SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
FAMILY DOLLAR STORES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No Fee Required
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
FAMILY DOLLAR STORES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Family Dollar Stores, Inc. (the Company) will be held at 2:00
o'clock p.m. on Thursday, January 20, 2000, at the office of the
Company at 10401 Old Monroe Road, Matthews, North Carolina, for the
following purposes:
(1) To elect a Board of eight directors;
(2) To ratify the action of the Board of Directors in
selecting PricewaterhouseCoopers LLP as
independent accountants to audit the consolidated
financial statements of the Company and its
subsidiaries for the current fiscal year; and
(3) To transact such other business as may properly
come before the meeting or any adjournments
thereof.
The Board of Directors has fixed the close of business on
November 22, 1999, as the record date for the determination of
Stockholders entitled to notice of and to vote at the meeting or any
adjournments thereof. The voting list of Stockholders will be
available for inspection in accordance with the By-Laws at the
Company's office at 10401 Old Monroe Road, Matthews, North Carolina,
at least ten days prior to the meeting.
Each Stockholder who does not plan to attend the meeting is
requested to date, sign and return the accompanying proxy in the
enclosed postage-paid return envelope.
By Order of the Board of Directors
GEORGE R. MAHONEY, JR.
Executive Vice President-
General Counsel and Secretary
Matthews, North Carolina
November 24, 1999
<PAGE>
FAMILY DOLLAR STORES, INC.
Post Office Box 1017
Charlotte, North Carolina 28201-1017
This Proxy Statement is furnished to the holders of the Common
Stock of Family Dollar Stores, Inc. (the Company) in connection with
the solicitation on behalf of the Board of Directors of the Company
of proxies to be used in voting at the Annual Meeting of Stockholders
to be held on January 20, 2000, or any adjournments thereof. This
Proxy Statement and the enclosed proxy were first sent to
Stockholders on or about November 24, 1999.
The enclosed proxy is for use at the meeting if the Stockholder
will not be able to attend in person. Any Stockholder giving a proxy
may revoke it at any time before it is exercised by delivering
written notice of such revocation to the Secretary of the Company or
by attending the meeting and voting. All shares represented by valid
proxies received pursuant to this solicitation and not revoked before
they are exercised will be voted in the manner specified therein. If
no specification is made, the proxies will be voted in favor of:
1. The election to the Board of Directors of the eight
nominees named in the Proxy Statement; and
2. The ratification of the action of the Board of Directors in
selecting PricewaterhouseCoopers LLP as independent
accountants to audit the consolidated financial statements
of the Company and its subsidiaries for the current fiscal
year.
The presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote is necessary for a quorum at
the meeting. Directors are elected by a plurality of the votes of
shares present in person or represented by proxy at the meeting. The
ratification of the selection of the accountants requires the
affirmative vote of a majority of shares present or represented by
proxy at the meeting and entitled to vote in respect thereto.
Abstentions will be counted for the purpose of determining the
existence of a quorum and will have the same effect as a negative
vote on matters other than the election of directors. If a nominee
holding shares for a beneficial owner indicates on the proxy that it
does not have discretionary authority as to certain shares to vote on
a particular matter or otherwise does not vote such shares, these
shares will not be considered as present and entitled to vote in
respect to that matter, but will be counted for the purpose of
determining the existence of a quorum.
<PAGE>
The cost of soliciting proxies for the meeting will be borne by
the Company. In addition to solicitation by mail, arrangements may
be made with brokerage firms, banks and other custodians, nominees
and fiduciaries to send proxy material to their principals. The
Company will reimburse these institutions for their reasonable costs
in doing so. No solicitation is to be made by specially engaged
employees or other paid solicitors.
Only the holders of Common Stock of record at the close of
business on November 22, 1999, will be entitled to vote at the
meeting. On such date, 172,884,307 shares of Common Stock were
outstanding and Stockholders will be entitled to one vote for each
share held.
<PAGE>
OWNERSHIP OF THE COMPANY'S SECURITIES
Ownership by Directors and Officers
The following table sets forth, with respect to each director
of the Company, each of the executive officers named in the Summary
Compensation Table and all executive officers and directors as a
group, the number of shares beneficially owned and the percent of
Common Stock so owned, all as of November 1, 1999:
<TABLE>
<CAPTION>
Amount and
Nature of Beneficial Percent of
Name Ownership (1) Class
<S> <C> <C>
Leon Levine 12,830,594 (2) 7.4%
Howard R. Levine 9,881,315 (3) 5.7%
R. James Kelly 186,000 *
George R. Mahoney, Jr. 507,700 *
R. David Alexander, Jr. 65,500 *
Mark R. Bernstein 25,710 (4) *
Sharon Allred Decker 0 *
James H. Hance, Jr. 12,000 *
James G. Martin 620 *
All Executive Officers and 23,991,643 13.9%
Directors of the Company
as a Group (16 persons)
* Less than one percent.
</TABLE>
<PAGE>
(1) All shares are held with sole voting and investment power,
except that Mr. Howard R. Levine does not have voting or
investment power with respect to 7,210,821 shares held in
irrevocable trusts by Bank of America, N.A., as Trustee, for his
benefit, as set forth in note (3) below, and Mr. Bernstein has
shared voting power with respect to 21,210 shares held in the
Profit Sharing Plan as set forth in note (4) below. Includes
those shares listed in the table which the following persons
have the right to acquire beneficial ownership of as of
November 1, 1999, or within 60 days thereafter, pursuant to the
exercise of stock options: (i) Mr. Howard R. Levine-172,000
shares; (ii) Mr. Kelly-180,000 shares; (iii) Mr. Mahoney-168,000
shares; (iv) Mr. Alexander-59,500 shares; and (v) all executive
officers and directors as a group-805,050 shares.
(2) Does not include (i) the 14,240,376 shares listed in the table
under the caption "Ownership by Others" below as being held in
irrevocable trusts by Bank of America, N.A., as Trustee, for
the benefit of certain of Mr. Leon Levine's children and
grandchildren, including 7,210,821 shares held in trusts for the
benefit of Mr. Leon Levine's son, Mr. Howard R. Levine; (ii)
212,700 shares owned by Mr. Leon Levine's wife; (iii) 2,430,000
shares held in trust by Mr. Leon Levine's wife and one of his
children for the benefit of another child of Mr. Leon Levine;
and (iv) 2,670,494 shares beneficially owned by Mr. Howard R.
Levine. Mr. Leon Levine disclaims beneficial ownership of the
shares referred to in this note (2).
(3) Includes 7,210,821 shares listed in the table under the caption
"Ownership by Others" below as being held in irrevocable trusts
by Bank of America, N.A., as Trustee, for the benefit of
Mr. Howard R. Levine. Does not include 187,284 shares listed
in said table as being held in irrevocable trusts by Bank of
America, N.A., as Trustee, for the benefit of a child of
Mr. Howard R. Levine.
(4) Includes 21,210 shares held under the Parker, Poe, Adams &
Bernstein L.L.P. Profit Sharing Plan, but does not include
22,500 shares owned by Mr. Bernstein's wife. Mr. Bernstein
disclaims beneficial ownership of the shares owned by his wife.
<PAGE>
Ownership by Others
On the basis of filings with the Securities and Exchange
Commission and other information, the Company believes that as of
November 1, 1999, the following additional Stockholder beneficially
owned more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
Amount and
Nature of Beneficial Percent of
Name and Address Ownership Class
<S> <C> <C>
Bank of America, N.A., as Trustee
One Bank of America Plaza
Charlotte, North Carolina 28255 14,240,376 (1) 8.2%
</TABLE>
(1) These shares are held with sole voting and investment power
under irrevocable trusts for the benefit of certain of
Mr. Leon Levine's children and grandchildren, including
7,210,821 shares held in trusts for the benefit
of Mr. Howard R. Levine.
<PAGE>
ELECTION OF DIRECTORS
At the meeting, eight directors are to be elected to serve for
the ensuing year and until their respective successors are elected
and qualified. Votes pursuant to the enclosed proxy will be cast for
the election as directors of the eight nominees named below unless
authority is withheld. All eight nominees are now members of the
Board of Directors. If for any reason any nominee shall not be a
candidate for election as a director at the meeting, an event not now
anticipated, the enclosed proxy will be voted for such substitute as
shall be designated by the Board of Directors.
The following information is furnished with respect to the
nominees:
<TABLE>
<CAPTION>
Year First
Elected
Name of Nominee Principal Occupation Age Director
<S> <C> <C> <C>
Leon Levine (1)(2) Chairman of the Board 62 1969
of the Company
Howard R. Levine (2) President and 40 1997 (3)
Chief Executive Officer
of the Company
R. James Kelly (2) Vice Chairman, 52 1997 (4)
Chief Financial and
Administrative Officer
of the Company
George R. Mahoney, Jr. (2) Executive Vice President- 57 1987 (5)
General Counsel and
Secretary of the Company
Mark R. Bernstein (6)(7) Partner in the law firm of 69 1980 (8)
Parker, Poe, Adams &
Bernstein L.L.P.
Sharon Allred Decker (6)(9) President of Doncaster, 42 1999 (10)
a division of The
Tanner Companies
James H. Hance, Jr. (9) Vice Chairman- 55 1995 (11)
Chief Financial Officer
Bank of America Corporation
James G. Martin (6)(7)(9) Vice President of Research 63 1996 (12)
Carolinas Medical Center
</TABLE>
<PAGE>
(1) Mr. Leon Levine served as Chairman of the Board, Chief
Executive Officer and Treasurer of the Company until August
1998 when he resigned from the positions of Chief Executive
Officer and Treasurer. He retains the position of Chairman of
the Board. Mr. Leon Levine is the father of Mr. Howard R.
Levine, President and Chief Executive Officer of the Company.
(2) Member of the Executive Committee of the Board of Directors.
(3) Mr. Howard R. Levine was employed by the Company in various
capacities in the Merchandising Department from 1981 to 1987,
including employment as Senior Vice President-Merchandising
and Advertising. 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 the Company in April
1996, and was elected 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, and Chief Executive
Officer in August 1998. He is the son of Mr. Leon Levine.
(4) Mr. Kelly was employed by the Company as Vice Chairman in
January 1997. Prior to his employment with the Company,
Mr. Kelly was a partner with PricewaterhouseCoopers LLP for
more than the last five years.
(5) Mr. Mahoney was employed by the Company as General Counsel in
1976, and also has served as Vice President and Secretary
since 1977, Senior Vice President since 1984, and Executive
Vice President since 1991.
(6) Member of the Compensation Committee of the Board of
Directors.
(7) Member of the Stock Option Committee of the Board of
Directors.
(8) Mr. Bernstein has been a partner in the law firm named above
for more than the last five years.
(9) Member of the Audit Committee of the Board of Directors.
<PAGE>
(10) Mrs. Decker has been President of Doncaster, a division of The
Tanner Companies, since August 1999. Doncaster is a direct
sales organization selling a high-end line of women's apparel.
From January 1997 to July 1999, she was President and Chief
Executive Officer of The Lynnwood Foundation which created and
manages a conference facility and leadership institute. Prior
to January 1997, Mrs. Decker was employed with Duke Energy
Corporation (formerly Duke Power Company), where her last
position was Corporate Vice President and Executive Director
of The Duke Power Foundation.
(11) Mr. Hance has been Vice Chairman and Chief Financial Officer
of Bank of America Corporation since October 1, 1998. He was
Vice Chairman and Chief Financial Officer of NationsBank
Corporation from 1993 through September 30, 1998, when
NationsBank Corporation and BankAmerica Corporation merged.
He also is a director of Bank of America Corporation,
Caraustar Industries, Inc., Lance, Inc. and Summit
Properties, Inc.
(12) Mr. Martin has been associated with the Carolinas Medical
Center since January 1993, and currently is Vice President of
Research. He served as Governor of the State of North
Carolina from 1985 through 1992 and was a member of the United
States House of Representatives, representing the Ninth
District of North Carolina, from 1973 until 1984. He also is
a director of Duke Energy Corporation and Applied Analytical
Industries, Inc.
(13) Directors who are not employees of the Company are paid $2,500
for each Board meeting attended and $500 for each Audit
Committee and Compensation Committee meeting attended.
Directors who are employees of the Company receive no
additional compensation for each Board or Committee meeting
attended.
<PAGE>
Committees of the Board of Directors
The Executive Committee, which met on six occasions during the
fiscal year ended August 28, 1999, is authorized under Delaware
corporate laws and the Company's By-Laws to exercise certain of the
powers of the Board of Directors.
The principal functions of the Audit Committee, which met with
the Company's independent accountants two times during fiscal 1999,
are to (i) recommend to the Board of Directors the firm to be
engaged as the Company's independent accountants, (ii) review with
the independent accountants the scope of the audit and the audit
report, (iii) consult with the independent accountants regarding
internal accounting controls, and (iv) review non-audit services to
be performed by the independent accountants.
The principal function of the Stock Option Committee, which
acted by unanimous written consent in lieu of meetings on 42
occasions during fiscal 1999, is to administer the 1989 Non-
Qualified Stock Option Plan, including determination of the
employees who are to be granted options under the Plan and the
number of shares subject to each option.
The principal functions of the Compensation Committee, which
met two times during fiscal 1999, are to review compensation
policies for executive officers of the Company, establish the
compensation of the Chairman of the Board and the Chief Executive
Officer and review and approve the pre-tax earnings goal and the
payment of bonuses under the Incentive Profit Sharing Plan.
There was no nominating committee of the Board of Directors nor
any other committee which performed a similar function during fiscal
1999.
The Board of Directors met four times, and acted by unanimous
written consent in lieu of meetings once, during fiscal 1999.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
during fiscal years 1999, 1998 and 1997 of the Company's Chief Executive
Officer and the four other most highly compensated executive officers
who served in such capacities as of August 28, 1999.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
All
Other Long-Term Other
Annual Restricted Securities Incentive Compen-
Name and Principal Fiscal Bonus Compen- Stock Underlying Plan sation
Position Year Salary($) ($)(1) sation($) Award(s)($) Options(#)(2) Payouts($) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leon Levine 1999(4) 1,000,000 525,000 - - 0 - 14,325
Chairman of the Board 1998 950,000 542,450 - - 0 - 17,377
1997 875,000 456,313 - - 0 - 8,942
Howard R. Levine 1999(5) 375,000 295,500 - - 75,000 - 10,519
President and Chief 1998 324,904 188,374 - - 70,000 - 19,216
Executive Officer 1997 208,654 83,212 - - 180,000 - 5,755
R. James Kelly 1999(6) 450,000 236,250 - - 150,000 - 10,593
Vice Chairman, Chief 1998 450,000 256,950 - - 300,000 - 7,586
Financial and 1997 268,269 139,902 - - 450,000 - 1,827
Administrative Officer
George R. Mahoney, Jr. 1999 264,135 94,721 - - 45,000 - 5,087
Executive Vice President- 1998 248,461 97,148 - - 60,000 - 7,070
General Counsel and 1997 228,824 81,690 - - 90,000 - 3,527
Secretary
R. David Alexander, Jr. 1999 231,308 69,092 - - 35,000 - 7,246
Senior Vice President- 1998 219,231 71,250 - - 40,000 - 6,070
Distribution and 1997 209,231 62,142 - - 30,000 - 7,391
Transportation
</TABLE>
<PAGE>
(1) Amounts paid under the Company's Incentive Profit Sharing Plan.
(2) Stock options were granted pursuant to the Company's 1989
Non-Qualified Stock Option Plan.
(3) Includes (a) Company contributions to the Employee Savings and
Retirement Plan and Trust for fiscal years 1999, 1998 and 1997,
respectively, as follows: Mr. Leon Levine-$2,400, $2,400 and
$2,400, Mr. Howard R. Levine-$3,029, $4,627 and $173, Mr. Kelly-
$4,217, $2,337 and $0, Mr. Mahoney-$2,377, $2,412 and $2,400,
Mr. Alexander-$2,370, $2,498 and $2,059; and (b) reimbursement
of expenses under the Company's Medical Expense Reimbursement
Plan of certain medical care costs for fiscal years 1999, 1998
and 1997, respectively, as follows: Mr. Leon Levine-$11,925,
$14,977 and $6,542, Mr. Howard R. Levine-$7,490, $14,589 and
$5,582, Mr. Kelly-$6,376, $5,249 and $1,827, Mr. Mahoney-$2,710,
$4,658 and $1,118, Mr. Alexander-$4,876, $3,572 and $5,332.
(4) Mr. Leon Levine served as Chairman of the Board, Chief Executive
Officer and Treasurer of the Company until August 1998 when he
resigned as Chief Executive Officer and Treasurer and was
succeeded as Chief Executive Officer by Mr. Howard R. Levine.
Mr. Leon Levine continues to serve as Chairman of the Board.
(5) Mr. Howard R. Levine was employed by the Company in April 1996.
He was elected President in April 1997 and Chief Executive
Officer in August 1998.
(6) Mr. Kelly was employed by the Company in January 1997.
<PAGE>
Option Grants During the Fiscal Year Ended August 28, 1999
The following table sets forth all options to acquire shares of the
Company's Common Stock granted during the fiscal year ended August 28,
1999, to the executive officers named in the Summary Compensation Table.
No options have been granted to Leon Levine. The potential realizable
value amounts shown in the table are the values that might be realized upon
exercise of options immediately prior to the expiration of their term based
on arbitrarily assumed annualized rates of appreciation in the price of the
Company's Common Stock of five percent and ten percent over the term of the
options, as set forth in the rules of the Securities and Exchange
Commission. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock. There can be no assurance
that the potential realizable values shown in the table will be achieved.
<TABLE>
<CAPTION>
Individual Grants(1) Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Howard R. Levine 75,000 8.8% 15.00 9/13/03 310,817 686,824
R. James Kelly 150,000 17.6% 18.75 2/9/04 777,042 1,717,059
George R. Mahoney, Jr. 45,000 5.3% 15.00 9/13/03 186,490 412,094
R. David Alexander, Jr. 35,000 4.1% 15.00 9/13/03 145,048 320,518
</TABLE>
(1) Stock options were granted pursuant to the Company's 1989
Non-Qualified Stock Option Plan. The exercise price for each
option is the fair market value per share of Common Stock on
the date of the grant. See "Report of the Compensation
Committee and Stock Option Committee of the Board of Directors
on Executive Compensation" for a description of other material
terms of the Plan.
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table sets forth all options exercised during the fiscal
year ended August 28, 1999, by the executive officers named in the Summary
Compensation Table, and the number and value of unexercised options held
by such executive officers at fiscal year-end. No options have been granted
to, or exercised by, Leon Levine.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money
Acquired on Realized Options at FY-End(#) Options at FY-End($)(2)
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Howard R. Levine 0 0 135,000 280,000 1,775,483 2,593,430
R. James Kelly 0 0 180,000 720,000 2,298,150 4,655,100
George R. Mahoney, Jr. 40,500 540,817 126,000 159,000 1,876,845 1,428,893
R. David Alexander, Jr. 22,500 287,336 34,500 93,000 472,354 749,078
</TABLE>
(1) The value realized is calculated based on the difference between the
option exercise price and the closing market price of the Company's
Common Stock on the date prior to the date of the exercise multiplied
by the number of shares to which the exercise relates.
(2) The closing price of the Company's Common Stock as reported on the
New York Stock Exchange Composite tape on August 27, 1999, was $19.69
and is used in calculating the value of unexercised options.
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Howard R. Levine's compensation arrangement with the Company
provides that for the period from August 29, 1998, through
August 28, 1999, he was to be paid a base salary of $7,212 per
week ($375,000 per annum) and for the period from August 29, 1999,
through August 26, 2000, he is to be paid a base salary of $8,654
per week ($450,000 per annum). In addition, under the Company's
Incentive Profit Sharing Plan, he may receive bonuses for the
fiscal years ended August 28, 1999, and ending August 26, 2000,
based on approximately 75% of the base salary he receives for each
of the fiscal years, subject to the achievement of pre-tax
earnings goals established by the Company and other terms of the
Plan. In the event Mr. Levine's employment is terminated by the
Company prior to August 26, 2000, for reasons other than for cause
or medical disability, the Company will pay Mr. Levine 180 days of
his base salary then in effect in six equal monthly installments.
If Mr. Levine accepts new employment, the unpaid balance of the
payments is reduced by the compensation Mr. Levine receives for
the same period from the new employment. However, in the event
the employment agreement is not terminated for any reason prior to
August 26, 2000, and there is no agreement before that date to
extend Mr. Levine's employment beyond August 26, 2000, the
employment agreement terminates automatically on August 26, 2000,
and the Company will pay Mr. Levine 60 days of his base salary
then in effect in two equal monthly installments. In addition, in
the event Mr. Levine's employment agreement is terminated by the
Company prior to August 26, 2000, for reasons other than for cause
or if there is no agreement before that date to extend
Mr. Levine's employment beyond August 26, 2000, Mr. Levine will
receive as a severance payment an amount equal to the bonus, if
any, under and subject to the terms and conditions of the
Incentive Profit Sharing Plan. The payment will be equal to 75%
of the base salary he receives for the period from the beginning
of the fiscal year in which the Company terminates the employment
agreement through the termination date or through August 26, 2000,
if Mr. Levine's employment continues through that date.
R. James Kelly's compensation arrangement with the Company provides
that for the fiscal years ended August 28, 1999, and ending August 26,
2000, he is to be paid a base salary of $8,654 per week ($450,000 per
annum), and for the fiscal year ending September 1, 2001, the
Compensation Committee of the Board of Directors shall establish the
weekly base salary, subject to ratification by the Board of Directors,
provided that such weekly base salary shall not be reduced below
$8,654. In addition, under the Company's Incentive Profit Sharing Plan,
he may receive a bonus for each fiscal year based on approximately 50%
of the base salary he receives for each fiscal year, subject to the
achievement of pre-tax earnings goals established by the Company and
other terms of the Plan. Pursuant to his employment agreement,
Mr. Kelly also was granted an option to purchase 150,000 shares of
<PAGE>
Common Stock on February 10, 1999, under the Company's 1989
Non-Qualified Stock Option Plan. See "Option Grants During the Fiscal Year
Ended August 28, 1999" herein. In the event Mr. Kelly's employment
agreement is terminated by the Company prior to September 1, 2001, for
reasons other than for cause or medical disability, the Company will
pay Mr. Kelly 180 days of his base salary then in effect in six equal
monthly installments. If Mr. Kelly accepts new employment, the unpaid
balance of the payments is reduced by the compensation Mr. Kelly
receives for the same period from the new employment. In the event the
employment agreement is not terminated for any reason prior to
September 1, 2001, and there is no agreement before that date to extend
Mr. Kelly's employment beyond September 1, 2001, the employment
agreement terminates automatically on September 1, 2001, and the
Company will pay Mr. Kelly 60 days of his base salary then in effect in
two equal monthly installments. In addition, in the event Mr. Kelly's
employment agreement is terminated by the Company prior to September 1,
2001, for reasons other than for cause or medical disability, Mr. Kelly
will receive as a severance payment an amount equal to the pro rata
share of the bonus, if any, under and subject to the terms and
conditions of the Incentive Profit Sharing Plan. The payment will be
equal to 50% of the base salary he receives for the period from the
beginning of the fiscal year in which the Company terminates the
employment agreement through the termination date.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee and the Stock Option Committee of the
Board of Directors during the fiscal year ended August 28, 1999, were
composed of James H. Hance, Jr. and James G. Martin. No member of
the Compensation Committee or Stock Option Committee was an officer
or employee of the Company. Mr. Hance and Mr. Martin were not
eligible to receive options under the Company's 1989 Non-Qualified
Stock Option Plan.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The objectives of the Company's executive compensation program are
to provide a competitive total compensation package that enables the
Company to attract and retain key executives, and to offer compensation
opportunities that are directly related to the annual and long-term
performance of the Company. The Company seeks to link a significant
portion of compensation to the Company's performance such that
executive officers will have a strong incentive to meet the Company's
goals and their compensation will then be aligned with the interests of
the Company's shareholders. With these objectives, the compensation of
executive officers consists primarily of (i) a base salary; (ii) annual
incentive compensation in the form of a bonus based on the achievement
of pre-tax earnings goals and the executive's contributions to meeting
the goals; and (iii) long-term incentive compensation in the form of
stock options.
BASE SALARY. The base salary of executive officers is reviewed
annually by the Compensation Committee. In determining the salary
level, the Compensation Committee takes into consideration the
responsibilities, experience and performance of the executives, their
contributions to the Company's operating performance, including the
achievement of pre-tax earnings goals, and competitive salary practices
of other companies in the retail industry, including companies in the
S&P Retail Composite Index and other companies in the retail industry
with sales comparable to the sales of the Company.
INCENTIVE PROFIT SHARING PLAN. The Compensation Committee also
reviews and approves a pre-tax earnings goal established by the Company
each fiscal year under the Company's Incentive Profit Sharing Plan.
This Plan provides for payments, not exceeding 5% of the Company's
consolidated earnings before income taxes and before deducting payments
under the Plan or any other incentive compensation arrangement, to
executive officers and other supervisory personnel if such goal is
achieved. The amount of the bonus is based on a percentage of the
employee's base salary, and for executive officers the percentage
ranges from 20% to 75%. The percentage is higher for the more senior
executive officers as a greater portion of the senior executives'
compensation is tied to the achievement of pre-tax earnings goals. In
the event the pre-tax earnings goal is exceeded, the amount of the
bonus increases by 2% for each 1% by which the goal is exceeded, to a
maximum of 50% additional bonus for exceeding the goal by 25%. If the
pre-tax earnings goal is not achieved, the amount of the bonus
decreases by 5% for each 1% by which the goal is not achieved, with no
bonus being paid if pre-tax earnings are below 90% of the goal. As
approximately 102.5% of the pretax earnings goal for the fiscal year
ended August 28, 1999, was achieved, the bonus paid was approximately
105% of the bonus that would have been paid if 100% of the goal had
been achieved. Except for the Chairman of the Board, the President and
Chief Executive Officer, and the Vice Chairman and Chief Financial and
Administrative Officer, the annual individual performance rating of
each executive officer by that officer's supervisor may increase or
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decrease the amount of bonus paid. The performance rating is based on
a variety of criteria, including the effectiveness of the officers in
executing their managerial responsibilities and their impact on the
financial results of the Company (such as sales, pre-tax earnings and
shareholders' return on average equity). The Compensation Committee
reviews and approves the payment of bonuses under the Incentive Profit
Sharing Plan.
STOCK OPTIONS. To establish another link between compensation and
management's performance in creating value for shareholders, evidenced
by increases in the Company's stock price, executive officers may
receive grants of stock options typically on an annual basis. The
Company encourages stock ownership by executives, but has not
established target levels for equity holdings by executives. Grants
are made by the Stock Option Committee of the Board of Directors. The
Compensation Committee considers the grant of stock options by the
Stock Option Committee in reviewing the compensation of executive
officers. The Chairman of the Board, Leon Levine, has never been
granted stock options. Under the Company's 1989 Non-Qualified Stock
Option Plan, the exercise price for each option is the fair market
value per share of Common Stock on the date of the grant. Fair market
value per share is the average of the highest price and lowest price at
which the Common Stock is sold regular way on the New York Stock
Exchange on the date of the grant. Options have a term of five years,
and may not be exercised prior to the expiration of two years from the
date of the grant. Thereafter, each option becomes exercisable in
cumulative installments of not more than 40% of the number of shares
subject to the option after two years, 70% after three years and 100%
after four years. Such vesting schedule encourages executives to
remain in the employ of the Company. With limited exceptions, no
option is exercisable unless the optionee has been continuously
employed by the Company from the date of grant to the date of exercise.
In determining the number of options to be granted, the Stock Option
Committee takes into account the executive's base salary and level of
responsibilities and the annual individual performance rating of the
executive, as well as the number of options granted in prior years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The base salary of the
Chief Executive Officer is established by the Compensation Committee
annually based on consideration of the same general factors as are
described above with respect to the determination of the base salary of
other executive officers. For the fiscal year ended August 28, 1999,
Howard R. Levine received a base salary of $375,000, and for the fiscal
year ending August 26, 2000, he will receive a base salary of $450,000.
The incentive compensation element of the compensation of the
Chief Executive Officer is based on the Company's achievement of its
pre-tax earnings goal. Under the Company's Incentive Profit Sharing
Plan, Mr. Levine's bonus is based on 75% of his base salary. The amount
of the bonus is subject to increase or decrease based on the level of
pre-tax earnings in the manner described above with respect to the
<PAGE>
bonus for other executive officers. For the fiscal year ended
August 28, 1999, Mr. Levine was paid a bonus of $295,500 under the
Incentive Profit Sharing Plan as the Company achieved approximately
102.5% of the pre-tax earnings goal.
In determining Mr. Howard R. Levine's base salary and bonus
percentage, the Compensation Committee also took into account the fact
that he receives options under the Company's 1989 Non-Qualified Stock
Option Plan. As described under the heading "Option Grants During the
Fiscal Year Ended August 28, 1999," Howard R. Levine received options
to purchase 75,000 shares. The Compensation Committee also considered
that the Company's only retirement plan or similar benefit for the Chief
Executive Officer or any executive officers is a 401(k) Plan and the
Company's contribution for Mr. Levine for the fiscal year ended August
28, 1999, was $3,029.
DEDUCTIBILITY OF COMPENSATION. Internal Revenue Code Section
162(m) provides that publicly held companies may not deduct in any
taxable year compensation in excess of $1 million paid to the Chief
Executive Officer or any of the four other highest paid executive
officers which is not "performance-based" as defined in Section 162(m).
At the Annual Meeting of Stockholders on January 16, 1997, Stockholders
approved an amendment to the 1989 Non-Qualified Stock Option Plan and
approved the Incentive Profit Sharing Plan for the purpose of
preserving the future deductibility of all compensation paid under said
Plans. The Company believes that all executive officer compensation
paid in the fiscal year ended August 28, 1999, met the deductibility
requirements of Section 162(m). The Compensation Committee will
continue to monitor this issue and will determine what additional
steps, if any, it may take in response to such provision.
This report is submitted by James H. Hance, Jr. and James G.
Martin as the members of the Compensation Committee and Stock Option
Committee during the fiscal year ended August 28, 1999.
<PAGE>
Stock Performance Graph
The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock
during the five fiscal years ended August 28, 1999, compared with the
cumulative total returns of the S&P Midcap 400 Index and the S&P Retail
Composite Index. The comparison assumes $100 was invested on
August 31, 1994, in the Company's Common Stock and in each of the
foregoing indices, and that dividends were reinvested.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN
AMONG FAMILY DOLLAR STORES, INC.,
THE S & P MIDCAP 400 INDEX
AND THE S & P RETAIL
COMPOSITE INDEX
8/94 8/95 8/96 8/97 8/98 8/99
<S> <C> <C> <C> <C> <C> <C>
Family Dollar Stores, Inc. 100 149 144 273 354 516
S & P Midcap 400 100 120 135 185 161 228
S & P Retail Composite 100 102 123 158 207 271
</TABLE>
<PAGE>
Related Transactions
Legal services were rendered to the Company during the fiscal year
ended August 28, 1999, and are being rendered to the Company during the
fiscal year ending August 26, 2000, by Parker, Poe, Adams & Bernstein
L.L.P., of which Mark R. Bernstein, a director of the Company, is a
partner.
The Company has commercial banking relationships with
subsidiaries of Bank of America Corporation, of which
James H. Hance, Jr.,a director of the Company, is Vice Chairman and
Chief Financial Officer.
Since December 1994, a subsidiary of the Company has leased space
in a building in Charlotte, North Carolina, from 9517 Monroe, LLC,
for processing merchandise returned from stores and for storing
merchandise. 9517 Monroe, LLC is a limited liability company in which
Leon Levine, the Chairman of the Board of the Company, and his brother,
Alvin E. Levine, both own a 50% interest. A total of $254,925 in rents
was paid to 9517 Monroe, LLC, for the fiscal year ended August 28,
1999. The current rent payable for the leasing of approximately 78,000
square feet is $21,117 per month ($253,404 annually) through April 30,
2000, and $21,434 per month ($257,208 annually) from May 1, 2000,
through the end of the term of the lease on April 30, 2001. The
Company believes that the rents for this leased space are competitive
with amounts that would be paid to an unaffiliated entity to lease
similar space.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of
PricewaterhouseCoopers LLP as independent accountants to audit
and report on the consolidated financial statements of the Company and
its subsidiaries for the year ending August 26, 2000, and to perform
such other appropriate accounting and related services as may be
required by the Board of Directors. The affirmative vote of the
holders of a majority of the shares of Common Stock present or
represented by proxy at the meeting and entitled to vote in respect
thereto is required to ratify the selection of PricewaterhouseCoopers
LLP for the purposes set forth above. The Board of Directors
recommends that the Stockholders vote for ratification of the selection
of PricewaterhouseCoopers LLP. If the Stockholders do not ratify the
selection of PricewaterhouseCoopers LLP, the selection of independent
accountants will be reconsidered by the Board of Directors.
PricewaterhouseCoopers LLP served as the Company's independent
accountants for the fiscal year ended August 31, 1991, and for each
subsequent fiscal year. Representatives of PricewaterhouseCoopers LLP
are expected to be present at the Annual Meeting of Stockholders and
will have an opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than
ten percent of the Company's Common Stock (collectively, "Reporting
Persons") to file with the Securities and Exchange Commission and New
York Stock Exchange initial reports of ownership and reports of changes
in ownership of the Common Stock, and to furnish the Company with
copies of such reports. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
written representations from Reporting Persons that no other reports
were required, during the fiscal year ended August 28, 1999, all
Reporting Persons complied with all applicable filing requirements.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the next
Annual Meeting of Stockholders in January 2001, and to be included in
the Proxy Statement and form of proxy pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Act"), must be received by the
Company on or before July 28, 2000. Any such proposals should be in
writing and be sent by certified mail, return receipt requested, to the
Secretary, Family Dollar Stores, Inc., P. O. Box 1017, Charlotte, North
Carolina 28201-1017. Additionally, if the Company receives notice of
any shareholder proposal after October 11, 2000, such proposal will be
considered untimely pursuant to Rules 14a-4 and 14a-5(e) under the Act,
and the persons named in the proxies solicited by the Board of
Directors of the Company for the Annual Meeting of Stockholders to be
held in January 2001 may exercise discretionary voting power with
respect to such proposal.
OTHER MATTERS
Management knows of no other matters to be brought before the
meeting. However, if any other matters do properly come before the
meeting, it is intended that the shares represented by the proxies in
the accompanying form will be voted in accordance with the best
judgment of the person voting the proxies. Whether Stockholders plan
to attend the meeting or not, they are respectfully urged to sign, date
and return the enclosed proxy which will, of course, be returned to
them at the meeting if they are present and so request.
<PAGE>
PROXY
FAMILY DOLLAR STORES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 20, 2000
The undersigned hereby appoints Leon Levine, Howard R. Levine and
George R. Mahoney, Jr., or any one of them, with full power of
substitution, proxies of the undersigned to the Annual Meeting of
Stockholders of Family Dollar Stores, Inc. to be held at 2:00 p.m.
on Thursday, January 20, 2000, at the office of the Company at 10401
Old Monroe Road, Matthews, North Carolina, or at any adjournments
thereof, with all the powers which the undersigned would possess if
personally present, and instructs them to vote upon any matter which
may properly be acted upon at this meeting, and specifically as
indicated below:
<TABLE>
<CAPTION>
<S> <C> <C>
[ ] [ ]
1. ELECTION OF DIRECTORS FOR ALL NOMINEES WITHHOLD AUTHORITY
(Mark only one) listed below (except as to vote for all
shown to the contrary nominees listed below
below)
</TABLE>
Nominees:
Leon Levine, Howard R. Levine, R. James Kelly, George R. Mahoney, Jr.,
Mark R. Bernstein, Sharon Allred Decker, James H. Hance, Jr., James G. Martin
(INSTRUCTION: To withhold authority to vote for any individual nominee,
print that nominee's name below)
2. Ratification of the selection of PricewaterhouseCoopers LLP as Independent
Accountants:
<TABLE>
<CAPTION>
<S> <C> <C>
FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
3. In their discretion, upon such other business as may properly come
before the meeting or any adjournments thereof.
(Please Sign on Reverse Side)
<PAGE>
(Continued from other side)
This Proxy, if received and correctly signed, will be voted in accordance
with the choices specified. If a choice is not specified, this Proxy will be
voted in favor of the election of the Directors named and for the
ratification of the selection of the independent accountants.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy is revocable, and the undersigned retains the right to attend this
meeting and to vote his or her stock in person.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement.
Dated this day of ,
(Please sign exactly as your name appears at
left. If there is more than one owner, each
should sign. When signing as a fiduciary or
representative, please give full title as
such. If the signer is a corporation, please
sign full corporate name by duly authorized
officer. If a partnership, please sign in
partnership name by authorized person.)
PLEASE SIGN AND RETURN PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE IS REQUIRED.
