Dollar General 2013 Annual Report Download - page 44

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 was designed to retain
Mr. Dreiling, whose 2008 stock option award fully vested and whose transfer restrictions on shares of
our common stock expired in 2012, while simultaneously incenting him to continue to drive superior
financial performance. 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
GAAP 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 all
items excluded from the 2013 Teamshare program adjusted EBIT calculation outlined above, as well as
share-based compensation charges. Additionally, the calculation of net income will exclude (unless the
Committee disallows such exclusion) any material and demonstrable impact resulting from changes in
tax or other legislation or accounting changes enacted after the beginning of the 2012 fiscal year and
not contemplated in our 2012-2016 financial plan (as opposed to the 2013 Teamshare program adjusted
EBIT calculation, which excludes, unless the Committee disallows, the losses due to changes in tax or
other legislation or accounting changes enacted after the beginning of the 2013 fiscal year).
(b) 2013 Equity Awards. A new long-term equity structure was finalized and implemented in
March 2012 to more closely align with typical public company equity structures, and this program was
revised in 2013 so that each of the named executive officers now receives restricted stock units, in
addition to the time-based stock options and performance share units previously received in 2012. The
mix of the equity value is delivered 50% in options, 25% in performance share units and 25% in
restricted stock units, as opposed to the previous equity value delivery mix of 75% options and 25% in
performance share units, to more closely match the equity mix of our market comparator group. The
Committee believes this is the appropriate allocation to achieve both the incentive and retention goals
of the awards.
Consistent with our compensation philosophy and objectives, the value of the long-term
incentive awards was based on the median of the long-term equity target values of our market
comparator group. The market value for each named executive officer’s position was blended to
establish a single long-term incentive value on which awards are based for all named executive officers
(other than the CEO for whom the market value was not blended). This blending practice is similar to
the one described under ‘‘Short—Term Cash Incentive Plan’’ above.
The actual number of stock options, performance share units and restricted stock units
awarded were determined by applying a formula provided by Meridian (Black Scholes for stock
options) 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 named executive officer’s continued employment with us and certain accelerated vesting provisions.
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