2,060,000			362,300
Repayment of short-term borrowings	(2,208,000		)	(2,075,000		)	(347,300		)
Repayments of long-term debt	(16,200		)	(16,200		)	(16,200		)
Repurchases of common stock	(125,038		)	(74,954		)	(191,573		)
Change in cash overdrafts	(24,525		)	71,745			26,786
Proceeds from exercise of employee stock options	19,161			20,796			24,900
Excess tax benefits from stock-based compensation	6,352			13,231			12,345
Payment of dividends	(130,087		)	(108,334		)	(91,390		)
Net cash used in financing activities	(270,337		)	(108,716		)	(220,132		)
Net change in cash and cash equivalents	(1,159		)	48,666			(49,072		)
Cash and cash equivalents at beginning of year	140,999			92,333			141,405
Cash and cash equivalents at end of year	$	139,840		$	140,999		$	92,333
Supplemental disclosures of cash flow information:
Purchases of property and equipment awaiting processing for payment, included in accounts payable	$	38,530		$	57,379		$	54,609
Cash paid during the period for:
Interest, net of amounts capitalized	26,596			21,895			24,001
Income taxes, net of refunds	208,694			272,748			234,740

The accompanying notes are an integral part of the consolidated financial statements.

Family Dollar Stores, Inc., and Subsidiaries

Consolidated statements of shareholders’ equity

(in thousands, except per share and share amounts)	Common stock			Capital in excess of par			Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total
Balance, August 27, 2011
(117,353,341 shares common stock; 29,962,891 shares treasury stock)	$	14,732		$	274,445		$	1,969,749		$	(6,403	)	$	(1,165,449	)	$	1,087,074
Net income for the year							422,240									422,240
Unrealized gains on investment securities (net of $2.7 million of taxes)										4,527						4,527
Other										35						35
Issuance of 1,209,507 common shares under incentive plans, including tax benefits	121			29,602												29,723
Purchase of 3,214,866 common shares for treasury													(191,573		)	(191,573		)
Retirement of 29,400,000 shares of treasury stock	(2,940		)	(60,139		)	(1,087,303		)				1,150,382			—
Issuance of 14,066 shares of treasury stock under incentive plans				152									622			774
Stock-based compensation				15,129												15,129
Dividends declared on common stock, $0.60 per share							(70,302		)							(70,302		)
Balance, August 25, 2012
(115,362,048 shares common stock; 3,763,691 shares treasury stock)	11,913			259,189			1,234,384			(1,841		)	(206,018		)	1,297,627
Net income for the year							443,575									443,575
Unrealized gains on investment securities (net of $0.4 million of taxes)										(413		)				(413		)
Other										59						59
Issuance of 965,419 common shares under incentive plans, including tax benefits	96			25,141												25,237
Purchase of 1,248,284 common shares for treasury													(74,954		)	(74,954		)
Issuance of 12,930 shares of treasury stock under incentive plans				27									723			750
Stock-based compensation				15,508												15,508
Dividends declared on common stock, $0.94 per share							(108,334		)							(108,334		)
Balance, August 31, 2013
(115,092,113 shares common stock; 4,999,045 shares treasury stock)	$	12,009		$	299,865		$	1,569,625		$	(2,195	)	$	(280,249	)	$	1,599,055
Net income for the year							284,503									284,503
Unrealized gains on investment securities (net of $0.9 million of taxes)										1,679						1,679
Other										27						27
Issuance of 658,822 common shares under incentive plans, including tax benefits	66			20,143												20,209
Purchase of 1,794,921 common shares for treasury													(125,038		)	(125,038		)
Issuance of 30,243 shares of treasury stock under incentive plans	2			13									1,804			1,819
Stock-based compensation				13,558												13,558
Dividends declared on common stock, $1.14 per share							(130,087		)							(130,087		)
Balance, August 30, 2014
(113,986,257 shares common stock; 6,763,723 shares treasury stock)	$	12,077		$	333,579		$	1,724,041		$	(489	)	$	(403,483	)	$	1,665,725

The accompanying notes are an integral part of the consolidated financial statements.

Family Dollar Stores, Inc., and Subsidiaries

Notes to consolidated financial statements

1. Description of business and summary of significant accounting policies:

Description of business

The Company operates a chain of more than 8,000 general merchandise retail discount stores in 46 contiguous states, providing consumers with a selection of competitively priced merchandise in convenient neighborhood stores. The Company’s products include health and beauty aids, packaged food and refrigerated products, home cleaning supplies, housewares, stationery, seasonal goods, apparel, and domestics. In the typical Family Dollar store, the majority of the products are priced at $10 or less, with many of the products priced at $1 or less. The Company manages its business on the basis of one operating segment.

Dollar Tree merger agreement

On July 27, 2014, the Company entered into the Dollar Tree merger agreement, upon the terms and subject to the conditions of which a subsidiary of Dollar Tree will be merged with and into Family Dollar, with Family Dollar continuing as the surviving entity and a wholly-owned subsidiary of Dollar Tree. The merger is subject to Family Dollar stockholder approval, expiration, or termination of the applicable waiting period under the HSR Act and other customary closing conditions. The merger could be in a position to close as early as December 2014.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated.

Fiscal year

The Company’s fiscal year generally ends on the Saturday closest to August 31 of each year, which generally results in an extra week every six years. Fiscal 2014 was a 52-week year, fiscal 2013 was a 53-week year, and fiscal 2012 was a 52-week year.

Use of estimates

The preparation of the Company’s consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying amount of the Company’s cash equivalents approximates fair value due to the short maturities of these investments and consists primarily of money market funds and other overnight investments. The Company maintains cash deposits with major banks, which from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes the risk of any loss is remote. Payments due from banks for third-party credit card, debit card and electronic benefit transactions are generally processed within 24-72 hours and are classified as cash equivalents.

The Company maintains zero balance cash disbursement accounts with certain banks. Outstanding checks in excess of funds on deposit with respect to these banks, referred to as cash overdrafts, are classified as Accounts Payable on the Consolidated Balance Sheets, and totaled $76.0 million at the end of fiscal 2014. Cash overdrafts totaled $100.5 million at the end of fiscal 2013. Changes in these overdraft amounts are recorded as financing activities on the Consolidated Statements of Cash Flows.

The Company’s wholly-owned captive insurance subsidiary maintains balances in cash and cash equivalents used in connection with the Company’s retained workers’ compensation, general liability, and automobile liability risks and are not designated for general corporate purposes. These cash and cash equivalents balances totaled $4.0 million as of the end of fiscal 2014 and $2.7 million as of the end of fiscal 2013.

Investment securities

The Company classifies all investment securities as available-for-sale. Securities accounted for as available-for-sale are required to be reported at fair value with unrealized gains and losses, net of taxes, excluded from net income and shown separately as a component of Accumulated Other Comprehensive Income within Shareholders’ Equity on the Consolidated Balance Sheets. The Company’s short-term investment securities currently consist primarily of short-term bond mutual funds and municipal debt securities. Historically, the Company’s long-term investment securities consisted of auction rate securities; however these were fully settled subsequent to year-end, therefore classified as short-term at the end of fiscal 2014. Refer to Notes 3 and 4 for more information on the Company’s investment securities.

In addition to the cash and cash equivalents balances discussed above, the Company’s wholly-owned captive insurance subsidiary also maintains balances in investment securities not designated for general corporate purposes. These investment securities balances were $8.8 million as of the end of fiscal 2014 and $27.0 million as of the end of fiscal 2013.

Restricted cash and investments

The Company has restricted certain cash and investments to serve as collateral for certain of our insurance obligations held at our wholly owned captive insurance subsidiary. These restricted funds cannot be withdrawn from the Company’s account without the consent of the secured party. As of August 30, 2014, the Company held $34.4 million in this restricted account, of which $31.4 million was included in Restricted Cash and Investments and $3.0 million was

included in Other Assets in the Consolidated Balance Sheets. As of August 31, 2013, we held $55.5 million in this restricted account, of which $35.4 million was included in Restricted Cash and Investments and $20.1 million was included in Other Assets in the Consolidated Balance Sheets. The classification between current and non-current is based on the timing of expected payments of the secured insurance obligations.

Merchandise Inventories

Inventories are valued using the retail method, based on retail prices less markup percentages, which approximates the lower of first-in, first-out (FIFO) cost or market. The Company records adjustments to inventory through cost of goods sold when retail price reductions, or markdowns, are taken against on-hand inventory. In addition, the Company makes estimates and judgments regarding, among other things, initial markups, markdowns, future demand for specific product categories and market conditions, all of which can significantly impact inventory valuation. These estimates and judgments are based on the application of a consistent methodology each period. The Company estimates inventory losses for damaged, lost or stolen inventory (inventory shrinkage) for the period from the most recent physical inventory to the financial statement date. The accrual for estimated inventory shrinkage is based on the trailing twelve-month actual inventory shrinkage rate and can fluctuate from period to period based on the timing of the physical inventory counts. Virtually all stores that have been open for approximately one year conduct a physical inventory at least annually. There were no material changes in the estimates or assumptions related to the valuation of inventory during fiscal 2014.

Property and equipment

Property and equipment is stated at cost. Depreciation for financial reporting purposes is calculated using the straight-line method over the estimated useful lives of the related assets. For leasehold improvements, this depreciation is over the shorter of the term of the related lease (generally between five and fifteen years) including reasonably assured renewal options or the asset’s useful economic life. Estimated useful lives of property and equipment are shown below.

Buildings and building improvements		5 - 40 years
Furniture, fixtures and equipment		3 - 10 years
Transportation equipment		3 - 10 years
Leasehold improvements		5 - 10 years

The Company capitalizes certain costs incurred in connection with developing, obtaining and implementing software for internal use. Capitalized costs are amortized over the expected economic life of the assets, generally ranging from three to eight years.

Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment losses on fixed assets typically relate to store closings. As part of its strategic initiatives, during the second half of fiscal 2014, the Company closed 377 underperforming stores. As a result of this initiative, an impairment of $19.9 million was recorded. Historically, impairment losses on fixed assets related to normal store closings have not been material to the Company’s financial

position or results of operations. Refer to Note 2 for more information on restructuring activities.

Capitalized interest

The Company capitalizes interest on borrowed funds during the construction of property and equipment. The Company capitalized $2.7 million, $7.3 million, and $4.0 million of interest costs during fiscal 2014, fiscal 2013 and fiscal 2012, respectively.

Treasury share retirement

The Company periodically retires treasury shares acquired through share repurchases and returns those shares to the status of authorized but unissued. The Company accounts for treasury stock transactions under the cost method. For each reacquisition of common stock, the number of shares and the acquisition price for those shares is added to the existing treasury stock count and total value. Thus, the average cost per share is re-averaged each time shares are acquired. When treasury shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired to both Retained Earnings and Capital in Excess of Par. The portion allocated to Capital in Excess of Par is determined by applying a percentage, determined by dividing the number of shares to be retired by the number of shares issued, to the balance of Capital in Excess of Par as of the retirement date.

Revenues

The Company recognizes revenue, net of returns and sales tax, at the time the customer tenders payment for and takes possession of the merchandise.

Certain merchandise at our stores is owned and maintained by third parties. For each one of these merchandise arrangements, the Company records revenue on either a gross or net basis in accordance with ASC 605-45, “Revenue Recognition—Principal Agent Considerations.” In determining the appropriate treatment, the Company considers factors such as identification of the primary obligor, inventory risk, latitude in establishing price, discretion in supplier selection, determination of merchandise specifications, and credit risk.

The Company recognizes gift card sales revenue at the time of redemption. A liability for gift cards is established for the cash value at the time of purchase or reload, and is recorded in Accrued liabilities. If a gift card is not redeemed, revenue is recognized using a time-based method over the period from issuance to the point where likelihood of redemption is considered remote. The gift cards do not have an expiration date or monthly fees. Gift card breakage income was first recorded in the first quarter of fiscal 2014, and in fiscal 2014 was $1.6 million.

Cost of sales

Cost of sales includes the purchase cost of merchandise and transportation costs to the Company’s distribution centers and stores. Buying, distribution center and occupancy costs, including depreciation, are not included in cost of sales. As a result, cost of sales may not be comparable to those of other retailers that may include these costs in their cost of sales.

Selling, general and administrative expenses

All operating costs, except transportation costs to the Company’s distribution centers and stores, are included in SG&A. Buying, distribution center and occupancy costs, including depreciation, are included in SG&A rather than cost of sales.

Insurance liabilities

The Company is primarily self-insured for health care, property loss, workers’ compensation, general liability, and auto liability costs. These liabilities are based on the total estimated costs of claims filed and estimates of claims incurred but not reported, less amounts paid against such claims, and are not discounted.

Advertising costs

Advertising costs, net of co-op recoveries from vendors, are expensed during the period of the advertisement and amounted to $7.8 million, $18.9 million and $19.6 million in fiscal 2014, fiscal 2013 and fiscal 2012, respectively.

Vendor allowances

The Company receives vendor support in the form of cash payments or allowances through a variety of reimbursements such as purchase discounts, cooperative advertising, markdowns, scandowns, and volume rebates. The Company has agreements with vendors setting forth the specific conditions for each allowance or payment. In accordance with ASC 605-50, “Revenue Recognition—Customer Payments and Incentives,” depending on the arrangement, the Company either recognizes the allowance as a reduction of current costs or defers the payment over the period the related merchandise is sold. If the payment is a reimbursement for costs incurred, it is offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise.

Operating leases

Except for its Store Support Center and distribution centers, the Company generally conducts its operations from leased facilities. Store real estate leases typically have an initial term between five and fifteen years with multiple renewal options for additional five-year periods. The Company also has leases for equipment generally with lease terms of five years to ten years.

All the Company’s store leases are classified as operating leases. The Company recognizes rental expense for its store leases on a straight-line basis over the base, non-cancelable lease term. For purposes of recognizing incentives, premiums, and minimum rental expenses, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation for intended use. For tenant improvement allowances and rent holidays, the Company records a deferred rent liability at the inception of the lease term and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the Consolidated Statements of Income.

When necessary, the Company vacates stores prior to the expiration of the related lease. For vacated locations with remaining lease commitments, the Company records an expense for the

present value of the future lease payments and related costs, including real estate taxes, insurance, and common area maintenance, from the date of closure through the end of the remaining lease terms, net of expected future sublease rental income. The estimate of future cash flows is based on historical experience; analysis of the specific real estate market, including input from independent real estate disposition experts; and economic conditions that can be difficult to predict. Cash flows are discounted using the incremental borrowing interest rates that coincide with the remaining lease terms.

Certain leases provide for contingent rental payments based upon a percentage of store sales. The Company accrues for contingent rental expense as it becomes probable that specified sales targets will be met.

Income taxes

The Company records deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting basis and the income tax basis of its assets and liabilities. The Company estimates contingent income tax liabilities based on an assessment of the probability of the income-tax-related exposures and settlements related to uncertain tax positions. The Company intends to reinvest certain undistributed earnings of foreign subsidiaries indefinitely and anticipates earnings will not be repatriated. Were the Company’s intention to change, the Company would be subject to U.S. taxes and withholding taxes payable to various foreign governments. Refer to Note 11 for more information on the Company’s income taxes.

Stock-based compensation

The Company recognizes compensation expense related to its stock-based awards based on the fair value of the awards on the grant date. The Company utilizes the Black-Scholes option-pricing model to estimate the grant-date fair value of its stock option awards. The Company also grants performance share rights and adjusts compensation expense each quarter based on the ultimate number of shares expected to be issued, which is dependent upon the Company’s performance relative to a peer group. If factors change and the Company employs different assumptions to measure stock-based compensation in future periods, the compensation expense recorded may differ significantly from the amount recorded in the current period. The grant-date fair value of the Company’s performance share rights awards is based on the stock price on the grant date. Compensation expense for the Company’s stock-based awards is recognized on a straight-line basis, net of estimated forfeitures, over the service period of each award. Refer to Note 14 for more information on the Company’s stock-based compensation plans.

Other Income

The Company classifies income earned on non-merchandise transactions, which primarily includes fees charged to customers when receiving cash back on debit card transactions, in a line item captioned Other Income below Operating Profit.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The ASU is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of fiscal 2018. The Company is still assessing the impact of this ASU on the Consolidated Financial Statements.

In July 2013, the FASB issued Accounting Standards Update 2013-11 Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company will adopt ASU 2013-11 during the first quarter of fiscal 2015, which is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In February 2013, the FASB issued Accounting Standards Update 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The ASU was effective for the Company beginning in the first quarter of fiscal 2014 and did not have a material impact on the Company’s Consolidated Financial Statements.

2. Restructuring and related activities

Beginning in the third quarter of fiscal 2014, the Company implemented a series of restructuring initiatives intended to strengthen its value proposition, increase operational efficiencies and improve financial performance. The restructuring initiatives included closing 377 underperforming stores across the chain and reducing expenses through workforce optimization. These restructuring initiatives were completed during the third and fourth quarters of fiscal 2014.

The Company incurred $90.1 million of charges related to the restructuring initiatives implemented in fiscal 2014. These charges consisted primarily of lease obligations, property and equipment impairments, inventory write-downs, and termination benefits directly associated with the store closings and workforce optimization.

Of the charges incurred in fiscal 2014 related to these restructuring initiatives, the inventory write-downs are presented in the Cost of Sales—Restructuring line item and the remainder of the restructuring charges are included in the Restructuring line item in the Consolidated

Statements of Income. The composition of the restructuring charges incurred during fiscal 2014 were as shown below. Refer to Note 18 for a summary of these charges per quarter.

(in thousands) Charge	Classification of charge	52 weeks ended August 30, 2014
Inventory write-downs	Non-cash	$	11,930
Cost of sales—restructuring		11,930
Property and equipment impairments	Non-cash	$	19,925
Employee termination benefits	Cash	$	3,842
Lease obligations	Cash	$	46,142
Other	Cash	$	8,271
Restructuring		78,180
Total restructuring charges		$	90,110

The table below summarizes the restructuring accrual activity related to the Company’s restructuring initiatives for fiscal 2014.

(in thousands)	Employee termination benefits			Lease obligations			Other			Total
Balance as of August 31, 2013	$	—		$	—		$	—		$	—
Charges	3,842			46,142			8,271			58,255
Cash payments	(3,019		)	(2,453		)	(4,065		)	(9,537		)
Balance as of August 30, 2014	$	823		$	43,689		$	4,206		$	48,718

The Company does not expect to incur any further material charges related to fiscal 2014 restructuring initiatives.

Additionally, in the fourth quarter of fiscal 2014, the Company entered into the Dollar Tree merger agreement, under which Dollar Tree will acquire Family Dollar in a cash and stock transaction. In conjunction with this pending merger agreement, the Company incurred $9.4 million of professional fees during fiscal 2014, consisting primarily of financial advisory and legal costs. As of August 30, 2014, the Company’s accrual for fees associated with the pending merger was $9.1 million; included within Accrued liabilities on the Consolidated Balance Sheet.

3. Fair value measurements:

Fair value accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value into three levels, giving the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

· Level 1—Quoted prices in active markets for identical assets or liabilities.

markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3—Inputs that are unobservable for the asset or liability.

The unobservable inputs in Level 3 can only be used to measure fair value to the extent that observable inputs in Level 1 and Level 2 are not available. The following table represents the Company’s fair value hierarchy as of August 30, 2014, and August 31, 2013, for items required to be measured at fair value on a recurring basis:

	August 30, 2014
(in thousands)	Fair value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	2,502	$	2,502	$	—	$	—
Investment securities:
Auction rate securities	4,800		—		—		4,800
Short-term bond mutual fund	4,000		4,000		—		—
Restricted cash and investments:(1)
Money market funds	46		46		—		—
Municipal debt securities	34,398		—		34,398		—
Other assets:
Mutual funds(2)	19,689		19,689		—		—

	August 31, 2013
(in thousands)	Fair value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	26,200	$	26,200	$	—	$	—
Investment securities:
Auction rate securities	22,977		—		—		22,977
Short-term bond mutual fund	4,000		4,000		—		—
Restricted cash and investments:(1)
Money market funds	437		437		—		—
Municipal debt securities	55,055		—		55,055		—
Other assets:
Mutual funds(2)	20,043		20,043		—		—

(1) As of August 30, 2014, restricted cash and investments of $31.4 million and $3.0 million were included in Restricted Cash and Investments and Other Assets, respectively, in the Consolidated Balance Sheets. As of August 31, 2013, restricted cash and investments of $35.4 million and $20.1 million were included in Restricted Cash and Investments and Other Assets, respectively, in the Consolidated Balance Sheets.

(2) Represents assets held pursuant to a deferred compensation plan for certain key management employees. The Company has recorded a corresponding liability related to the deferred compensation plan in an amount equivalent to the assets above. The liability for the deferred compensation plan is recorded in Other Liabilities on the Consolidated Balance Sheets.

On a non-recurring basis, the Company adjusts certain Property and Equipment to fair value through impairment charges. Property and Equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. The fair value of the Property and Equipment is determined based on a discounted cash flow analysis using Level 3 inputs. The Company estimates future cash flows based on historical experience and its expectations of future performance. Impairment charges related to the store closure initiative were $19.9 million during fiscal 2014 and were not

material during fiscal 2013. Refer to Note 2 for further discussion of the store closure initiative and related impairment charges.

Level 2 inputs

All assets classified as Level 2 are valued using matrix pricing. The Company believes that while the assets valued using Level 2 inputs currently trade in active markets and prices could be obtained for identical assets, the classification of these investments as Level 2 is more appropriate when matrix pricing is used.

Auction rate securities

The Company’s auction rate securities (“ARS”) are tax-exempt bonds collateralized by federally guaranteed student loans and were valued using Level 3 inputs. Due to continued issues in the global credit and capital markets, and specifically the ARS market, the Company’s $4.8 million par value ARS portfolio has historically experienced sustained failed auctions. The Company has been able to liquidate the investments, at or close to par value, when any of the following events occur: a successful auction, a buyer is found outside the auction process, the securities are called or refinanced by the issuer, or the underlying securities mature. For the past several years, the Company liquidated substantially all of its ARS portfolio at or near par through issuer calls, refinancings, or upon maturity.

During fiscal 2014, the Company settled $20.9 million par value of its ARS portfolio and realized a loss of $0.3 million on these settlements. As of August 30, 2014, the Company’s ARS portfolio was $4.8 million par value. Subsequent to year-end, on September 4, 2014, the Company settled the remainder of its ARS portfolio at par.

The Company had no temporary gross unrealized loss of with respect to its ARS portfolio as of August 30, 2014. Changes in the unrealized loss were included in Accumulated Other Comprehensive Loss within Shareholders’ Equity on the Consolidated Balance Sheet.

As of August 30, 2014, the ARS portfolio was classified within short- term investment securities as a result of a receipt of a redemption call notice prior to year-end. In previous fiscal years, due to the continued failure of the auction process and the continued uncertainty regarding the timing of future liquidity, the ARS portfolio was classified within long-term investment securities. The fair value of each security was determined through the use of a discounted cash flow analysis using Level 3 inputs because there is no active market for the Company’s ARS portfolio. The two most significant unobservable inputs used in the analysis were as follows:

· The weighted-average expected term to liquidate the securities. The assumption used in the analysis was based on the Company’s estimate of the timing of future liquidity, which assumed the securities would be called or refinanced by the issuer or repurchased by the broker dealers prior to maturity.

· The illiquidity factor applied to the discount rate. The assumption used in the analysis was based on market rates for similar liquid tax-exempt securities with comparable ratings and maturities. Due to the uncertainty surrounding the timing of future liquidity, a factor was applied to the discount rates to reflect the illiquidity of the investments.

The inputs used in the Company’s analysis were sensitive to market conditions, and the Company’s valuation of its ARS portfolio could have changed based on the assumptions used.

As of August 30, 2014, a 100 basis point increase or decrease in the illiquidity factor, along with a 12-month increase or decrease in the weighted average term, did not result in a material range of a gross unrealized loss.

The Company also evaluated each of its ARS for other-than-temporary impairment. The Company’s evaluation was based on an analysis of the credit rating and parity ratio of each security. The parity ratio is the ratio of trust assets available for distribution to creditors to the trust obligations to those creditors. The credit quality of the Company’s ARS portfolio remains high and the securities had a weighted average parity ratio of 143.9% as of August 30, 2014. Based on these factors, the Company concluded there was no other- than-temporary impairment as of August 30, 2014.

The following tables summarize the change in the fair value of the Company’s ARS portfolio measured using Level 3 inputs during fiscal 2014 and during fiscal 2013:

(in thousands)	Fiscal 2014			Fiscal 2013
Beginning balance—Level 3 inputs	$	22,977		$	23,720
Sales	(20,569		)	(200		)
Realized gains/(losses) on sale of investments	(281		)	—
Net unrealized gains/(losses) included in other comprehensive income	2,673			(543		)
Ending Balance—Level 3 inputs	$	4,800		$	22,977

Additional fair value disclosures

The estimated fair value of the Company’s current and long-term debt was $530.4 million as of August 30, 2014, and $546.4 million as of August 31, 2013. The Company has both public notes and private placement notes. The fair value for the public notes is determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. The fair value of the portion of the debt that are private placement notes is determined through the use of a discounted cash flow analysis using Level 3 inputs as there are no quoted prices in active markets for these notes. The discount rate used in the analysis was based on borrowing rates available to the Company for debt of the same remaining maturities, issued in the same private placement debt market. The fair value of the Company’s current and long-term debt was greater than the carrying value of the debt by $30.0 million as of August 30, 2014, and $29.9 million as of August 31, 2013. See Note 7 for more information on the Company’s long-term debt.

4. Investment securities:

The Company’s investment securities are currently classified as available- for-sale as the Company does not intend to hold the securities to maturity and does not purchase the securities for the purpose of selling them to make a profit on short-term differences in price. Available-for-sale securities are carried at estimated fair value, with unrealized gains and losses,

if any, reported as a component of Shareholders’ Equity. The Company’s investments consisted of the following available-for-sale securities at the end of fiscal 2014 and fiscal 2013:

	August 30, 2014
(in thousands)	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Fair value
Auction rate securities	$	4,800	$	—	$	—	$	4,800
Short-term bond mutual fund	4,000		—		—		4,000
Municipal debt securities	34,355		43				34,398

	August 31, 2013
(in thousands)	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
Auction rate securities	$	25,650	$	—	$	2,673	(1)	$	22,977
Short-term bond mutual fund	4,000		—		—			4,000
Municipal debt securities	54,954		101		—			55,055

(1) The gross unrealized holding losses for fiscal 2013 was in a continuous unrealized loss position for 12 months or longer.

As discussed in Note 3 above, subsequent to year-end all the Company’s auction rate securities were sold at par. The contractual maturity for the $4.8 million security outstanding at August 30, 2014 was 26 years. The Company’s other debt securities include primarily municipal bonds and have weighted average maturities of less than one year.

Proceeds from sales of investment securities available-for-sale during fiscal 2014 were $93.7 million, as compared to $45.7 million in fiscal 2013 and $334.9 million in fiscal 2012. No material gains or losses were realized on those sales for fiscal 2014, fiscal 2013, and fiscal 2012.

The Company also holds investments in mutual funds in connection with a deferred compensation plan for certain key management employees. These investments are classified as trading securities and are included, at fair value, in other assets on the Consolidated Balance Sheets. The Company records an offsetting deferred compensation liability in Other Liabilities. The fair value of the deferred compensation plan assets was $19.7 million as of the end of fiscal 2014 and $20.0 million as of the end of fiscal 2013. See Note 12 below for more information on the deferred compensation plan.

5. Prepayments and other current assets:

Prepayments and Other Current Assets consisted of the following at the end of fiscal 2014 and fiscal 2013:

(in thousands)	August 30, 2014		August 31, 2013
Vendor accounts receivable (net)	$	52,255	$	70,579
Prepaid rent	50,570		45,684
Other(1)	78,955		45,289
Total prepayments and other current assets	$	181,780	$	161,552

(1) Other current assets consist primarily of accrued interest receivable, short-term insurance assets, non-vendor receivables, prepaid supplies, prepaid advertising, and other prepaid expenses.

The Company performed an evaluation and recorded an allowance for doubtful accounts on all accounts receivable balances. The allowance for doubtful accounts was not material to the financial statements in fiscal 2014, fiscal 2013, or fiscal 2012.

6. Property and equipment:

Property and equipment is recorded at cost and consisted of the following at the end of fiscal 2014 and fiscal 2013:

(in thousands)	August 30, 2014		August 31, 2013
Buildings and building improvements	$	521,805	$	567,133
Furniture, fixtures, and equipment	2,170,436		1,949,873
Transportation equipment	105,839		93,963
Leasehold improvements	594,338		552,218
Construction in progress	87,499		131,793
	3,479,917		3,294,980
Less: accumulated depreciation and amortization	1,859,988		1,665,452
	1,619,929		1,629,528
Land	68,284		103,016
Property and equipment, net	$	1,688,213	$	1,732,544

Depreciation expense was $265.3 million, $238.9 million, and $204.5 million for fiscal 2014, fiscal 2013, and fiscal 2012, respectively. The increase in gross property and equipment, before depreciation, is not commensurate with capital expenditures as a result of the impairment recorded for 377 underperforming stores closed as part of the Company’s strategic initiatives in fiscal 2014 and as a result of the significant amount of assets sold during the year under sale-leaseback transactions. Refer to Note 2 for further discussion of the store closure initiative and related impairment charges and to Note 8 for additional information on sale-leaseback transactions.

7. Current and long-term debt:

Current and long-term debt consisted of the following at the end of fiscal 2014 and fiscal 2013:

(in thousands)	August 30, 2014		August 31, 2013
5.24% Notes due September 27, 2015	$	32,400	$	48,600
5.41% Notes due September 27, 2015	169,000		169,000
5.00% Notes due February 1, 2021	299,026		298,875
Total long-term debt	500,426		516,475
Less: Current portion of long-term debt	16,200		16,200
Long-term portion of long-term debt	$	484,226	$	500,275

On January 28, 2011, the Company issued $300 million of 5.00% unsecured senior notes due February 1, 2021 (the “2021 Notes”), through a public offering. The Company’s proceeds were approximately $298.5 million, net of an issuance discount of $1.5 million. In addition, the Company incurred issuance costs of approximately $3.3 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2021 Notes. Interest on the 2021 Notes is payable semiannually in arrears on February 1 and August 1 of each year,

commencing on August 1, 2011. The 2021 Notes rank pari passu in right of payment with the Company’s other unsecured senior indebtedness and will be senior in right of payment to any subordinated indebtedness. The Company may redeem the 2021 Notes in whole at any time or in part from time to time, at the option of the Company, subject to a make- whole premium. In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 2021 Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase.

On September 27, 2005, the Company obtained $250 million through a private placement of unsecured senior notes due September 27, 2015 (the “2015 Notes”), to a group of institutional accredited investors. The 2015 Notes were issued in two tranches at par and rank pari passu in right of payment with the Company’s other unsecured senior indebtedness. The first tranche has an aggregate principal amount of $169 million, is payable in a single installment on September 27, 2015, and bears interest at a rate of 5.41% per annum from the date of issuance. The second tranche has an aggregate principal amount of $81 million, matures on September 27, 2015, with amortization which commenced on September 27, 2011, and bears interest at a rate of 5.24% per annum from the date of issuance. The second tranche had a required principal payment of $16.2 million on September 27, 2011, and on each September 27 thereafter to and including September 27, 2015. The Company has made all required principal payments from September 2011 through September 2014. Interest on the 2015 Notes is payable semiannually in arrears on March 27 and September 27 of each year. The 2015 Notes contain certain restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of August 30, 2014, the Company was in compliance with all such covenants.

On November 17, 2010, the Company amended the 2015 Notes to remove the subsidiary co-borrower and all subsidiary guarantors.

Credit facilities

On November 13, 2013, the Company entered into a five-year unsecured revolving credit facility with a syndicate of lenders for borrowings of up to $600 million. The credit facility matures on November 13, 2018, and provides for two, one-year extensions that require lender consent. Any borrowings under the credit facility accrue interest at a variable rate based on short-term market interest rates.

On November 13, 2013, the Company entered into a four-year unsecured revolving credit facility with a syndicate of lenders for borrowings of up to $300 million. The credit facility matures on November 13, 2017, and provides for two, one-year extensions that require lender consent. Any borrowings under the credit facility accrue interest at a variable rate based on short-term market interest rates.

The revolving credit facilities provide the Company the capacity to borrow up to $900 million, less standby letters of credit needed for collateral for its insurance program of $18.7 million as of August 30, 2014. The prior unsecured revolving credit facilities provided the Company the capacity to borrow up to $700 million, less standby letters of credit needed for collateral for its insurance program of $18.8 million as of August 31, 2013.

The Company had no short-term borrowings outstanding under its unsecured revolving credit facilities as of August 30, 2014 or as of August 31, 2013. During fiscal 2014, the Company had

no net borrowings and had an average daily outstanding balance of $214.8 million at a weighted-average interest rate of 1.4% under its unsecured revolving credit facilities. This compares to net repayments of $15.0 million and an average daily outstanding balance of $141.5 million at a weighted-average interest rate of 1.5% under the Company’s unsecured revolving credit facilities during fiscal 2013.

The Company’s unsecured revolving credit facilities contain certain restrictive financial covenants, which include a consolidated debt to consolidated capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of August 30, 2014, the Company was in compliance with all such covenants.

8. Build-to-suit and sale-leaseback transactions

The Company uses build-to-suit and sale-leaseback transactions to construct and lease new stores. In a build-to-suit transaction, an unrelated third-party funds the new store construction and owns the property throughout and upon completion of construction. In a sale-leaseback transaction, the Company funds the new store construction and owns the property throughout and upon completion of construction with the intent to sell the property. Upon completion of the stores’ construction in build-to-suit transactions and concurrent with the sale of stores in sale-leaseback transactions, the Company enters into agreements to lease the properties over an initial term of 15 years, with four, five-year fixed renewal options. The Company evaluates each store individually upon certain events during the life of the lease, including individual renewal options. The Company classifies these leases as operating leases, actively uses the leased properties, and considers the leases as normal sale-leasebacks.

During fiscal 2014, the Company completed 356 build-to-suit transactions to support new store growth. Additionally, the Company completed sale-leaseback transactions under which it sold 159 stores to unrelated third-parties for net proceeds of approximately $194.8 million during fiscal 2014. Upon closing of the transactions, the Company realized a gain on the sale of the stores of $28.4 million, of which $1.1 million was recognized immediately and approximately $27.3 million was deferred and will amortize over the initial lease term.

During fiscal 2013, the Company completed 230 build-to-suit transactions. Additionally, the Company completed sale-leaseback transactions under which it sold 256 stores and 29 parcels of land to unrelated third-parties for net proceeds of approximately $345.2 million. Upon closing of the transactions, the Company realized a gain on the sale of the stores of $84.7 million, of which approximately $2.4 million was recognized immediately and approximately $82.3 million was deferred and will amortize over the initial lease term.

9. Accrued liabilities:

Accrued liabilities consisted of the following at the end of fiscal 2014 and fiscal 2013:

(in thousands)	August 30, 2014		August 31, 2013
Compensation	$	89,001	$	101,199
Taxes other than income taxes	86,307		95,825
Liabilities for workers’ compensation, general, and auto	52,575		52,229
Lease obligations on closed stores—restructuring	13,327		—
Merger fees accrual	9,115		—
Other(1)	84,729		86,601
Total accrued liabilities	$	335,054	$	335,854

(1) Other accrued liabilities consist primarily of certain store rental accruals, current portion of deferred gain on sale-leaseback transactions, medical accruals, accrued interest, and litigation accruals.

10. Other liabilities:

Other liabilities consisted of the following at the end of fiscal 2014 and fiscal 2013:

(in thousands)	August 30, 2014		August 31, 2013
Liabilities for workers’ compensation, general, and auto	$	172,327	$	179,930
Deferred rent	73,036		63,813
Lease obligations on closed stores—restructuring	30,362		—
Other(1)	40,657		45,451
Total other liabilities	$	316,382	$	289,194

(1) Other liabilities consist primarily of income taxes and deferred compensation.

11. Income taxes:

The provisions for income taxes in fiscal 2014, fiscal 2013 and fiscal 2012 were as follows:

(in thousands)	52 weeks ended August 30, 2014			53 weeks ended August 31, 2013			52 weeks ended August 25, 2012
Current:
Federal	$	141,274		$	216,077		$	228,245
State	10,460			24,927			36,709
Foreign	641			2,425			1,065
	152,375			243,429			266,019
Deferred:
Federal	(13,277		)	6,780			(19,648		)
State	(847		)	(3,087		)	(4,673		)
Foreign	—			—			—
	(14,124		)	3,693			(24,321		)
Total income taxes	$	138,251		$	247,122		$	241,698

The following table summarizes the components of income tax expense in fiscal 2014, fiscal 2013 and fiscal 2012:

	52 weeks ended August 30, 2014					53 weeks ended August 31, 2013					52 weeks ended August 25, 2012
(in thousands)	Income tax expense			% of pre-tax income		Income tax expense			% of pre-tax income		Income tax expense			% of pre-tax income
Computed federal income tax	$	147,964		35.0	%	$	241,744		35.0	%	$	232,378		35.0	%
State income taxes, net of federal income tax benefit	7,132			1.7		19,765			2.9		17,893			2.7
Tax credits	(10,805		)	(2.6	)	(12,281		)	(1.8	)	(9,810		)	(1.5	)
Foreign rate differences	(21,609		)	(5.1	)	(5,290		)	(0.8	)	(2,379		)	(0.4	)
Uncertain tax positions	(1,820		)	(0.4	)	6,783			1.0		2,493			0.4
Valuation allowance	3,046			0.7		(247		)	—		1,732			0.3
Foreign income subject to U.S. tax	15,262			3.6		2,622			0.4		1,351			0.2
Other	(919		)	(0.2	)	(5,974		)	(0.9	)	(1,960		)	(0.3	)
Actual income tax expense	$	138,251		32.7	%	$	247,122		35.8	%	$	241,698		36.4	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of the end of fiscal 2014 and the end of fiscal 2013, were as follows:

(in thousands)	August 30, 2014			August 31, 2013
Deferred income tax liabilities:
Excess of book over tax basis of property and equipment	$	97,710		$	101,865
Deferred income tax assets:
Excess of tax over book basis of inventories	$	14,073		$	25,436
Nondeductible accruals for:
Insurance	8,820			10,824
Compensation	34,303			37,580
Net Operating Losses	9,696			6,266
Deferred rent	27,893			24,398
Litigation charge	2,702			1,789
Restructuring charges	28,849			—
Other	10,430			12,547
Deferred income tax assets, gross	136,766			118,840
Less: valuation allowance	(8,052		)	(5,483		)
Deferred tax assets, net of valuation allowance	$	128,714		$	113,357

The Company had state net operating loss carryforwards of $175.5 million as of August 30, 2014, and $145.4 million as of August 31, 2013, in various states. These carryforwards expire at different intervals up to fiscal year 2034. Management considers all available evidence in determining the likelihood that a deferred tax asset will not be realized. As a result, the Company increased the valuation allowances related to these state loss carryforwards. In regard to the pending merger with Dollar Tree, the Company does not believe there will be any material limitations on net operating losses.

The Company classifies accrued interest expense and penalties related to uncertain tax positions as a component of income tax expense. Interest and penalties reduced income tax expense by $1.0 million in fiscal 2014, increased income tax expense by $1.4 million in fiscal 2013, and reduced income tax expense by $0.6 million in fiscal 2012. The decrease in fiscal 2014 relates to changes in uncertain tax positions, as compared to changes in uncertain tax positions recorded during fiscal 2013 and decreases in uncertain tax positions recorded during fiscal 2012.

As of August 30, 2014, the Company had a liability related to uncertain tax positions of $24.7 million, including a gross unrecognized tax benefit of $19.8 million and accrued interest and penalties of $4.9 million. The related non-current deferred tax asset balance was $5.6 million as of August 30, 2014. If the Company were to prevail on all unrecognized tax benefits recorded, approximately $19.1 million of unrecognized tax benefits, including penalties and tax effected interest of $4.9 million, would result in income tax benefits in the income statement of a future period. A reconciliation of the beginning and ending amount of total unrecognized tax benefits is as follows:

(in thousands)	Unrecognized tax benefit			Interest and penalties			Total
Balance at August 27, 2011	$	20,194		$	6,077		$	26,271
Increases related to prior year tax positions	1,147			1,668			2,815
Decreases related to prior year tax positions	(3,892		)	(1,427		)	(5,319		)
Increases related to current year tax positions	4,879			442			5,321
Settlements during the period	(3,586		)	(1,350		)	(4,936		)
Lapse of statute of limitations	(1,229		)	(549		)	(1,778		)
Balance at August 25, 2012	$	17,513		$	4,861		$	22,374
Increases related to prior year tax positions	877			999			1,876
Decreases related to prior year tax positions	(997		)	(11		)	(1,008		)
Increases related to current year tax positions	11,012			1,752			12,764
Settlements during the period	(2,962		)	(1,064		)	(4,026		)
Lapse of statute of limitations	(1,340		)	(477		)	(1,817		)
Balance at August 31, 2013	$	24,103		$	6,060		$	30,163
Increases related to prior year tax positions	753			1,334			2,087
Decreases related to prior year tax positions	(3,327		)	(209		)	(3,536		)
Increases related to current year tax positions	2,864			618			3,482
Settlements during the period	(1,138		)	(802		)	(1,940		)
Lapse of statute of limitations	(3,427		)	(2,100		)	(5,527		)
Balance at August 30, 2014	$	19,828		$	4,901		$	24,729

The Company is subject to U.S. federal income tax as well as income tax in multiple foreign, state, and local jurisdictions. As of August 30, 2014, the Company was subject to U.S. federal tax and foreign examinations for fiscal years ending subsequent to 2010. With few exceptions, the Company is subject to state and local income tax examinations for fiscal years ending subsequent to 2010.

The amount of future unrecognized tax positions may be reduced because the statute of limitations has expired or the tax position is resolved with the taxing authority. It is reasonably possible that during the next 12 months the unrecognized tax benefit may be reduced by a range of zero to $4.8 million due to settlements of audits by taxing authorities. Such unrecognized tax benefits relate primarily to state tax positions.

As of August 30, 2014, the Company has not provided tax on its cumulative undistributed earnings of foreign subsidiaries of approximately $35.4 million, because it is the Company’s intention to reinvest these earnings indefinitely. The calculation of the unrecognized deferred tax liability related to these earnings is complex and the calculation is not practicable. If earnings were distributed, the Company would be subject to U.S. taxes and withholding taxes payable to various foreign governments. Based on the facts and circumstances at that time, the Company would determine whether a credit for foreign taxes already paid would be available to reduce or offset the U.S. tax liability. The Company anticipates the earnings of foreign subsidiaries will not be repatriated.

12. Employee benefit plans:

Incentive compensation plan

The Company has an incentive profit-sharing plan which allows for payments to certain employees and officers at an aggregate annual amount not to exceed 7% of the Company’s consolidated income before income taxes and certain incentive compensation. Expenses under the profit-sharing plan were zero in fiscal 2014, $9.4 million in fiscal 2013, and $12.3 million in fiscal 2012.

Compensation deferral plans

The Company has a voluntary compensation deferral plan, under Section 401(k) of the Internal Revenue Code, available to eligible employees. At the discretion of the Board of Directors, the Company makes contributions to the plan which are allocated to participants, and in which they become vested, in accordance with formulas and schedules defined by the plan. In fiscal 2013, the Company increased its match to up to 2.5% of participants’ eligible compensation and in the fourth quarter of fiscal 2014, the Company increased its match to up to 4.0% of participant’s eligible compensation. Company expenses for contributions to the plan were $8.0 million in fiscal 2014, $6.2 million in fiscal 2013, and $3.2 million in fiscal 2012, and are included in Selling General and Administrative expenses on the Consolidated Statements of Income.

The Company has a deferred compensation plan to provide certain key management employees the ability to defer a portion of their base compensation and bonuses. The plan is an unfunded nonqualified plan. The deferred amounts and earnings thereon are payable to participants, or designated beneficiaries, at either specified future dates, or upon separation from service or death. The Company does not make contributions to this plan or guarantee earnings.

13. Commitments and contingencies:

Operating leases and other contractual obligations

The majority of the rental expense incurred by the Company relates to its stores and the majority of its stores are leased under agreements that generally have an initial term between five and fifteen years and provide for fixed rentals. Additionally, most of the Company’s leases require additional payments based upon a percentage of sales, property taxes, insurance

premiums, or common area maintenance charges. Rental expenses on all operating leases, both cancelable and non-cancelable, for fiscal 2014, fiscal 2013 and fiscal 2012 were as follows:

(in thousands)	52 weeks ended August 30, 2014		53 weeks ended August 31, 2013		52 weeks ended August 25, 2012
Minimum rentals, net of sublease rentals(1)	$	626,044	$	555,107	$	481,871
Contingent rentals	7,167		9,057		8,468
Total	$	633,211	$	564,164	$	490,339

(1) Minimum rentals, net of sublease rentals have increased in fiscal 2014 and fiscal 2013 primarily as a result of the new stores opened during fiscal 2014 and fiscal 2013 and new leases as a result of stores opened under build-to-suit and sale-leaseback transactions.

Aggregate minimum annual rentals under operating leases as of August 30, 2014 are as follows:

(in thousands)	Minimum rentals
Fiscal 2015	$	589,846
Fiscal 2016	553,859
Fiscal 2017	510,208
Fiscal 2018	460,031
Fiscal 2019	406,167
Thereafter	1,718,767
Total minimum rentals	$	4,238,878

In addition to the minimum and contingent rentals shown above, the Company has obligations related to merchandise letters of credit, construction obligations, and minimum royalty payments. Merchandise letters of credit represent obligations due within the next year to suppliers for merchandise the Company has agreed to purchase. Construction obligations relate primarily to amounts due to developers for new store construction projects, which have yet to be completed. Minimum royalty payments are related to an exclusive agreement to sell certain branded merchandise. At the end of fiscal 2014, these additional obligations were $67.5 million, $41.5 million, and $0.7 million, respectively, and are payable in fiscal 2015.

Additionally, the Company has outstanding standby letters of credit (which are primarily renewed on an annual basis), of which the majority are used as surety for future premium and deductible payments to the Company’s workers’ compensation and general liability insurance carrier. The following table shows the Company’s other commercial commitments as of August 30, 2014:

(in thousands)	Total amounts committed
Standby letters of credit	$	48,695
Surety bonds	49,256
Total	$	97,951

Pending merger commitments

The Dollar Tree merger agreement contains provisions that in the event of termination of the Dollar Tree merger agreement, Family Dollar may be required to pay to Dollar Tree its out-of-pocket expenses, not to exceed $90 million, if the merger agreement is terminated by either Dollar Tree or Family Dollar because Family Dollar fails to obtain the required stockholder approval at the Family Dollar stockholders’ meeting (as it may be adjourned or postponed). In addition, Family Dollar may be required to pay a termination fee of $305 million, less any payment paid in respect of Dollar Tree’s out-of-pocket expenses, under certain circumstances, including a change in the recommendation of the board of directors of Family Dollar or termination of the Dollar Tree merger agreement by Family Dollar to enter into an agreement for a “Company Superior Proposal” (as defined in the Dollar Tree merger agreement). As of August 30, 2014, no amount has been recorded in our Consolidated Financial Statements related to these provisions.

Litigation

The Company is engaged in a number of legal proceedings. The matters or groups of related matters discussed below, if decided adversely to the Company, or settled by the Company, individually or in the aggregate, may result in liability material to the Company’s Consolidated Financial Statements.

North Carolina multi-district misclassification litigation

Since 2001, the Company has been involved in a series of cases in which certain store managers (“Store Managers”) have alleged they were improperly classified as exempt employees under the Fair Labor Standards Act (“FLSA”). Current and former Store Managers have filed lawsuits alleging the Company violated the FLSA and/or similar state laws, by classifying them as “exempt” employees who are not entitled to overtime compensation. The majority of the complaints also request recovery of overtime pay, liquidated damages, attorneys’ fees, and court costs.

In April 2008, a Multi-District Litigation forum (“MDL”) was created in the Western District of North Carolina, Charlotte Division (“NC Federal Court”) to handle cases alleging FLSA violations against the Company. The first two of the MDL cases were Grace v. Family Dollar Stores, Inc. and Ward v. Family Dollar Stores, Inc., filed in May 2004 and June 2006, respectively. In each of these cases, the court entered orders finding the plaintiffs were not similarly situated and, therefore, neither nationwide notice nor collective treatment under the FLSA was appropriate. Since that time, the NC Federal Court has granted 60 summary judgments ruling Store Managers are properly classified as exempt from overtime.

Presently, there are a total of 10 named plaintiffs and/or opt-ins in the remaining cases in the MDL, for which the NC Federal Court has not decided the class certification or summary judgment issue. The Company cannot reasonably estimate the possible loss or range of loss that may result from these cases.

Wage and hour class action litigation

The Company is currently a defendant in four additional class action lawsuits in four states alleging Store Managers should be classified as non-exempt employees under various state laws. The plaintiffs in these cases seek recovery of overtime pay, liquidated damages, attorneys’ fees, and court costs.

· Farley, et al. v. Family Dollar Stores of Colorado, Inc., was filed in the United States District Court for the District of Colorado on February 7, 2012, seeking unpaid overtime compensation for a class of current and former Colorado Store Managers. On March 21, 2013, the Court granted the plaintiff’s motion for class certification. Class notice was issued in June 2013 and class discovery concluded in January 2014. In May 2014, the parties preliminarily agreed to resolve the litigation for an amount not material to the Consolidated Financial Statements. On July 21, 2014, the Court granted preliminary approval of the settlement. The Court held the final approval hearing on October 24, 2014, and the parties currently await the Court’s decision.

· Hegab v. Family Dollar Stores, Inc., was filed in the United States District Court for the District of New Jersey on March 3, 2011. The plaintiff is seeking unpaid overtime for himself and allegedly similarly situated current and former Store Managers under New Jersey law. The matter was administratively dismissed without prejudice. At the time of dismissal, no class had been certified. On January 14, 2014, the parties preliminarily agreed to resolve the litigation on a claims-made basis for an amount not material to the Consolidated Financial Statements. On June 6, 2014, the parties filed a Joint Motion for Preliminary Approval of the settlement with the Court. The Court preliminarily approved the settlement on October 3, 2014.

· Itterly v. Family Dollar Stores of Pennsylvania, Inc., which was formerly pending in the NC Federal Court, was remanded back to the United States District Court for the Eastern District of Pennsylvania on February 8, 2012. The plaintiffs are seeking unpaid overtime for a class of current and former Pennsylvania Store Managers whom the plaintiffs claim are not properly classified as exempt from overtime pay under Pennsylvania law. Discovery closed in June 2012. In August 2013, the Company filed summary judgment requesting the Court rule that Itterly was properly classified as exempt from overtime. The District Court granted the Company’s motion on January 30, 2014, and the case is now dismissed. On February 1, 2014, the plaintiffs filed a Notice of Appeal with the Third Circuit Court of Appeals. On August 26, 2014, Plaintiff filed his appellant brief. The Company filed its appellee brief on October 14, 2014.

· Premo v. Family Dollar Stores of Massachusetts, Inc., was filed in Worcester County Superior Court in the State of Massachusetts for alleged violations of the Massachusetts overtime law on April 26, 2013. The plaintiffs are seeking unpaid overtime for a class of current and former Massachusetts Store Managers whom plaintiffs claim are not properly classified as exempt from overtime under Massachusetts law. The Company removed the case to federal district court in Massachusetts on May 28, 2013. The plaintiffs challenged the removal to federal court. On March 28, 2014, the court remanded the claim back to state court. On April 7, 2014, the Company filed an interlocutory petition for appellate relief from the remand decision to the United States Court of Appeals for the 1st Circuit and awaits the appellate court’s ruling. In the interim, the Company filed its answer to the lawsuit on May 13, 2014. The Company currently awaits the Court’s ruling on its motion.

Considering, among other factors, that the Company has obtained multiple decisions ruling its Store Managers are properly classified as exempt from overtime, the Company cannot reasonably estimate the possible loss or range of loss that may result from these cases, except for Hegab and Farley, which are subject to preliminary settlements.

Gender pay litigation

Luanna Scott, et al. v. Family Dollar Stores, Inc.

On October 14, 2008, a complaint was filed in the U.S. District Court in Birmingham, Alabama captioned Scott, et al. v. Family Dollar Stores, Inc. alleging discriminatory pay practices with respect to the Company’s female Store Managers. This case was pled as a putative class action or collective action under applicable statutes on behalf of all Family Dollar female Store Managers. The plaintiffs seek recovery of back pay, compensatory and punitive money damages, recovery of attorneys’ fees, and equitable relief. The case was transferred to the United States District Court for the Western District of North Carolina in November 2008.

Presently, there are 48 named plaintiffs in the Scott case. On January 13, 2012, the trial court granted the Company’s Motion to Strike the class allegations asserted in the complaint based in part upon the United States Supreme Court’s ruling in Dukes v. Wal-Mart. The plaintiffs filed an appeal of the Court’s dismissal of the class allegations to the United States Court of Appeals for the Fourth Circuit. On October 16, 2013, the Fourth Circuit Court of Appeals partially reversed the trial court’s ruling. While the Fourth Circuit agreed the original Complaint should not proceed as a class action, it remanded the case and instructed the trial court to allow the amendment of the complaint, and then consider, based upon the amended complaint, whether the case should proceed as a class action. On November 14, 2013, the Fourth Circuit denied further en banc review of the decision. On January 24, 2014, the Company filed a Petition for Writ of Certiorari to the United States Supreme Court. On June 30, 2014 the United States Supreme Court denied further review of the Fourth Circuit’s decision. The case is now back with the district court. On September 8, 2014, the district court entered a new Pretrial Order and Scheduling Plan and the parties will proceed with limited discovery pursuant to those Orders.

The Company has tendered the matter to its Employment Practices Liability Insurance (“EPLI”) carrier for coverage under its EPLI policy. At this time, the Company expects the EPLI carrier will participate in any resolution of the case. The Company has exceeded its insurance retention and expects any additional legal fees and settlements will be paid by the EPLI carrier. No reserve is appropriate due to the status of the case.

Shareholder litigation

Three putative class action lawsuits have been filed against Family Dollar, its directors, Dollar Tree and merger sub in the Delaware Court of Chancery: Shiva Y. Stein v. Family Dollar Stores, Inc., et al., C.A. No. 9985, filed on July 31, 2014, Darrell Wickert v. Family Dollar Stores, Inc., et al., C.A. No. 10025, filed on August 11, 2014, and Stuart Friedman v. Family Dollar Stores, Inc., et al., C.A. No. 10080, filed on September 3, 2014. On August 26, 2014, the Stein and Wickert actions were consolidated under the caption In re Family Dollar Stores, Inc. Stockholder, Litig., C.A. No. 9985-CB. On September 11, 2014, all three actions were

consolidated under the caption In re Family Dollar Stores, Inc. Stockholder Litig., C.A. No. 9985-CB.

Each of the three actions has been brought on behalf of a putative class of Family Dollar’s stockholders, and each alleges generally that the members of the Family Dollar board breached their fiduciary duties in connection with the merger by, among other things, carrying out a process that the plaintiff alleges did not ensure adequate and fair consideration to Family Dollar’s stockholders. The plaintiffs further allege that Family Dollar and Dollar Tree aided and abetted the individual defendants’ breaches of their fiduciary duties. The plaintiffs seek equitable relief to enjoin consummation of the merger, rescission of the merger and/or rescissory damages, and attorneys’ fees and costs.

On August 28, 2014, the plaintiffs in the consolidated action filed motions for expedited proceedings and for a preliminary injunction enjoining the acquisition. On September 3, 2014, the plaintiffs in the consolidated action filed a motion for a temporary restraining order to require Family Dollar to terminate its rights agreement and to direct the Family Dollar board to deem the terms of Dollar General’s proposal sufficient to warrant entering into negotiations with Dollar General under the terms of the Dollar Tree merger agreement. At a hearing on September 10, 2014, the Delaware Court of Chancery concluded that the temporary restraining order application did not merit scheduling a hearing to consider such relief, and declined to do so. At the same hearing, the Delaware Court of Chancery declined to then schedule a hearing on the plaintiffs’ motion for a preliminary injunction, directed the parties to commence document discovery and denied the plaintiffs’ request to commence the taking of depositions. The Company believes these lawsuits are without merit and intends to vigorously defend the claims in these actions. Due to the preliminary status, the Company cannot reasonably estimate the possible loss or range of loss that may result from these lawsuits.

Other litigation

Winn-Dixie Stores, Inc., et al. v. Family Dollar Stores of Florida, Inc.

On March 5, 2014, the Company was served with a lawsuit entitled Winn-Dixie Stores, Inc., et al. v. Family Dollar Stores of Florida, Inc. in the Circuit Court for the Eleventh Judicial Circuit, in and for Miami-Dade County, Florida (the “Circuit Court”). In this lawsuit, Winn-Dixie Stores, Inc. (“Winn-Dixie”) alleges that 57 Family Dollar stores are currently, or have previously been, co-located in a shopping center with a Winn-Dixie store and are violating, or have violated, certain restrictive covenants Winn-Dixie contends are binding on the occupants of the shopping centers. Winn-Dixie seeks damages and injunctive relief limiting the sale of food and other items sold in the Company’s stores at issue in the lawsuit.

This case follows similar actions brought by Winn-Dixie against Dollar General Corporation, Dollar Tree, Inc., and Big Lots, Inc. The case against the Company is in the initial stages of litigation and the Company is evaluating Winn-Dixie’s claims. The Company previously filed and prevailed on a Motion to Dismiss Winn-Dixie’s Amended Complaint. Winn-Dixie filed a Second Amended Complaint on September 12, 2014. The Company is in the process of evaluating the Second Amended Complaint. Winn-Dixie has also filed a Motion for Temporary Injunction seeking to limit the Company’s sale of food and other items in the stores at issue. The Circuit Court has not set a hearing date for the Motion for Temporary Injunction.

This case has been assigned a trial date of January 4, 2016. Due to the preliminary status, the Company cannot reasonably estimate the possible loss or range of loss that may result from this case.

Reginald Moore, et al. v. Family Dollar Stores, Inc.

On August 13, 2014, the Company was served with a putative class action petition entitled Reginald Moore, et al. v. Family Dollar Stores, Inc. in the Circuit Court of the City of St. Louis, Missouri. Mr. Moore contends that he, and others similarly situated, received SMS text message advertisements from the Company, without providing express written consent in violation of the Telephone Consumer Protection Act (“TCPA”). Mr. Moore has requested that the court enter an order certifying the action as a class action, and appointing him as representative of the class. Mr. Moore further seeks judgment in favor of himself, and the proposed class, for all damages available under the TCPA, including statutory damages of $500 per violation, or $1,500 per violation if the Company willfully violated the TCPA.

A Notice of Removal was filed on September 9, 2014, along with a Disclosure of Corporate Interest to remove the case from the Circuit Court of the City of St. Louis, Missouri, to the United States District Court for the Eastern District of Missouri, Eastern Division.

The case against the Company is in the initial stages of litigation and the Company is working to evaluate the allegations contained in the class action petition. Due to the preliminary status, the Company cannot reasonably estimate the possible loss or range of loss that may result from this case.

Other matters

The Company is involved in numerous other legal proceedings and claims incidental to its business, including litigation related to alleged failures to comply with various state and federal employment laws, some of which are, or may be pled as class or collective actions, and litigation related to alleged personal or property injury damage, as to which the Company carries insurance coverage and/or has established accrued liabilities as set forth in the Company’s Consolidated Financial Statements. While the ultimate outcome cannot be determined, the Company currently believes these proceedings and claims, both individually and in the aggregate, are not expected to have a material impact on the Company’s Consolidated Financial Statements. However, the outcome of any litigation is inherently uncertain and, if decided adversely to the Company, or, if the Company determines settlement of such actions is appropriate, the Company may be subject to liability material to the Company’s Consolidated Financial Statements.

14. Stock-based compensation:

The Family Dollar Stores, Inc. 2006 Incentive Plan (the “2006 Plan”) permits the granting of a variety of compensatory award types. The Company currently grants non-qualified stock options and performance share rights under the 2006 Plan. Shares issued related to stock options and performance share rights represent new issuances of common stock. A total of 10.2 million common shares are reserved and available for issuance under the 2006 Plan, plus any shares awarded under the Company’s previous plan (1989 Non-Qualified Stock Option Plan) that expired or were canceled or forfeited after the adoption of the 2006 Plan. As of August 30, 2014, there were 8.2 million shares remaining available for grant under the 2006

Plan. The Company also issues shares under the 2006 Plan in connection with director compensation. These shares are currently issued out of treasury stock and are not material.

The Company’s results for fiscal 2014, fiscal 2013, and fiscal 2012 include stock-based compensation expense of $15.4 million, $16.3 million, and $15.9 million, respectively. These amounts are included within Selling, general and administrative expenses on the Consolidated Statements of Income. Tax benefits recognized in fiscal 2014, fiscal 2013, and fiscal 2012 for stock- based compensation totaled $5.9 million, $6.2 million, and $5.9 million, respectively.

Stock options

The Company grants stock options to key employees at prices not less than the fair market value of the Company’s common stock on the grant date. The Company’s practice for a number of years has been to make a single annual grant to all employees participating in the stock option program and generally to make other grants only in connection with employment or promotions. Options expire five years from the grant date and are exercisable to the extent of 40% after the second anniversary of the grant and an additional 30% at each of the following two anniversary dates on a cumulative basis. Compensation cost is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the grant-date fair value of each option. The fair values of options granted were estimated using the following weighted-average assumptions:

	Years ended
	August 30, 2014		August 31, 2013		August 25, 2012
Expected dividend yield	1.84	%	1.41	%	1.56	%
Expected stock price volatility	27.6	%	33.2	%	34.50	%
Weighted average risk-free interest rate	1.26	%	0.58	%	0.74	%
Expected life of options (years)	4.48		4.39		4.39

The expected dividend yield is based on the projected annual dividend payment per share divided by the stock price on the grant date. Expected stock price volatility is derived from an analysis of the historical and implied volatility of the Company’s publicly traded stock. The risk-free interest rate is based on the U.S. Treasury rates on the grant date with maturity dates approximating the expected life of the option on the grant date. The expected life of the options is based on an analysis of historical and expected future exercise behavior, as well as certain demographic characteristics. These assumptions are evaluated and revised for future grants, as necessary, to reflect market conditions and experience. There were no significant changes made to the methodology used to determine the assumptions during fiscal 2014. The weighted- average grant-date fair value of stock options granted was $13.93 during fiscal 2014, $16.47 during fiscal 2013 and $13.10 during fiscal 2012.

The following table summarizes the transactions under the stock option plans during fiscal 2014:

	Options outstanding (in thousands)		Weighted- average exercise price (in dollars)		Weighted-average remaining contractual life (in years)	Aggregate intrinsic value (in thousands)
Balance at August 31, 2013	1,664		$	50.71
Granted	684		68.66
Exercised	(523	)	36.61
Forfeited	(251	)	62.19
Expired	(2	)	29.37
Balance at August 30, 2014	1,572		$	61.38	3.01	$	28,999
Exercisable at August 30, 2014	203		$	46.64	1.40	$	6,733

The total intrinsic value of stock options exercised was $16.9 million during fiscal 2014, $30.2 million during fiscal 2013, and $28.7 million during fiscal 2012. As of August 30, 2014, there was approximately $11.0 million of unrecognized compensation cost related to outstanding stock options. The unrecognized compensation cost will be recognized over a weighted- average period of 2.6 years.

Performance share rights

The Company grants performance share rights to key employees on an annual basis and in connection with employment or promotion. Performance share rights give employees the right to receive shares of the Company’s common stock at a future date based on the Company’s performance relative to a peer group. Performance is measured based on two pre-tax metrics: Return on Equity and Income Growth. The Leadership Development and Compensation Committee of the Board of Directors establishes the peer group and performance metrics. The performance share rights vest at the end of the performance period (generally 3 years) and the shares are issued shortly thereafter. The actual number of shares issued can range from 0% to 200% of the employee’s target award depending on the Company’s performance relative to the peer group.

The Company’s performance share rights have a service condition and performance condition. The service condition is an explicit requisite service period that is known at grant date and is generally three years. The performance condition is the Company’s performance against its peer group. In accordance with ASC 718, the Company values the performance share rights at the grant date based on the most probable outcome of payout and the most probable outcome is re-evaluated in each reporting period. As a result, the Company adjusts compensation cost throughout the term of the award to reflect its estimate of the most probable payout of shares. Upon vesting, the appropriate number of shares are issued and compensation cost reflects the total grant date fair value of those shares.

The following table summarizes the transactions under the performance share rights program during fiscal 2014:

(in thousands, except per share amounts)	Performance share rights outstanding		Weighted average grant-date fair value
Nonvested—August 31, 2013	421		$	54.26
Granted	209		65.08
Vested	(179	)	46.84
Cancellations	(77	)	58.43
Adjustments	44		N/A
Nonvested—August 30, 2014	418		$	61.01

The grant-date fair value of the performance share rights is based on the stock price on the grant date. The weighted-average grant-date fair value of performance share rights granted was $65.08 during fiscal 2014, $64.34 during fiscal 2013, and $52.42 during fiscal 2012. Compensation cost is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period and adjusted quarterly to reflect the ultimate number of shares expected to be issued. The performance adjustments of performance share rights outstanding in the table above represent the performance adjustment for shares vested during the period. The total fair value of performance share rights vested was $12.8 million during fiscal 2014, $16.4 million during fiscal 2013, and $22.4 million during fiscal 2012. As of August 30, 2014, there was approximately $10.8 million of unrecognized compensation cost related to outstanding performance share rights, based on the Company’s most recent performance analysis. The unrecognized compensation cost will be recognized over a weighted-average period of 1.5 years.

15. Shareholders’ equity:

Stock repurchases

During fiscal 2014, the Company purchased a total of 1.8 million shares of its common stock at a cost of $125.0 million. All shares are purchased pursuant to share repurchase authorizations approved by the Board of Directors. $70.8 million of the $125.0 million repurchases were from the Board grant announced on September 28, 2011, which depleted this share repurchase authorization. The remaining $54.2 million of repurchases were from the Board grant announced on January 17, 2013. A summary of the share repurchase activity for fiscal 2014 is as follows:

(in thousands) Authorization announced	Authorized amount		Repurchases through fiscal 2013		Repurchases during fiscal 2014		Remaining repurchase authorization
September 28, 2011	$	250,000	$	179,209	$	70,791	$	—
January 17, 2013	300,000		—		54,220		245,780
Total	$	550,000	$	179,209	$	125,011	$	245,780

During fiscal 2013, the Company purchased a total of 1.2 million shares of its common stock at a cost of $75.0 million, all of which were purchased on the open market.

During fiscal 2012, the Company purchased a total of 3.2 million shares of its common stock at a cost of $191.6 million, all of which were purchased on the open market.

All shares were purchased pursuant to share repurchase authorizations approved by the Board of Directors. On September 28, 2011, the Company announced the Board of Directors authorized the Company to purchase up to $250 million of the Company’s outstanding common stock. This authorization was depleted with shares repurchased during fiscal 2014. On January 17, 2013, the Company announced the Board of Directors authorized the Company to purchase up to an additional $300 million of the Company’s outstanding common stock.

As of August 30, 2014, the Company had $245.8 million remaining under the current share repurchase authorization. There is no expiration date related to the active share repurchase authorization. Shares purchased under the share repurchase authorizations are generally held in treasury or are canceled and returned to the status of authorized but unissued shares.

Retirement of treasury shares

During fiscal 2012, the Company retired 29.4 million shares of its common stock held in treasury. The shares were returned to the status of authorized but unissued shares. As a result, the treasury stock balance decreased by approximately $1.2 billion. As a part of the retirement, the Company reduced its Common Stock, Capital in Excess of Par, and Retained Earnings balances by approximately $2.9 million, $60.1 million, and $1.1 billion, respectively. Refer to Note 1 for the Company’s accounting policy for retirements of treasury shares.

Stockholders’ rights plan

On June 8, 2014, the Company adopted a stockholders’ rights plan whereby the Board of Directors authorized and declared a dividend distribution of one right for each outstanding share of common stock of the Company to the stockholders of record at the close of business on June 19, 2014. The rights are not presently exercisable and remain attached to the shares of common stock until the occurrence of certain triggering events. The rights will expire on June 8, 2015, unless exercised, redeemed or exchanged prior that time. The Board of Directors may terminate the rights plan before the expiration date or extend the expiration date.

Dividends

During fiscal 2014, the Company paid cash dividends of $1.14 per share for a total of $130.1 million. During fiscal 2013, the Company paid cash dividends of $0.94 per share for a total of $108.3 million. During fiscal 2012, the Company paid cash dividends of $0.78 per share for a total of $91.4 million.

16. Net income per common share:

Basic net income per common share is computed by dividing net income by the weighted average number of shares outstanding during each period. Diluted net income per common share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period. In the calculation of diluted net income per common share, the denominator includes the number of additional common shares that would have been outstanding if the Company’s outstanding dilutive stock options and performance share rights had been exercised, as determined by the treasury stock method.

During the second quarter of fiscal 2014, the Company instituted an Employee Stock Purchase Plan which allows employees to purchase Company shares at a discount. Shares are purchased on a semi-annual basis with the Company’s expense equal to 15% of the closing price on the date of purchase. The share- based payment expense is recognized on a straight-line basis over the six-month offering period. During the fourth quarter of fiscal 2014, a semi-annual share purchase occurred and these shares are included in basic net income per common share. As of August 30, 2014, the incremental potential shares that would be issuable, if the reporting date were the end of the offering period, were not material and were included in diluted net income per common share.

Certain stock options and performance share rights, which have been summarized in the table below, were excluded from the calculation of diluted net income per common share because their effects were antidilutive.

(in thousands)		52 weeks ended August 30, 2014		53 weeks ended August 31, 2013		52 weeks ended August 25, 2012
Antidilutive shares		966		486		291

The following table sets forth the computation of basic and diluted net income per common share:

(in thousands, except per share amounts)	52 weeks ended August 30, 2014		53 weeks ended August 31, 2013		52 weeks ended August 25, 2012
Basic net income per share:
Net income	$	284,503	$	443,575	$	422,240
Weighted average number of shares outstanding	114,035		115,252		117,097
Net income per common share—basic	$	2.49	$	3.85	$	3.61
Diluted net income per share:
Net income	$	284,503	$	443,575	$	422,240
Weighted average number of shares outstanding	114,035		115,252		117,097
Effect of dilutive securities	386		553		961
Weighted average shares—diluted	114,421		115,805		118,058
Net income per common share—diluted	$	2.49	$	3.83	$	3.58

17. Segment information:

The Company operates a chain of more than 8,000 general merchandise retail discount stores in 46 states, serving the basic needs of customers primarily in the low- and middle-income brackets. The stores are supported by 11 distribution centers and one Store Support Center. All stores operate under the Family Dollar name and are substantially the same in terms of size, merchandise, customers, distribution, and operations. The Company has no franchised locations or other lines of business. All the Company’s operations are located in the United States with the exception of certain sourcing entities located in Asia and Europe. The foreign operations solely support domestic operations and are not material. The Company manages the business

on the basis of one operating segment and therefore, has only one reportable segment. The following table presents net sales by classes of similar products.

(in thousands)	52 weeks ended August 30, 2014		53 weeks ended August 31, 2013		52 weeks ended August 25, 2012
Classes of similar products:
Consumables	$	7,703,549	$	7,523,289	$	6,436,719
Home Products	1,003,685		1,053,670		1,067,541
Apparel and Accessories	767,608		785,384		822,839
Seasonal and Electronics	1,014,488		1,029,114		1,003,906
Net Sales	$	10,489,330	$	10,391,457	$	9,331,005

The following table describes the Company’s product categories in more detail:

Consumables		Batteries
		Diapers
		Food
		Hardware and automotive supplies
		Health and beauty aids
		Household chemicals
		Paper products
		Pet food and supplies
		Tobacco

Home Products		Domestics, including blankets, sheets and towels
		Giftware
		Home décor
		Housewares

Apparel and Accessories		Boys’ and girls’ clothing
		Fashion accessories
		Infants’ clothing
		Men’s clothing
		Shoes
		Women’s clothing

Seasonal and Electronics		Personal electronics, including pre-paid cellular phones and services
		Seasonal goods
		Stationery and school supplies
		Toys

18. Unaudited summaries of quarterly results:

(in thousands, except per share amounts)	13 weeks ended November 30, 2013		13 weeks ended March 1, 2014(2)		13 weeks ended May 31, 2014(4)		13 weeks ended August 31, 2014(3)(5)
Fiscal 2014
Net sales	$	2,499,691	$	2,716,621	$	2,658,964	$	2,614,054
Gross profit(1)	856,841		902,295		910,853		861,297
Net income	78,027		90,869		81,147		34,460
Diluted net income per common share(1)	$	0.68	$	0.80	$	0.71	$	0.30
Fiscal 2013
Net sales	$	2,421,688	$	2,893,997	$	2,573,506	$	2,502,266
Gross profit	826,794		967,050		892,458		868,443
Net income	80,279		140,145		120,938		102,213
Diluted net income per common share(1)	$	0.69	$	1.21	$	1.05	$	0.88

(1) The sum of the quarterly figures may not equal the annual figures due to rounding.

(2) The second quarter of fiscal 2014 included 13 weeks, as compared to 14 weeks in the second quarter of fiscal 2013. The extra week in the second quarter of fiscal 2013 contributed approximately $189 million in net sales and $0.07 of diluted net income per common share.

(3) The fourth quarter of fiscal 2013 includes a $5.0 million favorable accounting adjustment to Gross profit related to certain vendor allowances.

(4) The third quarter of fiscal 2014 includes $24.5 million of restructuring charges, of which $1.5 million is classified in Cost of sales—restructuring and $23.0 million is classified in Restructuring on the Consolidated Statement of Income. A summary of restructuring charges is shown below.

(5) The fourth quarter of fiscal 2014 includes $65.6 million of restructuring charges, of which $10.4 million is classified in Cost of sales—restructuring and $55.2 million is classified in Restructuring on the Consolidated Statement of Income. A summary of restructuring charges is shown below. Additionally, $9.4 million of fees related to the pending merger with Dollar Tree are included in the fourth quarter of fiscal 2014.

Restructuring charges

(in thousands) Charge	Classification of charge	13 weeks ended May 31, 2014		13 weeks ended August 30, 2014		52 weeks ended August 30, 2014
Inventory write-downs	Non-cash	$	1,486	$	10,444	$	11,930
Cost of sales—restructuring		1,486		10,444		11,930
Property and equipment impairments	Non-cash	19,041		884		19,925
Employee termination benefits	Cash	3,842		—		3,842
Lease obligations	Cash	—		46,142		46,142
Other	Cash	113		8,158		8,271
Restructuring		22,996		55,184		78,180
Total restructuring charges		$	24,482	$	65,628	$	90,110

19. Related party transactions:

There were no material related party transactions during fiscal 2014, fiscal 2013 or fiscal 2012.

EX-99.3 12 a15-15183_1ex99d3.htm EX-99.3

Exhibit 99.3

FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(in thousands, except per share and share amounts)	May 30, 2015			August 30, 2014
Assets
Current assets:
Cash and cash equivalents	$	215,993		$	139,840
Short-term investment securities	4,003			8,800
Restricted cash and investments (Note 5)	32,120			31,380
Merchandise inventories	1,631,925			1,609,932
Deferred income taxes	38,520			65,856
Income tax refund receivable	72,649			64,458
Prepayments and other current assets	176,026			181,780
Total current assets	2,171,236			2,102,046
Property and equipment, net	1,691,739			1,688,213
Other assets	70,142			67,036
Total assets	$	3,933,117		$	3,857,295

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term borrowings (Note 4)	$	—		$	—
Current portion of long-term debt (Note 4)	185,200			16,200
Accounts payable	643,101			773,021
Accrued liabilities	330,786			335,054
Income taxes	4,755			4,755
Total current liabilities	1,163,842			1,129,030
Long-term debt (Note 4)	299,139			484,226
Other liabilities	305,854			316,382
Deferred gain	213,806			227,080
Deferred income taxes	96,341			34,852
Commitments and contingencies (Note 9)
Shareholders’ equity (Note 7):
Preferred stock, $1 par; authorized 500,000 shares; no shares issued and outstanding	—			—
Common stock, $0.10 par; authorized 600,000,000 shares; issued 121,253,157 shares at May 30, 2015, and 120,749,980 shares at August 30, 2014, and outstanding 114,514,184 shares at May 30, 2015, and 113,986,257 shares at August 30, 2014	12,125			12,077
Capital in excess of par	357,641			333,579
Retained earnings	1,886,721			1,724,041
Accumulated other comprehensive loss	(334		)	(489		)
Common stock held in treasury, at cost (6,738,973 shares at May 30, 2015, and 6,763,723 shares at August 30, 2014)	(402,018		)	(403,483		)
Total shareholders’ equity	1,854,135			1,665,725
Total liabilities and shareholders’ equity	$	3,933,117		$	3,857,295

See Notes to the Consolidated Condensed Financial Statements.

FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	39 Weeks Ended		39 Weeks Ended
(in thousands, except per share amounts)	May 30, 2015		May 31, 2014
Net sales	$	8,082,866	$	7,875,276
Costs and expenses:
Cost of sales	5,355,667		5,203,802
Cost of sales - restructuring	—		1,486
Selling, general and administrative	2,390,926		2,265,608
Restructuring	—		22,996
Merger fees	21,781		—
Cost of sales and operating expenses	7,768,374		7,493,892
Operating profit	314,492		381,384
Investment income	143		162
Interest expense	21,812		22,256
Other income	24,409		23,334
Income before income taxes	317,232		382,624
Income taxes	119,206		132,581
Net income	$	198,026	$	250,043
Net income per common share — basic	$	1.73	$	2.19
Weighted average shares — basic	114,378		114,066
Net income per common share — diluted	$	1.73	$	2.18
Weighted average shares — diluted	114,636		114,458
Dividends declared per common share	$	0.31	$	0.83

See Notes to the Consolidated Condensed Financial Statements.

FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	39 Weeks Ended		39 Weeks Ended
(in thousands)	May 30, 2015		May 31, 2014
Net income	$	198,026	$	250,043
Other comprehensive income:
Unrealized net gains on investment securities (net of taxes)	68		640
Other	87		40
Other comprehensive income	155		680
Comprehensive income	$	198,181	$	250,723

There were no material reclassifications from Accumulated other comprehensive loss into Net income.

See Notes to the Consolidated Condensed Financial Statements.

FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	39 Weeks Ended			39 Weeks Ended
(in thousands)	May 30, 2015			May 31, 2014
Cash flows from operating activities:
Net income	$	198,026		$	250,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	214,198			195,671
Amortization of deferred gain	(14,244		)	(12,642		)
Impairment on property and equipment - restructuring	—			19,041
Lease obligations on closed stores due to restructuring initiatives	(13,613		)	—
Merger fees	(15,249		)	—
Deferred income taxes	92,673			9,190
Excess tax benefits from stock-based compensation	(3,722		)	(5,510		)
Stock-based compensation	8,165			12,639
Loss on disposition of property and equipment	4,593			8,335
Changes in operating assets and liabilities:
Merchandise inventories	(21,993		)	(124,546		)
Prepayments and other current assets	5,809			(50,768		)
Other assets	(2,508		)	9,385
Accounts payable and accrued liabilities	(102,855		)	(33,042		)
Income taxes	(8,191		)	(24,728		)
Other liabilities	1,549			(67		)
Net cash provided by operating activities	342,638			253,001

Cash flows from investing activities:
Purchases of restricted and unrestricted investment securities	(15,015		)	(50,422		)
Sales of restricted and unrestricted investment securities	18,347			63,715
Net change in restricted cash	27			390
Capital expenditures	(253,778		)	(307,183		)
Net proceeds from sale-leaseback	27,111			32,538
Proceeds from dispositions of property and equipment	2,402			563
Net cash used in investing activities	(220,906		)	(260,399		)

Cash flows from financing activities:
Short-term borrowings	1,120,000			1,916,000
Repayment of short-term borrowings	(1,120,000		)	(1,640,000		)
Repayment of long-term debt	(16,200		)	(16,200		)
Repurchases of common stock	—			(125,038		)
Change in cash overdrafts	(16,950		)	(29,138		)
Proceeds from exercise of employee stock options	19,185			13,794
Excess tax benefits from stock-based compensation	3,722			5,510
Payment of dividends	(35,336		)	(94,795		)
Net cash (used in) / provided by financing activities	(45,579		)	30,133

Net change in cash and cash equivalents	76,153			22,735
Cash and cash equivalents at beginning of period	139,840			140,999
Cash and cash equivalents at end of period	$	215,993		$	163,734

See Notes to the Consolidated Condensed Financial Statements.

FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. General Information

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements contain all adjustments (consisting of only normal recurring accruals, except as indicated in the Notes of this Report) necessary to present fairly the following:

· The financial position as of May 30, 2015.

· The results of operations for the 13 and 39 weeks ended May 30, 2015 (“third quarter” and “first three quarters” of fiscal 2015, respectively), and the 13 and 39 weeks ended May 31, 2014 (“third quarter” and “first three quarters” of fiscal 2014, respectively).

· Comprehensive income for the third quarter and first three quarters of fiscal 2015 and the third quarter and first three quarters of fiscal 2014.

· The cash flows for the first three quarters of fiscal 2015 and the first three quarters of fiscal 2014.

The unaudited Consolidated Condensed Financial Statements have been prepared for Family Dollar Stores, Inc., and its subsidiaries (“Family Dollar”) as a standalone company and should be read in conjunction with the Consolidated Financial Statements and Footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 30, 2014 (“fiscal 2014”).

The results of operations for the third quarter and first three quarters of fiscal 2015 are not necessarily indicative of the results to be expected for the full year.

The preparation of the Company’s Consolidated Condensed Financial Statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03 Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, however does not impact the recognition and measurement of debt issuance costs. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and early adoption is permitted. The Company does not expect the ASU to have a material impact on the Consolidated Condensed Financial Statements.

In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements - Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, and early adoption is permitted. The Company does not expect the ASU to have a material impact on the Consolidated Condensed Financial Statements.

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The ASU is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company is still assessing the impact of this ASU on the Consolidated Condensed Financial Statements.

2013. The ASU was effective for the Company beginning in the first quarter of fiscal 2015 and did not have a material impact on the Company’s Consolidated Condensed Financial Statements.

2. Restructuring and Related Activities

Dollar Tree Merger

On January 22, 2015, at the special meeting of the Company’s stockholders, the Company’s stockholders adopted the Agreement and Plan of Merger, dated as of July 27, 2014, as amended by Amendment No. 1 on September 4, 2014, and as it may be further amended from time to time, by and among the Company, Dollar Tree, Inc. (“Dollar Tree”), and Dime Merger Sub, Inc., a wholly-owned subsidiary of Dollar Tree (“merger agreement”). Upon the terms and subject to the conditions of the merger agreement, a subsidiary of Dollar Tree will be merged with and into Family Dollar, with Family Dollar continuing as the surviving entity and a wholly-owned subsidiary of Dollar Tree after consummation of the merger.

The completion of the merger remains subject to Federal Trade Commission (“FTC”) clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and other customary closing conditions. Dollar Tree, with support from Family Dollar, is continuing to work with the Federal Trade Commission on obtaining FTC clearance under the HSR Act, and on May 29, 2015, Dollar Tree announced that it entered into a definitive agreement with Sycamore Partners to sell a divestiture package of 330 Family Dollar stores, contingent on completion of the merger, in order to address FTC concerns.

On June 16, 2015, Dollar Tree and Family Dollar also announced they signed an Agreement Containing Consent Orders proposed by the FTC staff. The agreement includes a draft Decision and Order, which remains subject to acceptance and final approval by the FTC Commissioners, and would permit Dollar Tree to acquire Family Dollar subject to an obligation to complete the divestiture within a specified period following the closing of the acquisition of Family Dollar. Dollar Tree has informed Family Dollar that Dollar Tree intends to close the merger in early July 2015, shortly after the FTC accepts the Decision and Order for public comment.

In conjunction with the pending merger, the Company incurred expenses of $4.7 million in the third quarter of fiscal 2015 and $21.8 million in the first three quarters of fiscal 2015, consisting primarily of legal fees. The Company did not consider these expenses deductible for income taxes.

As of May 30, 2015, the Company’s accrual for fees associated with the pending merger was $6.5 million, included within Accrued liabilities in the Consolidated Condensed Balance Sheet.

Fiscal 2014 Strategic Initiatives

During the second half of fiscal 2014, the Company completed a series of restructuring initiatives which included closing 377 underperforming stores and reducing expenses through workforce optimization. As a result of these initiatives, the Company’s restructuring accrual as of August 30, 2014, was $48.7 million, consisting of lease obligations, termination benefits, and other charges related to the store closures. As of May 30, 2015, the Company has paid all termination benefits and other charges associated with these restructuring initiatives.

The Company will continue to incur payments for lease obligations on each closed store until either the lease term ends or a termination agreement is reached with the landlord. The Company’s lease obligations on closed stores due to restructuring decreased $13.6 million during the first three quarters of fiscal 2015, which resulted in a remaining accrual balance of $30.1 million as of May 30, 2015. The decrease was primarily due to cash paid for recurring lease obligations and negotiated lease termination agreements. The balance due in the next 12 months was included in Accrued liabilities, and the remaining balance was included in Other liabilities in the Consolidated Condensed Balance Sheet.

3. Fair Value Measurements

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3—Inputs that are unobservable for the asset or liability.

The unobservable inputs in Level 3 can only be used to measure fair value to the extent that observable inputs in Level 1 and Level 2 are not available. The following table represents the Company’s fair value hierarchy as of May 30, 2015, and August 30, 2014, for items required to be measured at fair value on a recurring basis:

	May 30, 2015
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	47,227	$	47,227	$	—	$	—
Investment securities:
Short-term bond mutual fund	4,003		4,003		—		—
Restricted cash and investments: (1)
Money market funds	19		19		—		—
Municipal debt securities	34,867		—		34,867		—
Other assets:
Mutual funds (2)	18,821		18,821		—		—

	August 30, 2014
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	2,502	$	2,502	$	—	$	—
Investment securities:
Auction rate securities	4,800		—		—		4,800
Short-term bond mutual fund	4,000		4,000		—		—
Restricted cash and investments: (1)
Money market funds	46		46		—		—
Municipal debt securities	34,398		—		34,398		—
Other assets:
Mutual funds (2)	19,689		19,689		—		—

(1) As of May 30, 2015, restricted cash and investments of $32.1 million and $2.8 million were included in Restricted cash and investments and Other assets, respectively, in the Consolidated Condensed Balance Sheet. As of August 30, 2014, restricted cash and investments of $31.4 million and $3.0 million were included in Restricted cash and investments and Other assets, respectively, in the Consolidated Balance Sheet.

(2) Represents assets held pursuant to a deferred compensation plan for certain key management employees. The Company recorded a corresponding liability related to the deferred compensation plan in an amount equivalent to the assets above. The liability for the deferred compensation plan was recorded in Other liabilities on the Consolidated Balance Sheets.

On a non-recurring basis, the Company adjusts certain Property and equipment to fair value through impairment charges. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. The fair value of the Property and equipment is determined based on a discounted cash flow analysis using Level 3 inputs. The Company estimates future cash flows based on historical experience and its expectations of future performance. Impairment charges were not material during the first three quarters of fiscal 2015.

Impairment charges were $19.0 million during the first three quarters of fiscal 2014 as a result of charges incurred to close 377 underperforming stores in the second half of fiscal 2014, as discussed in Note 2.

Level 2 Inputs

Auction Rate Securities

During the first quarter of fiscal 2015, the Company settled its remaining $4.8 million auction rate securities (“ARS”) portfolio, which included tax-exempt bonds collateralized by federally guaranteed student loans, at par. There was no further ARS activity, including impairment or unrealized loss, during the third quarter of fiscal 2015.

The ARS portfolio was valued using Level 3 inputs due to continued issues in the global credit and capital markets causing sustained failed auctions and uncertainty surrounding the timing of future liquidity. For the past several years, the Company was able to liquidate its ARS portfolio, at or close to par value, when any of the following events occurred: a buyer was found outside the auction process, the securities were called or refinanced by the issuer, or the underlying securities matured.

The fair value of each security was determined through the use of a discounted cash flow analysis using Level 3 inputs because there was no active market for the Company’s ARS portfolio. The two most significant unobservable inputs used in the analysis were as follows:

The following tables summarize the change in the fair value of the Company’s ARS portfolio measured using Level 3 inputs during the third quarter and first three quarters of fiscal 2015 and the third quarter and first three quarters of fiscal 2014:

	13 Weeks Ended
(in thousands)	May 30, 2015		May 31, 2014
Beginning Balance - Level 3 inputs	$	—	$	16,557
Net unrealized gain included in other comprehensive income	—		89
Ending Balance - Level 3 inputs	$	—	$	16,646

	39 Weeks Ended
(in thousands)	May 30, 2015			May 31, 2014
Beginning Balance - Level 3 inputs	$	4,800		$	22,977
Sales	(4,800		)	(6,946		)
Realized loss on sale of investments	—			(254		)
Net unrealized gain included in other comprehensive income	—			869
Ending Balance - Level 3 inputs	$	—		$	16,646

Additional Fair Value Disclosures

The Company has both public notes and private placement notes. The fair value for the public notes is determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. The fair value for the private placement notes is determined through the use of a discounted cash flow analysis using Level 3 inputs as there are no quoted prices in active markets for these notes. The discount rate used in the analysis was based on borrowing rates available to the Company for debt of the same remaining maturities, issued in the same private placement debt market. A summary of the

estimated fair value of the Company’s current and long-term debt, including the excess fair value over carrying value is as follows:

(in thousands)	May 30, 2015		August 30, 2014
Carrying value of current and long-term debt	$	484,339	$	500,426
Excess fair value over carrying value	26,173		30,019
Estimated fair value of current and long-term debt	$	510,512	$	530,445

4. Current and Long-Term Debt

Short-term Borrowings

On November 13, 2013, the Company entered into two new unsecured revolving credit facilities to replace its prior two unsecured revolving credit facilities. The unsecured revolving credit facilities provide the Company the capacity to borrow up to $900 million, less standby letters of credit needed for collateral for its insurance program of $16.4 million as of May 30, 2015.

As of May 30, 2015 and August 30, 2014, the Company had no short-term borrowings outstanding under its unsecured revolving credit facilities. During the first three quarters of fiscal 2015, the Company had no net borrowings, with $1.12 billion borrowed and repaid, and an average daily outstanding balance of $108.8 million at a weighted-average interest rate of 1.4% under its unsecured revolving credit facilities.

The Company’s unsecured revolving credit facilities contain certain restrictive financial covenants, which include a consolidated debt to consolidated capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth ratio. As of May 30, 2015, the Company was in compliance with all such covenants.

Current Portion of Long-term Debt

On September 27, 2005, the Company obtained $250 million through a private placement of unsecured senior notes due September 27, 2015. The first tranche has an aggregate principal amount of $169 million payable in a single installment on September 27, 2015.

The second tranche has an aggregate principal balance of $81 million, with a required annual principal payment of $16.2 million each September 27 from September 27, 2011, through September 27, 2015. During the first quarter of fiscal 2015, the Company made its scheduled principal payment in the amount of $16.2 million. The next and final principal payment of $16.2 million is due on September 27, 2015.

On June 19, 2015, the Company entered into an amendment to the note purchase agreement governing the unsecured senior notes due September 27, 2015, to amend the notice periods for certain optional prepayments of the notes in connection with the pending merger.

Long-term Debt

5. Restricted Cash and Investments

The Company has restricted a portion of cash and investments to serve as collateral for certain of the Company’s insurance obligations held at its wholly-owned captive insurance subsidiary. These restricted funds cannot be withdrawn from the Company’s account without secured third-party consent. As of May 30, 2015, the Company held $34.9 million in this restricted account, of which $32.1 million was included in Restricted cash and investments and $2.8 million was included in Other assets in the Consolidated Condensed Balance Sheet. As of August 30, 2014, the Company held $34.4 million in this restricted account, of which $31.4 million was included in Restricted cash and investments and $3.0 million was included in Other assets in the Consolidated Balance Sheet. The classification between current and non-current is based on the timing of expected payments of the secured insurance obligations.

6. Build-to-Suit and Sale-Leaseback Transactions

The Company uses build-to-suit and sale-leaseback transactions to construct and lease new stores. In a build-to-suit transaction, an unrelated third-party funds store construction and owns the property throughout and upon completion of construction. In a sale-leaseback transaction, the Company provides funding for store construction and owns the property upon completion of construction. Upon completion of the stores’ construction in build-to-suit transactions and concurrent with the sale of stores in sale-leaseback transactions, the Company enters into agreements to lease the properties over an initial term of 15 years, with four, 5-year fixed renewal options. The Company evaluates each store individually upon certain events during the life of the lease, including individual renewal options. The Company classifies these leases as operating leases, actively uses the leased properties, and considers the leases normal leasebacks.

During the first three quarters of fiscal 2015, the Company completed 210 build-to-suit transactions to support new store growth. Additionally, the Company completed sale-leaseback transactions under which it sold 15 stores to unrelated third-parties for net proceeds of approximately $27.1 million. Upon closing of the transactions, the Company deferred a gain of approximately $1.0 million realized on the sale of the assets and will amortize the gain over the initial lease term.

During the first three quarters of fiscal 2014, the Company completed 230 build-to-suit transactions to support new store growth. Additionally, the Company completed sale-leaseback transactions under which it sold 23 stores to unrelated third-parties for net proceeds of approximately $32.5 million. Upon closing of the transactions, the Company deferred a gain of approximately $0.8 million realized on the sale of the assets and continues to amortize the gain over the initial lease term.

7. Shareholders’ Equity

Stock Repurchases

During the first three quarters of fiscal 2015, the Company did not repurchase shares of its common stock, and under the terms of the Dollar Tree merger agreement, the Company will not repurchase any shares of its common stock. During the first three quarters of fiscal 2014, the Company purchased a total of 1.8 million shares of its common stock at a cost of $125.0 million. All shares were purchased pursuant to share repurchase authorizations approved by the Board of Directors of the Company. Shares purchased under the share repurchase authorizations are generally held in treasury or are canceled and returned to the status of authorized but unissued shares.

As of May 30, 2015, the Company had $245.8 million remaining under the January 17, 2013, share repurchase authorization. The authorization does not have an expiration date, however is subject to the terms of the Dollar Tree merger agreement.

Option Exercises

During the first three quarters of fiscal 2015, a total of 0.4 million stock options with a weighted average exercise price of $51.37 were exercised. The total intrinsic value of the options exercised during the period was $9.8 million. During the first three quarters of fiscal 2014, a total of 0.4 million stock options, with a weighted average exercise price of $35.03, were exercised. The total intrinsic value of the options exercised during the period was $13.2 million.

Dividends

The Company paid no cash dividends during the second or third quarters of fiscal 2015, and under the terms of the Dollar Tree merger agreement, the Company will not pay any further dividends. The Company paid cash dividends of $0.31 per share for a total of $35.3 million during the first quarter of fiscal 2015. During the first three quarters of fiscal 2014, the Company paid cash dividends of $0.83 per share for a total of $94.8 million.

Stockholders’ Rights Plan

Stock-Based Compensation

The Company’s practice is to make a single annual grant to all key employees participating in stock-based compensation programs and to generally make other grants only in connection with employment or promotions. Following is a summary of the Company’s stock-based compensation programs.

Stock Options

The Company awards stock options at prices not less than the fair market value of the Company’s common stock on the grant date, as estimated by the Black-Scholes option-pricing model. Stock options granted prior to October 2014 expire five years from the grant date, and stock options granted during and after October 2014 expire ten years from the grant date. All stock options are exercisable to the extent of 40% after the second anniversary of the grant and an additional 30% at each of the following two anniversary dates on a cumulative basis. Compensation cost is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period.

Performance Share Rights (“PSR”)

During the first quarter of fiscal 2015, the Company discontinued the PSR program as a method for granting new awards. Currently, there are two active tranches of PSRs for plan years 2013 - 2015 and 2014 - 2016.

The Company’s PSRs give employees the right to receive shares of the Company’s common stock at a future date and have both a service condition and a performance condition. The service condition is an explicit requisite service period determined at the grant date and is generally three years. The performance condition is measured based on pre-tax return on equity and pre-tax income growth against a peer group determined by the Leadership Development and Compensation Committee of the Board of Directors. The actual number of shares issued can range from 0% to 200% of the employee’s target award depending on the Company’s performance relative to the peer group.

The Company values the PSRs at the grant date and re-evaluates the value each reporting period based on the most probable outcome of payout. Therefore, the compensation cost is adjusted throughout the term of the award to reflect the estimate of the most probable payout of shares. Upon vesting, the appropriate number of shares are issued, and the compensation cost reflects the total grant date fair value of those shares.

Restricted Stock Units (“RSU”)

During the first quarter of fiscal 2015, the Company implemented an RSU program, which replaces the PSR plan for new award issuances. Currently, there is one active tranche of RSUs for the plan year 2015 - 2017.

The Company’s RSUs give employees the right to receive shares of the Company’s common stock at a future date and have only a service condition. The service condition is an explicit requisite service period determined at the grant date and is generally three years. The Company recognizes expense related to the fair value of RSUs over the requisite service period on a straight-line basis. The fair value is determined using the closing price of the Company’s common stock on the grant date.

Employee Stock Purchase Program (“ESPP”)

During fiscal 2014, the Company instituted an ESPP which allows employees to purchase Company shares at a discount. Shares were purchased on a semi-annual basis with the Company’s expense equal to 15% of the closing price on the date of purchase. The stock-based payment expense was recognized on a straight-line basis over the six-month offering period. The final share purchase under the ESPP was executed during the second quarter of fiscal 2015, and the program has been discontinued.

8. Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of shares outstanding during each period. Shares purchased through the ESPP are included in basic net income per common share.

Diluted net income per common share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period. In the calculation of diluted net income per common share, the denominator includes the number of additional common shares that would have been outstanding if the Company’s outstanding dilutive stock options, PSRs, and RSUs had been exercised, as determined by the treasury stock method. Additionally, the incremental potential

shares that would have been issuable through the ESPP at each reporting date were included in diluted net income per common share.

Certain stock options, PSRs, and RSUs, which have been summarized in the table below, were excluded from the calculation of diluted net income per common share because their effects were antidilutive.

	13 Weeks Ended		39 Weeks Ended
(in thousands)	May 30, 2015	May 31, 2014	May 30, 2015	May 31, 2014
Antidilutive shares	397	1,053	342	970

The following table sets forth the computation of basic and diluted net income per common share:

	13 Weeks Ended				39 Weeks Ended
(in thousands, except per share amounts)	May 30, 2015		May 31, 2014		May 30, 2015		May 31, 2014
Basic Net Income Per Common Share:
Net income	$	79,943	$	81,147	$	198,026	$	250,043
Weighted average number of shares outstanding	114,511		113,829		114,378		114,066
Net income per common share — basic	$	0.70	$	0.71	$	1.73	$	2.19

Diluted Net Income Per Common Share:
Net income	$	79,943	$	81,147	$	198,026	$	250,043
Weighted average number of shares outstanding	114,511		113,829		114,378		114,066
Effect of dilutive securities	244		321		258		392
Weighted average shares — diluted	114,755		114,150		114,636		114,458
Net income per common share — diluted	$	0.70	$	0.71	$	1.73	$	2.18

9. Litigation

North Carolina Multi-District Misclassification Litigation

Presently, there are a total of 10 named plaintiffs in the remaining cases in the MDL, for which the NC Federal Court has not decided the class certification or summary judgment issue. The Company cannot reasonably estimate the possible loss or range of loss that may result from these cases.

Wage and Hour Class Action Litigation

· Hegab v. Family Dollar Stores, Inc., was filed in the United States District Court for the District of New Jersey on March 3, 2011. The plaintiff is seeking unpaid overtime for himself and allegedly similarly situated current and former Store Managers under New Jersey law. The matter was administratively dismissed without prejudice. At the time of dismissal, no class had been certified. On January 14, 2014, the parties preliminarily agreed to resolve the litigation on a claims-made basis. On June 6, 2014, the parties filed a Joint Motion for Preliminary Approval of the settlement with the Court. The Court preliminarily approved the settlement on October 3, 2014. The Court granted final approval of the settlement on March 9, 2015, for an amount not material to the Consolidated Condensed Financial Statements. All class settlement payments have been made per the terms of the settlement agreement.

· Itterly v. Family Dollar Stores of Pennsylvania, Inc., which was formerly pending in the NC Federal Court, was remanded back to the United States District Court for the Eastern District of Pennsylvania on February 8, 2012. The plaintiffs are seeking unpaid overtime for a class of current and former Pennsylvania Store Managers whom the plaintiffs claim are not properly classified as exempt from overtime pay under Pennsylvania law. Discovery closed in June 2012. In August 2013, the Company filed summary judgment requesting the Court rule that Itterly was properly classified as exempt from overtime. The District Court granted the Company’s motion on January 30, 2014, and the case is now dismissed. On February 1, 2014, the plaintiffs filed a Notice of Appeal with the Third Circuit Court of Appeals. On April 9, 2015, the Third Court affirmed the district court’s decision granting summary judgment in favor of Family Dollar. As a result, this case is now dismissed.

· Premo v. Family Dollar Stores of Massachusetts, Inc., was filed in Worcester County Superior Court in the State of Massachusetts for alleged violations of the Massachusetts overtime law on April 26, 2013. The plaintiffs are seeking unpaid overtime for a class of current and former Massachusetts Store Managers whom plaintiffs claim are not properly classified as exempt from overtime under Massachusetts law. The Company removed the case to federal district court in Massachusetts on May 28, 2013. The plaintiffs challenged the removal to federal court. On March 28, 2014, the court remanded the claim back to state court. On April 7, 2014, the Company filed an interlocutory petition for appellate relief from the remand decision to the United States Court of Appeals for the First Circuit. In the interim, the Company filed its answer to the lawsuit on May 13, 2014. The Company currently awaits the Court’s ruling on its motion.

· Steingruber v. Family Dollar Stores of Florida, Inc., was filed in the United States District Court for the Middle District of Florida on February 23, 2015. The lawsuit was brought as a collective action on behalf of the plaintiff and other similarly situated Family Dollar store managers alleging the store managers are misclassified as being exempt from overtime under the FLSA. On April 3, 2015, the Company filed a Motion to Dismiss, or in the alternative to Stay the Case, a Motion to Compel Arbitration, and a Motion to Strike the Collective Action Allegations. Briefing is completed on these motions and they are currently pending before the court.

Considering, among other factors, the Company has obtained multiple decisions ruling its Store Managers are properly classified as exempt from overtime, the Company cannot reasonably estimate the possible loss or range of loss that may result from the Premo and Steingruber cases.

Gender Pay Litigation

Luanna Scott, et al. v. Family Dollar Stores, Inc.

On October 14, 2008, a complaint was filed in the U.S. District Court in Birmingham, Alabama captioned Scott, et al. v. Family Dollar Stores, Inc., alleging discriminatory pay practices with respect to the Company’s female Store Managers. This case was pled as a putative class action or collective action under applicable statutes on behalf of all Family Dollar female Store Managers. The plaintiffs seek recovery of back pay, compensatory and punitive money damages, recovery of attorneys’ fees, and equitable relief. The case was transferred to the United States District Court for the Western District of North Carolina in November 2008.

Wal-Mart. The plaintiffs filed an appeal of the Court’s dismissal of the class allegations to the United States Court of Appeals for the Fourth Circuit. On October 16, 2013, the Fourth Circuit Court of Appeals partially reversed the trial court’s ruling. While the Fourth Circuit agreed the original Complaint should not proceed as a class action, it remanded the case and instructed the trial court to allow the amendment of the complaint, and then consider, based upon the amended complaint, whether the case should proceed as a class action. On November 14, 2013, the Fourth Circuit denied further en banc review of the decision. On January 24, 2014, the Company filed a Petition for Writ of Certiorari to the United States Supreme Court. On June 30, 2014, the United States Supreme Court denied further review of the Fourth Circuit’s decision. The case is now back with the district court. On September 8, 2014, the district court entered a new Pretrial Order and Scheduling Plan and the parties are proceeding with limited discovery pursuant to those Orders.

Shareholder Litigation

Three putative class action lawsuits have been filed against Family Dollar, its directors, Dollar Tree and Dime Merger Sub, Inc., (subsidiary of Dollar Tree established for Family Dollar to merge into upon consummation of merger) in the Delaware Court of Chancery:

· Shiva Y. Stein v. Family Dollar Stores, Inc., et al., C.A. No. 9985, filed on July 31, 2014,

· Darrell Wickert v. Family Dollar Stores, Inc., et al., C.A. No. 10025, filed on August 11, 2014, and

· Stuart Friedman v. Family Dollar Stores, Inc., et al., C.A. No. 10080, filed on September 3, 2014.

On August 26, 2014, the Stein and Wickert actions were consolidated under the caption In re Family Dollar Stores, Inc. Stockholder, Litig., C.A. No. 9985-CB. On September 11, 2014, all three actions were consolidated under the caption In re Family Dollar Stores, Inc. Stockholder Litig., C.A. No. 9985-CB.

Each of the three actions has been brought on behalf of a putative class of Family Dollar’s stockholders, and each alleges, generally, that the members of the Family Dollar Board of Directors breached their fiduciary duties in connection with the pending Dollar Tree merger by, among other things, carrying out a process that the plaintiffs allege did not ensure adequate and fair consideration to Family Dollar’s stockholders. The plaintiffs further allege that Family Dollar and Dollar Tree aided and abetted the individual defendants’ breaches of their fiduciary duties. The plaintiffs seek equitable relief to enjoin consummation of the merger, rescission of the merger and/or rescissory damages, and attorneys’ fees and costs.

On August 28, 2014, the plaintiffs in the consolidated action filed motions for expedited proceedings and for a preliminary injunction enjoining the merger. On September 3, 2014, the plaintiffs in the consolidated action filed a motion for a temporary restraining order to require Family Dollar to terminate its rights agreement and to direct the Family Dollar Board of Directors to deem the terms of Dollar General’s proposal sufficient to warrant entering into negotiations with Dollar General under the terms of the Dollar Tree merger agreement. At a hearing on September 10, 2014, the Delaware Court of Chancery concluded the temporary restraining order application did not merit scheduling a hearing to consider such relief, and declined to do so. A hearing on the plaintiffs’ motion for a preliminary injunction was held on December 5, 2014, and on December 19, 2014, the Delaware Court of Chancery denied, in its entirety, the plaintiffs’ motion for preliminary injunctive relief. On December 24, 2014, the plaintiffs filed an application in the Delaware Court of Chancery to certify an appeal from the denial of preliminary injunctive relief to the Delaware Supreme Court, which application the Delaware Court of Chancery denied on January 2, 2015. The Company believes these lawsuits are without merit and intends to vigorously defend the claims in these actions. Due to the preliminary status, the Company cannot reasonably estimate the possible loss or range of loss that may result from these lawsuits.

Other Litigation

Winn-Dixie Stores, Inc., et al. v. Family Dollar Stores of Florida, Inc.

On March 5, 2014, the Company was served with a lawsuit entitled Winn-Dixie Stores, Inc., et al. v. Family Dollar Stores of Florida, Inc., in the Circuit Court for the Eleventh Judicial Circuit, in and for Miami-Dade County, Florida (the “Circuit Court”). In this lawsuit, Winn-Dixie Stores, Inc. (“Winn-Dixie”) alleges that 57 Family Dollar stores are currently, or have previously been, co-located in a shopping center with a Winn-Dixie store and are violating, or have violated, certain restrictive

covenants Winn-Dixie contends are binding on the occupants of the shopping centers. Winn-Dixie seeks damages and injunctive relief limiting the sale of food and other items sold in the Company’s stores at issue in the lawsuit.

This case follows similar actions brought by Winn-Dixie against Dollar General Corporation, Dollar Tree, Inc., and Big Lots, Inc. The case against the Company is in the discovery stage of litigation and the Company continues to evaluate Winn-Dixie’s claims. The Company previously filed and prevailed on a Motion to Dismiss Winn-Dixie’s Amended Complaint. Thereafter, Winn-Dixie filed a Second Amended Complaint. Winn-Dixie has also filed a Motion for Temporary Injunction seeking to limit the Company’s sale of food and other items in the stores at issue pending final outcome of the suit. The Circuit Court has not set a hearing date for the Motion for Temporary Injunction.

This case has been assigned a trial date of January 4, 2016. Due to the preliminary status of the case, the Company cannot reasonably estimate the possible loss or range of loss that may result from this case.

Reginald Moore, et al. v. Family Dollar Stores, Inc.

On August 13, 2014, the Company was served with a putative class action petition entitled Reginald Moore, et al. v. Family Dollar Stores, Inc., in the Circuit Court of the City of St. Louis, Missouri. Mr. Moore contends that he, and others similarly situated, received Short Message Service (“SMS”) text message advertisements from the Company, without providing express written consent in violation of the Telephone Consumer Protection Act (“TCPA”). Mr. Moore has requested the court enter an order certifying the action as a class action, and appointing him as representative of the class. Mr. Moore further seeks judgment in favor of himself, and the proposed class, for all damages available under the TCPA, including statutory damages of $500 -$1,500 per willful violation.

The Case has been removed from the Circuit Court of the City of St. Louis, Missouri, to the United States District Court for the Eastern District of Missouri, Eastern Division. The Company moved to bifurcate discovery, thus limiting initial discovery to the individual named plaintiff, Reginald Moore. After a hearing on the issue, the judge ruled in favor of the Company and issued an order limiting initial discovery to Mr. Moore’s individual TCPA claim. The parties have conducted initial discovery related to Mr. Moore’s TCPA claim only. Additionally, the Company has filed a Motion for Summary Judgment on Mr. Moore’s individual claim. No ruling has been made on the Company’s Motion for Summary Judgment.

Other Matters

The Company is involved in numerous other legal proceedings and claims incidental to its business, including litigation related to alleged failures to comply with various state and federal employment laws, some of which are, or may be pled as class or collective actions, and litigation related to alleged personal or property injury damage, as to which the Company carries insurance coverage and/or has established accrued liabilities as set forth in the Company’s Consolidated Condensed Financial Statements. While the ultimate outcome cannot be determined, the Company currently believes these proceedings and claims, both individually and in the aggregate, are not expected to have a material impact on the Company’s Consolidated Condensed Financial Statements. However, the outcome of any litigation is inherently uncertain and, if decided adversely to the Company, or, if the Company determines settlement of such actions is appropriate, the Company may be subject to liability material to the Company’s Consolidated Condensed Financial Statements.

10. Segment Information

The Company operates a chain of more than 8,200 general merchandise retail discount stores in 46 states, serving the basic needs of customers primarily in the low- and middle-income brackets. The stores are supported by 11 distribution centers and one Store Support Center. All stores operate under the Family Dollar name and are substantially the same in terms of size, merchandise, customers, distribution, and operations. The Company has no franchised locations or other lines of business. All the Company’s operations are located in the United States with the exception of certain sourcing entities located in Asia and Europe. The foreign operations solely support domestic operations and are not material. The Company manages the business on the basis of one operating segment and therefore, has only one reportable segment. The following table presents net sales by classes of similar products. The combination of Home Products, Apparel and Accessories, and Seasonal and Electronics are referred to as “Discretionary” categories.

	13 Weeks Ended				39 Weeks Ended
(in thousands)	May 30, 2015		May 31, 2014		May 30, 2015		May 31, 2014
Classes of similar products:
Consumables	$	2,022,992	$	1,948,174	$	5,982,901	$	5,753,716
Home Products	251,379		260,129		754,642		782,404
Apparel and Accessories	214,981		210,860		564,810		565,992
Seasonal and Electronics	238,824		239,801		780,513		773,164
Net sales	$	2,728,176	$	2,658,964	$	8,082,866	$	7,875,276

The following table describes the Company’s product categories in more detail:

Consumables		Batteries
		Diapers
		Food
		Hardware and automotive supplies
		Health and beauty aids
		Household chemicals
		Paper products
		Pet food and supplies
		Tobacco

Home Products		Domestics, including blankets, sheets and towels
		Giftware
		Home décor
		Housewares

Apparel and Accessories		Boys’ and girls’ clothing
		Fashion accessories
		Infants’ clothing
		Men’s clothing
		Shoes
		Women’s clothing

Seasonal and Electronics		Personal electronics, including pre-paid cellular phones and services
		Seasonal goods
		Stationery and school supplies
		Toys

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