Dollar General 2011 Annual Report Download - page 62

Proxy
PROPOSAL 2:
VOTE REGARDING THE AMENDED AND RESTATED 2007 STOCK INCENTIVE
PLAN
What are shareholders being asked to approve?
Our Board of Directors is asking you to approve our Amended and Restated 2007 Stock
Incentive Plan, along with the material terms of the performance-based compensation under the plan
for purposes of compensation deductibility under Internal Revenue Code Section 162(m). In this proxy
statement, we sometimes refer to this amended and restated plan as the ‘‘2007 Stock Incentive Plan.’’
On November 30, 2011, upon the recommendation of our Compensation Committee, our Board of
Directors approved the plan described in this proposal, subject to shareholder approval at the annual
meeting. The plan will not become effective unless and until it is approved by shareholders. A copy of
the proposed 2007 Stock Incentive Plan is attached as Appendix A to this proxy statement.
Why are shareholders being asked to approve the 2007 Stock Incentive Plan?
NYSE rules generally require companies to submit material revisions of equity-compensation
plans to shareholders for approval. Among other changes, the 2007 Stock Incentive Plan extends the
term of the plan to the tenth anniversary of the date of shareholder approval, which is considered a
material revision of the plan under NYSE rules.
Why are shareholders being asked to approve the material terms of the performance-based
compensation under the 2007 Stock Incentive Plan?
Section 162(m) of the Internal Revenue Code limits our ability to deduct from our U.S. federal
corporate income taxes compensation in excess of $1 million per year paid to ‘‘covered employees’’
unless the compensation qualifies as ‘‘performance-based.’’ Compensation cannot qualify as
‘‘performance-based’’ unless the plan under which it is paid is approved by shareholders. ‘‘Covered
employees’’ generally include each of the persons who are our Chief Executive Officer or one of the
other named executive officers (other than our Chief Financial Officer).
The 2007 Stock Incentive Plan is designed to permit Dollar General to grant awards that
qualify as performance-based compensation for purposes of satisfying the requirements of
Section 162(m). The Section 162(m) deduction limit does not apply for certain grants made during any
period during which our securities are not publicly-traded and during a transition reliance period after
our securities become publicly-traded. Our Section 162(m) transition reliance period ends in 2013.
Thus, in order for us to continue to have flexibility to pay performance-based compensation that meets
the requirements for deductibility under Section 162(m), we need to obtain shareholder approval of the
2007 Stock Incentive Plan no later than the 2013 annual meeting of shareholders. We decided to
submit the plan to our shareholders in 2012 because (1) we wanted to determine the availability of
making deductible awards in 2013 before the 2013 annual meeting of shareholders; and (2) an Internal
Revenue Service proposed regulation could eliminate the deductibility of all or a portion of the March
2012 performance share unit awards absent approval of the plan by our shareholders at the 2012
annual meeting.
Why should shareholders approve this proposal?
We believe the 2007 Stock Incentive Plan is important to our continued growth and success.
The purpose of the plan is to attract and retain management and other personnel and key service
providers, to motivate management personnel by means of growth-related incentives to achieve
long-range goals, and to further align the interests of plan participants with those of our shareholders.
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