Family Dollar 2006 Annual Report Download - page 74

officer’s annual base compensation, ranging from one times salary for Vice Presidents to five times salary for the CEO. Pending
achievement of these ownership goals, officers will be required to retain 25% of the net value (after the exercise price of any options
and after applicable taxes) of any equity award.
Incentive Plan Retirement Provisions
The Family Dollar Stores, Inc. 1989 Non−Qualified Stock Option Plan (the “1989 Plan”) and the 2006 Plan each contain
retirement provisions which provide that stock options granted to and held by qualifying retirees at the date of retirement shall
continue to vest and be exercisable in accordance with the terms of each plan. In order to qualify as a “retiree” under each Plan, an
employee must voluntarily terminate his or her employment at age sixty years or older after a period of at least ten years of service to
the Company. Additionally, retirees must agree to abide by certain non−compete and solicitation provisions for a period of five
years. This provision of the 1989 Plan only applies to options that were (i) unvested as of January 20, 2005, or (ii) any vested stock
options that were “underwater” on such date.
Deferred Compensation Plan
The Family Dollar Compensation Deferral Plan (the “Deferred Compensation Plan”) allows certain employees, including
NEOs, to defer receipt of up to 50% of their salary and 75% of their bonus payments. The Company provides this benefit to aid
retention and recruitment, as most of the companies with whom the Company competes provide a similar benefit to their executive
officers. For a description of the material terms of the Deferred Compensation Plan see “Nonqualified Deferred Compensation” set
forth below.
401(k) Plan
The Company offers a 401(k) savings plan for all eligible employees. The Company’s matching contribution is 50% of
employee contributions up to 3% of base salary or bonus pay, subject to plan and Internal Revenue Code limits.
Tax and Accounting
Deductibility of Compensation Section 162(m) of the Internal Revenue Code provides that publicly held companies may not
deduct in any taxable year compensation in excess of $1 million paid to the CEO or any of the four other highest paid executive
officers which is not “performance−based,” as defined in Section 162(m). The Company’s stockholders have approved the 1989 Plan,
the 2006 Plan and the Incentive Profit Sharing Plan for the purpose of preserving the future deductibility of all compensation paid
under these plans. The Committee fully considers Section 162(m) when determining executive compensation packages and believes
that all applicable executive officer compensation paid in fiscal 2006 met the deductibility requirements of Section 162(m).
FAS 123(R) The Company began accounting for share−based payments including stock options and PSRs pursuant to FAS
123(R) on August 27, 2006.
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Source: FAMILY DOLLAR STORES, 10−K, March 28, 2007