Document:

Exhibit
10.4

 

FORM OF SEVERANCE AGREEMENT FOR
SENIOR VICE PRESIDENTS

 

This
Severance Agreement is effective this
                
day of October, 2008, by and between
                        ,
(“Employee”) and Family Dollar Stores, Inc., and its successors,
subsidiaries and affiliated companies (collectively, the “Company”).

 

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

 

A.            Employee is
employed by the Company in a position of senior leadership.

 

B.            The Company desires to
obtain the agreement of Employee to certain restrictive covenants and other
provisions as set forth herein in exchange for Employee’s receipt of good and
valuable consideration to which Employee was not previously entitled, including
without limitation: (i) the Company’s agreement to provide certain
severance payments as described herein, (ii) an increase in Employee’s
rate of base salary effective as of September 7, 2008, (iii) an award
opportunity under the Company’s Incentive Bonus Plan for the fiscal year
beginning August 31, 2008, (iv) an award of Performance Share Rights
under the 2006 Incentive Plan for the 3-year performance period commencing August 31,
2008, and (v) an award of stock options under the 2006 Incentive Plan with
a grant date of October 7, 2008.

 

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

 

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

 

A.            “Cause” –  (i) At any time after a Change in
Control, Cause means any of the following acts by Employee, as determined by
the Compensation Committee of the Board of Directors of the Company:  (a) gross neglect of duty, (b) prolonged
absence from duty without the consent of the Company, (c) intentionally
engaging in any activity that is in conflict with or adverse to the business,
reputation or other interests of the Company, or (d) willful misconduct,
misfeasance or malfeasance of duty which is reasonably determined to be
detrimental to the Company. The determination of the Compensation Committee as
to the existence of “Cause” shall be conclusive on Employee and the Company.

 

(ii) At
any time prior to a Change in Control, Cause means any of the following: (a) conviction
of a felony, any act involving moral turpitude, or a misdemeanor where imprisonment
is imposed, (b) commission of any act of theft, fraud, dishonesty, or
falsification of any employment or Company records, (c) improper
disclosure of the Company’s confidential or proprietary information, (d) Employee’s
failure to comply with reasonable written directives of the Chairman of the
Board or the Board of Directors of the Company, (e) a course of conduct
amounting to gross incompetence, (f) chronic and unexcused absenteeism, or
(g) misconduct in 

 

1

 

connection
with the performance of any of Employee’s duties, including, without
limitation, misappropriation of funds or property of the Company, securing or
attempting to secure personally any profit in connection with any transaction
entered into on behalf of the Company, misrepresentation to the Company, or any
violation of law or regulations on Company premises or to which the Company is
subject.

 

B.            “Change in Control” – Change
in Control shall have the meaning set forth in Section 2.1(f) of the
2006 Incentive Plan; provided, however, that to the extent
applicable under Section 409A of the Code, for purposes of paying certain
severance payments within 24 months after a Change in Control under Paragraph 4
below, Change in Control shall have the same meaning as set forth in any
regulations, revenue procedure, revenue rulings or other pronouncements issued
by the Secretary of the United States Treasury pursuant to Section 409A of
the Code.

 

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

 

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

 

E.             “Competitive Position” –
Competitive Position means any employment with or activity or service performed
for a Competitor (whether as owner, member, manager, lender, partner,
shareholder, member, consultant, agent, employee, co-venturer or otherwise) in
which (i) Employee will use or could reasonably be expected to use any
Confidential Company Information or Trade Secrets of the Company for the
benefit of a Competitor in competition with the Company; or (ii) Employee will hold a position, have duties, or perform
services for such Competitor that is or are the same as or substantially similar
to Employee’s position with, duties for, or services actually performed for the
Company during Employee’s employment with the Company.

 

F.             “Competitor” – Competitor
means (i) any person or entity whose business is the same as or
substantially similar to the Company’s Business; (ii) any person or entity
who owns or operates multi-merchandise retail stores that each have 25,000
square feet, or less, of total selling space, and that sell, or offer for sale,
merchandise that is the same as or substantially similar to merchandise sold or
offered for sale by the Company; or (iii) any person or entity who plans
to own or operate multi-merchandise retail stores that have 25,000 square feet,
or less, of total selling space, and that will sell, or offer for sale,
merchandise that is the same as or substantially similar to merchandise sold or
offered for sale by the Company.

 

G.            “Confidential Company
Information” – Confidential Company Information means, unless otherwise
available to the public, (i) any and all
information relating to the Company’s methods of operation, source of
merchandise supply, organizational details, personnel information, marketing
plans, business plans, strategic plans, forecasts, or financial information or
data; (ii) any and all information relating to the Company’s real estate
activities  

 

2

 

including,
but not limited to, landlords, prospective landlords, and lease data; (iii) the specific terms of the Company’s agreements or
arrangements with any officers, directors, employees, vendors, suppliers, or
any other entity with which the Company may be affiliated from time to time, including, but not limited to, the value of any
consideration provided or received by the Company or the expiration date of any
such agreement or arrangement; and (iv) any and all information of a
technical or proprietary nature developed by or acquired by the Company or made
available to the Company and its employees by vendors, suppliers, contractors,
or other employees of the Company, on a confidential basis, including, but not
limited to, ideas, concepts, designs, specifications, prototypes, techniques,
technical data or know-how, formulae, methods, research and development, and
inventions, as such Confidential Company Information may exist from time to
time and whether in electronic, print or other form and all copies, notes, or
other reproductions thereof.

 

H.            “Disability” –  Disability shall have the meaning
set forth in Section 2.1(m) of the 2006 Incentive Plan.

 

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

 

J.             “Good Reason” shall mean any of the following
acts by the Company, without the consent of the Employee (in each case, other
than an isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Employee): (i) a reduction by the Company in the Employee’s
base salary; (ii) a direct or indirect material reduction by the Company
in the Employee’s aggregate annual and long-term incentive compensation
opportunities, such as through a reduction in target or maximum award
opportunities, a change in the performance goals or formulas for earning awards
resulting in a material increase in the degree of difficulty of achieving
target performance, or similar changes; (iii) a material reduction in the
Employee’s position, duties and responsibilities, assignment to duties inconsistent
with such position or material adverse change in reporting relationships, (iv) with
respect to an Employee who is stationed at the Company’s headquarters in
Charlotte, North Carolina, or in Matthews, North Carolina, the Company
requiring the Employee, without his or her consent, to be based at any office
or location more than 35 miles from the location at which the Employee was
stationed immediately prior to a Change in Control, or (v) the continuing
material breach by the Company of any employment agreement between the Employee
and the Company after the expiration of any applicable period for cure.

 

K.            “Incentive Bonus Plan” – The
annual cash incentive bonus plan established pursuant to the Guidelines for
Annual Cash Bonus adopted under the 2006 Incentive Plan.

 

L.             “Restricted Territory” –
Restricted Territory means any state in the United States of America, or any
state in Mexico, in which (i) the Company is conducting the 

 

3

 

Company’s
Business on Employee’s Termination Date, or (ii) the Company is planning
to conduct the Company’s Business on Employee’s Termination Date and Employee
has knowledge, or should have knowledge, of such Company plans.

 

M.           “Target Bonus” – Target
Bonus means Employee’s “target bonus” for the applicable fiscal year within the
meaning of Section 4 of the Incentive Bonus Plan.

 

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

 

O.            “2006 Incentive Plan” – The
Family Dollar Stores, Inc. 2006 Incentive Plan, as in effect from time to
time.

 

3.             Severance
Upon Termination without Cause Prior to a Change in Control – Subject to
the provisions of Paragraphs 5 and 8 hereunder, in the event of Employee’s
termination by the Company without Cause or due to Employee’s Disability or
death, in each case prior to a Change in Control, the Company shall provide
Employee with the following severance benefits:

 

A.            The Company
shall continue the payment of Employee’s base salary in effect on the date of
such termination of employment for a period of twelve (12) months.  Such salary continuation payments shall be
paid in a series of substantially equal installments in accordance with the
regular payroll practices of the Company as in effect as of the date of
termination over said period, commencing as soon as administratively
practicable, but in no event more than sixty (60) days, following the
Participant’s date of termination of employment (except as otherwise required
by Paragraph 14).  Such salary
continuation payments shall not be considered eligible compensation under any
of the Company’s employee benefit plans.

 

B.            If Employee’s
date of termination of employment is after the end of the Company’s fiscal year
but prior to the payment date of any bonus under the Incentive Bonus Plan for
such fiscal year, the Company shall pay Employee the portion of the Target
Bonus earned by Employee for such fiscal year according to the terms of the
Incentive Bonus Plan (i.e., based on the Company’s applicable performance level
and, to the extent applicable, Employee’s performance rating for the fiscal
year), without regard to any requirement in the Incentive Bonus Plan otherwise
requiring Employee to remain employed through the bonus payment date.  In addition, Employee shall be eligible to
receive a pro rated bonus under the Incentive Bonus Plan for the fiscal year of
the Company in which such termination of employment occurs, without regard to
any requirement in the Incentive Bonus Plan otherwise requiring Employee to
remain employed through the bonus payment date, based on the number of
completed weeks during the applicable fiscal year through the date of
termination of employment and 

 

4

 

further
based on the Company’s applicable performance level for the fiscal year and, if
available and to the extent applicable, Employee’s performance rating for the
fiscal year (or if no such performance rating is available, assuming a
performance rating of “satisfactory” or its equivalent).  Any such payment shall be made to Employee at
the same time the Company makes payments to other participants in the Incentive
Bonus Plan.

 

C.            For the number
of months set forth in clause A above after Employee’s date of termination of
employment, but not to exceed 18 months, the Company shall continue to provide
health insurance coverage and benefits to Employee and Employee’s dependents as
if Employee’s employment had not been terminated, including but not limited to
the provision of the Company’s Medical Expense Reimbursement Plan (the “MERP”).
Any period during which health benefits are continued pursuant to this
Paragraph shall be considered to be in satisfaction of the Company’s obligation
to provide “continuation coverage” pursuant to Section 4980B of the Code,
and the period of coverage required under said Section 4980B shall be
reduced by the period during which health benefits were provided pursuant to
this Paragraph.

 

Such
payments and benefits provided by the Company to Employee as set forth in
Paragraphs 3 A, B and C are herein called “Termination Compensation.”  Such Termination Compensation shall be
reduced, in whole or in part, by: (x) all other salary, bonus, consulting
fees or other compensation received by or payable to Employee for services
rendered in any capacity to any third party during the period that such
Termination Compensation is paid; (y) all disability or life insurance
payments made pursuant to disability or life insurance policies provided by and
paid for by the Company to Employee and which payments are received during the
period that such Termination Compensation is paid; and (z) comparable
health insurance coverage actually received by Employee for services rendered
in any capacity to any third party during the period that such Termination
Compensation is paid.  The Employee
agrees to pursue reasonable, good faith efforts to obtain other employment in a
position suitable to Employee’s background and experience. Moreover, Employee
agrees to notify the Company within three business days of obtaining other
employment during the time period in which Employee is receiving Termination
Compensation.  Notwithstanding any of the
foregoing, Employee’s Termination Compensation shall be subject to forfeiture
as set forth below in Paragraph Five.

 

4.             Severance Payable in connection
with a Change in Control –  In
the event of a Change in Control and a termination of Employee’s employment
within 24 months after such Change in Control either by the Company without
Cause or by Employee for Good Reason, the Company shall provide Employee with
the following severance benefits:

 

A.            The Company
shall pay to Employee in a lump sum in cash within 30 days after the date of
such termination of employment an amount equal to the product of (x) eighteen
(18) months and (y) the sum of (A) Employee’s monthly base salary at
the highest annual rate in effect during the period beginning immediately prior
to the Change in Control through the date of Employee’s termination of
employment and (B) the monthly equivalent of the average of the bonuses,
if any, paid or payable to Employee under the Incentive Bonus Plan for each of
the three (3) fiscal years preceding the fiscal year in which Employee’s
termination of 

 

5

 

employment
occurs (or such fewer number of fiscal years for which Employee was eligible to
receive a bonus under the Incentive Bonus Plan).

 

B.            For the number
of months represented by the multiple set forth in clause A (x) above
after Employee’s date of termination of employment, but not to exceed 18
months, the Company shall continue to provide health insurance coverage and
benefits to Employee and Employee’s dependents as if Employee’s employment had
not been terminated, including but not limited to the provision of the Company’s
Medical Expense Reimbursement Plan (the “MERP”). Any period during which health
benefits are continued pursuant to this Paragraph shall be considered to be in
satisfaction of the Company’s obligation to provide “continuation coverage”
pursuant to Section 4980B of the Code, and the period of coverage required
under said Section 4980B shall be reduced by the period during which health
benefits were provided pursuant to this Paragraph.  Such health insurance coverage shall be
subject to offset as provided in Paragraph 3 above for comparable coverage
received by Employee from a third party during the continuation period.

 

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

 

5.             Restrictive
Covenants; Non-Disclosure Obligations; Forfeiture of Termination Compensation.  Employee
and the Company understand and agree that the purpose of the provisions of this
Paragraph 5 is to protect the legitimate business interests of the Company,
especially within the multi-merchandise retail industry, in light of Employee’s
leadership position with the Company and exposure and access to Confidential
Company Information and Trade Secrets. 
Employee and the Company further agree and understand that the
multi-merchandise retail industry and the Company’s Business are national in
scope and that the Company has plans to expand the Company’s Business
internationally.  Employee acknowledges
that the employment and post-employment restrictions set forth in this
Paragraph 5 are therefore reasonable in that these restrictions are limited to
the multi-merchandise retail industry and to the legitimate protection of the
Company’s Business, and that they do not, and will not, unduly impair Employee’s
ability to earn a living during or after Employee’s employment with the
Company.  As a result of Employee’s
educational background, prior work experience, and Employee’s employment and
position with the Company, Employee possesses general skills and knowledge
enabling Employee, if need be, to pursue profitable work in businesses not
competitive with the Company’s Business.

 

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

 

A.            Covenant Not to Compete.

 

(i)            Employee agrees that during Employee’s employment
with the Company and for the period of twelve (12) months immediately following
Employee’s

 

6

 

Termination
Date (such period not to include any
period(s) of violation or period(s) of time required for litigation
to enforce the provisions of this Paragraph 5.A(i)) (the “Restricted Period”), Employee shall not, without the prior written
consent of the Company, directly or indirectly, accept, obtain, or hold a
Competitive Position within the Restricted Territory with a Competitor.  Notwithstanding the foregoing, the
provisions of this Paragraph 5.A(i) shall not apply from and after
a Change in Control.

 

(ii)           Employee agrees that in the event
Employee, without the Company’s prior written consent, directly or indirectly
accepts, obtains, or holds a Competitive Position within the Restricted
Territory with a Competitor during the period between the expiration date of
the Restricted Period and the date of the Company’s final payment to Employee
of any Termination Compensation under this Agreement (the “Concluding
Compensation Period”), the Company shall be entitled to terminate any
compensation, benefits, and/or remaining payments of the Termination
Compensation otherwise payable to Employee under this Agreement and Employee
forfeits such Termination Compensation.  Notwithstanding the foregoing, the
provisions of this Paragraph 5.A (ii) shall not apply from and
after a Change in Control.

 

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

 

B.            Non-Solicitation
of Company Employees.

 

(i)            Employee understands and agrees that the relationship between the Company and
each of its employees constitutes a valuable asset of the Company and may not
be converted to Employee’s own use or benefit, or for the use or benefit of any
other third party.  Accordingly, Employee
hereby agrees that during Employee’s employment and during the Restricted
Period, Employee shall not, without
the Company’s prior written consent, directly or indirectly, (A) solicit
or recruit for employment; hire; attempt to solicit or recruit for employment;
attempt to hire; or accept as an employee, consultant, contractor, or
otherwise, any Company employee, or (B) urge; encourage; induce; or
attempt to urge, encourage, or induce, any Company employee to terminate his or
her employment with Company; or (C) otherwise interfere with the Company’s
relationship with any Company employee.  Notwithstanding the foregoing, the
provisions of this Paragraph 5.B(i) shall not apply from and after
a Change in Control.

 

(ii)           Employee agrees that in the event Employee, without the
Company’s prior written consent, directly or indirectly, (A) solicits or
recruits for employment; hires; attempts to solicit or recruit for employment;
attempts to hire; or accepts as an employee, consultant, contractor, or
otherwise, any Company employee, or (B) urges; encourages; induces; or
attempts to urge, encourage, or induce, any Company employee to terminate his
or her employment with Company; or (C) otherwise interferes with the
Company’s relationship with any Company employee during the Concluding
Compensation Period, the Company shall be 

 

7

 

entitled to terminate any
compensation, benefits, and/or remaining payments of the Termination
Compensation otherwise payable to Employee under this Agreement and Employee
forfeits such Termination Compensation.  Notwithstanding the foregoing, the
provisions of this Paragraph 5.B(ii) shall not apply from and after
a Change in Control.

 

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

 

D.            Employee
Acknowledgement.  Employee
acknowledges and agrees that (i) the restrictive covenants in this
Paragraph 5 are reasonable in time, territory and scope, and in all other
respects; (ii) should any part or provision of any covenant be held
invalid, void or unenforceable in any court of competent jurisdiction, such
invalidity, voidness, or unenforceability shall not render invalid, void or
unenforceable any other part or provision of this Agreement; and (iii) if
any portion of the foregoing provisions is found to be invalid or unenforceable
by a court of competent jurisdiction because its duration, territory,
definition of activities or definition of information covered is considered to
be invalid or unreasonable in scope, the invalid or unreasonable terms shall be
redefined, or a new enforceable term provided, such that the intent of the
Company and Employee in agreeing to the provisions of this Agreement will not
be impaired and the provision in question shall be enforceable to the fullest
extent of the applicable laws.  The
restrictive covenants contained herein shall be construed as agreements
independent of any other provision in this Agreement and the existence of any
claim or cause of action of Employee against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of this restrictive covenant. 
Any decision in one state or jurisdiction invalidating or holding
unenforceable any provision of this Paragraph 5 shall not be binding in any
other state or jurisdiction.

 

6.             Other  Post-Termination Covenants.

 

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

 

B.            Upon Employee’s Termination Date, Employee agrees not to
make any statements to the Company’s employees, customers, vendors, or
suppliers or to any public or media source, whether written or oral, regarding
Employee’s employment or termination from the Company’s employment, except as
may be approved in writing by an executive officer of the 

 

8

 

Company in advance.  The Employee further agrees not to make any
statement (including to any media source, or to the Company’s suppliers,
customers or employees) or take any action that would disrupt, impair,
embarrass, harm or affect adversely the Company or any of the employees,
officers, directors, or customers of the Company or place the Company or such
individuals in any negative light.

 

C.            Following Employee’s Termination
Date, Employee covenants to render further advice and assistance to the Company
as may be required from time to time, and to provide all information available
to Employee on matters handled by and through Employee while employed by the
Company or of which Employee has personal knowledge, and by making available to
the Company at reasonable times and circumstances, upon request by the Company,
information pertinent to its operations in Employee’s possession; and, to the
extent that it is necessary, to cooperate with and assist the Company to
conclude any matters that are pending and which may require Employee’s
assistance; provided, that he shall be paid reasonable compensation by the
Company in the event Employee is required to expend time in the performance of
such services; and provided further, that Employee may perform such services in
a manner that does not unreasonably interfere with other employment obtained by
Employee.  The Employee shall be reimbursed
for any expenses incurred by Employee in the performance of the covenants
herein set forth in this Paragraph 6.C.

 

In addition, Employee agrees
to cooperate with and provide assistance to the Company and its legal counsel
in connection with any litigation (including arbitration or administrative
hearings) or investigation affecting the Company, in which, in the reasonable
judgment of the Company’s counsel, Employee’s assistance or cooperation is
needed.  The Employee shall, when
requested by the Company, provide testimony or other assistance and shall
travel at the Company’s request in order to fulfill this obligation.  In connection with such litigation or
investigation, the Company shall attempt to accommodate Employee’s schedule,
shall reimburse Employee (unless prohibited by law) for any actual loss of
wages in connection therewith, shall provide Employee with reasonable notice in
advance of the times in which Employee’s cooperation or assistance is needed,
and shall reimburse Employee for any reasonable expenses incurred in connection
with such matters.

 

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

 

8.             Enforcement
of Restrictions in Paragraphs 5 and 6.  Because Employee’s services to the Company
are special and unique and because Employee has been exposed to and has had
access to Confidential Company Information and Trade Secrets, Employee and the
Company agree that any breach or threatened
breach of the provisions of Paragraphs 5.A(i), 5.B(i), 5.C, and 6 would cause
irreparable injury to the Company and that money damages would not provide an
adequate remedy to the Company. 
In the event of a breach or threatened breach of Paragraphs 5.A(i), 5.B(i), 5.C, or 6 of this
Agreement, the Company or its successors or 

 

9

 

assigns may, in addition to
any other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance; temporary, preliminary, and
permanent injunctive relief; expedited discovery; or other equitable relief in
order to enforce or prevent any violations of any such provisions (without
posting a bond or other security).  The Company shall be specifically entitled to an
injunction restraining Employee from disclosing any Confidential Company
Information or Trade Secrets, and, further, from accepting or continuing any
employment with or rendering any services, or continuing to render services, to
any such third-party to whom any Confidential Company Information or Trade
Secret has been disclosed or is threatened to be disclosed by Employee.

 

In addition to the foregoing
and not in any way in limitation thereof, or in limitation of any right or
remedy otherwise available to the Company, if Employee violates any provision
of Paragraphs 5.A(i), 5.B(i), 5.C, and 6
of this Agreement: (i) any compensation, benefits and/or Termination
Compensation then or thereafter due from the Company to Employee shall be
terminated forthwith; (ii) the Company’s obligation to pay or provide and
Employee’s right to receive such compensation, benefits and/or Termination
Compensation shall terminate and be of no further force or effect; and (iii) upon
demand by the Company, Employee shall repay to the Company any such
compensation, benefits and/or Termination Compensation previously paid by the
Company because of not being informed or aware of Employee’s violation of a
provision of Paragraphs 5.A(i), 5.B(i), 5.C, or 6 of this Agreement; in each
case without limiting or affecting Employee’s obligations under such Paragraphs
5.A(i), 5.B(i), 5.C, or 6 or the Company’s other rights and remedies available
at law or in equity, and provided that at least $20,000 of such compensation,
benefits and/or Termination Compensation shall be retained by Employee
representing the consideration Employee received in exchange for Employee’s
release and waiver of rights or claims under Paragraph 9 of this Agreement.

 

9.             Waiver
and Release.  In
consideration for the payments and benefits provided and to be provided
hereunder, Employee agrees that Employee will, upon termination of employment
and as a condition to the Company’s obligation to pay any severance benefits
under this Agreement, deliver to the Company a fully executed release agreement
substantially in a form then used by and agreeable to the Company and which
shall fully and irrevocably release and discharge the Company, its directors,
officers, and employees from any and all claims, charges, complaints,
liabilities of any kind, known or unknown, owed to Employee.

 

10.           Special
Provisions. This Agreement shall inure to the benefit of any
successor to or assignee of the Company, and Employee specifically agrees on
demand to execute any and all necessary documents in connection with the
performance of this Agreement.  No waiver
by either party of any breach by the other of any provision hereof shall be
deemed to be a waiver of any later or other breach thereof or as a waiver of
any such or other provision of this Agreement. 
If any provision of this Agreement shall be declared invalid or
unenforceable as a matter of law, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision of this Agreement
or of the remainder of this Agreement as a whole.

 

11.           Complete
Agreement.  This
Agreement sets forth all of the terms of the understanding between the parties
with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between
the 

 

10

 

parties, but only by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination
is sought. This Agreement revokes and supersedes all prior or contemporaneous
agreements, representations, promises and understandings, whether written or
oral, between the parties.

 

12.           Choice of Law; Consent to
Jurisdiction.  This Agreement
shall be governed by and construed under the laws of the State of North
Carolina without regard to its choice of law or conflict of law
principles.  Employee hereby expressly
and irrevocably consents  to the venue
and jurisdiction of the United States District Court for the Western District
of North Carolina, or any state court in Mecklenburg County, North Carolina.

 

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

 

	
  Family Dollar
  Stores, Inc.

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  	
   

  	
  Post Office Box 1017

  
	
   

  	
   

  	
   

  	
  Charlotte, NC 28201-1017

  
	
   

  	
   

  	
   

  	
   

  
	
  With
  copy to:

  	
   

  	
  General
  Counsel

  
	
   

  	
   

  	
   

  	
  Family Dollar
  Stores, Inc.

  
	
   

  	
   

  	
   

  	
  Post Office Box 1017

  
	
   

  	
   

  	
   

  	
  Charlotte, NC 28201-1017

  

 

14.           Compliance with Code Section 409A.  This Agreement is intended to comply with
Code Section 409A, to the extent applicable.  Notwithstanding any provision herein to the
contrary, this Agreement shall be interpreted, operated and administered
consistent with this intent.  Each separate
installment under this Agreement shall be treated as a separate payment for
purposes of determining whether such payment is subject to or exempt from
compliance with the requirements of Code Section 409A.  In addition, in the event that Employee is a “specified
employee” within the meaning of Section 409A of the Code (as determined in
accordance with the methodology established by the Company as in effect on the
date of termination of Employee’s employment), any payment or benefits
hereunder that are nonqualified deferred compensation subject to the
requirements of Section 409A of the Code shall be provided to Employee no
earlier than six (6) months after the date of Employee’s “separation from
service” within the meaning of Section 409A of the Code.

 

11

 

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

 

	
   

  	
   

  	
  FAMILY
  DOLLAR STORES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

12Exhibit 10.5

 

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 Associates 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 Associates 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 Associates 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 Associates 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)

 

·                                          An Associate who becomes eligible for a
Performance Share Rights Award under these Guidelines after the beginning of a
performance period, either because the Associate is newly hired or is promoted
into a position covered by these Guidelines, will be granted an Award computed
in accordance with these Guidelines.  The
dollar value of an Award for the performance period beginning in the year in
which the Associate is hired or promoted will be established based upon the
Associate’s position and prorated for the number of months remaining (rounded
up to the next full month for any partial month of service) in the fiscal year
of the Associate’s hire or promotion (the “base line year”).  The dollar value of the base line year Award
will be prorated by a fraction, the numerator of which is the number of
calendar months remaining in the performance period at the date of hire or
promotion (rounded up to the next full month for any partial month of service),
and the denominator of which is the total number of calendar months in the
performance period for any performance periods beginning prior to the year of
hire or promotion.  The dollar amounts so
awarded shall be converted into Performance Share Rights based on the fair
value of the Performance Share Rights, as established from time to time by the
Company.  Payments of all such Awards
shall be subject to Company performance as outlined in Section 4 below.

 

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

 

·                                          An Associate 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

 

·                                          An Associate 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.

 

2

 

·                                          An Associate 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.  An Associate who is on an approved family
medical leave or approved military leave will be issued Common Stock pursuant
to such Award at the time such shares are issued even if the Associate 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 Associate’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 Associate 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 an Associate is
selected for an Award under these Guidelines for a particular performance
period, the Associate 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):

 

3

 

	
  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
Associate whose employment with the Company terminates.

 

·                                          In the event of a termination of an Associate’s
employment, either (i) as a result of the Associate’s death, Disability or
Retirement (as defined by Article 2, section 3.1 (11) of the Incentive
Plan) or (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, over the three fiscal years
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 each
relevant performance period.  The pro
ration will be determined by multiplying the number of Performance Shares
Rights to which the Associate 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 Associate’s actual employment with the
Company (including the full calendar month in which the Associate’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 termination of the Associate’s employment.

 

4

 

·                                          In the case of death or Disability,
individual performance of the Associate will be ignored.  In either event, payments under this
paragraph shall be made as soon as administratively convenient after
termination of employment.

 

·                                          In the event of termination of an Associate’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 Associate 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 Associate leaves
the Plan for any reason but remains employed by the company, the Associate’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 Associate’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 an
Associate is or becomes Retirement-eligible during a performance period, (i) the
Associate will not be considered to have terminated from employment under these
Guidelines unless the Associate 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 Associate’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, 

 

5

 

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 Associate agrees that
such decisions, rulings and interpretations will be final and that each Associate
will be bound by them.  Each Associate
further agrees that if and when any circumstances arise relating to these
Guidelines, which are not covered by this description of the Plan, the
Associate will be bound by the final decision, ruling or interpretation of the
Chairman.

 

Section 7: Transition Period

 

·                                          In addition to Performance Share Rights
Awards made under these Guidelines for three year periods, during the Company’s
2006 and 2007 fiscal years, Performance Share Rights Awards will be made to
Associates participating in the Plan under these Guidelines for each of the
2006 and 2007 fiscal years based upon the Company’s performance in each of such
fiscal years as set forth in Section 4 above.  An Associate who is hired or is promoted into
a position eligible to receive a Performance Share Rights Award under the Plan
during 2006 or 2007 will be eligible to receive a prorated Performance Share
Rights Award which is otherwise computed in the manner set forth in Section 3
above and subject to all other provisions of these Guidelines.

 

Section 8: Qualified Performance Based
Awards

 

Notwithstanding anything in
these Guidelines to the contrary, the following provisions will apply to any
Associate who is a vice president or above at the time the Awards are established
under these Guidelines.  Awards under
this Section 8 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.

 

6

 

·                                          The Committee will establish within 90 days
after the beginning of each performance period the target Award payout for each
Associate covered by this Section 8, 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 Associate covered by
this Section 8 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 Associate covered by this Section 8 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 Associate
covered by this Section 8 in accordance with the applicable performance
formula described above.  In no event
will the Award otherwise payable to any Associate covered by this Section 8
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 Associate covered by this Section 8
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

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]