Dollar General 2011 Annual Report Download - page 70

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such participant at the end of the restriction period or, if later, the payment date. 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.
Performance Share Units. There are no immediate tax consequences of receiving an award of
performance share units under the plan. A participant who is awarded performance share units will be
required to recognize ordinary income in an amount equal to the fair market value of shares issued to
such participant on the payment date. 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.
Dividend Equivalent Rights. A participant generally will not recognize taxable income when a
dividend equivalent right is granted. The participant, however, will generally recognize ordinary income
upon receiving payment of cash and/or shares for the dividend equivalent right. The amount included
in the participant’s income will equal the amount of cash and the fair market value of the shares
received. Dollar General generally will be entitled to a corresponding tax deduction at the time the
participant recognizes ordinary income with respect to a dividend equivalent right.
Section 280(G). To the extent payments that are contingent on a change in control are
determined to exceed certain Internal Revenue Code limitations, they may be subject to a 20%
nondeductible excise tax, and Dollar General’s deduction with respect to the associated compensation
expense may be disallowed in whole or in part.
Section 409A. The plan is intended to comply with Section 409A of the Internal Revenue
Code to the extent that such section would apply to any award under the plan. Section 409A governs
the taxation of deferred compensation. Any participant granted an award that is deemed to be deferred
compensation, such as a grant of restricted stock units, that does not qualify for an exemption from
Section 409A, and does not comply with Section 409A, could be subject to immediate taxation on the
award as soon as the award is no longer subject to a substantial risk of forfeiture (even if the award is
not exercisable) and an additional 20% tax (and a further additional tax based upon an amount of
interest determined under Section 409A) on the value of the award.
Have any awards been granted under the amended and restated terms of the 2007 Stock Incentive
Plan prior to the annual meeting?
On March 20, 2012, the Committee approved awards of performance share units to certain
employees, subject to shareholder approval of the 2007 Stock Incentive Plan. If this proposal is not
approved at the annual meeting, these performance share units will be automatically forfeited.
Additionally, in connection with the annual meeting, we anticipate awarding stock options and
restricted stock units to the non-employee directors under the 2007 Stock Incentive Plan. If this
proposal is not approved at the annual meeting, these stock options and restricted stock units will still
be granted, but they will be granted pursuant to the 2007 Stock Incentive Plan as in effect prior to the
annual meeting. Information regarding the March 20, 2012 grants of performance share units and the
planned award of options and restricted stock units to the non-employee directors is set forth in the
table below.
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