UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Definitive Proxy Statement | ||
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o | Soliciting Material under §240.14a-12 |
Dollar General Corporation | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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Dollar General Corporation 100 Mission Ridge Goodlettsville, Tennessee 37072 | ||
Dear Shareholder:
The 20112013 Annual Meeting of Shareholders of Dollar General Corporation will be held on Wednesday, May 25, 2011,29, 2013, at 9:00 a.m., Central Time, at Goodlettsville City Hall Auditorium, 105 South Main Street, Goodlettsville, Tennessee. All shareholders of record at the close of business on March 16, 201121, 2013 are invited to attend the annual meeting. For security reasons, however, to gain admission to the meeting you may be required to present photo identification and comply with other security measures.
At this year's meeting, you will have an opportunity to vote on the matters described in our accompanying Notice of Annual Meeting of Shareholders and Proxy Statement. Our 20102012 Annual Report and our Annual Report on Form 10-K for the fiscal year ended January 28, 2011February 1, 2013 also accompany this letter.
Your interest in Dollar General and your vote are very important to us. We encourage you to read the Proxy Statement and vote your proxy as soon as possible so your vote can be represented at the annual meeting. You may vote your proxy via the Internet or telephone, or if you received a paper copy of the proxy materials by mail, you may vote by mail by completing and returning a proxy card.
On behalf of the Board of Directors, I would like to express our appreciation for your continued interest insupport of Dollar General.
Sincerely, | ||
/s/ Rick Dreiling | ||
Rick Dreiling Chairman & Chief Executive Officer |
April 5, 2011[ ], 2013
Dollar General Corporation 100 Mission Ridge Goodlettsville, Tennessee 37072 | ||
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: | Wednesday, May | |||
TIME: | 9:00 a.m., Central Time | |||
PLACE: | Goodlettsville City Hall Auditorium 105 South Main Street Goodlettsville, Tennessee | |||
ITEMS OF BUSINESS: | 1) | To elect as directors the | ||
2) | To | |||
3) | ||||
To ratify the appointment of the independent registered public accounting firm for fiscal | ||||
To transact any other business that may properly come before the annual meeting and any adjournments of that | ||||
WHO MAY VOTE: | Shareholders of record at the close of business on March | |||
By Order of the Board of Directors, | ||||
/s/ Christine L. Connolly | ||||
Goodlettsville, Tennessee April | Christine L. Connolly Corporate Secretary |
Please vote your proxy as soon as possible even if you expect to attend the annual meeting in person. You may vote your proxy via the Internet or by phone by following the instructions on the notice of internet availability or proxy card, or if you received a paper copy of these proxy materials by mail, you may vote by mail by completing and returning the enclosed proxy card in the enclosed reply envelope. No postage is necessary if the proxy is mailed within the United States. You may revoke your proxy by following the instructions listed on page 43 of the proxy statement.
DOLLAR GENERAL CORPORATION
Proxy Statement for20112013 Annual Meeting of Shareholders
TABLE OF CONTENTS
General Information | 1 | ||
Voting Matters | |||
Proposal 1: Election of Directors | |||
Corporate Governance | |||
Director Compensation | 17 | ||
Director Independence | 19 | ||
Transactions with Management and Others | |||
Executive Compensation | |||
Compensation Discussion and Analysis | |||
Compensation Committee Report | |||
Summary Compensation Table | |||
Grants of Plan-Based Awards in Fiscal | |||
Outstanding Equity Awards at | 43 | ||
Option Exercises and Stock Vested During Fiscal | |||
Pension Benefits Fiscal | |||
Nonqualified Deferred Compensation Fiscal | |||
Potential Payments upon Termination or Change in Control | |||
Compensation Committee Interlocks and Insider Participation | 57 | ||
Compensation Risk Considerations | 57 | ||
| 58 | ||
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Security Ownership of Certain Beneficial Owners | |||
Security Ownership of Officers and Directors | 60 | ||
Proposal 2: Vote Regarding Charter Amendment | 62 | ||
Audit Committee Report | |||
Proposal | |||
Fees Paid to Auditors | |||
Section 16(a) Beneficial Ownership Reporting Compliance | 67 | ||
Shareholder Proposals for |
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 29, 2013
This Proxy Statement, our 20102012 Annual Report and a form of proxy card are available at www.proxyvote.com. You will need your Notice of Internet Availability or proxy card to access the proxy materials.
As permitted by rules adopted by the Securities and Exchange Commission ("SEC"), we are furnishing our proxy materials over the Internet to some of our shareholders. This means that some shareholders will not receive paper copies of these documents. Instead, these shareholders will receive only a Notice of Internet Availability containing instructions on how to access the proxy materials over the Internet. The Notice of Internet Availability also contains instructions on how each of those shareholders can request a paper copy of our proxy materials, including the Proxy Statement, our 20102012 Annual Report and a proxy card. Shareholders who do not receive a Notice of Internet Availability will receive a paper copy of the proxy materials by mail, unless they have previously requested delivery of proxy materials electronically. If you received only the Notice of Internet Availability and would like to receive a paper copy of the proxy materials, the notice contains instructions on how you can request copies of these documents.
What is this document?
This documentIt is the Proxy Statement of Dollar General Corporation for the Annual Meeting of Shareholders to be held on Wednesday, May 25, 2011.29, 2013. We will begin mailing printed copies of this document or the Notice of Internet Availability to our shareholders on or about April 5, 2011.[ ], 2013. We are providing this document to solicit your proxy to vote upon certain matters at the annual meeting.
In this document weWe refer to our company as "we" or"we," "us" or "Dollar General." In addition, unlessUnless otherwise noted in this document or therequired by context, requires otherwise,"2013," "2012," "2011," "2010," "2009," "2008""2010" and "2007""2009" refer to our fiscal years ending or ended January 31, 2014, February 1, 2013, February 3, 2012, January 28, 2011 and January 29, 2010, January 30, 2009, and February 1, 2008.2010.
What is a proxy?proxy, who is asking for it, and who is paying for the cost to solicit it?
ItA proxy is your legal designation of another person, called a "proxy," to vote the stock you own.your stock. The document that designates someone as your proxy is also called a proxy or a proxy card.
Who is paying the costs of this document and the solicitation of my proxy?
Dollar General will pay all expenses of this solicitation.
Who is soliciting my proxy, and will anyone be compensated to solicit my proxy?
Your proxy is being solicited by and on behalf of our Board of Directors. In addition to solicitation by useDollar General will pay all expenses of the mails, ourthis solicitation. Our directors officers and employees may solicit proxies in person or by mail, telephone, telegram, electronic mail,e-mail, facsimile or other means, of communication. Those personsbut they will not be additionally compensated but may be reimbursed for those efforts except we will reimburse out-of-pocket expenses in connection with any solicitation.they incur. We also may reimburse custodians nominees and fiduciariesnominees for their expenses in sending proxies and proxy material to beneficial owners.
Who may attend the annual meeting?
Only shareholders, their proxy holders and our invited guests may attend the meeting. If your shares are registered in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or a letter from that record holder or your most recent brokerage account statement that confirms your ownership of those shares as of March 16, 2011.21, 2013. For security reasons, we also may require photo identification for admission.
Where can I find directions to the annual meeting?
You can find directionsDirections to Goodlettsville City Hall, where we will hold the annual meeting, are posted on the "Investor Information" portion of our web site located at www.dollargeneral.com.
What is Dollar General Corporation and where is it located?
We operate convenient-sized stores to deliver everyday low prices on products that families use every day. We are the largest discount retailer in the United States by number of stores with more than 9,40010,557 locations in 3540 states as of March 16, 2011.1, 2013. Our principal executive offices are located at 100 Mission Ridge, Goodlettsville, TN 37072. Our telephone number is 615-855-4000.
Where is Dollar General common stock traded?
Our common stock is traded and quoted on the New York Stock Exchange ("NYSE") under the symbol "DG."
Where can I find information regarding Dollar General's corporate governance practices?
We have posted Dollar General governance-related information on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com, including without limitation our Corporate Governance Guidelines, Code of Business Conduct and Ethics, the charter of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and the names of the persons chosen to lead the executive sessions of the non-management directors and of the independent directors. This information is available in print to any shareholder who sends a request in writing to: Investor Relations, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TN 37072.
How can I communicate with the Board of Directors?
Our Board of Directors has approved a process for security holders and other interested parties to contact the Board, a particular director, or the non-management or the independent directors as a group. Such process is described on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com.
How many votes must be present to hold the annual meeting?
A quorum, consisting of the presence in person or by proxy of the holders of a majority of shares of our common stock outstanding on March 16, 2011,21, 2013, must exist to conduct any business.
What am I voting on?
You will be asked to vote on the election of 7 directors, to vote on an advisory basis on our executive compensation, to vote on an advisory basis on the frequency of holding future advisory votes on our executive compensation, and to vote on the ratification of the appointment of our independent registered public accounting firm for 2011.on:
• | the election of 9 directors; | ||
• | an amendment to our Amended and Restated Charter to implement a majority voting standard in uncontested elections of directors; and | ||
• | the ratification of the appointment of our independent registered public accounting firm for 2013. |
May other matters be raised at the annual meeting?
We currently are unaware of any other matters to be acted upon at the meeting. Under Tennessee law and our governing documents, no other non-procedural business may be raised at the meeting unless proper notice has been given to shareholders. If other business is properly raised, your proxies have authority to vote as they think best, including to adjourn the meeting.
Who is entitled to vote?vote at the annual meeting?
You may vote if you owned shares of Dollar General common stock at the close of business on March 16, 2011.21, 2013. As of that date, there were 341,521,858327,212,294 shares of Dollar General common stock outstanding and entitled to vote. Each share is entitled to one vote on each matter.
How do I vote?
If you are a shareholder of record, you may vote your proxy over the telephone or Internet or, if you received printed proxy materials, by marking, signing, dating and returning the printed proxy card in the enclosed envelope. Please refer to the instructions on the Notice of Internet Availability or proxy card, as applicable. Alternatively, you may vote in person at the meeting.
If you are a "street name" holder, your broker, bank, or other nominee will provide materials and instructions for voting your shares. You may vote in person at the meeting if you obtain a proxy from your broker, banker, trustee or other nominee giving you the right to vote the shares.
What is the difference between a "shareholder of record" and a "street name" holder?
You are a "shareholder of record" if your shares are registered directly in your name with Wells Fargo Shareowner Services, our transfer agent. You are a "street name" holder if your shares are held in the name of a brokerage, bank, trust or other nominee as custodian.
What if I receive more than one Notice of Internet Availability or proxy card?
You will receive multiple Notices of Internet Availability or proxy cards if you hold your shares in different ways (e.g., joint tenancy, trusts, custodial accounts, etc.) or in multiple accounts. If you are a street name holder, you will receive your Notice of Internet Availability or proxy card or other voting
information, along with voting instructions, from your broker, and you will follow your broker's instructions for voting your shares. You shouldbroker. Please vote the shares represented by each Notice of Internet Availability or proxy card you receive.
How will my proxy be voted?
The persons named on the proxy card will vote your proxy as you direct on the proxy card. If your signed proxy card does not specify instructions, your proxy will be voted: "FOR" all directors nominated; "FOR" the approval on an advisory basis, of the compensationamendment to our Amended and Restated Charter to implement a majority voting standard in uncontested elections of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC; for the approval, on an advisory basis, of an advisory vote on executive compensation once every "3 YEARS;"directors; and "FOR" ratification of Ernst & Young LLP as our independent registered public accounting firm for 2011.2013.
Can I change my mind and revoke my proxy?
Yes. If you are a shareholder of record, to revoke a proxy given pursuant to this solicitation you must:
• | sign a later-dated proxy card and submit it so that it is received before the annual meeting in accordance with the instructions included in the proxy card; | ||
• | at or before the annual meeting, send to our Corporate Secretary a written notice of revocation dated later than the date of the proxy; | ||
• | submit a later-dated vote by telephone or Internet no later than 11:59 p.m. (ET) on May 28, 2013; or | ||
• | attend the annual meeting and vote in person. |
If you are a street name holder, to revoke a proxy given pursuant to this solicitation you must follow the instructions of the bank, broker, trustee or other nominee who holds your shares.
How many votes are needed to elect directors and approve other matters?
Directors areAt the annual meeting, directors will be elected by a plurality of the votes cast by holders of shares entitled to vote at the meeting. Youmeeting, which means that the 9 nominees receiving the largest number of affirmative votes will be elected to our Board. The proposals to amend our Amended and Restated Charter to provide for a majority voting standard in future uncontested elections of directors and to ratify the appointment of our independent registered public accounting firm for 2013 will be approved if the votes cast in favor of each proposal exceed the votes cast against it.
With respect to the director elections, you may vote for all nominees or you may withhold your vote on one or more nominees.
The vote on With respect to each of the compensation of our named executive officers is advisoryother proposals, and therefore, not binding on Dollar General, our Board of Directors, or its Compensation Committee. The compensation of our named executive officers will be approved, on an advisory basis, ifany other matter properly brought before the votes cast for the proposal exceed the votes cast against it. Youannual meeting, you may vote in favor of or against thisthe proposal, or you may elect to abstain from voting your shares.
ForWhat are broker non-votes?
Although your broker is the record holder of any shares that you hold in street name, it must vote onthose shares pursuant to your instructions. If you do not provide instructions, your broker may exercise discretionary voting power over your shares for "routine" items but not for "non-routine" items. All matters described in this proxy statement, except for the frequency of future votes on our executive compensation, the option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency that has been selected by shareholders. However, because this vote is advisory and not binding on Dollar General or our Board of Directors in any way, our Board may decide that it is in the best interests of our shareholders and Dollar General to hold such advisory votes more or less frequently than the option selected by our shareholders. You may vote by choosing the option of 1 year, 2 years, 3 years or abstain from voting when you vote on this proposal.
The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, for 2011are considered to be non-routine matters.
"Broker non-votes" occur when shares held of record by a broker are not voted on a matter because the broker has not received voting instructions from the beneficial owner and either lacks or declines to exercise the authority to vote the shares in its discretion. Like abstentions, as long as a quorum is present, broker non-votes will be approved ifhave no effect on the votes cast for the proposal exceed the votes cast against it. You may vote in favoroutcome of or against this ratification, or you may elect to abstain from voting your shares.a particular proposal.
How will abstentions and broker non-votes be treated?
Abstentions and broker non-votes, if any, will be treated as shares that are present and entitled to vote for purposes of determining whether a quorum is present, but will not be counted as votes cast either in favor of or against a particular proposal.
What are broker non-votes?
Your broker is the record holder of any shares that you hold in street name, but your broker must vote those shares pursuant to your instructions. If you do not provide instructions, your broker may exercise discretionary voting power over your shares for "routine" matters but not for "non-routine" items. All matters described in this proxy statement, except for the ratification of the appointment of the independent registered public accounting firm, are considered to be non-routine matters.
"Broker non-votes" occur when shares held of record by a broker are not voted on a matter because the broker has not received voting instructions from the beneficial owner of the shares and either lacks or declines to exercise the authority to vote the shares in its discretion. To avoid giving them the effect of negative votes, broker non-votes are disregarded for the purpose of determining the total number of votes cast with respect to a proposal.
Will my vote be confidential?
Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that is intended to protect your voting privacy. Your vote will not be intentionally disclosed either within Dollar General or to third parties, except (1) as necessary to meet applicable legal requirements; (2) in a dispute regarding authenticity of proxies and ballots; (3) in the case of a contested proxy solicitation, if the other party soliciting proxies does not agree to comply with the confidential voting policy; (4) to allow for the tabulation of votes and certification of the vote; (5) to facilitate a successful proxy solicitation; or (6) when a shareholder makes a written comment on the proxy card or otherwise communicates the vote to management.
PROPOSAL 1:
ELECTION OF DIRECTORS
What is the structure of the Board of Directors?
Our Board of Directors must consist of at least 1 but not more thanto 15 directors. Thedirectors, with the exact number, currently fixed at 7, is9, set by the Board pursuant to and in compliance with our shareholders' agreement with our controlling shareholder, Buck Holdings, L.P., and the sponsor shareholders indentifiedidentified in that agreement. All directors are elected annually by our shareholders.
Who are the nominees this year?
The nominees for the Board of Directors consist of 79 current directors. If elected, each nominee would hold office until the 20122014 annual meeting of shareholders orand until his or her successor is elected and qualified. These nominees, their ages at the date of this document and the calendar year in which they first became a director are listed in the table below.
Name | Age | Director Since | Age | Director Since | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Raj Agrawal | 38 | 2007 | 40 | 2007 | |||||||
Warren F. Bryant | 65 | 2009 | 67 | 2009 | |||||||
Michael M. Calbert | 48 | 2007 | 50 | 2007 | |||||||
Sandra B. Cochran | 54 | 2012 | |||||||||
Richard W. Dreiling | 57 | 2008 | 59 | 2008 | |||||||
Patricia D. Fili-Krushel | 59 | 2012 | |||||||||
Adrian Jones | 46 | 2007 | 48 | 2007 | |||||||
William C. Rhodes, III | 45 | 2009 | 47 | 2009 | |||||||
David B. Rickard | 64 | 2010 | 66 | 2010 |
What are the backgrounds of this year's nominees?
Mr. Agrawal joined Kohlberg Kravis Roberts & Co., L.P. ("KKR") in May 2006 and is a memberthe North American head of theKKR's Infrastructure team.business. He previously was a member of KKR's Retail and Energy and Natural Resources industry teams. From 2002 to May 2006, he was a Vice President with Warburg Pincus, where he was involved in the execution and oversight of a number of investments in the energy and infrastructure sector. Mr. Agrawal's prior experience also includes Thayer Capital Partners, where he played a role in the firm's business and manufacturing services investments, and McKinsey & Co., where he provided strategic and mergers and acquisitions advice to clients in a variety of industries. KKR's affiliates indirectly own a substantial portion of our outstanding common stock through their investment in Buck Holdings, L.P. and related entities. Mr. Agrawal is a director of Colonial Pipeline Company and El Paso Midstream Investment Corp.Bayonne Water JV Parent, LLC.
Mr. Bryant served as the President and Chief Executive Officer of Longs Drug Stores Corporation, a retail drugstore chain on the West Coast and in Hawaii, from 2002 through 2008 and as its Chairman of the Board from 2003 through his retirement in 2008. Prior to joining Longs Drug Stores, Mr. Bryanthe served as the Senior Vice President of The Kroger Co., a retail grocery chain, from 1999 to 2002. Mr. Bryant is a director of OfficeMax Incorporated and George Weston LtdLTD of Canada.
Mr. Calbert joined KKR in 2000 and during that time has been directly involved with several portfolio companies. He heads the Retail industry team.team within KKR's Private Equity platform. He joined Randall's Food Markets beginning in 1994 and served as the Chief Financial Officer in 1994, ultimately taking the company through a transaction with KKR in June 1997. He left Randall's Food Markets after the companyfrom 1997 until it was sold in September 1999 and1999. He joined KKR.KKR in January 2000. Mr. Calbert started his professional careeralso previously worked as a certified public accountant and consultant with Arthur Andersen Worldwide from 1985-1994, where his
primary focus was on the retail/consumer industry. He served as our Chairman until December 2008. KKR's affiliates indirectly own a substantial portion of our outstanding common stock through their
investment in Buck Holdings, L.P. and related entities. Mr. Calbert is currently on the board of directorsa director of Toys "R" Us, Inc., US Foods, Pets at Home, and U.S. Foodservice.Academy, Ltd.
Ms. Cochran has served as a director and as President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc. since September 2011. She joined Cracker Barrel in April 2009 as Executive Vice President and Chief Financial Officer and was named President and Chief Operating Officer in November 2010. She was previously Chief Executive Officer at book retailer Books-A-Million, Inc. from February 2004 to April 2009. She also served as that company's President (August 1999—February 2004), Chief Financial Officer (September 1993—August 1999) and Vice President of Finance (August 1992—September 1993). Ms. Cochran has 20 years of experience in the retail industry. Ms. Cochran is a director of Cracker Barrel Old Country Store, Inc. She served as a director of Books-A-Million, Inc. from 2006 to 2009.
Mr. Dreiling joined Dollar General in January 2008 as Chief Executive Officer and a member of our Board. He was appointed Chairman of the Board on December 2, 2008. Prior to joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., the largest drugstore chain in New York City, from November 2005 until January 2008 and as Chairman of the Board of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President—Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug stores on the West Coast and Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President—Marketing, Manufacturing and Distribution at Safeway, Inc., a food and drug retailer. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a Southern California food and drug division of Safeway. He currently serves as the Vice Chairman of the Retail Industry Leaders Association (RILA). Mr. Dreiling is a director of Lowe's Companies, Inc.
Ms. Fili-Krushel has served as Chairman of NBCUniversal News Group, a division of NBCUniversal Media, LLC, composed of NBC News, CNBC, MSNBC and the Weather Channel, since July 2012. She previously served as Executive Vice President of NBCUniversal (January 2011—July 2012) with a broad portfolio of functions reporting to her, including Operations and Technical Services, Business Strategy, Human Resources and Legal. Prior to NBCUniversal, Ms. Fili-Krushel was Executive Vice President of Administration at Time Warner Inc. (July 2001—December 2010) where her responsibilities included oversight of philanthropy, corporate social responsibility, human resources, worldwide recruitment, employee development and growth, compensation and benefits, and security. Before joining Time Warner in July 2001, Ms. Fili-Krushel had been CEO of WebMD Health since April 2000. From July 1998 to April 2000, Ms. Fili-Krushel was President of the ABC Television Network, and from 1993 to 1998 she served as President of ABC Daytime. Before joining ABC, she had been with Lifetime Television since 1988. Prior to Lifetime, Ms. Fili-Krushel held several positions with Home Box Office. Before joining HBO, Ms. Fili-Krushel worked for ABC Sports in various positions.
Mr. Jones has been with Goldman, Sachs & Co. since 1994. He is a managing director in Principal Investment Area (PIA) in New York where he focuses on consumer-related and healthcare opportunities. Affiliates of Goldman, Sachs & Co. indirectly own a substantial portion of our outstanding common stock through their investment in Buck Holdings, L.P. and related entities. Mr. Jones is currently on the board of directorsa director of Biomet, Inc., Education Management Corporation, HealthMarkets, Inc., Signature Hospital, LLC, and Michael Foods Inc. and Del Taco Holdings,Group, Inc. He also previously served on the board of directors of Burger King Holdings, Inc. from 2002 to 2008.
Mr. Rhodes was elected Chairman of AutoZone, a specialty retailer and distributor of automotive replacement parts and accessories, in June 2007. He has served as President and Chief Executive Officer and as a director of AutoZone since 2005. Prior to his appointment as President and Chief Executive Officer, Mr. Rhodes was Executive Vice President—Store Operations and Commercial. Prior to 2005,2004, he had been Senior Vice President—Supply Chain and Information Technology since 2002, and prior thereto had been Senior Vice President—Supply Chain since 2001. Prior to that time, he served in various capacities with AutoZone, including Vice President—Stores in 2000, Senior Vice President—Finance and Vice President—Finance in 1999, and Vice President—Operations Analysis and Support.Support from 1997 to 1999. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young, LLP.
Mr. Rickard served as the Executive Vice President, Chief Financial Officer and Chief Administrative Officer of CVS Caremark Corporation, a retail pharmacy chain and provider of healthcare services and pharmacy benefits management, from September 1999 until his retirement in December 2009. Prior to joining CVS Caremark, Mr. Rickard was the Senior Vice President and Chief Financial Officer of RJR Nabisco Holdings Corporation from March 1997 to August 1999. Previously, he was Executive Vice President of International Distillers and Vintners Americas. Mr. Rickard is a director of Harris Corporation and Jones Lang LaSalle Incorporated. He served as a director of The May Companies from January 2005 to August 2005.
How are directors identified and nominated?
All persons nominatednominees for election as directors at the 2011 annual meeting are currently serving on our Board of Directors and were recommended for election or re-election, as the case may be, by our Board committee responsible for nominating and corporate governance matters, which was our combined Compensation, Nominating and Corporate Governance Committee. We established that Committee in connection with the initial public offering of our common stock in November 2009.prior to April 1, 2013, and since April 1, 2013 is a separate Nominating and Governance Committee (the "Nominating Committee"). The Nominating and Corporate Governance Committee is responsible for identifying, evaluating and recommending future director candidates, subject to the terms of the shareholders' agreement and Mr. Dreiling's employment agreement discussed below.
Table Our Board is responsible for nominating the slate of Contentsdirectors for election by shareholders at the annual meeting.
The charter of our Nominating and Corporate Governance Committee's charterCommittee and our Corporate Governance Guidelines require the Nominating Committee to consider candidates timely submitted by our shareholders in accordance with the notice provisions and procedures set forth inof our Bylaws (as described below under(see "Can shareholders nominate directors?") below) and to apply the same criteria to the evaluation of those candidates as the Committeeit applies to other director candidates. The Nominating Committee may also use a variety of other methods to identify potential director candidates, such as recommendations by our directors, management, or third party search firms. No
In January 2012, when our Board consisted of seven directors, the Nominating Committee initiated a search for additional director candidates and retained a third-party search firm to assist in identifying potential future Board candidates who meet our qualification and experience requirements and to compile and evaluate information regarding the candidates' qualifications, experience and independence. Ms. Fili-Krushel was recommended as a candidate by the third party search firm is currently retained to assist in that process. Our Board is responsible for nominating the slate of directors to be electedwhile Ms. Cochran was recommended as a candidate by our shareholders at the annual meeting, upon the Committee's recommendation.CEO. Each of Ms. Fili-Krushel and Ms. Cochran was fully vetted by our third party search firm and by our Nominating Committee and our Board.
OurFour of our directors, Messrs. Agrawal, Calbert, Dreiling and Jones, are managers of Buck Holdings, LLC, which serves as the general partner of Buck Holdings, L.P. The Second Amended and Restated Limited Liability Company Agreementlimited liability company agreement of Buck Holdings, LLC generally requires that Buck Holdings, LLC to cause anyshares of our common stock held by Buck Holdings, L.P. to be voted in favor of any person designated to be a member of our Board pursuant to our shareholders' agreement with Buck Holdings, L.P. described below.
Pursuant to our shareholders' agreement with Buck Holdings, L.P. and the sponsor shareholders identified in that agreement, certain of our shareholders have the right to designate
nominees to our Board, subject to their election by our shareholders at the annual meeting. Specifically, KKR 2006 Fund L.P., KKR PEI Investments, L.P., KKR Partners III, L.P., 8 North America Investor LP, and their respective permitted transferees (collectively, the "KKR Shareholders"), given the current ownership level of Buck Holdings, L.P. of our common stock, have the right to designate the following percentageup to 10% of the number of total directors comprising our Board, so long as Buck Holdings, L.P. beneficially ownswell as the following specified amount of the then outstanding shares of our common stock:
right to designate one person to serve as a non-voting Board observer. Any fractional amount that results from determining the percentage of the total number of directors will be rounded up to the nearestnext whole number (for example, if the applicable percentage would result in 2.1 directors, thenumber. The KKR Shareholders will have the right to designate 3 directors). In addition, in the event that the KKR Shareholders only have the right to designate one director, they also have the right to designate one person to serveretain these rights for as a non-voting observer to the Board.
In addition, pursuant to the shareholders' agreement, GS Capital Partners VI Fund, L.P., GS Capital Partners VI Parallel, L.P., GS Capital Partners VI GmbH & Co. KG, GS Capital Partners VI Offshore Fund, L.P., GSUIG, L.L.C., Goldman Sachs DGC Investors, L.P. and Goldman Sachs DGC Investors Offshore Holdings, L.P., and their permitted transferees (collectively, the "Goldman Shareholders") have the right to designate (i) one director so long as they beneficially ownBuck Holdings, L.P. owns at least 5% of the thenour outstanding shares of our common stock and (ii) one person to serve as a non-voting observer.stock.
Each of theThe KKR Shareholders and the Goldman Shareholders have the right to remove and replace their director-designeesdirector-designee at any time and for any reason and to fill any vacanciesvacancy otherwise resulting in such director positions.
Table of Contentsposition.
Pursuant to the shareholders' agreement, the KKR Shareholders have nominated Messrs.Mr. Calbert and Agrawal, and the Goldman Shareholders have nominatedto serve on our Board. Mr. Jones. These nominees,Calbert, like all of our director nominees, areis subject to election by our shareholders at ourthe annual meeting.
Given current beneficial ownership by Buck Holdings, L.P. of our common stock, we are a "controlled company" under New York Stock Exchange ("NYSE") listing standards. For as long as we continue to qualify as a "controlled company" under NYSE listing standards and subject to applicable law, (i) the KKR Shareholders have the right to designate a majority of the members of our Nominating and Corporate Governance Committee and up to two members of our Compensation Committee and (ii) the Goldman Shareholders have the right to designate one member to each such committee, as long as the Goldman Shareholders have the right to designate one director to our Board. If we do not qualify as a "controlled company" under NYSE listing standards, the KKR Shareholders have the right to designate one member to each of our Nominating and Corporate Governance Committee and Compensation Committee for as long as they have the right to designate one director to our Board.
In addition, our employment agreement with Mr. Dreiling provides thatrequires Dollar General to (1) our Nominating and Corporate Governance Committee shall nominate him to serve as a member of our Board each year that he is slated for reelection to the Board; and (2) Dollar General shall also recommend to the Board that Mr. Dreiling serve as Chairman of the Board. FailureOur failure to nominate Mr. Dreiling for election by our shareholders to our Boarddo so would give rise to a breach of contract claim.
Our CEO initially recommended Messrs. Bryant and Rhodes to our Board for consideration, while Mr. Rickard was initially recommended by certain of our non-management directors.
How are nominees evaluated; what are the minimum qualifications?
Subject to the shareholders' agreement and Mr. Dreiling's employment agreement discussed above, the Nominating and Corporate Governance Committee is charged with identifying, recruiting and recommending to the Board only those candidates that the Committeeit believes are qualified to become Board members consistent with the criteria for selection of new directors adopted from time to time by the Board. We have a written policy to strive to have a Board representing diverse experience at policy-making levels in business, education or other areas that are relevant to our business. To implement this policy, the Nominating Committee assesses diversity inby evaluating each candidate's individual qualifications in the context of how that candidate would relate to the Board as a whole. The Committee will periodically assessassesses the effectiveness of this policy by considering whether the Board as a whole represents such diverse experience and recommending to the Board changes to the criteria for selection of new directors as appropriate. The Committee recommends candidates, including those submitted by shareholders, only if the Committeeit believes the candidate's knowledge, experience and expertise would strengthen the Board and that the candidate is committed to representing the long-term interests of all Dollar General shareholders.
For as long as we continue to qualify as a "controlled company" under NYSE listing standards, we do not have to comply with the general NYSE rule that a majority of the Board be independent.
The Nominating and Corporate Governance Committee assesses a candidate's independence, background and experience, as well as the current Board's skill needs and diversity. With respect to incumbent directors selected for re-election, the Committee assesses each director's meeting attendance record and the suitability of continued service. In addition, individual directors and any nominee should be in a position to devote an adequate amount of time to the effective performance of director duties and possess the following characteristics: integrity and accountability, informed judgment, financial literacy, a cooperative approach, a record of achievement, loyalty, and the ability to consult with and advise management.
What particular experience, qualifications, attributes or skills led the Board of Directors to conclude that each nominee should serve as a director of Dollar General?
Our Board of Directors believes that each of this year'sthe nominees is in a position tocan devote an adequate amount of time to the effective performance of director duties and has concluded that each nominee possesses the minimum qualifications identified under "How are nominees evaluated; what are the minimum qualifications" above. In considering the Board as a whole, theThe Board has determined that this year'sthe nominees, as a whole, complement each other, meet the Board's skill needs, and represent diverse experience at policy-making levels in areas relevant to our business.
In addition, thebusiness. The Board believes that the nominees possess the following experience, qualifications, attributes and skills andalso considered the following in determining that the nominees should serve as directors of Dollar General:
public retail company and his 10 years of practice as a certified public accountant. Our Board has chosen Mr. Calbert to lead the executive sessions of the non-management directors.
among Supermarket News "Power 50 Retailers" for 2011 and 2012 and named "CEO of the Year" by the Retail Leader in 2012.
Acting upon the recommendation of the Nominating and Corporate Governance Committee and in accordance with the shareholders' agreement, our Board has concluded that these nominees possess the appropriate experience, qualifications, attributes and skills to serve as directors of Dollar General and has nominated these individuals to be elected by our shareholders at our annual meeting.
Can shareholders nominate directors?
The KKR Shareholders and the Goldman Shareholders may nominate directors pursuant to the shareholders' agreement discussed above under "How are directors identified and nominated." Other shareholders can nominate directors by following the procedures set forthoutlined in our Bylaws. In short, the shareholder must timely deliver a written notice to our Corporate Secretary at 100 Mission Ridge, Goodlettsville, TN 37072. To be timely, the notice must be received37072 for receipt no earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the precedingprior year's annual meeting. However, if the meeting is held more than 30 days before or more than 60 days after such anniversary date, the notice must be received no earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the date of such annual meeting. If the first public announcement of the
annual meeting date is less than 100 days prior to the date of such annual meeting, the notice must be received by the 10th day following the day on which the public announcement was made.
For example, to be considered for the 2012 annual shareholders' meeting, if the 2012 annual meeting is held not more than 30 days before and not more than 60 days after May 25, 2012, the
notice must be received no earlier than the close of business on January 26, 2012 and no later than the close of business on February 25, 2012. The notice must contain all information required by our Bylaws about the shareholder proposing the nominee and about the nominee, which generally includes:
You should consult our Bylaws, posted on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com, for more detailed information regarding the process by which shareholders may nominate directors. Our Bylaws are posted on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com. No shareholder nominees have been proposed for this year's meeting, other than the nomineesnominee designated pursuant to the shareholders' agreement as discussed above.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, the persons designated as proxies on your proxy card are authorized to vote your proxy for a substitute designated by our Board of Directors.
Are there any familial relationships between any of the nominees?
There are no familial relationships between any of the nominees or between any of the nominees and any of our executive officers. See "Director Independence" below for a discussion of a familial relationship between Ms. Cochran and one of our non-executive officers.
What does the Board of Directors recommend?
Our Board recommends that you voteFOR the election of each of the director nominees.
Does Dollar General combine the positions of Chairman and CEO?
Yes. Our CEO, Mr. Dreiling serves as theCEO and Chairman of our Board of Directors. Mr. Dreiling's employment agreement with us provides that Dollar General shall recommend to the Board that he serve as the Chairman of the Board for as long as he is employed under such agreement.
The Board believes combining these roles provides an efficient and effective leadership model for Dollar General because, given Mr. Dreiling'shis day-to-day involvement with and intimate understanding of our specific business, industry and management team, Mr. Dreiling is particularly suited to effectively identify strategic priorities, lead the discussion and execution of strategy, and facilitate information flow between management and the Board. The Board further believes that combining these roles fosters clear accountability, effective decision-making, and alignment on the development and execution of corporate strategy. To promote effective independent oversight, the Board has adopted a number of governance practices, including:
The Board recognizes that no single leadership model is right for all companies and at all times, and the Board will review its leadership structure as appropriate to ensure it continues to be in the best interests of Dollar General and our shareholders.
Does Dollar General have a management succession plan?
Yes. Our Corporate Governance Guidelines require our Board of Directors to coordinate with our CEO to ensure that a formalized process governs long-term management development and succession, including succession in the event of an emergency or the retirement of our CEO. Our Board formally reviews our management succession plan at least annually. Our comprehensive program encompasses not only our CEO and other executive officers but all employees through the front-line supervisory level. The program focuses on key succession elements, including identification of potential successors for positions where it has been determined that internal succession is appropriate, assessment of each potential successor's level of readiness, and preparation of individual growth and development plans. With respect to CEO succession planning, the Company's long-term business strategy is also considered. In addition, we maintain at all times, and review with the Board periodically, a confidential procedure for the timely and efficient transfer of the CEO's responsibilities in the event of an emergency or his sudden incapacitation or departure.
Are there share ownership guidelines for Board members and senior officers?
Yes. Share ownership guidelines for Board members and senior officers, summarized below, are included in our Corporate Governance Guidelines. Please see the Corporate Governance Guidelines for details of the share ownership guidelines.
For Board members, the guideline is 3 times the annual cash retainer payable for service on our Board as in effect on January 1, 2011 (or, if later, the date on which the director joined or joins our Board) to be achieved within 5 years of August 24, 2011 (or, if later, the date on which the director joined or joins our Board).
For senior officers, the guideline is a multiple, as set forth below, of the officer's annual base salary as in effect on April 1, 2013 (or, if later, the officer's hire or promotion date) to be achieved within 5 years of the later of April 1, 2013 or the April 1 next following such person's hire or promotion date.
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What is Dollar General's policy regarding Board member attendance at the annual meeting?
Our Board of Directors has adopted a policy that all directors should attend annual shareholders' meetings unless attendance is not feasible due to unavoidable circumstances. All Board members serving at the time attended the 2012 annual shareholders' meeting.
Does the Board have standing Audit, Compensation and Nominating Committees?
Yes. Our Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. The Board has adopted a written charter for each of these committees which are available on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com.
The Board has determined that all current members of each of the Audit Committee, and two members of the Compensation Committee and the Nominating and Governance Committee are independent as defined in the NYSE listing standards and in our Corporate Governance Guidelines. In addition,Prior to April 2013, when the Compensation Committee did not consist solely of independent directors, the Board hashad established a sub-committeesubcommittee of ourthe Compensation Committee consisting solely of independent directors (at various points in time including Messrs. Bryant, Rhodes and RhodesRickard and Ms. Fili-Krushel) for purposes of approving any compensation that may otherwise be subject to Section 162(m) of the Internal Revenue Code of 1986, as amended. NoneIn addition, a subcommittee of our Nominating Committee consisting of Messrs. Bryant and Calbert oversaw the members of the Nominating and Corporate Governance Committee are independent as definedsearch for additional directors that was launched in the NYSE listing standards and in our Corporate Governance Guidelines.January 2012.
The Board has adopted a written charter forCurrent information regarding each of these committees. All such charters are availablecommittees is set forth below. Ms. Cochran joined the Audit Committee on December 5, 2012. Messrs. Calbert and Jones served on our combined Compensation, Nominating and Governance Committee (the "CNG Committee") until April 1, 2013, Mr. Agrawal served on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com.CNG Committee until June 26, 2012, Mr. Rickard served on the CNG Committee from June 26, 2012 to October 15, 2012, and Ms. Fili-Krushel joined the CNG Committee
Current information regarding the Audit,on October 15, 2012. Effective April 1, 2013, we separated our CNG Committee into a separate Compensation Committee and a Nominating and Corporate Governance Committees is set forth below.Committee.
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Does Dollar General have an audit committee financial expert serving on its Audit Committee?
Yes. Our Board has designated Messrs. RhodesMr. Rickard and RickardMs. Cochran as audit committee financial experts and has determined that each is independent as defined in NYSE listing standards and in our Corporate Governance Guidelines. Audit committee financialSuch experts have the same responsibilities as the other Audit Committee members. They are not our auditors or accountants, do not perform "field work" and are not employees. The SEC has determined that designation as an audit committee financial expert will not cause a person to be deemed to be an "expert" for any purpose.
How often did the Board and its committees meet in 2012?
During 2012, our Board, Audit Committee, and CNG Committee met 7, 4, and 5 times, respectively. Each director attended at least 75% of the total of all meetings of the Board and all committees (including ad hoc committees) on which he served.
What is the Board's role in risk oversight?
Our Board of Directors and its committees have an important role in our risk oversight process. Our Board regularly reviews with management our financial and business strategies, which reviews include a discussion of relevant material risks as appropriate. Our General Counsel also periodically reviews with the Board our insurance coverage and programs as well as litigation risks.
The Audit Committee discusses our policies with respect to risk assessment and risk management, primarily through review and oversight of our enterprise risk management program. Our Internal Audit department coordinates that program, which entails review and documentation of our comprehensive risk management practices, including an assessment ofpractices. The program evaluates internal and external risks. The program evaluates each risk,risks, identifies mitigation strategies, and assesses the remaining residual risk. The program is updated through interviews with senior management and our Board, review of strategic initiatives, evaluation of the fiscal budget, review of upcoming legislative or regulatory changes, and review of other outside information concerning business, financial, legal, reputational, and other risks. Semi-annually the results are presented to the Audit Committee andCommittee. Quarterly, the categories with high residual risk, along with their mitigation strategies, are discussed individually.
Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements.program. In addition, as discussed under "Executive Compensation—Compensation Risk Considerations" below, the Compensation Committee also participates in periodic assessments of the risks relating to our overall compensation programs.
While the Audit Committee and the Compensation Committee oversee the management of the risk areas identified above, the entire Board is regularly informed through committee reports about such risks. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. Our Board believes thethis division of risk management responsibilities described above is an effective approach for addressingeffectively addresses the risks facing Dollar General. Accordingly, the risk oversight role of our Board and its committees has not had any effect on our Board's leadership structure.
How often didcan I communicate with the Board and its committees meet in 2010?
During 2010, our Board, Audit Committee and Compensation Committee each met 5 times and our Nominating and Corporate Governance Committee met once. Each director attended at least 75% of the total of all meetings of the Board and all committees on which he served.
What is Dollar General's policy regarding Board member attendance at the annual meeting?Directors?
Our Board-approved process for security holders and other interested parties to contact the Board, a particular director, or the non-management directors or the independent directors as a group is described on www.dollargeneral.com under "Investor Information—Corporate Governance."
Where can I find more information about Dollar General's corporate governance practices?
Our governance-related information is posted on www.dollargeneral.com under "Investor Information—Corporate Governance," including our Corporate Governance Guidelines, Code of Directors has adoptedBusiness Conduct and Ethics, the charter of each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, and the names of the persons chosen to lead the executive sessions of the non-management directors and of the independent directors. This information is available in print to any shareholder who sends a policy that all directors should attend annual shareholders' meetings unless attendance is not feasible due to unavoidable circumstances. All 7 of our Board members attended the 2010 annual shareholders' meeting.written request to: Investor Relations, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TN 37072.
The following table and text discuss the compensation of persons who served as a memberpaid to each of our non-employee Board of Directors during all or part of 2010, other thanmembers for 2012. Mr. Dreiling whosewas not separately compensated for his service on the Board; his compensation for service as our CEO is discussed under "Executive Compensation" below and who was not separately compensated for Board service.below. We have omitted from this table the columns pertaining to non-equity incentive plan compensation and nonqualified deferred compensation earnings because they are inapplicable.
Fiscal 20102012 Director Compensation
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||
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Raj Agrawal | 75,000 | 51,780 | 56,495 | — | 183,275 | |||||||||||
Warren F. Bryant | 84,000 | 51,780 | 56,495 | — | 192,275 | |||||||||||
Michael M. Calbert | 92,500 | 51,780 | 56,495 | — | 200,775 | |||||||||||
Sandra B. Cochran | 5,503 | — | — | — | 5,503 | |||||||||||
Patricia D. Fili-Krushel | 15,897 | 49,570 | 53,239 | — | 118,706 | |||||||||||
Adrian Jones | 75,000 | 51,780 | 56,495 | — | 183,275 | |||||||||||
William C. Rhodes, III | 84,000 | 51,780 | 56,495 | — | 192,275 | |||||||||||
David B. Rickard | 95,500 | 51,780 | 56,495 | — | 203,775 |
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||
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Raj Agrawal | 75,000 | — | — | — | 75,000 | |||||||||||
Warren F. Bryant | 79,500 | — | — | — | 79,500 | |||||||||||
Michael M. Calbert | 100,000 | — | — | — | 100,000 | |||||||||||
Adrian Jones | 75,000 | — | — | — | 75,000 | |||||||||||
William C. Rhodes, III | 79,697 | — | — | — | 79,697 | |||||||||||
David B. Rickard | 91,461 | — | — | — | 91,461 |
The Compensation Committee is responsible for recommending the form and amount of director compensation for consideration and approval by our Board. The Committee may consult with Meridian Compensation Partners, its independent consultant ("Meridian"), regarding the form and amount of director compensation and also welcomes the input of our CEO and our Chief People Officer, but the Committee and the Board retain and exercise ultimate decision-making authority regarding director compensation. We do not compensate for Board service any director who simultaneouslyalso serves as a Dollar Generalour employee. We will reimburse directors for certain fees and expenses incurred in connection with continuing education seminars and for travel and related expenses related to Dollar General business. We may allow directors to travel on the Dollar General airplane for those purposes.
EachFor 2012, each non-employee director receivesreceived quarterly payment (prorated as applicable) of the following cash compensation, as applicable:
In addition, to the director compensation described above,except as provided below, each non-employee director received inan annual equity award under our 2009 fiscal year an equity awardAmended and Restated 2007 Stock Incentive Plan with an estimated value of $75,000 on the grant date. Sixty percent of the value of the equity grant consisted of non-qualified stock options to purchase shares of our common stock ("Options") and 40% consisted of restricted stock units ultimately payable in shares of our common stock ("RSUs"). The Options vest as to 25% of the Option on each of the first four anniversaries of the grant date and the RSUs vest as to 331/3% of the award on each of our first three annual shareholders' meetings following the grant date, each subject to the director's continued service on our Board. Our directors may elect to defer receipt of shares under the RSUs. We did not grant an annual equity award to our non-employee directors in fiscal 2010.
Beginning in our 2011 fiscal year, each non-employee director will receive an annual equity award with an estimated value of $75,000$125,000 on the grant date, as determined by the Compensation Committee's consultantMeridian using economic variables such as the trading price of our common stock, expected volatility of the stock trading prices of similar companies, and the terms of the awards. We anticipate that 60%Sixty percent of thethis value consisted of the annual equity award will consistnon-qualified stock options to purchase shares of Optionsour common stock ("Options") and 40% will consistconsisted of RSUs. We expect that therestricted stock units payable in shares of our common stock ("RSUs"). The Options will vest as to 25% of the Option on each of the first four anniversaries of the grant dateOptions and that the RSUs will vest as to 331/3% of the award on each of the Company's first four and three annual shareholders' meetings followinganniversaries of the grant date, respectively, in each case subject to the director's continued service on our Board. The directorsDirectors may elect to defer receipt of shares underlying the RSUs. Ms. Cochran received her annual equity award in March 2013 consistent with these terms and parameters.
The effective date of the annualWe anticipate granting similar equity awards (the "grant date") is expectedannually to be the date on which the quarterly Board meeting is held in conjunction with the Company's annual shareholders' meeting, and such awards shall be made to those non-employee directors who are elected or reelected at sucheach applicable shareholders' meeting. Any new director appointed after the annual shareholders' meeting but before February 1 of a given year, as was the case with Mss. Cochran and Fili-Krushel, will receive a full equity award no later than the first regularly scheduled Compensation Committee meeting following the date on which he or she is elected.appointed. Any new director appointed on or after February 1 of a given year but before the next annual shareholders' meeting shall not receive a full or pro-rated equity award, but rather shall be eligible to receive the next regularly scheduled annual award.
The compensation program described above was similar to that in place in 2011 but was slightly revised for 2012 as a result of a market benchmarking review. In 2011, after reviewing with Meridian our Board compensation program relative to our market comparator group, the Compensation Committee determined that 2011 total compensation was approximately 29% below the market median, with the shortfall in the equity component. Accordingly, the Committee recommended, and the Board approved, a $50,000 increase in the estimated value of the equity component of Board compensation (from $75,000 to $125,000) effective June 2012.
Effective April 1, 2013, we separated our CNG Committee into a Compensation Committee and a Nominating and Governance Committee. We also named a lead director effective March 19, 2013. The Compensation Committee Chairman, the Nominating and Governance Committee Chairman, and the lead director will receive an annual retainer of $15,000, $10,000, and $17,500, respectively.
Is Dollar General subject to the NYSE governance rules regarding director independence?
Buck Holdings, L.P. controls aYes. A majority of our outstanding common stock. As a result, we are a "controlled company" withindirectors must be independent in accordance with the meaning ofindependence requirements set forth in the NYSE corporate governancelisting standards. UnderIn addition, the NYSE rules, a companyAudit Committee, the Compensation Committee and the Nominating and Governance Committee must be composed solely of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect notindependent directors to comply with certain NYSE corporate governancesuch listing standards including:
We are, however, subject to the NYSE and SEC rules that require fulllisting standards contain a separate definition (to take effect in 2013) of independence of our Audit Committee. As a result, our Audit Committee is entirely comprised of independent directors, but we do not have a majority of independent directors on our Board, and our Compensation Committee and our Nominating and Corporate Governance Committee do not consist entirely of independent directors.for compensation committees.
How does the Board determine director independence?
The Board of Directors affirmatively determines the independence of each director and director nominee in accordance with guidelines it has adopted, which include all elements of independence set forth in the NYSE listing standards as well as certain Board-adopted categorical independence standards. These guidelines are contained in our Corporate Governance Guidelines which are posted on the "Investor Information—Corporate Governance" portion of our web site located at www.dollargeneral.com.
The Board first analyzes whether any director or director nominee has a relationship covered by the NYSE listing standards that would prohibit an independence finding for Board, Audit Committee, Compensation Committee or AuditNominating and Governance Committee purposes. The Board then analyzes any relationship of a directorthe remaining eligible directors and nominees to Dollar General or to our management that does not fall withinfalls outside the parameters set forth inof the Board's separately adopted categorical independence standards to determine whether or not that relationship is material. The Board may determine that a director or nominee who has a relationship that falls outside of the parameters of the categorical independence standards is nonetheless independent (to the extent that the relationship would not constitute a bar to independence under the NYSE listing standards). Any director who has a material relationship is not considered to be independent. The Board does not consider or analyze any relationship that falls within the parameters of the Board's separately adopted categorical independence standards.
Are all of the current directors and nominees independent?
No. Our Board of Directors consists of Raj Agrawal, Warren Bryant, Mike Calbert, Sandra Cochran, Richard Dreiling, Patricia Fili-Krushel, Adrian Jones, Bill Rhodes and Dave Rickard. Messrs. Bryant Rhodes and Rickard and Ms. Cochran serve on our Audit Committee.Committee, Messrs. Agrawal, Bryant Calbert, Jones and Rhodes and Ms. Fili-Krushel serve on our Compensation Committee. Messrs. Agrawal, CalbertCommittee, and JonesMr. Rhodes and Mss. Cochran and Fili-Krushel serve on our Nominating and Corporate Governance Committee.
Our Board of Directors has affirmatively determined that Messrs. Bryant, Rhodes and Rickard and Mss. Cochran and Fili-Krushel, but not Messrs. Agrawal, Calbert, Dreiling or Jones, are independent from our management under both the NYSE's listing standards and our additional standards. AnyExcept as described below, any relationship between an independent director and Dollar General or our management fell within the Board-adopted categorical standards and, accordingly, was not reviewed or considered by our Board. The Board has also determined that the currently serving members of the Audit Committee and the Compensation Committee meet the independence standards
for membership on those Board committees set forth in the NYSE listing standards (including the additional requirements for the Compensation Committee to take effect in 2013) and, as to the Audit Committee, SEC rules.
Ms. Cochran's brother, Stephen Brophy, has served as a Vice President of the Company (a non-executive position) since 2009. For 2012, Mr. Brophy earned from the Company total cash compensation of less than $300,000. In addition, Mr. Brophy received from the Company on March 20, 2012 an equity award of 4,729 non-qualified stock options to purchase shares of the Company's Common Stock and a target award of 825 performance share units (814 of which were earned as a result of the Company's level of achievement of applicable financial performance measures for 2012) and on March 18, 2013 an equity award of 2,999 non-qualified stock options to purchase shares of the Company's Common Stock, between 0 and 1,414 performance share units, with a targeted amount of 707 (the exact amount to be determined based upon the Company's fiscal 2013 financial performance), and 711 restricted stock units, in each case on terms substantially similar to awards described in the Company's Annual Proxy Statement filed with the SEC on April 5, 2012 and in this Proxy Statement. The Company does not expect Mr. Brophy's cash compensation for 2013 to materially differ from his 2012 cash compensation.
Mr. Brophy also participates in employee benefits plans and programs available to our other full time employees. Ms. Cochran does not participate in any consideration or decision-making related to Mr. Brophy's compensation or performance evaluations. Mr. Brophy's cash compensation was approved by the Compensation Committee pursuant to the Company's related party transaction approval policy.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Does the Board have a policy for the review, approval or ratification of related-party transactions?
Yes. Our Board of Directors has adopted a written policy for the review, approval or ratification of "related party" transactions. For purposes of this policy, aA "related party" for this purpose includes our directors, director nominees, executive officers and greater than 5% shareholders, as well asand any of their immediate family members, and a "transaction" includes one in which (1) the total amount may exceed $100,000,$120,000, (2) Dollar General is a participant, and (3) a related party will have a direct or indirect material interest (other than as a director or a less than 10% owner of another entity, or both).
Pursuant to this policy and subject to certain exceptions identified below, all known related party transactions require prior Board approval. In addition, at least annually after receiving a list of immediate family members and affiliates from our directors, executive officers and overgreater than 5% shareholders, the Corporate Secretary inquires of relevant internal departments to determine whether any transactions were unknowingly entered into with a related party and presents a list of such transactions, subject to certain exceptions identified below, to the Board for review.
This policy authorizesAs Chairman and Chief Executive Officer, Mr. Dreiling is authorized to approve a related party transaction in which he is not involved if the total amount is expected to be less than $1 million and ifhe informs the Board is informed of transactions approved in this manner. In addition, thesuch transactions. The following transactions are deemed automatically pre-approved and require no furtherwithout Board review or approval:
The policy prohibits the related party from participating in any discussion or approval of the transaction and requires the related party to provide to the Board all material information concerning the transaction.
Were there anyWhat related-party transactions existed in 20102012 or are any planned for 2011?2013?
We describe below the transactions that have occurred since the beginning of 2010,2012, and any currently proposed transactions, that involve Dollar General and exceed $120,000, and in which a related party had or has a direct or indirect material interest. In addition, we describe below certain other relationships between Dollar General and related parties in which a related party has an interest that may not be material.
Relationships with Management. Simultaneously with the closing of our 2007 merger and thereafter in connection with our offering equity awards to our employees under our 2007 Stock Incentive Plan,through May 2011, we, Buck Holdings L.P. and certain of our employees who hold shares of common stock, or who were granted options to acquire shares of common stock or who were granted shares of restricted common stock, of Dollar General (collectively, "management shareholders") entered into shareholder's agreements (each, a "Management Stockholder's Agreement"). The Management Stockholder's Agreement imposes that impose significant restrictions on transfer of covered shares of our common stock held by the management shareholders that are subject to the agreement.shareholders. Generally, shares will beare nontransferable by any means at any time prior to the fifth anniversary of either the closing date of our July 6, 2007 merger or a later specified date (depending uponon the terms of the Management Stockholder's Agreement),applicable agreement) except (i) sales pursuant to an effective registration statement filed by us under the Securities Act of 1933 (the "Securities Act") in accordance with the Management Stockholder's Agreement, (ii) a sale to certain permitted transferees, or (iii) as otherwise permitted by our Board of Directors or pursuant to a waiver of the restrictions on transfers;transfer restrictions; provided, that, in the event KKR or its affiliates transfer their limited partnership units owned by them to a third party, such transfer restrictions shall lapse with respect to the same proportion of shares of common stock owned by a management shareholder as the proportion of limited partnership units transferred by KKR and such affiliates relative to the aggregate number of limited partnership units they owned by them prior to such transfer. Following our initial public offering in November 2009, we amended the Management Stockholder's Agreements so thatto exclude from the transfer restrictions any shares acquired in the open market or through the directed share program administered as part of the initial public offering are not subject to the transfer restrictions of the Management Stockholder's Agreement. However, sharesoffering. Shares acquired by executive officers in the open market or through the directed share program will still be subject to any lock-up arrangements with the underwriters of any public offering of shares. Limited waivers of the transfer restrictions on a certain percentage of the shares subject to the Management Stockholder's Agreement have been granted since 2009, and a complete waiver of all remaining transfer restrictions, including those applicable to Mr. Vasos and to two other of our Executive Vice Presidents, Messrs. Flanigan and Ravener, was granted on February 1, 2013. These transfer restrictions had expired for a significant number of management shareholders, including some of our executive officers (Messrs. Dreiling and Tehle and Mss. Lanigan and Elliott) in July 2012.
In the event that a registration statement is filed with respect to our common stock, the Management Stockholder's Agreement prohibits management shareholders from selling shares not included in the registration statement from the time of receipt of notice that we have filed or intend to file such registration statement until 180 days (in the case of an initial public offering) or 90 days (in the case of any other public offering) of the effective date of the registration statement.statement, unless the underwriters, if any, agree to a shorter period. The Management Stockholder's Agreement also provides forenables the management shareholder's abilityshareholder to cause us to repurchase his outstandingor her covered stock and vested options (and vested restricted stock, with respect to Mr. Dreiling) subject to the Management Stockholder's Agreement in the event of the management shareholder'shis or her death or disability, and for our abilityenables us to cause the management shareholder to sell his or her covered stock or options subject to the Management Stockholder's Agreement back to us upon certain termination events.events, all for the period of time specified in the Management Stockholder's Agreement. These put and call rights expired for a significant number of the management shareholders, including some of our executive officers (Messrs. Dreiling and Tehle and Mss. Lanigan and Elliott), in July 2012 and are scheduled to expire for our remaining covered executive officers at various points in 2013.
Certain members of senior management, including theour executive officers other than Mr. Sparks (the "Senior Management Shareholders"), will have limited "piggyback" registration rights with respect to their shares of our common stock in the event that certain investors sell, or cause to be sold, shares of our common stock in a public offering. Such rights may be voluntarily extended to other members of management as determined by our Board in connection with any given future such sale by certain
investors. See the description of the registration rights agreement under "Relationships with the Investors" below. During 2010, we amended these rights to allow for thetheir accumulation of such rights by any employee entitled, to exercise, but who elects not, to so exercise such rights in a given offering. In connection with our initial public offering in November 2009, theThe Senior Management Shareholders agreed to waivewaived their piggyback registration rights arising from thatour initial public offering in 2009 in consideration of our
releasing them from the transfer restrictions contained in the Management Stockholder's Agreements after the expiration of thea 180-day restricted period contained in the underwriting agreement with respect to thata number of shares of our common stock equal to the number of shares of our common stock that such Senior Management Shareholders could have required us to register in connection with our initial public offering.
In connection with his promotion to Executive Vice President in April 2010, Mr. Flanigan was offered the opportunity,See "Director Independence" for a discussion of a familial relationship between Ms. Cochran and elected, to purchase 5,388 shares of Dollar General common stock under our 2007 Stock Incentive Plan. The shares were purchased at a per share price that equaled the closing priceone of our common stock on the NYSE on the effective date of purchase ($29.38), for an aggregate purchase price of $158,299. Without such purchase, the stock options grantednon-executive officers and compensation paid to Mr. Flanigan in March 2010, as disclosed in the Grants of Plan-Based Awards table under "Executive Compensation" below, would not be eligible to become exercisable. The shares purchased by Mr. Flanigan are subject to certain transfer limitationsthat officer during 2012 and repurchase rights by Dollar General as set forth in a Management Stockholder's Agreement between us and Mr. Flanigan.2013.
Interlocks. Mr. Dreiling serves as a manager of Buck Holdings, LLC for which Messrs. Calbert, Agrawal and Jones (three(each of whom served on our CompensationCNG Committee members)for all or part of 2012) serve as managers.
Relationships with the Investors. In connection with our initial public offering in November 2009, we entered into a shareholders' agreement with affiliates of each of KKR and Goldman, Sachs & Co. Among its other terms, the shareholders' agreement establishes certain rights with respect to our corporate governance, including the designation of directors. For additional information regarding those rights, see "How are directors identified and nominated" elsewhere in this document. The shareholders' agreement also provides that, as long as Buck Holdings, L.P. owns at least 35% of our outstanding shares of common stock, the following actions require the approval of the KKR shareholders party to the shareholders' agreement: hiring and firing of our CEO, any change of control as defined in the shareholders' agreement, entering into any agreement providing for the acquisition or divestiture of assets for aggregate consideration in excess of $1 billion, and any issuance of equity securities for an aggregate consideration in excess of $100 million.
OnIn July 6, 2007, we and Buck Holdings, L.P. entered into an indemnification agreement with KKR and Goldman, Sachs & Co. pursuant to which we agreed to provide customary indemnification to such parties and their affiliates in connection with certain claims and liabilities incurred in connection with certain transactions involving such parties, including the financing for our 2007 merger and pursuant to services provided under theour sponsor advisory agreement with such parties that was entered into between usin 2007 and such parties in connection with our 2007 merger (which agreement was terminated in connection with our initial public offering in November 2009).2009.
In connection with our 2007 merger, we entered into a registration rights agreement with Buck Holdings, L.P., Buck Holdings, LLC, (the general partner of Buck Holdings, L.P.), KKR and Goldman, Sachs & Co. (and certain of their affiliated investment funds), among certain other parties. Pursuant to this agreement, investment funds affiliated with KKR have an unlimited number of demand registration rights and investment funds affiliated with Goldman, Sachs & Co. have two demand registration rights which can be exercised once a year commencing 180 days after our initial public offering in November 2009.year. Pursuant to such demand registration rights, we are required to register with the SEC the shares of common stock beneficially owned by them through Buck Holdings L.P. with the SEC for sale by them to the public, provided that each of them hold at least $100 million in registrable securities and such registration is reasonably expected to result in aggregate gross proceeds of $50 million. We are not obligated to file a registration statement relating to any request to register shares pursuant to such demand registration rights without KKR's consent within a period of 180 days after the effective date of any other registration statement we file pursuant to such demand registration rights. In addition, in
the event that we are registering additional shares of common stock for sale to the public, whether on our own behalf or on behalf of us or the investment funds as described above, we are required tomust give notice of such registration to all parties to the registration rights agreement, including certain senior management members,the Senior Management Shareholders, and such persons have piggyback registration rights providing them the right to have us include the shares of common stock owned by them in any such registration. In each such event, we are required to pay the registration expenses.
Pursuant to this registration rights agreement and the demand registration rights thereunder, secondary offerings of our common stock were completed in April, 2010June and December 2010October 2012 for which affiliates of KKR and of Goldman, Sachs & Co. served as underwriters. Dollar General did not sell shares of common stock, receive proceeds, or pay any underwriting fees in connection with eitherany of these secondary offering,offerings, but paid resulting aggregate expenses of approximately $1.1 million.$1.4 million in connection
with these secondary offerings. Certain members of our management, including certain of our executive officers, exercised registration rights in connection with such offerings.
Affiliates The underwriters, including affiliates of KKR and Goldman, Sachs & Co. (among other entities), waived their fee for members of our management who participated in the October 2012 secondary offering. To the extent additional secondary offerings of our common stock are completed in fiscal 2013, we expect affiliates of KKR and Goldman, Sachs & Co. to serve as underwriters and for us to pay resulting expenses, in each case consistent with the 2012 secondary offerings.
Concurrent with the closing of the April 2012 secondary offering and pursuant to a Share Repurchase Agreement between Dollar General and Buck Holdings L.P., dated March 25, 2012, Dollar General purchased 6,817,311 shares of Common Stock from Buck Holdings L.P. for an aggregate purchase price of $300 million, or $44.00562 per share which represents the per share price to the public in the secondary offering less underwriting discounts and commissions. Of such shares, affiliates of KKR and Goldman, Sachs & Co. sold to Dollar General 3,552,787 and 1,478,274 shares for proceeds of $156.3 million and $65.1 million, respectively.
In addition, pursuant to a Share Repurchase Agreement between Dollar General and Buck Holdings, L.P., dated September 25, 2012, Dollar General purchased 4,929,508 shares of Common Stock from Buck Holdings, L.P. for an aggregate purchase price of $250 million, or $50.715 per share which represents the per share price to the public in the October 2012 secondary offering less underwriting discounts and commissions. Of such shares, affiliates of KKR and Goldman, Sachs & Co. sold to Dollar General 2,567,370 and 1,068,254 shares for proceeds of approximately $130.2 million and $54.2 million, respectively. The closing of such share repurchase was conditioned upon the receipt of the consent of the requisite lenders under our senior secured credit facilities and the consummation of the October 2012 secondary offering. In connection with the closing of such repurchase transaction, Buck Holdings, L.P. reimbursed Dollar General approximately $1.7 million for lender fees incurred in obtaining such consent as further described below. Affiliates of KKR are and affiliates of Goldman, Sachs & Co. may be lenders under the term loan and, as such, each would have received a pro-rata portion of such fee.
Each of the share repurchase transactions with Buck Holdings, L.P. described above was part of an overall Board-authorized share repurchase program and was specifically reviewed and approved by a special committee of our Board made up entirely of independent directors.
Affiliates of KKR are and Goldman, Sachs & Co. may be lenders under our senior secured term loan facility, which had a $2.3 billion principal amount at inception and a principal balance as of January 28, 2011February 1, 2013 of approximately $1.964$2.0 billion. Goldman Sachs Credit Partners L.P. also served as syndication agent and joint lead arranger for the term loan facility. This term loan facility was entered into and subsequently amended (as discussed below) in the ordinary course of business and, as of the loan origination and subsequent amendment, was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We paid approximately $53.4$62.0 million of interest on the term loan during fiscal 2010.2012.
We amended this term loan facility in March 2012 to, among other things, extend the maturity of a portion of such facility from 2014 to 2017. An affiliate of each of KKR and Goldman, Sachs & Co. is, along with a third unaffiliated entity, acted as a joint lead arranger in connection with such term loan facility amendment for which each of the KKR and Goldman, Sachs & Co. affiliates received a fee from Dollar General of approximately $440,000. As disclosed above, in connection with the October 2012 share repurchase from Buck Holdings, L.P., we further amended this term loan facility in October 2012 to add additional capacity for Dollar General to repurchase, redeem or
otherwise acquire shares of its capital stock, not to exceed $250 million. Dollar General incurred a fee associated with such amendment, which was reimbursed by Buck Holdings, L.P. as discussed above.
Goldman, Sachs & Co. was a counterparty to an amortizing interest rate swap, with a notional amount totaling $323.3 million as of January 28, 2011, entered into in connection with the senior secured term loan facility.facility, which matured on July 31, 2012. Such interest rate swap had a notional amount of $103.3 million immediately prior to its maturity date. We paid Goldman, Sachs & Co. approximately $12.9$2.5 million in fiscal 20102012 pursuant to this swap.
In May 2010March 2012, we amended our senior secured asset-based revolving credit facility to, among other things, increase the maximum total commitment to $1.2 billion. An affiliate of Goldman, Sachs & Co. (among other entities) serves as lender and September 2010, we repurchasedserved as documentation agent and joint lead arranger under such facility. This amended revolving credit facility was entered into in the open market $50.0ordinary course of business, was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We paid approximately $6.0 million and $65.0of interest on the revolving credit facility during fiscal 2012.
As disclosed above, in connection with the October 2012 share repurchase from Buck Holdings, L.P., we further amended this revolving credit facility in October 2012 to add additional capacity for Dollar General to repurchase, redeem or otherwise acquire shares of its capital stock, not to exceed $250 million.
In July 2012, pursuant to an indenture dated as of July 12, 2012 (the "Senior Indenture"), we issued $500 million respectively, aggregate principal amount of 10.625%4.125% senior notes due 2015 at a price of 111.0% and of 110.75%, respectively, plus accrued and unpaid interest. KKR Capital Markets LLC, an affiliate of KKR, received in the aggregate approximately $125,000 acting as an agent for Fidelity Capital Markets,2017 (the "Senior Notes") which served as broker/dealermature on July 15, 2017. As joint book-running managers in connection with such repurchases.
From time to time,the issuance of the Senior Notes, an affiliate or affiliates of each of KKR and Goldman Sachs & Co. received an equivalent share of approximately $2.3 million during fiscal 2012.
Dollar General paid approximately $185,000 to Goldman, Sachs & Co. for brokerage services in connection with the Company's open market share repurchases in September 2012 under a Board-authorized share repurchase program.
As previously disclosed, the Company intends to effect a refinancing of its existing senior secured credit facilities in the first quarter of fiscal 2013. The Company expects affiliates of each of KKR and Goldman, Sachs & Co. to participate in various capacities and receive customary fees consistent with prior financings.
Each of KKR and Goldman, Sachs & Co., either directly or through affiliates, has ownership interests in a broad range of companies ("Portfolio Companies") with whom we may investfrom time to time enter into commercial transactions in indebtedness issued by us.the ordinary course of business, primarily for the purchase of goods and services. We believe that none of our transactions or arrangements with Portfolio Companies is significant enough to be considered material to KKR or Goldman, Sachs & Co. or to our business or shareholders. In 2012, the largest amount paid to a Portfolio Company was approximately $95.8 million paid to a KKR Portfolio Company in the ordinary course of business for the purchase of merchandise for resale. This amount represented less than 3.0% of the vendor's revenues for its last completed fiscal year and less than 1.0% of our revenues for 2012.
Our Board members, Messrs. Calbert and Agrawal, serve as executives of KKR, while our Board member, Mr. Jones, serves as a Managing Director of Goldman, Sachs & Co. KKR and certain affiliates of Goldman, Sachs & Co. indirectly own, through their investment in Buck Holdings, L.P., a substantial portionsignificant percentage of our common stock.
We refer to the persons includedlisted in the Summary Compensation Table below as our "named executive officers." References to "2011," "2010," "2009," "2008," and "2007" mean, respectively, our fiscal years ending or ended February 3, 2012, January 28, 2011, January 29, 2010, January 30, 2009, and February 1, 2008. References to the "merger" or the "2007 merger" mean our merger that occurred on July 6, 2007 as a result of which substantially all of our common stock became owned by Buck Holdings, L.P. ("Buck"Buck LP"), a Delaware limited partnership controlled by investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P. ("KKR"). Buck continues to own in excess of 70% of our outstanding common stock.KKR.
Compensation Discussion and Analysis
Executive Overview
The overarching goal of our executive compensation program is to serve the long-term interests of our shareholders. A competitive executive compensation package is critical for us to attract, retain and motivate persons who we believe have the ability and desire to deliver superior shareholder returns. We strive to balance the short-term and long-term components of our executive compensation program to incent achievement of both our annual and long-term business strategies, to pay for performance and to maintain our competitive position in the market in which we compete for executive talent. We believe the success of our program is evidenced by the following key financial and operating results for 2010:2012 (2012 was a 52-week year and 2011 was a 53-week year):
While 2011 Say on Pay Vote. In 2011 our shareholders voted on an advisory basis with respect to our compensation program for named executive officers. Of the total votes cast (excluding abstentions and broker non-votes), 96.5% were cast in support of the program. We continue to view this vote as supportive of our compensation policies and decisions and, accordingly, do not believe the results required consideration of changes to our compensation program in 2010 remained relatively unchanged from the last several years, the following identifies material items2012 or 2013.
The most significant compensation-related actions or achievements in 2012 pertaining to our named executive officers:officers include:
appropriate return
Our Compensation Committee will continue to evaluate our executive compensation program and make changes when it believes it to be appropriate and in the best interests of our shareholders.
Executive Compensation Philosophy and Objectives
We strive to attract, retain and motivate persons with superior ability, to reward outstanding performance, and to align the long-term interests of our named executive officers with the long-term intereststhose of our shareholders. The material compensation principles applicable to the 20102012 and 20112013 compensation of our named executive officers included the following, all of which are discussed in more detail in "Elements of Named Executive Officer Compensation" below:
The Compensation Committee utilizesWe utilize employment agreements with the named executive officers which, among other things, set forth minimum levels of certain compensation components. The Committee believesWe believe such arrangements are a common protection offered to named executive officers at other companies and help to ensure continuity and aid in retention. The employment agreements also provide for standard protections to both the executive and to Dollar General should the executive's employment terminate. In 2010, after achieving tremendous financial results, we entered into an amended and restated employment agreement with Mr. Dreiling, described under "Compensation of Mr. Dreiling" below.
Named Executive Officer Compensation Process
Oversight. Our Board of Directors has delegated responsibility for executive compensation to its Compensation Committee. The Compensation Committee of our Board of Directors approves the compensation of our named executive officers, while its subcommittee consisting entirely of independent directors at such times as the Compensation Committee did not consist entirely of independent directors (the "162(m) Subcommittee") approves any portion that is intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code or that is intended to be exempt for purposes of Section 16(b) of the Securities Exchange Act of 1934. Messrs. Calbert, Agrawal, Jones, Rhodes, and Bryant serve on our Compensation Committee, and Messrs. Rhodes and Bryant make up the 162(m) Subcommittee.
Use of Outside Advisors. In March 2010, theThe Compensation Committee entered into a new written agreement withhas selected Meridian Compensation Partners ("Meridian") to serve as its independent compensation consultant. Meridian (including its predecessor Hewitt Associates ("Hewitt") and reaffirmed the selection of Hewitt, which hadAssociates) has served as the Committee's consultant since our 2007 merger, as its compensation consultant. In December 2010, after Meridian Compensation Partners ("Meridian") was formed as a spin-off of Hewitt's executive compensation consulting business and after undertaking an independence analysis pertaining to Meridian, the Committee entered into amerger. The written agreement with Meridian and selected Meridian to serve as its independent compensation consultant. The written agreement details the terms and conditions under which Meridian will provide independent advice to the Committee in connection with matters pertaining to executive and director compensation. Under the agreement, the Committee (or its chairman) shall determine the scope of Meridian's services, which is anticipated to include but not be limited toservices. The approved scope generally includes attendance at select Committee meetings and associated preparation work, risk assessment assistance, guiding the Committee's decision making with respect to executive and Board of Directors compensation matters, providing advice on our executive pay philosophy, compensation peer group, and incentive plan design and employment agreement design, providing competitive market studies, and apprising the Committee about emerging best practices and changes in the regulatory and governance environment. Throughout this document, when we referIn 2012, the Committee decreased the amount of work performed by Meridian, primarily with respect to benchmarking and risk assessment assistance, which work was performed by management.
Meridian did not provide any services to the Committee's consultant we are referring to either Hewitt or Meridian, depending upon the applicable time period.
In addition to services relating to director and executive compensation, from time to time Hewitt has provided consulting services to management for various projects and assignments pertaining to general employee compensation, benefits, and other matters. Under the agreement with Meridian, Committee approval would be required before Meridian could provide such additional services to management. Fees incurred for services and products provided by Meridian and/or HewittCompany in 2012 unrelated to director andBoard or executive compensation did not exceed $120,000 in 2010.compensation.
The Committee's consultantA Meridian representative attends such Committee meetings and private sessions as requested by the Committee. The Committee's members also are authorized to consult directly with the Committee's consultant at other times as desired. During 2010,2012, the Committee's Chairman periodically consulted directly with the Committee's consultant, as did Mr. DreilingBob Ravener, our Executive Vice President and Mr. RavenerChief People Officer, and other non-executive members of our human resources group, in connection with named executive officer compensation (as described below under "Management's Role"). In an effort to decrease costs, the Committee chose to rely more heavily upon management than it had in prior years to provide benchmarking data and resulting recommendations with respect to 2012 and 2013 annual base salary and short-term cash incentive decisions. Meridian, along with management, assisted the Committee in developing the new long-term annual incentive program and provided detailed data from the market comparator group upon which the Committee relied in determining the size of the grants under the program.
The Committee reviewed benchmark information provided by its consultant regarding 2010 executive compensationassessed the independence of Meridian pursuant to SEC rules and discussed with Messrs. Dreiling and Ravener their executive compensation recommendations. With respect to 2011 executive compensation decisions thus far, Meridian has met directly with the Committee to review the 2010 compensation benchmark study and its application in 2011.did not identify any relationships that could be viewed as conflicts of interest.
Management's Role. Messrs. DreilingMr. Ravener and Ravener, along with non-executive members of the human resources group assist the Compensation Committee's consultanthave assisted Meridian in gathering and analyzing relevant competitive data and identifying and evaluating various alternatives for named executive officer compensation (including theirhis own). At the Compensation Committee's request, management's role in collecting this type of data expanded beginning in 2012, including increased reliance on management with respect to recommendations for certain portions of 2012 and 2013 executive compensation. Messrs. Dreiling and Ravener also discuss with the Committee their recommendations regarding named executive officer pay components, typically based on benchmarking data compiled by the Committee's consultant;data; however, Mr. Dreiling does not participate in the Committee's discussionsdeliberations of his own compensation. Mr. Dreiling subjectively assesses performance of each of the other named executive officers (see "Use of Performance Evaluations" below).
Although the Committee values and welcomessolicits such input from management, it retains and exercises sole authority to make decisions regarding named executive officer compensation.
Use of Performance Evaluations. AtAnnually, the end of each fiscal year, theCompensation Committee assesses the performance of Mr. Dreiling, and Mr. Dreiling assesses the performance of each of the other named executive officers. These evaluations are designedofficers, in each case to determine each such officer's overall success in meeting or exhibiting certain enumerated factors, including our four publicly disclosed operating priorities and certain core attributes on which all of our employees are evaluated. These evaluations are
entirely subjective; no objective criteria or relative weighting is assigned to any individual factor considered in the evaluation.factor.
The Committee uses the performance evaluation results as an eligibility threshold for annual base salary increases and Teamshare bonus payments. In other words, a determination of unsatisfactorypayments for named executive officers. A performance rating below "good" (i.e., "unsatisfactory" or "needs improvement") performance for the last completed fiscal year would generally preclude a named executive officer from receiving any annual base salary increase or Teamshare bonus payment (although the Committee would haveretains discretion to approve a Teamshare bonus payment in the event of a "needs improvement" performance rating). Otherwise, theThe performance evaluation results of the performance evaluations have not been used to determine the amount of the Teamshare bonus payment;payment for any named executive officer; rather, suchthe Teamshare bonus amount is determined solely based upon the Company's level of achievement of pre-established financial performance measures.measures and the terms of the Teamshare program (see discussion below). Each named executive officer received a satisfactory (i.e., "good," "very good," or "outstanding") overall subjective performance evaluation with respect to each of 20092011 and 2010.2012 (Mr. Sparks was hired in 2012; accordingly, he was only subject to a performance evaluation for 2012).
Beginning with the March 2010 process, theThe performance evaluation results are also partly used to determinemay impact the amount of thean officer's annual base salary increases.increase. Any named executive officer who receives a satisfactory performance rating is given a percentage base salary increase that equals the overall budgeted amountincrease for the Company's U.S.-based employee population unless:
Actual annual base salary determinations are discussed under "Elements of Named Executive Compensation—Base Salary" below.
Use of Market Benchmarking Data. We must pay compensation that is competitive with the external market for executive talent in order to attract and retain named executive officers who we believe will enhancehelp improve our long-term business results.business. We believe that this primary talent market consists of retail companies with revenues both larger and smaller than ours and with similar business models similar to ours because thoseours. Those companies are likely to have executive positions similarcomparable in breadth, complexity and scope of responsibility to ours. For 2010, the Committee's consultant provided data regarding total and individual compensation elements from its proprietary salary survey database and from the proxy statements of selected retail companies that met these criteria. We refer to this combined group, which is approved by the Committee, as the market comparator group. In 2010, theOur market comparator group for 2012 compensation decisions consisted of 7-Eleven, AutoZone, Big Lots, Collective Brands, Family Dollar, Genuine Parts, McDonald's, Nordstrom, OfficeMax, PetSmart, Staples, J.C. Penney, The Gap, Macy's, Blockbuster, The Pantry, Ross Stores, TJX Companies, Kohls, Starbucks, Limited Brands, Dollar Tree, Foot Locker, Safeway and Yum Brands.
The Committee may also consider summary market data from all retail companies in the compensation consultant's database and from the proxy statement information for certain other significantly larger retail companies to help gain a general understanding of overall retail compensation trends. The Committee did not use such additional summary market data as reference points upon which to base, justify or provide a framework for the 2010 or 2011 compensation decisions.
For 2011 compensation decisions, the Committee requested that Meridian obtain updated CEO benchmark data from the same market comparator group was modified in August 2011 by removing 7-Eleven, Collective Brands, Genuine Parts, Nordstrom, Blockbuster, and The Pantry and adding TJX Companies, Kohls, Starbucks, Limited Brands, Dollar Tree, Foot Locker and Safeway. We modified our market comparator group for 2012 to be certainreposition the Company at the median of the group in terms of revenues, to ensure that the constituent companies more closely represent the retail companies with which we compete for executive talent, and to ensure that the group continues to include companies whose business models are similar to ours. However, we continued to use the 2011 market comparator group as a reference point in our 2012 base salary and short-term incentive decisions (other than for the CEO), as described below.
For 2012 base salary and short-term cash incentive compensation decisions for the named executive officers, the Company averaged market data obtained from the most recently available proxies of the 2012 market comparator group, from a survey of our 2012 market comparator group conducted by Equilar and from a similar "aging" process of the data obtained in 2010 for the members of the 2011 market comparator group, aged an additional 2.7%, consistent with the Company's overall 2012 budget for merit increases. However, in the case of the CEO, the 2011 market comparator group data was not used; instead, to ensure the Compensation Committee was aware of any significant movement in CEO compensation levels within the market comparator group, Meridian provided survey data from the 2012 market comparator group. However,These three market data sources were averaged in order to reduce reliance on any one data source and to smooth out anomalies that might exist in the actual individual position data reported by the market data source.
for all other named executive officer 2011 For 2013 compensation decisions regarding base salary, short-term cash incentives and long term equity grant dollar values, the Committee relied upon informationreviewed survey data provided by Meridian from the 20102012 market comparator group that had been increased, or "aged," by 2.5% upon Meridian's advice that common public company practice is to conduct a full benchmark review only once every twoand referenced compensation data from the previous three years and that 2.5% was a reasonable estimate of the degreeproxy statements of movement in officer salaries in the retail industry from 2010 to 2011. The Committee determined this was an acceptable method2012 market comparator group for estimating market salaries for officerthose positions while reducing the cost associated with an annual benchmark study.where comparable positions could be identified.
The Committee believes that the median of the competitive market generally is the appropriate target for a named executive officer's total compensation. However, the Committee recognizes that because of liquidity and other comparability issues, it is difficult to compare equity awards that were granted to our named executive officers, as a controlled company and under an equity structure more common to private companies, to equity granted to named executive officers of a more typical public company. As a result, the Committee has focused primarily on total cash compensation in comparing our executive compensation program with companies in the market comparator group.
Elements of Named Executive Officer Compensation
We provide compensation in the form of base salary, short-term cash incentives, long-term equity incentives, benefits and perquisites. The Compensation Committee believes thatWe believe each of these elements is a necessary component of the total compensation package and is consistent with compensation programs at competing companies.
Base Salary. Base salary generally promotes the recruiting and retention functions of our compensation principlesprogram by reflecting the salaries for comparable positions in the competitive marketplace, by rewarding strong performance, and by providing a stable and predictable income source of income for our executives. Because the Compensation Committee believes that we likely would be unable to attract or retain quality named executive officers in the absence of competitive base salary levels, this component constitutes a significant portion of a named executive officer'sthe total compensation. Thecompensation package. Our employment agreements between Dollar General andwith the named executive officers set forth minimum base salary levels, but the Compensation Committee retains sole discretion to increase these levels from time to time.
In 2010 and 2011, to determine annual base salary increases for each named executive officer otherTable of Contents
(a) Named Executive Officers Other than Mr. Dreiling,Dreiling. In each of 2012 and 2013, the Compensation Committee determined, uponwith Mr. Dreiling's recommendation, that the named executive officers' performance assessments relative to other executives supported a percentage increase equal to that which was budgeted for our entire U.S.-based employee population (see "Use of Performance Evaluations" above). In addition, after reviewing) as such increases, along with the benchmarking dataother compensation components, would maintain total 2012 compensation within the median of the market comparator group (see "Use of Market Benchmarking Data" above), the Committee determined that market adjustments were not necessary for any named executive officer in 2010 or for any named executive officer other than Mr. Ravener in 2011.group. Accordingly, each of the named executive officers received the budgeted 2.5%2.7% and 2.75% annual base salary increase in each of 20102012 and 2011.2013, respectively, except that Mr. Ravener receivedSparks joined our Company in 2012 and, accordingly, did not receive a further 0.82% annual base salary increase in 2011 as a result of the market adjustment in order to more closely align his total cash compensation to the median of the market comparator group.2012. All such increases were effective as of April 1 of the applicable year.
With respect to 2010 annualIn March 2012, Mr. Sparks was hired as our Executive Vice President of Store Operations. The Compensation Committee determined his base salary each of Messrs. Flanigan and Ravener received a base salary increase of 3.5% effective March 24, 2010, in addition to the 2.5% budgeted increase discussed above, in connection with his promotion to an executive vice president level position. The amountsbased on consideration of the salary increases were determined necessary to more closely align total cash compensation within the median of the2011 market comparator group fordata provided by Meridian, his compensation with his prior employer, the applicable new position and to recognize each such officer's greater responsibility level.
Mr. Dreiling's 2010 annual base salary increase was negotiated in connection with the renewalrelationship of his employment agreement. The 2.5% salary increase was effective April 1, 2010,position to similar executive positions and was settled upon after consideringthe amount we believed necessary to entice him to accept our offer of employment.
(b) Mr. Dreiling's performance assessmentDreiling. In each of 2012 and our annual base salary budget for all U.S.-based employees. However, because2013, the benchmarking data indicated that Mr. Dreiling's total cash compensation was below the median of the market comparator group, the Committee increased his Teamshare bonus target for fiscal 2010 as discussed under "Short-Term Cash Incentive Plan" below.
To determine Mr. Dreiling's annual base salary increase for 2011, theCompensation Committee took into account Mr. Dreiling's performance assessment, the amount budgeted for our entire U.S.-based employee population (see "Use of Performance Evaluations" above)), and the benchmarking data of the market comparator group (see "Use of Market Benchmarking Data" above)). Such benchmarking data indicatedWith respect to Mr. Dreiling's 2012 and 2013 base salary increase, the Committee determined that Mr. Dreiling should receive the same 2.7% (2012) and 2.75% (2013) increase that was awarded to each of the other named executive officers which, along with the other components of Mr. Dreiling's 2012 compensation, maintained his total cash compensation was belowat the median range of the market comparator group. Accordingly,
(c) One-Time Base Salary Adjustments. In 2012, the Compensation Committee decided to reduce tax reimbursements and tax gross-ups relating to Company-provided perquisites. As a result, to address the change in the policy equitably, the Committee approved a 5% annualauthorized one-time base salary increaseadjustments for all officers, including Mr. Dreiling and each of the other named executive officers, effective January 1, 2013, in an amount equal to the actual 2012 individual tax and gross-up costs paid by Dollar General for life insurance and financial services, as applicable, in exchange for the elimination of such tax and gross-up benefits as of April 1, 2011, which consistsDecember 31, 2012. Mr. Dreiling also received an additional one-time salary adjustment of $5,000 in exchange for his agreement to waive the budgeted 2.5% increaseprovisions in his employment agreement that provide for a gross-up on taxes for Company-paid professional club memberships (to date, Mr. Dreiling has not invoked his right to require the Company to pay for any such professional club memberships) and the additional 2.5% market adjustment intendedlegal consultation fees relating to more closely align Mr. Dreiling's total cash compensation with the median of the market comparator group. Mr. Dreiling's target bonus percentage for the 2011 short-term cash incentive plan was also increased as discussed further below.future amendments to his employment agreement.
Short-Term Cash Incentive Plan. Our short-term cash incentive plan, called Teamshare, motivates named executive officers to achieve pre-established, objective, annual financial goals. Teamshare, provides an opportunity for each named executive officer to receive a cash bonus payment equal to a certain percentage of base salary based upon Dollar General's achievement of one or more pre-established financial performance measures. For our named executive officers, theThis Teamshare program is established pursuant to our Amended and Restated Annual Incentive Plan, under which "covered employees" under Section 162(m) of the Internal Revenue Code, any of our executive officers, and such other of ourcertain employees, as the Committee may select (includingincluding our named executive officers),officers, may earn up to $5 million (up to $2.5($10 million prior to 2010)for 2013 and thereafter) in respect of a given fiscal year, subject to the achievement of certain performance targets based on any of the following performance measures: net earnings or net income (before or after taxes), earnings per share, net sales or revenue growth, gross or net operating profit, return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue), cash flow (including, but not limited to, operating cash flow, free cash flow,listed in the Amended and cash flow return on capital), earnings before or after taxes, interest, depreciation, and/or amortization, gross or operating margins, productivity ratios, share price (including, but not limited to, growth measures and total shareholder return), expense targets, margins, operating efficiency, customer satisfaction, working capital targets, economic value added, volume, capital expenditures, market share, costs, regulatory ratings, asset quality, net worth, or safety. The Committee administers theRestated Annual Incentive Plan and can amend or terminate it at any time.Plan.
As a threshold matter, a named executive officer's eligibility to receive a bonus under the Teamshare program depends upon his or her receiving an overall subjective individual performance rating of satisfactory (see "Use of Performance Evaluations" above)). Accordingly, Teamshare fulfills an important part of our pay for performance philosophy while aligning the interests of our named executive officers and our shareholders. Teamshare also helps us meet our recruiting and retention objectives by providing compensation opportunities that are consistent with those prevalent in our market comparator group.
(a) 20102012 Teamshare Structure. The Compensation Committee selected adjusted EBITDA as calculated below, for the primary financial performance measure and added return on invested capital ("ROIC"), calculated as set forth below, as an additionalthe financial performance measures for the 2012 Teamshare program. The Committee weighted the ROIC measure for officer-level employeesand the adjusted EBITDA measure at 10% and 90%, respectively, of the total Teamshare bonus, recognizing the importance of EBITDA in the measurement of our current performance, the ability to reflectrepay our debt and funding our growth and day-to-day operation, while ROIC reflects the importance of achieving an appropriate return on our invested capital and the management of and level ofmanaging investments necessary to achieve superior business performance. The Committee weighted the ROIC measure at 10% and the adjusted EBITDA measure at 90% of the
total Teamshare bonus, recognizing that EBITDA is the most critical measure of our current performance, enables the payment of debt, and funds our growth and our day-to-day operations.
For purposes of the 20102012 Teamshare program, adjusted EBITDA is computed in accordance with our credit agreements, and ROIC is calculated as total return (calculated as the sum of operating income, depreciation and amortization and minimum rentals, less taxes) divided by average invested capital of the most recent five quarters (calculated as the sum of total assets and accumulated depreciation and amortization, less cash, goodwill, accounts payable, other payables, accrued liabilities, plus 8x minimum rentals). Each of the adjusted EBITDA and ROIC calculations shall:shall be further adjusted to exclude the impact of:
The Committee established threshold (below which no bonus may be paid) and target performance levels, discussed below, for each of the adjusted EBITDA and ROIC performance measures. Since fiscal year 2008, there has not been a maximum level of adjusted EBITDA or ROIC performance associated with the Teamshare program, although any individual payout is capped at $5 million (in 2012) and $10 million (in 2013 and thereafter), in order to avoid discouraging employees from striving to achieve performance results beyond the maximum levels.
We did not achieve the threshold Teamshare performance level in fiscal years 2005 or 2006. We achieved Teamshare performance levels between target and maximum in fiscal year 2007. For fiscal years 2008 and 2009,through 2011, we achieved an adjusted EBITDA performance level ranging from 101.79% (in 2011) to 112.47% (in 2008) of approximately 112.47%the target. For 2010 and 111.88%2011, we achieved an ROIC performance level of 100.9% of the target and 100.78% of the target, respectively.
The target adjusted EBITDA performance level for the 20102012 Teamshare program was $1.48$1.992 billion which, consistent with prior practice, was the same level as our 20102012 annual financial plan objective. The Committee considered that level to be challenging and somewhat more difficult to achieve than performance targets for prior years. Theyears, requiring superior execution and success on many of our new business initiatives. As it has done since 2008, the Committee also established the adjusted EBITDA threshold at 95% of target, which was consistent with the Committee's 2008 determination that such threshold level was more consistent with other companies within the KKR portfolio than the threshold level used prior to 2008.target.
The Committee established the thresholdtarget ROIC performance level for the 20102012 Teamshare program at 20.95% which was the 2009same level as our 2012 annual financial plan objective. Again, the Committee viewed the target as challenging to achieve. The threshold ROIC year-end actual result of 21.78% because it believed that result was strong and that 2010 results should be as good or better for that metric. The Committee established the ROIC target performance level by determining the expected level of improvement over the 2009 ROIC year-end actual result based on expected productivity enhancements. Specifically, the Companywas set
determinedat 20.45%, or 50 basis points lower than the ROIC level that would result if we were to achieve 110% of the adjusted EBITDA target performance level. We then divided the difference between that ROIC level, and the threshold ROIC200% achievement level described above over pro rata increments between those levels to arrivewas set at 21.95%, or 100 basis points higher than the ROIC target performancethreshold level.
The bonus payable to each named executive officer if we reached the 20102012 target performance levels for each of the adjusted EBITDA and ROIC financial performance measures is equal to the applicable percentage of each executive's salary as set forth in the chart below. Except for Mr. Dreiling,For all named executive officers, such payout percentages which are consistent with Teamshare payoutthose for the prior year. In addition, for all named executive officers, such percentages for prior years, continued to fall withinreflect a blend of the approximate median of the payout percentages for the market comparator group. As discussed under "Base Salary" above,group (other than for the CEO for whom the market value was not blended). Mr. Dreiling's employment agreement with us requires minimum threshold (50%) and minimum target (125%) bonus percentages, but in 2011 the Committee increased Mr. Dreiling'sdetermined his target bonus target from 100% to 125% of his base salary in 2010 and topercentage should be 130% in 2011 in order to more closely align Mr. Dreiling's bonus target and total cash compensation with the median of the market comparator group.
Name | Target Payout Percentage | |||
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Mr. | % | |||
Mr. Tehle | % | |||
| % | |||
| % | |||
Mr. | % |
Bonus payments for financial performance below or above the applicable target levels are prorated on a graduated scale commensurate with financial performance levels in accordance with the schedule below. For 2012, the ROIC graduated scale was modified to more closely align the ROIC achievement levels with the EBITDA achievement levels.
Adjusted EBITDA | Adjusted EBITDA | ROIC | Total | Adjusted EBITDA | ROIC | Total | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% of Performance Target | % of Performance Target | % of Bonus Payable | % of Performance Target | % of Bonus Payable | Bonus at Target | % of Performance Target | % of Bonus Payable | % of Performance Target | % of Bonus Payable | Bonus at Target (%) | ||||||||||||||||||
95% | 45% | 98.5% | 5% | 50% | 95 | 45 | 97.61 | 5 | 50 | |||||||||||||||||||
96% | 54% | 98.8% | 6% | 60% | 96 | 54 | 98.09 | 6 | 60 | |||||||||||||||||||
97% | 63% | 99.1% | 7% | 70% | 97 | 63 | 98.57 | 7 | 70 | |||||||||||||||||||
98% | 72% | 99.4% | 8% | 80% | 98 | 72 | 99.05 | 8 | 80 | |||||||||||||||||||
99% | 81% | 99.7% | 9% | 90% | 99 | 81 | 99.52 | 9 | 90 | |||||||||||||||||||
100% | 90% | 100.0% | 10% | 100% | 100 | 90 | 100.00 | 10 | 100 | |||||||||||||||||||
101% | 99% | 100.3% | 11% | 110% | 101 | 99 | 100.48 | 11 | 110 | |||||||||||||||||||
102% | 108% | 100.6% | 12% | 120% | 102 | 108 | 100.95 | 12 | 120 | |||||||||||||||||||
103% | 117% | 100.9% | 13% | 130% | 103 | 117 | 101.43 | 13 | 130 | |||||||||||||||||||
104% | 126% | 101.2% | 14% | 140% | 104 | 126 | 101.91 | �� | 14 | 140 | ||||||||||||||||||
105% | 135% | 101.5% | 15% | 150% | 105 | 135 | 102.39 | 15 | 150 | |||||||||||||||||||
106% | 144% | 101.8% | 16% | 160% | 106 | 144 | 102.86 | 16 | 160 | |||||||||||||||||||
107% | 153% | 102.1% | 17% | 170% | 107 | 153 | 103.34 | 17 | 170 | |||||||||||||||||||
108% | 162% | 102.4% | 18% | 180% | 108 | 162 | 103.82 | 18 | 180 | |||||||||||||||||||
109% | 171% | 102.7% | 19% | 190% | 109 | 171 | 104.30 | 19 | 190 | |||||||||||||||||||
110% | 180% | 103.0% | 20% | 200% | 110 | 180 | 104.77 | 20 | 200 |
For each 1% adjusted EBITDA increase in the percent of performance target level between the threshold performance level and 110% of the target performance level, the corresponding payout increases by 9% of the officer's target payout amount (based upon the officer's target payout percentage). For each 1% adjusted EBITDA increase above
110% of the target performance level, the corresponding payout increases by 10.24%10.865% of the officer's target payout amount (based upon the
officer's target payout percentage). For ROIC, each .477% increase in the percent of performance target level between the threshold performance level and 104.77% of the target performance level increases the payout percentage by 1% of the officer's target payout amount (based upon the officer's target payout percentage). For ROIC, each 0.67% increase in performance between the threshold performance level and the target performance level increases the payout percentage by 1%percentages). For each 0.67%.477% increase in ROIC performance above the 104.77% of the target performance level, the bonus payout increases by 1%, and above 200%1.207% of the officer's target payout level,amount (based upon the bonusofficer's target payout increases by 1.14%percentage). Payout percentages greater than 200% of the target payout levels are based on an approximate sharing between Dollar General (80%) and the Teamshare participants (20%) of the incremental adjusted EBITDA dollars earned above the 110% of the adjusted EBITDA performance level, split 90% to adjusted EBITDA and 10% to ROIC.
This proration schedule, through 110% of the target performance level, is consistent with the schedule approved by the Committee in 2007 in reliance upon benchmarking data which, at that time, indicated that the typical practice was to set the threshold payout percentage at half of the target and the maximum payout percentage at twice the target. The Committee determined in 2008 that the proration schedule for adjusted EBITDA performance above 110% of target should approximate a sharing between Dollar General (80%) and the Teamshare participants (20%) of the adjusted EBITDA dollars earned above that level.
(b) 20102012 Teamshare Results. The Compensation Committee approved the adjusted EBITDA/EBITDA and ROIC performance results at 105.5%$1,986,617,000 (97.3% of target) and 100.9%21.06% (111.0% of target,target), respectively, which equate to a payout of 152.24%98.67% of individual bonus targets under the 20102012 Teamshare program. Accordingly, a 20102012 Teamshare payout was made to each named executive officer at the following percentages of base salary earned: Mr. Dreiling, 190.30%128.3%; and each of Mr. Tehle, Mr. Vasos, Ms. Guion, Mr. FlaniganLanigan and Mr. Ravener, 98.96%Sparks, 64.1%. Such amounts are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table.
(c) 20112013 Teamshare Structure. The Compensation Committee has approved a 20112013 Teamshare structure similar to that which was approved for 2010. The2012. However, the 2013 performance measure has been determined to be adjusted EBIT, as the Committee approved certain changesbelieved that this was a more comprehensive measure of the Company's performance since it includes the cost of capital investments in achieving the current year's financial results and should provide a different, but complementary, focus for the short-term incentive program than that used for the long-term incentive program.
Adjusted EBIT is defined as the Company's operating profit as calculated in accordance with United States general accepted accounting principles ("GAAP"), but shall exclude:
legislation or accounting changes will be discussed in detail in our proxy statement forenacted after the 2012 annual meeting.beginning of the 2013 fiscal year; (e) significant tax settlements; and (f) any significant unplanned items of a non-recurring or extraordinary nature.
The applicabletarget percentage of each named executive officer's salary upon which his or her bonus is based for the 20112013 Teamshare plan is also the same as in 2010, except for Mr. Dreiling whose2012. Those target as discussed above, was increased to 130%percentages are based on a blend of base salary. Those percentages continue to approximate the median of the payouttarget percentages for the 2012 market comparator group.group for each position, other than the CEO.
Long-Term Equity Incentive Program. Long-term equity incentives motivate named executive officers to focus on long-term success for shareholders. These incentives help provide a balanced focus on both short-term and long-term goals and are also important to our compensation program's recruiting and retention objectives because most of the companies in our market comparator group offer them. Our long-term equityobjectives. Such incentives are designed to compensate named executive officers for a long-term commitment to us, while motivating sustained increases in our financial performance and shareholder value. We believe that our long-term equity incentive program provides significant motivation and retention value to us for many reasons, most notably:
Equity awards are made under our Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates (the "2007 Stock Incentive Plan") and are always granted with a per share exercise price equal to the fair market value of one share of our common stock on the date of the grant.
The 2007 Stock Incentive Plan generally provides (a) Pre-2012 Equity Awards. Until March 2012, the Compensation Committee the authority to grant equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, and other equity-based awards (including dividend equivalent rights), to any of our employees, non-employee members of our Board of Directors, any consultant or other person having a service relationship with our company. The 2007 Stock Incentive Plan is administered by the Committee, which has the power to amend any awards outstanding under the 2007 Stock Incentive Plan in any manner (unless de minimis) that is not adverse to the holder of such award. Upon any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, change in control of our company (as defined in the 2007 Stock Incentive Plan), payment of a dividend (other than a cash dividend paid as part of a regular dividend program) or other similar transaction or occurrence that affects the equity securities of Dollar General or the value thereof, the Committee must adjust awards then outstanding under the 2007 Stock Incentive Plan (including the number and kind of securities subject to the award and, if applicable, the exercise price), in each case as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the 2007 Stock Incentive Plan and any outstanding awards. In the event of a change in control of Dollar General (as defined in the 2007 Stock Incentive Plan), the Committee may accelerate the vesting of any outstanding awards, cancel for fair value (as determined in its sole discretion) outstanding awards, substitute new awards that will substantially preserve the otherwise applicable terms and value of the awards being substituted, or provide for a period of at least 10 business days prior to the change in control that any stock option or stock appreciation right will be fully exercisable, and then shall terminate upon the change in control. The Board has the power to amend or terminate the 2007 Stock Incentive Plan, except that shareholder approval is required to increase the aggregate number of shares available for awards, to decrease the exercise price of outstanding stock options or stock appreciation rights, to change the requirements relating to the Committee, or to extend the term of the 2007 Stock Incentive Plan. The 2007 Stock Incentive Plan currently expires July 6, 2017, although awards made on or before its expiration may extend beyond the expiration date. As of March 16, 2011, there were 31,142,858 shares authorized for issuance under the 2007 Stock Incentive Plan (no more than 4,500,000 of which may be granted in the form of stock options and stock appreciation rights, and no more than 1,500,000 of which may be granted in the form of other stock-based awards, in each case to any one participant in a given fiscal year), approximately 17,869,260 of which remained available for future grants.
Since our 2007 merger, a personal financial investment in Dollar General stock generally has been a prerequisite to eligibility to receive an option grant under the 2007 Stock Incentive Plan. All named executive officers (other than Mr. Dreiling) met that personal investment at the time of our merger in 2007 or upon their hire or promotion date in one or more of the following three forms: (a) cash; (b) rollover of stock issued prior to our 2007 merger; and/or (c) rollover of in-the-money options issued prior to our 2007 merger. Accordingly, each such named executive officer received an option grant under the 2007 Stock Incentive Plan at the time he or she met the personal investment
requirement. Mr. Dreiling received an option agreement upon commencement of his employment with us pursuant to the negotiated terms of his employment agreement.
The Committee hashad not made annual equity awards since our 2007 merger as it believes thatbecause the long-term equity previously granted at the time of that merger or for named executive officers who were later employed by us, at the time of hire havehas been sufficiently retentive and otherwise havehas adequately met our current compensation objectives. The Committee has, however, made special one-time equity grants to certain of our named executive officersHowever, in connection with promotions or, with respect to Mr. Dreiling, in connection withthe amendment of his employment agreement and is contemplating the implementation ofin April 2010, Mr. Dreiling also received a new long-term equity programspecial one-time stock option grant that incorporates an annual grant component (discussed further below).
With respect to the promotion-related grants to Messrs. Flanigan and Ravener, the Committee used a mathematical formula to determine both the number of options awarded and whether any additional investment would be required by such officers to be eligible to receive the options awards. That formula applied a mathematical proration of the level of investment and number of options generally granted under the existing program to personsfully vested in senior vice president and executive vice president positions over the period of time each such officer had served as a senior vice president and will serve as an executive vice president during the five-year transfer restriction period that initially began upon their respective employment dates. As a result of the application of such formula, Mr. Flanigan made an additional investment of $158,299 as a condition to the exercisability of his option award, while Mr. Ravener had already invested the minimum amount required to be eligible for the promotion-related option award.
April 2011. The options granted to the named executive officers prior to 2012 (other than Mr. Dreiling's April 2010 option award) are divided so that half are time-vested (generally over 4 or(over 5 years) and half are performance-vested (generally over 5 or 6 years) based on a comparison of an EBITDA-based performance metric, as described below, against pre-set goals for that performance metric. The combination of time and performance-based vesting criteria is designed to compensate executives for long-term commitment to us, while motivating sustained increases in our financial performance. See "Grants of Plan-Based Awards in Fiscal 2010" and "Outstanding Equity Awards at 2010 Fiscal Year-End" below.
The vesting of the performance-based options granted to the named executive officers prior to March 2012 is subject to continued employment with us over the performance period and the Board's determination that we have achieved for each of the relevant fiscal years the specified annual performance target based on EBITDA and adjusted as described below. For fiscal years 2007, 2008, 2009 and 2010,2008-2012, those adjusted EBITDA targets were $700 million, $828 million, $961 million, and $1.139 billion, respectively (except for Mr. Flanigan$1.35 billion and Mr. Ravener's March 2010 promotion-related grants discussed below),$1.517 billion, respectively, which were based on the long-term financial plan, at the time of our 2007 merger, less any anticipated permissible adjustments, primarily to account for unique expenses related to our 2007 merger. If a performance target for a given fiscal year is not met, the performance-based options may still vest and become exercisable on a "catch up" basis if, at the end of a subsequent fiscal year, a specified cumulative adjusted EBITDA performance target is achieved. The annual and cumulative adjusted EBITDA performance targets are based on our long-term financial plans in existence at the time of grant. Accordingly, in each case at the time of grant, we believed those levels, while attainable, would require strong performance and execution. Although Messrs. Flanigan and Ravener joined us during fiscal 2008 after the original performance targets had been set for fiscal 2008, 2009, 2010 and 2011, the Committee decided to grant their performance awards at the same performance targets as had been set for the other officers since the long-term financial plans in place at that time had been determined relatively recently and to avoid having different sets of performance levels for one member of the team applying to the same fiscal years.
For Mr. Flanigan and Mr. Ravener's promotion-related option grants in 2010, the Committee determined that the EBITDA targets for the performance-based options should be set based on the updated adjusted EBITDA forecast in our long-term business plan. The target for fiscal year 2010 was $1.4 billion. At the time of grant, we believed the annual adjusted EBITDA levels, while attainable, would require strong performance and execution.
For purposes of calculating the achievement of performance targets for our long-term equity incentive program,grants prior to March 2012, "EBITDA" means earnings before interest, taxes, depreciation and amortization plus transaction, management and/or similar fees paid to KKR and/or its affiliates. In addition, the Board is required to fairly and appropriately adjust the calculation of EBITDA to reflect, to the extent not contemplated in our financial plan, the following: acquisitions, divestitures, any change required by generally accepted accounting principles ("GAAP")GAAP relating to share-based compensation or for other changes in GAAP promulgated by accounting standard setters that, in each case, the Board in good faith determines require adjustment to the EBITDA performance metricmeasure we use for our long-term equity incentive
program. Adjustments to EBITDA for purposes of calculating performance targets for our long-term equity incentive program may not in all circumstances be identical to adjustments to EBITDA for other purposes, including our Teamshare program targets and the covenants contained in our principal financial agreements. Accordingly, comparability of such measures is limited.
All performance-based options and time-based options granted to the named executive officers prior to 2012, except for those granted to Mr. Vasos, are vested. We have surpassed the cumulative adjusted EBITDA performance targets through fiscal 2010,2012, and we anticipate surpassing the cumulative adjusted EBITDA performance target through fiscal 2011,2013, for all options except forMr. Vasos' options.
(b) 2012 Equity Awards. Since 2010, the promotion-related option grants awarded to Messrs. Flanigan and Ravener. For such promotion-related awards, we exceeded the 2010 annual adjusted EBITDA performance target.
Over the last year, theCompensation Committee has been workingworked with its consultant and with management to develop a new long-term equity incentive structure under the 2007 Stock Incentive Plan that is more in line with typical public company equity structures. We expect that theThe new structure will contain an annual grant componentwas finalized and not retain the mandatory investment feature or the transfer restrictions, put rights, call rights, and piggyback registration rights contained in the Management Stockholder's Agreement. We anticipate that the new structure will be partly implemented in May 2011 for new hire equity awards and fully implemented in March 2012. Under the new program, each of the named executive officers received a grant of time-based stock options and a grant of performance share units. The combination of time and performance-based vesting criteria is designed to compensate executives for long-term commitment to us, while motivating sustained increases in our shareholder value and financial performance.
Consistent with our compensation philosophy and objectives, the value of the long-term incentive awards was based on the median of the long-term equity target values of our 2012 market comparator group. The market value for each named executive officer's position other than the CEO was blended to establish a single long-term incentive value on which awards are based for all named executive officers (other than the CEO for whom the market value was not blended). This blending practice is similar to that which we used in establishing the short-term cash incentive where the targets for each of the named executive officers' positions (other than the CEO) are also the same.
For the 2012 grant, the long-term incentive values were awarded 75% in time-based stock options and 25% in performance share units recognizing that splits between performance and time-based awards and between options and units are common within our 2012 market comparator group. The Committee believes this is the appropriate allocation to achieve both the retention and incentive goals of the awards. The actual number of stock options and performance share units awarded were determined by applying a Black Scholes formula provided by Meridian to the selected long-term incentive values.
The options will vest 25% on each of the first four anniversaries of the grant date, subject to the executive officer's continued employment with us and certain accelerated vesting provisions.
The performance share units awarded are equal to a target number of performance share units that can be earned if certain performance measures are achieved during the performance period (which was fiscal year 2012) and if certain additional vesting requirements are met. The performance measures are goals related to adjusted EBITDA (weighted 90%) and ROIC (weighted 10%) as established by the Compensation Committee on the grant date, using the same adjusted EBITDA/ROIC-based performance criteria used to determine performance under the Teamshare program discussed under "Short-Term Cash Incentive Plan" above. The number of performance share units earned could vary between 0% and 200% of the target number based on actual performance compared to target performance on the same graduated scale that determines incentive payouts under our Teamshare program discussed above. The actual number of performance shares earned for 2012 for annual equity awards. The structureeach of the named executive officers was 39,278 for Mr. Dreiling and 6,443 for each of the other named executive officers. One-third of the performance share units earned based on 2012 financial performance vested on the last day of the one-year performance period, and the timingremaining two-thirds of the program remainperformance share units vest on the second and third anniversaries of the grant date, subject to change untilthe named executive officer's continued employment with us and certain accelerated vesting provisions. All vested performance share units will be settled in shares of our common stock.
In addition, in March 2012 the Committee awarded Mr. Dreiling a retention grant of 326,037 performance-based restricted shares of our common stock which he can earn if certain earnings per share ("EPS") performance targets are met for fiscal years 2014 and 2015. This award is designed to retain Mr. Dreiling, whose 2008 stock option award fully vested and whose transfer restrictions on shares of our common stock expired in 2012, while simultaneously incenting him to continue to drive superior financial performance. In structuring the award, the Committee reviewed retention grant practices of the 2012 market comparator group and determined that a grant value equivalent to 1.5 times the value of the annual long-term incentive award would approximate the median range of retention grants are approvedawarded by the 162(m) Subcommittee.market comparator group. The EPS goals were established by the Committee on the grant date based upon EPS forecasts contained in our long-term strategic plan. Half of the performance-based restricted stock will vest after the end of our 2014 fiscal year if the EPS goal for that year is achieved, and the other half will vest after the end of our 2015 fiscal year if the EPS goal for that year is achieved, in each case subject to continued employment with us and certain accelerated vesting provisions. For purposes of calculating the achievement of the EPS targets for each of 2014 and 2015, EPS shall be calculated as the quotient of (x) net income earned in the applicable fiscal year (as calculated in accordance with generally accepted accounting principles applicable to the Company at the relevant time), with such net income calculation to exclude the items identified below, by (y) the weighted average number of shares of our common stock outstanding during the applicable fiscal year. The net income calculation will exclude the impact of the items that are excluded from the EBITDA calculation for Teamshare purposes identified above under "Short-Term Cash Incentive Program" except that adjustments relating to any tax, legislation or accounting changes enacted after the beginning of the 2012 fiscal year must be material and demonstrable and must not have been contemplated in our 2012-2016 financial plan.
(c) 2013 Equity Awards. The Compensation Committee authorized additional long-term equity incentive awards to our named executive officers in March 2013 on substantially similar terms as those set forth above. However, the Committee changed the mix of the equity value to 50% options, 25% performance share units and 25% restricted stock units to more closely match the equity mix of our market comparator group. The restricted stock units are time-based awards, payable in shares of our common stock and vest in equal installments over 3 years from the date of grant, subject to continued employment with us and certain accelerated vesting conditions. The Committee also rebalanced the weighting of the performance measures for the performance share units to be evenly weighted at 50% adjusted EBITDA and 50% ROIC to put greater emphasis on maintaining ROIC at a consistent level since that will help ensure that capital invested is providing an appropriate return over time.
Benefits and Perquisites. Along with certain benefits offered to named executive officers on the same terms that are offered to all of our salaried employees (such as health and welfare benefits and matching contributions under our 401(k) plan), we provide our named executive officers with certain additional benefits and perquisites for retention and recruiting purposes, to promote tax efficiency for such persons, and to replace benefit opportunities lost due to regulatory limits. We also provide named executive officers with benefits and perquisites as additional forms of compensation that we believe to be consistent and competitive with benefits and perquisites provided to executives with similar positions in our market comparator group and in our industry.
The named executive officers have the opportunity to participate in the Compensation Deferral Plan (the "CDP") and, other than Mr. Ravener,Messrs. Sparks and Vasos, the defined contribution Supplemental Executive Retirement Plan (the "SERP", and together with the CDP, the "CDP/SERP Plan"). The Compensation Committee previously determined to no longer offer SERP participation is not available to persons to whom employment offers are made after May 28, 2008, including newly hired executive officers.Messrs. Sparks and Vasos.
We provide each named executive officer a life insurance benefit equal to 2.5 times his or her base salary up to a maximum of $3 million. We pay the premiumsmillion and gross up each named executive officer's income to pay the tax costs associated with this benefit. We also provide each named executive officer a disability insurance benefit that provides income
replacement of 60% of base salary up to a maximum monthly benefit of $20,000. We pay the cost of this benefitpremiums and, grossthrough December 31, 2012, grossed up such executive's
each named executive officer's income to pay the tax costs associated with the premiumslife insurance benefit and through June 30, 2012 for thistax costs associated with the disability benefits (with respect to the disability benefit, only to the extent necessary to provide a comparable cost for this benefit to the named executive officer as the cost applicable to all salaried employees.employees). As discussed under "Executive Overview" above, we eliminated the tax gross-up for the life insurance benefits effective December 31, 2012 in exchange for one-time base salary adjustments for the named executive officers.
We also provide a relocation assistance program to named executive officers under a policy applicable to officer-level employees, which policy is similar to that offered to certain other employees. In 2010, we did not incur any relocation expenses for any named executive officer in accordance with this policy. The significant differences between the relocation assistance available to officers from the relocation assistance available to non-officers are as follows:
In fiscal 2012, we incurred $27,559 in expenses related to Mr. Sparks' relocation.
We provide through a third party a personal financial and advisory service benefit to all executive officers who report directly to the CEO, including the named executive officers. This program provides each named executive officer with various personal financial support services,officers, including financial planning, estate planning and tax preparation services, in an annual amount of up to $20,000 per person (plus an individual tax gross-up and payment ofin addition to the advisor's related travel expenses byand through December 31, 2012, related tax costs. As discussed under "Executive Overview" above, we eliminated the third party provider).tax gross-up for the financial planning benefit effective December 31, 2012 in exchange for one-time base salary adjustments for the named executive officers. The Committee approvedbelieves the financial services program to reducereduces the amount of time and attention that executives must spend on these matters, furthering their ability to focus on their responsibilities to us, and to maximizemaximizes the executive's net financial reward to the executive of compensation received from us. The Committee also believed this benefit is commonly provided to executives within our market comparator group.
Compensation of Mr. Dreiling
The Compensation Committee approved an amended and restated employment agreement, effective April 23, 2010, with Mr. Dreiling is entitled to assure Dollar Generalcertain additional perquisites as a result of Mr. Dreiling's continued services in light of tremendous financial performance in 2008 and 2009. Thethe terms of his amended and restated employment agreement as summarized below, were settled after negotiation with Mr. Dreiling and were considered by our Committee to be fair and appropriate given CEO compensation and benefits at comparable companies and given Mr. Dreiling's experience, leadership ability, and proven performance. The Board firmly believes he is the right leader for Dollar General as we move forward.
The amended and restated agreement provides for a five-year term, with automatic one-year renewals thereafter. Key compensatory provisions include:us, including:
In addition, effective April 23, 2010, the 162(m) Subcommittee granted Mr. Dreiling a non-qualified stock option to purchase 100,000 shares of our common stock. While the option and the common stock underlying the option are subject to the terms of the existing Management Stockholder's Agreement between us and Mr. Dreiling, they are not subject to the transfer restrictions and put and call provisions set forth in Sections 3, 5 and 6 thereof. The Committee believed this award was of a sufficient size to appropriately reward Mr. Dreiling for Dollar General's tremendous performance results while continuing to incent future performance.
Severance Arrangements
As noted above, we have an employment agreement with each of our named executive officers that, among other things, provides for such executive's rights upon a termination of employment. We believe that reasonable severance benefits are appropriate to protect the named executive officer
against circumstances over which he or she does not have control and as consideration for the promises of non-disclosure, non-competition, non-solicitation and non-interference that we require in our employment agreements.
A change in control, by itself, does not trigger any severance provision applicable to our named executive officers, except for the provisions related to long-term equity incentives under our Amended and Restated 2007 Stock Incentive Plan. As required by applicable securities laws, we have included a summary of our severance and change in control arrangements as they existed as of the end of fiscal year 2010 (that is, as of January 28, 2011) under "Potential Payments upon Termination or Change in Control as of January 28, 2011" below.
Considerations Associated with Regulatory Requirements
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to any publicly held corporation for individual compensation over $1 million paid in any taxable year to each of the persons who were, at the end of the fiscal year, Dollar General's CEO or one of the other named executive officers (other than our Chief Financial Officer). Section 162(m) specifically exempts certain performance-based compensation from the deduction limit.
If our Compensation Committee determines that our shareholders' interests are best served by the implementation of compensation policies that are affected by Section 162(m), our policies will not restrict the Committee from exercising discretion to approve compensation packages even though that flexibility may result in certain non-deductible compensation expenses.
We believe that our Amended and Restated 2007 Stock Incentive Plan currently satisfies the requirements of Section 162(m), so that compensation expense realized in connection with stock options and stock appreciation rights, if
any, and in connection with performance-based restricted stock and restricted stock unit awards, if any, willcan be deductible. However, restricted stock or restricted stock units granted to executive officers that solely vest over time are not "performance-based compensation" under Section 162(m), so that compensation expense realized in connection with those time-vested awards to executive officers covered by Section 162(m) will not be deductible by Dollar General. We currently do not grant restricted stock or restricted stock unit awards to executive officers.
In addition, any salary, signing bonuses or other annual compensation paid or imputed to the executive officers covered by Section 162(m) that causes non-performance-based compensation to exceed the $1 million limit will not be deductible by Dollar General. However, we believe that our Amended and Restated Annual Incentive Plan currently satisfies the requirements of Section 162(m), so that compensation expense realized in connection with short-term incentive payments under our Teamshare program, if any, will be deductible.
The Committee administers our executive compensation program with the good faith intention of complying with Section 409A of the Internal Revenue Code, which relates to the taxation of nonqualified deferred compensation arrangements.
The Compensation Committee of our Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this document.
This report has been furnished by the members of the Compensation Committee:
The above Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Dollar General filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Dollar General specifically incorporates this report by reference therein.
The following table summarizes compensation paid to or earned by our named executive officers in each of fiscal 2010,2012, fiscal 20092011 and fiscal 2008.2010. We have omitted from this table the columns for Bonus Stock Awards, and Change in Pension Value and Nonqualified Deferred Compensation Earnings as no amounts are required to be reported in such columns for any named executive officer.
Name and Principal Position(1) | Year | Salary ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($) | Total ($) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Richard W. Dreiling, | 2012 | 1,235,626 | 16,554,441 | 3,091,549 | 1,591,956 | 686,625 | (6) | 23,160,197 | ||||||||||||||
Chairman & | 2011 | 1,196,947 | — | — | 1,850,386 | 785,036 | 3,832,369 | |||||||||||||||
Chief Executive Officer | 2010 | 1,143,231 | — | 1,193,210 | 2,186,595 | 640,293 | 5,163,329 | |||||||||||||||
David M. Tehle, | 2012 | 677,136 | 295,483 | 507,162 | 436,209 | 191,915 | (7) | 2,107,905 | ||||||||||||||
Executive Vice President & | 2011 | 658,356 | — | — | 506,906 | 220,278 | 1,385,540 | |||||||||||||||
Chief Financial Officer | 2010 | 642,299 | — | — | 638,125 | 219,450 | 1,499,874 | |||||||||||||||
Todd J. Vasos, | 2012 | 654,617 | 295,483 | 507,162 | 421,698 | 76,435 | (8) | 1,955,395 | ||||||||||||||
Executive Vice President, | 2011 | 636,614 | — | — | 490,165 | 71,712 | 1,198,491 | |||||||||||||||
Division President, Chief | 2010 | 618,855 | — | — | 617,050 | 57,839 | 1,293,744 | |||||||||||||||
Merchandising Officer | ||||||||||||||||||||||
Susan S. Lanigan, | 2012 | 553,158 | 295,483 | 507,162 | 356,343 | 152,834 | (9) | 1,864,980 | ||||||||||||||
Executive Vice President & | 2011 | 530,326 | — | — | 414,102 | 122,171 | 1,066,599 | |||||||||||||||
General Counsel | ||||||||||||||||||||||
Gregory A. Sparks, | 2012 | 523,618 | 295,483 | 507,162 | 338,643 | 65,404 | (10) | 1,730,310 | ||||||||||||||
Executive Vice President, | ||||||||||||||||||||||
Store Operations |
Name and Principal Position(1) | Year | Salary ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($) | Total ($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Richard W. Dreiling, | 2010 | 1,143,231 | 1,193,210 | 2,186,595 | 640,293 | (5) | 5,163,329 | ||||||||||||
Chairman & | 2009 | 1,100,876 | — | 2,434,924 | 887,800 | (6) | 4,423,600 | ||||||||||||
Chief Executive Officer | 2008 | 1,000,038 | — | 2,176,300 | 343,397 | 3,519,735 | |||||||||||||
David M. Tehle, | 2010 | 642,299 | — | 638,125 | 219,450 | (7) | 1,499,874 | ||||||||||||
Executive Vice President & | 2009 | 626,884 | — | 888,258 | 278,263 | (6) | 1,793,405 | ||||||||||||
Chief Financial Officer | 2008 | 612,358 | — | 870,431 | 153,431 | 1,636,220 | |||||||||||||
Kathleen R. Guion, | 2010 | 621,087 | — | 617,050 | 186,161 | (8) | 1,424,298 | ||||||||||||
Executive Vice President, | 2009 | 606,180 | — | 858,922 | 246,806 | (6) | 1,711,908 | ||||||||||||
Division President, | 2008 | 581,689 | — | 841,684 | 141,333 | 1,564,706 | |||||||||||||
Store Operations & Store Development | |||||||||||||||||||
John W. Flanigan, | 2010 | 403,156 | 1,131,072 | 402,176 | 112,667 | (9) | 2,049,071 | ||||||||||||
Executive Vice President, Global Supply Chain | |||||||||||||||||||
Robert D. Ravener, | 2010 | 441,599 | 1,220,382 | 440,525 | 63,505 | (10) | 2,166,011 | ||||||||||||
Executive Vice President & Chief People Officer |
$299,388 which represents the aggregate incremental cost of providing certain perquisites, including $254,886$266,311 for costs associated with personal airplane usage, by Mr. Dreiling and his guests, $20,174$19,318 for costs associated with financial and estate planning services, and other amounts which individually did not equal or exceed the greater of $25,000 or 10% of total perquisites, including expenses related to attendance by Mr. Dreilingsporting and his guests atother entertainment events, event participationmiscellaneous gifts, and appreciation gifts, costs incurred in connection with a medical physical examination, and minimal incremental travel expenses incurred by Mr. Dreiling's spouse accompanying him on Dollar General business.framing projects. The aggregate incremental cost related to the personal airplane usage was calculated using costs we would not have incurred but for the personal usage (including costs incurred as a result of "deadhead" legs of personal flights), including fuel costs, variable maintenance costs, crew expenses, landing, parking and other associated fees, supplies and catering costs.
Grants of Plan-Based Awards in Fiscal 20102012
The table below sets forth information regarding grants of plan-based awards to our named executive officers infor fiscal 2010.2012. The grantsawards listed under "Estimated Possible Payouts Under Equity Incentive Plan Awards" include (1) for each of the named executive officers, the threshold, target and maximum number of performance share units which may be earned by each named executive officer based upon the level of achievement of financial performance measures for fiscal 2012; and (2) for Mr. Dreiling, an additional award of performance-based restricted stock which he may earn based upon achievement of financial performance measures for fiscal 2014 and 2015. The awards listed under "All Other Option Awards" include non-qualified stock options that vest over time based upon the named executive officer's continued employment by our Company. All of the awards listed in this table were granted pursuant to our Amended and Restated 2007 Stock Incentive Plan. See "Long-Term Equity Incentive Program" and "Compensation of Mr. Dreiling" in "Compensation Discussion & Analysis" above for further discussion of these grants.awards. We have omitted the columns for Threshold and Maximum Estimated Future Payouts under Equity Incentive Plan Awards and the column for All Other Stock Awards: Number of Shares of Stock or Stock Units because they areit is inapplicable.
EachThe table below also sets forth each named executive officer's annual Teamshare bonus opportunity established for fiscal 2010 is also set forth in the table below.2012. Actual bonus amounts earned by each named executive officer for fiscal 2010 as a result of our financial performance2012 are set forth in the Summary Compensation Table above and represent prorated payments on a graduated scale for financial performance abovebetween the threshold and target performance levels, but at or below the maximum payout cap of $5.0 million, for each of the named executive officers.level. See "Short-Term Cash Incentive Plan" in "Compensation Discussion and Analysis" above for further discussion of the fiscal 20102012 Teamshare program.
| | | | | | | | | | Grant Date Fair Value of Stock and Option Awards ($)(2) | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | | Exercise or Base Price of Option Awards ($/Sh)(1) | ||||||||||||||||||||||||||
| | All Other Option Awards: Number of Securities Underlying Options (#) | |||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||
Mr. Dreiling | — | 806,725 | 1,613,450 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 228,226 | 45.25 | 3,091,549 | ||||||||||||||||||||||
3/20/12 | — | — | — | 19,904 | 39,807 | 79,614 | — | — | 1,801,267 | ||||||||||||||||||||||
3/20/12 | — | — | — | 163,019 | 326,037 | — | — | — | 14,753,174 | ||||||||||||||||||||||
Mr. Tehle | — | 221,049 | 442,098 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | ||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | ||||||||||||||||||||||
Mr. Vasos | — | 213,696 | 427,391 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | ||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | ||||||||||||||||||||||
Ms. Lanigan | — | 180,577 | 361,154 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||
3/20/12 | — | �� | — | — | — | — | — | 37,440 | 45.25 | 507,162 | |||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | ||||||||||||||||||||||
Mr. Sparks | — | 171,607 | 343,215 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | ||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 |
| | | | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||
Name | Grant Date | Date of Board Action(1) | Threshold ($) | Target ($) | Maximum ($) | Target (#)(2) | ||||||||||||||||||||||
Mr. Dreiling | — | — | 718,141 | 1,436,281 | 5,000,000 | — | — | — | — | |||||||||||||||||||
4/23/10 | 4/22/10 | — | — | — | — | 100,000 | (5) | 29.38 | 1,193,210 | |||||||||||||||||||
Mr. Tehle | — | — | 209,591 | 419,182 | 5,000,000 | — | — | — | — | |||||||||||||||||||
Ms. Guion | — | — | 202,669 | 405,339 | 5,000,000 | — | — | — | — | |||||||||||||||||||
Mr. Flanigan | — | — | 132,094 | 264,189 | 5,000,000 | — | — | — | — | |||||||||||||||||||
3/24/10 | 3/24/10 | — | — | — | — | 49,759 | (6) | 25.25 | 565,536 | |||||||||||||||||||
3/24/10 | 3/24/10 | — | — | — | 49,759 | — | 25.25 | 565,536 | ||||||||||||||||||||
Mr. Ravener | — | — | 144,690 | 289,380 | 5,000,000 | — | — | — | — | |||||||||||||||||||
3/24/10 | 3/24/10 | — | — | — | — | 53,688 | (6) | 25.25 | 610,191 | |||||||||||||||||||
3/24/10 | 3/24/10 | — | — | — | 53,688 | — | 25.25 | 610,191 |
Outstanding Equity Awards at 20102012 Fiscal Year-End
The table below sets forth information regarding outstanding equity awards granted under our Amended and Restated 2007 Stock Incentive Plan and held by our named executive officers as of the end of fiscal 2010, including (1) equity awards granted under our 2007 Stock Incentive Plan; and (2) Rollover Options, as defined and discussed following2012. The $7.9975 exercise prices set forth in the table granted under our 1998 Stock Incentive Plan. We have omitted from this table the columns pertaining to stock awards under equity incentive plans because they are inapplicable.
| Option Awards | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(1) | Option Exercise Price ($) | Option Expiration Date | |||||||||||
Mr. Dreiling | 428,571 | (2) | 285,714 | (3) | — | 7.9975 | 07/06/2017 | |||||||||
571,428 | (4) | — | 142,857 | 7.9975 | 07/06/2017 | |||||||||||
— | 100,000 | (5) | — | 29.38 | 04/23/2020 | |||||||||||
Mr. Tehle | 10,188 | (6) | — | — | 2.1875 | 08/09/2014 | ||||||||||
188,571 | (2) | 125,714 | (3) | — | 7.9975 | 07/06/2017 | ||||||||||
204,786 | (4) | — | 62,857 | 7.9975 | 07/06/2017 | |||||||||||
Ms. Guion | 150,000 | (2) | 100,000 | (3) | — | 7.9975 | 07/06/2017 | |||||||||
163,641 | (4) | — | 50,000 | 7.9975 | 07/06/2017 | |||||||||||
Mr. Flanigan | 36,572 | (7) | 54,856 | (8) | — | 7.9975 | 08/28/2018 | |||||||||
48,762 | (9) | — | 42,666 | 7.9975 | 08/28/2018 | |||||||||||
9,144 | (7) | 13,713 | (10) | — | 12.1975 | 05/28/2019 | ||||||||||
12,191 | (11) | — | 10,666 | 12.1975 | 05/28/2019 | |||||||||||
— | 49,759 | (12) | — | 25.25 | 03/24/2020 | |||||||||||
10,367 | (13) | — | 39,392 | 25.25 | 03/24/2020 | |||||||||||
Mr. Ravener | 22,858 | (14) | 34,284 | (15) | — | 7.9975 | 08/28/2018 | |||||||||
27,620 | (16) | — | 29,522 | 7.9975 | 08/28/2018 | |||||||||||
22,858 | (14) | 34,284 | (15) | — | 7.9975 | 12/19/2018 | ||||||||||
27,620 | (16) | — | 29,522 | 7.9975 | 12/19/2018 | |||||||||||
— | 53,688 | (17) | — | 25.25 | 03/24/2020 | |||||||||||
11,185 | (13) | — | 42,503 | 25.25 | 03/24/2020 |
options with an exercise price of $12.1975; and (f) 12,440 shares per year on February 3, 2012 and February 1, 2013, 12,439 shares on January 31, 2014 and 2,073 shares on January 30, 2015 for Mr. Flanigan with respect to options with an exercise price of $25.25. If an annual adjusted EBITDA-based target is not met, these options may still vest on a "catch up" basis if the applicable cumulative adjusted EBITDA-based target is achieved at the end of fiscal years (1) 2011 or 2012 in the case of Mr. Dreiling, Mr. Tehle and Ms. Guion; (2) 2011, 2012, 2013, or 2014 in the case of Mr. Ravener's options identified in (b) above and Mr. Flanigan's options identified in (d) and (e) above; and (3) 2011, 2012, 2013, 2014, or 2015 in the case of Mr. Ravener's and Mr. Flanigan's options identified in (c) and (f), respectively, above. These options also are subject to certain accelerated vesting provisions as described in "Potential Payments upon Termination or Change in Control" below.
In connection with our 2007 merger, certain named executive officers elected to roll over all or a portion of their options held prior to our 2007 merger (the "Rollover Options") rather than receive in exchange for each such option the cash merger consideration, without interest and less applicable withholding taxes, equal to $22.00 less the exercise price of each option. The exercise price of the Rollover Options and the number of shares underlying the Rollover Options were adjusted as a result of our 2007 merger to provide their pre-merger value equivalents. The Rollover Options are fully vested and were originally granted, and otherwise continue, under the terms of our 1998 Stock Incentive Plan.
In connection with the special dividend paid to our shareholders onin September 11, 2009 our Compensation Committee (1) approved a payment in substitution for the dividend adjustment with respect to Rollover Options as permitted thereunder to reflect the effects of the specialsuch dividend on such Rollover Options and (2) adjusted the exercise price of options, granted under the terms of our 2007 Stock Incentive Plan as required by the terms of such options to reflect the effects of the special dividend on such options. The exercise prices listed in the table above reflect the exercise price adjustments for the options granted under our 2007 Stock Incentive Plan in connection with the special dividend.
OnIn October 12, 2009, we completed a reverse stock split of 1 share for each 1.75 shares of common stock outstanding. The exercise prices of, and number of shares outstanding under, our equity awards existing at the time of the reverse stock split were retroactively adjusted to reflect the reverse stock split and are reflected in the table above.below.
See "Long-Term Equity Incentive Program" in "Compensation Discussion and Analysis" above for additional discussion
| Option Awards | Stock Awards | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||
Mr. Dreiling | 285,714 | (1) | — | — | 7.9975 | 07/06/2017 | — | — | — | — | ||||||||||||||||||
222,235 | (2) | — | — | 7.9975 | 07/06/2017 | — | — | — | — | |||||||||||||||||||
100,000 | (3) | — | — | 29.38 | 04/23/2020 | — | — | — | — | |||||||||||||||||||
— | 228,226 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 326,037 | (5) | 15,088,992 | (5) | ||||||||||||||||||
— | — | — | — | — | 26,184 | (6) | 1,211,796 | (6) | — | — | ||||||||||||||||||
Mr. Tehle | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | ||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | ||||||||||||||||||
Mr. Vasos | 50,000 | (1) | 50,000 | (1) | — | 7.9975 | 12/19/2018 | — | — | — | — | |||||||||||||||||
84,623 | (7) | — | 41,667 | (7) | 7.9975 | 12/19/2018 | — | — | — | — | ||||||||||||||||||
— | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | |||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | ||||||||||||||||||
Ms. Lanigan | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | ||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | ||||||||||||||||||
Mr. Sparks | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | ||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — |
March 20, 2014 and 50% on March 20, 2015, subject to certain accelerated vesting provisions as described in "Potential Payments upon Termination or Change in Control" below. The market value was computed by multiplying the number of such units by the closing market price of one share of our common stock on February 1, 2013.
Option Exercises and Stock Vested During Fiscal 20102012
We have omitted the columns pertaining to stock awards because they are inapplicable.
| Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | |||||||||
Mr. Dreiling | 425,512 | 17,572,324 | 13,094 | 605,990 | |||||||||
Mr. Tehle | 386,171 | 15,511,027 | 2,149 | 99,456 | |||||||||
Mr. Vasos | 228,760 | 9,154,305 | 2,149 | 99,456 | |||||||||
Ms. Lanigan | 235,256 | 9,459,266 | 2,149 | 99,456 | |||||||||
Mr. Sparks | — | — | 2,149 | 99,456 |
| Option Awards | ||||||
---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | |||||
Mr. Dreiling | — | — | |||||
Mr. Tehle | 146,172 | 3,917,203 | |||||
Ms. Guion | 112,236 | 3,004,596 | |||||
Mr. Flanigan | — | — | |||||
Mr. Ravener | — | — |
Pension Benefits
Fiscal 20102012
We have omitted the Pension Benefits table as it is inapplicable.
Nonqualified Deferred Compensation
Fiscal 20102012
Information regarding each named executive officer's participation in our CDP/SERP Plan is included in the following table. The material terms of the CDP/SERP Plan are described after the table. Please also see "Benefits and Perquisites" in "Compensation Discussion and Analysis" above. We have omitted from this table the column pertaining to aggregate withdrawals/distributions during the fiscal year because it is inapplicable.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | 61,781 | 341,775 | 114,334 | 1,791,559 | |||||||||
Mr. Tehle | 33,857 | 133,448 | 134,440 | 1,405,253 | |||||||||
Mr. Vasos | 65,462 | 20,108 | 10,459 | 154,259 | |||||||||
Ms. Lanigan | 27,658 | 87,427 | 72,131 | 774,674 | |||||||||
Mr. Sparks | 2,526 | 2,526 | 3 | 5,055 |
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | 57,161 | 312,981 | 66,149 | 795,020 | |||||||||
Mr. Tehle | 32,115 | 165,078 | 119,026 | 927,122 | |||||||||
Ms. Guion | 79,692 | 129,647 | 116,523 | 988,804 | |||||||||
Mr. Flanigan | 1,694 | 61,284 | 5,403 | 99,313 | |||||||||
Mr. Ravener | 22,051 | 9,696 | 11,136 | 86,733 |
Pursuant to the CDP, each named executive officersofficer may annually elect to defer up to 65% of base salary if theirhis or her compensation is in excess ofexceeds the Internal Revenue Service limit set forth in Section 401(a)(17) of the Internal Revenue Code, of 1986, as amended (the "Internal Revenue Code"), and up to 100% of bonus pay if theirhis or her compensation equals or exceeds the Internal Revenue Service highly compensated limit under Section 414(q)(1)(B) of the Internal Revenue Code. We currently match base pay deferrals at a rate of 100%, up to 5% of annual salary, with annual salary offset by the amount of match-eligible salary under the 401(k) plan. All named executive officers are 100% vested in all compensation and matching deferrals and earnings on those deferrals.
Pursuant to the SERP, we make an annual contribution equal to a certain percentage of a participant's annual salary and bonus to all participants who are actively employed in an eligible job grade on January 1 and continue to be employed as of December 31 of a given year. Persons hired after May 27, 2008 (the "Eligibility Freeze Date"), including Mr. Ravener,Messrs. Vasos and Sparks, are not eligible to participate in the SERP. The contribution percentage is based on age, years of service and job grade. The fiscal 20102012 contribution percentage for each eligible named executive officer was 9.5% for each of Messrs. Dreiling and Mr. Tehle and 7.5% for Mr. Dreiling, Ms. Guion and Mr. Flanigan and 9.5% for Mr. Tehle.Lanigan.
As a result of our 2007 merger, which constituted a change-in-control under the CDP/SERP Plan, all previously unvested SERP amounts vested on July 6, 2007. For newly eligible SERP participants after July 6, 2007 but prior to the Eligibility Freeze Date, SERP amounts vest at the earlier of the participant's attainment of age 50 or the participant's being credited with 10 or more "years of service", or upon termination of employment due to death or "total and permanent disability" or upon a "change-in-control", all as defined in the CDP/SERP Plan. See "Potential Payments upon Termination or Change in Control as of January 28, 2011—February 1, 2013—Payments After a Change in Control" below for a general description of our change in control arrangements.
The amounts deferred or contributed to the CDP/SERP Plan are credited to a liability account, which is then invested at the participant's option in an account that mirrors the performance of a fund or funds selected by the Compensation Committee or its delegate. Beginning on August 2, 2008, these funds are identical to the funds offered in our 401(k) Plan.
A participant who ceases employment with at least 10 years of service or after reaching age 50 and whose CDP account balance or SERP account balance exceeds $25,000 may elect for that account balance to be paid in cash by (a) lump sum, (b) monthly installments over a 5, 10 or 15-year period or (c) a combination of lump sum and installments. Otherwise, payment is made in a lump sum. The vested amount will be payable at the time designated by the Plan upon the participant's termination of employment. A participant's CDP/SERP benefit normally is payable in the following February if employment ceases during the first 6 months of a calendar year or is payable in the following August if employment ceases during the last 6 months of a calendar year. However, participants may elect to receive an in-service lump sum distribution of vested amounts credited to the CDP account, provided that the date of distribution is no sooner than 5 years after the end of the year in which the amounts were deferred. In addition, a participant who is actively employed may request an "unforeseeable emergency hardship" in-service lump sum distribution of vested amounts credited to the participant's CDP account. Account balances are payable in cash.
As a result of our 2007 merger, the CDP/SERP Plan liabilities through July 6, 2007 were fully funded into an irrevocable rabbi trust. We also funded into the rabbi trust deferrals into the CDP/SERP Plan between July 6, 2007 and October 15, 2007. All CDP/SERP Plan liabilities incurred on or after October 15, 2007 are unfunded.
Potential Payments upon Termination or Change in Control as of January 28, 2011
The tables below reflect potential payments to each ofOur employment agreements with our named executive officers, the award agreements for our equity awards, and certain plans and programs offered to or in variouswhich our named executive officers participate provide for benefits or payments to the officers upon certain termination and change in control scenarios based on compensation, benefit, and equity levels in effect on January 28, 2011. The amounts shown assume that the terminationof employment or change in control event was effective as of January 28, 2011. For stock valuations, we have assumed that the price per share is the fair market value of our stock on January 28, 2011 ($28.40), which was the closing price on the NYSE on such date. The amounts shown are merely estimates. We cannot determine the actual amounts to be paid until a termination or change in control scenario occurs.
Payments Regardless of Manner of Termination
Regardless of the termination scenario, the named executive officers will receive earned but unpaid base salary through the employment termination date, along with any other payments or benefits owed under any of our plans or agreements covering the named executive officer as governed by the terms of those plans or agreements.events. These benefits include vested amounts in the CDP/SERP Planand payments are discussed under "Nonqualified Deferred Compensation" above.
The tables below exclude any amounts payable to the named executive officerexcept to the extent that they area benefit or payment is available generally to all salaried employees and dodoes not discriminate in favor of our executive officers.
Payments Upon Termination Due to Death or Disability
In the event of Mr. Dreiling's 2012 Performance-Based Restricted Stock. If Mr. Dreiling's employment with us terminates due to his death or disability, with respectall or a portion of his performance-based restricted stock may vest, unless previously vested or forfeited, depending upon the timing of his termination due to each named executive officer:death or disability:
2012 Equity Awards. If any of the named executive officers' employment with us terminates due to death or disability:
Pre-2012 Equity Awards. If Mr. Vasos's employment with us terminates due to death or disability, the portion of performance-based options that would have become exercisable in respect of the fiscal year in which the named executive officer'shis employment terminates if the named executive officerhe had remained employed with us through that date will remain outstanding through the date we determine whether the applicable performance targets are met for that fiscal year. If thesuch performance targets are met, for that fiscal year, such portion of the performance-based options will become exercisable on such performance-vesting determination date. Otherwise, such portion will be forfeited. In addition, the portion of Mr. Vasos's time-based options that would have become exercisable on the next scheduled vesting date if Mr. Vasos had remained employed with us through that date will become vested and exercisable.
Except with respect to the options granted to Mr. Dreiling in April 2010, all otherwise unvested options will be forfeited, and vested options generally may be exercised (by the employee's survivor in the case of death) for a period of 1 year (3 years in the case of Rollover Options) from the service termination date unless we purchase such vested options (other than thedate.
The options granted to Mr. Dreiling in April 2010) in total at the fair market value of the shares of our common stock underlying the2010 are fully vested, and such vested options lessgenerally may be exercised (by his survivor in the aggregate exercise pricecase of thedeath) for a period of 1 year from service termination, but are not subject to our right to purchase such vested options.
Other Payments. In the event of death, each named executive officer's beneficiary will receive payments under our group life insurance program in an amount, up to a maximum of $3 million, equal
to 2.5 times the named executive officer's annual base salary.salary, rounded to the next highest $1,000. We have excluded from the tables below amounts that the named executive officer would receive under our disability insurance program since the same benefit level is provided to all of our salaried employees. The named executive officer's CDP/SERP Plan benefit also becomes fully vested (to the extent not already vested) upon his or her death and is payable in a lump sum within 60 days after the end of the calendar quarter in which the named executive officer's death occurs.
In the event of disability, each named executive officer's CDP/SERP Plan benefit becomes fully vested (to the extent not already vested) and is payable in a lump sum within 60 days after the end of the calendar quarter in which we receive notification of the disability determination of the named executive officer's disability by the Social Security Administration.
In the event of Mr. Dreiling's termination of employment terminates due to disability, he will also be entitled to receive any incentive bonus accrued in respect offor any of our previously completed fiscal years but unpaid as of thehis termination date, of his termination. He will also receiveas well as a lump sum cash payment, payable at the time annual bonuses are paid to our other senior executives, equal to a pro rata portion of his annual incentive bonus, if any, that he would have been entitled to receive, if such termination had not occurred, for the fiscal year in which his termination occurred.
"Disability" Definitions. For purposes of the named executive officers' employment agreements, other than Mr. Dreiling's, "disability" means (1) the employee must be disabled for purposes of our long-term disability insurance plan or (2) the employee has an inability to perform the duties under the agreement in accordance with our expectations because of a medically determinable physical or mental impairment that (x) can reasonably be expected to result in death or (y) has lasted or can reasonably be expected to last longer than ninety (90)90 consecutive days. For purposes of Mr. Dreiling's employment agreement, "disability" means (1) he must be disabled for purposes of our long-term disability insurance plan or for purposes of his portable long-term disability insurance policy, or (2) if no such plan or policy is in effect or in the case of the plan, the plan is in effect but no longer applies to him, he has an inability to perform the duties under the agreement in accordance with our expectations because of a medically determinable physical or mental impairment that (x) can reasonably be expected to result in death or (y) has lasted or can reasonably be expected to last longer than ninety (90)90 consecutive days. For purposes of the CDP/SERP Plan, "disability" means total and permanent disability for purposes of entitlement to Social Security disability benefits. For purposes of each named executive officer's agreement(s) governing stock option agreement(s),options granted prior to 2012, "disability" has the same definition as that which is set forth in such officer's employment agreement, or (for each named executive officer other than Mr. Dreiling), in the absence of such an agreement or definition, "disability" shall be as defined in our long-term disability plan. For purposes of each named executive officer's agreement(s) governing stock options and performance share units and Mr. Dreiling's agreement governing performance share units, in each case granted in 2012, "disability" has the same definition as that set forth in such officer's employment agreement, or in the absence of an agreement, "disability" shall be as defined in any change-in-control agreement between the officer and Dollar General, or in the absence of any such agreement, as defined in our long-term disability plan.
Payments Upon Termination Due to Retirement
RetirementExcept as provided immediately below with respect to stock options and performance share units awarded in 2012, retirement is not treated differently from any other voluntary termination without good reason (as defined under the relevant agreements, as discussed below under "Payments Upon Voluntary Termination") under any of our plans or agreements for named executive officers, exceptofficers.
In the event of the retirement of any of the named executive officers:
remained employed with us shall remain exercisableoutstanding for a period of 3 years1 year following the retirement date and shall become vested and exercisable on the anniversary of the grant date that falls within the 1 year period following the retirement date (but only to the extent such portion has not otherwise terminated or become exercisable). However, if during such 1 year period there occurs a Change in Control or the officer dies or incurs a disability, such portion shall instead become immediately vested and exercisable (but only to the extent such portion has not otherwise terminated). Otherwise, any option which is unvested and unexercisable as of the officer's termination of employment shall immediately expire without payment. The officer may exercise the option to the extent vested and exercisable any time prior to the 5th anniversary of the retirement date, but no later than the 10th anniversary of the grant date.
For purposes of each named executive officer's retirement unless theagreements governing stock options expire earlier. To be entitled to the extended exercise period for the Rollover Options, the retirement must occurand performance share units granted in 2012, "retirement" means such officer's voluntary termination of employment with us on or after reaching the named executive officer reaches theminimum age of 6562 and achieving 5 consecutive years of service, but only if (1) the sum of such officer's age plus years of service (counting whole years only) equals at least 70 and (2) there is no basis for us to terminate the officer for cause (as defined under the applicable agreement) at the time of his or with our express consent, prior to age 65 in accordance with any applicable early retirement policy then in effect or as may be approved by our Compensation Committee.her voluntary termination.
Payments Upon Voluntary Termination
The payments to be made to a named executive officer upon voluntary termination vary depending upon whether the named executive officerhe or she resigns with or without "good reason" or after our failure to offer to renew, extend or replace the named executive officer'shis or her employment agreement under certain circumstances. For purposes of each named executive officer, "good"Good reason" generally means (as more fully described in the applicable employment agreement):
No event (in(but in the case of Mr. Dreiling, no isolated, insubstantial and inadvertent event not in bad faith) will constitute "good reason" if we cure the claimed event within 30 days (10 business days in the case of Mr. Dreiling) after receiving notice from the named executive officer.
Voluntary Termination with Good Reason or After Failure to Renew the Employment Agreement. If any named executive officer resigns with good reason, he or she will forfeit all then unvested option grantsoptions, all then unvested performance-based restricted stock and all then unvested performance share units held by that officer will be forfeited. Unlessofficer. He or she generally may exercise any vested options that were granted in 2012 up to 90 days following the resignation date and generally may exercise any vested options that were granted prior to 2012 (unless, with respect to Mr. Vasos we purchase any thensuch vested options (including Rollover Options) in total at a price equal to the fair market value of the shares underlying the vested options,shares, less the aggregate exercise price of the vested options, the named executive officer generally may exercise vested optionsprice) for the following periods from the terminationresignation date: 180 days in the case of options(options granted to Mr. Dreiling Mr. Tehle and Ms. Guion on or before January 21, 2008; 3 months in the case of Rollover Options;2008) or 90 days in the case of options(options granted to Messrs. Dreiling Flanigan and RavenerVasos prior to 2012 but after January 21, 2008. We do not have a repurchase, or call, right with respect to the option granted to Mr. Dreiling in April 2010 and the shares underlying such option.2008).
In the event any named executive officer (other than Mr. Dreiling) resigns under the circumstances described in (2) below, or in the event we fail to extend the term of Mr. Dreiling's employment as provided in (3) below, the relevant named executive officer's equity will be treated as described under "Voluntary Termination without Good Reason" below.
Additionally, if the named executive officer (1) resigns with good reason, or (2) in the case of named executive officers (otherother than Mr. Dreiling),Dreiling, resigns within 60 days of our failure to offer to renew, extend or replace the named executive officer'shis or her employment agreement before, at or within 6 months after the end of the agreement's term (unless we enter into a mutually acceptable severance arrangement or the resignation is a result of the named executive officer's voluntary retirement or termination), or (3) in the case of Mr. Dreiling, in the event we elect not to extend thehis term of his employment by providing 60 days prior written notice before the applicable extension date, then in each case the named executive officer will receive the following benefits generally on or beginning on the 60th day after termination of employment but contingent upon the execution and effectiveness of a
release of certain claims against us and our affiliates in the form attached to the named executive officer's employment agreement:
Note that any amounts owed to a named executive officer (other than Mr. Dreiling) in the form of salary continuation that would otherwise have been paid during the 60 day period after the named executive officer'shis or her employment termination will instead be payable in a single lump sum as soon as administratively practicable after the 60th day after such termination date and the remainder will be paid in the form of salary continuation payments as set forth above.
Subject to any applicable prohibition on acceleration of payment under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), we may, at any time and in our sole discretion, elect to make a lump-sum payment of all these amounts (other than Mr. Dreiling's severance benefits, which shall be provided over 24 months), or all other earned but unpaid amounts due as a result of this type of termination.
The named executive officer will forfeit any unpaid severance amounts upon a material breach of any continuing obligation under the employment agreement or the release (the "Continuing Obligations"), which include:
Wal-Mart, Sam's Club, Target, Costco, K-Mart, Big Lots, BJ's Wholesale Club, Walgreens, Rite-Aid, CVS, Family Dollar Stores, Fred's, the 99 Cents Stores, Casey's General Stores, Inc., Pantry, Inc. and Dollar Tree Stores (and, with respect to Mr. Dreiling, Casey's General Stores and The Pantry, Inc. Sam's(Sam's Club, Big Lots, Walgreens, Rite-Aid and CVS are not specifically listed in Mr. Dreiling's employment agreement), or any person then planning to enter the deep discount consumable basics retail business, if the named executive officer is required to perform services for that person which are substantially similar to those he or she provided or directed at any time while employed by us.
Voluntary Termination without Good Reason. If the named executive officer resigns without good reason, he or she will forfeit all then unvested equity grants andoptions, all vested but unexercised options (other than Rollover Options). Rollover Options are fully exercisablethat were granted prior to 2012, all then unvested performance-based restricted stock, and all then unvested performance share units. The named executive officer generally may be exercised for 3 months fromexercise any vested options that were granted in 2012 up to 90 days following the termination date unless they expire earlier or unless we repurchase them, on a per share basis, at a per share price equal to the lesser of (1) the fair market value of one of our shares, minus the per share exercise price of a Rollover Option or (2) the sum of (x) $8.75 per share (the "Base Price") plus (y) the applicable percentage (e.g., 20% for each anniversary of July 6, 2007) of the excess of the fair market value of one of our shares over the per share Base Price, minus (z) the per share exercise price of a Rollover Option.resignation date.
Payments Upon Involuntary Termination
The payments to be made to a named executive officer upon involuntary termination vary depending upon whether termination is with or without "cause". For purposes of each named executive officer, "cause""Cause" generally means (as more fully described in the applicable employment agreement):
parent entity of Dollar General) or reduces our or our affiliates' good name and standing or would bring Dollar General or its affiliates into public contempt or ridicule; or
For purposes of Mr. Tehle, Mr. Vasos, Ms. Guion, Mr. FlaniganLanigan and Mr. Ravener,Sparks, "cause" also means:means (as more fully described in the applicable employment agreement):
For purposes of determining treatmentthe equity awards granted in 2012, "cause" shall be as defined in the applicable employment agreement or change-in-control agreement (in the absence of a named executive officer's Rollover Options,an employment
agreement) or, in the absence of either of such agreements, "cause" means, tois defined materially consistent with the extent that our Compensation Committee determines that it is directly and materially harmful to our business or reputation:definition set forth above.
Involuntary Termination for Cause. If the named executive officer is involuntarily terminated for cause, he or she will forfeit all unvested equity grants as well asand all vested but unexercised options. However, we may repurchase any Rollover Options, that by their terms do not terminate immediately upon a termination for cause, at a per share price equal to the lesser of (x) Base Price over the per share exercise price of these options and (y) the fair market value of one of our shares underlying these options over the per share exercise price of these options.
Involuntary Termination without Cause. If theany named executive officer is involuntarily terminated without cause, he or she:
Payments After a Change in Control
Upon a change in control (as defined under each applicable governing document), regardless of whether the named executive officer's employment terminates:
vested and nonforfeitable, or have not previously been forfeited, will immediately vest, become nonforfeitable and be paid upon the change in control.
If the named executive officer is involuntarily terminated without cause or resigns for good reason following the change in control, he or she will receive the same severance payments and benefits as described above under "Voluntary Termination with Good Reason or After Failure to Renew the Employment Agreement" above.Agreement." However, the named executive officer will have 1 year from the termination date in which to exercise vested options that were granted in 2012 if he or she resigns or is involuntarily terminated within 2 years of the change in control under any scenario other than retirement or involuntary with cause (in which cases, he or she will have 5 years from the retirement date to exercise vested options and will forfeit any vested but unexercised options held at the time of the termination with cause).
If any payments or benefits in connection with a change in control (as defined in Section 280G of the Internal Revenue Code) would be subject to the "golden parachute" excise tax under federal income tax rules, we will pay an additional amount to the named executive officer to cover the excise tax and any other excise and income taxes resulting from this payment. However, other than with respect to Mr. Dreiling and Mr. Sparks, if after receiving this payment the named executive officer's after-tax benefit would not be at least $50,000 more than it would be without this payment, then this payment will not be made and the severance and other benefits due to the named executive officer will be reduced so that the golden parachute excise tax is not incurred. In Mr. Sparks' case, his employment agreement provides for a capped payment (taking into consideration all payments covered by Section 280G of the Internal Revenue Code) of $1 less than the amount that would trigger the golden parachute excise tax unless he signs a release and his after-tax benefit would be at least $50,000 more than it would be without the capped payment, but we would not pay an additional amount to cover the excise tax.
For purposes of the CDP/SERP Plan, a change in control generally is deemed to occur (as more fully described in the plan document):
For purposes of the treatment of equity discussed above, a change in control generally means (as more fully described in the Management Stockholder's Agreement between usAmended and Restated 2007 Stock Incentive Plan):
The following tables summarize thetable reflects potential payments to each of our named executive officers upon the occurrence ofin various termination of employment eventsand change in control scenarios based on compensation, benefit, and equity levels in effect on, and assuming the scenario was effective as of, February 1, 2013. For stock valuations, we have used the endclosing price of our most recently completed fiscal year (i.e., January 28, 2011)stock on the NYSE on February 1, 2013 ($46.28). The table reports only amounts that are increased, accelerated or otherwise paid or owed as a result of the applicable scenario and, as a result, excludes equity awards and CDP/SERP Plan benefits that had vested prior to the event and earned but unpaid base salary through the employment termination date. The table also excludes any amounts that are available generally to all salaried employees and do not discriminate in favor of our executive officers. The amounts shown are merely estimates. We cannot determine actual amounts to be paid until a termination or change in control scenario occurs.
Potential Payments to Named Executive Officers Upon Occurrence of
Various Termination Events As of January 28, 2011February 1, 2013
Name/Item | Death ($) | Disability ($) | Retirement ($)(1) | Voluntary Without Good Reason ($) | Involuntary Without Cause or Voluntary with Good Reason ($) | Involuntary With Cause ($) | Change in Control ($) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | |||||||||||||||||||
Equity Vesting Due to Event(2) | 4,592,196 | 4,592,196 | — | n/a | n/a | n/a | 17,166,333 | ||||||||||||
Cash Severance | — | 1,591,956 | n/a | n/a | 7,399,603 | n/a | 7,399,603 | ||||||||||||
Health Continuation(3) | n/a | 26,774 | n/a | n/a | 26,774 | n/a | 26,774 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 3,000,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 7,592,196 | 6,210,926 | — | — | 7,436,377 | — | 24,602,710 | ||||||||||||
| |||||||||||||||||||
Mr. Tehle | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,605,058 | n/a | 2,605,058 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 25,320 | n/a | 25,320 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,734,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 2,074,772 | 340,772 | — | — | 2,640,378 | — | 2,981,149 | ||||||||||||
| |||||||||||||||||||
Mr. Vasos | |||||||||||||||||||
Equity Vesting Due to Event | 2,296,357 | 2,296,357 | — | n/a | n/a | n/a | 2,296,357 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,511,989 | n/a | 2,511,989 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 15,202 | n/a | 15,202 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,672,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 3,968,357 | 2,296,357 | — | — | 2,537,191 | — | 4,833,548 | ||||||||||||
| |||||||||||||||||||
Ms. Lanigan | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,127,728 | n/a | 2,127,728 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 16,436 | n/a | 16,436 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,417,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 1,757,772 | 340,772 | — | — | 2,154,164 | — | 2,494,935 | ||||||||||||
| |||||||||||||||||||
Mr. Sparks | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,277,377 | n/a | 2,277,377 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 16,436 | n/a | 16,436 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,516,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 1,856,772 | 340,772 | — | — | 2,303,813 | — | 2,644,584 | ||||||||||||
|
Name/Item | Death ($) | Disability ($) | Retirement ($)(1) | Voluntary Without Good Reason ($)(1) | Involuntary Without Cause or Voluntary with Good Reason ($) | Involuntary With Cause ($) | Change in Control ($)(2) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | ||||||||||||||||||
Vested Options Prior to Event | 20,402,480 | 20,402,480 | — | — | 20,402,480 | — | 20,402,480 | |||||||||||
Option Vesting Due to Event | 2,914,640 | 2,914,640 | n/a | n/a | n/a | n/a | 8,743,920 | |||||||||||
SERP Benefits Prior to Event | 552,146 | 552,146 | 552,146 | 552,146 | 552,146 | 552,146 | 552,146 | |||||||||||
SERP Benefits Due to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Deferred Comp Plan Balance Prior to and After Event | 242,874 | 242,874 | 242,874 | 242,874 | 242,874 | 242,874 | 242,874 | |||||||||||
Cash Severance | — | 2,186,595 | n/a | n/a | 7,357,208 | n/a | 7,357,208 | |||||||||||
Health Continuation(3) | n/a | 23,106 | n/a | n/a | 23,106 | n/a | 23,106 | |||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | |||||||||||
Life Insurance Proceeds | 2,872,563 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 26,984,702 | 26,321,840 | 795,020 | 795,020 | 28,587,813 | 795,020 | 37,331,733 | |||||||||||
| ||||||||||||||||||
Mr. Tehle | ||||||||||||||||||
Vested Options Prior to Event | 8,292,519 | 8,292,519 | 267,053 | 267,053 | 8,292,519 | — | 8,292,519 | |||||||||||
Option Vesting Due to Event | 1,282,440 | 1,282,440 | n/a | n/a | n/a | n/a | 3,847,320 | |||||||||||
SERP Benefits Prior to Event | 574,344 | 574,344 | 574,344 | 574,344 | 574,344 | 574,344 | 574,344 | |||||||||||
SERP Benefits Due to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Deferred Comp Plan Balance Prior to and After Event | 352,778 | 352,778 | 352,778 | 352,778 | 352,778 | 352,778 | 352,778 | |||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 3,112,565 | n/a | 3,112,565 | |||||||||||
Health Payment(3) | n/a | n/a | n/a | n/a | 21,157 | n/a | 21,157 | |||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | |||||||||||
Life Insurance Proceeds | 1,612,240 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 12,114,321 | 10,502,081 | 1,194,175 | 1,194,175 | 12,363,364 | 927,122 | 16,210,684 | |||||||||||
| ||||||||||||||||||
Ms. Guion | ||||||||||||||||||
Vested Options Prior to Event | 6,399,061 | 6,399,061 | — | — | 6,399,061 | — | 6,399,061 | |||||||||||
Option Vesting Due to Event | 1,020,125 | 1,020,125 | n/a | n/a | n/a | n/a | 3,060,375 | |||||||||||
SERP Benefits Prior to Event | 494,484 | 494,484 | 494,484 | 494,484 | 494,484 | 494,484 | 494,484 | |||||||||||
SERP Benefits Due to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Deferred Comp Plan Balance Prior to and After Event | 494,320 | 494,320 | 494,320 | 494,320 | 494,320 | 494,320 | 494,320 | |||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 3,009,771 | n/a | 3,009,771 | |||||||||||
Health Payment(3) | n/a | n/a | n/a | n/a | 13,326 | n/a | 13,326 | |||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | |||||||||||
Life Insurance Proceeds | 1,558,995 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 9,966,985 | 8,407,990 | 988,804 | 988,804 | 10,420,962 | 988,804 | 13,481,337 | |||||||||||
|
Name/Item | Death ($) | Disability ($) | Retirement ($)(1) | Voluntary Without Good Reason ($)(1) | Involuntary Without Cause or Voluntary with Good Reason ($) | Involuntary With Cause ($) | Change in Control ($)(2) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Flanigan | ||||||||||||||||||
Vested Options Prior to Event | 2,119,363 | 2,119,363 | — | — | 2,119,363 | — | 2,119,363 | |||||||||||
Option Vesting Due to Event | 486,328 | 486,328 | n/a | n/a | n/a | n/a | 2,665,519 | |||||||||||
SERP Benefits Prior to Event | 97,629 | 97,629 | 97,629 | 97,629 | 97,629 | 97,629 | 97,629 | |||||||||||
SERP Benefits Due to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Deferred Comp Plan Balance Prior to and After Event | 1,683 | 1,683 | 1,683 | 1,683 | 1,683 | 1,683 | 1,683 | |||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 1,961,686 | n/a | 1,961,686 | |||||||||||
Health Payment(3) | n/a | n/a | n/a | n/a | 13,326 | n/a | 13,326 | |||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | 857,290 | |||||||||||
Life Insurance Proceeds | 1,016,110 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 3,721,114 | 2,705,004 | 99,313 | 99,313 | 4,203,688 | 99,313 | 7,726,497 | |||||||||||
| ||||||||||||||||||
Mr. Ravener | ||||||||||||||||||
Vested Options Prior to Event | 2,094,988 | 2,094,988 | — | — | 2,094,988 | — | 2,094,988 | |||||||||||
Option Vesting Due to Event | 508,599 | 508,599 | n/a | n/a | n/a | n/a | 2,906,605 | |||||||||||
SERP Benefits Prior to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
SERP Benefits Due to Event | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Deferred Comp Plan Balance Prior to and After Event | 86,733 | 86,733 | 86,733 | 86,733 | 86,733 | 86,733 | 86,733 | |||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,148,740 | n/a | 2,148,740 | |||||||||||
Health Payment(3) | n/a | n/a | n/a | n/a | 8,512 | n/a | 8,512 | |||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | 1,007,772 | |||||||||||
Life Insurance Proceeds | 1,113,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 3,803,320 | 2,690,320 | 86,733 | 86,733 | 4,348,972 | 86,733 | 8,263,350 |
Compensation Committee Interlocks and Insider Participation
Each of Messrs. Agrawal, Bryant, Calbert, Jones, Rhodes and RhodesRickard and Ms. Fili-Krushel was a member of our Compensation Committee during 2010.all or a portion of 2012. None of these persons was at any time during 20102012 an officer or employee of Dollar General or any of our subsidiaries or an officer of Dollar General or any of our subsidiaries at any time prior to fiscal 2010.2012. Messrs. Calbert and Agrawal, due to their relationships with KKR, and Mr. Jones, due to his relationship with Goldman, Sachs & Co., may be viewed as having an indirect material interest in certain of our relationships and transactions with KKR and Goldman, Sachs & Co. discussed under "Certain Transactions with Management and Others" above. Messrs. Calbert, Agrawal and Jones no longer serve on the Compensation Committee. Mr. Dreiling serves as a manager of Buck Holdings, LLC, for which Messrs. Calbert, Agrawal and Jones serve as managers.
Compensation Risk Considerations
In March 2010,2013, our Compensation Committee, with the assistance of its compensation consultant and management, reviewed our compensation policies and practices for all employees, including executive officers, to assess the risks that may arise from our compensation programs. The assessment included a review of our compensation programs for certain design features which could potentially encourage excessive risk-taking or otherwise generate risk to Dollar General. As a result of that assessment, management and the Compensation Committee concluded, after considering the degree to which identified risk-aggravating factors were offset by risk-mitigating factors, that the net risks created by our overall compensation program were not reasonably likely to have a material adverse effect on Dollar General. Several of the design features that were noted as reducing the likelihood of excessive risk-taking or otherwise mitigating risk included:
Throughout 2010, the Committee continued to discuss risks pertaining to various compensation programs during meetings at which changes to any such programs were discussed. In addition, in March 2011 the Committee reviewed and discussed a management presentation confirming that our compensation programs have undergone few changes, analyzing those changes, and determining that the risk profile identified in the March 2010 risk assessment has not significantly changed. As a result of this review and discussion, which included identification of further risk-mitigating factors such as the use of an additional company-wide performance measure for the short-term cash incentive plan and the comprehensive management succession plan, the Committee again determined that the net risks created by our overall compensation program are not reasonably likely to have a material adverse effect on Dollar General.
PROPOSAL 2:ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required by SEC rules, we are providing our shareholders the opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules, which includes the disclosures under "Compensation Discussion and Analysis," and the accompanying compensation tables and related narrative discussion in the "Executive Compensation" section above.
As discussed in "Compensation Discussion and Analysis" above, our compensation programs are designed to attract, retain and motivate persons with superior ability, to reward outstanding performance, and to align the interests of our named executive officers with the long-term interests of our shareholders. Under these programs, our named executive officers are rewarded for the achievement of specific annual and long-term goals and the realization of increased shareholder value. We firmly believe that our compensation programs have been effective at attracting and retaining the executive talent necessary to guide Dollar General during a period of significant growth and transformation, and have been instrumental in helping us achieve strong financial performance in the last three fiscal years.
We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement in accordance with SEC rules by voting for this proposal. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers. This advisory vote is not a vote on the compensation of our Board or our compensation policies as they relate to risk management, as described under "Compensation Risk Considerations" in the "Executive Compensation" section above.
Although the vote we are asking shareholders to cast is non-binding, our Board and the Compensation Committee value the views of our shareholders and intend to consider the outcome of the vote when making future compensation decisions for our named executive officers.
Our Board recommends that you voteFOR the approval of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.
PROPOSAL 3:ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
As required by SEC rules, we are seeking your input with regard to the frequency of future shareholder advisory votes on our named executive officer compensation, specifically whether they should occur once every 1, 2 or 3 years. We ask that you support a frequency period of every 3 years.
Our Board believes that a 3-year period for holding this vote:
Our Board believes that anything less than a 3-year frequency period will yield a short-term mindset, detract from our long-term interests and goals, would not allow for changes to our executive compensation program to be in place long enough to evaluate whether the changes were effective.
Although the vote we are asking you to cast is non-binding, our Board and the Compensation Committee value the views of our shareholders and will consider the outcome of the vote when determining the frequency of future say-on-pay votes. Furthermore, our Board welcomes input from shareholders with respect to our executive compensation program even in years when the advisory vote does not occur.
Our Board recommends that you vote to conduct a non-binding, advisory vote on named executive officer compensation once every3 YEARS.
SECTION 16(a) BENEFICIAL OWNERSHIPREPORTING COMPLIANCE
The United States securities laws require our executive officers, directors, and greater than 10% shareholders to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based solely upon a review of these reports furnished to us during and with respect to 2010, or written representations that no Form 5 reports were required, we believe that each of those persons filed, on a timely basis, the reports required by Section 16(a) of the Securities Exchange Act of 1934, except that (1) Mr. John Flanigan filed 1 late Form 4 to report a purchase of Dollar General common stock directly from the Company and filed an amended Form 3 to report a holding inadvertently omitted from his original Form 3; (2) Mr. Todd Vasos filed 1 late Form 4 to report the acquisition of a stock option to purchase shares of Dollar General common stock resulting from the accelerated vesting in connection with a secondary offering of shares of our common stock by certain of our shareholders in December 2010; and (3) each of Mr. Adrian Jones and Goldman, Sachs & Co. filed 1 late Form 4 to report 1 open market sale of Dollar General common stock by Goldman, Sachs & Co. Both Mr. Jones and Goldman, Sachs & Co. disclaim beneficial ownership of the shares involved in the transaction.
For purposes of the tables below, a person is a "beneficial owner" of a security ifover which that person has or shares voting or investment power over the security or which that person has the right to acquire beneficial ownership within 60 days. Unless otherwise noted, to our knowledge these persons have sole voting and investment power over the shares listed. Percentage computations are based on 341,521,858327,212,294 shares of our common stock outstanding as of March 16, 2011.21, 2013.
Security Ownership of Certain Beneficial Owners
The following table shows the amount of our common stock beneficially owned as of March 16, 201121, 2013 by those known by us to beneficially own more than 5% of our common stock.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||
---|---|---|---|---|---|---|---|
Buck Holdings, L.P.(1) | 54,145,011(1) | 16.5% |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||
---|---|---|---|---|---|---|---|
Buck Holdings, L.P.(1) | 241,997,057 | (1) | 70.9 | % | |||
T. Rowe Price Associates, Inc.(2) | 25,898,013 | (2) | 7.6 | % |
and for Mr. Kravis is c/o Kohlberg Kravis Roberts & Co. L.P., 9 West 57th Street, Suite 4200, New
York, NY 10019. The address for Mr. Roberts is c/o Kohlberg Kravis Roberts & Co. L.P., 2800 Sand Hill Road, Suite 200, Menlo Park, CA 94025.
Security Ownership of Officers and Directors
The following table shows the amount of our common stock beneficially owned as of March 16, 201121, 2013 by our directors and named executive officers individually and by our directors and all of our executive officers as a group. Unless otherwise noted, these persons may be contacted at our executive offices.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||
---|---|---|---|---|---|
Raj Agrawal(1)(2)(4) | * | ||||
Warren F. Bryant(2)(4) | * | ||||
Michael M. Calbert(1)(2)(4) | * | ||||
Sandra B. Cochran(2) | — | * | |||
Patricia D. Fili-Krushel(2) | 2,500 | * | |||
Adrian Jones(2)(3)(4) | * | ||||
William C. Rhodes, III(2)(4)(5) | * | ||||
David B. Rickard(2)(4) | * | ||||
Richard W. | * | ||||
David M. | * | ||||
| * | ||||
| * | ||||
| * | ||||
All directors and executive officers as a group | * |
percentage of outstanding stock owned by each named person and by the group, but not for the purpose of computing the percentage ownership of any other person.
PROPOSAL 2:
VOTE REGARDING CHARTER AMENDMENT
What am I being asked to approve?
Our Board of Directors is recommending that you approve an amendment to our Amended and Restated Charter, referred to herein as the charter amendment, to provide for majority voting in uncontested elections of directors. The disclosure below is a summary of the purpose and effect of the charter amendment, as well as the text of the charter amendment.
What is a majority voting standard for the election of directors?
Under a majority voting standard for the election of directors, a director nominee will not be elected unless the number of votes cast "for" his or her election exceed the number of votes cast "against" his or her election.
How are director nominees currently elected to our Board of Directors?
The Tennessee Business Corporation Act provides that, unless otherwise specified in a company's charter, a director is elected by a plurality of the votes cast in the election. Because our existing charter does not specify the voting standard required in director elections, our directors currently are elected by a plurality vote as described under "Proposal 1".
Why should I approve the charter amendment?
In making its recommendation, our Board of Directors and the CNG Committee carefully considered the advantages of both majority and plurality voting standards for the election of directors, analyzed current corporate governance trends, including the standards for voting in director elections in place at other Fortune 500 companies, and evaluated the appropriateness of a majority voting standard in light of our overall corporate governance structure.
Our Board of Directors and the CNG Committee also considered the benefits of retaining a plurality voting standard, including the greater certainty that the annual election will result in a full and duly elected Board. By contrast, a majority voting standard carries with it the possibility that (i) the CEO or another management director might fail to be elected, (ii) our ability to comply with NYSE listing standards and SEC requirements with respect to independent directors may be impaired, and (iii) the triggering of a possible "change in control" may occur due to the failure of a majority of the directors to be elected. Nevertheless, we believe that generally requiring directors to be elected by a majority of the votes cast both ensures that only directors with broad acceptability among our voting shareholders will be elected and enhances the accountability of each elected director to our shareholders. On balance, our Board and the CNG Committee concluded that a majority vote standard would be in our and our shareholders' best interests and would conform our director election voting standards with a large percentage of our peer companies.
Under a majority voting standard, shareholders will also be entitled to "abstain" from voting in the election of a director. Abstentions and broker non-votes will have no effect in determining whether the required affirmative majority vote has been obtained. In the case of a contested election, that is, an election for which the number of nominees exceeds the number of directors to be elected, directors will continue to be elected by a plurality of the votes cast by our shareholders entitled to vote in the election.
What happens if an incumbent director nominee fails to receive a majority of the votes cast for his or her election in an uncontested election?
Under Tennessee law, a director continues in office until a successor is elected and qualified, even if the director is not reelected in an uncontested election. To address the status of a "holdover" incumbent director who fails to receive a majority of the votes cast for his or her election in an uncontested election, we intend to implement a director resignation policy to be set forth in our Corporate Governance Guidelines. This policy will require a director to tender his or her resignation upon receiving, in an uncontested election, a greater number of votes cast against his or her election than in favor of his or her election. The Board has adopted this policy through amendments to the Corporate Governance Guidelines that are contingent upon and will be effective immediately following the approval of the charter amendment by the shareholders.
Under the resignation policy, the Board, taking into account the recommendation of the Nominating and Governance Committee, will determine whether to accept a tendered resignation. The Nominating and Governance Committee and the Board of Directors, in making their decisions, may consider any factor or other information that they deem relevant, including whether the "holdover" director's resignation may result in any adverse impact to us, including under any NYSE or SEC board or committee composition requirement. The Board will be required to publicly disclose its decision and its rationale. The director who tenders his or her resignation will not be permitted to participate in deliberations of or voting by the Nominating and Governance Committee or the Board regarding his or her resignation.
If the Board rejects the offered resignation, the director will continue to serve until the next annual shareholders' meeting and until his or her successor is duly elected or his or her resignation or removal in accordance with our Bylaws. If the Board accepts the offered resignation, or if a nominee for director, who is not an incumbent director, is not elected, then the Board, in its sole discretion, may fill any resulting vacancy or decrease the size of the Board, in each case pursuant to the provisions of our Bylaws.
How would the charter amendment read?
The proposed charter amendment would amend our current charter by inserting a new Article 10 in the form set forth below immediately following Article 9 of our current charter:
"10. Except as provided in Article 9 or in the case of a contested election, a nominee for director shall be elected by the affirmative vote of a majority of the votes cast in favor of or against the election of such nominee by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. For purposes of this Article 10, "affirmative vote of a majority of the votes cast" shall mean that the number of votes cast in favor of the election of such nominee exceeds the number of votes cast against the election of such nominee; abstentions and broker non-votes shall not be deemed to be votes cast for purposes of tabulating the vote. In a contested election, a nominee for director shall be elected by a plurality of the votes cast by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. An election shall be considered "contested" if there are more nominees for election than positions on the Board of Directors to be filled by election at the meeting. The determination of the number of nominees for purposes of this subsection shall be made as of (i) the expiration of the time fixed by the Amended and Restated Bylaws of the corporation, as the same may be amended from time to time, for advance notice by a shareholder of an intention to nominate directors, or (ii) absent such a provision, at a time publicly announced by the Board of
Directors which is not more than 14 days before notice is given of the meeting at which the election is to occur."
What vote is required to approve the charter amendment and, if approved, when will the charter amendment be effective?
The charter amendment will be approved if the votes cast in favor of adopting the charter amendment exceed the votes cast against it. If approved, the charter amendment will become effective upon the filing of articles of amendment with the Tennessee Secretary of State. We would make such a filing promptly after the annual meeting. If approved, nominees to our Board of Directors will be elected under a majority voting standard beginning at the next meeting of shareholders at which directors are elected.
What does the Board of Directors recommend?
Our Board unanimously recommends that you voteFOR approval of the charter amendment.
The Audit Committee of our Board of Directors has:
Based on these reviews and discussions, the Audit Committee unanimously recommended to the Board of Directors that Dollar General's audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended January 28, 2011February 1, 2013 for filing with the SEC.
While the Audit Committee has the responsibilities and powers set forth in its charter, the Audit Committee does not have the duty to plan or conduct audits or to determine that Dollar General's financial statements are complete, accurate, or in accordance with generally accepted accounting principles. Dollar General's management and independent auditor have this responsibility. The Audit Committee also does not have the duty to assure compliance with laws and regulations or with the policies of the Board of Directors.
This report has been furnished by the members of the Audit Committee:
The above Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Dollar General filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Dollar General specifically incorporates this report by reference therein.
PROPOSAL 4:3:
RATIFICATION OF APPOINTMENT OF AUDITORS
Who has the Audit Committee selected as the independent registered public accounting firm?
The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for the 20112013 fiscal year. Ernst & Young LLP has served in that capacity since October 2001.
Will representatives of Ernst & Young LLP attend the annual meeting?
Representatives of Ernst & Young LLP have been requested and are expected to attend the annual meeting. These representatives will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
What does the Board of Directors recommend?
Our Board unanimously recommends that you voteFOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for the 20112013 fiscal year. The Audit Committee is not bound by a vote either for or against the firm. If the shareholders do not ratify this appointment, our Audit Committee will consider that result in selecting our independent registered public accounting firm in the future.
What fees were paid to the independent registered public accounting firm in 20102012 and 2009?2011?
The following table sets forth the aggregate fees for professional audit services rendered to us by Ernst & Young LLP for the audit of our consolidated financial statements for the past two fiscal years and fees billed for other services rendered by Ernst & Young LLP during the past two fiscal years:
Service | 2012 Aggregate Fees Billed ($) | 2011 Aggregate Fees Billed ($) | |||||
---|---|---|---|---|---|---|---|
Audit Fees(1) | 2,057,071 | 1,973,644 | |||||
Audit-Related Fees(2) | 29,500 | 29,500 | |||||
Tax Fees(3) | 1,995,318 | 1,547,980 | |||||
All Other Fees(4) | 6,000 | 6,000 |
Service | 2010 Aggregate Fees Billed ($) | 2009 Aggregate Fees Billed ($) | |||||
---|---|---|---|---|---|---|---|
Audit Fees(1) | 2,077,949 | 2,512,641 | |||||
Audit-Related Fees(2) | 29,500 | 28,500 | |||||
Tax Fees(3) | 1,220,411 | 1,310,650 | |||||
All Other Fees(4) | 6,000 | 6,000 |
How does the Audit Committee pre-approve services provided by the independent registered public accounting firm?
The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. Where feasible, the Committee considers and, when appropriate, pre-approves services at regularly scheduled meetings after disclosure by management and the independent registered public accounting firm of the nature of the proposed services, the estimated fees (when available), and their opinions that the services will not impair the independence of the independent registered public accounting firm. The Committee's chairperson (or any Committee member if the chairperson is unavailable) may pre-approve such services in between Committee meetings, and must report to the Committee at its next meeting with respect to all services so pre-approved. The Committee pre-approved 100% of the services provided by Ernst & Young LLP during 20102012 and 2009.2011.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The United States securities laws require our executive officers, directors, and greater than 10% shareholders to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based solely upon a review of these reports furnished to us during and with respect to 2012, or written representations that no Form 5 reports were required, we believe that each of those persons filed, on a timely basis, the reports required by Section 16(a) of the Securities Exchange Act of 1934 except that (1) each of Mr. Flanigan, Mr. Ravener and Mr. Vasos filed 1 late Form 4 to report 2, 2 and 1 acquisitions, respectively, of stock options to purchase shares of Dollar General common stock resulting from the accelerated vesting in connection with the sale of shares of our common stock by certain of our shareholders pursuant to a Rule 10b5-1 trading plan; and (2) Mr. Jones filed 1 late Form 4 to report a decrease in a short position in a basket of stocks, that may be deemed to be beneficially owned directly by Goldman Sachs International and indirectly by The Goldman Sachs Group, Inc., that includes shares of Dollar General common stock. Mr. Jones is a managing director of Goldman, Sachs & Co., a wholly-owned subsidiary of The Goldman Sachs Group, Inc. Mr. Jones disclaims beneficial ownership of the shares involved in the transaction except to the extent of his pecuniary interest therein.
SHAREHOLDER PROPOSALS
FOR 20122014 ANNUAL MEETING
To be considered for inclusion in our proxy materials relating to the 20122014 annual meeting of shareholders, proposals must be submitted by eligible shareholders who have compliedmust submit proposals that comply with the relevant regulations of the SEC and must be receivedregulations no later than December 7, 2011. In addition, if[ ]. To introduce other new business at the 2014 annual meeting, you must provide written notice to us no earlier than the close of business on [ ] and no later than the close of business on [ ], and comply with the advance notice provisions of our Bylaws. If we are not notified of a shareholder proposal by February 25, 2012,[ ], then the proxies held by our management may provide the discretion to vote against such shareholder proposal, even though the proposal is not discussed in our proxy materials sent in connection with the 20122014 annual meeting of shareholders.
If you would like to introduce other new business at the 2012 annual meeting, you must provide written notice to us no earlier than the close of business on January 26, 2012 and no later than the close of business on February 25, 2012, and comply with the advance notice provisions of our Bylaws.
Shareholder proposals should be mailed to Corporate Secretary, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TN 37072. Shareholder proposals that are not included in our proxy materials will not be considered at any annual meeting of shareholders unless such proposals have complied with the requirements of our Bylaws.
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