Dollar General 2007 Annual Report Download - page 97

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for accounting purposes, under SFAS 123(R) such options are not considered vested until the
expiration of the Company’ s call option (July 6, 2012). Accordingly, all references to the
vesting provisions or vested status of the options discussed in this note give effect to the vesting
pursuant to the provisions of SFAS 123(R) and may differ from descriptions of the vesting status
of the Time Options and Performance Options located elsewhere in the Company’ s Annual
Report on Form 10-K.
Each of the Company’ s management-owned shares, Rollover Options, and vested new
options include certain provisions by which the holder of such shares, Rollover Options, or
vested new options may require the Company to repurchase such instruments in limited
circumstances. Specifically, each such instrument is subject to a repurchase right for a period of
365 days after termination due to the death or disability of the holder of the instrument that
occurs within five years from the closing date of the Merger. In such circumstances, the holder
of such instruments may require the Company to repurchase any shares at the fair market value
of such shares and any Rollover Options or vested new options at a price equal to the intrinsic
value of such rollover or vested new options. Because the Company does not have control over
the circumstances in which it may be required to repurchase the outstanding shares or Rollover
Options, such shares and Rollover Options, valued at a fair value and intrinsic value of $6.0
million and $3.2 million, respectively, have been classified as Redeemable common stock in the
accompanying consolidated balance sheet at February 1, 2008. Because redemption of such
shares is uncertain, such shares are not subject to re-measurement until their redemption becomes
probable.
In addition to the repurchase rights upon death or disability that are common to all
management held shares, Rollover Options, and vested new options, the management
stockholder’ s agreement which the Company entered into with certain executive officers
provides such officers with an additional repurchase right in the event their employment
terminates for any reason prior to July 21, 2008. Such executive officers may require the
Company to repurchase their outstanding shares and Rollover Options at a price of $5 per share
in the case of shares and the difference in $5 per share and the exercise price of any Rollover
Options that they hold. This repurchase right exists for a period of 365 days following their
termination within the required timeframe. As noted above, each of the shares, whether held by
general members of management or executive officers, has been classified within Redeemable
common stock on the accompanying consolidated balance sheet as of February 1, 2008. In the
case of the Rollover Options held by the executive officers, however, the additional repurchase
rights in the event of their termination prior to July 21, 2008 are considered within the control of
the employee, and as such, $3.6 million (representing the fixed repurchase price) related to such
Rollover Options have been classified in Other (noncurrent) liabilities in the accompanying
consolidated balance sheet at February 1, 2008 pursuant to SFAS 123(R).
The Company adopted SFAS 123(R) effective February 4, 2006 and began recognizing
compensation expense for stock options based on the fair value of the awards on the grant date.
The Company adopted SFAS 123(R) under the modified-prospective-transition method and,
therefore, results from prior periods have not been restated. The following table illustrates the
effect on net income and earnings per share as if the Company had applied the fair value
recognition provisions of SFAS 123 to options granted under the Company’ s stock plans for the