Dollar General 2011 Annual Report Download - page 41

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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
is fiscal year 2012) and if certain additional vesting requirements are met. The performance measures
are goals related to adjusted EBITDA (weighted 90%) and adjusted ROIC (weighted 10%) as
established by the 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 will 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. One-third of the performance share units earned based on 2012 financial
performance will vest on the last day of the one-year performance period, and the remaining two-thirds
of the performance share units will vest on the second and third anniversaries of the grant date, subject
to the 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 is anticipated to fully vest, and whose transfer
restrictions on shares of our common stock are scheduled to expire, in July 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 awarded by the 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.
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
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