Dollar General 2006 Annual Report Download - page 80

The Company believes that stock-based awards assist in retaining employees and better align the
interests of its employees with those of its shareholders.
Stock options granted under the plan are non-qualified stock options issued at an exercise
price equal to the market price of the Company’ s common stock on the grant date, vest ratably
over a four-year period (subject to earlier vesting in certain circumstances such as a change in
control), and expire no more than 10 years following the grant date. The number of options
granted is generally based on individual job grade levels, which are determined based upon
competitive market data. Dividends are not paid or accrued on stock options.
Unvested options generally are forfeited upon the cessation of employment with the
Company. In the event employment terminates for a reason other than cause, death, disability or
retirement, any outstanding vested options issued under the plan generally may be exercised for a
period of three months. In the event employment terminates due to death, disability or
retirement, the option recipient (or the recipient’ s legal representative or beneficiary) generally
may exercise any outstanding vested options issued under the plan for a period of three years.
Notwithstanding the foregoing, no option may be exercised beyond its initial 10-year expiration
date.
Restricted stock awards and restricted stock unit awards granted under the plan generally
vest ratably over three years (subject to earlier vesting in certain circumstances such as a change
in control). Unvested restricted stock and restricted stock unit awards generally are forfeited
upon the cessation of a grantee’ s employment with the Company. Recipients of restricted stock
are entitled to receive cash dividends and to vote their respective shares, but are generally
prohibited from selling or transferring restricted shares prior to vesting. Recipients of restricted
stock units are entitled to accrue dividend equivalents on the units but are not entitled to vote,
sell or transfer the units or the shares underlying the units prior to both vesting and payout.
Dividends or dividend equivalents, as the case may be, are paid or accrued on the grants of
restricted stock and restricted stock units at the same rate that dividends are paid to shareholders
generally. Dividend equivalents on restricted stock units vest at the same time that the underlying
shares vest.
The plan provides for the automatic annual grant of 4,600 restricted stock units to each
non-employee director that vest one year after the grant date (subject to earlier vesting upon
retirement, change in control or other circumstances set forth in the plan) and generally may not
be paid until the individual has ceased to be a member of the Company’ s Board of Directors.
In the past, the Company had various stock and incentive plans under which stock
options were granted. Stock options that were granted under prior plans and were outstanding on
February 2, 2007 continue in accordance with the terms of the respective plans.
On February 3, 2006, the vesting of all outstanding options granted prior to August 2,
2005, other than options previously granted to the Company’ s CEO and options granted in 2005
to the officers of the Company at the level of Executive Vice President or above, accelerated
pursuant to a January 24, 2006 action of the Compensation Committee of the Company’ s Board
of Directors. In addition, pursuant to that Compensation Committee action, the vesting of all
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