Dollar General 2012 Annual Report Download - page 42

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legislation or accounting changes enacted after the beginning of the 2013 fiscal year;
(e) significant tax settlements; and (f) any significant unplanned items of a non-recurring or
extraordinary nature.
The target percentage of each named executive officer’s salary upon which his or her bonus is
based for the 2013 Teamshare plan is also the same as in 2012. Those target percentages are based on
a blend of the median of the target percentages for the 2012 market comparator group for each
position, other than the CEO.
Long-Term Equity Incentive Program. Long-term equity incentives motivate named executive
officers to focus on long-term success for shareholders. These incentives help provide a balanced focus
on both short-term and long-term goals and are important to our compensation program’s recruiting
and retention objectives. Such incentives are designed to compensate named executive officers for a
long-term commitment to us, while motivating sustained increases in our financial performance and
shareholder value.
Equity awards are made under our Amended and Restated 2007 Stock Incentive Plan and are
granted with a per share exercise price equal to the fair market value of one share of our common
stock on the date of grant.
(a) Pre-2012 Equity Awards. Until March 2012, the Compensation Committee had not made
annual equity awards since our 2007 merger because the long-term equity granted at the time of that
merger or at the time of hire has been sufficiently retentive and otherwise has adequately met our
compensation objectives. However, in connection with the amendment of his employment agreement in
April 2010, Mr. Dreiling also received a special one-time stock option grant that fully vested in April
2011. The options granted to the named executive officers prior to 2012 (other than Mr. Dreiling’s
April 2010 option award) are divided so that half are time-vested (over 5 years) and half are
performance-vested (generally over 5 or 6 years) based on a comparison of an EBITDA-based
performance metric, as described below, against pre-set goals for that performance metric. The
combination of time and performance-based vesting criteria is designed to compensate executives for
long-term commitment to us, while motivating sustained increases in our financial performance.
The vesting of the performance-based options granted to the named executive officers prior to
March 2012 is subject to continued employment with us over the performance period and the Board’s
determination that we have achieved for each of the relevant fiscal years the specified annual
performance target based on EBITDA and adjusted as described below. For fiscal years 2008-2012,
those adjusted EBITDA targets were $828 million, $961 million, $1.139 billion, $1.35 billion and
$1.517 billion, respectively, which were based on the long-term financial plan, less any anticipated
permissible adjustments, primarily to account for unique expenses related to our 2007 merger. If a
performance target for a given fiscal year is not met, the performance-based options may still vest and
become exercisable on a ‘‘catch up’’ basis if, at the end of a subsequent fiscal year, a specified
cumulative adjusted EBITDA performance target is achieved. The annual and cumulative adjusted
EBITDA performance targets are based on our long-term financial plans in existence at the time of
grant. Accordingly, in each case at the time of grant, we believed those levels, while attainable, would
require strong performance and execution.
For purposes of calculating the achievement of performance targets for our long-term equity
incentive grants prior to March 2012, ‘‘EBITDA’’ means earnings before interest, taxes, depreciation
and amortization plus transaction, management and/or similar fees paid to KKR and/or its affiliates. In
addition, the Board is required to fairly and appropriately adjust the calculation of EBITDA to reflect,
to the extent not contemplated in our financial plan, the following: acquisitions, divestitures, any
change required by GAAP relating to share-based compensation or for other changes in GAAP
promulgated by accounting standard setters that, in each case, the Board in good faith determines
require adjustment to the EBITDA performance measure we use for our long-term equity incentive
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