Dollar General 2006 Annual Report Download - page 114

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The Committee also asks Hewitt to provide information from all other general industry
companies for certain positions that are less specific to the retail industry and to serve as
additional reference points in assessing the appropriateness of the compensation levels of all
NEO level positions.
The market comparator group does not include all of the companies that are included in
the S&P 500 General Merchandise Store Index because the Committee believes that many of
these companies are too large or too small to provide an appropriate comparison and that it is
more appropriate to compare compensation of our NEOs with that of executives in companies
that are more comparable in size in terms of revenue.
Does the Committee provide Employment Contracts to NEOs?
The Committee authorized an employment contract with Mr. Perdue upon his hire in
April 2003. Thereafter, beginning in 2004, the Committee began offering employment contracts
to all officers including the other NEOs. The Committee took this action because it believed,
based on benchmarking data, it was a common protection offered to NEOs at other comparable
companies, and because contracts were needed to lock-in members of a new management team
to execute changes necessary to meet strategic objectives. The Committee also wanted to give
standard protections to the NEOs as well as to Dollar General from a competitive standpoint
should the NEO decide to leave our employ. The Committee approved revisions to these
employment contracts for all NEOs (other than the CEO) in April of 2006 as follows:
• Contract term changed to 3 years instead of 2 years per common competitive practice.
• In addition to other severance payments and benefits, an additional lump sum
payment in an amount equal to 2 times the annual employer contribution to
participation in our medical, dental and vision benefits programs.
• In addition to other severance, if any payments or benefits in connection with a
change-in-control would be subject to excise tax under federal income tax rules, we
have agreed to pay an additional amount to the NEO to cover the excise tax and any
resulting taxes. However, if after receiving this payment, the NEO's after-tax
benefit is not at least $25,000 more than it would be without this payment, then it will
not be made and the severance and other benefits due will be reduced so that an
excise tax is not incurred.
• Change-in-control triggers revised to be more consistent with the stock plan triggers
and to remove the exclusion from the change-in-control provisions ownership or
acquisitions of our securities by Cal Turner, Jr., James Stephen Turner, members of
their family or certain of their affiliates or associates.
• Addition of Target, K-Mart, Walgreen’ s, Rite Aid and CVS to the list of named
companies in the list of competitors for purposes of the non-compete provisions.
The Committee also approved certain revisions to Mr. Perdue’ s contract in September
2006 as described below under “What are the Terms of the Extension of Mr. Perdue’ s Contract?”
112