<SUBMISSION>
<ACCESSION-NUMBER>0000912057-00-031652
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>7
<PERIOD>20000505
<ITEMS>5
<ITEMS>7
<FILING-DATE>20000712
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>DOLLAR TREE STORES INC
<CIK>0000935703
<ASSIGNED-SIC>5331
<IRS-NUMBER>541387365
<STATE-OF-INCORPORATION>VA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>000-25464
<FILM-NUMBER>671805
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>500 VOLVO PARKWAY
<STREET2>NORFOLK COMMERCE PARK
<CITY>CHESAPEAKE
<STATE>VA
<ZIP>23320
<PHONE>7573215000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>P.O. BOX 2500
<CITY>NORFOLK
<STATE>VA
<ZIP>23501-2500
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>a8-k.txt
<DESCRIPTION>8-K
<TEXT>

<PAGE>
                                    FORM 8-K

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                 CURRENT REPORT
                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                          Date of Report: July 12, 2000

                  Date of Earliest Event Reported: May 5, 2000

                            DOLLAR TREE STORES, INC.
             (Exact name of registrant as specified in its charter)

                         COMMISSION FILE NUMBER: 0-25464

                VIRGINIA                              54-1387365
     (State or other jurisdiction of               (I.R.S. Employer
     incorporation or organization)                Identification No.)

                                500 Volvo Parkway
                          Chesapeake, Virginia 23320
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (757) 321-5000
<PAGE>

ITEM 5: OTHER EVENTS

On May 5, 2000, Dollar Tree Stores, Inc. consummated a merger with Dollar
Express, Inc. accounted for as a pooling-of-interests. Attached herein, as
Exhibit 99.1, are the restated supplemental consolidated financial statements
of Dollar Tree Stores, Inc. and subsidiaries giving effect to the merger. As
a result, these supplemental consolidated financial statements have been
restated to retroactively combine Dollar Tree's and Dollar Express's
financial statements as if the merger had occurred at the beginning of the
earliest period presented.

ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

      (c) Exhibits

Exhibit #    Description

23.1         Independent Auditors' Consent.

27.1         Financial Data Schedule.

27.2         Financial Data Schedule.

27.3         Financial Data Schedule.

99.1         Supplemental Consolidated Financial Statements of Dollar Tree
             Stores, Inc. and subsidiaries as of December 31, 1999 and 1998
             and for the years ended December 31, 1999, 1998 and 1997 and the
             Supplemental Condensed Consolidated Financial Statements as of
             March 31, 2000 and for the three months ended March 31, 2000
             and 1999.

99.2         Escrow Agreement by and between Dollar Tree Stores, Inc., the
             former shareholders of Dollar Express, Inc., Bernard Spain and
             David Mussafer and State Street Bank and Trust Company.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.

DATE: July 12, 2000

                                                  DOLLAR TREE STORES, INC.


                                                  By: /s/ Frederick C. Coble
                                                      ----------------------
                                                      Frederick C. Coble
                                                      Senior Vice President-
                                                      Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>ex-23_1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>

<PAGE>
                                                                  Exhibit 23.1

                        INDEPENDENT AUDITORS' CONSENT


The Board of Directors and Shareholders
Dollar Tree Stores, Inc.:

We consent to incorporation by reference in the registration statements (Nos.
33-92812, 33-92814, 33-92816, 333-38735, 333-61139 and 333-35916) on Forms
S-3 and S-8 of Dollar Tree Stores, Inc., of our report dated May 25, 2000
relating to the supplemental consolidated balance sheets of Dollar Tree
Stores, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related supplemental consolidated income statements, statements of
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999, which report is included herein. The
supplemental consolidated financial statements give retroactive effect to the
merger of Dollar Tree Stores, Inc. and Dollar Express, Inc. which occurred on
May 5, 2000.

/s/ KPMG LLP

Norfolk, Virginia
July 12, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>3
<FILENAME>ex-27_1.txt
<DESCRIPTION>EXHIBIT 27.1
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S FORM S-3
FILED ON JULY 12, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THE FINANCIAL DATA SCHEDULES FOR ALL PERIODS ARE RESTATED
TO GIVE EFFECT TO THE POOLING-OF-INTEREST MERGER WITH DOLLAR EXPRESS, INC.
</LEGEND>
<MULTIPLIER> 1,000

<S>                             <C>                     <C>                     <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   3-MOS                   6-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1997             DEC-31-1998             DEC-31-1998             DEC-31-1998
<PERIOD-END>                               DEC-31-1997             MAR-31-1998             JUN-30-1998             SEP-30-1998
<CASH>                                          48,912                   9,834                  11,462                  11,156
<SECURITIES>                                         0                       0                       0                       0
<RECEIVABLES>                                        0                       0                       0                       0
<ALLOWANCES>                                         0                       0                       0                       0
<INVENTORY>                                    123,053                 167,135                 194,186                 229,656
<CURRENT-ASSETS>                               185,073                 189,890                 218,545                 257,677
<PP&E>                                         142,582                 153,105                 163,136                 183,540
<DEPRECIATION>                                (48,189)                (52,258)                (56,484)                (61,127)
<TOTAL-ASSETS>                                 328,282                 339,418                 373,582                 428,078
<CURRENT-LIABILITIES>                          114,552                 100,448                 105,387                 146,915
<BONDS>                                         42,622                  56,832                  79,303                 111,929
<PREFERRED-MANDATORY>                                0                       0                       0                       0
<PREFERRED>                                          0                       0                       0                       0
<COMMON>                                           443                     445                     651                     651
<OTHER-SE>                                     172,847                 184,875                 201,509                 215,231
<TOTAL-LIABILITY-AND-EQUITY>                   328,282                 339,418                 373,582                 428,078
<SALES>                                        847,830                 205,641                 443,569                 681,421
<TOTAL-REVENUES>                               847,830                 205,641                 443,569                 681,421
<CGS>                                          551,926                 133,769                 290,045                 441,953
<TOTAL-COSTS>                                  551,926                 133,769                 290,045                 441,953
<OTHER-EXPENSES>                               205,077                  57,408                 116,914                 179,839
<LOSS-PROVISION>                                     0                       0                       0                       0
<INTEREST-EXPENSE>                               3,686                     747                   1,872                   3,478
<INCOME-PRETAX>                                 87,141                  13,717                  34,738                  56,151
<INCOME-TAX>                                    31,323                   4,899                  11,781                  19,340
<INCOME-CONTINUING>                             55,818                   8,818                  22,957                  36,811
<DISCONTINUED>                                       0                       0                       0                       0
<EXTRAORDINARY>                                      0                       0                       0                       0
<CHANGES>                                            0                       0                       0                       0
<NET-INCOME>                                    55,818                   8,818                  22,957                  36,811
<EPS-BASIC>                                       0.55                    0.09                    0.22                    0.35
<EPS-DILUTED>                                     0.50                    0.08                    0.20                    0.32


</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.2
<SEQUENCE>4
<FILENAME>ex-27_2.txt
<DESCRIPTION>EXHIBIT 27.2
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S FORM S-3
FILED ON JULY 12, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THE FINANCIAL DATA SCHEDULES FOR ALL PERIODS ARE RESTATED
TO GIVE EFFECT TO THE POOLING-OF-INTEREST MERGER WITH DOLLAR EXPRESS, INC.
</LEGEND>
<MULTIPLIER> 1,000

<S>                             <C>                     <C>                     <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   3-MOS                   6-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1998             DEC-31-1999             DEC-31-1999             DEC-31-1999
<PERIOD-END>                               DEC-31-1998             MAR-31-1999             JUN-30-1999             SEP-30-1999
<CASH>                                          84,714                  24,661                  40,072                  22,080
<SECURITIES>                                         0                       0                       0                       0
<RECEIVABLES>                                        0                       0                       0                       0
<ALLOWANCES>                                         0                       0                       0                       0
<INVENTORY>                                    154,719                 194,340                 205,504                 276,240
<CURRENT-ASSETS>                               254,074                 232,938                 261,892                 312,313
<PP&E>                                         199,201                 209,947                 223,650                 234,534
<DEPRECIATION>                                (67,740)                (73,446)                (78,905)                (82,936)
<TOTAL-ASSETS>                                 436,768                 422,704                 459,336                 525,210
<CURRENT-LIABILITIES>                          129,316                  96,801                 120,334                 135,463
<BONDS>                                         53,759                  81,309                  83,689                 118,706
<PREFERRED-MANDATORY>                                0                  28,584                  29,326                  33,228
<PREFERRED>                                          0                       0                       0                       0
<COMMON>                                           652                     656                     657                     658
<OTHER-SE>                                     261,923                  222,37                 238,563                 253,475
<TOTAL-LIABILITY-AND-EQUITY>                   436,768                 422,704                 459,336                 525,210
<SALES>                                      1,073,887                 258,091                 546,239                 845,107
<TOTAL-REVENUES>                             1,073,887                 258,091                 546,239                 845,107
<CGS>                                          682,689                 168,391                 353,223                 544,769
<TOTAL-COSTS>                                  682,689                 168,391                 353,223                 544,769
<OTHER-EXPENSES>                               260,684                  69,249                 146,332                 225,734
<LOSS-PROVISION>                                     0                       0                       0                       0
<INTEREST-EXPENSE>                               4,613                     864                   2,189                   3,674
<INCOME-PRETAX>                                125,901                  19,587                  44,495                  70,648
<INCOME-TAX>                                    44,583                   5,241                  14,781                  24,949
<INCOME-CONTINUING>                             81,318                  14,346                  29,714                  45,699
<DISCONTINUED>                                       0                       0                       0                       0
<EXTRAORDINARY>                                      0                       0                       0                       0
<CHANGES>                                            0                       0                       0                       0
<NET-INCOME>                                    81,318                  14,346                  29,714                  45,699
<EPS-BASIC>                                       0.79                    0.14                    0.29                    0.41
<EPS-DILUTED>                                     0.71                    0.13                    0.26                    0.37


</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.3
<SEQUENCE>5
<FILENAME>ex-27_3.txt
<DESCRIPTION>EXHIBIT 27.3
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S FORM S-3
FILED ON JULY 12, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THE FINANCIAL DATA SCHEDULES FOR ALL PERIODS ARE RESTATED
TO GIVE EFFECT TO THE POOLING-OF-INTEREST MERGER WITH DOLLAR EXPRESS, INC.
</LEGEND>
<MULTIPLIER> 1,000

<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1999             DEC-31-2000
<PERIOD-END>                               DEC-31-1999             MAR-31-2000
<CASH>                                         181,587                  83,711
<SECURITIES>                                         0                       0
<RECEIVABLES>                                        0                       0
<ALLOWANCES>                                         0                       0
<INVENTORY>                                    192,838                 276,811
<CURRENT-ASSETS>                               395,106                 377,986
<PP&E>                                         247,414                 264,231
<DEPRECIATION>                                (90,046)                (90,046)
<TOTAL-ASSETS>                                 611,233                 603,318
<CURRENT-LIABILITIES>                          169,273                 137,254
<BONDS>                                        108,773                 112,380
<PREFERRED-MANDATORY>                           35,171                  36,247
<PREFERRED>                                          0                       0
<COMMON>                                           659                     662
<OTHER-SE>                                     315,579                 334,968
<TOTAL-LIABILITY-AND-EQUITY>                   611,233                 603,318
<SALES>                                      1,351,820                 327,111
<TOTAL-REVENUES>                             1,351,820                 327,111
<CGS>                                          854,567                 213,538
<TOTAL-COSTS>                                  854,567                 213,538
<OTHER-EXPENSES>                               321,657                  90,354
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                               5,686                     500
<INCOME-PRETAX>                                169,910                  22,719
<INCOME-TAX>                                    63,333                   8,767
<INCOME-CONTINUING>                            106,577                  13,952
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                   106,577                  13,952
<EPS-BASIC>                                       1.01                    0.13
<EPS-DILUTED>                                     0.92                    0.12


</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>ex-99_1.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>

<PAGE>
                                                                    Exhibit 99.1


<TABLE>
<CAPTION>
       Index to Supplemental Consolidated Financial Statements               Page
                                                                             ----
<S>                                                                           <C>
Independent Auditors' Report..............................................     2

Supplemental Consolidated Balance Sheets as of March 31, 2000
         (unaudited) and December 31, 1999 and 1998.......................     3

Supplemental Consolidated Income Statements for the three months ended
         March 31, 2000 and 1999 (unaudited) and the years ended
         December 31, 1999, 1998 and 1997 ................................     4

Supplemental Consolidated Statements of Shareholders' Equity
         for the years ended December 31, 1999, 1998 and 1997.............     5

Supplemental Consolidated Statements of Cash Flows for the three months
         ended March 31, 2000 and 1999 (unaudited) and the years ended
         December 31, 1999, 1998 and 1997..................................    6

Notes to Supplemental Consolidated Financial Statements...................     7
</TABLE>

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
Dollar Tree Stores, Inc.:

We have audited the accompanying supplemental consolidated balance sheets of
Dollar Tree Stores, Inc. and subsidiaries (the Company) as of December 31, 1999
and 1998, and the related supplemental consolidated income statements,
statements of shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1999. These supplemental consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The supplemental consolidated financial statements give retroactive effect to
the merger of Dollar Tree Stores, Inc. and Dollar Express, Inc. on May 5, 2000
which has been accounted for as a pooling of interests as described in note 1 to
the supplemental consolidated financial statements. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation. However, they will
become the historical consolidated financial statements of Dollar Tree Stores,
Inc. and subsidiaries after financial statements covering the date of
consummation of the business combination are issued.

In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Dollar
Tree Stores, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles applicable after financial statements are issued for a
period which includes the date of consummation of the business combination.

/s/ KPMG LLP

Norfolk, Virginia
May 25, 2000


                                       2
<PAGE>

                            DOLLAR TREE STORES, INC.
                                AND SUBSIDIARIES

                SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (Note 2)


<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                           March 31,       -------------------
                                                                             2000          1999           1998
                                                                          -----------      ----           ----
                                                                          (unaudited)

                                                                            (In thousands, except share data)
                              ASSETS
<S>                                                                        <C>            <C>            <C>
Current assets:
     Cash and cash equivalents                                            $  83,711       $ 181,587      $  84,714
     Merchandise inventories                                                276,811         192,838        154,719
     Deferred tax asset (Note 3)                                              5,751           6,093          6,709
     Prepaid expenses and other current assets                               11,713          14,588          7,932
                                                                          ---------       ---------      ---------
        Total current assets                                                377,986         395,106        254,074

Property and equipment, net (Notes 4 and 5)                                 167,167         157,368        131,461
Deferred tax asset (Note 3)                                                     642             470          2,194
Goodwill, net of accumulated amortization                                    41,890          42,394         42,551
Other assets, net (Note 4)                                                   15,633          15,895          6,488
                                                                          ---------       ---------      ---------

         TOTAL ASSETS                                                     $ 603,318       $ 611,233      $ 436,768
                                                                          =========       =========      =========

                LIABILITIES, MANDITORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                     $  73,631       $  73,878      $  59,882
     Income taxes payable (Note 3)                                           10,502          29,193         21,353
     Other current liabilities (Note 5)                                      23,262          34,942         30,934
     Current portion of long-term debt (Note 6)                              26,595          28,070         16,638
     Current installments of obligations under capital leases (Note 4)        3,264           3,190            509
                                                                          ---------       ---------      ---------
         Total current liabilities                                          137,254         169,273        129,316

Long-term debt, excluding current portion (Note 6)                           54,930          49,138         34,136
Obligations under capital leases, excluding
     current installments (Note 4)                                           27,591          28,375          2,476
Common stock put warrants of Dollar Express (Note 8)                          4,394           4,394             --
Other liabilities                                                             7,272           8,644          8,265
                                                                          ---------         -------        -------
         Total liabilities                                                  231,441         259,824        174,193

Cumulative convertible manditorily redeemable preferred stock of
     Dollar Express (Note 8)                                                 36,247          35,171             --

Shareholders' equity (Notes 8 and 10):
     Common stock, par value $0.01. 450,000,000 shares authorized,
         99,239,404 issued and outstanding at March 31, 2000 and
         98,842,201 shares issued and outstanding at December 31,
         1999; and 150,000,000 shares authorized, 97,746,113
         shares issued and outstanding at December 31, 1998                     662             659            652
     Additional paid-in capital                                              81,544          75,031         55,522
     Retained earnings                                                      253,424         240,548        206,401
                                                                          ---------       ---------      ---------
         Total shareholders' equity                                         335,630         316,238        262,575

Commitments, contingencies and subsequent
     events (Notes 1, 4, 6, 7, 8, 10 and 11)
                                                                          ---------       ---------      ---------
         TOTAL LIABILITIES, MANDITORILY REDEEMABLE PREFERRED STOCK
          AND SHAREHOLDERS' EQUITY                                        $ 603,318       $ 611,233      $ 436,768
                                                                          =========       =========      =========
</TABLE>

    See accompanying Notes to Supplemental Consolidated Financial Statements.


                                       3
<PAGE>

                            DOLLAR TREE STORES, INC.
                                AND SUBSIDIARIES

              SUPPLEMENTAL CONSOLIDATED INCOME STATEMENTS (Note 2)


<TABLE>
<CAPTION>
                                                                    Three Months
                                                                       Ended                           Year Ended
                                                                      March 31,                        December 31,
                                                                 -------------------    -----------------------------------------
                                                                    2000      1999         1999            1998            1997
                                                                    ----      ----         ----            ----            ----
                                                                      (unaudited)

                                                                              (In thousands, except per share data)
<S>                                                              <C>         <C>       <C>            <C>            <C>
Net sales ...................................................... $ 327,111   $ 258,091  $ 1,351,820    $ 1,073,886    $   847,830
Cost of sales (Note 4) .........................................   213,538     168,391      854,124        681,387        551,926
Merger related costs ...........................................        --          --          443          1,301             --
                                                                 ---------   ---------  -----------    -----------    -----------

         Gross profit ..........................................   113,573      89,700      497,253        391,198        295,904
                                                                 ---------   ---------  -----------    -----------    -----------

Selling, general and administrative expenses (Notes 4, 7 and 9):
       Operating expenses ......................................    81,661      62,517      290,241        234,197        189,060
       Merger related expenses .................................        --          --          607          4,024             --
       Depreciation and amortization ...........................     8,693       6,732       30,809         22,463         16,017
                                                                 ---------   ---------  -----------    -----------    -----------
         Total selling, general and administrative
           expenses ............................................    90,354      69,249      321,657        260,684        205,077
                                                                 ---------   ---------  -----------    -----------    -----------

         Operating income ......................................    23,219      20,451      175,596        130,514         90,827
Interest income ................................................     1,778         416        1,743            604            145
Interest expense (Note 6) ......................................    (2,278)     (1,280)      (7,429)        (5,217)        (3,831)
                                                                 ---------   ---------  -----------    -----------    -----------

         Income before income taxes ............................    22,719      19,587      169,910        125,901         87,141
Provision for income taxes (Note 3) ............................     8,767       5,241       63,333         44,583         31,323
                                                                 ---------   ---------  -----------    -----------    -----------

         Net income ............................................    13,952      14,346      106,577         81,318         55,818

Less: Preferred stock dividends and accretion (Note 8) .........     1,076         440        7,027             --             --
                                                                 ---------   ---------  -----------    -----------    -----------

         Net income available to common shareholders ........... $  12,876   $  13,906  $    99,550    $    81,318    $    55,818
                                                                 =========   =========  ===========    ===========    ===========

Pro forma income data:
       Net income available to common shareholders ............. $  12,876   $  13,906  $    99,550    $    81,318    $    55,818
       Pro forma adjustment for C-corporation income taxes .....        --         234          505          4,804          2,279
                                                                 ---------   ---------  -----------    -----------    -----------
       Pro forma net income available to
         common shareholders ................................... $  12,876   $  13,672  $    99,045    $    76,514    $    53,539
                                                                 =========   =========  ===========    ===========    ===========

       Pro forma basic net income per common share ............. $    0.13   $    0.14  $      1.01    $      0.79    $      0.55
                                                                 =========   =========  ===========    ===========    ===========

       Pro forma diluted net income per common share ........... $    0.12   $    0.13  $      0.92    $      0.71    $      0.50
                                                                 =========   =========  ===========    ===========    ===========

Weighted average number of common shares outstanding ...........    99,032      97,989       98,435         97,454         96,747
                                                                 =========   =========  ===========    ===========    ===========
Weighted average number of common shares
  and dilutive potential common shares outstanding .............   108,647     107,622      107,960        107,115        106,149
                                                                 =========   =========  ===========    ===========    ===========
</TABLE>

    See accompanying Notes to Supplemental Consolidated Financial Statements.


                                       4
<PAGE>

                            DOLLAR TREE STORES, INC.
                                AND SUBSIDIARIES

      SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Note 2)

                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                     Common                       Additional
                                                     Stock           Common         Paid-in         Retained       Shareholders'
                                                     Shares          Stock          Capital         Earnings          Equity
                                                     ------          -----          -------         --------          ------
                                                                     (In thousands, except share data)
<S>                                                <C>             <C>             <C>              <C>              <C>
Balance at December 31, 1996 ................      96,247,430      $      306      $   36,310       $   80,035       $  116,651
Transfer from additional paid-in
  capital for Common Stock dividend .........              --             135            (135)              --               --
Net income for the year
  ended December 31, 1997 ...................              --              --              --           55,818           55,818
Shareholder distributions ...................              --              --              --           (4,456)          (4,456)
Issuance of stock under Employee
  Stock Purchase Plan and
  other plans (Note 10) .....................          29,508              --             358               --              358
Exercise of stock options, including
  income tax benefit of $2,752 (Note 10) ....         709,961               2           4,917               --            4,919
                                                   ----------      ----------      ----------       ----------       ----------

Balance at December 31, 1997 ................      96,986,899             443          41,450          131,397          173,290
Transfer from additional paid-in
  capital for Common Stock dividend .........              --             198            (198)              --               --
Net income for the year
  ended December 31, 1998 ...................              --              --              --           81,318           81,318
Shareholder distributions ...................              --              --              --           (6,314)          (6,314)
Issuance of stock under Employee
  Stock Purchase Plan and
  other plans (Note 10) .....................          36,505               7             634               --              641
Grant of stock options under the 1998
   Special Stock Option Plan (Note 10) ......              --              --           4,413               --            4,413
Exercise of stock options, including
  income tax benefit of $4,916 (Note 10) ....         722,709               4           9,223               --            9,227
                                                   ----------      ----------      ----------       ----------       ----------

Balance at December 31, 1998 ................      97,746,113             652          55,522          206,401          262,575
Contribution of Only $One's undistributed
   S-corporation earnings ...................              --              --           4,469           (4,469)              --
Net income for the year
  ended December 31, 1999 ...................              --              --              --          106,577          106,577
Shareholder distributions (Note 8) ..........              --              --              --          (60,934)         (60,934)
Issuance of stock under Employee Stock
  Purchase Plan and other plans (Note 10) ...          45,656              --             838               --              838
Exercise of stock options, including
  income tax benefit of $6,278 (Note 10) ....       1,050,432               7          14,202               --           14,209
Accretion to redemption value, amortization
   of discount and accrued dividends of
   cumulative convertible redeemable
   preferred stock of Dollar Express (Note 8)              --              --              --           (7,027)          (7,027)
                                                   ----------      ----------      ----------       ----------       ----------

Balance at December 31, 1999 ................      98,842,201      $      659      $   75,031       $  240,548       $  316,238
                                                   ==========      ==========      ==========       ==========       ==========
</TABLE>

    See accompanying Notes to Supplemental Consolidated Financial Statements.


                                       5
<PAGE>

                            DOLLAR TREE STORES, INC.
                                AND SUBSIDIARIES

           SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 2)


<TABLE>
<CAPTION>
                                                               Three Months
                                                                   Ended                              Year Ended
                                                                  March 31,                           December 31,
                                                             ------------------         -----------------------------------------
                                                               2000       1999             1999           1998             1997
                                                               ----       ----             ----           ----             ----
                                                                 (unaudited)
                                                                                     (In thousands)
<S>                                                          <C>        <C>             <C>             <C>             <C>
Cash flows from operating activities:
   Net income ............................................   $  13,952  $  14,346       $ 106,577       $  81,318       $  55,818
                                                             ---------  ---------       ---------       ---------       ---------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
        Depreciation and amortization ....................       8,693      6,732          30,809          22,463          16,017
        Loss on disposal of property and equipment .......         205         60             692           1,664             290
        Lease loss charge ................................        (283)      (255)            529           1,125              --
        Provision for deferred income taxes ..............         170     (2,577)          2,340          (1,207)         (3,503)
        Accretion of common stock put warrants of
          Dollar Express to redemption value .............          --         --             382              --              --
   Changes in assets and liabilities increasing
      (decreasing) cash and cash equivalents:
              Merchandise inventories ....................     (83,973)   (39,621)        (37,391)        (31,666)        (21,006)
              Prepaid expenses and other current assets ..       2,875      1,094          (7,488)           (292)          1,235
              Other assets ...............................         141        311             449             265            (293)
              Accounts payable ...........................        (247)    (7,818)         13,824          (1,794)         10,409
              Income taxes payable .......................     (15,761)   (11,698)         14,118           6,682           9,366
              Other current liabilities ..................     (11,790)   (11,262)          4,008           7,197           6,386
              Other liabilities ..........................        (979)      (206)           (294)           (230)          1,301
                                                             ---------  ---------       ---------       ---------       ---------
                 Total adjustments .......................    (100,949)   (65,240)         21,978           4,207          20,202
                                                             ---------  ---------       ---------       ---------       ---------
                 Net cash provided (used in) by operating
                    activities                                 (86,997)   (50,894)        128,555          85,525          76,020
                                                             ---------  ---------       ---------       ---------       ---------

Cash flows from investing activities:
   Acquisition, net of cash acquired .....................          --         --            (320)             --              --
   Capital expenditures ..................................     (18,069)   (11,317)        (55,013)        (57,212)        (63,476)
   Proceeds from sale of property and equipment ..........          65         27             172             174             159
                                                             ---------  ---------       ---------       ---------       ---------
                 Net cash used in investing activities ...     (18,004)   (11,290)        (55,161)        (57,038)        (63,317)
                                                             ---------  ---------       ---------       ---------       ---------

Cash flows from financing activities:
   Distributions paid ....................................          --    (59,874)        (60,934)         (6,314)         (4,456)
   Proceeds from long-term debt ..........................          --     22,000          22,500          17,500          31,350
   Proceeds from revolving credit facilities .............       6,000      5,750          48,600         190,800         206,600
   Net change in notes payable to bank ...................          --         --              --         (10,045)          1,359
   Repayment of long-term debt and facility fees .........      (1,683)      (775)         (1,966)         (2,304)           (225)
   Repayment of revolving credit facilities ..............          --         --         (46,100)       (186,800)       (209,600)
   Proceeds from sale-leaseback transaction ..............          --         --          21,605              --              --
   Principal payments under capital lease obligations ....        (778)      (123)         (1,151)           (474)           (354)
   Proceeds from issuance of preferred stock and
      common stock put warrants of Dollar Express ........          --     32,156          32,156              --              --
   Proceeds from stock issued pursuant to stock-based
      compensation plans .................................       3,586      2,997           8,769           4,952           2,525
                                                              --------  ---------       ---------       ---------       ---------
                 Net cash provided by financing activities       7,125      2,131          23,479           7,315          27,199
                                                              --------  ---------       ---------       ---------       ---------

Net increase (decrease) in cash and cash equivalents .....     (97,876)   (60,053)         96,873          35,802          39,902
Cash and cash equivalents at beginning of year ...........     181,587     84,714          84,714          48,912           9,010
                                                              --------  ---------       ---------       ---------       ---------

Cash and cash equivalents at end of year .................    $ 83,711  $  24,661       $ 181,587       $  84,714       $  48,912
                                                              ========  =========       =========       =========       =========

Supplemental disclosure of cash flow information:
   Cash paid during the year for:
      Interest, net of amount capitalized ................                              $   6,821       $   4,680       $   4,558
                                                                                        =========       =========       =========
      Income taxes .......................................                              $  46,640       $  39,171       $  25,321
                                                                                        =========       =========       =========

</TABLE>

    See accompanying Notes to Suplemental Consolidated Financial Statements.


                                       6
<PAGE>

                            DOLLAR TREE STORES, INC.
                                AND SUBSIDIARIES

             NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

      Dollar Tree Stores, Inc. (DTS or the Company) owns and operates, in one
business segment, discount variety retail stores which sell substantially all
items for $1.00. The Company operates under the names of Dollar Tree, Dollar
Express, Dollar Bills, Spain's Cards & Gifts, Only $One and Only One Dollar. The
Company's headquarters and one of its distribution centers are located in
Chesapeake, Virginia. The Company also operates distribution centers in Olive
Branch, Mississippi, in the Chicago, Illinois area, in Stockton, California and
in Philadelphia, Pennsylvania. Most of the Company's stores are located in the
eastern half of the United States and in northern and central California. The
Company's merchandise includes housewares, candy and food, seasonal goods,
health and beauty care, toys, party goods, gifts, stationery and other consumer
items. Approximately 40% to 45% of the Company's merchandise is directly
imported, primarily from China. The Company is not dependent on a few suppliers.

Recent Developments

      On May 5, 2000, DT Keystone, Inc., a wholly owned subsidiary,
completed a merger, which was accounted for as a pooling of interests, with
privately-held Dollar Express, Inc. (Dollar Express), in which Dollar Express
became a wholly owned subsidiary of Dollar Tree Stores, Inc. Dollar Express
operated 132 stores primarily in the Mid-Atlantic area. Of the stores acquired,
107 are $1.00 single price point stores operated as "Dollar Express" and 25 are
multi-price point stores operated as "Spain's Cards & Gifts." Sales from the
multi-price point stores accounted for less than 2% of total net sales in 1999.
As a result of the merger, the Company's consolidated financial statements have
been restated to retroactively combine Dollar Express's financial statements as
if the merger had occurred at the beginning of the earliest period presented.

      In addition, on May 25, 2000 the Board of Directors authorized a
stock dividend, in which the Company issued one-half share for each outstanding
share of Common Stock, payable June 19, 2000 to shareholders of record as of
June 12, 2000. As a result, all share and per share data in these supplemental
consolidated financial statements and the accompanying financial statements and
footnotes that follow have been adjusted to reflect this dividend, having the
effect of a 3-for-2 stock split.

Principles of Consolidation

      At December 31, 1999, DTS has three wholly owned subsidiaries, Dollar Tree
Management, Inc. (DTM), Dollar Tree Distribution, Inc. (DTD) and Dollar Tree New
York, Inc. (DTN). DTM provides management, accounting and administrative
services to DTS for a fee and DTD provides merchandise procurement, purchasing,
warehousing and distribution services to DTS for a fee. DTN owns and operates
discount variety retail stores under the name Only $One and was merged with and
into DTS on January 1, 2000. Effective October 29, 1996, DTD established a
wholly owned subsidiary, Dollar Tree Properties, Inc. (DTP). DTP is organized as
a real estate holding company and owns certain undeveloped property. The
supplemental consolidated financial statements include the financial statements
of Dollar Tree Stores, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

      On December 10, 1998, Dollar Tree West, Inc. (DTW), a former wholly owned
subsidiary, completed a merger, which was accounted for as a pooling of
interests, with Step Ahead Investments, Inc. (98 Cent Clearance Center) in which
98 Cent Clearance Center became a wholly owned subsidiary of DTS. 98 Cent
Clearance Center operated 66 stores in northern and central California and
Nevada under the name "98 Cent Clearance Center". Prior to the merger, 98 Cent
Clearance Center's fiscal year end was the 52-week period ending on the last
Sunday in January. As a result of the merger, the Company's consolidated
financial statements were restated to retroactively combine 98 Cent Clearance
Center's financial statements as if the merger had occurred at the beginning of
the earliest period presented.


                                       7
<PAGE>

      On June 30, 1999, DTN completed a merger, which was accounted for as a
pooling of interests, with privately-held Tehan's Merchandising, Inc. (Only
$One), in which Only $One became a wholly owned subsidiary of DTS. Only $One
operated 24 stores in central and upstate New York state under the name "Only
$One." As a result of the merger, the Company's consolidated financial
statements were restated to retroactively combine Only $One's financial
statements as if the merger had occurred at the beginning of the earliest period
presented.

      The consolidated income statement and statements of shareholders' equity
and cash flows for the year ended December 31, 1998 reflect the results of
operations and cash flows for Dollar Tree Stores, Inc. for the year then ended
combined with 98 Cent Clearance Center for the 11-month period ended December
31, 1998. The consolidated income statement, statements of shareholders' equity
and cash flows for the year ended December 31, 1997 reflect the results of
operations and cash flows for Dollar Tree Stores, Inc. for the year then ended
combined with 98 Cent Clearance Center for the fiscal year ended January 25,
1998.

Unaudited Quarterly Financial Statements

      The supplemental consolidated financial statements at March 31, 2000
and for the three-month periods ended March 31, 2000 and 1999, are unaudited
and reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
the financial position and operating results for the interim periods. The
results of operations for the three-month period ended March 31, 2000 are not
necessarily indicative of the results to be expected for the entire year
ending December 31, 2000.

Cash and Cash Equivalents

      Cash and cash equivalents at December 31, 1999 and 1998 includes $162,755
and $71,700, respectively, of investments in money market securities and bank
participation agreements which are valued at cost, which approximates market.
The underlying assets of these short-term participation agreements are primarily
commercial notes. For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.

Merchandise Inventories

      Merchandise inventories are stated at the lower of cost or market. Cost is
assigned to store inventories using the retail inventory method, determined on a
first-in, first-out (FIFO) basis. Costs directly associated with warehousing and
distribution are capitalized as merchandise inventories. Total warehousing and
distribution costs capitalized into inventories amounts to $8,347 and $7,790 at
December 31, 1999 and 1998, respectively.

Property and Equipment

      Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets as
follows:

         Buildings..........................................       39 years
         Furniture, fixtures and equipment..................       3 to 7 years
         Transportation vehicles............................       4 to 6 years

      Leasehold improvements and assets held under capital leases are
amortized over the estimated useful lives of the respective assets or terms of
the related leases, whichever is shorter.

      Costs incurred related to software developed for internal use are
capitalized and amortized over three years. Costs capitalized include those
incurred in the application development stage.

      Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. In 1998 and
1997, $402 and $916, respectively, of interest cost was capitalized; no interest
was capitalized in 1999.


                                       8
<PAGE>

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

      The Company reviews its long-lived assets and certain identifiable
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by comparing the
carrying amount of an asset to future net undiscounted cash flows expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets based on discounted
cash flows or other readily available evidence of fair value, if any. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

Goodwill

      Goodwill, which represents the excess of acquisition cost over the fair
value of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, generally 20 to 25 years. Accumulated
amortization relating to goodwill approximates $7,593 and $5,619 at December 31,
1999 and 1998, respectively.

Financial Instruments

      The Company utilizes derivative financial instruments to reduce its
exposure to market risks from changes in interest rates. By entering into a
receive-variable, pay-fixed interest rate swap, the Company changed the variable
rate cash flow exposure on certain variable-rate debt to fixed rate cash flows.
The Company is exposed to credit related losses in the event of non-performance
by the counterparty to the interest rate swap; however, the counterparty is a
major financial institution, and the risk of loss due to non-performance is
considered remote. Interest rate differentials paid or received on the swap are
recognized as adjustments to interest expense in the period earned or incurred.
The Company does not speculate using derivative instruments in the form of
interest rate swaps; therefore, these swaps are not recorded in the Company's
balance sheet. The Company had no interest rate derivative instruments
outstanding at December 31, 1998.

      The Company enters into foreign exchange forward contracts to hedge
off-balance sheet foreign currency denominated purchase commitments from
suppliers. The contracts are exclusively for Italian lire which account for
approximately 1% of the Company's purchases. The terms of these contracts are
generally less than three months. Gains and losses on these contracts are not
recognized until included in the measurement of the related foreign currency
transaction. At December 31, 1999, open foreign exchange contracts of
approximately $793 were recorded, based on current conversion rates, in
prepaid expenses and other current assets and accounts payable. There were no
open exchange contracts at December 31, 1998.

Cost of Sales

      The Company includes the cost of merchandise, warehousing and distribution
costs, and certain occupancy costs in cost of sales.

Income Taxes

      Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in the tax rates is recognized in income in
the period that includes the enactment date of such change.

Stock-Based Compensation

      The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25), and related Interpretations in accounting for
its fixed stock option plans. As such, compensation expense would be recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price. Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123) established
accounting and disclosure requirements using a fair value-based method of
accounting for stock-based employee compensation plans. As allowed by SFAS No.
123, the Company has elected to continue to apply the


                                       9
<PAGE>

intrinsic value-based method of accounting described above, and has adopted the
disclosure only requirements of SFAS No. 123.

Pro Forma Net Income Per Common Share

      Pro forma basic net income per common share has been computed by dividing
pro forma net income available to common shareholders by the weighted average
number of common shares outstanding. Pro forma diluted net income per common
share reflects the potential dilution that could occur assuming the inclusion of
dilutive potential common shares and has been computed by dividing pro forma net
income available to common shareholders by the weighted average number of common
shares and dilutive potential common shares outstanding. Dilutive potential
common shares include all outstanding stock options and warrants after applying
the treasury stock method.

New Accounting Standards

      The Financial Accounting Standards Board (FASB) has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of SFAS No. 133, an Amendment of SFAS No. 133," which defers the effective date
of SFAS No. 133 to all fiscal quarters of fiscal years beginning after June 15,
2000. Management does not expect the implementation of these pronouncements to
have a material effect on the Company's financial condition or results of
operations.

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates. In addition, the
Company has contingent liabilities related to legal proceedings and other
matters arising from the normal course of operations. Management does not expect
that amounts, if any, which may be required to satisfy such contingencies will
be material in relation to the accompanying supplemental consolidated financial
statements.

Reclassifications

      Certain 1998 and 1997 amounts have been reclassified for comparability
with the 1999 financial statement presentation.

NOTE 2 - MERGERS AND ACQUISITIONS

Dollar Express Merger

      On May 5, 2000, the Company completed its merger with Dollar Express.
The merger was accounted for as a pooling of interests. DTS issued .8772
shares of the Company's common stock for each share of Dollar Express's
outstanding common stock. The Company issued 8,771,928 shares of its common
stock for all of the outstanding shares of Dollar Express's common stock,
which included all of Dollar Express's preferred shares converted into common
shares on a one-for-one basis as more fully discussed in Note 8. Stock
options to purchase 260,000 shares of Dollar Express's common stock were
converted into options to purchase 228,072 common shares of the Company.

      Prior to February 5, 1999, Dollar Express was treated as an
S-corporation for federal and state income tax purposes. As such, income of
Dollar Express for periods prior to February 5, 1999 was taxable to the
Dollar Express shareholders, rather than to Dollar Express. Effective
February 5, 1999, Dollar Express converted from an S-corporation to a
C-corporation and recorded the cumulative deferred tax benefit in the first
quarter of 1999. The pro forma provisions for income taxes presented in the
supplemental consolidated income statements represent an estimate of the
taxes that would have been recorded had Dollar Express been a C-corporation
and were computed at 38.5%. A portion of the distributions paid presented in
the supplemental consolidated statements of cash flows represents
distributions paid to the Dollar Express shareholders for payment of their
pass-through tax liabilities.

                                       10
<PAGE>

      The following table presents a reconciliation of net sales and net income
previously reported in the Company's 1999 Annual Report to those presented in
the accompanying supplemental consolidated financial statements.

                                      For the year ended December 31,
                                 1999               1998             1997
                                 ----               ----             ----
       Net sales:
       DTS...............     $1,197,960         $  944,122       $ 745,590
       Dollar Express....        153,860            129,764         102,240
                              ----------         ----------       ---------
       Combined..........     $1,351,820         $1,073,886       $ 847,830
                              ==========         ==========       =========

       Net income:
       DTS...............     $   98,518         $   71,553       $  51,959
       Dollar Express....          8,059              9,765           3,859
                              ----------         ----------       ---------
       Combined..........     $  106,577         $   81,318       $  55,818
                              ==========         ==========       =========

98 Cent Clearance Center Merger

      On December 10, 1998, the Company completed its merger with 98 Cent
Clearance Center. The merger was accounted for as a pooling of interests. DTS
issued 1.6818 shares of the Company's common stock for each share of 98 Cent
Clearance Center outstanding common and preferred stock. A total of 2,494,110
of the Company's common stock was issued as a result of the merger and 98
Cent Clearance Center's outstanding stock options were converted into options
to purchase 484,811 common shares of the Company. In addition, the Company
issued options to certain former shareholders of 98 Cent Clearance Center in
exchange for non-competition agreements and a consulting agreement. Included
in other assets at December 31, 1998 is the fair value of these agreements of
$4,413 which is being amortized, generally, over a ten-year period. At
December 31, 1999, the carrying value of these agreements is $3,930, net of
$483 of accumulated amortization. The recording of these non-competition
agreements did not involve the use of cash and, accordingly, has been
excluded from the accompanying supplemental consolidated statements of cash
flows. In connection with the merger, the Company incurred $5,325 ($4,201
after taxes or $0.04 pro forma diluted net income per common share) of merger
related costs and expenses, consisting primarily of professional fees and
writedowns of inventory and fixed assets, which were charged to operations
during the year ended December 31, 1998.

Only $One Merger

      On June 30, 1999, the Company completed the merger with Only $One. The
merger was accounted for as a pooling of interests. The Company issued
752,400 shares of its common stock for all of the Only $One outstanding
common stock. In connection with the merger, the Company incurred
approximately $1,050 ($792 after taxes or $0.01 pro forma diluted net income
per common share) of merger related costs and expenses, consisting primarily
of professional fees and writedowns of inventory, which were charged to
operations during the year ended December 31, 1999.

      Prior to June 30, 1999, Only $One was treated as an S-corporation for
federal and state income tax purposes. As such, income of Only $One for periods
prior to June 30, 1999 was taxable to the Only $One shareholders, rather than to
Only $One. Effective with the Company's merger with Only $One, Only $One became
a C-corporation. The pro forma provisions for income taxes presented in the
supplemental consolidated income statements represent an estimate of the taxes
that would have been recorded had Only $One been a C-corporation and were
computed at 38.5%. A portion of the distributions paid presented in the
supplemental consolidated statements of cash flows represents distributions paid
to the Only $One shareholders for payment of their pass-through tax liabilities.

Other

      On July 6, 1999, the Company acquired all of the assets and liabilities of
a small dollar store operator for approximately $2,600 in cash and forgiveness
of receivables. The acquisition was accounted for as a purchase. The purchase
price was allocated to the assets acquired based on their estimated fair market
values. The excess of the purchase price over the fair value of the net assets
acquired (goodwill) was approximately $1,800. The goodwill is being amortized
over 20 years. The operating results of the acquired company are included in the
Company's operating results beginning July 6, 1999. Pro forma financial
information to reflect the effect of the purchase on historical periods is not
presented because it is immaterial.


                                       11
<PAGE>

NOTE 3 - INCOME TAXES

      The provision for income taxes for the years ended December 31, 1999, 1998
and 1997 consists of the following:

<TABLE>
<CAPTION>
                                                              1999           1998           1997
                                                              ----           ----           ----
      <S>                                                   <C>            <C>            <C>
      Federal--Current ...............................      $ 52,093       $ 39,348       $ 29,967
      Federal--Deferred ..............................         3,856         (1,024)        (3,067)
      Federal--S-corporation to C-corporation
        conversion ...................................        (1,700)            --             --
      State--S-corporation to C-corporation conversion          (524)            --             --
      State--Current .................................         8,900          6,442          4,859
      State--Deferred ................................           708           (183)          (436)
                                                            --------       --------       --------

                                                            $ 63,333       $ 44,583       $ 31,323
                                                            ========       ========       ========
</TABLE>

      A reconciliation of the statutory federal income tax rate and the
effective rate for the years ended December 31, 1999, 1998 and 1997 follows:

                                                     1999     1998     1997
                                                     ----     ----     ----

      Statutory tax rate .........................   35.0%    35.0%    35.0%
      Effect of:
        State and local income taxes, net of
           federal income tax benefit ............    3.7      3.2      3.2
        Other, net ...............................    0.2      0.6      0.1
        Only $One and Dollar Express S-corporation
           income ................................   (0.3)    (3.4)    (2.4)
        Conversion of Dollar Express from S- to
           C-corporation .........................   (1.3)      --       --
                                                     ----     ----     ----
             Effective tax rate ..................   37.3%    35.4%    35.9%
                                                     ====     ====     ====

      Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax
assets and liabilities are classified on the balance sheet based on the
classification of the underlying asset or liability. Significant components of
the Company's net deferred tax assets as of December 31, 1999 and 1998 are as
follows:

                                                      1999         1998
                                                      ----         ----
      Deferred tax assets:
         Property and equipment ................    $    828     $  2,359
         Accrued expenses ......................       6,008        5,487
         Inventories ...........................       3,536        3,147
         Other .................................       1,248          361
                                                    --------     --------

             Total deferred tax assets .........      11,620       11,354
                                                    --------     --------

      Deferred tax liabilities:
         Intangible assets .....................      (2,553)      (2,311)
         Property and equipment ................        (657)          --
         Deferred compensation .................      (1,626)          --
         Other .................................        (221)        (140)
                                                    --------     --------

             Total deferred tax liabilities ....      (5,057)      (2,451)
                                                    --------     --------

             Net deferred tax assets ...........    $  6,563     $  8,903
                                                    ========     ========

      In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred taxes will not be realized. Based upon the availability of carrybacks
of future deductible amounts to 1999, 1998 and 1997 taxable income and
management's projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not the existing net deductible temporary differences will reverse during
periods in which carrybacks are available or in which the Company generates net
taxable income. However, there can be no assurance that the Company will
generate any income or any specific level of continuing income in future years.


                                       12
<PAGE>


NOTE 4 - COMMITMENTS

      Future minimum lease payments under noncancelable store, distribution
center and former corporate headquarters operating leases and the present value
of future minimum capital lease payments as of December 31, 1999 are as follows:

                                                           Capital     Operating
                                                           Leases       Leases
                                                           ------       ------
 Year ending December 31:
     2000 ............................................     $ 5,880     $ 84,435
     2001 ............................................       5,859       77,377
     2002 ............................................       5,829       65,189
     2003 ............................................       5,792       50,495
     2004 ............................................       6,346       34,718
     Thereafter.......................................      13,525       69,225
                                                           -------     --------
 Total minimum lease payments.........................      43,231     $381,439
                                                                       ========
 Less amount representing interest
     (at an average rate of approximately 9%).........      11,666
                                                           -------
 Present value of net minimum capital lease payments..      31,565
 Less current installments of obligations under
     capital leases...................................       3,190
                                                           -------
 Obligations under capital leases, excluding current
     installments.....................................     $28,375
                                                           =======

      The above future minimum lease payments include amounts for leases that
were signed prior to December 31, 1999 for stores that were not open as of
December 31, 1999. Minimum rental payments for operating leases do not include
contingent rentals that may be paid under certain store leases based on a
percentage of sales in excess of stipulated amounts. Future minimum lease
payments have not been reduced by future minimum sublease rentals of $7,284
under operating leases.

      Included in property and equipment at December 31, 1999 and 1998 are
leased furniture and fixtures and transportation vehicles, excluding
sale-leaseback assets, with a cost of $3,514 and $3,621 and accumulated
amortization of $1,259 and $754 at December 31, 1999 and 1998, respectively.

Sale-Leaseback Transaction

      On September 30, 1999, the Company sold certain retail store leasehold
improvements to an unrelated third party and leased them back for a period of
seven years. The Company has an option to purchase the leasehold improvements at
the end of the fifth and seventh years at amounts approximating their fair
market values at the time the option is exercised. This transaction is being
accounted for as a financing arrangement. The total amount of the lease
obligation is $29.0 million. The lease agreement includes financial covenants
that are not more restrictive than those of existing loan agreements. As part of
the transaction, the Company received proceeds of $20,880, net of financing
costs, and an $8,120 11% note receivable which matures September 2006 and is
included in "other assets, net." The future minimum lease payments related to
the capital lease obligation are included in the five-year schedule above.

Operating Leases

      During June 1999, the Company entered into an $18,000 operating lease
agreement to finance the construction of the new unautomated distribution center
in Stockton. This distribution center replaced the Sacramento, California area
facility. Under this agreement, the lessor purchases the property, pays for the
construction costs and subsequently leases the facility to the Company. The
initial lease term is five years. The lease provides for a residual value
guarantee and includes a purchase option based on the initial cost of the
property. Each reporting period, the Company estimates its liability, if any,
under the residual value guarantee and, if necessary, records additional rent
expense on a straight-line basis over the remaining lease term. There was no
liability recorded as of December 31, 1999.

      The Company is responsible for payments under leases for former
distribution centers located in Memphis, Tennessee and Sacramento and the
former corporate headquarters and distribution center in Norfolk, Virginia.
The leases for the facilities expire in September 2005, June 2008 and
December 2009, respectively. The future minimum lease payments for each
facility are included in the five-year schedule above. The Company receives
sublease income in connection with the Norfolk and Memphis facilities from
sublease agreements which expire in February 2008 and March 2002,
respectively. The sublease income on the Norfolk facility exceeds the annual
obligation of $656 under the lease. Due to the uncertainty regarding the
ultimate recovery of the

                                       13
<PAGE>

future lease payments and the investment in the improvements in the buildings in
Memphis and Sacramento, the Company recorded a $1,300 charge related to
Sacramento in 1999 and a $1,125 charge related to Memphis in 1998. The charge
for Memphis was reduced $700 in 1999 due to leasing the facility earlier than
expected in 1999.

      The Company also leases properties for thirteen of its stores, its former
corporate headquarters and distribution center in Norfolk and the Philadelphia
office and warehouse from partnerships owned by related parties. The total
rental payments related to these leases were $2,094, $1,990 and $1,554 for the
years ended December 31, 1999, 1998 and 1997, respectively. The future minimum
lease payments for each facility are included in the five-year schedule above.
Rental payments to related parties are included in the rental expense disclosure
below.

      Rental expense for store, distribution center and former corporate
headquarters operating leases included in the accompanying supplemental
consolidated income statements for the years ended December 31, 1999, 1998 and
1997 are as follows:

                                           1999         1998         1997
                                           ----         ----         ----

      Minimum rentals .............      $78,780      $62,693      $51,843
      Contingent rentals ..........        1,613        1,374        1,837
                                         -------      -------      -------
               Total ..............      $80,393      $64,067      $53,680
                                         =======      =======      =======

Purchase Contract

       During 1996, the Company entered into a purchase agreement with a
vendor which commits the Company to purchase a minimum of $39,462 in vendor
products by April 2003, of which $9,600 has been purchased through December
31, 1999. If the Company does not meet the minimum purchase requirement by
the stated end of the contract term, the contract will extend in six-month
increments until the commitment has been met.

NOTE 5 - BALANCE SHEET COMPONENTS

       Property and equipment, net as of December 31, 1999 and 1998 consists
of the following:

                                                         1999       1998
                                                         ----       ----

      Land .........................................   $  8,051   $  8,051
      Buildings ....................................     28,468     17,714
      Improvements .................................     69,289     52,584
      Furniture, fixtures and equipment ............    130,747     95,996
      Transportation vehicles ......................      3,283      3,938
      Construction in progress .....................      7,576     20,918
                                                       --------   --------
             Total property and equipment ..........    247,414    199,201

      Less accumulated depreciation and amortization     90,046     67,740
                                                       --------   --------

             Total .................................   $157,368   $131,461
                                                       ========   ========


                                       14
<PAGE>

      Other current liabilities as of December 31, 1999 and 1998 consists of
the following:

                                                        1999         1998
                                                        ----         ----

      Compensation and benefits ................      $13,745      $16,332
      Taxes (other than income taxes) ..........       18,298       11,383
      Other ....................................        2,899        3,219
                                                      -------      -------

             Total .............................      $34,942      $30,934
                                                      =======      =======

NOTE 6 - LONG-TERM DEBT

      Long-term debt as of December 31, 1999 and 1998 consists of the
following:

                                                                1999      1998
                                                                ----      ----

      7.29% unsecured Senior Notes, interest payable
         semiannually on April 30 and October 30,
         principal payable $6,000 per year beginning
         April 2000 and maturing April 2004 ................   $30,000   $30,000

      Demand Revenue Bonds, interest payable monthly at a
         variable rate which was 6.9% at December 31, 1999,
         principal payable beginning June 2006, maturing
         June 2018 .........................................    19,000    16,500

      Revolving credit facility, interest payable monthly
         at a variable interest rate which was 9.5% at
         December 31, 1999, paid in full in May 2000 .......     6,500     4,000

      Term loan, interest payable monthly at a variable rate
         which was 8.63% at December 31, 1999, paid in
         full in May 2000 ..................................    20,000        --

      Other long-term debt .................................     1,708       274
                                                               -------   -------

      Total long-term debt .................................    77,208    50,774
      Less current portion .................................    28,070    16,638
                                                               -------   -------
      Long-term debt, excluding current portion ............   $49,138   $34,136
                                                               =======   =======

      Maturities of long-term debt are as follows: 2000 - $28,070; 2001 -
$10,638; 2002 - $12,000; 2003 - $20,500; 2004 - $6,000.

Senior Notes

      The holders of the Senior Notes have the right to require the Company
to prepay the Notes in full without premium upon a change of control or upon
certain other transactions by the Company. The Senior Notes rank pari passu
with the Company's other debt. The Note agreements, among other things,
prohibit certain mergers and consolidations and require the maintenance of
certain specified ratios. In the event of default or a prepayment at the
option of the Company, the Company is required to pay a prepayment penalty
equal to a make-whole amount.

Demand Revenue Bonds

      On May 20, 1998, the Company entered into a Loan Agreement with the
Mississippi Business Finance Corporation (MBFC) under which the MBFC issued
Taxable Variable Rate Demand Revenue Bonds (the Bonds) in an aggregate principal
amount of $19,000 to finance the acquisition, construction, and installation of
land, buildings, machinery and equipment for the Company's new distribution
facility in Olive Branch. The Bonds do not contain a prepayment penalty as long
as the interest rate remains variable. The Bonds are secured by a $19,300 letter
of credit issued by one of the Company's existing lending banks. The letter of
credit is renewable annually. The Letter of Credit and Reimbursement Agreement
requires, among other things, the maintenance of certain specified ratios and
restricts the payment of dividends. The Bonds contain a demand provision and,
therefore, outstanding amounts are classified as current liabilities.

      On April 1, 1999, the Company entered into an interest rate swap agreement
(swap) related to the $19,000 Loan Agreement with the MBFC (Loan Agreement).
This swap converts the variable interest rate to a fixed rate and reduces the
Company's exposure to interest rate fluctuations. Under this agreement, as
amended, the Company pays interest to the bank which provided the swap at a
fixed rate of 4.99%. In exchange, the bank pays the Company at a variable
interest rate, which approximates the rate on the Loan Agreement. The variable
interest rate of the swap is adjusted monthly. For months in which the interest
rate as calculated under the agreement is


                                       15
<PAGE>

greater than 8.28%, no payments are made by either party. The swap, effective
through April 1, 2009, is for the entire amount outstanding under the Loan
Agreement.

Revolving Credit Facility and Term Loan

      In February 1999, Dollar Express entered into a credit facility for an
aggregate amount of $40,000, of which $20,000 is a term loan and $20,000 is a
revolving credit facility. At the option of Dollar Express, interest on the
facility is calculated at the lender's base rate plus a margin, or LIBOR plus
a margin based on a leverage ratio, as defined. Commitment fees on the unused
portion of the revolving credit facility are calculated based on the LIBOR
margin in effect during the period, as defined. The facility was secured by
substantially all of Dollar Express's assets, as well as all of Dollar
Express's outstanding common and preferred stock. The facility contains
customary operational and financial covenants, including covenants regarding
maintenance of specified financial ratio, restrictions on capital
expenditures, restrictions on payment of cash dividends and other
distributions, limits on incurrence of debt and prohibitions on changes of
control. As of December 31, 1999, Dollar Express was not in compliance with
one of its covenants but received a waiver from its lender. Amounts
outstanding on the revolving credit facility and term loan at December 31,
1999 were $6,500 and $20,000, respectively, all of which were paid in full in
May 2000. Of the $20.0 million available under the revolving credit facility,
$13.0 million is available at December 31, 1999 and $0.5 million is reserved
for a standby letter of credit.

Revolving Credit Facility

      On September 27, 1996, the Company entered into an Amended and Restated
Revolving Credit Agreement with its banks (the Agreement). The Agreement
provides for, among other things: (1) a $135,000 revolving line of credit,
bearing interest at the agent bank's prime interest rate or LIBOR, plus a
spread, at the option of the Company; (2) an annual facilities fee, calculated
as a percentage, as defined, of the amount available under the line of credit,
and annual agent's fee payable quarterly; and (3) the reduction of amounts
outstanding under the Agreement for a period of 30 consecutive days between
December 1, 1999 and March 1, 2000 to $10,000. There are no additional reduction
requirements.

      The Agreement, among other things, requires the maintenance of certain
specified financial ratios, restricts the payment of certain distributions and
prohibits the incurrence of certain new indebtedness. During 1998, the Agreement
was amended to remove the restrictions on the amount of capital expenditures and
on the minimum beneficial ownership of the founding shareholders. The Agreement
matures on May 31, 2002. At December 31, 1999, the variable interest rate on the
facility was 7.0%. At December 31, 1999 and 1998, no amounts were outstanding
under the Agreement; however, approximately $42,387 of the $135,000 available
under the Agreement was committed to certain letters of credit issued in
relation to the routine purchase of imported merchandise at December 31, 1999.

Fair Value of Financial Instruments

      The carrying values of cash and cash equivalents, other current assets,
other assets, accounts payable, other current liabilities and other
liabilities approximate fair value because of the short maturity of these
instruments.

      The carrying value of the Company's long-term debt approximates its fair
value. The fair value is estimated by discounting the future cash flows of each
instrument at rates offered for similar debt instruments of comparable
maturities.

      The fair value of the interest rate swap is the estimated amount the
Company would receive or pay to terminate the agreement as of the reporting
date. The fair value of the interest rate swap at December 31, 1999 is $867.


                                       16
<PAGE>

NOTE 7 - MANAGEMENT ADVISORY SERVICES

      The Company has a financial and management advisory service agreement with
one of its non-employee shareholders. The agreement provides for the payment of
$200 annually over the term of the agreement. The agreement is terminable by
vote of the Company's Board of Directors. During each of the years ended
December 31, 1999, 1998 and 1997, the Company paid $200 under this agreement.

NOTE 8 - SHAREHOLDERS' EQUITY

Unattached Warrants

      The Company issued unattached warrants to purchase 4,188,675 shares of
Common Stock on September 30, 1993 for $0.12 per warrant and unattached warrants
to purchase 4,188,675 shares of Common Stock on February 22, 1994 for $0.12 per
warrant. The warrants, which are held by certain Company shareholders, carry an
exercise price of $0.57 per share, have been exercisable since March 6, 1995
(the effective date of the Company's initial public offering), and expire on
December 31, 2003. All warrants are outstanding at December 31, 1999.

Preferred Stock

      Effective February 1, 1995, the Articles of Incorporation were amended to
authorize 10,000,000 shares of Preferred Stock, $0.01 par value per share.

Stock Dividends

      In connection with stock dividends authorized by the Board of
Directors in 1998 and 1997, the Company issued one-half share for each
outstanding share of Common Stock, payable June 29, 1998 to shareholders of
record as of June 22, 1998, and payable July 21, 1997 to shareholders of record
as of July 14, 1997, respectively. On May 25, 2000 the Board of Directors
authorized a stock dividend, in which the Company issued one-half share for
each outstanding share of Common Stock, payable June 19, 2000 to shareholders of
record as of June 12, 2000. All share and per share data in these supplemental
consolidated financial statements and the accompanying notes have been
retroactively adjusted to reflect these dividends, each having the effect of a
3-for-2 stock split.

Recapitalization of Dollar Express

      On February 5, 1999, Dollar Express issued 3,530,000 shares of cumulative
convertible redeemable preferred stock for gross proceeds of $34,000, net of
offering costs of $2,844. The preferred shareholders were entitled, at any time,
to convert any or all shares, on a one-for-one basis, into shares of common
stock of Dollar Express. Upon conversion, the holders of the preferred shares
were also entitled to payment of all accrued but unpaid dividends, if any, as
long as a qualified public offering, merger or consolidation or any other
recapitalization or other business combination with an affiliated entity had not
occurred prior to August 2001. All outstanding preferred shares were converted
into common shares of Dollar Express, on a one-for-one basis, upon consummation
of the Dollar Express merger as more fully discussed in Note 2. Dividends for
1999 of $2,751 have been accrued and are unpaid at December 31, 1999. As of
result of the merger with Dollar Express, all accrued and unpaid preferred stock
dividends were forfeited and credited to additional paid-in capital in May 2000.

      The accretion of preferred stock to redemption value represents the pro
rata portion of the change in redemption value of the preferred stock from its
initial value at the date of issuance to December 31, 1999. The costs of $2,844
associated with issuing the preferred stock and the discount of $3,013 related
to the value of the detachable common stock put warrants have been recorded as
discounts on the preferred stock. The redemption value adjustments were being
accreted and the discounts were being amortized over a five-year period from the
date of issuance.

      Dollar Express issued 416,667 detachable common stock put warrants to
the holders of the cumulative convertible redeemable preferred stock to
purchase shares of Dollar Express's common stock. The detachable common stock
warrants were exercisable beginning August 3, 2001, and thereafter until
expiration. The warrants were terminated upon consummation of the merger with
Dollar Express.

      In connection with the recapitalization, Dollar Express distributed
$59,524 to the former owners of Dollar Express.


                                       17
<PAGE>

Pro Forma Net Income Per Common Share

      The following table sets forth the calculation of pro forma basic and
diluted net income per common share:

<TABLE>
<CAPTION>
                                                          1999       1998      1997
                                                          ----       ----      ----
                                                     (In thousands, except per share data)
<S>                                                     <C>        <C>        <C>
      Pro forma basic net income per common share:
        Pro forma net income available to common
           shareholders .............................   $ 99,045   $ 76,514   $ 53,539
                                                        --------   --------   --------
        Weighted average number of common shares
           outstanding ..............................     98,435     97,454     96,747
                                                        --------   --------   --------
        Pro forma basic net income per common share .   $   1.01   $   0.79   $   0.55
                                                        ========   ========   ========

      Pro forma diluted net income per common share:
        Pro forma net income available to common
           shareholders .............................   $ 99,045   $ 76,514   $ 53,539
                                                        --------   --------   --------
        Weighted average number of common shares
           outstanding ..............................     98,435     97,454     96,747
        Dilutive effect of stock options and warrants
           (as determined by applying the treasury
           stock method) ............................      9,525      9,661      9,402
                                                        --------   --------   --------
        Weighted average number of common shares and
           dilutive potential common shares
           outstanding ..............................    107,960    107,115    106,149
                                                        --------   --------   --------
        Pro forma diluted net income
           per common share .........................   $   0.92   $   0.71   $   0.50
                                                        ========   ========   ========
</TABLE>

      Detachable common stock put warrants to purchase 416,667 shares of
common stock of Dollar Express and 3,530,000 shares of cumulative convertible
redeemable preferred stock, eligible for conversion into 3,530,000 shares of
common stock of Dollar Express, were outstanding from February 5, 1999 to
December 31, 1999. These common stock equivalents are not included in the
calculation of the weighted average number of common shares and dilutive
potential common shares outstanding because their effect would be
anti-dilutive.

NOTE 9 - PROFIT SHARING AND 401(K) RETIREMENT PLAN

      The Company maintains defined contribution profit sharing and 401(k) plans
which are available to all employees over 21 years of age who have completed one
year of service in which they have worked, in general, at least 1,000 hours.
Eligible employees may make elective salary deferrals. The Company may make
contributions at its discretion.

      Contributions to and reimbursements by the Company of expenses of the
plans included in the accompanying consolidated income statements for the years
ended December 31 were as follows:

                1999........................................      $ 5,413
                1998........................................        4,059
                1997........................................        2,923

NOTE 10 - STOCK-BASED COMPENSATION PLANS

      At December 31, 1999, the Company has five stock-based compensation plans,
which are described below.


                                       18
<PAGE>

Accounting Method

      The Company adopted the disclosure-only option under SFAS No. 123 as of
January 1, 1996. If the accounting provisions of SFAS No. 123 had been adopted
as of the beginning of 1996, the Company's pro forma net income available to
common shareholders and pro forma net income per common share would have been
reduced to the pro forma amounts indicated in the following table:

<TABLE>
<CAPTION>
                                                                  1999         1998         1997
                                                                  ----         ----         ----
<S>                                                            <C>          <C>          <C>
      Pro forma net income available to common shareholders:
         As reported .......................................   $   99,045   $   76,514   $   53,539
                                                               ==========   ==========   ==========
         Pro forma for SFAS No. 123 ........................   $   88,718   $   69,774   $   50,531
                                                               ==========   ==========   ==========

      Pro forma basic net income per common share:
         As reported .......................................   $     1.01   $     0.79   $     0.55
                                                               ==========   ==========   ==========
         Pro forma for SFAS No. 123 ........................   $     0.90   $     0.72   $     0.52
                                                               ==========   ==========   ==========

      Pro forma diluted net income per common share:
         As reported .......................................   $     0.92   $     0.71   $     0.50
                                                               ==========   ==========   ==========
         Pro forma for SFAS No. 123 ........................   $     0.82   $     0.65   $     0.48
                                                               ==========   ==========   ==========
</TABLE>

      The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income available to common
shareholders for SFAS No. 123 and pro forma net income per share for SFAS No.
123 amounts presented above because compensation cost is reflected over the
options' vesting periods and compensation cost for options granted prior to
January 1, 1995 is not considered. These pro forma amounts for SFAS No. 123 may
not be representative of future disclosures because compensation cost is
reflected over the options' vesting periods and because additional options may
be granted in future years.

Fixed Stock Option Plans

      The Company has four fixed stock option plans. Under the Non-Qualified
Stock Option Plan (SOP), the Company granted options to its employees for
1,047,264 shares of Common Stock in 1993 and 1,048,289 shares in 1994. Options
granted under the SOP have an exercise price of $0.86 and are fully vested at
the date of grant.

      Under the 1995 Stock Incentive Plan (SIP), the Company may grant options
to its employees for up to 8,100,000 shares of Common Stock. The exercise price
of each option equals the market price of the Company's stock at the date of
grant, unless a higher price is established by the Board of Directors, and an
option's maximum term is ten years. Options granted under the SIP generally vest
over a three-year period.

      The Step Ahead Investments, Inc. Long-Term Incentive Plan (SAI Plan)
provided for the issuance of stock options, stock appreciation rights (SARs),
phantom stock and restricted stock awards to officers and key employees.
Effective with the merger with 98 Cent Clearance Center and in accordance with
the terms of the SAI Plan, outstanding 98 Cent Clearance Center options were
assumed by the Company and converted, based on 1.6818 Company options for each
98 Cent Clearance Center option, to options to purchase the Company's common
stock. Options issued as a result of this conversion were fully vested as of the
date of the merger. At the date of the merger, the SAI Plan was authorized to
issue 400,000 shares subject to stock options, 40,000 phantom shares, 125,000
SARs, and 25,000 restricted stock awards. In 1996, 98 Cent Clearance Center
converted all of the outstanding SARs and phantom stock awards to stock options
and restricted stock awards, respectively.

      Under the 1998 Special Stock Option Plan (Special Plan), options to
purchase 247,500 shares were granted to five former officers of 98 Cent
Clearance Center who were serving as employees or consultants of the Company
following the merger. The options were granted as consideration for entering
into non-competition agreements and a consulting agreement. The exercise price
of each option equals the market price of the Company's stock at the date of
grant, and an option's maximum term is ten years. Options granted under the
Special Plan vest over a five-year period.


                                       19
<PAGE>

      The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:

                                                  1999       1998       1997
                                                  ----       ----       ----

      Expected term in years ............            8          8         10
      Expected volatility ...............        52.7%      50.4%      47.7%
      Annual dividend yield .............           --         --         --
      Risk-free interest rate ...........         6.6%       4.9%       5.8%

      The following tables summarize the Company's various option plans,
including the SAI Plan for the period prior to the merger with 98 Cent Clearance
Center and the Dollar Express plan for the period prior to the merger with
Dollar Express, as of December 31, 1999, 1998 and 1997, and for the years then
ended and information about fixed options outstanding at December 31, 1999.

<TABLE>
<CAPTION>
                                                               Stock Option Activity

                                        1999                           1998                           1997
                               -----------------------        -----------------------        -----------------------
                                               Weighted                       Weighted                      Weighted
                                                Average                        Average                       Average
                                               Per Share                      Per Share                     Per Share
                                               Exercise                       Exercise                      Exercise
                                 Shares          Price        Shares            Price        Shares           Price
                                 ------          -----        ------            -----        ------           -----
<S>                             <C>            <C>           <C>              <C>          <C>               <C>
Outstanding at
   beginning of year.......     4,876,365      $ 14.33       3,606,963        $  6.77      3,274,869         $  4.71
Granted....................     1,697,847        19.05       2,119,610          24.20      1,197,508           10.43
Exercised..................    (1,050,432)        7.55        (722,709)          5.94       (709,961)           3.06
Forfeited..................      (235,317)       21.05        (127,499)         12.13       (155,453)           8.40
                               ----------                    ---------                     ---------
Outstanding at
   end of year.............     5,288,463        16.86       4,876,365          14.33      3,606,963            6.77
                               ==========                    =========                     =========

Options exercisable
   at end of year..........     2,212,093        12.07       2,016,101           5.99      1,631,381            4.03
                               ==========                    =========                     =========

Weighted average fair
   value of options
   granted during the
   year....................                    $ 12.56                        $ 15.02                        $  6.93
</TABLE>

<TABLE>
<CAPTION>
                                                    Stock Options Outstanding and Exercisable

                                             Options Outstanding                         Options Exercisable
                               -------------------------------------------           --------------------------
                                                   Weighted
                                 Number             Average          Weighted          Number           Weighted
      Range of                 Outstanding         Remaining          Average        Exercisable         Average
      Exercise               at December 31,      Contractual        Exercise      at December 31,      Exercise
       Prices                     1999               Life              Price            1999              Price
       ------                     ----               ----              -----            ----              -----
<S>                            <C>                <C>               <C>               <C>              <C>
$0.86......................      228,079            (a)             $  0.86             228,079        $  0.86
$2.96 to $5.95.............      555,090          5.7 years            4.46             555,090           4.46
$6.77 to $9.93.............      937,548          6.9 years            9.82             670,955           9.77
$10.81 to $19.50...........    1,533,636          9.1 years           17.92              85,952          14.87
$20.67 to $24.09...........    1,247,925          8.4 years           22.96             468,427          22.91
$25.63 to $33.21...........      786,185          9.0 years           27.15             203,590          26.99
                               ---------                                              ---------

$0.86 to $33.21............    5,288,463                                              2,212,093
                               =========                                              =========
</TABLE>

      (a) Options granted under the SOP in 1993 and 1994 have no expiration
date. They are therefore not included in the total weighted average remaining
life.


                                       20
<PAGE>

Employee Stock Purchase Plan

      Under the Dollar Tree Stores, Inc. Employee Stock Purchase Plan (ESPP),
the Company is authorized to issue up to 759,375 shares of Common Stock to
eligible employees. Under the terms of the ESPP, employees can choose to have up
to 10% of their annual base earnings withheld to purchase the Company's common
stock. The purchase price of the stock is 85% of the lower of the price at the
beginning or the price at the end of the quarterly offering period. Under the
ESPP, the Company has sold 146,174 shares as of December 31, 1999.

      The fair value of the employees' purchase rights is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:

      Expected term................................3 months
      Expected volatility..........................21% to 34%
      Annual dividend yield....................... --
      Risk-free interest rate......................5.16% to 5.88% (annualized)

      The weighted average per share fair value of those purchase rights granted
in 1999, 1998 and 1997 was $4.06, $4.19, and $2.65, respectively.

NOTE 11 - SUBSEQUENT EVENTS

      On January 13, 2000, the Company entered into a $35,000 operating lease
agreement to finance the construction of a new automated distribution center in
Savannah, Georgia. Under this agreement the lessor purchases the property, pays
for the construction costs and subsequently leases the facility to the Company.
The initial lease term is five years with renewal options for two additional
five-year periods. The lease provides for a residual value guarantee and
includes a purchase option based on the initial cost of the property. When the
assets are placed into service, the Company will estimate its liability, if any,
under the residual value guarantee and record additional rent expense on a
straight-line basis over the remaining lease term. The new facility is expected
to be operational in early 2001.

         On May 25, 2000, the Company's shareholders approved an amendment to
the SIP to increase the authorized number of option shares available for grant
under the plan to 12,600,000.

NOTE 12 - QUARTERLY FINANCIAL INFORMATION (Unaudited)

      The following table sets forth certain unaudited results of operations for
each quarter of 1999 and 1998. The unaudited information has been prepared on
the same basis as the audited supplemental consolidated financial statements
appearing elsewhere in this report and includes all adjustments, consisting only
of normal recurring adjustments, which management considers necessary for a fair
presentation of the financial data shown. The operating results for any quarter
are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
                                               First     Second         Third      Fourth
                                              Quarter   Quarter(1)     Quarter   Quarter(2)
                                              -------   ----------     -------   ----------
                                             (In thousands, except store and per share data)
<S>                                           <C>         <C>         <C>         <C>
1999:
    Net sales .............................   $258,091    $288,148    $298,868    $506,713
    Gross profit ..........................     89,700     103,316     107,322     196,915
    Operating income ......................     20,451      26,233      27,920     100,992
    Net income available to common
      shareholders ........................     13,906      14,626      12,083      58,935
    Pro forma net income available to
     common shareholders (3) ..............     13,672      14,355      12,083      58,935
    Pro forma diluted net income per common
      share ...............................       0.13        0.13        0.11        0.54
    Stores open at end of quarter .........      1,335       1,403       1,461       1,507
    Comparable store net sales increase(4)        4.6%        1.7%        4.9%        7.5%

1998:
    Net sales .............................   $205,641    $237,928    $237,852    $392,465
    Gross profit ..........................     71,872      81,652      85,944     151,730
    Operating income ......................     14,464      22,146      23,019      70,885
    Net income available to common
      shareholders ........................      8,818      14,139      13,854      44,507
    Pro forma net income available to
      common shareholders (3) .............      8,396      12,937      13,190      41,991
    Pro forma diluted net income per common
      share ...............................       0.08        0.12        0.12        0.39
    Stores open at end of quarter .........      1,100       1,163       1,241       1,285
    Comparable store net sales increase(4)        4.6%       12.3%        5.3%        5.2%
</TABLE>

(1)   Included in gross profit is $443 of merger related costs. Included in
      operating income is $443 of merger related costs and $607 of merger
      related expenses.

(2)   Included in gross profit is $1,301 of merger related costs. Included in
      operating income is $1,301 of merger related costs and $4,024 of merger
      related expenses.

(3)   Amounts include a pro forma adjustment for C-corporation income taxes
      relating to Dollar Express and Only $One of $271 for the quarter ended
      June 30, 1999, $234 for the quarter ended March 31, 1999, $2,516 for the
      quarter ended December 31, 1998, $664 for the quarter ended September 30,
      1998, $1,202 for the quarter ended June 30, 1998, and $422 for the quarter
      ended March 31, 1998.

(4)   Easter was observed on April 4, 1999, April 12, 1998 and March 30, 1997.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>7
<FILENAME>ex-99_2.txt
<DESCRIPTION>EXHIBIT 99.2
<TEXT>

<PAGE>
                                                                    Exhibit 99.2

                               ESCROW AGREEMENT

      THIS ESCROW AGREEMENT, dated as of May 5, 2000 (the "Escrow Agreement"),
by and among DOLLAR TREE STORES, INC., a Virginia corporation ("Parent"); THE
SHAREHOLDERS IDENTIFIED ON SCHEDULE 1 HERETO, (each a "Shareholder" and,
collectively, the "Shareholders"); BERNARD SPAIN and DAVID MUSSAFER, as
representatives of the Shareholders (collectively, the "Shareholder
Representatives"); and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
banking corporation acting solely as escrow agent hereunder and not in its
individual capacity ("Escrow Agent"). The Parent and the Shareholders are
sometimes referred to herein as the "Interested Parties." Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in the Merger Agreement (as hereinafter defined).

                              W I T N E S S E T H:

      WHEREAS, pursuant to a certain Merger Agreement, dated as of April 5, 2000
(the "Merger Agreement") by and among Parent, DT Keystone, Inc., a Pennsylvania
corporation and wholly- owned subsidiary of Parent ("Sub") and Dollar Express,
Inc., a Pennsylvania corporation (the "Company"), the capital stock of the
Company owned by the Shareholders has been (simultaneously with the execution
hereof) converted into the right to receive shares of Parent Common Stock;

      WHEREAS, pursuant to Article 10 of the Merger Agreement, the Shareholders
have agreed to indemnify Parent and its subsidiaries and Affiliates (including
DT Keystone, Inc., Dollar Express, Inc., and the surviving corporation in the
Merger), each of their respective officers, directors, employees, agents and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "Parent Indemnified Parties") for Parent
Losses;

      WHEREAS, as security for the Shareholders' obligations under the Merger
Agreement but without limiting the other remedies of the Parent Indemnified
Parties thereunder, the Merger Agreement also contemplates a surrender of Escrow
Shares (as defined below) and related funds to the extent Parent Indemnified
Parties suffer Parent Losses;
<PAGE>

      WHEREAS, pursuant to Section 8.5 of the Merger Agreement, the Shareholders
have appointed the Shareholder Representatives to act on their behalf with
respect to the performance on behalf of such Shareholder under the terms and
provisions of this Escrow Agreement; and

      WHEREAS, Escrow Agent is willing to act as escrow agent hereunder.

      NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:

      1 Delivery of Escrow Shares.

            1.1 Subject and pursuant to the Merger Agreement, Escrow Shares
shall be delivered to the Escrow Agent on behalf of the Shareholders, in the
proportion specified on Schedule 1 hereto. The Escrow Shares shall be
represented by a stock certificate in the name of State Street Bank and Trust
Company, as Escrow Agent under the Escrow Agreement, dated May 5, 2000.
Notwithstanding the foregoing, during the term of this Escrow Agreement, title
to the Escrow Shares will be in the name of the Escrow Agent for record holder
purposes only. The parties acknowledge that the Shareholders are the beneficial
owners of the Escrow Shares, subject to the terms and conditions of the Merger
Agreement and this Escrow Agreement, and each Shareholder shall retain all
rights to vote the shares of Parent Common Stock delivered on behalf of such
Shareholder to the Escrow Agent that are not transferred to Parent pursuant to
Section 2 hereof.

            1.2 The Escrow Shares shall be contributed into escrow hereunder on
behalf of the Shareholders in the same proportion to the Parent Common Stock to
be received by each Shareholder pursuant to Article 2 of the Merger Agreement.
Escrow Agent agrees to submit said shares for transfer into its name as Escrow
Agent hereunder or, in its discretion, into the name of its nominee, and agrees
to hold and administer said shares subject to the terms of this Escrow
Agreement. Except as set forth in this Agreement, the Escrow Agent shall be
under no obligation to preserve, protect or exercise rights in the Escrow
Shares, and shall be responsible only for reasonable measures to maintain the
physical safekeeping thereof, and otherwise to perform and observe such duties
on its part as are expressly set forth in this Escrow Agreement. The Escrow
Agent shall have no responsibility for the genuineness, validity, market value,
title or sufficiency for any intended purpose of the Escrow Shares.

      2 The Escrow Fund. All cash dividends on or proceeds from the permitted
sale of the Escrow Shares shall be deposited directly into an escrow account
created by the Escrow Agent specifically for the purpose of holding such cash
dividends and proceeds (the "Dividend Account"), without any tax or other
withholding or deduction, subject to the terms of the Escrow Agreement. Shares
resulting from stock dividends, stock splits and other shares or securities
issued in respect of the Escrow Shares shall be issued in the name of the Escrow
Agent, and shall be held by the Escrow Agent subject to the provisions of this
Agreement, and upon issuance shall become part of the Escrow Shares. The Escrow
Agent shall


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 2
<PAGE>

invest the Dividend Account at, and pursuant to, the written direction of the
Shareholder Representatives in Eligible Investments and shall not be responsible
or liable for any loss accruing from any investment made in accordance herewith
except for losses due to the gross negligence or wilful misconduct of the Escrow
Agent. "Eligible Investments" shall mean (i) obligations issued or guaranteed by
the United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof); (ii) obligations (including certificates of deposit and banker's
acceptances) of any domestic commercial bank having capital and surplus in
excess of $500,000,000; (iii) repurchase obligations for underlying securities
of the type described in clause (i); (iv) shares of money market funds at least
95% of the assets of which constitute obligations of the type described in
clause (i) above. No investment shall have a term of more than ninety (90) days.
If otherwise qualified, obligations of the Escrow Agent shall qualify as
Eligible Investments. Absent its timely receipt of such specific written
investment instruction from the Shareholder Representatives, the Escrow Agent
shall invest the funds in the Dividend Account in the Eligible Investments
described in clause (i) above. All earnings received from the investment of the
Dividend Account shall be credited to, and shall become a part of, the Dividend
Account (and any losses on such investments shall be debited to the Dividend
Account). The Escrow Agent shall have no liability for any investment losses,
including any losses on any investment required to be liquidated prior to
maturity in order to make a payment required hereunder except for losses due to
the gross negligence or wilful misconduct of the Escrow Agent.

      The Escrow Agent is hereby authorized, in making or disposing of any
investment permitted by this section, to deal with itself (in its individual
capacity) or with any one or more affiliates, whether it or such affiliate is
acting as an agent of the Escrow Agent or for any third person or dealing as
principal for its own account.

      3 Voting and Disposition of Escrow Shares.

            (a) The Escrow Shares shall be voted on all matters submitted to the
shareholders of Parent as each Shareholder shall direct with respect to the
number of Escrow Shares allocated to such Shareholder. During the period the
Escrow Shares are held hereunder, Parent shall cause all proxy solicitation
materials, including forms of proxy, to be sent to the Shareholders and Escrow
Agent as and when sent to the shareholders of Parent. In the absence of
direction from any Shareholder, the Escrow Agent shall not be responsible for
forwarding to any party, notifying any party with respect to, or taking any
action with respect to any Escrow Shares.

            (b) Following the Restricted Period (as defined below), and subject
to compliance with the requirements of applicable securities laws, the Escrow
Shares may be sold by the Escrow Agent on behalf of the Shareholders for cash at
the time and in the manner the Shareholder Representatives shall direct. No
Escrow Shares may be sold, transferred or otherwise disposed of, nor shall any
person in any other way reduce such person's risk or other shares of the capital
stock of Parent until after such time as financial results covering at least 30
days of post merger combined operations of Parent and the Company


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 3
<PAGE>

have been published (within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies) by Parent, in the form of a
post-effective amendment, issuance of a quarterly earnings report, a Form 10-K,
10-Q or 8-K filing, or any other public issuance which includes the combined
sales and net income (the "Restricted Period"). Proceeds from the permitted sale
of the Escrow Shares shall be deposited in the Dividend Account and allocated to
identified subaccount for the benefit of the applicable Shareholders.
Notwithstanding any provision of this section 3(b) to the contrary, the Escrow
Agent conclusively may assume that the Restricted Period has expired if it
receives direction from the Shareholder Representatives to sell shares.

      4 Application of Escrow Shares and the Dividend Account to Claims of
        Parent Indemnified Parties and Deficit Amount.

            4.1 In the event a Parent Indemnified Party claims that it is
entitled to indemnification pursuant to the Merger Agreement (including without
limitation a claim for a Deficit Amount pursuant to Section 7.1(vi)), such
Parent Indemnified Party shall give written notice of such claim to the
Shareholder Representatives and the Escrow Agent. Any such notice shall be
signed by an officer of Parent and shall contain (i) a reasonable description of
the claim and (ii) and the amount thereof. The Escrow Agent shall thereupon, but
in no event less promptly than five (5) business days thereafter, deliver a copy
of such notice to the Shareholder Representatives. Subject to compliance by such
Parent Indemnified Party with the applicable indemnification provisions of the
Merger Agreement, the amount of such claim shall be paid to the Parent
Indemnified Party as provided in Section 4.3, unless the Shareholder
Representatives shall contest the right of such Parent Indemnified Party to such
payment by delivering to such Parent Indemnified Party and the Escrow Agent
notice of such contest within twenty (20) days after such Parent Indemnified
Party shall have delivered notice to the Shareholder Representatives of the
claim.

            4.2 If within the twenty (20) day period specified in Section 4.1
above, the Shareholder Representatives shall deliver to the Parent Indemnified
Party and the Escrow Agent the notice of contest referred to in Section 4.1
above, the Parent Indemnified Party and the Shareholder Representatives shall
use their reasonable efforts to resolve the dispute by mutual agreement within
ninety (90) days from the receipt of such notice of contest. If at the end of
such ninety-day period, the Parent Indemnified Party and Shareholder
Representatives have not reached an agreement with respect to such dispute, then
such parties shall use their good faith efforts to submit such dispute promptly
to binding arbitration or, if such parties cannot agree to the terms of such
arbitration, to a court of competent jurisdiction. The Escrow Agent shall make
no payment hereunder with respect to the claim involved until the dispute has
been finally settled by written agreement of such Parent Indemnified Party and
the Shareholder Representatives, a copy of which is delivered to Escrow Agent,
or, in the absence of such an agreement, by a binding and final arbitration
award if such Parent Indemnified Party and the Shareholder Representative have
agreed to such arbitration, or otherwise by a binding and final judgment, order
or decree of a court of competent jurisdiction, a copy of which is delivered to
Escrow Agent.


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 4
<PAGE>

            4.3 Promptly upon determination by the Escrow Agent that a payment
is to be made to a Parent Indemnified Party hereunder, then the Escrow Agent
shall calculate each Shareholder's pro rata liability for such payment ("Per
Shareholder Amount") in accordance with Schedule 1 hereof. The Escrow Agent
shall then make such payment of the Per Shareholder Amount, with respect to each
Shareholder:

                  (i) first, by cancellation of the number of whole unsold
      Escrow Shares allocable to such Shareholder having an aggregate value
      nearest to the Per Shareholder Amount ("Share Value") without exceeding
      the Per Shareholder Amount, such value per share to be $57.10 (the
      "Average Closing Price") subject to appropriate adjustment to take into
      account any stock split, stock dividend or recapitalization subsequent to
      the Effective Time and not reflected in such Average Closing Price; and

                  (ii) second, if the Per Shareholder Amount cannot be fully
      satisfied pursuant to Section 4.3(i), by payment of a distribution of
      amounts, if any, contained in the Dividend Account allocable to such
      Shareholder which shall be made to such Parent Indemnified Party in an
      amount equal to the Per Shareholder Amount minus the Share Value.

The intent of this provision is to divide any payment made to Parent Indemnified
Parties among the Shareholders and then to satisfy such payments first out of
each Shareholder's unsold Escrow Shares and secondly out of each Shareholder's
share of the Dividend Account.

      5 Final Distribution. On the first anniversary of the date hereof (the
"Anniversary"), except as otherwise provided in this Section, the Escrow Shares
and the Dividend Account then remaining in escrow shall be distributed to the
Shareholders pro rata in accordance with Schedule 1 hereto. If any claim
theretofore asserted by a Parent Indemnified Party shall not have been paid or
finally determined to be without merit or the amount of such claim shall not
have been finally determined, the number of whole shares of the Escrow Shares
having an aggregate value (determined as provided in Section 4.3 above) nearest
to the amount of such claim on the Anniversary (the "Retained Escrow Shares"),
plus, if the Retained Escrow Shares are insufficient to cover the amount of such
claim, an amount from the Dividend Account equal to any amount remaining subject
to such claim, shall be retained in escrow until such claim(s) shall have been
paid or finally determined to be without merit, whereupon such Retained Escrow
Shares and Dividend Account amount shall be distributed to the Shareholders pro
rata in accordance with Schedule 1 hereto, subject to the remaining provisions
of this Section. Any distribution pursuant hereto shall be net of any required
tax or other withholding or deduction. The parties will make all reasonable
efforts to resolve any claims hereunder as quickly as possible.

      6 Fractional Shares; Distributions. In the event any calculations required
under this Escrow Agreement result in the allocation of a fractional share
amount to a Shareholder, the fraction shall be rounded to the next lower whole
number, and any remainder shares shall be canceled. Parent agrees to deliver to
any Shareholder requesting it, a cash payment to such Shareholder in the amount
of the value of


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 5
<PAGE>

any canceled fractional share, measured at the Average Closing Price. All
deliveries under this Escrow Agreement shall be made by and to the parties
hereto (or their lawfully appointed attorneys-in-fact) in the United States.

      7 Shareholder Representatives; Unanimous Action; Notices and Written
        Directions.

            (a) Each Shareholder agrees to execute a power of attorney in the
form of Exhibit A hereto (and to deliver copies of such power to Parent and the
Escrow Agent), which power appoints the Shareholder Representative to be his,
her or its true and lawful attorney for those matters specified therein.
Notwithstanding the foregoing, the Shareholder Representative will not act on
behalf of the Shareholders with respect to distributions, voting or tax
withholdings.

            (b) The Shareholder Representatives hereby agree to accept, with
respect to each Shareholder, the appointment as set forth in Exhibit A. Whenever
there are two or more Shareholder Representatives, action by the Shareholder
Representatives shall require their unanimous consent, and all obligations in
this Escrow Agreement with respect to the Shareholder Representatives shall
apply to both such representatives.

            (c) Until notified in writing by the Shareholder Representatives
that they have resigned or by holders of 75% of the Escrow Shares that they have
been removed, the Escrow Agent may act upon the directions, instructions and
notices of the Shareholder Representatives named above and, thereafter, upon the
directions, instructions and notices of any successor named in a writing
executed by holders of 75% of the Escrow Shares delivered to the Escrow Agent.

      8 Escrow Agent.

            8.1 Duties. Each Interested Party acknowledges and agrees that the
Escrow Agent (i) shall not be responsible for any of the agreements referred to
or described herein (including without limitation the Merger Agreement), or for
determining or compelling compliance therewith, and shall not otherwise be bound
thereby, (ii) shall be obligated only for the performance of such duties as are
expressly and specifically set forth in this Escrow Agreement on its part to be
performed, each of which are ministerial (and shall not be construed to be
fiduciary) in nature, and no implied duties or obligations of any kind shall be
read into this Escrow Agreement against or on the part of the Escrow Agent,
(iii) shall not be obligated to take any legal or other action hereunder which
might in its judgment involve or cause it to incur any expense or liability
unless it shall have been furnished with acceptable indemnification, (iv) may
rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction (including, without limitation, wire transfer
instructions, whether incorporated herein or provided in a separate written
instruction), instrument, statement, certificate, request or other document
furnished to it hereunder and reasonably believed by it to be genuine and to
have been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof, and (v) may consult counsel
satisfactory


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 6
<PAGE>

to it, including in-house counsel, and the opinion or advice of such counsel in
any instance shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or advice of such counsel. Escrow Agent shall not be
in any manner liable or responsible for the sufficiency, correctness,
genuineness or validity of any instruments deposited with it or with reference
to the form of execution thereof, or the identity, authority or rights of any
person executing or depositing same, and Escrow Agent shall not be liable for
any loss that may occur by reason of forgery, false representation or the
exercise of its discretion in any particular manner or for any other reason to
anyone for any action taken or omitted to be taken by it hereunder, except for
its own gross negligence or willful misconduct or for a breach of the terms of
this Escrow Agreement. In no event shall the Escrow Agent be liable for
punitive, special or consequential damage or loss (including but not limited to
lost profits) whatsoever, even if the Escrow Agent has been informed of the
likelihood of such loss or damage and regardless of the form of action.

            8.2 Indemnification. Except in instances of Escrow Agent's own gross
negligence or willful misconduct Shareholders collectively on the one hand and
the Parent on the other shall each indemnify, defend, and hold harmless Escrow
Agent (and its directors, officers and employees) against fifty percent (50%) of
any and all costs, losses, claims, damages, liabilities, expenses, including
reasonable costs of investigation, court costs, and attorneys' fees, and
disbursements, which may be imposed upon Escrow Agent (or its directors,
officers and employees) solely in connection with its actions taken within the
scope of duties specified hereunder as Escrow Agent (and the exercise or failure
to exercise its discretion hereunder), including any litigation arising from
this Escrow Agreement involving the subject matter hereof, and all such costs,
expenses and disbursement shall be for the account of and shall be borne and
paid by Parent and the Shareholders as a condition to termination of this Escrow
Agreement. The foregoing indemnification and agreement to hold harmless shall
survive the termination of the Escrow Agreement.

            8.3 Disputes. In the event of a dispute between the parties, in the
discretion of Escrow Agent, Escrow Agent shall be entitled to tender into the
registry or custody of any court of competent jurisdiction all money or property
in its hands under this Escrow Agreement, together with such legal pleadings as
it deems appropriate, and thereupon shall be discharged from all further duties
and liabilities under this Escrow Agreement. Any such legal action may be
brought in such court as Escrow Agent shall determine to have jurisdiction
thereof. The filing of any such legal proceedings shall not deprive Escrow Agent
of its compensation earned prior to such filing, or of the benefits of Section
8.2 hereof.

            8.4 Receipt. Escrow Agent shall provide written acknowledgment to
the Parent and the Shareholder Representatives of receipt of the Escrow Shares.

            8.5 Fees. Escrow Agent's fees hereunder shall be as set forth on the
fee schedule attached hereto as Schedule 2 and incorporated herein by reference.
All such fees, expenses and reimbursements (other than in relation to a dispute,
which shall be governed by Section 8.3) shall be paid by the Parent.


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 7
<PAGE>

      9 Transfer of Interests. The interests of the Shareholders in the Escrow
Shares and the rights and obligations of the Shareholders hereunder may not be
transferred except by will, the laws of descent and distribution or by other
operation of law.

      10 Miscellaneous.

            10.1 Benefits and Burdens; Assignment. This Escrow Agreement shall
inure to the benefit of and shall be binding upon Parent and the Shareholders
and Escrow Agent and their respective heirs, representatives, successors and
assigns. No party to this Escrow Agreement may assign its rights or obligations
hereunder without the prior written consent of each of the other parties hereto,
provided however, that this Escrow Agreement may only be assigned by Parent to a
corporation, all of whose issued and outstanding capital stock is owned directly
or indirectly by Parent, and in such event Parent shall not be released from its
obligations hereunder.

            10.2 Governing Law. This Escrow Agreement shall be governed by the
internal laws (ignoring principles of conflicts of laws) of the Commonwealth of
Massachusetts. All deliveries under this Escrow Agreement shall be made by and
to the parties hereto (or their lawfully appointed attorneys-in-fact) in the
United States.

            10.3 Headings. The section and paragraph headings contained in this
Escrow Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Escrow Agreement.

            10.4 Notices; Wiring Instructions.

                  (a) Any transmittals, notice or other communications required
or permitted hereunder shall be sufficiently given if sent by registered or
certified mail, postage prepaid, by national overnight courier service or, in
the case of any communication not involving a transmittal of original documents,
by telecopy, addressed as follows:

            If to Parent or, after the Closing, the Company:

                  Dollar Tree Stores, Inc.
                  500 Volvo Parkway
                  Chesapeake, Virginia 23320
                  Attention: Mr. Frederick C. Coble
                  Telecopier: (757) 321-5111


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 8
<PAGE>

            With a copy to:

                  Hofheimer Nusbaum, P.C.
                  999 Waterside Drive, Suite 1700
                  P. O. Box 3460
                  Norfolk, Virginia  23514
                  Attention: William A. Old, Jr., Esquire
                  Telecopier: (757) 629-0660

            If to the Shareholder Representatives:

                  Mr. Bernard Spain
                  233 S. 6th Street
                  Philadelphia, Pennsylvania 19106

                  Mr. David Mussafer
                  Advent International Corporation
                  75 State Street
                  Boston, Massachusetts 02109

            With copies to:

                  Cary S. Levinson, Esq.
                  Pepper Hamilton LLP
                  3000 Two Logan Square
                  Eighteenth & Arch Streets
                  Philadelphia, PA 19103-2799
                  Telecopier: 215-981-4750

                  Ramon R. Obod, Esq.
                  Fox, Rothschild, O'Brien & Frankel, LLP
                  2000 Market Street, Tenth Floor
                  Philadelphia, PA 19103-3291
                  Telecopier: 215-299-2150

            If to Shareholders:

                  To the addresses stated on Schedule 1

            If to Escrow Agent:


--------------------------------------------------------------------------------
                                                        Escrow Agreement--Page 9
<PAGE>

                  State Street Bank and Trust Company
                  Two Avenue de Lafayette, Sixth Floor
                  Boston, Massachusetts 02111
                  Attention:  Corporate Trust Department
                              Attention: Dollar Tree/Dollar Express Escrow
                              Fax: 617-662-1463

            With a copy to:

                  Donald E. Vaughan, Esq.
                  Peabody & Arnold LLP
                  50 Rowes Wharf
                  Boston, Massachusetts 02110-3342

or such other addresses as shall be furnished in writing by any of the parties,
and any such notice or communication shall be deemed to have been given as of
the next business day, if delivered by overnight courier service or upon receipt
(as evidenced by proof of transmission), if telecopied when received and three
days after the date so mailed (if mailed).

                  (b) Any funds to be paid to or by the Escrow Agent hereunder
shall be sent by wire transfer or certified or cashier's check pursuant to the
following instructions (or by such method of payment and pursuant to such
instruction as may have been given in advance and in writing to or by the Escrow
Agent, as the case may be, in accordance with Section 10.4(a) above):

            If to Parent:

            Bank: First Union National Bank, N.A.
            ABA #: 0514 0054 9
            A/C #: 2070000330892
            Attn: Theresa Boneske (757) 628-0438
            Ref: Dollar Tree/DLRX Escrow

            If to Shareholders:

            By certified or cashier's check sent via
            registered or certified mail, postage prepaid,
            or by national overnight courier service to
            the addresses stated on Schedule 1.


--------------------------------------------------------------------------------
                                                       Escrow Agreement--Page 10
<PAGE>

            If to the Escrow Agent:

            Bank: State Street Bank and Trust Company
            ABA #: 0110 0002 8
            A/C #: 9903-9901
            Attn: Corporate Trust Department
            Ref: Dollar Tree/DLRX Escrow

            10.5 Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.

            10.6 Modification. This Escrow Agreement may be modified only by a
written instrument signed by each of the parties hereto, provided however that
Schedule 1 hereto may be modified to reflect valid transfers of the
Shareholders' interests in the Escrow Shares by a writing signed by Parent and
the Shareholder Representatives, upon which Escrow Agent shall be entitled to
rely without further investigation.

            10.7 Cooperation. Shareholders, Parent and the Escrow Agent shall
deliver to each other such information and documents and shall execute and
deliver to each other such further information and documents and shall execute
and deliver such further instruments and agreements as the others may reasonably
request in order to accomplish the purpose of this Escrow Agreement or to assure
to the others the benefits of this Escrow Agreement.

            10.8 Entire Understanding. This Escrow Agreement and the schedules
referred to herein represent the entire understanding of the parties with
respect to the subject matter hereof and supersede all correspondence,
memoranda, conversations or other communications with respect thereto.

            10.9 Severability. The invalidity or unenforceability of any
provision of this Escrow Agreement shall not affect the validity or
enforceability of any other provision of this Escrow Agreement.

            10.10 Time. Time is of the essence under this Escrow Agreement.

            10.11 Statutes. Any reference herein to any federal, state or local
statute shall include all amendments to such statute through the date of this
Escrow Agreement.

            10.12 Interpretation. It is the intention of the parties hereto and
the Shareholders and Company that the Merger qualify as a "reorganization" under
the provisions of Section 368 of the Code, and be accounted for as a "pooling of
interests," and this Escrow Agreement shall be interpreted and


--------------------------------------------------------------------------------
                                                       Escrow Agreement--Page 11
<PAGE>

applied in a manner consistent with, and shall be subject to amendment to
conform to, the requirements for such treatment.

            10.13 Tax-Related Terms.

                  (a) Tax Reporting. The Interested Parties agree that, for tax
reporting purposes, all interest or other income earned from the investment of
the Dividend Account in any tax year shall (i) to the extent such interest or
other income is distributed by the Escrow Agent to any person or entity pursuant
to the terms of this Escrow Agreement during such tax year, be allocated to such
person or entity, and (ii) otherwise shall be allocated to the Shareholders in
proportion to their holdings as set forth on Schedule 1.

                  (b) Certification of Tax Identification Number. The
Shareholder Representatives agree to obtain the certified tax identification
number for each Shareholder on a Form W-9 (or Form W-8, in case of non-U.S.
persons) and deliver the same to the Escrow Agent prior to the date on which any
income earned on the investment of the Dividend Account is credited to the
Dividend Account. In the event that any tax identification number is not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Dividend Account.

                  (c) Tax Indemnification. The Shareholder Representatives will
instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments or other
governmental charges, and will instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Escrow Agreement. The Shareholders will indemnify and hold the Escrow
Agent harmless from any liability or obligation on account of taxes,
assessments, additions for late payment, interest, penalties, expenses and other
governmental charges that may be assessed or asserted against the Escrow Agent
in connection with or relating to any payment made or other activities performed
under the terms of this Escrow Agreement, including without limitation any
liability for the withholding or deduction of (or the failure to withhold or
deduct) the same, and any liability for failure to obtain proper certifications
or to report properly to governmental authorities in connection with this Escrow
Agreement, including costs and expenses (including reasonable legal fees and
expenses), interest and penalties. The foregoing indemnification and agreement
to hold harmless shall survive the termination of this Escrow Agreement.

            10.14 Resignation. The Escrow Agent may at any time resign as Escrow
Agent hereunder by giving ten (10) business days' prior written notice of
resignation to the Parent and the Shareholder Representatives. Prior to the
effective date of the resignation as specified in such notice, the Parent will
issue to the Escrow Agent a written instruction authorizing redelivery of the
Escrow Shares and Dividend Account to a bank or trust company that it selects as
successor to the Escrow Agent hereunder, subject


--------------------------------------------------------------------------------
                                                       Escrow Agreement--Page 12
<PAGE>

to the consent of the Shareholder Representatives (which consent shall not be
unreasonably withheld). If, however, the Parent shall fail to name such a
successor escrow agent within five (5) business days after the notice of
resignation from the Escrow Agent, the Shareholder Representatives shall be
entitled to name such successor escrow agent. If no successor escrow agent is
named by the Parent or the Shareholder Representatives, the Escrow Agent may
apply to a court of competent jurisdiction for appointment of a successor escrow
agent.

            10.15 Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, external power or communications line failures, earthquakes or other
natural disasters.

            10.16 Reproduction of Documents. This Escrow Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

                            [Signatures pages follow]


--------------------------------------------------------------------------------
                                                       Escrow Agreement--Page 13
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement under seal as of the date first written above.

PARENT:                       DOLLAR TREE STORES, INC.


                              By /s/ Frederick C. Coble
                                -----------------------------------------------
                                 Frederick C. Coble
                                 Senior Vice President - Chief Financial Officer

                              /s/ Bernard Spain
SHAREHOLDER                   -------------------------------------------------
REPRESENTATIVES:              BERNARD SPAIN, as Shareholder Representative

                              /s/ David Mussafer
                              -------------------------------------------------
                              DAVID MUSSAFER, as Shareholder Representative


                             [Executions Continue]


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

SHAREHOLDERS:                 /s/ Bernard Spain
                              -------------------------------------------------
                              BERNARD SPAIN

                              /s/ Murray Spain
                              -------------------------------------------------
                              MURRAY SPAIN

                              BERNARD SPAIN FAMILY LIMITED
                              PARTNERSHIP


                              By: /s/ Murray Spain
                                  ---------------------------------------------
                                  Murray Spain, its General Partner

                              MURRAY SPAIN FAMILY LIMITED
                              PARTNERSHIP


                              By: /s/ Stephen Greenfield
                                  ---------------------------------------------
                                  Stephen Greenfield, its General Partner


                             [Executions Continue]


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

                              GLOBAL PRIVATE EQUITY III LIMITED
                              PARTNERSHIP

                              By: Advent International Limited Partnership, its
                              General Partner

                              By: Advent International Corporation, its General
                              Partner


                              By: /s/ David M. Mussafer
                                 ----------------------------------------------
                                 Name: David M. Mussafer
                                 Title: Senior Vice President


                              ADVENT PGGM GLOBAL LIMITED
                              PARTNERSHIP

                              By: Advent International Limited Partnership, its
                              General Partner

                              By: Advent International Corporation, its General
                              Partner


                              By: /s/ David M. Mussafer
                                 ----------------------------------------------
                                 Name: David M. Mussafer
                                 Title: Senior Vice President


                              [Executions Continue]


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

                              ADVENT PARTNERS GPE III LIMITED
                              PARTNERSHIP

                              By: Advent International Corporation, General
                              Partner


                              By: /s/ David M. Mussafer
                                 ----------------------------------------------
                                 Name: David M. Mussafer
                                 Title: Senior Vice President



                              ADVENT PARTNERS (NA) GPE III LIMITED
                              PARTNERSHIP

                              By: Advent International Corporation, General
                              Partner


                              By: /s/ David M. Mussafer
                                 ----------------------------------------------
                                 Name: David M. Mussafer
                                 Title: Senior Vice President



                              ADVENT PARTNERS LIMITED PARTNERSHIP

                              By: Advent International Corporation, General
                              Partner


                              By: /s/ David M. Mussafer
                                 ----------------------------------------------
                                 Name: David M. Mussafer
                                 Title: Senior Vice President


                              [Executions Continue]


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

                              GUAYACAN PRIVATE EQUITY FUND LIMITED
                              PARTNERSHIP

                              By: Advent-Morro Equity Partners, Inc., its
                              General Partner


                              By: /s/ Cyril L. Meduna
                                 ----------------------------------------------
                                 Name: Cyril L. Meduna
                                 Title:  President



                              DOLLAR EXPRESS INVESTMENT, LLC


                              By:              [illegible]
                                 ----------------------------------------------
                                 Name:
                                 Title:


                              [Executions Continue]


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

ESCROW AGENT:                 STATE STREET BANK AND TRUST COMPANY
                              (Acting solely as Escrow Agent herein and not in
                              its individual capacity)


                              By: /s/ Arthur L. Blakeslee
                                 ----------------------------------------------
                                 Name: Arthur L. Blakeslee
                                 Title: Assistant Vice President


--------------------------------------------------------------------------------
                                               Escrow Agreement--Signature Pages
<PAGE>

                                  SCHEDULE 1

                             LIST OF SHAREHOLDERS

--------------------------------------------------------------------------------

        Name               Escrow Shares   Pro Rata Percentage       SS# or
    and Address             Contributed   of Total Escrow Shares    Tax Id#

--------------------------------------------------------------------------------
Bernard Spain                     83,618       28.5973%           ###-##-####
233 S. 6th Street
Philadelphia, PA 19106
--------------------------------------------------------------------------------
Murray Spain                      82,981       28.3795%           ###-##-####
1429 Garrison Drive
Ambler, PA 19002
--------------------------------------------------------------------------------
Bernard Spain Family              11,028       3.7716%            23-3007519
Limited Partnership
1429 Garrison Drive
Ambler, PA 19002
--------------------------------------------------------------------------------
Murray Spain Family               11,555       3.9518%            23-3007513
Limited Partnership
11300 Rockville Pike
Rockville, MD 20852
--------------------------------------------------------------------------------
Global Private Equity III         83,192       28.4516%           04-3352454
Limited Partnership
75 State Street
Boston, MA 02109
--------------------------------------------------------------------------------
Advent PGGM Global                12,748       4.3598%            04-3339615
Limited Partnership
75 State Street
Boston, MA 02109
--------------------------------------------------------------------------------
Advent Partners GPE III            1,256       0.4296%            04-3353928
Limited Partnership
75 State Street
Boston, MA 02109
--------------------------------------------------------------------------------
Advent Partners Limited              546       0.1867%            04-3259121
Partnership
75 State Street
Boston, MA 02109
--------------------------------------------------------------------------------
Advent Partners (NA)                 372       0.1272%            04-3353929
GPE III Limited
Partnership
75 State Street
Boston, MA 02109
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                                                     Escrow Agreement--Schedules
<PAGE>

--------------------------------------------------------------------------------

        Name               Escrow Shares   Pro Rata Percentage       SS# or
    and Address             Contributed   of Total Escrow Shares    Tax Id#

--------------------------------------------------------------------------------
Guayacan Private                   2,949       1.0086%            66-0536180
Equity Fund Limited
Partnership
Banco Popular Bldg.
206 Tetuan, Street, Ste
903,
San Juan, PR 0901
--------------------------------------------------------------------------------
Dollar Express                     2,153       0.7363%            56-2127458
Investment LLC
101 S. Tryon St.
40th Flr.
Charlotte, NC 28280
--------------------------------------------------------------------------------
Total                            292,398      100.0000%
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                                                     Escrow Agreement--Schedules
<PAGE>


                                   SCHEDULE 2

                                  STATE STREET
                                SCHEDULE OF FEES
                                       FOR
                                 ESCROW SERVICES

                               Dollar Tree Stores
                                       and
                                 Dollar Express

ACCEPTANCE FEE:                      Waived

ADMINISTRATION FEE:                       $3,500.00 per year or part thereof,
                                          Plus $500.00 per sale of Escrow Shares

INVESTMENT FEE (IF APPLICABLE):
direct investments in treasuries,    $65.00 per buy/sell
C/D's CP, Repos, etc.

SWEEP FEE (IF APPLICABLE):
SSgA or selected other Money         40 basis points per annum of
Market Funds                              the average daily net assets

State Street's Insured Money              No Charge
Market Account

WIRE TRANSFER FEE (outgoing, if
  applicable):                            $20.00

OUT-OF-POCKET EXPENSES:                   At cost

LEGAL FEES (Peabody & Arnold):            At  cost

April 24, 2000 (Revised)


--------------------------------------------------------------------------------
                                                     Escrow Agreement--Schedules
<PAGE>

                                    EXHIBIT A
                                POWER OF ATTORNEY

                                     NOTICE

            THE PURPOSE OF THIS POWER OF ATTORNEY IS TO GIVE THE PERSON YOU
DESIGNATE (YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY, WHICH MAY INCLUDE
POWERS TO SELL OR OTHERWISE DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT
ADVANCE NOTICE TO YOU OR APPROVAL BY YOU.

            THIS POWER OF ATTORNEY DOES NOT IMPOSE A DUTY ON YOUR AGENT TO
EXERCISE GRANTED POWERS, BUT WHEN POWERS ARE EXERCISED, YOUR AGENT MUST USE DUE
CARE TO ACT FOR YOUR BENEFIT AND IN ACCORDANCE WITH THIS POWER OF ATTORNEY.

            YOUR AGENT MAY EXERCISE THE POWERS GIVEN HERE THROUGHOUT YOUR
LIFETIME, EVEN AFTER YOU BECOME INCAPACITATED, UNLESS YOU EXPRESSLY LIMIT THE
DURATION OF THESE POWERS OR YOU REVOKE THESE POWERS OR A COURT ACTING ON YOUR
BEHALF TERMINATES YOUR AGENT'S AUTHORITY.

            YOUR AGENT MUST KEEP YOUR FUNDS SEPARATE FROM YOUR AGENT'S FUNDS.

            A COURT CAN TAKE AWAY THE POWERS OF YOUR AGENT IF IT FINDS YOUR
AGENT IS NOT ACTING PROPERLY.

            THE POWERS AND DUTIES OF AN AGENT UNDER A POWER OF ATTORNEY ARE
EXPLAINED MORE FULLY IN 20 Pa.C.S. Ch. 56.

            IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU
SHOULD ASK A LAWYER OF YOUR OWN CHOOSING TO EXPLAIN IT TO YOU.

            I HAVE READ OR HAD EXPLAINED TO ME THIS NOTICE AND I UNDERSTAND ITS
CONTENTS.

      Signed,                                         Date:

      ______________________________________          ______________, 2000


--------------------------------------------------------------------------------
                                             Escrow Agreement--Power of Attorney
<PAGE>

            The undersigned Shareholder hereby irrevocably (except to the extent
described below) constitutes and appoints Bernard Spain and David Mussafer, with
power and authority to act in any matter hereunder or under the Merger Agreement
or Escrow Agreement, the true and lawful attorney-in-fact of the undersigned
Shareholder, with full power in the name of, for and on behalf of, the
undersigned Shareholder with respect to all matters arising in connection with
the Escrow Shares and the indemnification obligations of the undersigned
Shareholder pursuant to the Merger Agreement including, but not limited to, the
power and authority to take any and all of the following actions:

                  (i) negotiate, determine, defend and settle any dispute which
may arise under Article 10 of the Merger Agreement or under the Escrow
Agreement; and

                  (ii) make, execute, acknowledge and deliver any releases,
assurances, receipts, requests, instructions, notices, agreements, certificates
and any other instruments, and to generally do any and all things and to take
any and all actions which may be requisite, proper or advisable in connection
with Article 10 of the Merger Agreement or under the Escrow Agreement.

            The undersigned Shareholder acknowledges that Shareholders holding
at least seventy-five percent (75%) of the Escrow Shares may replace the
Shareholder Representatives at any time with one or more substitute Shareholder
Representative(s). In such event, the appointment of the Shareholder
Representatives as such undersigned Shareholder's attorneys-in-fact shall be
revoked and the substitute Shareholder Representative(s) shall be deemed to be
automatically appointed, in their stead, as attorney(s)-in-fact hereunder,
without the necessity of further action on the part of the undersigned
Shareholders. The undersigned also acknowledges that neither the Shareholder
Representatives nor any substitute Shareholder Representative(s) shall be liable
to any person for any action taken or any omission to act, in good faith, in
connection with the Shareholder Representatives' responsibilities as Shareholder
Representative.

            The power of attorney conferred hereby is an agency coupled with an
interest and all authority conferred hereby shall be irrevocable and shall not
be terminated by any act of the undersigned Shareholders or by operation of law,
whether by the death or incapacity of the undersigned or by the occurrence of
any other event or events (including, without limiting the foregoing, the
termination of any trust or estate for which the undersigned Shareholders are
acting as a fiduciary or fiduciaries or the dissolution or liquidation of any
corporation or partnership); provided, however, that the appointment of Bernard
Spain and David Mussafer as attorneys-in-fact shall be deemed revoked in the
event a substitute Shareholder Representative(s) is/are selected, whereupon the
substitute Shareholder Representative(s) shall be deemed automatically appointed
as attorney(s)-in-fact in their stead. If after the execution hereof any of the
undersigned should die or become incapacitated, or if any trust or estate should
be terminated, or if any corporation or partnership should be dissolved or
liquidated, or if any other such event or events shall occur, before the
completion of the transactions contemplated by the Merger Agreement and the
Escrow


--------------------------------------------------------------------------------
                                             Escrow Agreement--Power of Attorney
<PAGE>

Agreement, actions taken by the Shareholder Representatives (or any substitute
Shareholder Representative(s)) hereunder shall be as valid as if such death,
incapacity, termination, dissolution, liquidation or other event or events had
not occurred, regardless of whether or not the Shareholder Representatives (or
substitute Shareholder Representative(s)), Parent or the Escrow Agent, or any
one of them, shall have received notice of such death, incapacity, termination,
dissolution, liquidation or other event.

            Action by the Shareholders Representatives shall require their
unanimous consent, and all obligations in this Escrow Agreement with respect to
the Shareholder Representatives shall apply to both such representatives.

      Signed,                                         Date:

      ______________________________________          ______________, 2000

                            ACKNOWLEDGMENT BY AGENT

            I have read the attached power of attorney and am the person
identified as the agent for the principal. I hereby acknowledge that in the
absence of specific provision to the contrary in the power of attorney or in the
Pennsylvania Probate, Estates and Fiduciaries Code (20 Pa.C.S.) when I act as
agent:

            I shall exercise the powers for the benefit of the principal.
            I shall keep the assets of the principal separate from my assets.
            I shall exercise reasonable caution and prudence.
            I shall keep a full and accurate record of all actions, receipts and
            disbursements on behalf of the principal.

      Signed,                                         Date:

      ______________________________________          ______________, 2000
      Bernard Spain

      ______________________________________          ______________, 2000
      David Mussafer


--------------------------------------------------------------------------------
                                             Escrow Agreement--Power of Attorney
</TEXT>
</DOCUMENT>
</SUBMISSION>
