2006 Incentive Plan Guidelines for Performance Share Rights Awards



 Exhibit 10.1 
 FAMILY DOLLAR STORES, INC. 
 2006 INCENTIVE PLAN

 Guidelines for Long-Term Incentive Performance Share Rights Awards 
 Section 1: Purpose 
 Family
Dollar Stores, Inc. (the “Company”) maintains for the benefit of eligible individuals the Family Dollar Stores, Inc. 2006 Incentive Plan (the “Plan”), which is intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of such individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. These Guidelines for Long-Term Incentive Performance Share
Rights Awards (the “Guidelines”) are intended to implement the Plan by providing eligible Team Members of the Company with an opportunity to participate in the Company’s success by earning long-term incentive compensation awards in
the form of shares of Company Stock (“Common Stock”) within the framework of the Plan (the “Performance Share Rights Awards” or the “Awards”), and as further described in these Guidelines. 
 These Guidelines are adopted pursuant to relevant provisions of the Plan and are to be interpreted and applied in accordance with the terms and provisions
thereof. Specifically, these Guidelines provide for the grant of Performance Share Rights Awards under Article 9 of the Plan and, with respect to Team Members in the position of Vice President or above, the grant of Qualified Performance-Based
Awards under Article 14 of the Plan. Unless otherwise provided herein, capitalized terms used in these Guidelines will have the meaning given such terms in the Plan. If there is any conflict between these Guidelines and the Plan, the terms and
provisions of the Plan shall control. 
 Section 2: Scope 
 The Guidelines cover Team Members who are eligible for participation in the Plan under these Guidelines and are selected by the Committee
for Performance Share Rights Awards identified in Section 1 above. Awards under these Guidelines cover three (3) year performance periods relating to such Awards which generally track the Company’s fiscal (not calendar) year that is
the 12-month period that generally runs from approximately September 1st to August 31st. (the “performance period”). The actual dates for the fiscal year are determined and announced by the Company at the beginning of each fiscal year. See Section 7 below regarding transition periods. 
 Section 3: Eligibility for Awards and Payouts 
 The Compensation Committee of the Board (the “Committee”) and/or management of the Company will determine annually which Team Members are eligible to receive Performance Share Rights Awards
under these Guidelines. Participants are selected no later than 90 days following the beginning of each performance period or upon








 
employment with the Company or promotion. Annual Performance Share Rights Awards under these Guidelines will result in overlapping performance periods. Additional eligibility requirements are as
follows: 
 New Hire and Promotion Awards (New Equity Plan Participants) 
  

	—	 	 A Team Member who becomes eligible for a Performance Share Rights Award under these Guidelines after the beginning of a performance period as a new
hire will be granted a prorated Award for all pending performance periods as of the Team Member’s date of hire, other than any performance period that will lapse within six months of such date of hire. A Team Member who becomes eligible for a
Performance Share Rights Award under these Guidelines after the beginning of a performance period due to promotion will be granted a prorated Award for all pending performance periods as of the Team Member’s effective date of promotion. The
dollar value of an Award and the Performance Share Rights to be issued shall be computed based upon an equitable proration recognizing the number of months of a Team Member’s service in any applicable performance period (rounded up to the
nearest full month). 


 Promotion Awards for Active Equity Plan Participants (Equity to Equity) 
  

	—	 	 A Team Member covered by these Guidelines who has a job change that results in a higher Performance Share Rights Award will have their Award for all
pending performance periods as of the date of the job change adjusted upward on a pro rata basis. The additional equity award will be calculated as the difference between the full year Award for the new position and the actual Award for the old
position for each relevant performance period, prorated for the time in the new position. Payments of all such Awards will be subject to Company performance as outlined in section 4 below. 









 Payout Eligibility 
  

	—	 	 A Team Member must be classified as a regular full-time employee during the entire performance period for which an Award is being made and at the time
of the actual issuance of the Common Stock pursuant to the Performance Shares Rights Award in order to be issued Common Stock pursuant to an Award. 


  

	—	 	 A Team Member on leave of absence, regardless of type, will be issued Common Stock pursuant to a Performance Share Rights Award only upon return to
regular, full time work/active status. A Team Member who is on an approved military leave will be issued Common Stock pursuant to such Award at the time such shares are issued even if the Team Member has not returned to regular, full time
work/active status at that time. 


  

	—	 	 The Company will not issue common stock pursuant to the Performance Share Rights Award for any performance period if the Team Member’s most recent
annual performance rating is Unsatisfactory/Does Not Meet Expectations. 


  

	—	 	 These Guidelines do not in any manner restrict the right of the Company or the Team Member to terminate employment at any time, for any reason, with or
without cause. See Section 5 below for further information on the consequences of termination of employment during a pending performance period. 


 Section 4: Payout Calculation of PSR Awards 
 At the time a Team Member is
selected for an Award under these Guidelines for a particular performance period, the Team Member will be assigned a “target” number of shares of Common Stock to be earned if the Company’s performance level is at the 50% level in
comparison to the peer group (as set forth below) for the performance period. “Target” is defined as the actual number of shares approved and awarded. Any payout is based on cumulative yearly performance over the relevant performance
period. The Award will be expressed as a number of Performance Share Rights and will be evidenced by an Award Certificate consistent with the provisions of the Plan. The actual payout for the performance period, if any, will be determined as a
percentage of the target Award payout depending on Company performance. 








	—	 	 Company performance for each performance period will be based equally upon (i) the Company’s average annual return on equity
(“ROE”) for each fiscal year during the performance period and (ii) the Company’s pre-tax net income growth rate over the performance period, compounded annually. For purposes of these Guidelines, ROE will be calculated by
dividing the Company’s pre-tax net income for the relevant fiscal year by the total shareholders’ equity. 


  

	—	 	 Actual Company performance for each criteria above at the end of the relevant performance period is then measured against the performance of a peer
group of companies selected prior to, or within 90 days after the beginning of, the performance period. The Award levels for the relevant performance period will be adjusted at the end of the performance period to reflect the Company’s
performance relative to the peer group. Any such adjustment will generally range from 0% (i.e., no payout for the performance period) to 200% of the target Award per the following chart (with linear interpolation between the thresholds set forth
below): 


  

			
	 Performance
 Against
 Performance

 Peer Group
	  	 Percent of
 Award
 Adjustment
 (to Target Award)

	90th Percentile	  	200%
	75th Percentile	  	150%
	50th Percentile	  	100%
	40th Percentile	  	75%
	30th Percentile	  	25%
	<30th Percentile	  	0%

  

	—	 	 In addition, under relevant provisions of the Plan, the determination of ROE and net-income-growth and the peer group of companies for the relevant
performance period may be further adjusted, collectively or individually, to reflect extraordinary events or circumstances affecting the Company or its business, or any of the companies included in the peer group, which render any such goals or peer
group selection unsuitable. 


  

	—	 	 These Guidelines do not in any manner restrict the right of the Company to modify performance measures, targets, cycles, or any other term or condition
of these Guidelines, as the Company deems it necessary or appropriate, subject to the terms of the Plan. 









 Section 5: Termination of Employment or Plan Participation 
 Notwithstanding anything in these Guidelines to the contrary, the following provisions will apply to any Team Member whose employment with the Company
terminates. 
  

	—	 	 In the event of a termination of a Team Member’s employment, either (i) as a result of the Team Member’s death, Disability or Retirement (ii)
by the Company without Cause, payments with respect to any outstanding Performance Share Rights Awards will be based on actual Company performance, as set forth in Section 4 above, for (A) the fiscal year in which the date of termination occurs plus
(B) each completed fiscal year during the applicable performance period immediately preceding the date of termination. Common stock awarded pursuant to the Performance Share Rights will be issued on a pro-rata basis based on the actual number of
months worked in the applicable performance period. The pro ration will be determined by multiplying the number of Performance Shares Rights to which the Team Member would have been entitled based on Company performance by a fraction the numerator
of which is the number of calendar months in the performance period of the Team Member’s actual employment with the Company (including the full calendar month in which the Team Member’s employment terminated) and the denominator of which
is the total number of calendar months in the performance period. Payments under this paragraph will be made as soon as administratively convenient following the end of the fiscal year in which the date of termination occurs.



  

	—	 	 In the case of death or Disability, individual performance of the Team Member will be ignored. In either event, payments under this paragraph shall be
made as soon as administratively convenient after the end of the fiscal year in which the date of termination of employment occurs. 


  

	—	 	 In the event of termination of a Team Member’s employment with the Company before the end of any relevant performance period or the actual
issuance by the Company of Common Stock pursuant to the Performance Share Rights Award, either (i) by the Company for Cause, or (ii) by the Team Member for any reason (other than death, Disability or Retirement), any outstanding Awards for
all relevant performance periods will be immediately forfeited. 


  

	—	 	 In the event that an active Team Member leaves the Plan for any reason but remains employed by the company, the Team Member’s Performance Share
rights will be paid on a pro-rata basis based on the actual number of months worked in each relevant performance period, including the full calendar month in which the Team Member’s plan participation ended. Payments will be made during the
same cycle as active plan participants and will be subject to the Company performance criteria outlined in section 4 of this document. 


  

	—	 	 To the extent a Team Member is or becomes Retirement-eligible during a performance period, (i) the Team Member will not be considered to have
terminated from employment under these Guidelines unless the Team Member











	 	 
has had a “separation from service” with the Company within the meaning of Code Section 409A and the Company’s 409A Administrative Policies and (ii) to the extent
required by Code Section 409A and the Company’s 409A Administrative Policies, payment will not be made before the date that is six months after the Team Member’s termination from employment. 


 Section 6: Additional Rules 
  

	—	 	 All payments under these Guidelines are considered supplemental pay and will be taxed as such. Appropriate withholding and deductions will be taken
from such payments. In accordance with the Plan, the Company may require tax withholding to be satisfied through withholding of shares of Common Stock otherwise payable under the Award. 


  

	—	 	 These Guidelines cannot be changed or modified by a verbal communication or course of dealing but only by a written communication signed by the
Chairman, Vice Chairman, and/or the Chief Executive Officer (“CEO”) of the Company or any officer designated by one of them. 


  

	—	 	 Payouts earned under these Guidelines are expected to be paid as soon as administratively convenient following the end of the relevant performance
period in the form of one (1) share of the Company’s Common Stock for each whole Performance Share Right that is payable under the Plan and these Guidelines, rounded up to the next whole share. Notwithstanding the foregoing, the Company
may permit recipients of Awards to elect to defer receipt of payment of such Awards under such terms and conditions as the Company may prescribe in accordance with the requirements of Code Section 409A. 


  

	—	 	 In the event of major economic changes, catastrophic events, or any other circumstances not contemplated by the Company (but subject to the Plan
provisions relating to Qualified Performance-Based Awards), the Committee, the Chairman, Vice Chairman and/or the CEO of the Company reserves the right to alter, amend, or terminate these Guidelines and any Awards hereunder.



  

	—	 	 The Chairman of the Company will make all final decisions, rulings and interpretations under these Guidelines (subject to the Plan provisions relating
to Qualified Performance-Based Awards, which may require action by the Committee). By participating in the Plan under these Guidelines, each Team Member agrees that such decisions, rulings and interpretations will be final and that each Team Member
will be bound by them. Each Team Member further agrees that if and when any circumstances arise relating to these Guidelines, which are not covered by this description of the Plan, the Team Member will be bound by the final decision, ruling or
interpretation of the Chairman. 









 Section 7: Qualified Performance Based Awards 
 Notwithstanding anything in these Guidelines to the contrary, the following provisions will apply to any Team Member who is a vice president or above at the
time the Awards are granted under these Guidelines. Awards under this Section 7 are intended to satisfy the Section 162(m) Exemption applicable to Qualified Performance-Based Awards under Article 14 of the Plan. Please refer to the Plan
document for further information. 
  

	—	 	 All determinations under these Guidelines will be made by the Committee which, pursuant to Section 4.1 of the Plan, will consist of all the
members of the Compensation Committee who are “outside directors” within the meaning of Section 162(m) of the Code. 


  

	—	 	 The Committee will establish within 90 days after the beginning of each performance period the target Award payout for each Team Member covered by this
Section 7, the peer group of companies and potential payout adjustments relating thereto for the relevant performance period. 


  

	—	 	 Notwithstanding the foregoing, the Committee will adjust ROE and net-income-growth, the peer group of companies and potential payout adjustments
relating thereto for the relevant performance period, collectively or individually, with respect to each Team Member covered by this Section 7 to adequately reflect the occurrence, during the performance period, of any of the events described
in Sections 14.2 and 14.4 of the Plan. 


  

	—	 	 Payment of any Award under these Guidelines to any Team Member covered by this Section 7 is conditioned upon the written certification of the
Committee that the performance goals and any other material conditions applicable to such Award were satisfied. 










	—	 	 The Committee will retain the discretion to decrease, but not increase, the Award otherwise payable to any Team Member covered by this Section 7
in accordance with the applicable performance formula described above. In no event will the Award otherwise payable to any Team Member covered by this Section 7 in accordance with the applicable performance formula described above exceed
1,000,000 shares of Company Stock. 


  

	—	 	 Consistent with Section 1 above, payment of any Award under these Guidelines to any Team Member covered by this Section 7 is conditioned upon
the Plan having been previously approved by the shareholders of the Company. 


 Adopted: September 28, 2005 

Amended: January 19, 2006; March 27, 2007; August 28, 2007; October 13, 2009