Dollar General 2011 Annual Report Download - page 69

Proxy
If the Committee permits such a transfer, a participant who has transferred a non-qualified
stock option to a family member by gift will realize taxable income at the time the non-qualified stock
option is exercised by the family member. The participant will be subject to withholding of income and
employment taxes at that time. The family member’s tax basis in the shares of common stock will be
the fair market value of the shares of common stock on the date the option is exercised. The transfer
of vested non-qualified stock options will be treated as a completed gift for gift and estate tax
purposes. Once the gift is completed, neither the transferred options nor the shares acquired on
exercise of the transferred options will be includable in the participant’s estate for estate tax purposes.
Stock Appreciation Rights. There are no immediate tax consequences of receiving an award of
stock appreciation rights under the plan. Upon exercising a stock appreciation right, a participant will
recognize ordinary income in an amount equal to the difference between the exercise price and the fair
market value of our common stock on the date of exercise. If Dollar General complies with applicable
reporting requirements and with the restrictions of Section 162(m), Dollar General will be entitled to a
business expense deduction in the same amount and generally at the same time as the participant
recognizes ordinary income.
Other Stock-Based Awards. The Committee may grant or sell to participants Other Stock-Based
Awards, the form and terms of which will be determined by the Committee. Other Stock-Based Awards
may include unrestricted shares, restricted shares, and other awards that are valued by reference to the
fair market value of or a number of shares of our common stock, awards that are otherwise based on
the fair market value of or a number of shares of our common stock, and awards that are in any way
payable in the form of shares of our common stock (which may include, without limitation, restricted
stock units, performance shares, performance share units, and bonus stock). The federal income tax
consequences of Other-Stock Based Awards will depend on the form and terms of those awards. The
summary below describes the federal income tax consequences of some of the Other-Stock Based
Awards the Committee has granted or sold or may be likely to grant or sell to participants.
Unrestricted Shares. Participants who are awarded unrestricted shares of common stock will be
required to recognize ordinary income in an amount equal to the fair market value of the shares of our
common stock on the date of the award, reduced by the amount, if any, paid for such shares. If Dollar
General complies with applicable reporting requirements and with the restrictions of Section 162(m),
Dollar General will be entitled to a business expense deduction in the same amount and generally at
the same time as the participant recognizes ordinary income.
Restricted Shares. A participant who is awarded restricted shares of common stock will not
recognize any taxable income for federal income tax purposes in the year of the award, provided that
the shares of common stock are subject to restrictions (that is, the restricted stock is nontransferable
and subject to a substantial risk of forfeiture). However, the participant may elect under Section 83(b)
of the Internal Revenue Code to recognize compensation income in the year of the award in an
amount equal to the fair market value of the common stock on the date of the award (less the
purchase price, if any), determined without regard to the restrictions. If the participant does not make
such a Section 83(b) election, the fair market value of the common stock on the date the restrictions
lapse (less the purchase price, if any) will be treated as compensation income to the participant and
will be taxable in the year the restrictions lapse and dividends paid while the common stock is subject
to restrictions will be subject to withholding taxes. If Dollar General complies with applicable reporting
requirements and with the restrictions of Section 162(m), Dollar General will be entitled to a business
expense deduction in the same amount and generally at the same time as the participant recognizes
ordinary income.
Restricted Stock Units. There are no immediate tax consequences of receiving an award of
restricted stock units under the plan. A participant who is awarded restricted stock units will be
required to recognize ordinary income in an amount equal to the fair market value of shares issued to
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