SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 as amended
Filed by the Registrant [X]
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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 Sect. 240.14a-11(c) or Sect. 240.14a-12
DOLLAR TREE STORES, INC.
(Name of Registrant as specified in its Charter)
------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
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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.
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid
[ ] Fee paid previously with preliminary materials
[ ] Check 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 of schedule and the date of its filing.
(1) Amount previously paid:
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<PAGE>
DOLLAR TREE STORES, INC.
500 Volvo Parkway
Chesapeake, Virginia 23320
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on
Thursday, June 3, 1999
To Our Shareholders:
We will hold the annual meeting of the shareholders of Dollar Tree
Stores, Inc. at the Norfolk Waterside Marriott, Norfolk, Virginia, on Thursday,
June 3, 1999 at 10:00 a.m. local time. Shareholders will consider and vote on
the following proposals:
o election of two directors;
o an increase in the shares of authorized common stock; and
o any other business that may properly come before the meeting.
Shareholders of record at the close of business on April 1, 1999 will
receive notice of and be allowed to vote at the meeting.
Your vote is important to us. We encourage you to read this Proxy
Statement then sign, date and return your proxy card in the enclosed envelope at
your earliest convenience. Sending in your proxy card will not prevent you from
voting your stock at the meeting if you desire to do so.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ H. Ray Compton
H. Ray Compton
Executive Vice President
and Secretary
Chesapeake, Virginia
April 28, 1999
<PAGE>
DOLLAR TREE STORES, INC.
500 Volvo Parkway
Chesapeake, Virginia 23320
PROXY STATEMENT
We sent you this proxy statement and the enclosed proxy card because Dollar
Tree's Board of Directors is soliciting your proxy to vote your shares at the
Annual Meeting. We will bear all costs for this solicitation. On or about April
28, 1999, we began mailing these proxy materials to all stockholders of record
at the close of business on April 1, 1999.
VOTING PROCEDURES
Shareholders of record have one vote per share of stock held. On April 1,
1999, there were 61,237,898 shares of common stock outstanding.
If you vote by proxy, that is, by signing, dating and returning the
enclosed proxy card, the individuals named on the card (your "proxies") will
vote your shares in the manner you indicate. If you do not indicate instructions
on the card, then your shares will be voted FOR the election of two nominees for
director in Class I and FOR the increase in the shares of authorized common
stock. If any other matter is presented, then your proxy will vote in accordance
with your proxies' best judgment. At this time, the Board of Directors is
unaware of any other business to be brought before the meeting. If you send more
than one proxy card, then your shares will be voted in accordance with the proxy
card bearing the latest date.
As shown in the Notice of Annual Meeting, the 1999 Annual Meeting of
Shareholders of Dollar Tree Stores, Inc. will be held on Thursday, June 3, 1999,
at the Norfolk Waterside Marriott in Norfolk, Virginia, at 10:00 a.m. local
time. A quorum of shareholders is necessary to hold a valid meeting. If holders
of a majority of the outstanding shares of common stock are present in person or
by proxy, a quorum will exist. Abstentions and broker non-votes are counted as
present for establishing a quorum. A broker non-vote occurs when a broker votes
on some matters on the proxy card but not on others because he does not have the
authority to do so.
If you send in your proxy card, you may revoke your proxy by providing a
written notice of revocation to the Secretary of Dollar Tree Stores, Inc. or by
attending the annual meeting to cast your vote in person.
I. ELECTION OF DIRECTORS
Directors and Nominees
Our Board of Directors is divided into three staggered classes for purposes
of election. One class is elected at each annual meeting of shareholders to
serve for a three-year term.
At the 1999 Annual Meeting of Shareholders, the terms of two Class I
directors are expiring. Allan W. Karp, one of the Class I directors, has
informed the Board of his desire to retire his directorship at the end of his
current term. The Board has nominated Richard G. Lesser to replace Mr. Karp.
Class I directors elected at this annual meeting will hold office for a
three-year term expiring in 2002. The other directors will continue in office
following this annual meeting, and their terms will expire in 2000 (Class II)
and 2001 (Class III). Officers are appointed by the Board of Directors.
The nominees have indicated their willingness to serve as directors. If a
nominee becomes unable to stand for reelection, the persons named in the proxy
will vote for any substitute nominee proposed by the Board of Directors.
Vote Required
A director is elected at the meeting, so long as a quorum is present, if
the votes cast favoring the election of that director exceed those cast in
opposition. Abstentions and broker non-votes are not "cast" for this purpose.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTOR.
1
<PAGE>
INFORMATION CONCERNING NOMINEES, DIRECTORS, AND EXECUTIVE OFFICERS
Nominees
Macon F. Brock, Jr.
Class of Director: I
Director Since: 1986
Principal Occupation: President and Chief Executive Officer, Dollar
Tree Stores, Inc.
Recent Business Experience: Mr. Brock, age 57, has been Chief Executive
Officer since 1993 and a Director and President
since 1986 when he founded Dollar Tree with Mr.
Perry and Mr. Compton. He directs the overall
operations of Dollar Tree. Until 1991, he was
employed in a similar role with K&K Toys. Mr.
Brock has 30 years of retail experience.
Other Directorships: First Union National Bank of Virginia/Maryland/
Washington, D.C.
- -------------------------------------------------------------------------------
Richard G. Lesser
Class of Director: I
Principal Occupation: President, The Marmaxx Group and Executive Vice
President and Chief Operating Officer, The TJX
Companies, Inc.
Recent Business Experience: Mr. Lesser, age 64, has been President of The
Marmaxx Group (T.J. Maxx and Marshalls) since
1995, Chief Operating Officer of The TJX
Companies, Inc. since 1994 and Executive Vice
President of The TJX Companies, Inc. since 1991.
From 1981 to 1991, he has held various executive
positions within The TJX Companies, Inc. Mr.
Lesser has over 35 years of retail experience.
Other Directorships: The TJX Companies, Inc.; Reebok International
Ltd.; A.C. Moore Arts & Crafts, Inc.
- -------------------------------------------------------------------------------
Continuing Directors
J. Douglas Perry
Class of Director: II
Director Since: 1986
Principal Occupation: Chairman of the Board, Dollar Tree Stores, Inc.
Recent Business Experience: Mr. Perry, age 51, has been Chairman of the Board
since 1986 when he founded Dollar Tree with Mr.
Brock and Mr. Compton. He retired as an employee
and officer of the company as of March 1, 1999.
He expects to continue his duties as Chairman of
the Board and enter into a consulting arrangement
with the company. He is also Chairman of the
Board of Old Dominion Trust Company. Until 1991,
he was an executive officer of K&K Toys which he,
along with Mr. Brock, Mr. Compton and Mr. Perry's
father, built from the company's original single
store to 136 stores. Mr. Perry has 30 years of
retail experience.
Other Directorships: None
- -------------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------------------------------------------
H. Ray Compton
Class of Director: III
Director Since: 1986
Principal Occupation: Executive Vice President, Dollar Tree Stores,
Inc.
Recent Business Experience: Mr. Compton, age 56, has been Executive Vice
President since 1986 when he founded Dollar Tree
with Mr. Perry and Mr. Brock. From 1986 until
1998, he also served as Dollar Tree's Chief
Financial Officer. From 1979 until 1991, he was
employed in a similar role with K&K Toys. Prior
to 1979, he was associated for 15 years with a
manufacturing company in various accounting and
management positions.
Other Directorships: Hibbett Sporting Goods, Inc.
- -------------------------------------------------------------------------------
John F. Megrue
Class of Director: III
Director Since: 1993
Principal Occupation: Member, Saunders Karp & Megrue Partners, L.L.C.
Recent Business Experience: Mr. Megrue, age 40, has been Vice Chairman of the
Board of Dollar Tree since 1993. He also serves
as Chairman of the Board for Hibbett Sporting
Goods, Inc. Mr. Megrue has been a member of
Saunders Karp & Megrue Partners, L.L.C., which
serves as the general partner of the general
partner of The SK Equity Fund, L.P., since 1992.
From 1989 to 1992, he served as a Vice President
and Principal at Patricof & Co. Prior to 1989, he
served as a Vice President at C.M. Diker
Associates.
Other Directorships: Hibbett Sporting Goods, Inc.; Children's Place
Retail Stores, Inc.
- -------------------------------------------------------------------------------
Thomas A. Saunders, III
Class of Director: II
Director Since: 1993
Principal Occupation: Member, Saunders Karp & Megrue Partners, L.L.C.
Recent Business Experience: Mr. Saunders, age 62, has been a member of
Saunders Karp & Megrue Partners, L.L.C., which
serves as the general partner of the general
partner of The SK Equity Fund, L.P., since 1990.
Before founding Saunders Karp & Megrue, he served
as a Managing Director of Morgan Stanley & Co.
from 1974 to 1989. Mr. Saunders is the Vice
President of the Board of Visitors of the
Virginia Military Institute. He is immediate past
Chairman and a Trustee of the University of
Virginia's Darden Graduate School of Business
Administration. Mr. Saunders is a Trustee of The
Thomas Jefferson Memorial Foundation
(Monticello).
Other Directorships: Hibbett Sporting Goods, Inc.
- -------------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
Alan L. Wurtzel
Class of Director: III
Director Since: 1995
Principal Occupation: Private investor; corporate director
Recent Business Experience: Mr. Wurtzel, age 65, serves as the Vice Chairman
of the Board of Circuit City Stores, Inc., a
large consumer electronics retailing chain. From
1986 to 1994, he served as Chairman of the Board
of Circuit City. Prior to 1986, he served in
several other capacities with Circuit City,
including Chief Executive Officer from 1973 to
1986. From 1986 to 1988, he served as President
of Operation Independence, a non profit
organization. Mr. Wurtzel was a director of
Office Depot, Inc. from 1989 to 1996. Mr. Wurtzel
has 31 years of retail experience.
Other Directorships: Circuit City Stores, Inc.
- -------------------------------------------------------------------------------
Frank Doczi
Class of Director: II
Director Since: 1995
Principal Occupation: Special Advisor to the Chairman of Hechinger
Company
Recent Business Experience: Mr. Doczi, age 61, currently serves as Special
Advisor to the Chairman of Hechinger Company.
Prior to that appointment, he served as the
President and Chief Executive Officer of Home
Quarters Warehouse, Inc. (HQ), a subsidiary of
Hechinger Company, from 1988 until 1995. Mr.
Doczi has been with HQ since it began in 1984.
He also served as a member of the Management
Committee for the Hechinger Company. Prior to
1984, Mr. Doczi spent seven years with Moore's,
a chain of home centers operated by Evans
Products Company, where he was the Senior Vice
President, General Merchandise Manager.
Other Directorships: None
- -------------------------------------------------------------------------------
4
<PAGE>
EXECUTIVE OFFICERS
(Other than those listed above)
Frederick C. Coble
Principal Occupation: Senior Vice President, Chief Financial Officer,
Dollar Tree Stores, Inc.
Recent Business Experience: Mr. Coble, age 38, became Senior Vice President,
Chief Financial Officer in 1998. Prior to that,
he served as Senior Vice President, Finance from
1997 and as Vice President, Controller from 1991.
Before joining Dollar Tree in 1989, Mr. Coble
served as Internal Audit Manager with Royster
Company, a manufacturing company, and as Audit
Manager for KPMG LLP.
- -------------------------------------------------------------------------------
Bob Sasser
Principal Occupation: Chief Operating Officer, Dollar Tree Stores, Inc.
Recent Business Experience: Mr. Sasser, age 47, became Chief Operating
Officer in 1999. Before joining Dollar Tree, he
served as Senior Vice President, Merchandise and
Marketing of Roses Stores, Inc. from 1997. From
1994 to 1996, he was Vice President, General
Merchandise Manager for Michaels Stores, Inc.
Prior to 1994, he held several positions at Roses
Stores, Inc., ranging from Store Manager to Vice
President, General Merchandise Manager.
- -------------------------------------------------------------------------------
Mr. Brock is married to Mr. Perry's sister. There are no additional family
relationships among the Directors and Executive Officers.
5
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, officers and persons who own more than 10% of our stock to file
reports of ownership and changes in ownership of our stock with the Securities
and Exchange Commission and Nasdaq, and to provide us with copies of these
reports. Based on our review of the reports and written representations
furnished to us, we believe that all of these reporting persons complied with
their filing requirements for 1998.
INFORMATION ABOUT THE BOARD OF DIRECTORS
Meetings of the Board of Directors
The Board of Directors has scheduled four regular meetings in 1999 and will
hold special meetings when company business requires. During 1998, the Board
held four regular meetings, one special meeting (in relation to the purchase of
land for a replacement distribution center for the Company's Memphis facility)
and took action on three separate occasions by unanimous written consent in lieu
of a special meeting. Each member of the Board attended at least 75% of all
Board meetings and meetings of Committees of which each was a member.
Committees of the Board of Directors
The Board of Directors currently appoints an Audit Committee and a
Compensation Committee. The memberships and functions of these committees is set
forth below. The Board has no standing Executive or Nominating Committees.
o Audit Committee
Directors Megrue (Chairman), Wurtzel and Doczi constitute the
Audit Committee, whose functions include reviewing the
accounting principles and procedures employed by the company,
reviewing annual and interim reports of the company and the
independent public accountants of the company, reviewing
significant financial information, reviewing the company's
system of internal controls, reviewing all related party
transactions and recommending the selection of the independent
public accountants. The Audit Committee met twice in 1998.
o Compensation Committee
Directors Megrue (Chairman), Wurtzel and Doczi also constitute our
Compensation Committee, which meets as necessary to oversee the
company's compensation and benefit practices, recommend to the full
Board the compensation arrangements for the company's senior
officers, administer the company's executive compensation plans and
Employee Stock Purchase Plan, and administer and consider awards under
the company's Stock Incentive Plan. The Compensation Committee met four
times in 1998.
OWNERSHIP OF COMMON STOCK
The table on the following page shows the number of shares of our common
stock beneficially owned on April 1, 1999 by
o each of the Directors and nominees for director,
o each of the Executive Officers,
o all Directors and Executive Officers as a group, and
o each other person who has reported beneficial ownership of more than
five percent of the outstanding common stock.
The address of each Director and Executive Officer of Dollar Tree is c/o Dollar
Tree Stores, Inc., 500 Volvo Parkway, Chesapeake, Virginia 23320.
6
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership(1)
Directors and Executive Officers Shares Percent
------ -------
<S> <C> <C>
J. Douglas Perry............................... 4,987,608(2) 8.0%
Macon F. Brock, Jr............................. 4,421,023(3) 7.1%
H. Ray Compton................................. 558,469(4) *
John F. Megrue................................. 6,977,246(5) 10.9%
Allan W. Karp.................................. 6,977,250(6) 10.9%
Thomas A. Saunders, III........................ 7,074,750(7) 11.1%
Alan L. Wurtzel................................ 82,126(8) *
Frank Doczi.................................... 65,813(9) *
Frederick C. Coble............................. 132,051(10) *
Bobby Sasser................................... 50,000(11) *
All current Directors and Named
Officers (10 persons)..................... 17,395,345 25.9%
Other 5% Shareholders
- ---------------------
Putnam Investments, Inc........................ 8,266,205(12) 14.0%
One Post Office Square
Boston, MA 02109
The SK Equity Fund, L.P........................ 6,965,664(13) 10.9%
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
Baron Capital Group, Inc....................... 4,452,787(14) 7.3%
767 Fifth Avenue, 24th Floor
New York, NY 10153
Gilder Gagnon Howe & Co. LLC................... 3,520,546(15) 5.9%
1775 Broadway, 26th Floor
New York, NY 10019
<FN>
- ------------
* less than 1%
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition of
any security. A person is deemed as of any date to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days after
such date. Any security that any person named above has the right to acquire
within 60 days is deemed to be outstanding for purposes of calculating the
ownership percentage of such person, but is not deemed to be outstanding for
purposes of calculating the ownership percentage of any other person. The
Company has issued warrants to acquire 5,584,899 shares of common stock (the
"Warrant Shares") all of which are currently exercisable.
(2) Includes 1,514,977 shares and 1,256,600 Warrant Shares owned by trusts for
the benefit of certain Perry family members, of which Mr. Perry is a trustee,
and 152,600 shares owned by a private foundation over which Mr. Perry and his
wife, Patricia W. Perry, exercise shared control, but excludes 188,247 shares
owned by Patricia W. Perry.
(3) Includes 841,378 shares and 1,256,600 Warrant Shares owned by trusts for
the benefit of certain Brock family members, of which Mr. Brock is a trustee,
and 75,710 shares owned by a private foundation over which Mr. Brock and his
wife, Joan P. Brock, exercise shared control but excludes 1,609,331 shares owned
by Mr. Brock's wife, Joan P. Brock.
(4) Includes 220,620 shares and 279,248 Warrant Shares owned by trusts for the
benefit of certain Compton family members, over which Mr. Compton may indirectly
exercise investment or voting power, but excludes 56,250 shares owned by Mr.
Compton's wife, Jean T. Compton.
(5) Represents 7,028 shares and 4,554 Warrant Shares owned by Mr. Megrue's
sister as Custodian for his children. Also includes 4,187,790 shares and
2,777,874 Warrant Shares owned by The SK Equity Fund, L.P. Mr. Megrue is a
member of the general partner of the general partner of The SK Equity Fund, L.P.
(6) Includes 4,187,790 shares and 2,777,874 Warrant Shares owned by The SK
Equity Fund, L.P., and 4,556 Warrant Shares owned by Mr. Karp. Mr. Karp is a
member of the general partner of the general partner of The SK Equity Fund, L.P.
(7) Includes 7,030 shares and 4,556 Warrant Shares owned by an irrevocable
trust for the benefit of certain Saunders family members, of which Mr. Saunders
is a trustee. Also includes 4,187,790 shares and 2,777,874 Warrant Shares owned
by The SK Equity Fund, L.P. Mr. Saunders is a member of the general partner of
the general partner of The SK Equity Fund, L.P.
(8) Includes 16,313 shares held in a revocable trust of which Mr. Wurtzel is a
trustee and 65,813 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(9) Includes 65,813 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(10) Includes 91,188 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(11) Represents 50,000 shares issuable upon exercise of certain stock options
granted pursuant to The Dollar Tree Stores, Inc. Stock Incentive Plan.
(12) Includes shares held or controlled by Putnam Investments, Inc. and its
affiliates including Marsh & McLennan Companies, Inc., Putnam Investments parent
holding company, and Putnam Investment Management, Inc. and The Putnam Advisory
Company, Inc., investment advisors and subsidiaries of Putnam Investments, Inc.
Based on Schedule 13G/A filed by Putnam Investments on February 9, 1999.
(13) Includes 2,777,874 Warrant Shares. Messrs. Megrue, Saunders and Karp, as
members of the general partner of the general partner of The SK Equity Fund,
L.P., may be deemed to have beneficial ownership of shares held by that fund,
and the shares and warrant shares held by that fund have been attributed to them
in the table above. See Notes (5), (6) and (7) above.
(14) Includes shares held or controlled by Baron Capital Group, Inc., a parent
holding company, and its affiliates including BAMCO, Inc. and Baron Capital
Management, Inc., registered investment advisors, and Baron
7
<PAGE>
Asset Fund, a registered investment company. Ronald Baron owns a controlling
interest in Baron Capital Management, Inc. Based on Schedule 13F filed by Baron
Capital Management on December 31, 1998.
(15) Includes shares held or controlled by Gilder Gagnon Howe & Co., LLC., a
registered brokerage. Based on Schedule 13G filed by Gilder Gagnon Howe & Co. on
February 18, 1999.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leases
As described below, we lease our former corporate headquarters and
distribution center facility and three stores from various lessors who are
affiliated with officers or directors of our company, including leases with a
partnership consisting of both parents of Mr. Perry and Mrs. Brock and a
partnership controlled by Mr. Perry and Mr. Brock.
Lease on Former Headquarters and Distribution Center: Located in Norfolk,
Virginia, this facility is leased from DMK Associates, a partnership controlled
by Mr. Perry and Mr. Brock; the lease expires in December 2009. Rental payments
under the lease are adjusted every other lease year to reflect certain changes
in a consumer price index. The lease currently provides for an aggregate minimum
annual rental of $656,250. We replaced our Norfolk location with an expanded
facility in Chesapeake, Virginia, in early 1998. In March 1998, we subleased the
Norfolk facility through March 2008 for an amount that exceeds our annual
obligation under the prime lease.
Store and Other Leases: We currently lease three stores from lessors who
are affiliated with officers or directors of our company. We lease a store from
Suburban Management Company, a partnership owned by the parents of Mr. Perry and
Mrs. Brock. In addition, we rent two stores from DMK Associates. Rental payments
on the three stores totaled approximately $134,000 in 1998. The lease with
Suburban Management expires in March 2001. The store leases with DMK Associates
expire in November 1999, with an option to renew for four years, and January
2003, respectively.
While we believe that the terms of these leases are fair to us, their
respective terms were not negotiated on an arms-length basis and accordingly the
terms of the leases may not be as favorable to us as those which we could have
obtained from an independent third party.
Advisory Agreements
On September 30, 1993, we entered into a financial and management advisory
agreement with Saunders Karp & Megrue, L.P., (the Advisor), a limited
partnership under the control of SKM Partners, L.P., of which Messrs. Saunders,
Karp and Megrue are general partners. In consideration for certain financial
advisory services, the Advisor was entitled to receive an initial annual fee of
$250,000, reduced to $200,000 in 1995, payable quarterly, and will be reimbursed
for certain of its out-of-pocket expenses. In addition, we have agreed to
indemnify the Advisor for certain losses arising out of the provision of
advisory services. The agreement is terminable by a majority of the Board of
Directors of our company upon 30 days notice to the Advisor.
II. COMPENSATION OF EXECUTIVE OFFICERS
Compensation of Executive Officers
The following table sets forth the compensation earned by our executive
officers for the years ended December 31, 1996, 1997 and 1998:
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------ ------------
Securities
Name and Other Underlying All Other
Principal Position Year Salary Bonus(1) Annual(2) Options(3) Compensation(4)
- ------------------ ---- ------ ------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Douglas Perry(5) 1998 $266,667 --- --- --- $31,690
Chairman of the Board 1997 $340,696 $125,000 --- --- $34,141
1996 $331,105 $100,000 --- --- $33,484
Macon F. Brock, Jr. 1998 $450,000 $285,000 --- --- $32,307
President and 1997 $340,696 $125,000 --- --- $30,996
Chief Executive Officer 1996 $331,105 $100,000 --- --- $31,110
H. Ray Compton 1998 $250,000 $ 84,875 --- --- $19,833
Executive Vice President 1997 $227,132 $100,000 --- --- $22,301
1996 $220,737 $ 75,000 --- --- $21,716
Frederick C. Coble(6) 1998 $146,250 $ 77,012 --- 22,500 $14,530
Senior Vice President and 1997 --- --- --- --- ---
Chief Financial Officer 1996 --- --- --- --- ---
8
<PAGE>
- ----------
<FN>
(1) Bonuses were earned in the years shown, to be paid in the following year.
(2) Does not include the value of perquisites or other personal benefits because
they do not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus for any Named Executive Officer.
(3) Stock options were granted pursuant to our Stock Incentive Plan, and the
number of shares has been adjusted to reflect a 3-for-2 stock split,
effected as a stock dividend, distributed in June 1998.
(4) For 1998, this column includes the following amounts for Messrs. Perry,
Brock, Compton and Coble, respectively: $14,443, $15,082, $14,760 and
$14,530 for the Company's discretionary and matching contributions
allocated to the owners' 401(k) and Profit Sharing Plan accounts; and
$17,247, $17,225, $5,073 and $0 for life insurance premiums on policies of
which the officer is the owner.
(5 Mr. Perry reduced his daily activities with the Company in May 1998 and
announced his full retirement from the Company in early 1999. He continues
in his capacity as Chairman of the Board.
(6) Mr. Coble was named Senior Vice President, Chief Financial Officer in April
1998. Disclosure of compensation for years prior to becoming a Named
Executive Officer is not required.
</FN>
</TABLE>
Options Granted in 1998
Of the Named Executive Officers, only Mr. Coble received options in 1998,
under the Company's stock-compensation plans. The following table provides
information as to options granted to Mr. Coble during 1998:
Number of Securities Underlying Options Granted(1) 22,500
Percentage of Total Options Granted to Employees in 1998 1.6%
Exercise or Base Price $34.50
Expiration Date 04/20/08
Grant Date Present Value(2) $ 476,004
(1) Options to acquire shares of Dollar Tree common stock are granted under the
Company's Stock Incentive Plan. The exercise price equals the closing price
of Dollar Tree stock on the day preceding the date of grant, which reflects
fair market value at the date of grant. The options are exercisable in
three approximately equal annual installments beginning one year after
grant. They expire ten years after grant.
(2) The fair value of these options at the date of grant was estimated using a
Black-Scholes option pricing model. The following weighted average
assumptions were used to estimate the value of options: an 8 year expected
life of the options; expected volatility for Dollar Tree common stock of
50.4%; and a risk-free rate of return of 4.85%. The Company does not pay
dividends.
Option Exercises in 1998 and Year End Option Values
The following table provides information regarding options exercised by Mr.
Coble during the calendar year ended December 31, 1998, and the number and value
of options he held at the end of the year:
Shares Acquired on Exercise 39,000
Value Realized(1) $1,509,733
Number of Securities Underlying Unexercised Options
at Year End:
Exerciseable 72,881
Unexerciseable 41,670
Value of Unexercised "In-the-Money" Options at
Year End(2):
Exerciseable $2,711,863
Unexerciseable $ 759,508
(1) The value realized equals the difference between the option exercise price
and the closing price of Dollar Tree common stock on the day prior to
exercise, multiplied by the number of shares to which the exercise relates.
(2) The value of unexercised "in-the-money" options equals the difference
between the option exercise price and the closing price of Dollar Tree
common stock at December 31, 1998, multiplied by the number of shares
underlying the options. The closing price of Dollar Tree common stock on
Thursday, December 31, 1998, as reported by Nasdaq, was $43 5/16.
Director Compensation
Each Director who is not a founder or an employee of the company or an
affiliate of The SK Equity Fund, L.P., is paid a fee of $15,000 per year and
$1,000 plus expenses for each meeting of the Board of Directors or of any
committee thereof the Director attends. Such Directors also receive options for
shares of common stock under the company's Stock Incentive Plan. Effective March
1, 1999, Mr. Perry receives $75,000 per year to serve as Chairman of the Board,
but he receives no per meeting fee. He also receives options for shares of
common stock under the company's Stock Incentive Plan comparable to those
granted to the outside Directors described above.
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Employment Agreements
There are currently no employment or non-competition agreements in force
between the company and Messrs. Perry, Brock, Compton, Coble or Sasser. We plan
to enter into a consulting agreement with Mr. Perry.
Compensation Committee Interlocks and Insider Participation
Members of the Compensation Committee during 1997 were Messrs. Megrue,
Wurtzel and Doczi. No executive officer of the company currently serves or has
served on the Compensation Committee. Mr. Megrue is an affiliate of Saunders
Karp & Megrue, L.P., which has entered into an advisory agreement with the
company, as disclosed above.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Compensation Policy
Our management compensation policy in general is to offer a package
including a competitive salary, an incentive cash bonus based upon performance
goals, competitive benefits, and an efficient workplace environment. We also
encourage broad-based employee ownership of Dollar Tree stock through the
Employee Stock Purchase Plan and by granting stock options to employees at
virtually all levels within the company.
The Compensation Committee of the Board of Directors (comprised entirely of
non-employee directors) reviews and approves individual officer salaries, bonus
plan and financial performance goals, and stock option grants. This committee
also reviews guidelines for compensation, bonus, and stock option grants for
non-officer employees. It employs compensation consultants to assist the
committee in evaluating compensation plans in comparable companies.
Key personnel of our company are paid salaries in line with their
responsibilities. These salaries are structured to be competitive with salaries
paid by a peer group consisting of similar companies in the discount retail
industry. In the performance graph which immediately follows this report, our
performance is compared to that of these same peers. Management employees, up to
the level of Senior Vice President, participate in our Management Compensation
Program, which includes cash and long-term incentives based on performance.
However, the Chairman of the Board, President/CEO and Executive Vice President
receive only base salaries and certain customary benefits; together with their
spouses, they currently own or otherwise control 17.7% of our outstanding common
stock. Our company's performance and return on equity are of vital importance to
these officers due to their substantial equity holdings. As a result, these
officers do not participate in the Stock Incentive Plan or any structured bonus
plan. Benefits extended to these officers vary by recipient and may include
disability, split-dollar life insurance, and participation in our 401(k) and
Profit Sharing plans. In addition, the Compensation Committee may from time to
time approve a discretionary bonus to be paid to the executive officers in
recognition of their contributions.
Compensation of Chief Executive Officer
The Compensation Committee reviews and approves the compensation of Macon
F. Brock, Jr., Dollar Tree's Chief Executive Officer. For the year ended
December 31, 1998, Mr. Brock received a base salary of $450,000, an increase of
32.1% from the prior year. The Committee believes Mr. Brock is paid a reasonable
salary. In recognition of his performance in 1997 and 1998, Mr. Brock received a
discretionary bonus of $125,000 and $285,000 respectively.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code imposes a limitation on the
deductibility of nonperformance-based compensation in excess of $1 million paid
to executive officers. Given the relatively modest salaries of our executive
officers, the Committee believes that we will be able to continue to manage our
executive compensation program to preserve federal income tax deductions.
SUBMITTED BY THE COMPENSATION COMMITTEE
JOHN F. MEGRUE ALAN L. WURTZEL FRANK DOCZI
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COMPARISON OF SHAREHOLDER RETURNS
As required by the rules of the Securities and Exchange Commission, the
following is a line-graph comparing cumulative total shareholder return on our
common stock against a cumulative total return of The Nasdaq Stock Market(R)
Index and our Peer Group. The Peer Group consists of the following
publicly-traded retail corporations: Family Dollar Stores, Dollar General Corp.,
Consolidated Stores Corp., and 99(cent) Only Stores.
<TABLE>
<CAPTION>
Data Points:
3/7/95 12/31/95 12/31/96 12/31/97 12/31/98
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Dollar Tree 100 139 323 525 831
The Nasdaq Stock Market(R) 100 134 164 202 283
Peer Group 100 102 171 308 260
</TABLE>
The following graph outlines returns for the period beginning March 7,
1995, when our common stock began publicly trading, through December 31, 1998.
[GRAPH]
III. INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors believes it is in Dollar Tree's best interest to
increase the number of shares of common stock the Company is authorized to issue
from 100,000,000 to 300,000,000 shares. The text of the proposed amendment to
our Articles of Incorporation is as follows:
The aggregate number of shares that the Corporation shall have
the authority to issue is Ten Million (10,000,000) shares of Preferred
Stock, One Cent ($.01) par value per share, and Three Hundred Million
(300,000,000) shares of Common Stock, One Cent ($.01) par value per
share.
On April 1, 1999, the following shares of our common stock were outstanding
or reserved for issuance:
Shares issued and outstanding 61,237,898
Shares issuable upon exercise of options 2,855,448
Shares issuable upon exercise of warrants 5,584,899
----------
TOTAL 69,678,245
On December 10, 1998, we completed a merger with Step Ahead Investments, Inc.
The total above includes approximately 2,152,000 shares of common stock issued
to or reserved for shareholders, option holders and certain officers of Step
Ahead.
By increasing the number of shares of common stock which we are authorized
to issue, we will have the flexibility to raise equity through the sale of
additional shares, if the need should arise, or to issue shares in connection
with possible stock dividends, employee compensation plans, acquisitions and
other general corporate purposes. Since our stockholders have
11
<PAGE>
no preemptive rights, the Board of Directors would be able to issue the
increased number of shares at any time without further authorization from the
shareholders of the Company, except to the extent otherwise required by law or
the rules and regulations of The Nasdaq Stock Market(R). We presently have no
plans, agreements, contracts, arrangements or understandings with respect to the
issuance of any additional shares of common stock, except as provided above.
The authorization of additional shares will have no immediate effect upon
the rights of existing security holders. However, because no preemptive rights
attach to ownership of common stock, the additional common stock, when issued,
may affect the proportionate interest of each shareholder and may reduce
shareholders' equity per share. The Board could use the additional shares of
common stock to discourage an attempt to change control of our company. However,
the proposed amendment is not in response to any effort of which we are aware to
obtain control by accumulating shares of our common stock or otherwise.
Vote Required
The amendment will be adopted at the meeting, so long as a quorum is
present, if the votes cast favoring the amendment are a majority of all votes
cast. Abstentions and broker non-votes are considered votes against this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED AMENDMENT.
IV. OTHER MATTERS
Our Independent Certified Public Accountants
KPMG LLP has audited our accounts and our subsidiaries' accounts since 1986
and will continue in that capacity during 1999. A representative of KPMG LLP
will be present at the 1999 Annual Meeting of Shareholders. The representative
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
Costs of the Proxy Solicitations
The cost of the solicitation of proxies will be borne by us. Proxies may be
solicited by officers, directors and regular employees of our company, or our
affiliates, none of whom will receive any additional compensation for their
services. Such solicitations may be made personally, or by mail, facsimile,
telephone, telegram or messenger. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy material and annual reports to the beneficial owners of stock in
accordance with the schedule of charges approved by the National Association of
Securities Dealers, Inc.
Shareholder Nominations for Election of Directors
Our Bylaws provide that any shareholder of record entitled to vote
generally in the election of directors may nominate persons for election as
directors at a meeting if written notice of such shareholder's intent to make
such nomination has been given, either by personal delivery or by United States
certified mail, postage prepaid, to the Secretary of our company. We must
receive the notice not less than 120 days nor more than 150 days before the
first anniversary of the date of our proxy statement in connection with the last
annual meeting of stockholders, or if no annual meeting was held in the previous
year or the date of the applicable annual meeting has been changed by more than
30 days from the date contemplated at the time of the previous year's proxy
statement, not less than 90 days before the date of the applicable annual
meeting.
Each such shareholder's notice to the Secretary of his or her intent to
nominate must set forth:
o the name and address of record of the shareholder who intends to make
the nomination;
o a representation that the shareholder is a shareholder of record
of our company's capital stock and intends to appear in person or by
proxy at such meeting to nominate the person or persons specified
in the notice;
o the class and number of shares of our capital stock beneficially owned
by the shareholder; and
o a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder.
For each person nominated, each such shareholder's notice to the Secretary
must also set forth:
o the name, age, business address and, if known, residence address, of
such person,
o his or her principal occupation or employment,
o the class and number of shares of our capital stock beneficially owned
by such person,
12
<PAGE>
o any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors or
is otherwise required by the rules and regulations of the Securities
and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, and
o the written consent of such person to be named in the proxy statement
as a nominee and to serve as a director if elected.
Shareholder Proposals
Shareholder proposals for the Annual Meeting of Shareholders to be held in
2000 will not be included in our Proxy Statement for that meeting unless
received by us at our executive office in Chesapeake, Virginia, on or prior to
December 31, 1999. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to shareholder
proposals.
By order of the Board of Directors,
/s/ H. Ray Compton
H. Ray Compton
Executive Vice President and Secretary
Chesapeake, Virginia
April 28, 1999
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Our 1998 Annual Report to Shareholders is mailed to our shareholders. It
includes audited financial statements for the years ended December 31, 1996,
1997 and 1998, reported on by KPMG LLP, together with the related Management's
Discussion and Analysis of Financial Condition and Results of Operations.
A copy of Dollar Tree Stores, Inc. 1998 Form 10-K will be supplied without
charge upon request. Requests for such annual reports, interim reports, or other
information should be directed to:
Shareholder Services
Dollar Tree Stores, Inc.
P.O. Box 2500
Norfolk, Virginia 23501-2500
(757) 321-5000
14
<PAGE>
DOLLAR TREE STORES, INC.
1999
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of Shareholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
To assist us in planning, please indicate in the appropriate block on your proxy
whether you plan to attend the Annual Meeting of Shareholders. We look forward
to seeing you there.
HIGHLIGHTS
** In 1998, the Company replaced its Memphis distribution center facility with
a new 425,000 square foot, fully automated distribution center located in
Olive Branch, Mississippi. When this facility became operational in January
1999, it increased the Company's distribution capacity to approximately
2,000 stores.
** During 1998, the Company opened 210 stores, ending with 1,156 stores in 31
states. Net sales increased $195.6 million (27.0%) to $918.8 million, while
combined earnings per share, excluding merger-related charges, increased
45.3% to $1.09. Comparative store net sales increased 6.8% for the year.
** In December 1998, the Company completed a merger with Step Ahead
Investments, Inc. From this merger, the Company gained 66 stores in
northern and central California and Nevada, operating under the name
"98(cent) Clearance Center" and a distribution center in northern
California.
<PAGE>
DOLLAR TREE STORES, INC.
500 Volvo Parkway
Chesapeake, Virginia 23320
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For Annual Meeting, June 3, 1999
The undersigned hereby appoints J. Douglas Perry, Macon F. Brock, Jr., and H.
Ray Compton, jointly and severally, each with full power of substitution, as
proxies to represent the undersigned at the Annual Meeting of Shareholders of
DOLLAR TREE STORES, INC. to be held at the Norfolk Waterside Marriott, Norfolk,
Virginia on Thursday, June 3, 1999 at 10:00 a.m. local time, and at any
adjournment thereof, on any matters coming before the Meeting.
Please specify your choice by marking the appropriate box for each matter on the
reverse side. Any boxes not marked will be voted in accordance with the
recommendations of the Board of Directors. The Proxies cannot vote your shares
unless you sign and return this card.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
1386-PS-99
<PAGE>
This proxy, when properly executed, will be voted in the manner directed herein
and authorizes the Proxies to take action in their discretion upon other matters
that may properly come before the Meeting. If no direction is made, this proxy
will be voted FOR the election of the directors listed in proposal 1 and FOR the
amendment to the Articles of Incorporation listed in proposal 2.
1. Election of Directors.
Nominees: Class I - Macon F. Brock, Jr. and Richard G. Lesser
[ ] FOR [ ] WITHHELD [ ] FOR, except withheld from the following nominees:
______________________________________________________
2. Adoption of the amendment to the Articles of Incorporation increasing
authorized common stock to 300,000,000 shares from 100,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. If you will be attending the Annual Meeting, please mark [ ] YES
CHANGE OF ADDRESS:
NAME OF SHAREHOLDER __________________________________________
STREET ADDRESS __________________________________________
CITY, STATE AND ZIP CODE __________________________________________
Signature(s): ________________________________________ Date: __________________
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
1386-PS-99
