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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
Dollar General Corporation | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
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(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
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o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
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(2) | Form, Schedule or Registration Statement No.: | |||
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(4) | Date Filed: |
Dollar General Corporation 100 Mission Ridge Goodlettsville, Tennessee 37072 | ||
Dear Shareholder:
The 20132015 Annual Meeting of Shareholders of Dollar General Corporation will be held on Wednesday, May 29, 2013,27, 2015, at 9:00 a.m., Central Time, at Goodlettsville City Hall Auditorium, 105 South Main Street, Goodlettsville, Tennessee. All shareholders of record at the close of business on March 21, 201319, 2015 are invited to attend the annual meeting. For security reasons, however, to gain admission to the meeting you may be required to present photo identification and comply with other security measures.
At this year's meeting, you will have an opportunity to vote on the matters described in our accompanying Notice of Annual Meeting of Shareholders and Proxy Statement. Our 20122014 Annual Report and our Annual Report on Form 10-K for the fiscal year ended February 1, 2013January 30, 2015 also accompany this letter.
Your interest in Dollar General and your vote are very important to us. We encourage you to read the Proxy Statement and vote your proxy as soon as possible so your vote can be represented at the annual meeting. You may vote your proxy via the Internet or telephone, or if you received a paper copy of the proxy materials by mail, you may vote by mail by completing and returning a proxy card.
On behalf of the Board of Directors, I would like to express our appreciationthank you for your continued support of Dollar General.
Sincerely, | ||
/s/ Rick Dreiling | ||
Rick Dreiling Chairman & Chief Executive Officer |
April 11, 20132, 2015
Dollar General Corporation 100 Mission Ridge Goodlettsville, Tennessee 37072 | ||
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: | Wednesday, May | |||
TIME: | 9:00 a.m., Central Time | |||
PLACE: | Goodlettsville City Hall Auditorium 105 South Main Street Goodlettsville, Tennessee | |||
ITEMS OF BUSINESS: | 1) | To elect as directors the | ||
2) | To | |||
To transact any other business that may properly come before the annual meeting and any adjournments of that meeting | ||||
WHO MAY VOTE: | Shareholders of record at the close of business on March | |||
By Order of the Board of Directors, | ||||
/s/ Christine L. Connolly | ||||
Goodlettsville, Tennessee April | Christine L. Connolly Corporate Secretary |
Please vote your proxy as soon as possible even if you expect to attend the annual meeting in person. You may vote your proxy via the Internet or by phone by following the instructions on the notice of internet availability or proxy card, or if you received a paper copy of these proxy materials by mail, you may vote by mail by completing and returning the enclosed proxy card in the enclosed reply envelope. No postage is necessary if the proxy is mailed within the United States. You may revoke your proxy by following the instructions listed on page 3 of the proxy statement.
DOLLAR GENERAL CORPORATION
Proxy Statement for20132015 Annual Meeting of Shareholders
General Information | 1 | |
Voting Matters | 2 | |
Proposal 1: Election of Directors | 5 | |
Corporate Governance | ||
Director Compensation | ||
Director Independence | 19 | |
Transactions with Management and Others | 21 | |
Executive Compensation | ||
Compensation Discussion and Analysis | ||
Compensation Committee Report | ||
Summary Compensation Table | ||
Grants of Plan-Based Awards in Fiscal | ||
Outstanding Equity Awards at | ||
Option Exercises and Stock Vested During Fiscal | ||
Pension Benefits Fiscal | ||
Nonqualified Deferred Compensation Fiscal | ||
Potential Payments upon Termination or Change in Control | ||
Compensation Committee Interlocks and Insider Participation | ||
Compensation Risk Considerations | ||
Security Ownership | ||
Security Ownership of Certain Beneficial Owners | ||
Security Ownership of Officers and Directors | ||
| ||
Audit Committee Report | ||
Proposal | ||
Fees Paid to Auditors | ||
Section 16(a) Beneficial Ownership Reporting Compliance | ||
Shareholder Proposals for |
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 29, 201327, 2015
This Proxy Statement, our 20122014 Annual Report and a form of proxy card are available at www.proxyvote.com. You will need your Notice of Internet Availability or proxy card to access the proxy materials.
As permitted by rules adopted by the Securities and Exchange Commission ("SEC"), we are furnishing our proxy materials over the Internet to some of our shareholders. This means that some shareholders will not receive paper copies of these documents. Instead, these shareholders will receive only a Notice of Internet Availability containing instructions on how to access the proxy materials over the Internet. The Notice of Internet Availability also contains instructions on how each of those shareholders can request a paper copy of our proxy materials, including the Proxy Statement, our 20122014 Annual Report and a proxy card. Shareholders who do not receive a Notice of Internet Availability will receive a paper copy of the proxy materials by mail, unless they have previously requested delivery of proxy materials electronically. If you received only the Notice of Internet Availability and would like to receive a paper copy of the proxy materials, the notice contains instructions on how you can request copies of these documents.
What is this document?
ItThis document is the Proxy Statement of Dollar General Corporation for the Annual Meeting of Shareholders to be held on Wednesday, May 29, 2013.27, 2015. We will begin mailing printed copies of this document or the Notice of Internet Availability to our shareholders on or about April 11, 2013.2, 2015. We are providing this document to solicit your proxy to vote upon certain matters at the annual meeting.
We refer to our company as "we," "us" or "Dollar General." Unless otherwise noted or required by context, "2015," "2014," "2013," "2012," "2011," "2010" and "2009""2011" refer to our fiscal years ending or ended January 29, 2016, January 30, 2015, January 31, 2014, February 1, 2013, and February 3, 2012, January 28, 2011 and January 29, 2010.respectively.
What is a proxy, who is asking for it, and who is paying for the cost to solicit it?
A proxy is your legal designation of another person, called a "proxy," to vote your stock. The document that designates someone as your proxy is also called a proxy or a proxy card.
YourOur directors, officers and employees are soliciting your proxy is being solicited by and on behalf of our Board of Directors. Dollar General will pay all expenses of this solicitation. Our directors and employees may solicit proxies in person or by mail, telephone, e-mail, facsimile or other means, but theysolicitation expenses. We will not be additionally compensated for those efforts except wecompensate these persons to solicit your proxy but will reimburse them for any out-of-pocket expenses they incur. We also may reimburse custodians and nominees for their expenses in sending proxy material to beneficial owners.
Who may attend the annual meeting?
Only shareholders, their proxy holders and our invited guests may attend the meeting. If your shares are registered in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or a letter from that record holder or your most recent brokerage account statement that confirms your ownership of those shares as of March 21, 2013.19, 2015. For security reasons, we also may require photo identification for admission.
Where can I find directions to the annual meeting?
Directions to Goodlettsville City Hall, where we will hold the annual meeting, are posted on the "Investor Information" portionsection of our website located at www.dollargeneral.com.
Will the annual meeting be webcast?
Yes. You are invited to visit the "Conference Calls and Investor Events" section of the "Investor Information" section of our website located at www.dollargeneral.com at 9:00 a.m., Central Time, on May 27, 2015 to access the live webcast of the meeting. An archived copy of the webcast will be available on our website for at least 60 days. The information on our website, however, is not incorporated by reference into, and does not form a part of, this proxy statement.
What is Dollar General Corporation and where is it located?
We operate convenient-sizedDollar General operates conveniently located, small-box stores tothat deliver everyday low prices on products that families use every day. WeAs of February 27, 2015, we are the largest discount retailer in the United States by number of stores with more than 10,55711,879 locations in 40 states as of March 1, 2013.43 states. Our principal executive offices are located at 100 Mission Ridge, Goodlettsville, TNTennessee 37072. Our telephone number is 615-855-4000.
Where is Dollar General common stock traded?
Our stock is traded on the New York Stock Exchange ("NYSE") under the symbol "DG."
How many votes must be present to hold the annual meeting?
A quorum, consisting of the presence in person or by proxy of the holders of a majority of shares of our common stock outstanding on March 21, 2013,19, 2015, must exist to conduct any business.business at the meeting.
What if a quorum is not present at the annual meeting?
If a quorum is not present at the meeting, any officer entitled to preside at or to act as Secretary of the meeting shall have power to adjourn the meeting from time to time until a quorum is present.
What am I voting on?
You will be asked to vote on:
• | the election of | ||
• |
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| the ratification of the appointment of our independent registered public accounting firm (the "independent auditor") for |
May other matters be raised at the annual meeting?
We are unaware of other matters to be acted upon at the meeting. Under Tennessee law and our governing documents, no other non-procedural business may be raised at the meeting unless proper notice has been given to shareholders. If other business is properly raised, your proxies have authority to vote as they think best, including to adjourn the meeting.
Who is entitled to vote at the annual meeting?
You may vote if you owned shares of Dollar General common stock at the close of business on March 21, 2013.19, 2015. As of that date, there were 327,212,294303,703,702 shares of Dollar General common stock outstanding and entitled to vote. Each share is entitled to one vote on each matter.
What is the difference between a "shareholder of record" and a "street name" holder?
You are a "shareholder of record" if your shares are registered directly in your name with Wells Fargo Shareowner Services, our transfer agent. You are a "street name" holder if your shares are held in the name of a brokerage firm, bank, trust or other nominee as custodian.
How do I vote?
If you are a shareholder of record, you may vote your proxy over the telephone or Internet or, if you received printed proxy materials, by marking, signing, dating and returning the printed proxy card in the enclosed envelope. Please refer to the instructions on the Notice of Internet Availability or proxy card, as applicable. Alternatively, you may vote in person at the meeting.
If you are a "street name"street name holder, your broker, bank, or other nominee will provide materials and instructions for voting your shares. You may vote in person at the meeting if you obtain and bring to the meeting a legal proxy from your broker, banker, trustee or other nominee giving you the right to vote the shares.
What is the difference between a "shareholderTable of record" and a "street name" holder?Contents
You are a "shareholder of record" if your shares are registered directly in your name with Wells Fargo Shareowner Services, our transfer agent. You are a "street name" holder if your shares are held in the name of a brokerage, bank, trust or other nominee as custodian.
What if I receive more than one Notice of Internet Availability or proxy card?
You will receive multiple Notices of Internet Availability or proxy cards if you hold shares in different ways (e.g., joint tenancy, trusts, custodial accounts, etc.) or in multiple accounts. If you are a streetStreet name holder, youholders will receive yourthe Notice of Internet Availability or proxy card or other voting
information, along with voting instructions, from your broker.their brokers. Please vote the shares represented by each Notice of Internet Availability or proxy card you receive.receive to ensure that all your shares are voted.
How will my proxy be voted?
The persons named on the proxy card will vote your proxy as you direct on the proxy card. If youror, if you return a signed proxy card doesor complete the Internet or telephone voting procedures but do not specify instructions,how you want to vote your proxy will be voted:shares: "FOR" all directors nominated; "FOR" the approval of the amendment to our Amended and Restated Charter to implement a majority voting standard in uncontested elections of directors;nominated and "FOR" ratification of Ernst & Young LLP as our independent registered public accounting firmauditor for 2013.2015.
Can I change my mind and revoke my proxy?
Yes. If you are aA shareholder of record tomay revoke a proxy given pursuant to this solicitation you must:by:
• | |||
• | at or before the annual meeting, | ||
• |
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• |
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If you are aYour attendance at the annual meeting, by itself, will not revoke your proxy.
A street name holder tomay revoke a proxy given pursuant to this solicitation you must followby following the instructions of the bank, broker, trustee or other nominee who holds yourhis or her shares.
How many votes are needed to elect directors and approve other matters?directors?
AtTo be elected at the annual meeting, directors will be elected by a pluralitynominee must receive the affirmative vote of thea majority of votes cast by holders of shares entitled to vote at the meeting, which means that the 9 nominees receiving the largest number of affirmative votes will be elected to our Board. The proposals to amendmeeting. Under our Amended and Restated Charter, to provide forthe "affirmative vote of a majority of votes cast" means that the number of votes cast in favor of a nominee's election exceeds the number of votes cast against his or her election. You may vote in favor of or against the election of each nominee, or you may elect to abstain from voting standardyour shares.
What happens if a director fails to receive the required vote for election?
An incumbent director who does not receive the required vote for election at the annual meeting must promptly tender a resignation as a director for the Board's consideration pursuant to our Board-approved director resignation policy outlined in future uncontested electionsour Corporate Governance Guidelines. Each director standing for reelection at the annual meeting has agreed to resign, effective upon the Board's acceptance of directorssuch resignation, if he or she does not receive a majority vote. If the Board rejects the offered resignation, the director will continue to serve until the next annual shareholders' meeting and until his or her successor is duly elected or his or her earlier resignation or removal in accordance with our Amended and Restated Bylaws ("Bylaws"). If the Board accepts the offered resignation, the Board, in its sole discretion, may fill the resulting vacancy or decrease the size of the Board.
How many votes are needed to approve other matters?
The proposal to ratify the appointment of our independent registered public accounting firmauditor for 20132015 will be approved if the votes cast in favor of eachsuch proposal exceed the votes cast against it.
With respect to the director elections, you may vote for all nominees or you may withhold your vote on one or more nominees. With respect to each of the other proposals,this proposal, and any other matter properly brought before the annual meeting, you may vote in favor of or against the proposal, or you may elect to abstain from voting your shares.
What are broker non-votes?
Although your broker is the record holder of any shares that you hold in street name, it must vote those shares pursuant to your instructions. If you do not provide instructions, your broker may exercise discretionary voting power over your shares for "routine" items but not for "non-routine" items. All matters described in this proxy statement, except forThe election of directors is considered to be a non-routine item, while the ratification of the appointment of our independent registered public accounting firm, areauditor is considered to be non-routine matters.a routine matter.
"Broker non-votes" occur when shares held of record by a broker are not voted on a matter because the broker has not received voting instructions from the beneficial owner and either lacks or declines to exercise the authority to vote the shares in its discretion. Like abstentions, as long as a quorum is present, broker non-votes will have no effect on the outcome of a particular proposal.
How will abstentions and broker non-votes be treated?
Abstentions and broker non-votes, if any, will be treated as shares that are present and entitled to vote for purposes of determining whether a quorum is present but will not be counted as votes cast either in favor of or against a particular proposal and will have no effect on the outcome of a particular proposal.
Will my vote be confidential?
Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that is intended to protect your voting privacy. Your vote will not be intentionally disclosed either within Dollar General or to third parties, except (1) as necessary to meet applicable legal requirements; (2) in a dispute regarding authenticity of proxies and ballots; (3) in the case of a contested proxy solicitation, if the other party soliciting proxies does not agree to comply with the confidential voting policy; (4) to allow for the tabulation of votes and certification of the vote; (5) to facilitate a successful proxy solicitation; or (6) when a shareholder makes a written comment on the proxy card or otherwise communicates the vote to management.
PROPOSAL 1:
ELECTION OF DIRECTORS
What is the structure of the Board of Directors?
Our Board of Directors must consist of 1 to 15 directors, with the exact number, currently fixed at 9,8, set by the Board pursuant to and in compliance with our shareholders' agreement with Buck Holdings, L.P., and the sponsor shareholders identified in that agreement.Board. All directors are elected annually by our shareholders.
Who are the nominees this year?
The nominees for the Board of Directors consist of 9the 8 current directors. If elected, each nominee would hold office until the 20142016 annual meeting of shareholders and until his or her successor is elected and qualified.qualified, subject to any earlier resignation or removal. These nominees, their ages at the date of this document and the calendar year in which they first became a director are listed in the table below.
Name | Age | Director Since | Age | Director Since | ||||
---|---|---|---|---|---|---|---|---|
Raj Agrawal | 40 | 2007 | ||||||
Warren F. Bryant | 67 | 2009 | 69 | 2009 | ||||
Michael M. Calbert | 50 | 2007 | 52 | 2007 | ||||
Sandra B. Cochran | 54 | 2012 | 56 | 2012 | ||||
Richard W. Dreiling | 59 | 2008 | 61 | 2008 | ||||
Patricia D. Fili-Krushel | 59 | 2012 | 61 | 2012 | ||||
Adrian Jones | 48 | 2007 | ||||||
Paula A. Price | 53 | 2014 | ||||||
William C. Rhodes, III | 47 | 2009 | 49 | 2009 | ||||
David B. Rickard | 66 | 2010 | 68 | 2010 |
What are the backgrounds of this year's nominees?
Mr. Agrawal joined Kohlberg Kravis Roberts & Co., L.P. ("KKR") in May 2006 and is the North American head of KKR's Infrastructure business. He previously was a member of KKR's Retail and Energy and Natural Resources industry teams. From 2002 to May 2006, he was a Vice President with Warburg Pincus, where he was involved in the execution and oversight of a number of investments in the energy and infrastructure sector. Mr. Agrawal's prior experience also includes Thayer Capital Partners, where he played a role in the firm's business and manufacturing services investments, and McKinsey & Co., where he provided strategic and mergers and acquisitions advice to clients in a variety of industries. KKR's affiliates indirectly own a substantial portion of our outstanding common stock through their investment in Buck Holdings, L.P. and related entities. Mr. Agrawal is a director of Colonial Pipeline Company and Bayonne Water JV Parent, LLC.
Mr. Bryant served as the President and Chief Executive Officer of Longs Drug Stores Corporation, a retail drugstore chain on the West Coast and in Hawaii, from 2002 through 2008 and as its Chairman of the Board from 2003 through his retirement in 2008. Prior to joining Longs Drug Stores, he served as thea Senior Vice President of The Kroger Co., a retail grocery chain, from 1999 to 2002. Mr. Bryant is a director of Office Depot, Inc. and Loblaw Companies Limited of Canada and served as a director of OfficeMax Incorporated and George Weston LTD of Canada.from 2004 to 2013.
Mr. Calbert joined KKR & Co. L.P. ("KKR") in January 2000 and has beenwas directly involved with several KKR portfolio companies. He headscompanies until his retirement in January 2014. Mr. Calbert led the Retail industry team within KKR's Private Equity platform. Heplatform prior to his retirement and now serves as a consultant to KKR. Mr. Calbert joined Randall's Food Markets beginning in 1994 and served as the Chief Financial Officer from 1997 until it was sold in September 1999. He joined KKR in January 2000. Mr. Calbert also previously worked as a certified public accountant and consultant with Arthur Andersen Worldwide from 1985-1994,1985 to 1994, where his
primary focus was on the retail/retail and consumer industry. He served as our Chairman of the Board until December 2008. KKR's affiliates indirectly own a substantial portion of our outstanding common stock through their investment in Buck Holdings, L.P. and related entities. Mr. Calbert is a director of Toys "R" Us, Inc., US Foods, Pets at Home,Inc. and Academy, Ltd.
Ms. Cochran has served as a director and as President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc. since September 2011. She joined Cracker Barrel in April 2009 as Executive Vice President and Chief Financial Officer, and was named President and Chief Operating Officer in November 2010. She was previously Chief Executive Officer at book retailer Books-A-Million, Inc. from February 2004 to April 2009. She also served as that company's President (August 1999—February 2004), Chief Financial Officer (September 1993—August 1999) and Vice President of Finance (August 1992—September 1993). Ms. Cochran has over 20 years of experience in the retail industry. Ms. Cochran is a director of Cracker Barrel Old Country Store, Inc. She served as a director of Books-A-Million Inc. from 2006 to 2009.
Mr. Dreiling joined Dollar General in January 2008 as Chief Executive Officer and a member of our Board. He was appointed Chairman of the Board on December 2, 2008. Prior to joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., the largest drugstore chain in New York City, from November 2005 until January 2008 and as Chairman of the Board of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President—Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug storesdrugstore chain on the West Coast and in Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President—Marketing, Manufacturing and Distribution at Safeway Inc., a food and drug retailer. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a Southern California food and drug division of Safeway. He currently serves as the Vice Chairman of the Retail Industry Leaders Association (RILA). Mr. Dreiling is a director of Lowe's Companies, Inc.
Ms. Fili-Krushel has served as Chairman of NBCUniversal News Group, a division of NBCUniversal Media, LLC, composed of NBC News, CNBC, MSNBC and the Weather Channel, sincefrom July 2012.2012 until April 2015. She previously served as Executive Vice President of NBCUniversal (January 2011—July 2012) with a broad portfolio of functions reporting to her, including Operationsoperations and Technical Services, Business Strategy, Human Resourcestechnical services, business strategy, human resources and Legal.legal. Prior to NBCUniversal, Ms. Fili-Krushel was Executive Vice President of Administration at Time Warner Inc. (July 2001—December 2010) where her responsibilities included oversight of philanthropy, corporate social responsibility, human resources, worldwide recruitment, employee development and growth, compensation and benefits, and security. Before joining Time Warner in July 2001, Ms. Fili-Krushel had been CEOChief Executive Officer of WebMD Health Corp. since April 2000. From July 1998 to April 2000, Ms. Fili-Krushel was President of the ABC Television Network, and from 1993 to 1998 she served as President of ABC Daytime. Before joining ABC, she had been with Lifetime Television since 1988. Prior to Lifetime, Ms. Fili-Krushel held several positions with Home Box Office. Before joining HBO, Ms. Fili-Krushel worked for ABC Sports in various positions.
Mr. JonesMs. Price has been with Goldman, SachsSenior Lecturer at Harvard Business School in the Accounting and Management Unit since July 2014. She was Executive Vice President and Chief Financial Officer of Ahold USA from May 2009 until January 2014. At Ahold, which operates more than 700 supermarkets under the Stop & Shop, Giant and Martin's names as well as the Peapod online grocery delivery service, Ms. Price was responsible for finance, accounting and shared services, strategic planning, real estate development, store format and construction, and information technology. Before joining Ahold, she was the Senior Vice President, Controller and Chief Accounting Officer at CVS Health Corporation (formerly CVS Caremark Corporation) from July 2006 until August 2008. Earlier in her career, Ms. Price served as the Chief Financial Officer for the Institutional Trust Services division of JPMorgan Chase (from August 2002 until September 2005), and held several other senior management positions in the U.S. and the U.K. in the financial services and consumer packaged goods industries. A certified public accountant, she began her career at Arthur Andersen & Co. since 1994. He is a managing director in Principal Investment Area (PIA) in New York where he focuses on consumer-related and healthcare opportunities. Affiliates of Goldman, Sachs & Co. indirectly own a substantial portion of our outstanding common stock through their investment in Buck Holdings, L.P. and related entities. Mr. Jones isMs. Price has also served as a director of Biomet,Accenture plc since May 2014 and Western Digital Corporation since July 2014 and served as a director of Charming Shoppes, Inc., Education Management Corporation, HealthMarkets, Inc. (Lane Bryant, Catherine's, Fashion Bug, Cacique and Michael Foods Group, Inc. He also previously served on the board of directors of Burger King Holdings, Inc.Figi's brands) from 2002 to 2008.
Table of ContentsMarch 2011 until it was sold in June 2012.
Mr. Rhodes was elected Chairman of AutoZone, Inc., a specialty retailer and distributor of automotive replacement parts and accessories, in June 2007. He has served as President and Chief Executive Officer and as a director of AutoZone since 2005. Prior to his appointment as President and Chief Executive Officer, Mr. Rhodes was Executive Vice President—Store Operations and Commercial. Prior to 2004, he had been Senior Vice President—Supply Chain and Information Technology since 2002, and prior thereto had been Senior Vice President—Supply Chain since 2001. Prior to that time, he served in various capacities with AutoZone, including Vice President—Stores in 2000, Senior Vice President—Finance and Vice President—Finance in 1999, and Vice President—Operations Analysis and Support from 1997 to 1999. Prior to 1994, Mr. Rhodes was a manager with Ernst & Young, LLP.
Mr. Rickard served as the Executive Vice President, Chief Financial Officer and Chief Administrative Officer of CVS Health Corporation (formerly CVS Caremark Corporation,Corporation), a retail pharmacy chain and provider of healthcare services and pharmacy benefits management, from September 1999 until his retirement in December 2009. Prior to joining CVS, Caremark, Mr. Rickard was the Senior Vice President and Chief Financial Officer of RJR Nabisco Holdings Corporation from March 1997 to August 1999. Previously, he was Executive Vice President of International Distillers and Vintners Americas. Mr. Rickard is a director of Harris Corporation and Jones Lang LaSalle Incorporated. He served as a director of The May Companies from January 2005 to August 2005.
How are directors identified and nominated?
All nominees for election as directors at the annual meeting are currently servingserve on our Board of Directors and were recommendednominated by the Board for election or re-election, as applicable, upon the case may be, by our Board committee responsible for nominating and corporate governance matters, which was our combined Compensation, Nominating and Governance Committee prior to April 1, 2013, and since April 1, 2013 is a separaterecommendation of the Nominating and Governance Committee (the "Nominating Committee"). The Nominating Committee is responsible for identifying, evaluating and recommending director candidates, subject to the terms of the shareholders' agreement and Mr. Dreiling's employment agreement discussed below. Ourwhile our Board is responsible for nominating the director slate of directors for election by shareholders at the annual meeting.
The charter of our Nominating CommitteeCommittee's charter and our Corporate Governance Guidelines require the Nominating Committee to consider candidates submitted by our shareholders in accordance with the notice provisions of our Bylaws (see "Can shareholders nominate directors?" below) and to apply the same criteria to the evaluation of those candidates as it applies to other director candidates. The Nominating Committee also may also use a variety of other methods to identify potential director candidates, such as recommendations by our directors, management, or third partythird-party search firms.
In January 2012, when Ms. Price, who joined our Board consisted of seven directors,in 2014, was initially recommended to the Nominating Committee initiatedby a search for additional director candidates and retained a third-party search firm to assist in identifying potential future Board candidates who meet our qualification and experience requirements and to compile and evaluate information regarding the candidates' qualifications, experience and independence. Ms. Fili-Krushel was recommended as a candidate by the third party search firm while Ms. Cochran was recommended as a candidate by our CEO. Each of Ms. Fili-Krushel and Ms. Cochran was fully vetted by our third party search firm and by our Nominating Committee and our Board.non-management director.
Four of our directors, Messrs. Agrawal, Calbert, Dreiling and Jones, are managers of Buck Holdings, LLC, which serves as the general partner of Buck Holdings, L.P. The limited liability company agreement of Buck Holdings, LLC generally requires Buck Holdings, LLC to cause shares of our common stock held by Buck Holdings, L.P. to be voted in favor of any person designated to be a member of our Board pursuant to our shareholders' agreement with Buck Holdings, L.P.
Pursuant to our shareholders' agreement with Buck Holdings, L.P. and the sponsor shareholders identified in that agreement, certain of our shareholders have the right to designate
nominees to our Board, subject to their election by our shareholders at the annual meeting. Specifically, KKR 2006 Fund L.P., KKR PEI Investments, L.P., KKR Partners III, L.P., 8 North America Investor LP, and their respective permitted transferees (collectively, the "KKR Shareholders"), given the current ownership level of Buck Holdings, L.P. of our common stock, have the right to designate up to 10% of the number of total directors comprising our Board, as well as the right to designate one person to serve as a non-voting Board observer. Any fractional amount that results from determining the percentage of the total number of directors will be rounded up to the next whole number. The KKR Shareholders will retain these rights for as long as Buck Holdings, L.P. owns at least 5% of our outstanding common stock.
The KKR Shareholders have the right to remove and replace their director-designee at any time and for any reason and to fill any vacancy otherwise resulting in such position.
Pursuant to the shareholders' agreement, the KKR Shareholders have nominated Mr. Calbert to serve on our Board. Mr. Calbert, like all of our director nominees, is subject to election by our shareholders at the annual meeting.
In addition, ourOur employment transition agreement with Mr. Dreiling requires Dollar General to (1) nominate him to serve as a member of our Board each yearat any meeting of our shareholders held prior to January 29, 2016 that he is slatedcalled for reelection to the Board; and (2) recommend to the Board that Mr. Dreiling serve as Chairmanpurpose of the Board.electing directors. Our failure to do so would give rise to a breach of contract claim. If Mr. Dreiling is re-elected to our Board at such a meeting, he agrees to serve in such capacity and shall serve as the Chairman of the Board at least through the date on which a successor chief executive officer begins employment with us and, if asked by our Board, through January 29, 2016 if later.
How are nominees evaluated; what are the minimum qualifications?
Subject to the shareholders' agreement and Mr. Dreiling's employment transition agreement discussed above, the Nominating Committee is charged with recommending to the Board of Directors only those candidates that it believes are qualified to becomeserve as Board members consistent with the criteria for selection of new directors adopted from time to time by the Board.Board and who have not achieved the age of 76, unless the Board has approved an exception to this limit on a case by case basis. We have a written policy to strive to have a Board representing diverse experience at policy-making levels in areas that are relevant to our business. To implement this policy, the Nominating Committee assesses diversity by evaluating each candidate's individual qualifications in the context of how that candidate would relate to the Board as a whole.whole and also considers more traditional concepts of diversity. The Committee periodically assesses the effectiveness of this policy by considering whether the Board as a whole represents such diverse experience and composition and by recommending to the Board changes to the criteria for selection of new directors as appropriate. The Committee recommends candidates, including those submitted by shareholders, only if it believes the candidate's knowledge, experience and expertise would strengthen the Board and that the candidate is committed to representing the long-term interests of all Dollar General shareholders.
�� The Nominating Committee assesses a candidate's independence, background and experience, as well as the current Board's skill needs and diversity. With respect to incumbent directors selected for re-election, the Committee also assesses each director's meeting attendance record and the suitability offor continued service. In addition, individual directors and any nominee should bethe Committee determines that all nominees are in a position to devote an adequate amount of time to the effective performance of director duties and possess the following characteristics: integrity and accountability, informed judgment, financial literacy, a cooperative approach, a record of achievement, loyalty, and the ability to consult with and advise management.
What particular experience, qualifications, attributes or skills led the Board of Directors to conclude that each nominee should serve as a director of Dollar General?
Our Board of Directors believes that each of the nominees can devote an adequate amount of time to the effective performance of director duties and possesses the minimum qualifications identified above. The Board has determined that the nominees, as a whole, complement each other, meet the Board's skill needs, and represent diverse experience at policy-making levels in areas relevant to our
business. The Board also considered the following in determining that the nominees should serve as directors of Dollar General:
Mr. Bryant has over 40 years of retail experience, including experience in marketing, merchandising, operations and finance. His substantial experience in leadership and policy-making roles at other retail companies provides him with an extensive understanding of our industry, as well as with valuable executive management skills and the ability to effectively advise our CEO. As a former board chairman and as the chairman of the governance and nominating committee of another public company, Mr. Bryant also possesses leadership experience in the area of corporate governance. As a result, our Board has chosen Mr. Bryant to preside over the executive sessions of our independent directors. Mr. Bryant obtained his B.S. from Cal State University in 1971 and his MBA from Azuza Pacific University in 1982. He also completed a Harvard University Finance Course in 1995.
Mr. Calbert, who was nominated by the KKR Shareholders pursuant to the shareholders' agreement and who has served on our Board for over 5.5 years, has considerable experience in managing private equity portfolio companies and is familiar with corporate finance and strategic business planning activities. As the former head of KKR's Retail industry team, Mr. Calbert has a strong background and extensive experience in advising and managing companies in the retail industry, including evaluating business strategies, financial plans and structures, and management teams. Mr. Calbert also has a significant financial and accounting background evidenced by his prior experience as the chief financial officer of a retail company and his 10 years of practice as a certified public accountant. Our Board has chosen Mr. Calbert to serveserves as the Board's independent lead director and to leadleads the executive sessions of theour non-management and independent directors.
Ms. Cochran brings over 20 years of retail experience to Dollar General as a result of her current and former roles at Cracker Barrel Old Country Store and her former roles at Books-A-Million. This experience allows her to provide additional support and perspective to our CEO and our Board. In addition, Ms. Cochran's industry and executive experience provides leadership, consensus-building, strategic planning, risk management and budgeting skills. Ms. Cochran also has significant financial experience, having served as the Chief Financial Officerchief financial officer of two public companies and as the Vice President, Corporate Financevice president, corporate finance of SunTrust Securities, Inc., and our Board has determined that she qualifies as an audit committee financial expert.
Mr. Dreiling brings to Dollar General over 4045 years of retail experience at all operating levels. He provides a unique perspective regarding our industry as a result of his experience progressing through the ranks within various retail companies. Mr. Dreiling also has a thorough understanding of all key areas of our business as a result of hisHis experience overseeing the operations, marketing, manufacturing and distribution functions of other retail companies.companies bolsters Mr. Dreiling's thorough understanding of all key areas of our business. In addition, Mr. Dreiling's service in leadership and policy-making positions of other companies in the retail industrycompanies has provided him with the necessary leadership skills to effectively guide and oversee the direction of Dollar General and with the consensus-building skills required to lead our management team and our Board. Moreover, during the more than 5 yearstime that Mr. Dreiling has served as our CEO, he has gained a thorough understanding of our operations and has managed us through significant
change. In 2011, heHe was named "Retailer of the Year" by Mass Market Retailer.Retailer for 2010 and 2014. Mr. Dreiling was also listed among Supermarket News "Power 50 Retailers" for 2011 and 2012 and named "CEO of the Year" by the Retail Leader in 2012.
Ms. Fili-Krushel's background increases the breadth of experience of our Board as a result of her extensive executive experience overseeing the business strategy, philanthropy, corporate social responsibility, human resources, recruitment, employee growth and development, compensation and benefits, and legal functions at large public companies in the media industry. In addition, her understanding of consumer behavior based on her knowledge of viewership patterns and preferences will provideprovides additional perspective to our Board in understanding our customer base.
Mr. JonesMs. Price has 15brings broad experience across finance, general management and strategy gained from her service in senior executive and management positions at major corporations across several industries, including as Chief Financial Officer of Ahold USA before her retirement in 2014. Ms. Price's numerous years of experience in governing private equity portfolio companies, including over 5.5 years with Dollar General. His 19 years at Goldman, Sachs & Co. have provided him with extensive understanding of corporate finance and strategic business planning activities. In addition, his experience as a director ofcertified public companies outsideaccountant, former Chief Financial Officer and former Chief Accounting Officer provide our Board with valuable experience and insight into accounting and finance matters, and consequently, our Board has determined that Ms. Price is an audit committee financial expert. She also brings to our Board a valuable perspective as a member of the retail industryfaculty at Harvard Business School and his focus at Goldman Sachs on consumer and healthcare companies enables Mr. Jones to contributefrom her service as a different perspective to Board discussions.board member of several public companies.
Mr. Rhodes has 1820 years of experience in the retail industry, including extensive experience in operations, supply chain and finance, among other areas. This background serves as a strong foundation for offering invaluable perspective and expertise to our CEO and our Board. In addition, his experience as a board chairman and chief executive officer of a public retail company and as the former Chairman of the Retail Industry Leaders AssociationRILA provides leadership, consensus-building, strategic planning and budgeting skills, as well as extensive understanding of both short- and long-term issues confronting the retail industry. Mr. Rhodes also has a strong financial background.
Mr. Rickard has held senior management and executive positions for much of his 38 years in the corporate world. He has significant retail experience and a diverse retail industry background, including experience serving on the board of another retail company. He also has an extensive financial and accounting background, having served as the chief financial officer of two public companies, including a large retailer. As a result, our Board has determined that Mr. Rickard is an audit committee financial expert and has elected him to serve as the Chairman of the Audit Committee. Mr. Rickard's financial experience within the retail industry also brings expertise and perspective to our Board's discussions regarding strategic planning and budgeting.
Acting upon the Nominating Committee's recommendation, of the Nominating Committee and in accordance with the shareholders' agreement, our Board has concludedafter concluding that these nominees possess the appropriate experience, qualifications, attributes and skills, to serve as directors of Dollar General andour Board has unanimously nominated these individuals to be elected by our shareholders at our annual meeting.
Can shareholders nominate directors?
The KKRYes. Shareholders may nominate directors pursuant to the shareholders' agreement discussed above under "How are directors identified and nominated." Other shareholders can nominate directors by following the procedures outlined in our Bylaws. In short, the shareholder must deliver a written notice to our Corporate Secretary at 100 Mission Ridge, Goodlettsville, TN 37072 for receipt no earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the prior year's annual meeting. However, if the meeting is held more than 30 days before or more than 60 days after such anniversary date, the notice must be received no earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the date of such annual meeting. If the first public announcement of the
annual meeting date is less than 100 days prior to the date of such annual meeting, the notice must be received by the 10th day following the day on which the public announcement was made.date.
The notice must contain all information required by our Bylaws about the shareholder proposing the nominee and about the nominee, which generally includes:
You should consult our Bylaws, posted on the "Investor Information—Corporate Governance" portionsection of our website located at www.dollargeneral.com, for more detailed information regarding the process by which shareholders may nominate directors. No shareholder nominees have been proposed for this year's meeting, other than the nominee designated pursuant to the shareholders' agreement as discussed above.annual meeting.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, the persons designated as proxies on yourthe proxy card are authorized to vote your proxy for a substitute designated by our Board of Directors.
Are there any familial relationships between any of the nominees?
There are no familial relationships between any of the nominees or between any of the nominees and any of our executive officers. See "Director Independence" below for a discussion of a familial relationship between Ms. Cochran and one of our non-executive officers.
What does the Board of Directors recommend?
Our Board unanimously recommends that you voteFOR the election of each of the director nominees.
Does the Board of Directors have standing Audit, Compensation and Nominating Committees?
Yes. Our Board of Directors has a standing Audit Committee, Compensation Committee and Nominating Committee. The Board has adopted a written charter for each of these committees, which are available on the "Investor Information—Corporate Governance" section of our website located at www.dollargeneral.com. Current information regarding each of these committees is set forth below.
Name of Committee & Members | Committee Functions | |
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AUDIT: Mr. Rickard, Chairman | • Selects the independent auditor • Pre-approves the independent auditor's audit engagement fees and terms and all permitted non-audit services and fees • Reviews an annual report describing the independent auditor's internal quality control procedures and any material issues raised by its most recent review of internal quality controls • Annually evaluates the independent auditor's qualifications, performance and independence, annually evaluates the lead audit partner, and periodically considers whether there should be a regular rotation of such firm • Discusses the audit scope and any audit problems or difficulties • Sets policies regarding the hiring of current and former employees of the independent auditor • Discusses the annual audited and quarterly unaudited financial statements with management and the independent auditor • Discusses types of information to be disclosed in earnings press releases and provided to analysts and rating agencies • Discusses policies governing the process by which risk assessment and risk management are to be undertaken • Reviews disclosures made by the CEO and CFO regarding any significant deficiencies or material weaknesses in our internal control over financial reporting • Reviews internal audit activities, projects and budget • Establishes procedures for receipt, retention and treatment of complaints we receive regarding accounting or internal controls • Discusses with our general counsel legal matters having an impact on financial statements • Performs an annual self-evaluation • Furnishes the committee report required in our proxy statement • Evaluates and makes recommendations concerning shareholder proposals relating to matters within the committee's expertise • Periodically reviews and reassesses the committee's charter |
Name of Committee & Members | Committee Functions | |
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COMPENSATION: Mr. Bryant, Chairman | • Reviews and approves corporate goals and objectives relevant to the compensation of our CEO • Determines the compensation of our executive officers and recommends the compensation of our directors • Recommends, when appropriate, changes to our compensation philosophy and principles • Establishes our short-term incentive compensation program for senior officers • Establishes our long-term incentive compensation program and approves equity-based awards under such program • Oversees the share ownership guidelines and holding requirements for Board members and senior officers • Oversees the process for evaluating our senior officers • Reviews and discusses with management, prior to the filing of the proxy statement, the disclosure regarding executive compensation, including the Compensation Discussion and Analysis and compensation tables (in addition to preparing a report on executive compensation for the proxy statement) • Oversees and evaluates the independence of its compensation consultant and other advisors • Performs an annual self-evaluation • Evaluates and makes recommendations concerning shareholder proposals relating to matters within the committee's expertise • Periodically reviews and reassesses the committee's charter | |
NOMINATING AND | • Develops and recommends criteria for selecting new directors | |
GOVERNANCE: | • Screens and recommends to our Board individuals qualified to become | |
Mr. Rhodes, Chairman | members of our Board • Recommends the structure and membership of Board committees • Recommends persons to fill Board and committee vacancies • Develops and recommends Corporate Governance Guidelines and corporate governance practices • Oversees the process governing the evaluation of the Board • Performs an annual self-evaluation • Evaluates and makes recommendations concerning shareholder proposals relating to matters within the committee's expertise • Periodically reviews and reassesses the committee's charter |
Does Dollar General have an audit committee financial expert serving on its Audit Committee?
Yes. Our Board has designated each of Mr. Rickard, Ms. Cochran and Ms. Price as an audit committee financial expert and has determined that each is independent as defined in NYSE listing standards and in our Corporate Governance Guidelines. Such experts have the same responsibilities as the other Audit Committee members. They are not our auditors or accountants, do not perform "field work" and are not employees. The SEC has determined that designation as an audit committee financial expert will not cause a person to be deemed to be an "expert" for any purpose.
How often did the Board and its committees meet in 2014?
During 2014, our Board, Audit Committee, Compensation Committee and Nominating Committee met 16, 5, 8 and 3 times, respectively. Each incumbent director attended at least 75% of the total of all meetings of the Board and all committees on which he or she served which were held during the period for which he or she was a director and a member of each applicable committee.
What is Dollar General's policy regarding Board member attendance at the annual meeting?
Our Board of Directors has adopted a policy that all directors should attend annual shareholders' meetings unless attendance is not feasible due to unavoidable circumstances. All persons serving as Board members at the time attended the 2014 annual shareholders' meeting.
Does Dollar General combine the positions of Chairman and CEO?
Yes. Mr. Dreiling serves as CEO and Chairman of our Board of Directors. Mr. Dreiling's employment agreement with us provides that Dollar General shall recommend to theDirectors and CEO. The Board that he serve as the Chairman of the Board for as long as he is employed under such agreement.
The Boardcurrently believes combining these roles provides an efficient and effective leadership model for Dollar General because, given his day-to-day involvement with and intimate understanding of our specific business, industry and management team, Mr. Dreiling is particularly suited to effectively identify strategic priorities, lead the discussion and execution of strategy, and facilitate information flow between management and the Board. The Board further believes that combining these roles fosters clear accountability, effective decision-making, and alignment on the development and execution of corporate strategy. To promote effective independent oversight, the Board has adopted a number of governance practices, including:
The Board recognizes that no single leadership model is right for all companies and at all times, and the Board will review its leadership structure as appropriate, including in connection with the appointment of a new CEO in light of Mr. Dreiling's planned retirement in January 2016, to ensure it continues to be in the best interests of Dollar General and our shareholders.
Does Dollar General have a management succession plan?
Yes. Our Corporate Governance Guidelines require our Board of Directors to coordinate with our CEO to ensure that a formalized process governs long-term management development and succession, including succession in the event of an emergency or the retirement of our CEO. Our Board formally reviews our management succession plan at least annually. Our comprehensive program encompasses not only our CEO and other executive officers but all employees through the front-line supervisory level. The program focuses on key succession elements, including identification of potential successors for positions where it has been determined that internal succession is appropriate, assessment of each potential successor's level of readiness, and preparation of individual growth and development plans. With respect to CEO succession planning, the Company's long-term business strategy is also considered. In addition, we maintain at all times, and review with the Board periodically, a confidential procedure for the timely and efficient transfer of the CEO's responsibilities in the event of an emergency or his sudden incapacitation or departure.
Are there share ownership guidelines for Board members and senior officers?
Yes. Share ownership guidelines for Board members and senior officers, summarized below, are included in our Corporate Governance Guidelines. Please see the Corporate Governance Guidelines for details of the share ownership guidelines.
For Board members, the guideline is 3 times the annual cash retainer payable for service on our Board as in effect on January 1, 2011 (or, if later, the date on which the director joined or joins our Board) to be achieved within 5 years of August 24, 2011 (or, if later, the date on which the director joined or joins our Board).
For senior officers, the guideline is a multiple, as set forth below, of the officer's annual base salary as in effect on April 1, 2013 (or, if later, the officer's hire or promotion date) to be achieved within 5 years of the later of April 1, 2013 or the April 1 next following such person's hire or promotion date.
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What is Dollar General's policy regarding Board member attendance at the annual meeting?
Our Board of Directors has adopted a policy that all directors should attend annual shareholders' meetings unless attendance is not feasible due to unavoidable circumstances. All Board members serving at the time attended the 2012 annual shareholders' meeting.
Does the Board have standing Audit, Compensation and Nominating Committees?
Yes. Our Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Governance Committee. The Board has adopted a written charter for each of these committees which are available on the "Investor Information—Corporate Governance" portion of our website located at www.dollargeneral.com.
The Board has determined that all current members of each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are independent as defined in the NYSE listing standards and in our Corporate Governance Guidelines. Prior to April 2013, when the Compensation Committee did not consist solely of independent directors, the Board had established a subcommittee of the Compensation Committee consisting solely of independent directors (at various points in time including Messrs. Bryant, Rhodes and Rickard and Ms. Fili-Krushel) for purposes of approving any compensation that may otherwise be subject to Section 162(m) of the Internal Revenue Code of 1986, as amended. In addition, a subcommittee of our Nominating Committee consisting of Messrs. Bryant and Calbert oversaw the search for additional directors that was launched in January 2012.
Current information regarding each of these committees is set forth below. Ms. Cochran joined the Audit Committee on December 5, 2012. Messrs. Calbert and Jones served on our combined Compensation, Nominating and Governance Committee (the "CNG Committee") until April 1, 2013, Mr. Agrawal served on the CNG Committee until June 26, 2012, Mr. Rickard served on the CNG Committee from June 26, 2012 to October 15, 2012, and Ms. Fili-Krushel joined the CNG Committee
on October 15, 2012. Effective April 1, 2013, we separated our CNG Committee into a separate Compensation Committee and a Nominating and Governance Committee.
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Does Dollar General have an audit committee financial expert serving on its Audit Committee?
Yes. Our Board has designated Mr. Rickard and Ms. Cochran as audit committee financial experts and has determined that each is independent as defined in NYSE listing standards and in our Corporate Governance Guidelines. Such experts have the same responsibilities as the other Audit Committee members. They are not our auditors or accountants, do not perform "field work" and are not employees. The SEC has determined that designation as an audit committee financial expert will not cause a person to be deemed to be an "expert" for any purpose.
How often did the Board and its committees meet in 2012?
During 2012, our Board, Audit Committee, and CNG Committee met 7, 4, and 5 times, respectively. Each director attended at least 75% of the total of all meetings of the Board and all committees (including ad hoc committees) on which he or she served.
What is the Board'sBoard of Director's role in risk oversight?
Our Board of Directors and its committees have an important role in our risk oversight process. Our Board regularly reviews with management our financial and business strategies, which reviews include a discussion ofincluding relevant material risks as appropriate. Our General Counsel also periodically reviews with the Board our insurance coverage and programs as well as litigation risks.
The Audit Committee discusses our policies with respect to risk assessment and risk management, primarily through oversight of our enterprise risk management program. Our Internal Audit department coordinates that program, which entails review and documentation of our comprehensive risk management practices. The program evaluates internal and external risks, identifies mitigation strategies, and assesses the remaining residual risk. The program is updated through interviews with senior management and our Board, review of strategic initiatives, evaluation of the
fiscal budget, review of upcoming legislative or regulatory changes, review of certain internal metrics and review of other outside information concerning business, financial, legal, reputational, and other risks. Semi-annually theThe results are presented to the Audit Committee.Committee at least annually. Quarterly, the categories with high residual risk, along with their mitigation strategies, are discussedreviewed individually.
Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation program. In addition, asAs discussed under "Executive Compensation—Compensation Risk Considerations" below, the Compensation Committee also participates in periodic assessments of the risks relating to our overall compensation programs.
While the Audit Committee and the Compensation Committee oversee the risk areas identified above, the entire Board is regularly informed about risks through committee reports about such risks.reports. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. Our Board believes this division of risk management responsibilities effectively addresses the risks facing Dollar General. Accordingly, the risk oversight role of our Board and its committees has not had any effect on our Board's leadership structure.
Does Dollar General have a management succession plan?
Yes. Our Corporate Governance Guidelines require our Board of Directors to coordinate with our CEO to ensure that a formalized process governs long-term management development and succession. Our Board formally reviews our management succession plan at least annually. Our comprehensive program encompasses not only our CEO and other executive officers but all employees through the front-line supervisory level. The program focuses on key succession elements, including identification of potential successors for positions where it has been determined that internal succession is appropriate, assessment of each potential successor's level of readiness, and preparation of individual growth and development plans. With respect to CEO succession planning, our long-term business strategy is also considered. In addition, we maintain at all times, and review with the Board periodically, a confidential procedure for the timely and efficient transfer of the CEO's responsibilities in the event of an emergency or his sudden incapacitation or departure.
In connection with Messrs. Dreiling's and Tehle's planned retirements in January 2016 and July 2015, respectively, we are actively engaged in an internal and external search for successors. The CEO search includes, and the CFO search may include, use of a third-party executive search firm to help facilitate the process. Messrs. Calbert and Bryant (as lead director and as Compensation Committee Chairman, respectively) represent the Board on the day to day CEO search work with the executive search firm.
Are there share ownership guidelines and holding requirements for Board members and senior officers?
Yes. Details of our share ownership guidelines and holding requirements for Board members and senior officers are included in our Corporate Governance Guidelines. See "Compensation Discussion and Analysis" and "Director Compensation" for more information on such ownership guidelines and holding requirements for senior officers and Board members, respectively.
How can I communicate with the Board of Directors?
Our Board-approved process for security holders and other interested parties to contact the Board of Directors, a particular director, or the non-management directors or the independent directors as a group is described on www.dollargeneral.com under "Investor Information—Corporate Governance."
Where can I find more information about Dollar General's corporate governance practices?
Our governance-related information is posted on www.dollargeneral.com under "Investor Information—Corporate Governance," including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, the charter of each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, and the namesname(s) of the persons chosen to lead the executive sessions of the non-management directors and of the independent directors. This information is available in print to any shareholder who sends a written request to: Investor Relations, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TN 37072.
The following table and text discusssummarize the compensation earned by or paid to each of our non-employee Board members for 2012.2014. Mr. Dreiling was not separately compensated for his service on the Board; his compensation for service as our CEO is discussed under "Executive Compensation" below. We have omitted the columns pertaining to non-equity incentive plan compensation and change in pension value and nonqualified deferred compensation earnings because they are inapplicable.
Fiscal 20122014 Director Compensation
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||
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Raj Agrawal | 75,000 | 51,780 | 56,495 | — | 183,275 | |||||||||||||||||||||||||||
Warren F. Bryant | 84,000 | 51,780 | 56,495 | — | 192,275 | 120,000 | 47,669 | 75,846 | — | 243,515 | ||||||||||||||||||||||
Michael M. Calbert | 92,500 | 51,780 | 56,495 | — | 200,775 | 110,000 | 47,669 | 75,846 | — | 233,515 | ||||||||||||||||||||||
Sandra B. Cochran | 5,503 | — | — | — | 5,503 | 95,500 | 47,669 | 75,846 | — | 219,015 | ||||||||||||||||||||||
Patricia D. Fili-Krushel | 15,897 | 49,570 | 53,239 | — | 118,706 | 97,000 | 47,669 | 75,846 | — | 220,515 | ||||||||||||||||||||||
Adrian Jones | 75,000 | 51,780 | 56,495 | — | 183,275 | |||||||||||||||||||||||||||
Paula A. Price(5) | 36,896 | 56,088 | 91,516 | — | 184,500 | |||||||||||||||||||||||||||
William C. Rhodes, III | 84,000 | 51,780 | 56,495 | — | 192,275 | 115,000 | 47,669 | 75,846 | — | 238,515 | ||||||||||||||||||||||
David B. Rickard | 95,500 | 51,780 | 56,495 | — | 203,775 | 113,500 | 47,669 | 75,846 | — | 237,015 |
The Board approves, upon recommendation of the Compensation Committee, is responsible for recommending the form and amount of director compensation for consideration and approval by our Board. Thecompensation. As part of this process, the Committee may consult with or review information provided by Meridian Compensation Partners ("Meridian"), its independent consultant, ("Meridian"), regarding the form and amount of director compensation and also welcomesmay consider the input of our CEO and our Chief People Officer, butOfficer. However, the Committee and the Board retain and exercise ultimate decision-making authority regarding director compensation. We do not compensate for Board service any director who also serves as our employee. We will reimburse directors for certain fees and expenses incurred in connection with continuing education seminars and for travel and related expenses related to Dollar General business.
For 2012,2014, each non-employee director received quarterly payment (prorated as applicable), in quarterly installments, of the following cash compensation, as applicable:
In addition, except as provided below, each non-employee director, including Ms. Price who joined the Board mid-year, received an annual equity award under our Amended and Restated 2007 Stock Incentive Plan with an estimated value of $125,000 on the grant date as(as determined by Meridian using economic variables such as the trading price of our common stock, expected volatility of the stock trading prices of similar companies, and the terms of the awards.award) under our Amended and Restated 2007 Stock Incentive Plan. Sixty percent of this value consisted ofwas delivered in non-qualified stock options to purchase shares of our common stock ("Options") and 40% consisted ofwas delivered in restricted stock units payable in shares of our common stock ("RSUs"). The Options willare scheduled to vest as to 25% of the Optionsaward and the RSUs willare scheduled to vest as to 331/3% of the award on each of the first four and three anniversaries of the grant date, respectively, in each case subject to the director's continued service on our Board. Directors may elect to defer receipt of shares underlying the RSUs. Ms. Cochran received her annual equity award in March 2013 consistent with these terms and parameters.
We anticipate granting similar equity awards annually to those non-employee directors who are elected or reelected at each applicable shareholders' meeting. Any new director appointed after the annual shareholders' meeting but before February 1 of a given year, as was the case with Mss. Cochran and Fili-Krushel, will receive a full equity award no later than the first regularly scheduled Compensation Committee meeting following the date on which he or she is appointed. Any new director appointed on or after February 1 of a given year but before the next annual shareholders' meeting shall be eligible to receive the next regularly scheduled annual award.
The compensation program described above was similar to that in place in 2011 but was slightly revised for 2012 as a result of a market benchmarking review. In 2011, afterAfter reviewing with Meridian our Board compensation program relative to our market comparator group, the Compensation Committee determined that 2011 total compensation was approximately 29% below the market median, with the shortfall in the equity component. Accordingly, the Committeehas recommended, and the Board approved, a $50,000 increasehas determined based upon the Committee's recommendation, that the cash component of the 2015 non-employee director compensation will remain unchanged, but the following changes will be made to the equity portion:
In addition, beginning with calendar year 2015, Dollar General has implemented a Non-Employee Director Deferred Compensation Plan (the "Director Deferred Compensation Plan") to allow for deferral by non-employee directors of up to 100% of cash fees earned for Board service in a fiscal year. For those who choose to participate, benefits are payable upon separation from service in the equity componentform, as elected by the director at the time of Board compensation (from $75,000 to $125,000) effective June 2012.
Effective April 1, 2013, we separated our CNG Committee intodeferral, of a Compensation Committee and a Nominating and Governance Committee. We also named a lead director effective March 19, 2013. The Compensation Committee Chairman, the Nominating and Governance Committee Chairman, and the lead director will receive an annual retainer of $15,000, $10,000, and $17,500, respectively.lump sum distribution or monthly
payments for 5, 10 or 15 years. Participating directors can direct the hypothetical investment of deferred fees into funds identical to the funds offered in our 401(k) Plan and will be credited with the deemed investment gains and losses. The amounts deferred, along with deemed investment gains and losses, are credited to a liability account. The amount of the benefit will vary depending on the fees the director has deferred and the deemed investment gains and losses. In the event of a director's death, benefits are payable to the director's named beneficiary. In the event of a director's disability (as defined in the Director Deferred Compensation Plan), the unpaid benefit will be paid in a lump sum. Participant deferrals are not contributed to a trust, and all benefits are paid from Dollar General's general assets.
Our non-employee directors are subject to share ownership guidelines and holding requirements. The ownership guideline is 4 times the annual cash retainer payable for service on our Board as in effect on January 1, 2011 (or, if later, the date on which the director joined or joins our Board) to be achieved within 5 years of August 24, 2011 (or, if later, within 5 years of the date on which the director joined or joins our Board). At least 1 times the annual cash retainer in effect at the time the director joined or joins our Board should be acquired prior to joining the Board (or as soon after as practicable). Administrative details pertaining to these matters are established by the Compensation Committee.
Is Dollar General subject to the NYSE governance rules regarding director independence?
Yes. A majority of our directors must be independent in accordance with the independence requirements set forth in the NYSE listing standards. In addition, the Audit Committee, the Compensation Committee and the Nominating and Governance Committee must be composed solely of independent directors to comply with such listing standards and, in the case of the Audit Committee, with SEC rules. The NYSE listing standards define specific relationships that disqualify directors from being independent and further require that for a director to qualify as "independent," the Board must affirmatively determine that the director has no material relationship with our company.Dollar General. The SEC's rules and the NYSE listing standards contain a separate definitiondefinitions of independence for members of audit committees and the NYSE listing standards contain a separate definition (to take effect in 2013) of independence for compensation committees.committees, respectively.
How does the Board of Directors determine director independence?
The Board of Directors affirmatively determines the independence of each director and director nominee in accordance with guidelines it has adopted, which include all elements of independence set forth in the NYSE listing standards and SEC rules as well as certain Board-adopted categorical independence standards. These guidelines are contained in our Corporate Governance Guidelines, which are posted on the "Investor Information—Corporate Governance" portionsection of our website located at www.dollargeneral.com.
The Board first analyzes whether any director or director nominee has a relationship covered by the NYSE listing standards that would prohibit an independence finding for Board Audit Committee, Compensation Committee or Nominating and Governance Committeecommittee purposes. The Board then analyzes any relationship of the remaining eligible directors and nominees towith Dollar General or to our management that falls outside the parameters of the Board's separately adopted categorical independence standards to determine whether or not that relationship is material. The Board may determine that a director or nominee who has a relationship that falls outside of thesuch parameters of the categorical independence standards is nonetheless independent (to the extent thatbecause the relationship wouldis not constitute a barconsidered to independence under the NYSE listing standards).be material. Any director who has a material relationship with Dollar General or its management is not considered to be independent. TheAbsent special circumstances, the Board does not consider or analyze any relationship that falls within the parameters of the Board's separately adopted categorical independence standards.
Are all of the current directors and nominees independent?
No. Our Board of Directors consists of Raj Agrawal, Warren F. Bryant, MikeMichael M. Calbert, Sandra B. Cochran, Richard W. Dreiling, Patricia D. Fili-Krushel, Adrian Jones, BillPaula A. Price, William C. Rhodes and DaveDavid B. Rickard. Messrs. Rickard and Bryant and RickardMss. Cochran and Ms. CochranPrice serve on our Audit Committee, Messrs. Bryant and Rhodes and Ms. Fili-Krushel serve on our Compensation Committee, and Mr. Rhodes and Mss. Cochran and Fili-Krushel serve on our Nominating and Governance Committee.
Our Board of Directors has affirmatively determined that Messrs. Bryant, Calbert, Rhodes and Rickard and Mss. Cochran, Fili-Krushel and Fili-Krushel,Price, but not Messrs. Agrawal, Calbert,Mr. Dreiling, or Jones, are independent from our management under both the NYSE'sNYSE listing standards and our additional standards. Except as described below, any relationship between an independent director and Dollar General or our management fell within the Board-adopted categorical standards and, accordingly, was not reviewed or considered by our Board. The Board has also determined that the currently servingcurrent members of the Audit Committee, the Compensation Committee and the CompensationNominating Committee meet the independence requirements for membership on those committees set forth in the NYSE listing standards, our additional standards and, as to the Audit Committee, SEC rules.
for membership on those In reaching the determination that Ms. Cochran is independent, the Board committees set forth in the NYSE listing standards (including the additional requirements for the Compensation Committee to take effect in 2013) and, as to the Audit Committee, SEC rules.
considered that Ms. Cochran's brother, Stephen Brophy, has served as a Vice President of the Company (a non-executive position) since 2009. For 2012,2014, Mr. Brophy earned from the Company total cash compensation (comprised of his base salary and bonus compensation) of less than $300,000. In addition, Mr. Brophy$320,000 and received from the Company on March 20, 2012 an annual equity award consisting of 4,7293,034 non-qualified stock options, to purchase shares of the Company's Common Stock and a target award of 825569 performance share units, (814 of which were earned as a result of the Company's level of achievement of applicable financial performance measures for 2012) and on566 restricted stock units. In March 18, 20132015, Mr. Brophy received an annual equity award consisting of 2,9993,583 non-qualified stock options, to purchase sharesa target award of the Company's Common Stock, between 0 and 1,414433 performance share units, with a targeted amount of 707 (the exact amount to be determined based upon the Company's fiscal 2013 financial performance), and 711433 restricted stock units, in each caseunits. All equity awards were granted on terms consistent with the annual equity awards received by all Dollar General employees at the same job grade level as Mr. Brophy and on terms substantially similar to awards described in the Company's Annual Proxy Statement filedforms of award agreements on file with the SEC on April 5, 2012 and in this Proxy Statement. The Company doesSEC. We do not expect Mr. Brophy's total cash compensation for 20132015 to materially differ from his 20122014 total cash compensation.
Mr. Brophy also participatesis eligible to participate in employee benefits plans and programs available to our other full timefull-time employees. Ms. Cochran does not participate in any consideration or decision-making related to Mr. Brophy's compensation or performance evaluations. Mr. Brophy's cash compensation wasand equity awards were approved by the Compensation Committee pursuant to the Company's related party transactionrelated-party transactions approval policy.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Does the Board of Directors have a policy for the review,related-party transactions approval or ratification of related-party transactions?policy?
Yes. Our Board of Directors has adopted a written policy for the review, approval or ratification of "related party" transactions. A "related party" for this purpose includes our directors, director nominees, executive officers and greater than 5% shareholders, and any of their immediate family members, and a "transaction" includes one in which (1) the total amount may exceed $120,000, (2) Dollar General is a participant, and (3) a related party will have a direct or indirect material interest (other than as a director or a less than 10% owner of another entity, or both).
Pursuant to thisThe policy andrequires prior Board approval for all known related party transactions, subject to certain exceptions identified below, all known related party transactions require prior Board approval.below. In addition, at least annually after receiving a list of immediate family members and affiliates from our directors and executive officers, and greater than 5% shareholders, the Corporate Secretary inquires of relevant internal departments to determine whether any transactions were unknowingly entered into with a related party and presentsthe Board is presented with a list of such transactions, subject to certain exceptions identified below, for review. The related party may not participate in any discussion or approval of the transaction and must provide to the Board for review.all material information concerning the transaction.
AsOur Chairman and Chief Executive Officer, Mr. DreilingCEO is authorized to approve a related party transaction in which he is not involved if the total anticipated amount is expected to be less than $1 million and he informs the Board of such transactions.the transaction. The following transactions below are deemed pre-approved without Board review or approval:
The policy prohibits the related party from participating in any discussion or approval of the transaction and requires the related party to provide to the Board all material information concerning the transaction.
What related-party transactions existed in 20122014 or are planned for 2013?2015?
We describe below theOther than compensation paid or to be paid during 2014 and 2015 to one of our non-executive officers who is a family member of Ms. Cochran, as discussed further under "Director Independence" above, there are no transactions that have occurred since the beginning of 2012, and2014, or any currently proposed transactions, that involve Dollar General and exceed $120,000 and in which a related party had or has a direct or indirect material interest. In addition, we describe below certain other relationships between Dollar General and related parties in which a related party has an interest that may not be material.
Relationships with Management. Simultaneously with the closing of our 2007 merger and thereafter through May 2011, we, Buck Holdings L.P. and certain of our employees (collectively, "management shareholders") entered into shareholder's agreements (each, a "Management Stockholder's Agreement") that impose significant restrictions on transfer of covered shares of our common stock held by the management shareholders. Generally, shares are nontransferable prior to the fifth anniversary of either the closing date of our 2007 merger or a later specified date (depending on the terms of the applicable agreement) except (i) sales pursuant to an effective registration statement filed by us under the Securities Act of 1933 (the "Securities Act") in accordance with the Management Stockholder's Agreement, (ii) a sale to certain permitted transferees, or (iii) as otherwise permitted by our Board of Directors or pursuant to a waiver of the transfer restrictions; provided, that, in the event KKR or its affiliates transfer their limited partnership units to a third party, such transfer restrictions shall lapse with respect to the same proportion of shares of common stock owned by a management shareholder as the proportion of limited partnership units transferred by KKR and such affiliates relative to the aggregate number of limited partnership units they owned prior to such transfer. Following our initial public offering in 2009, we amended the Management Stockholder's Agreements to exclude from the transfer restrictions any shares acquired in the open market or through the directed share program administered as part of the initial public offering. Shares acquired by executive officers in the open market or through the directed share program will still be subject to any lock-up arrangements with the underwriters of any public offering of shares. Limited waivers of the transfer restrictions on a certain percentage of the shares subject to the Management Stockholder's Agreement have been granted since 2009, and a complete waiver of all remaining transfer restrictions, including those applicable to Mr. Vasos and to two other of our Executive Vice Presidents, Messrs. Flanigan and Ravener, was granted on February 1, 2013. These transfer restrictions had expired for a significant number of management shareholders, including some of our executive officers (Messrs. Dreiling and Tehle and Mss. Lanigan and Elliott) in July 2012.
In the event that a registration statement is filed with respect to our common stock, the Management Stockholder's Agreement prohibits management shareholders from selling shares not included in the registration statement from receipt of notice that we have filed or intend to file such registration statement until 180 days (in the case of an initial public offering) or 90 days (in the case of any other public offering) of the effective date of the registration statement, unless the underwriters, if any, agree to a shorter period. The Management Stockholder's Agreement also enables the management shareholder to cause us to repurchase his or her covered stock and vested options in the event of his or her death or disability, and enables us to cause the management shareholder to sell his or her covered stock or options to us upon certain termination events, all for the period of time specified in the Management Stockholder's Agreement. These put and call rights expired for a significant number of the management shareholders, including some of our executive officers (Messrs. Dreiling and Tehle and Mss. Lanigan and Elliott), in July 2012 and are scheduled to expire for our remaining covered executive officers at various points in 2013.
Certain members of senior management, including our executive officers other than Mr. Sparks (the "Senior Management Shareholders"), have limited "piggyback" registration rights with respect to their shares of our common stock in the event that certain investors sell, or cause to be sold, shares of our common stock in a public offering. Such rights may be voluntarily extended to other members of management as determined by our Board in connection with any given future such sale by certain
investors. See the description of the registration rights agreement under "Relationships with the Investors" below. During 2010, we amended these rights to allow for their accumulation by any employee entitled, but who elects not, to exercise such rights in a given offering. The Senior Management Shareholders waived their piggyback registration rights arising from our initial public offering in 2009 in consideration of our releasing them from the transfer restrictions contained in the Management Stockholder's Agreements after the expiration of a 180-day restricted period with respect to a number of shares of our common stock equal to the number of shares that such Senior Management Shareholders could have required us to register in connection with our initial public offering.
See "Director Independence" for a discussion of a familial relationship between Ms. Cochran and one of our non-executive officers and compensation paid to that officer during 2012 and 2013.
Interlocks. Mr. Dreiling serves as a manager of Buck Holdings, LLC for which Messrs. Calbert, Agrawal and Jones (each of whom served on our CNG Committee for all or part of 2012) serve as managers.
Relationships with the Investors. In connection with our initial public offering in 2009, we entered into a shareholders' agreement with affiliates of each of KKR and Goldman, Sachs & Co. Among its other terms, the shareholders' agreement establishes certain rights with respect to our corporate governance, including the designation of directors. For additional information regarding those rights, see "How are directors identified and nominated" elsewhere in this document.
In July 2007, we and Buck Holdings, L.P. entered into an indemnification agreement with KKR and Goldman, Sachs & Co. pursuant to which we agreed to provide customary indemnification to such parties and their affiliates in connection with certain claims and liabilities incurred in connection with certain transactions involving such parties, including the financing for our 2007 merger and pursuant to services provided under our sponsor advisory agreement with such parties that was entered into in 2007 and terminated in 2009.
In connection with our 2007 merger, we entered into a registration rights agreement with Buck Holdings, L.P., Buck Holdings, LLC, KKR and Goldman, Sachs & Co. (and certain of their affiliated investment funds), among certain other parties. Pursuant to this agreement, investment funds affiliated with KKR have an unlimited number of demand registration rights and investment funds affiliated with Goldman, Sachs & Co. have two demand registration rights which can be exercised once a year. Pursuant to such demand registration rights, we are required to register with the SEC the shares of common stock beneficially owned by them through Buck Holdings L.P. for sale by them to the public, provided that each of them hold at least $100 million in registrable securities and such registration is reasonably expected to result in aggregate gross proceeds of $50 million. We are not obligated to file a registration statement relating to any request to register shares pursuant to such demand registration rights without KKR's consent within a period of 180 days after the effective date of any other registration statement we file pursuant to such demand registration rights. In addition, in the event that we are registering additional shares of common stock for sale to the public, whether on behalf of us or the investment funds as described above, we must give notice of such registration to all parties to the registration rights agreement, including the Senior Management Shareholders, and such persons have piggyback registration rights providing them the right to have us include the shares of common stock owned by them in any such registration. In each such event, we are required to pay the registration expenses.
Pursuant to this registration rights agreement and the demand registration rights thereunder, secondary offerings of our common stock were completed in April, June and October 2012 and April 2013 for which affiliates of KKR and of Goldman, Sachs & Co. served as underwriters. Dollar General did not sell shares of common stock, receive proceeds, or pay any underwriting fees in connection with any of these secondary offerings, but paid resulting aggregate expenses of approximately $1.4 million in
connection with the 2012 secondary offerings and expects to pay resulting aggregate expenses of approximately $0.5 million in connection with the April 2013 secondary offering. Certain members of our management, including certain of our executive officers, exercised registration rights in connection with such offerings. The underwriters, including affiliates of KKR and Goldman, Sachs & Co., waived their fee for members of our management who participated in the October 2012 and the April 2013 secondary offerings. To the extent additional secondary offerings of our common stock are completed in fiscal 2013, we expect affiliates of KKR and Goldman, Sachs & Co. to serve as underwriters and for us to pay resulting expenses, in each case consistent with the 2012 and April 2013 secondary offerings.
Concurrent with the closing of the April 2012 secondary offering and pursuant to a Share Repurchase Agreement between Dollar General and Buck Holdings L.P., dated March 25, 2012, Dollar General purchased 6,817,311 shares of Common Stock from Buck Holdings L.P. for an aggregate purchase price of $300 million, or $44.00562 per share which represents the per share price to the public in the secondary offering less underwriting discounts and commissions. Of such shares, affiliates of KKR and Goldman, Sachs & Co. sold to Dollar General 3,552,787 and 1,478,274 shares for proceeds of $156.3 million and $65.1 million, respectively.
In addition, pursuant to a Share Repurchase Agreement between Dollar General and Buck Holdings, L.P., dated September 25, 2012, Dollar General purchased 4,929,508 shares of Common Stock from Buck Holdings, L.P. for an aggregate purchase price of $250 million, or $50.715 per share which represents the per share price to the public in the October 2012 secondary offering less underwriting discounts and commissions. Of such shares, affiliates of KKR and Goldman, Sachs & Co. sold to Dollar General 2,567,370 and 1,068,254 shares for proceeds of approximately $130.2 million and $54.2 million, respectively. The closing of such share repurchase was conditioned upon the receipt of the consent of the requisite lenders under our senior secured credit facilities and the consummation of the October 2012 secondary offering. In connection with the closing of such repurchase transaction, Buck Holdings, L.P. reimbursed Dollar General approximately $1.7 million for lender fees incurred in obtaining such consent as further described below. Affiliates of KKR are and affiliates of Goldman, Sachs & Co. may be lenders under the term loan and, as such, each would have received a pro-rata portion of such fee.
Each of the share repurchase transactions with Buck Holdings, L.P. described above was part of an overall Board-authorized share repurchase program and was specifically reviewed and approved by a special committee of our Board made up entirely of independent directors.
Affiliates of KKR are and Goldman, Sachs & Co. may be lenders under our senior secured term loan facility, which had a $2.3 billion principal amount at inception and a principal balance as of February 1, 2013 of approximately $2.0 billion. Goldman Sachs Credit Partners L.P. also served as syndication agent and joint lead arranger for the term loan facility. This term loan facility was entered into and subsequently amended (as discussed below) in the ordinary course of business and, as of the loan origination and subsequent amendment, was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We paid approximately $62.0 million of interest on the term loan during fiscal 2012.
We amended this term loan facility in March 2012 to, among other things, extend the maturity of a portion of such facility from 2014 to 2017. An affiliate of each of KKR and Goldman, Sachs & Co., along with a third unaffiliated entity, acted as a joint lead arranger in connection with such term loan facility amendment for which each of the KKR and Goldman, Sachs & Co. affiliates received a fee from Dollar General of approximately $440,000. As disclosed above, in connection with the October 2012 share repurchase from Buck Holdings, L.P., we further amended this term loan facility in October 2012 to add additional capacity for Dollar General to repurchase, redeem or
otherwise acquire shares of its capital stock, not to exceed $250 million. Dollar General incurred a fee associated with such amendment, which was reimbursed by Buck Holdings, L.P. as discussed above.
Goldman, Sachs & Co. was a counterparty to an amortizing interest rate swap, entered into in connection with the senior secured term loan facility, which matured on July 31, 2012. Such interest rate swap had a notional amount of $103.3 million immediately prior to its maturity date. We paid Goldman, Sachs & Co. approximately $2.5 million in fiscal 2012 pursuant to this swap.
In March 2012, we amended our senior secured asset-based revolving credit facility to, among other things, increase the maximum total commitment to $1.2 billion. An affiliate of Goldman, Sachs & Co. (among other entities) serves as lender and served as documentation agent and joint lead arranger under such facility. This amended revolving credit facility was entered into in the ordinary course of business, was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We paid approximately $6.0 million of interest on the revolving credit facility during fiscal 2012.
As disclosed above, in connection with the October 2012 share repurchase from Buck Holdings, L.P., we further amended this revolving credit facility in October 2012 to add additional capacity for Dollar General to repurchase, redeem or otherwise acquire shares of its capital stock, not to exceed $250 million.
In July 2012, pursuant to an indenture dated as of July 12, 2012 (the "Senior Indenture"), we issued $500 million aggregate principal amount of 4.125% senior notes due 2017 (the "Senior Notes") which mature on July 15, 2017. As joint book-running managers in connection with the issuance of the Senior Notes, an affiliate or affiliates of each of KKR and Goldman Sachs & Co. received an equivalent share of approximately $2.3 million during fiscal 2012.
Dollar General paid approximately $185,000 to Goldman, Sachs & Co. for brokerage services in connection with the Company's open market share repurchases in September 2012 under a Board-authorized share repurchase program.
As previously disclosed, the Company intends to effect a refinancing of its existing senior secured credit facilities in the first quarter of fiscal 2013. The Company expects affiliates of each of KKR and Goldman, Sachs & Co. to participate in various capacities and receive customary fees consistent with prior financings.
Each of KKR and Goldman, Sachs & Co., either directly or through affiliates, has ownership interests in a broad range of companies ("Portfolio Companies") with whom we may from time to time enter into commercial transactions in the ordinary course of business, primarily for the purchase of goods and services. We believe that none of our transactions or arrangements with Portfolio Companies is significant enough to be considered material to KKR or Goldman, Sachs & Co. or to our business or shareholders. In 2012, the largest amount paid to a Portfolio Company was approximately $95.8 million paid to a KKR Portfolio Company in the ordinary course of business for the purchase of merchandise for resale. This amount represented less than 3.0% of the vendor's revenues for its last completed fiscal year and less than 1.0% of our revenues for 2012.
Our Board members, Messrs. Calbert and Agrawal, serve as executives of KKR, while our Board member, Mr. Jones, serves as a Managing Director of Goldman, Sachs & Co. KKR and certain affiliates of Goldman, Sachs & Co. indirectly own, through their investment in Buck Holdings, L.P., a significant percentage of our common stock.
We refer to the persons listed in the Summary Compensation Table below as our "named executive officers." References to the "merger" or the "2007 merger" mean our merger that occurred on July 6, 2007 as a result of which substantially all of our common stock became owned by Buck Holdings, L.P. ("Buck LP"), a Delaware limited partnership controlled by investment funds affiliated with KKR.
Compensation Discussion and Analysis
Executive Overview
The overarching goal of our executive compensation program is to serve the long-term interests of our shareholders. A competitive executive compensation package is critical for us to attract, retain and motivate persons who we believe have the ability and desire to deliver superior shareholder returns. We strive to balance the short-term and long-term components of our executive compensation program to incent achievement of both our annual and long-term business strategies, to pay for performance and to maintain our competitive position in the market in which we compete for executive talent. We believe the success of our program is
Compensation Best Practices. As evidenced by the following practices and policies, we strive to ensure alignment of interests with shareholders and to implement sound corporate governance practices:
Compensation Practice | Dollar General Policy | |||
---|---|---|---|---|
Pay for Performance | ü | We link pay to performance by ensuring a significant percentage of total direct compensation is linked with the financial performance of key metrics. All of our short-term cash incentive compensation and a significant majority of our long-term equity incentive compensation are performance based. For more details, see "Pay for Performance" below. | ||
Share ownership guidelines and holding requirements | ü | We utilize share ownership guidelines and holding requirements to create alignment with the long-term interests of our shareholders. For more details, see "Share Ownership Guidelines and Holding Requirements" below. | ||
Prohibition on hedging and pledging Dollar General securities and on holding Dollar General securities in margin accounts | ü | We prohibit executive officers and Board members from hedging their ownership of Dollar General stock, pledging Dollar General securities as collateral, and holding Dollar General securities in a margin account. For more details, see "Policy Against Hedging and Pledging Transactions" below. | ||
Substantial elimination of tax gross-ups | ü | None of our executives are eligible for tax gross-up payments other than on relocation-related items. | ||
Prohibition on repricing or cash buyout of underwater stock options without shareholder approval | ü | Our long-term equity incentive program does not permit repricing of underwater stock options, including reduction in exercise price of stock options or replacement of an award with cash or another award type, without shareholder approval. |
Compensation Practice | Dollar General Policy | |||
---|---|---|---|---|
Annual compensation risk assessment | ü | Our Compensation Committee performs at least annually a risk assessment of our compensation program. | ||
Independent compensation consultant | ü | The Compensation Committee retains an independent compensation consultant to advise the Compensation Committee on the executive and non-employee director compensation program and practices. |
Pay for Performance. Consistent with our pay-for-performance philosophy, a significant majority of our named executive officers' target total direct compensation for 2014 was performance based and exposed to fluctuations in the price of our common stock. In addition, our 2014 target total direct compensation packages sought to reward both long-term and annual performance, as shown in the charts below:
CEO | Other NEOs (Average) | |
STI—Short-Term Cash Incentive
LTI—Long-Term Equity Incentive
The results of the financial and operating results for 2012 (2012 was a 52-week year and 2011 was a 53-week year):performance metrics used in connection with our 2014 performance-based compensation are as follows:
Significant Compensation-Related Actions in 2014. We make various changes to our annualcompensation program in the normal course in order to remain competitive and further strengthen our program in ways that support our shareholders' interests. The most significant compensation-related actions in 2014 pertaining to our named executive officers include:
20112014 Say on Pay Vote. In 2011Once every three years, we provide the opportunity for our shareholders votedto vote on an advisorya nonbinding basis with respect to our compensation program for named executive officers.officers, which is the time interval last approved by our shareholders on a nonbinding basis. The advisory vote on our named executive officer compensation program was last held in 2014. Of the total votes cast (excluding abstentions and broker non-votes), 96.5%96.0% were cast in support of the program. We continue toprogram, which we view this vote as overwhelmingly supportive of our compensation policies and decisions and, accordingly,decisions. Accordingly, we do not believe the results required consideration of changes to our compensation program in 2012 or 2013.
program. The most significant compensation-related actions or achievements in 2012 pertainingnext opportunity for our shareholders to vote to approve on a nonbinding basis the compensation of our named executive officers include:
Table of Contentsshareholders.
Executive Compensation Philosophy and Objectives
We strive to attract, retain and motivate persons with superior ability, to reward outstanding performance, and to align the long-term interests of our named executive officers with those of our shareholders. The material compensation principles applicable to the 2012 and 2013 compensation of our named executive officers included the following, all of which are summarized below and discussed in more detail in "Elements of Named Executive Officer Compensation" below::
We utilize employment agreements with the named executive officers which, among other things, set forth minimum levels of certain compensation components. We believe such arrangements are a common protection offered to named executive officers at other companies and help to ensure continuity and aid in retention. The employment agreements also provide for standard protections to both the named executive officer and Dollar General should the executive'ssuch officer's employment terminate.
Named Executive Officer Compensation Process
Oversight. Our Board of Directors has delegated responsibility for executive compensation to its Compensation Committee. The Compensation Committee, consisting entirely of independent directors, approves the compensation of our named executive officers, while its subcommittee consisting entirely of independent directors at such times as the Compensation Committee did not consist entirely of independent directors (the "162(m) Subcommittee") approves any portion that is intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code or that is intended to be exempt for purposes of Section 16(b) of the Securities Exchange Act of 1934.officers.
Use of Outside Advisors. The Compensation Committee has selected Meridian Compensation Partners ("Meridian") to serve as its independent compensation consultant. Meridian (including(or its predecessor Hewitt Associates)predecessor) has served as the Committee's consultant since our 2007 merger.2007. The written agreement with Meridian details the terms and conditions under which Meridian will provide independent advice to the Committee in connection with matters pertaining to executive and director compensation. Under the agreement, theThe Committee (or its chairman) shall determine the scope of Meridian's services. The approved scope generally includes availability for attendance at select Committee meetings and associated preparation work, risk assessment assistance, guidingassisting with the Committee's decision making with respect to executive and Board of Directorsdirector compensation matters, providing advice on our executive pay philosophy, compensation peermarket comparator group and incentive plan design and employment agreement design, providing competitive market studies, and apprising the Committee about emerging best practices and changes in the regulatory and corporate governance environment. In 2012, the Committee decreased the amount of work performed by Meridian, primarily with respect to benchmarking and risk assessment assistance, which work was performed by management.
Meridian did not provide any services to the Company in 2012 unrelated to Board or executive compensation.
A Meridian representative attends or is on call to join such Committee meetings and private sessions as requested by the Committee.Committee requests. The Committee's members are authorized to consult directly with the consultant at other times as desired. During 2012,Meridian, along with management, prepares market comparator group data for consideration by the Committee's Chairman periodically consulted directly withCommittee in making decisions on items such as base salary, the Teamshare bonus program, and the long-term incentive program.
After evaluating all of the factors required to be considered by the NYSE listing standards, the Committee has determined that Meridian is independent from Dollar General and that no conflicts of interest exist related to Meridian's services provided to the Committee.
Management's Role. Mr. Bob Ravener, our Executive Vice President and Chief People Officer, and other non-executive members of our human resources group, in connection with named executive officer compensation (as described below under "Management's Role"). In an effort to decrease costs, the Committee chose to rely more heavily upon management than it had in prior years to provide benchmarking data and resulting recommendations with respect to 2012 and 2013 annual base salary and short-term cash incentive decisions. Meridian, along with management, assisted the Committee in developing the new long-term annual incentive program and provided detailed data from the market comparator group upon which the Committee relied in determining the size of the grants under the program.
The Committee assessed the independence of Meridian pursuant to SEC rules and did not identify any relationships that could be viewed as conflicts of interest.
Management's Role. Mr. Ravener and non-executive members of the human resources group have assisted Meridian in gathering and analyzing relevant competitive data and, with the input of Mr. Dreiling, identifying and evaluating various alternatives for named executive officer compensation (including his own)Mr. Ravener's). At the CompensationThe Committee's request, management's roleChairman periodically consults directly with Messrs. Dreiling and Ravener, and other non-executive members of our human resources group, in collecting this typeconnection with executive compensation, and consulted with Mr. Ravener, Ms. Rhonda M. Taylor, our Executive Vice President and General Counsel, and other non-executive members of data expanded beginningour human resources group, in 2012, including increased reliance on managementconnection with respect to recommendations for certain portions of 2012 and 2013 executiveMr. Dreiling's employment transition compensation. Messrs. Dreiling and Ravener also discuss with the Committee their recommendations regarding named executive officer pay components, typically based on benchmarking data; however, Mr. Dreiling does not participate in the Committee's deliberations of his own compensation. Mr. Dreiling subjectively assesses performanceFor the role of each of the othermanagement in named executive officers (seeofficers' performance evaluations, see "Use of Performance Evaluations" below).below.
Although the Committee values and solicits such input from management, it retains and exercises sole authority to make decisions regarding named executive officer compensation.
Use of Performance Evaluations. Annually,For 2013, the Compensation Committee assessesassessed the performance of Mr. Dreiling, considering Mr. Dreiling's input, the anonymous input of his direct reports as consolidated by Mr. Ravener, and other factors. In addition, Mr. Dreiling assessesassessed the performance of each of the other named executive officers inand reported to the Committee whether each casenamed executive officer (other than himself) performed satisfactorily. A similar process was followed to evaluate each named executive officer's 2014 performance other than Mr. Dreiling. Mr. Dreiling's 2014 performance evaluation was instead subsumed within the negotiations surrounding his employment transition agreement as discussed under "CEO Employment Transition Agreement" below.
These evaluations are used to determine each such officer's overall success in meeting or exhibiting certain enumerated factors, including our four publicly disclosed operating priorities and certain core attributes on which all of our employees are evaluated. These evaluations are subjective; no objective criteria or relative weighting is assigned to any individual factor.
The Committee uses the overall performance evaluation results as an eligibility threshold for annual base salary increases and Teamshare bonus payments for named executive officers. AAn overall performance rating below "good" (i.e., "unsatisfactory" or "needs improvement") for the last completed fiscal year would generally preclude a named executive officer from receiving any annual base salary increase or Teamshare bonus payment (although the Committee retains discretion to approve a Teamshare bonus payment in the event of a "needs improvement" rating). The performance evaluation results have not been used to determine the amount of the Teamshare bonus payment for any named executive officer; rather, the Teamshare bonus amount is determined solely based upon the Company's level of achievement of a pre-established financial performance measuresmeasure and the terms of the Teamshare program (see discussion below). Any named executive officer who receives a "needs improvement" performance rating also would receive a reduced level of restricted stock units and stock options. Each named executive officer received a satisfactory (i.e., "good," "very good," or "outstanding") overall performance evaluation with respect to each of 20112013 and 2012 (Mr. Sparks was hired in 2012; accordingly, he was only subject to a performance evaluation for 2012).2014.
The performance evaluation results also may impact the amount of ana named executive officer's annual base salary increase. Any named executive officer who receives a satisfactory performance rating is given a percentage base salary increase that equals the overall budgeted increase for the Company's U.S.-based employee population unless:
Actual annual base salary determinations are discussed under "Elements Use of Named Executive Compensation—Base Salary" below.Market Benchmarking Data. The Compensation Committee utilizes a market comparator group when making compensation decisions (see "Executive Compensation Philosophy and Objectives" above). The market comparator group is approved by the Committee and consists of companies selected according to their similarity to our operations, services, revenues and markets.
Use of Market Benchmarking Data. We pay compensation that is competitive with the external market for executive talent to attract and retain named executive officers who we believe will help improve our business. We believe that this primary talent market consists of retail companies with revenues both larger and smaller than ours and with business models similar to ours. Those companies are likely to have executive positions comparable in breadth, complexity and scope of responsibility to ours. This market comparator group is periodically reviewed to ensure that it remains relevant.
Our market comparator group for 20122014 compensation decisions other than for Mr. Vasos consisted of the same companies as our 2013 market comparator group:
AutoZone | Big Lots | Family Dollar | McDonald's | |||
OfficeMax | PetSmart | Staples | J.C. Penney | |||
The Gap | Macy's | Ross Stores | TJX Companies | |||
Kohl's | Starbucks | L Brands | Dollar Tree | |||
Foot Locker | Safeway | Yum! Brands |
Our market comparator group for Mr. Vasos' 2014 compensation decisions consisted of AutoZone, Bigthe nine companies (Big Lots, Dollar Tree, Family Dollar, McDonald's, OfficeMax, PetSmart, Staples,Foot Locker, J.C. Penney, The Gap, Macy's,McDonald's, PetSmart, Ross Stores TJX Companies, Kohls, Starbucks, Limited Brands, Dollar Tree, Foot Locker, Safeway and Yum Brands.
TheSafeway) in our 2014 market comparator group was modified in August 2011that report data for a comparable position.
For positions below CEO, the Committee biennially reviews market data provided by removing 7-Eleven, Collective Brands, Genuine Parts, Nordstrom, Blockbuster, and The Pantry and adding TJX Companies, Kohls, Starbucks, Limited Brands, Dollar Tree, Foot Locker and Safeway. We modified our market comparator groupMeridian for 2012 to repositioneach named executive officer. In years where individual data is not provided by Meridian, the Company atCommittee conducts its review against the median ofprior year's data after applying an aging factor provided by Meridian. Market data for the group in terms of revenues,CEO is provided by Meridian annually to ensure that the constituent companies more closely represent the retail companies with which we compete for executive talent, and to ensure that the group continues to include companies whose business models are similar to ours. However, we continued to use the 2011 market comparator group as a reference point in our 2012 base salary and short-term incentive decisions (other than for the CEO), as described below.
For 2012 base salary and short-term cash incentive compensation decisions for the named executive officers, the Company averaged market data obtained from the most recently available proxies of the 2012 market comparator group, from a survey of our 2012 market comparator group conducted by Equilar and from a similar "aging" process of the data obtained in 2010 for the members of the 2011 market comparator group, aged an additional 2.7%, consistent with the Company's overall 2012 budget for merit increases. However, in the case of the CEO, the 2011 market comparator group data was not used; instead, to ensure the Compensation Committee wasis aware of any significant movement in CEO compensation levels within the market comparator group. For 2014 executive compensation decisions other than Mr. Dreiling, the Committee reviewed 2013 market comparator group data that had been aged by 3%. In the case of Mr. Dreiling's 2014 compensation, Meridian provided current survey data from the 2012 market comparator group. These three market data sources were averaged in order to reduce reliance on any one data source and to smooth out anomalies that might exist in the actual individual position data reported by the market data source.
For 2013 compensation decisions regarding base salary, short-term cash incentives and long term equity grant dollar values, the Committee reviewed survey data provided by Meridian from the 2012 market comparator group and referenced compensation data from the previous three years of the proxy statements of the 2012 market comparator group for those positions where comparable positions could be identified.
The Committee believes that the median of the competitive market generally is the appropriate target for a named executive officer's total compensation.
Elements of Named Executive Officer Compensation
We provide compensation in the form of base salary, short-term cash incentives, long-term equity incentives, benefits and limited perquisites. We believe each of these elements is a necessary component of the total compensation package and is consistent with compensation programs at competing companies.companies with whom we compete both for business and talent.
Base Salary. Base salary promotes the recruiting and retention functions of our compensation program by reflecting the salaries for comparable positions in the competitive marketplace, rewarding strong performance, and providing a stable and predictable income source for our executives. Because we likely would be unable to attract or retain quality named executive officers in the absence of competitive base salary levels, this component constitutes a significant portion of the total compensation package. Our employment agreements with the named executive officers set forth minimum base salary levels, but the Compensation Committee retains sole discretion to increase these levels from time to time.
(a) Named Executive Officers Other than Mr. Dreiling. In each of 2012 and 2013,2014, the Compensation Committee determined with Mr. Dreiling's recommendation, that the named executive officers' performance assessments relative to other executives supported a percentage increase equal to that which was budgeted for our entire U.S.-based employee population (see "Use of Performance Evaluations") as such increases,. Such increase, along with the other compensation components, would maintainmaintained total 2012 compensation within a reasonable range of the median of the market comparator group. Accordingly, each of the named executive officers received the budgeted 2.7% and 2.75%2.45% annual base salary increase in 2012 and 2013, respectively, except that Mr. Sparks joined our Company in 2012 and, accordingly, did not receive a base salary2014. The increase in 2012. All such increases werewas effective as of April 1, 2014.
Table of the applicable year.Contents
In March 2012, Mr. Sparks was hired as our Executive Vice President of Store Operations. The Compensation Committee determined his base salary based on consideration of the 2011 market comparator group data provided by Meridian, his compensation with his prior employer, the relationship of his position to similar executive positions and the amount we believed necessary to entice him to accept our offer of employment.
(b) Mr. Dreiling. In each of 2012 and 2013,determining Mr. Dreiling's 2014 base salary, the Compensation Committee took into account Mr. Dreiling's performance assessment, the amount budgeted for our entire U.S.-based employee population (see "Use of Performance Evaluations"), and the benchmarking data of the applicable market comparator group (see "Use of Market Benchmarking Data"). With respect to Mr. Dreiling's 2012 and 2013 base salary increase, theThe Committee determined that Mr. Dreiling should receive the same 2.7% (2012) and 2.75% (2013)2.45% base salary increase that was awarded to each of the other named executive officers which, along with the other components of Mr. Dreiling's 20122014 compensation, maintained his total compensation atwithin a reasonable range of the median range of the market comparator group.
(c) One-Time Base Salary Adjustments. In 2012, the Compensation Committee decided to reduce tax reimbursements and tax gross-ups relating to Company-provided perquisites. As a result, to address the change in the policy equitably, the Committee authorized one-time base salary adjustments for all officers, including Mr. Dreiling and each of the other named executive officers, effective January 1, 2013, in an amount equal to the actual 2012 individual tax and gross-up costs paid by Dollar General for life insurance and financial services, as applicable, in exchange for the elimination of such tax and gross-up benefits as of December 31, 2012. Mr. Dreiling also received an additional one-time salary adjustment of $5,000 in exchange for his agreement to waive the provisions in his employment agreement that provide for a gross-up on taxes for Company-paid professional club memberships (to date, Mr. Dreiling has not invoked his right to require the Company to pay for any such professional club memberships) and legal consultation fees relating to future amendments to his employment agreement.
Short-Term Cash Incentive Plan. Our short-term cash incentive plan, called Teamshare, is established under our shareholder-approved Amended and Restated Annual Incentive Plan. The Teamshare program provides an opportunity for each named executive officer to receive a cash bonus payment equal to a certain percentage of base salary based upon Dollar General's achievement of one or more pre-established financial performance measures. This Teamshare program is established pursuant to our Amended and Restated Annual Incentive Plan, under which certain employees, including our named executive officers, may earn up to $5 million ($10 million for 2013 and thereafter) in respect of a given fiscal year, subject to the achievement of certain performance targets based on any of the performance measures listed in the Amended and Restated Annual Incentive Plan.
As a threshold matter, a named executive officer's eligibility to receive a bonus under the Teamshare program depends upon his or her receiving an overall individual performance rating of satisfactory (see "Use of Performance Evaluations"). Accordingly, Teamshare fulfills an important part of our pay for performance philosophy while aligning the interests of our named executive officers and our shareholders.
(a) 20122014 Teamshare Structure. The Compensation Committee selected adjusted EBITDA and return on invested capital ("ROIC")EBIT as the financial performance measuresmeasure for the 20122014 Teamshare program. The Committee weighted the ROICbelieves that EBIT is a comprehensive measure and the adjusted EBITDA measure at 10% and 90%, respectively, of the total Teamshare bonus, recognizingCompany's performance and provides a different but complementary focus for the importance of EBITDA inshort-term incentive program than that used for the measurement of our current performance, the ability to repay our debt and funding our growth and day-to-day operation, while ROIC reflects the importance of achieving an appropriate return on our invested capital and managing investments necessary to achieve superior performance.
long-term incentive program. For purposes of the 20122014 Teamshare program, adjusted EBITDAEBIT is computeddefined as the Company's operating profit as calculated in accordance with our credit agreements, and ROIC is calculated as total return (calculated as the sum of operating income, depreciation and amortization and minimum rentals, less taxes) divided by average invested capital (calculated as the sum of total assets and accumulated depreciation and amortization, less cash, goodwill, accounts payable, other payables, accrued liabilities, plus 8x minimum rentals). Each of the adjusted EBITDA and ROIC calculationsU.S. generally accepted accounting principles ("GAAP"), but shall be further adjusted to exclude the impact of:exclude:
The Committee established a target performance level for the adjusted EBIT performance measure, as well as threshold (below which no bonus may be paid)earned) and targetmaximum (above which no further bonus may be earned) performance levels, discussed below, for each of the adjusted EBITDA and ROIC performance measures. Since 2008, there has not been a maximum level of adjusted EBITDA or ROIC performance associated with the Teamshare program, although any individual payout is capped at $5 million (in 2012) and $10 million (in 2013 and thereafter), in order to avoid discouraging employees from striving to achieve performance results beyond maximum levels.
For 2008 through 2011, we achieved an adjusted EBITDA performance level ranging from 101.79% (in 2011) to 112.47% (in 2008) of the target. For 2010 and 2011, we achieved an ROIC performance level of 100.9% of the target and 100.78% of the target, respectively.
The target adjusted EBITDAEBIT performance level for the 20122014 Teamshare program was $1.992$1.851 billion which, consistent with prior practice, was the same level as our 20122014 annual financial plan objective. The Committee considered that level to be challenging andTo more difficult to achieve than performance targets for prior years, requiring superior execution and success on manyclosely reflect the practices of our new business initiatives. As it has done since 2008,market comparator group, the Committee also establishedset the adjusted EBITDA threshold performance level at 95%90% of target.
The Committee established the target ROIClevel and instituted a performance level for the 2012 Teamshare program at 20.95% which was the same level as our 2012 annual financial plan objective. Again, the Committee viewedcap of 120% of the target as challenging to achieve. The threshold ROIC performance level was setlevel.
at 20.45%, or 50 basis points lower than the target level, and the 200% achievement level was set at 21.95%, or 100 basis points higher than the threshold level.
The bonus payable to each named executive officer if we reached the 2012 target performance levels for eachupon satisfaction of the financial2014 target adjusted EBIT performance measureslevel is equal to the applicable target percentage, of salary as set forth in the chart below.below, of the applicable salary. For all named executive officers, such percentages are consistent with those forin effect at the end of the prior year. In addition,year and, except for all named executive officers,Messrs. Dreiling and Vasos (for whom the market value was not blended), such percentages reflect a blend of the approximate median of the payout percentages for the market comparator group (other than for the CEO for whom the market value was not blended). Mr. Dreiling's employment agreement with us requires minimum threshold (50%) and minimum target (125%) bonus percentages, but in 2011 the Committee determined his target bonus percentage should be 130% in order to more closely align Mr. Dreiling's bonus target and total cash compensation with the median of the market comparator group.
Name | Target Payout Percentage | |||
---|---|---|---|---|
Mr. Dreiling | 130% | |||
Mr. Vasos | ||||
Mr. Tehle | ||||
Mr. | ||||
| ||||
Mr. Sparks |
Bonus payments forPerformance between 90% (threshold) and 100% of the financial performance below or abovetarget, as well as between 100% and 120% (maximum) of the applicablefinancial performance target, levels are proratedis interpolated on a graduated scale commensurate with financial performance levels in accordance with the schedule below. For 2012, the ROIC graduated scale was modified to more closely align the ROIC achievement levels with the EBITDA achievement levels.
Adjusted EBITDA | ROIC | Total | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% of Performance Target | % of Bonus Payable | % of Performance Target | % of Bonus Payable | Bonus at Target (%) | ||||||||||
95 | 45 | 97.61 | 5 | 50 | ||||||||||
96 | 54 | 98.09 | 6 | 60 | ||||||||||
97 | 63 | 98.57 | 7 | 70 | ||||||||||
98 | 72 | 99.05 | 8 | 80 | ||||||||||
99 | 81 | 99.52 | 9 | 90 | ||||||||||
100 | 90 | 100.00 | 10 | 100 | ||||||||||
101 | 99 | 100.48 | 11 | 110 | ||||||||||
102 | 108 | 100.95 | 12 | 120 | ||||||||||
103 | 117 | 101.43 | 13 | 130 | ||||||||||
104 | 126 | 101.91 | 14 | 140 | ||||||||||
105 | 135 | 102.39 | 15 | 150 | ||||||||||
106 | 144 | 102.86 | 16 | 160 | ||||||||||
107 | 153 | 103.34 | 17 | 170 | ||||||||||
108 | 162 | 103.82 | 18 | 180 | ||||||||||
109 | 171 | 104.30 | 19 | 190 | ||||||||||
110 | 180 | 104.77 | 20 | 200 |
For each 1% adjusted EBITDA increase in the percentstraight-line basis on actual results for a bonus payout of performance target level between the threshold performance level50% (at threshold), 100% (at target) and 110%300% (at maximum) of the target performance level, the corresponding payout increases by 9% of the officer'sindividual's target payout amount (based upon the officer's target payout percentage). For each 1% adjusted EBITDA increase above 110% of the target performance level, the corresponding payout increases by 10.865% of the officer's target payout amount (based upon the
officer's target payout percentage). For ROIC, each .477% increase in the percent of performance target level between the threshold performance level and 104.77% of the target performance level increases the payout percentage by 1% of the officer's target payout amount (based upon the officer's target payout percentages). For each .477% increase in ROIC above the 104.77% of the target performance level, the bonus payout increases by 1.207% of the officer's target payout amount (based upon the officer's target payout percentage). Payout percentages greater than 200% of the target payout levels are based on an approximate sharing between Dollar General (80%) and the Teamshare participants (20%) of the incremental adjusted EBITDA dollars earned above 110% of the adjusted EBITDA performance level, split 90% to adjusted EBITDA and 10% to ROIC.
This proration schedule, through 110% of the target performance level, is consistent with the schedule approved by the Committee in 2007 in reliance upon benchmarking data which, at that time, indicated that the typical practice was to set the threshold payout percentage at half of the target and the maximum payout percentage at twice the target. The Committee determined in 2008 that the proration schedule for adjusted EBITDA performance above 110% of target should approximate a sharing between Dollar General (80%) and the Teamshare participants (20%) of the adjusted EBITDA dollars earned above that level.percentage.
(b) 20122014 Teamshare Results. The Compensation Committee approvedconfirmed the adjusted EBITDA and ROICEBIT performance resultsresult at $1,986,617,000 (97.3% of target) and 21.06% (111.0%$1.795 billion (96.97% of target), respectively, which equateequates to a payout of 98.67%84.84% of individual bonus targets under the 20122014 Teamshare program. Accordingly, a 20122014 Teamshare payout was made to each named executive officer at the following percentages of base salary earned: Mr. Dreiling, 128.3%110.29%; Mr. Vasos, 67.87%; and each of Mr.Messrs. Tehle, Mr. Vasos, Ms. LaniganD'Arezzo and Mr. Sparks, 64.1%55.14%. Such amounts are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table.
(c) 2013 Teamshare Structure. The Compensation Committee has approved a 2013 Teamshare structure similar to that which was approved for 2012. However, the 2013 performance measure has been determined to be adjusted EBIT, as the Committee believed that this was a more comprehensive measure of the Company's performance since it includes the cost of capital investments in achieving the current year's financial results and should provide a different, but complementary, focus for the short-term incentive program than that used for the long-term incentive program.
Adjusted EBIT is defined as the Company's operating profit as calculated in accordance with United States general accepted accounting principles ("GAAP"), but shall exclude:
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 shareholder-approved Amended and Restated 2007 Stock Incentive Plan and options 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.2012 Performance-Based Restricted Stock Award. UntilIn 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
program. Adjustments to EBITDA for purposes of calculating performance targets for our long-term equity incentive program may not in all circumstances be identical to adjustments to EBITDA for other purposes, including the covenants contained in our principal financial agreements. Accordingly, comparability of such measures is limited.
All performance-based options and time-based options granted to the named executive officers prior to 2012, except for those granted to Mr. Vasos, are vested. We have surpassed the cumulative adjusted EBITDA performance targets through fiscal 2012, and we anticipate surpassing the cumulative adjusted EBITDA performance target through fiscal 2013, for Mr. Vasos' options.
(b) 2012 Equity Awards. Since 2010, the Compensation Committee has worked with its consultant and management to develop a new long-term equity incentive structure that is more in line with typical public company equity structures. The new structure was finalized and implemented in March 2012. Under the new program, each of the named executive officers received a grant of time-based stock options and a grant of performance share units. 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 shareholder value and financial performance.
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 2012 market comparator group. The market value for each named executive officer's position other than the CEO 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 that which we used in establishing the short-term cash incentive where the targets for each of the named executive officers' positions (other than the CEO) are also the same.
For the 2012 grant, the long-term incentive values were awarded 75% in time-based stock options and 25% in performance share units recognizing that splits between performance and time-based awards and between options and units are common within our 2012 market comparator group. The Committee believes this is the appropriate allocation to achieve both the retention and incentive goals of the awards. The actual number of stock options and performance share units awarded were determined by applying a Black Scholes formula provided by Meridian 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 executive officer's continued employment with us and certain accelerated vesting provisions.
The performance share units awarded are equal to a target number of performance share units that can be earned if certain performance measures are achieved during the performance period (which was fiscal year 2012) and if certain additional vesting requirements are met. The performance measures are goals related to adjusted EBITDA (weighted 90%) and ROIC (weighted 10%) as established by the Compensation Committee on the grant date, using the same adjusted EBITDA/ROIC-based performance criteria used to determine performance under the Teamshare program discussed under "Short-Term Cash Incentive Plan" above. The number of performance share units earned could vary between 0% and 200% of the target number based on actual performance compared to target performance on the same graduated scale that determines incentive payouts under our Teamshare program discussed above. The actual number of performance shares earned for 2012 for each of the named executive officers was 39,278 for Mr. Dreiling and 6,443 for each of the other named executive officers. One-third of the performance share units earned based on 2012 financial performance vested on the last day of the one-year performance period, and the remaining two-thirds of the performance share units vest on the second and third anniversaries of the grant date, subject to the named executive officer's continued employment with us and certain accelerated vesting provisions. All vested performance share units will be settled in shares of our common stock.
In addition, 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 ifcould be earned upon the satisfaction of certain earnings per share ("EPS") performance targets are met for fiscal years 2014 and 2015. This award is 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. In structuring the award, the Committee reviewed retention grant practices of the 2012 market comparator group and determined that a grant value equivalent to 1.5 times the value of the annual long-term incentive award would approximate the median range of retention grants awarded by the market comparator group. 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 vestvested after the end of our 2014 fiscal year ifas a result of achievement of the EPS goal for that year is achieved,of $3.61, and the other half willis eligible to vest after the end of our 2015 fiscal year if the EPS goal for that year is achieved, in each caseachieved. The vesting of the 2015 tranche is subject to continued employment with us through the date on which it is determined that the EPS goal has been achieved and certain accelerated vesting provisions. In light of Mr. Dreiling's announced retirement, we do not currently anticipate that Mr. Dreiling will remain employed with us through the date necessary for vesting of the 2015 tranche.
For purposes of calculating the achievement of the EPS targets for each of 2014 and 2015, EPS shall be calculated asmeans the quotient of (x) net income earned in the applicable fiscal year (as calculated in accordance with generally accepted accounting principlesGAAP 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 excludeexcludes the impact of theall items that are excluded from the EBITDA2014 Teamshare program adjusted EBIT calculation for Teamshare purposes identifiedoutlined above, under "Short-Term Cash Incentive Program" except that adjustmentsas well as share-based compensation charges and all consulting, accounting, legal, valuation, banking, filing, disclosure and similar costs, fees and expenses directly related to the consideration, negotiation, approval and consummation of the proposed acquisition and related financing of the Company by affiliates of Kohlberg Kravis Roberts & Co. (including without limitation any costs, fees and expenses relating to the filing and maintenance of a market maker registration statement or to any refinancings) and any litigation or settlement of any litigation related thereto. Additionally, the calculation of net income excludes (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 must be material and demonstrable and must not have been contemplated in our 2012-2016 financial plan.plan (as opposed to the 2014 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 2014 fiscal year).
(c)(b) 20132014 Equity Awards. The Compensation Committee authorized additionalUnder our long-term equity incentive awards to ourstructure, each of the named executive officers in March 2013 on substantially similar terms as those set forth above. However, the Committee changed thereceives an annual award of time-based stock options, time-based restricted stock units and performance share units. The mix of the equity value tois delivered 50% in options, 25% in performance share units and 25% in restricted stock units, which the Committee has previously determined to more closely matchalign with the equity mix among our market comparator group. Additionally, the Committee believes this design is appropriate 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 a reasonable range of the median of the long-term equity target values of our market comparator group. The market value for named executive officer positions was blended to establish a single long-term incentive value on which awards are based for all named executive officers (other than the CEO and COO 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.
The performance share units can be earned if certain performance measures are achieved during the performance period (which was fiscal year 2014) and if certain additional vesting requirements are met. The performance measures are goals related to adjusted EBITDA (weighted 50%) and ROIC (weighted 50%) as established by the Committee on the grant date, using the adjusted EBITDA/ROIC-based performance criteria as outlined below:
Adjusted EBITDA Shares Earned | ROIC Shares Earned | | ||||||
---|---|---|---|---|---|---|---|---|
EBITDA Result v. Target (%) | Shares Earned (%) | ROIC Result v. Target (%) | Shares Earned (%) | Total Shares Earned (%) | ||||
<90 | 0 | <94.86 | 0 | 0 | ||||
90 | 25 | 94.86 | 25 | 50 | ||||
100 | 50 | 100.00 | 50 | 100 | ||||
120 | 150 | 110.29 | 150 | 300 |
The Committee believes that this weighting puts the appropriate emphasis on maintaining ROIC at an acceptable level to help ensure that invested capital is providing an appropriate return over time. In 2014, the threshold and maximum levels of performance criteria for performance share units were revised from 95% and 110% of target, respectively, for adjusted EBITDA, and 97.51% and 104.98% of target, respectively, for ROIC, to 90% and 120% of target, respectively, for adjusted EBITDA, and 94.86% and 110.29% of target, respectively, for ROIC, with performance in between such levels to be determined on the same graduated scale used to determine incentive cash payouts under our 2014 Teamshare program discussed above between 50% of threshold performance and 300% for maximum performance. This change reflects the Committee's desire to align the payout and performance scale of the short-term and long-term incentive programs. The number of performance share units earned could vary between 0% and 300% of the target number based on actual performance compared to target performance on a similar graduated scale as that of our Teamshare program discussed above. The target performance levels for 2014 adjusted EBITDA and ROIC were $2.246 billion and 19.44%, respectively. Actual 2014 adjusted EBITDA and adjusted ROIC results were $2.175 billion (96.84% of adjusted EBITDA target) and 19.50% (100.31% of ROIC target), respectively. Accordingly, 95.10% of the target number of performance share units was earned as a result of 2014 performance. The 2014 target adjusted EBITDA and ROIC performance levels, consistent with prior practice, were the same levels as our 2014 annual financial plan objectives.
The actual number of performance share units earned for 2014 for each of the named executive officers was 28,838 for Mr. Dreiling, 6,759 for Mr. Vasos and 4,957 for each of the other named executive officers. One-third of the performance share units earned based on 2014 financial performance vested on the last day of the one-year performance period, and the remaining two-thirds of the performance share units vest equally on the second and third anniversaries of the grant date, subject to the named executive officer's continued employment with us and certain accelerated vesting provisions. All vested performance share units will be settled in shares of our common stock.
The adjusted EBITDA performance target is computed as income (loss) from continuing operations before cumulative effect of change in accounting principles plus interest and other financing costs, net, provision for income taxes, and depreciations and amortization, but excludes the impact of all items excluded from the 2014 Teamshare program adjusted EBIT calculation outlined above, as well as share-based compensation charges. The ROIC performance target is calculated as (a) the result of (x) the sum of (i) our operating income, plus (ii) depreciation and amortization, plus (iii) minimum rentals, minus (y) taxes, divided by (b) the result of (x) the sum of the averages of: (i) total assets, plus (ii) accumulated depreciation and amortization, minus (y) (i) cash, minus (ii) goodwill, minus (iii) accounts payable, minus (iv) other payables, minus (v) accrued liabilities, plus (vi) 8x minimum rentals (with all of the foregoing terms as determined per our financial statements) but excludes the impact of all items excluded from the 2014 Teamshare program adjusted EBIT calculation outlined above.
The restricted stock units are time-based awards, payable in shares of our common stock and vest in equal installments over 3 years from the grant date, of grant, subject to continued employment with us and certain accelerated vesting conditions.
(d) Share Ownership Guidelines and Holding Requirements. We have adopted share ownership guidelines and holding requirements for senior officers, which are included in our Corporate Governance Guidelines. The Committee also rebalanced the weightingshare ownership guideline is a multiple, as set forth below, of the performance measures forofficer's annual base salary as in effect on April 1, 2013 (or, if later, the performance share unitsofficer's hire or promotion date) to be evenly weighted atachieved within 5 years of the later of April 1, 2013 or the April 1 next following such person's hire or promotion date.
Officer Level | Multiple of Base Salary | |||
---|---|---|---|---|
CEO | 5X | |||
COO | 4X | |||
EVP | 3X | |||
SVP | 2X |
Each senior officer is required to retain ownership of 50% adjusted EBITDAof all net after-tax shares granted by Dollar General until he or she reaches the target. Administrative details pertaining to these matters are established by the Compensation Committee.
(e) Policy Against Hedging and 50% ROICPledging Transactions. Our Insider Trading Policy prohibits Board members and executive officers from pledging Dollar General securities as collateral, from holding Dollar General securities in a margin account, and from hedging their ownership of Dollar General stock. Examples of hedging ownership include entering into or trading prepaid variable forward contracts, equity swaps, collars, puts, calls, options (other than those granted under a Dollar General compensation plan) or other derivative instruments related to put greater emphasis on maintaining ROIC at a consistent level since that will help ensure that capital invested is providing an appropriate return over time.Dollar General stock.
Benefits and Perquisites. Along with certain benefits offered to named executive officers on the same terms that are offered to all of our salaried employees (such as health and welfare benefits and matching contributions under our 401(k) plan)Plan), we provide our named executive officers with certain additional benefits and perquisites for retention and recruiting purposes to promote tax efficiency for such persons, and to replace benefit opportunities lost due to regulatory limits. We also provide named executive officers with benefits and perquisites as additional forms of compensation that we believe to be consistent and competitive with benefits and perquisites provided to executives with similar positions in our market comparator group and in our industry. We do not provide tax gross-up payments on any benefits and perquisites other than relocation-related items.
The named executive officers have the opportunity to participate in the Compensation Deferral Plan (the "CDP"), and other than Messrs. SparksDreiling and Vasos,Tehle further participate in the defined contribution Supplemental Executive Retirement Plan (the "SERP","SERP," and together with the CDP, the "CDP/SERP Plan"). SERP participation is not available to persons to whom employment offers are made after May 28, 2008, including Messrs. Sparks and Vasos.
We providepay the premiums for each named executive officer aofficer's life insurance benefit equal to 2.5 times his or her base salary up to a maximum of $3 million andmillion.
We pay administrative fees for each named executive officer for short-term disability coverage, which provides income replacement of up to 70% of monthly base salary in the case of a short-term disability. We also pay the premiums for each named executive officer under a group long-term disability insurance benefit thatplan, which provides income
replacement of 60% of base salary up to a maximum monthly benefit of $20,000. We pay the premiums and, through December 31, 2012, grossed up each named executive officer's income to pay the tax costs associated with the life insurance benefit and through June 30, 2012 for tax costs associated with the disability benefits (with respect to the disability benefit, only to the extent necessary to provide a comparable cost for this benefit to the named executive officer as the cost applicable to all salaried employees). As discussed under "Executive Overview" above, we eliminated the tax gross-up for the life insurance benefits effective December 31, 2012 in exchange for one-time base salary adjustments for the named executive officers.$400,000.
We also provide a relocation assistance program to named executive officers under a policy applicable to officer-level employees, which policy is similaremployees. Pursuant to that offeredCompensation Committee approval, Mr. D'Arezzo was reimbursed for 9 return trips to certain other employees. The significant differences between the relocation assistance availablehis origination location until his family was able to officers from the relocation assistance available to non-officers are as follows:
In fiscal 2012, we incurred $27,559 in expenses related to Mr. Sparks' relocation.him.
We provide through a third party a personal financial and advisory service benefit to the named executive officers, including financial planning, estate planning and tax preparation services, in an annual amount of up to $20,000 per person in addition to the advisor's related travel expenses and through December 31, 2012, related tax costs. As discussed under "Executive Overview" above, we eliminated the tax gross-up for the financial planning benefit effective December 31, 2012 in exchange for one-time base salary adjustments for the named executive officers.person. The Committee believes the financial services program reduces the amount of time and attention that executives must spend on these matters, furthering their ability to focus on their responsibilities to us, and maximizes the executive's net financial reward of compensation received from us.
Mr. Dreiling iswas entitled to certain additional perquisites as a result of the terms of his employment agreement with us, including:
CEO Employment Transition Agreement. As previously disclosed, Mr. Dreiling intends to retire on January 29, 2016 (the "Retirement Date"). In light of the announced retirement plans, the Compensation Committee deemed Mr. Dreiling's performance for 2014 to be satisfactory and determined his 2015 compensation as part of our negotiated employment transition agreement with him, effective March 10, 2015, which superseded his employment agreement. The terms of the employment transition agreement were negotiated in order to secure Mr. Dreiling's services through the Retirement Date and ensure a smooth transition to his successor. The employment transition agreement contains business protection provisions, including non-competition and non-solicitation provisions, for two years following the service termination date.
The employment transition agreement provides that Mr. Dreiling will continue to serve as the Company's Chief Executive Officer through the Retirement Date or, if earlier, until the appointment of a successor (the "Successor CEO Date"). In the event the Successor CEO Date precedes the Retirement Date, Mr. Dreiling will serve as Senior Advisor to the Company from the Successor CEO Date through the Retirement Date. Mr. Dreiling will continue to serve as a member of the Board of Directors, but will resign from the Board upon request of the Board on or at any time following the CEO Successor Date. In addition, Mr. Dreiling will serve as Chairman of the Board through the CEO Successor Date or, if asked by the Board, through the Retirement Date.
Pursuant to the employment transition agreement, Mr. Dreiling's annual salary was increased to $1,368,242 effective April 1, 2015 to reflect the same 2.95% base salary increase that was budgeted for our entire U.S.-based employee population; he is eligible to participate in the 2015 Teamshare program at the same threshold, target and maximum levels as the prior year; in lieu of receiving an annual equity award in 2015 under the long-term incentive program he instead was awarded 57,670 restricted stock units (the "Transition RSU Award"); he will retain coverage through the Retirement Date under all employee benefit plans and is entitled to all welfare, fringe and other benefits and perquisites that are available to all other executives of the Company; and he is entitled to limited additional perquisites including reimbursement for up to $15,000 of legal expenses for review of the employment transition agreement, payment of the premiums on his portable long-term disability insurance through the Retirement Date, and personal use of the Company's airplane for his and his spouse's travel between Nashville, Tennessee, and Livermore, California, while he continues to serve as Chief Executive Officer, not to exceed 100 hours total during the period of time beginning with the effective date of the employment transition agreement and continuing through the Successor CEO Date or the Retirement Date, whichever occurs first, but in no event more than 16 hours per month. The employment transition agreement provides for certain payments to Mr. Dreiling in the event of his termination of employment by the Company without cause or by Mr. Dreiling for good reason or in the event of death or disability, with each of "cause," "good reason" and "disability" as defined in the employment transition agreement.
Mr. Dreiling's outstanding equity awards will continue to vest, if at all, in accordance with the terms of the applicable award agreements. The Transition RSU Award is a time-based award scheduled to vest in full as of Mr. Dreiling's voluntary termination of employment on or after the Retirement Date, subject to accelerated vesting in the event of his termination of employment by the Company without cause or by Mr. Dreiling for good reason or in the event of death or disability or a change in control. Once vested, the Transition RSU Award is scheduled to be paid as to fifty percent of the award on each of the first two anniversaries of the grant date, subject to accelerated payment in the event of death or disability or a change in control prior to a payment date. Each of "cause," "good reason," "disability" and "change in control" are as defined in the award agreement. The Transition RSU Award will be payable in an equal number of shares of Company common stock, subject to reduction, cancellation, forfeiture or recoupment, in whole or in part, upon various events specified in the award agreement, including but not limited to the breach of the business protection provisions set forth in the employment transition agreement.
Severance Arrangements
As noted above, we have an employment agreement with each of our named executive officers and an employment transition agreement with Mr. Dreiling that, among other things, provides for such executive's rights upon a termination of employment. We believe that reasonable severance benefits are appropriate to protect the named executive officer
against circumstances over which he or she does not have control and as consideration for the promises of non-disclosure, non-competition, non-solicitation and non-interference that we require in our employment agreements. A change in control, by itself, does not trigger any severance provision applicable to our named executive officers, except for the provisions related to long-term equity incentives under our Amended and Restated 2007 Stock Incentive Plan.
Considerations Associated with Regulatory Requirements
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to any publicly held corporation for individual compensation over $1 million paid in any taxable year to each of the persons who were, at the end of the fiscal year, Dollar General's CEO or one of the other named executive officers (other than our Chief Financial Officer)CFO). Section 162(m) specifically exempts certain performance-based compensation from the deduction limit.
If our Compensation Committee determines that our shareholders' interests are best served by the implementation of compensation policies that are affected by Section 162(m), our policies will not restrict the Committee from exercising discretion to approve compensation packages even though that flexibility may result in certain non-deductible compensation expenses.
We believe that our Amended and Restated 2007 Stock Incentive Plan currently satisfies the requirements of Section 162(m), so that compensation expense realized in connection with stock options and stock appreciation rights, if any, and in connection with performance-based restricted stock and restricted stock unit awards, if any, can be deductible. However, restricted stock or restricted stock units granted to executive officers that solely vest over time are not "performance-based compensation" under Section 162(m), so that compensation expense realized in connection with those time-vested awards to executive officers covered by Section 162(m) will not be deductible by Dollar General.
In addition, any salary, signing bonuses or other annual compensation paid or imputed to the executive officers covered by Section 162(m) that causes non-performance-based compensation to exceed the $1 million limit will not be deductible by Dollar General. However, we believe that our Amended and Restated Annual Incentive Plan currently satisfies the requirements of Section 162(m), so that compensation expense realized in connection with short-term incentive payments under our Teamshare program, if any, will be deductible.
The Committee administers our executive compensation program with the good faith intention of complying with Section 409A of the Internal Revenue Code, which relates to the taxation of nonqualified deferred compensation arrangements.
The Compensation Committee of our Board of Directors reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this document.
This report has been furnished by the members of the Compensation Committee:
The above Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Dollar General filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Dollar General specifically incorporates this report by reference therein.
The following table summarizes compensation paid to or earned by our named executive officers in each of fiscalthe 2014, 2013 and 2012 fiscal 2011 and fiscal 2010.years. We have omitted from this table the columns for Bonus and Change in Pension Value and Nonqualified Deferred Compensation Earnings as no amountsbecause they are required to be reported in such columns for any named executive officer.inapplicable.
Name and Principal Position(1) | Year | Salary ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||||||||||||
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Name and Principal Position(1) | Year | Salary ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||||||||||||
Richard W. Dreiling, | 2012 | 1,235,626 | 16,554,441 | 3,091,549 | 1,591,956 | 686,625 | (6) | 23,160,197 | 2014 | 1,323,789 | 3,503,208 | 2,790,016 | 1,465,747 | 681,392(6) | 9,764,152 | |||||||||||||||||||||||||||||
Chairman & | 2011 | 1,196,947 | — | — | 1,850,386 | 785,036 | 3,832,369 | 2013 | 1,291,515 | 3,440,634 | 2,059,459 | — | 855,567 | 7,647,175 | ||||||||||||||||||||||||||||||
Chief Executive Officer | 2010 | 1,143,231 | — | 1,193,210 | 2,186,595 | 640,293 | 5,163,329 | 2012 | 1,235,626 | 16,554,441 | 3,091,549 | 1,591,956 | 686,688 | 23,160,260 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||
David M. Tehle, | 2012 | 677,136 | 295,483 | 507,162 | 436,209 | 191,915 | (7) | 2,107,905 | 2014 | 727,140 | 602,090 | 479,529 | 402,558 | 136,438(7) | 2,347,755 | |||||||||||||||||||||||||||||
Executive Vice President & | 2011 | 658,356 | — | — | 506,906 | 220,278 | 1,385,540 | 2013 | 709,413 | 625,574 | 374,452 | — | 172,598 | 1,882,037 | ||||||||||||||||||||||||||||||
Chief Financial Officer | 2010 | 642,299 | — | — | 638,125 | 219,450 | 1,499,874 | 2012 | 677,136 | 295,483 | 507,162 | 436,209 | 191,915 | 2,107,905 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||
Todd J. Vasos, | 2014 | 765,342 | 821,048 | 653,913 | 521,486 | 67,422(8) | 2,829,211 | |||||||||||||||||||||||||||||||||||||
Chief Operating Officer | 2013 | 699,549 | 625,574 | 422,846 | — | 72,464 | 1,820,433 | |||||||||||||||||||||||||||||||||||||
2012 | 654,617 | 295,483 | 507,162 | 421,698 | 76,435 | 1,955,395 | ||||||||||||||||||||||||||||||||||||||
Todd J. Vasos, | 2012 | 654,617 | 295,483 | 507,162 | 421,698 | 76,435 | (8) | 1,955,395 | ||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2011 | 636,614 | — | — | 490,165 | 71,712 | 1,198,491 | |||||||||||||||||||||||||||||||||||||
Division President, Chief | 2010 | 618,855 | — | — | 617,050 | 57,839 | 1,293,744 | |||||||||||||||||||||||||||||||||||||
Merchandising Officer | ||||||||||||||||||||||||||||||||||||||||||||
Susan S. Lanigan, | 2012 | 553,158 | 295,483 | 507,162 | 356,343 | 152,834 | (9) | 1,864,980 | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||
David W. D'Arezzo, | 2014 | 663,297 | 602,090 | 479,529 | 367,213 | 274,737(9) | 2,386,866 | |||||||||||||||||||||||||||||||||||||
Executive Vice President & | 2011 | 530,326 | — | — | 414,102 | 122,171 | 1,066,599 | |||||||||||||||||||||||||||||||||||||
General Counsel | ||||||||||||||||||||||||||||||||||||||||||||
Chief Merchandising Officer | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||
Gregory A. Sparks, | 2012 | 523,618 | 295,483 | 507,162 | 338,643 | 65,404 | (10) | 1,730,310 | 2014 | 635,676 | 602,090 | 479,529 | 351,922 | 56,960(10) | 2,126,177 | |||||||||||||||||||||||||||||
Executive Vice President, | 2013 | 620,178 | 625,574 | 374,452 | — | 300,228 | 1,920,432 | |||||||||||||||||||||||||||||||||||||
Store Operations | 2012 | 523,618 | 295,483 | 507,162 | 338,643 | 65,404 | 1,730,310 |
2013 and fiscal 2012, respectively. Information regarding the assumptions made in the valuation of these awards is set forth in see Note 1110 of the annual consolidated financial statements in our 20122014 Form 10-K.
$720 for premiums paid under our group long-term disability program; and $29,291$225,244 which represents the aggregate incremental cost of providing certain perquisites, including $19,318$217,875 for costs associated with relocation and other amounts for perquisites which individually did not equal or exceed the greater of $25,000 or 10% of total perquisites, including sporting and other entertainment events, travel costs for spouse to accompany the executive on business, miscellaneous gifts and an administrative fee for coverage under our short-term disability program, as well as participation in a group umbrella liability insurance program offered at no incremental cost to Dollar General through a third party vendor at a group rate paid by the executive and coverage under our business travel accident insurance for which Dollar General incurs no incremental cost for participation by the named executive officers in addition to other employees. The aggregate incremental cost related to relocation included costs of transporting his automobile, home finding expenses, reimbursement for the costs of trips to and from his former home and home sale costs incurred in connection with the sale of his former home (such as appraisals, inspections, pre-title expenses, title and deed costs, broker's commission, document preparation fees, recording fees and legal fees).
Grants of Plan-Based Awards in Fiscal 20122014
The table below sets forth each named executive officer's annual Teamshare bonus opportunity for fiscal 2014 under "Estimated Possible Payouts Under Non-Equity Incentive Plan Awards." The actual bonus amount earned by each named executive officer under the fiscal 2014 Teamshare program is set forth in the Summary Compensation Table above and represents prorated payment on a graduated scale for financial performance between the threshold and target performance levels. See "Short-Term Cash Incentive Plan" in "Compensation Discussion and Analysis" above for discussion of the fiscal 2014 Teamshare program.
The table below also includes information regarding grants of plan-basedequity awards made to our named executive officers for fiscal 2012.2014. The awards listed under "Estimated Possible Payouts Under Equity Incentive Plan Awards" include (1) for each of the named executive officers, the threshold, target and maximum number of performance share units which maycould be earned by each named executive officer based upon the level of achievement of financial performance measures for fiscal 2012; and (2) for Mr. Dreiling, an additional award of performance-based2014. The awards listed under "All Other Stock Awards" represent restricted stock which he may earnunits payable in shares of common stock on a one-for-one basis that vest over time based upon achievement of financial performance measures for fiscal 2014 and 2015.the named executive officer's continued employment by Dollar General. The awards listed under "All Other Option Awards" include non-qualified stock options that vest over time based upon the named executive officer's continued employment by our Company. All of theDollar General. The awards listed in this table were granted pursuant to our Amended and Restated 2007 Stock Incentive Plan. See "Long-Term Equity Incentive Program" in "Compensation Discussion &and Analysis" above for further discussion of these awards. We have omitted the column for All Other Stock Awards: Number of Shares of Stock or Units because it is inapplicable.
The table below also sets forth each named executive officer's annual Teamshare bonus opportunity for fiscal 2012. Actual bonus amounts earned by each named executive officer for fiscal 2012 are set forth in the Summary Compensation Table above and represent prorated payments on a graduated scale for financial performance between the threshold and target performance level. See "Short-Term Cash Incentive Plan" in "Compensation Discussion and Analysis" above for discussion of the fiscal 2012 Teamshare program.
| | | | | | | | | | Grant Date Fair Value of Stock and Option Awards ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | | Exercise or Base Price of Option Awards ($/Sh)(1) | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| | All Other Option Awards: Number of Securities Underlying Options (#) | Grant Date Fair Value of Stock and Option Awards ($)(2) | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | Exercise or Base Price of Option Awards ($/Sh)(1) | Grant Date Fair Value of Stock and Option Awards ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Dreiling | — | 806,725 | 1,613,450 | 5,000,000 | — | — | — | — | — | — | — | 863,873 | 1,727,746 | 5,183,237 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 228,226 | 45.25 | 3,091,549 | 3/18/14 | — | — | — | — | — | — | — | 161,817 | 57.91 | 2,790,016 | |||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | �� | — | — | — | 19,904 | 39,807 | 79,614 | — | — | 1,801,267 | 3/18/14 | — | — | — | — | — | — | 30,170 | — | — | 1,747,145 | ||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | 163,019 | 326,037 | — | — | — | 14,753,174 | 3/18/14 | — | — | — | 15,162 | 30,324 | 90,972 | — | — | — | 1,756,063 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Mr. Tehle | — | 221,049 | 442,098 | 5,000,000 | — | — | — | — | — | — | — | 237,257 | 474,514 | 1,423,543 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | 3/18/14 | — | — | — | — | — | — | — | 27,812 | 57.91 | 479,529 | |||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | 3/18/14 | — | — | — | — | — | — | 5,185 | — | — | 300,263 | |||||||||||||||||||||||||||||||||||||||||||||
3/18/14 | — | — | — | 2,606 | 5,212 | 15,636 | — | — | — | 301,827 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Mr. Vasos | — | 213,696 | 427,391 | 5,000,000 | — | — | — | — | — | — | — | 307,350 | 614,700 | 1,844,100 | — | �� | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | 3/18/14 | — | — | — | — | — | — | — | 37,926 | 57.91 | 653,913 | |||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | 3/18/14 | — | — | — | — | — | — | 7,071 | — | — | 409,482 | |||||||||||||||||||||||||||||||||||||||||||||
3/18/14 | — | — | — | 3,554 | 7,107 | 21,321 | — | — | — | 411,566 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Lanigan | — | 180,577 | 361,154 | 5,000,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Mr. D'Arezzo | — | 216,426 | 432,851 | 1,298,554 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | 3/18/14 | — | — | — | — | — | — | — | 27,812 | 57.91 | 479,529 | |||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | 3/18/14 | — | — | — | — | — | — | 5,185 | — | — | 300,263 | |||||||||||||||||||||||||||||||||||||||||||||
3/18/14 | — | — | — | 2,606 | 5,212 | 15,636 | — | — | — | 301,827 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Mr. Sparks | — | 171,607 | 343,215 | 5,000,000 | — | — | — | — | — | — | — | 207,413 | 414,827 | 1,244,480 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | — | — | — | 37,440 | 45.25 | 507,162 | 3/18/14 | — | — | — | — | — | — | — | 27,812 | 57.91 | 479,529 | |||||||||||||||||||||||||||||||||||||||||||||
3/20/12 | — | — | — | 3,265 | 6,530 | 13,060 | — | — | 295,483 | 3/18/14 | — | — | — | — | — | — | 5,185 | — | — | 300,263 | |||||||||||||||||||||||||||||||||||||||||||||
3/18/14 | — | — | — | 2,606 | 5,212 | 15,636 | — | — | — | 301,827 |
Outstanding Equity Awards at 20122014 Fiscal Year-End
The table below sets forth information regarding awards granted under our Amended and Restated 2007 Stock Incentive Plan and held by our named executive officers as of the end of fiscal 2012.2014. The $7.9975 exercise pricesprice set forth in the table below reflectreflects an adjustment made in connection with a special dividend paid to our shareholders in September 2009 to reflect the effects of such dividend on such options, as required by the terms of such options. In October 2009, we completed a reverse split of 1 share for each 1.75 shares of common stock outstanding. The exercise prices of, and number of shares outstanding under, our equity awards existing at the time of the reverse stock split were retroactively adjusted to reflect the reverse split and are reflected below. We have omitted from this table the column for Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options because it is inapplicable.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||||||
Mr. Dreiling | 285,714 | (1) | — | — | 7.9975 | 07/06/2017 | — | — | — | — | 11,653 | (1) | — | 7.9975 | 07/06/2017 | — | — | — | — | ||||||||||||||||||||||||||||||||||
222,235 | (2) | — | — | 7.9975 | 07/06/2017 | — | — | — | — | 100,000 | (2) | — | 29.38 | 04/23/2020 | — | — | — | — | |||||||||||||||||||||||||||||||||||
100,000 | (3) | — | — | 29.38 | 04/23/2020 | — | — | — | — | 114,114 | (3) | 114,112 | (3) | 45.25 | 03/20/2022 | — | — | — | — | ||||||||||||||||||||||||||||||||||
— | 228,226 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | 37,801 | (4) | 113,403 | (4) | 48.11 | 03/18/2023 | — | — | — | — | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 326,037 | (5) | 15,088,992 | (5) | — | 161,817 | (5) | 57.91 | 03/18/2024 | — | — | — | — | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | 26,184 | (6) | 1,211,796 | (6) | — | — | — | — | — | — | — | — | 326,037 | (6) | 21,864,041 | (6) | |||||||||||||||||||||||||||||||||
— | — | — | — | 13,092 | (7) | 877,950 | (7) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 9,392 | (8) | 629,828 | (8) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 19,224 | (9) | 1,289,161 | (9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 23,898 | (10) | 1,602,600 | (10) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 30,170 | (11) | 2,023,200 | (11) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Mr. Tehle | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | 18,720 | (3) | 18,720 | (3) | 45.25 | 03/20/2022 | — | — | — | — | |||||||||||||||||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | 6,873 | (4) | 20,619 | (4) | 48.11 | 03/18/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||
— | 27,812 | (5) | 57.91 | 03/18/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 2,147 | (7) | 143,978 | (7) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 1,708 | (8) | 114,538 | (8) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 3,304 | (9) | 221,566 | (9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 4,344 | (10) | 291,309 | (10) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 5,185 | (11) | 347,706 | (11) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Mr. Vasos | 50,000 | (1) | 50,000 | (1) | — | 7.9975 | 12/19/2018 | — | — | — | — | 18,720 | (3) | 18,720 | (3) | 45.25 | 03/20/2022 | — | — | — | — | ||||||||||||||||||||||||||||||||
84,623 | (7) | — | 41,667 | (7) | 7.9975 | 12/19/2018 | — | — | — | — | 6,873 | (4) | 20,619 | (4) | 48.11 | 03/18/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||
— | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | 720 | (12) | 2,160 | (12) | 56.48 | 12/03/2023 | — | — | — | — | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | — | 37,926 | (5) | 57.91 | 03/18/2024 | — | — | — | — | ||||||||||||||||||||||||||||||||||
— | — | — | — | 2,147 | (7) | 143,978 | (7) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Ms. Lanigan | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | — | — | — | — | 1,708 | (8) | 114,538 | (8) | — | — | |||||||||||||||||||||||||||||||||
— | — | — | — | 4,506 | (9) | 302,172 | (9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 4,344 | (10) | 291,309 | (10) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 7,071 | (11) | 474,181 | (11) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Mr. D'Arezzo | 2,729 | (12) | 8,187 | (12) | 56.48 | 12/03/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
— | 27,812 | (5) | 57.91 | 03/18/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 3,304 | (9) | 221,566 | (9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 5,185 | (11) | 347,706 | (11) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Mr. Sparks | — | 37,440 | (4) | — | 45.25 | 03/20/2022 | — | — | — | — | 18,720 | (3) | 18,720 | (3) | 45.25 | 03/20/2022 | — | — | — | — | |||||||||||||||||||||||||||||||||
— | — | — | — | — | 4,294 | (6) | 198,726 | (6) | — | — | 6,873 | (4) | 20,619 | (4) | 48.11 | 03/18/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||
— | 27,812 | (5) | 57.91 | 03/18/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 2,147 | (7) | 143,978 | (7) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 1,708 | (8) | 114,538 | (8) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 3,304 | (9) | 221,566 | (9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 4,344 | (10) | 291,309 | (10) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | 5,185 | (11) | 347,706 | (11) | — | — |
March 20, 2014 and 50% on March 20, 2015, subject to certain accelerated vesting provisions as described in "Potential Payments upon Termination or Change in Control" below. The market value was computed by multiplying the number of such units by the closing market price of one share of our common stock on February 1,January 30, 2015.
Option Exercises and Stock Vested During Fiscal 20122014
We have omitted from this table the Option Awards columns because they are inapplicable.
| Option Awards | Stock Awards | Stock Awards | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | ||||||||||||||
Mr. Dreiling | 425,512 | 17,572,324 | 13,094 | 605,990 | 34,657 | 2,090,635 | ||||||||||||||
Mr. Tehle | 386,171 | 15,511,027 | 2,149 | 99,456 | 5,974 | 360,371 | ||||||||||||||
Mr. Vasos | 228,760 | 9,154,305 | 2,149 | 99,456 | 6,574 | 400,607 | ||||||||||||||
Ms. Lanigan | 235,256 | 9,459,266 | 2,149 | 99,456 | ||||||||||||||||
Mr. D'Arezzo | 1,653 | 110,850 | ||||||||||||||||||
Mr. Sparks | — | — | 2,149 | 99,456 | 5,974 | 360,371 |
We have omitted the Pension Benefits table as it is inapplicable.
We have omitted the Pension Benefits table because it is inapplicable.
Nonqualified Deferred Compensation
Fiscal 20122014
Information regarding each named executive officer's participation in our CDP/SERP Plan is included in the following table. The material terms of the CDP/SERP Plan are described after the table. Please also see "Benefits and Perquisites" in "Compensation Discussion and Analysis" above. We have omitted from this table the column pertaining to aggregate withdrawals/distributions during the fiscal year because it is inapplicable.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4) | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4) | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | 61,781 | 341,775 | 114,334 | 1,791,559 | 66,189 | 178,565 | 42,403 | 2,476,833 | ||||||||||||||||||
Mr. Tehle | 33,857 | 133,448 | 134,440 | 1,405,253 | 69,672 | 92,224 | 86,300 | 2,094,507 | ||||||||||||||||||
Mr. Vasos | 65,462 | 20,108 | 10,459 | 154,259 | 73,333 | 25,190 | 40,729 | 466,132 | ||||||||||||||||||
Ms. Lanigan | 27,658 | 87,427 | 72,131 | 774,674 | ||||||||||||||||||||||
Mr. D'Arezzo | 39,243 | 30,390 | 3,493 | 78,979 | ||||||||||||||||||||||
Mr. Sparks | 2,526 | 2,526 | 3 | 5,055 | 31,784 | 18,720 | 857 | 103,428 |
Pursuant to the CDP, each named executive officer may annually elect to defer up to 65% of his base salary if his or her compensation exceeds the limit set forth in Section 401(a)(17) of the Internal Revenue Code, and up to 100% of his bonus pay if his or her compensation equals or exceeds the highly compensated limit under Section 414(q)(1)(B) of the Internal Revenue Code. We currently match base pay deferrals at a rate of 100%, up to 5% of annual salary, with annual salary offset by the amount of match-eligible salary under the 401(k) plan.Plan. All named executive officers are 100% vested in all compensation and matching deferrals and earnings on those deferrals.
Pursuant to the SERP, we make an annual contribution equal to a certain percentage of a participant's annual salary and bonus to all participants who are actively employed in an eligible job grade on January 1 and continue to be employed as of December 31 of a given year. Persons hired after May 27, 2008, (the "Eligibility Freeze Date"), including Messrs. Vasos, D'Arezzo and Sparks, are not eligible to participate in the SERP. The contribution percentage is based on age, years of service and job grade. The fiscal 20122014 contribution percentage for each eligible named executive officer was 9.5% for each of Messrs. Dreiling and Mr. Tehle and 7.5% for Ms. Lanigan.Tehle.
As a result of our 2007 merger, which constituted a change-in-controlchange in control, as defined under the CDP/SERP Plan, which occurred in 2007, all previously unvested SERP amounts vested on July 6, 2007. For newly eligible SERP participants after July 6, 2007 but prior to the Eligibility Freeze Date,May 27, 2008, SERP amounts vest at the earlier of the participant's attainment of age 50 or the participant's being credited with 10 or more "years of service",service," or upon termination of employment due to death or "total and permanent disability" or upon a "change-in-control","change in control," all as defined in the CDP/SERP Plan. See "Potential Payments upon Termination or Change in Control as of February 1, 2013—Payments After a Change in Control" below for a general description of our change in control arrangements.
The amounts deferred or contributed to the CDP/SERP Plan are credited to a liability account, which is then invested at the participant's option in an account that mirrors the performance of a fund or funds selected by the Compensation Committee or its delegate. Beginning on August 2, 2008, these funds are identical to the funds offered in our 401(k) Plan.
A participant who ceases employment with at least 10 years of service or after reaching age 50 and whose CDP account balance or SERP account balance exceeds $25,000 may elect for that account balance to be paid in cash by (a) lump sum, (b) monthly installments over a 5, 10 or 15-year period or (c) a combination of lump sum and installments. Otherwise, payment is made in a lump sum. The vested amount will be payable at the time designated by the CDP/SERP Plan upon the participant's termination of employment. A participant's CDP/SERP benefit normally is payable in the following February if employment ceases during the first 6 months of a calendar year or is payable in the following August if employment ceases during the last 6 months of a calendar year. However, participants may elect to receive an in-service lump sum distribution of vested amounts credited to the CDP account, provided that the date of distribution is no sooner than 5 years after the end of the year in which the amounts were deferred. In addition, a participant who is actively employed may request an "unforeseeable emergency hardship" in-service lump sum distribution of vested amounts credited to the participant's CDP account. Account balances are payable in cash.
As a result of our change in control which occurred in 2007, merger, the CDP/SERP Plan liabilities through July 6, 2007 were fully funded into an irrevocable rabbi trust. We also funded into the rabbi trust deferrals into the CDP/SERP Plan between July 6, 2007 and October 15, 2007. All CDP/SERP Plan liabilities incurred on or after October 15, 2007 are unfunded.
Potential Payments upon Termination or Change in Control
Our employment agreements and equity award agreements with our named executive officers the award agreements for our equity awards, and certain plans and programs offered to or in which our named executive officers participate, in each case as in effect at the end of our 2014 fiscal year, provide for benefits or payments to the officers upon certain employment termination of employment or change in control events. These benefits and payments are discussed below except to the extent a benefit or payment is available generally to all salaried employees and does not discriminate in favor of our executive officers. This summary excludes discussion of the operation of any agreements or programs entered into or to the extent modified after the end of our 2014 fiscal year, including without limitation our employment transition agreement with Mr. Dreiling effective March 10, 2015, and the restricted stock unit award agreement with Mr. Dreiling dated March 17, 2015. As of the date of this document, we believe that Mr. Tehle's retirement in July 2015 will not result in payments or benefits that differ from those described below.
Payments Upon Termination Due to Death or Disability
Pre-2012 Equity Awards. Mr. Dreiling is the only named executive officer who has options outstanding that were granted prior to 2012. All such options are fully vested and generally may be exercised for a period of 1 year from service termination unless such options have expired earlier.
Mr. Dreiling's 2012 Performance-Based Restricted Stock. If Mr. Dreiling's employment with us terminates due to his death or disability (as defined in his performance-based restricted stock award agreement), all or a portion of his performance-based restricted stock may vest, unless previously vested or forfeited, depending upon the timing of hissuch termination due to death or disability:as follows:
based restricted shares shall bewould have been automatically forfeited and cancelled. The pro-rata portion equals a fraction (not to exceed one), the numerator of which is the number of calendar months in the period encompassing the first day of fiscal 2012 and ending and including the last day of fiscal 2014 (the "initial service period") during which Mr. Dreiling was continuously in our employment and the denominator of which is the number of calendar months in the initial service period. Mr. Dreiling will be deemed to be employed for a full calendar month if his death or disability occurs after the 15th day of a calendar month.
2012Other Post-2011 Equity Awards. If any of the named executive officers' employment with us terminates due to death or disability:disability (as defined in the applicable governing document):
Except with respect to the options granted to Mr. Dreiling in April 2010, all otherwise unvested options will be forfeited, and vested options generally may be exercised (by the employee's survivor in the case of death) for a period of 1 year from the service termination date.
The options granted to Mr. Dreiling in April 2010 are fully vested, and such vested options generally may be exercised (by his survivor in the case of death) for a period of 1 year from service termination, but are not subject to our right to purchase such vested options.
Other Payments. In the event of death, each named executive officer's beneficiary will receive payments under our group life insurance program in an amount, up to a maximum of $3 million, equal to 2.5 times such officer's annual base salary. In addition, in the event of disability (as defined in the governing document), each named executive officer would receive 60% of covered monthly earnings up
to 2.5 times the named executive officer's annual base salary, rounded to the next highest $1,000. We have excluded from the tables below amounts that the named executive officer would receive$20,000 per month under our long-term disability insurance program sinceprogram. In the same benefit level is provided to allevent of our salaried employees. Thedeath or disability (as defined in the CDP/SERP Plan), each named executive officer's CDP/SERP Plan benefit also becomeswill become fully vested (to the extent not already vested) upon his or her death and iswill be payable in a lump sum within 60 days after the end of the calendar quarter in which the death occurs.
Insuch termination event occurs, provided that we may delay payment in the event of disability each named executive officer's CDP/SERP Plan benefit becomes fully vested (to the extent not already vested) and is payable in a lump sum within 60 daysuntil as soon as reasonably practicable after the end of the calendar quarter in which we receive notificationreceipt of the disability determination by the Social Security Administration. Additionally, in the event of death on or after the last day of a fiscal year, each named executive officer will receive payment for his incentive bonus earned for that fiscal year under the terms of our Teamshare program (which otherwise requires that a participant remain employed on the payment date to be entitled to any incentive bonus earned for that fiscal year).
In the eventIf Mr. Dreiling's employment terminates due to death or disability (as defined in his employment agreement), he also will also be entitled to receive, pursuant to the terms of his employment agreement, any incentive bonus accruedearned for any of our previously completed fiscal years but unpaid as of his termination date and payment for any unused vacation accrued but unpaid as well asof his termination date, and, in the event of disability only, he will receive a lump sum cash payment, payable at the time annual bonuses are paid to our other executives, equal to a pro rata portion of his annual incentive bonus, if any, that he would have been entitled to receive, if such termination had not occurred, for the fiscal year in which his termination occurred.
"Disability" Definitions. For purposes of the named executive officers' employment agreements, other than Mr. Dreiling's, "disability" means (1) disabled for purposes of our long-term disability insurance plan or (2) an inability to perform the duties under the agreement in accordance with our expectations because of a medically determinable physical or mental impairment that (x) can reasonably be expected to result in death or (y) has lasted or can reasonably be expected to last longer than 90 consecutive days. For purposes of Mr. Dreiling's employment agreement, "disability" means (1) disabled for purposes of our long-term disability insurance plan or for purposes of his portable long-term disability insurance policy, or (2) if no such plan or policy is in effect or in the case of the plan, the plan is in effect but no longer applies to him, an inability to perform the duties under the agreement in accordance with our expectations because of a medically determinable physical or mental impairment that (x) can reasonably be expected to result in death or (y) has lasted or can reasonably be expected to last longer than 90 consecutive days. For purposes of the CDP/SERP Plan, "disability" means total and permanent disability for purposes of entitlement to Social Security disability benefits. For purposes of each named executive officer's agreement(s) governing stock options granted prior to 2012, "disability" has the same definition as that which is set forth in such officer's employment agreement, or (for each named executive officer other than Mr. Dreiling) in the absence of such an agreement or definition, "disability" shall be as defined in our long-term disability plan. For purposes of each named executive officer's agreement(s) governing stock options and performance share units and Mr. Dreiling's agreement governing performance share units, in each case granted in 2012, "disability" has the same definition as that set forth in such officer's employment agreement, or in the absence of an agreement, "disability" shall be as defined in any change-in-control agreement between the officer and Dollar General, or in the absence of any such agreement, as defined in our long-term disability plan.
Payments Upon Termination Due to Retirement
Except as provided immediately below with respect to stock options, and performance share units and restricted stock units awarded after 2011, retirement (as defined in 2012, retirementthe applicable governing document) is not treated differently from any other voluntary termination without good reason (as defined under the relevant agreements, and as discussed below under "Payments Upon Voluntary Termination") under any of our plans or agreements for named executive officers.
In the event of the retirement of any of thea named executive officers:officer retires:
remained employed with us shall remain outstanding for a period of 1 year following the retirement date and shall become vested and exercisable on the anniversary of the grant date that falls within the 1 year period following the retirement date (but only to the extent such portion has not otherwise terminated or become exercisable). However, if during such 1 year period there occurs a Change in Control occurs or the officer dies or incurs a disability, such portion shall instead become immediately vested and exercisable (but only to the extent such portion has not otherwise terminated). Otherwise, any option which is unvested and unexercisable as ofon the officer's termination of employmentdate shall immediately expire without payment. The officer may exercise the option to the extent vested and exercisable any time prior to the 5th anniversary of the retirement date, but no later than the 10th anniversary of the grant date.
For purposes
Payments Upon Voluntary Termination
The payments to be made to a named executive officer upon voluntary termination vary depending upon whether he or she resigns with or without "good reason" (as defined in the applicable employment agreement) or after our failure to offer to renew, extend or replace his or her employment agreement under certain circumstances. "Good reason" generally means (as more fully described in the applicable employment agreement):
No event (but in the case of Mr. Dreiling, no isolated, insubstantial and inadvertent event not in bad faith) will constitute "good reason" if we cure the claimed event within 30 days (10 business days in the case of Mr. Dreiling) after receiving notice from the named executive officer.
Voluntary Termination with Good Reason or After Failure to Renew the Employment Agreement. If any named executive officer resigns with good reason, he or she will forfeit all then unvested options, all then unvested performance-based restricted stock and all then unvested performance share units held by that officer. He or sheequity awards. Such officer generally may exercise any vested options that were granted in 2012after 2011 up to 90 days following the resignation date and generally may exercise any vested options that were granted prior to 2012 (unless, with respect to Mr. Vasos we purchase such vested options in total at a price equal to the fair market value of the underlying shares, less the aggregate exercise price) for the180 days following periods from the resignation date: 180 days (options granted to Mr. Dreiling on or before January 21, 2008) or 90 days (options granted to Messrs. Dreiling and Vasos prior to 2012 but after January 21, 2008).date.
In the event any named executive officer (other than Mr. Dreiling) resigns under the circumstances described in (2) below, or in the event we failfailed to extend the term of Mr. Dreiling's employment as provided in (3) below, the relevant named executive officer's equity will be treated as described under "Voluntary Termination without Good Reason" below.
Additionally, (1) if the named executive officer (1) resigns with good reason, or (2) inif the case of named executive officersofficer, other than Mr. Dreiling, resigns within 60 days of our failure to offer to renew, extend or replace his or her employment agreement before, at or within 6 months after the end of the agreement's term (unless we enter into a mutually acceptable severance arrangement or the resignation is a result of the named executive officer's voluntary retirement or termination), or (3) in the case of Mr. Dreiling, in the eventif we electhad elected not to extend hisMr. Dreiling's term of employment by providing 60 days prior written notice before the applicable extension date, then in each case the named executive officer will receive or would have received (in Mr. Dreiling's case) the following benefits generally on or beginning on the 60th day after termination of employment but contingent upon the execution and effectiveness of a
release of certain claims against us and our affiliates in the form attached to the employment agreement:
Table For Mr. Dreiling, a continuation of Contents2 times his annual base salary, payable over 24 months in equal installments in accordance with our normal payroll cycles and procedures. With the exception of Mr. Dreiling, the amount of any payment or entitlement to payment of the base salary continuation shall be forfeited or, if paid, subject to recovery if and to the extent that the named executive officer earns any base salary as a result of subsequent employment during the 24 months after his termination date.
Note that any amounts owed to a named executive officer (other than Mr. Dreiling) in the form of salary continuation that would otherwise have been paid during the 60 day period after his or her employment termination will instead be payable in a single lump sum as soon as administratively practicable after the 60th day after such termination date and the remainder will be paid in the form of salary continuation payments as set forth above.
The named executive officer will forfeit any unpaid severance amounts upon a material breach of any continuing obligation under the applicable employment agreement or the release, (the "Continuing Obligations"), which include:
Voluntary Termination without Good Reason. If the named executive officer resigns without good reason, he or she will forfeit all then unvested options,equity awards and all vested but unexercised options that were granted prior to 2012, all then unvested performance-based restricted stock, and all then unvested performance share units.2012. The named executive officer generally may exercise any vested options that were granted in 2012after 2011 up to 90 days following the resignation date, but in any event prior to the 10th anniversary of the grant date.
Payments Upon Involuntary Termination
The payments to be made to a named executive officer upon involuntary termination vary depending upon whether termination is with or without "cause". "Cause" generally means (as more fully describeddefined in the applicable employment agreement):
For purposes of Mr. Tehle, Mr. Vasos, Ms. Lanigan and Mr. Sparks, "cause" also means (as more fully described in the applicable employment agreement):
For purposes of the equity awards granted in 2012, "cause" shall beaward agreement, as defined in the applicable employment agreement or change-in-control agreement (in the absence of an employment agreement) or, in the absence of either of such agreements, "cause" is defined materially consistent with the definition set forth above.applicable).
Involuntary Termination for Cause. If the named executive officer is involuntarily terminated for cause, he or she will forfeit all unvested equity grants and all vested but unexercised options.
Involuntary Termination without Cause. If any named executive officer is involuntarily terminated without cause, he or she:he:
Payments After a Change in Control
Upon a change in control (as defined under eachthe applicable governing document), regardless of whether the named executive officer's employment terminates:
If the named executive officer is involuntarily terminated without cause or resigns for good reason following the change in control, he or she will receive the same severance payments and benefits as described above under "Voluntary Termination with Good Reason or After Failure to Renew the Employment Agreement." However, the named executive officer will have 1 year from the termination date in which to exercise vested options that were granted in 2012after 2011 if he or she resigns or is involuntarily terminated within 2 years of the change in control under any scenario other than retirement or involuntary termination with cause (in which cases, he or she will have 5 years from the retirement date to exercise vested options and will forfeit any vested but unexercised options held at the time of the termination with cause).
If any payments or benefits in connection withIn the event of a change in control (asas defined in Section 280G of the Internal Revenue Code) would be subject to the "golden parachute" excise tax under federal income tax rules, we will pay an additional amount to theCode, each named executive officer to cover the excise tax and any other excise and income taxes resulting from this payment. However, other than with respect to Mr. Dreiling and Mr. Sparks, if after receiving this payment the named executive officer's after-tax benefit would not be at least $50,000 more than it would be without this payment, then this payment will not be made and the severance and other benefits due to the named executive officer will be reduced so that the golden parachute excise tax is not incurred. In Mr. Sparks' case, his employment agreement provides for a capped paymentpayments (taking into consideration all payments and benefits covered by Section 280G of the Internal Revenue Code) of $1 less than the amount that would trigger the golden parachute"golden parachute" excise tax under federal income tax rules (the "excise tax") unless, for each named executive officer other than Mr. Dreiling, he signs a release and, for all named executive officers, his after-tax benefit would be at least $50,000 more than it would be without the payments being capped. In such case, such officer's payments and benefits would not be capped and such officer would be responsible for the payment but weof the excise tax. We would not pay anany additional amount to cover the excise tax.
For purposes of the CDP/SERP Plan, a change in control generally is deemed to occur (as more fully described in the plan document):
For purposes of the treatment of equity discussed above, a change in control generally means (as more fully described in the Amended and Restated 2007 Stock Incentive Plan):
The following table reflects potential payments to each of our named executive officers in various termination and change in control scenarios based on compensation, benefit, and equity levels in effect on, and assuming the scenario was effective as of, February 1, 2013.January 30, 2015. For stock valuations, we have used the closing price of our stock on the NYSE on February 1, 2013January 30, 2015 ($46.28)67.06). The table reports only amounts that are increased, accelerated or otherwise paid or owed as a result of the applicable scenario and, as a result, excludes equity awards and CDP/SERP Plan benefits that had vested prior to the event and earned but unpaid base salary through the employment termination date. The table also excludes any amounts that are available generally to all salaried employees and do not discriminate in favor of our executive officers. The amounts shown are merely estimates. We cannot determine actual amounts to be paid until a termination or change in control scenario occurs.
Potential Payments to Named Executive Officers Upon Occurrence of
Various Termination Events Asas of February 1, 2013January 30, 2015
Name/Item | Death ($) | Disability ($) | Retirement ($)(1) | Voluntary Without Good Reason ($) | Involuntary Without Cause or Voluntary with Good Reason ($) | Involuntary With Cause ($) | Change in Control ($) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | |||||||||||||||||||
Equity Vesting Due to Event(2) | 4,592,196 | 4,592,196 | — | n/a | n/a | n/a | 17,166,333 | ||||||||||||
Cash Severance | — | 1,591,956 | n/a | n/a | 7,399,603 | n/a | 7,399,603 | ||||||||||||
Health Continuation(3) | n/a | 26,774 | n/a | n/a | 26,774 | n/a | 26,774 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 3,000,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 7,592,196 | 6,210,926 | — | — | 7,436,377 | — | 24,602,710 | ||||||||||||
| |||||||||||||||||||
Mr. Tehle | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,605,058 | n/a | 2,605,058 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 25,320 | n/a | 25,320 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,734,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 2,074,772 | 340,772 | — | — | 2,640,378 | — | 2,981,149 | ||||||||||||
| |||||||||||||||||||
Mr. Vasos | |||||||||||||||||||
Equity Vesting Due to Event | 2,296,357 | 2,296,357 | — | n/a | n/a | n/a | 2,296,357 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,511,989 | n/a | 2,511,989 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 15,202 | n/a | 15,202 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,672,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 3,968,357 | 2,296,357 | — | — | 2,537,191 | — | 4,833,548 | ||||||||||||
| |||||||||||||||||||
Ms. Lanigan | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,127,728 | n/a | 2,127,728 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 16,436 | n/a | 16,436 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,417,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 1,757,772 | 340,772 | — | — | 2,154,164 | — | 2,494,935 | ||||||||||||
| |||||||||||||||||||
Mr. Sparks | |||||||||||||||||||
Equity Vesting Due to Event | 340,772 | 340,772 | — | n/a | n/a | n/a | 340,772 | ||||||||||||
Cash Severance | n/a | n/a | n/a | n/a | 2,277,377 | n/a | 2,277,377 | ||||||||||||
Health Payment | n/a | n/a | n/a | n/a | 16,436 | n/a | 16,436 | ||||||||||||
Outplacement(4) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | ||||||||||||
280(G) Excise Tax and Gross-Up | n/a | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||
Life Insurance Proceeds | 1,516,000 | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||
Total | 1,856,772 | 340,772 | — | — | 2,303,813 | — | 2,644,584 | ||||||||||||
|
Name/Item | Death ($) | Disability ($) | Retirement ($)(1) | Voluntary Without Good Reason ($) | Involuntary Without Cause or Voluntary with Good Reason ($) | Involuntary With Cause ($) | Change in Control ($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Dreiling | ||||||||||||||||||
Equity Vesting Due to Event | 22,500,281 | 22,500,281 | n/a | n/a | n/a | n/a | 24,217,554 | |||||||||||
Cash Severance | 1,465,747 | 1,465,747 | n/a | n/a | 7,579,308 | n/a | 7,579,308 | |||||||||||
Health Continuation(2) | n/a | n/a | n/a | n/a | 23,578 | n/a | 23,578 | |||||||||||
Outplacement(3) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
Life Insurance Proceeds | 3,000,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 26,966,028 | 23,966,028 | n/a | n/a | 7,612,886 | n/a | 31,830,440 | |||||||||||
| ||||||||||||||||||
Mr. Tehle | ||||||||||||||||||
Equity Vesting Due to Event | 2,002,258 | 2,002,258 | n/a | n/a | n/a | n/a | 2,300,541 | |||||||||||
Cash Severance | 402,558 | n/a | n/a | n/a | 1,928,247 | n/a | 1,928,247 | |||||||||||
Health Payment | n/a | n/a | n/a | n/a | 18,566 | n/a | 18,566 | |||||||||||
Outplacement(3) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
Life Insurance Proceeds | 1,826,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 4,230,816 | 2,002,258 | n/a | n/a | 1,956,813 | n/a | 4,257,354 | |||||||||||
| ||||||||||||||||||
Mr. Vasos | ||||||||||||||||||
Equity Vesting Due to Event | 2,283,627 | 2,283,627 | n/a | n/a | n/a | n/a | 2,669,491 | |||||||||||
Cash Severance | 521,486 | n/a | n/a | n/a | 2,143,274 | n/a | 2,143,274 | |||||||||||
Health Payment | n/a | n/a | n/a | n/a | 10,099 | n/a | 10,099 | |||||||||||
Outplacement(3) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
Life Insurance Proceeds | 1,921,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 4,726,113 | 2,283,627 | n/a | n/a | 2,163,374 | n/a | 4,832,864 | |||||||||||
| ||||||||||||||||||
Mr. D'Arezzo | ||||||||||||||||||
Equity Vesting Due to Event | 797,307 | 797,307 | n/a | n/a | n/a | n/a | 1,038,321 | |||||||||||
Cash Severance | 367,213 | n/a | n/a | n/a | 1,758,944 | n/a | 1,758,944 | |||||||||||
Health Payment | n/a | n/a | n/a | n/a | 19,235 | n/a | 19,235 | |||||||||||
Outplacement(3) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
Life Insurance Proceeds | 1,665,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 2,829,520 | 797,307 | n/a | n/a | 1,788,179 | n/a | 2,826,500 | |||||||||||
| ||||||||||||||||||
Mr. Sparks | ||||||||||||||||||
Equity Vesting Due to Event | 2,002,258 | 2,002,258 | n/a | n/a | n/a | n/a | 2,300,541 | |||||||||||
Cash Severance | 351,922 | n/a | n/a | n/a | 1,685,700 | n/a | 1,685,700 | |||||||||||
Health Payment | n/a | n/a | n/a | n/a | 19,235 | n/a | 19,235 | |||||||||||
Outplacement(3) | n/a | n/a | n/a | n/a | 10,000 | n/a | 10,000 | |||||||||||
Life Insurance Proceeds | 1,596,000 | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||
Total | 3,950,180 | 2,002,258 | n/a | n/a | 1,714,934 | n/a | 4,015,475 | |||||||||||
|
Compensation Committee Interlocks and Insider Participation
Each of Messrs. Agrawal, Bryant Calbert, Jones,and Rhodes and Rickard and Ms. Fili-Krushel was a member of our Compensation Committee during all or a portion of 2012.2014. None of these persons was at any time during 20122014 an officer or employee of Dollar General or any of our subsidiaries or an officer of Dollar General or any of our subsidiaries at any time prior to 2012. Messrs. Calbert and Agrawal, due to their relationships with KKR, and Mr. Jones, due to his relationship with Goldman, Sachs & Co., may be viewed as having an indirect material interest in certain of our relationships and transactions with KKR and Goldman, Sachs & Co. discussed under "Certain Transactions with Management and Others" above. Messrs. Calbert, Agrawal and Jones no longer serve on the Compensation Committee. Mr. Dreiling serves as a manager of Buck Holdings, LLC, for which Messrs. Calbert, Agrawal and Jones serve as managers.2014.
Compensation Risk Considerations
In March 2013,2015, our Compensation Committee, with the assistance ofinput from its compensation consultant and management, reviewed our compensation policies and practices for all employees, including executive officers, to assess the risks that may arise from our compensation programs. The assessment included a review of our compensation programs for certain design features which could potentially encourage excessive risk-taking or otherwise generate risk to Dollar General. As a result of that assessment, management and the Compensation Committee concluded, after considering the degree to which identified risk-aggravating factors were offset by risk-mitigating factors, that the net risks created by our overall compensation program were not reasonably likely to have a material adverse effect on Dollar General.
For purposes of the tables below, a person is a "beneficial owner" of a security over which that person has or shares voting or investment power or which that person has the right to acquire beneficial ownership within 60 days. Unless otherwise noted, to our knowledge these persons have sole voting and investment power over the shares listed. Percentage computations are based on 327,212,294303,703,702 shares of our common stock outstanding as of March 21, 2013.19, 2015.
Security Ownership of Certain Beneficial Owners
The following table shows the amount of our common stock beneficially owned as of March 21, 201319, 2015 by those known by us to beneficially own more than 5% of our common stock.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Buck Holdings, L.P.(1) | 54,145,011(1) | 16.5% | ||||||||||||
BlackRock, Inc.(1) | 22,888,347 | 7.5% | ||||||||||||
The Vanguard Group(2) | 19,203,111 | 6.3% | ||||||||||||
Soroban Capital GP, LLC(3) | 18,330,295 | 6.0% | ||||||||||||
GIC Private Limited(4) | 15,221,181 | 5.0% |
and for Mr. Kravis is c/o Kohlberg Kravis Roberts & Co. L.P., 9 West 57th Street, Suite 4200, New York, NY 10019. The address for Mr. Roberts is c/o Kohlberg Kravis Roberts & Co. L.P., 2800 Sand Hill Road, Suite 200, Menlo Park, CA 94025.
Security Ownership of Officers and Directors
The following table shows the amount of our common stock beneficially owned as of March 21, 201319, 2015 by our current directors and named executive officers individually and by our current directors and all of our executive officers as a group. Unless otherwise noted, these persons may be contacted at our executive offices.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||
---|---|---|---|---|---|
| | ||||
| * | ||||
Michael M. | | * | |||
Sandra B. | 6,157 | * | |||
Patricia D. Fili-Krushel(1) | 6,545 | * | |||
Paula A. Price(1)(2) | — | ||||
| |||||
| |||||
William C. Rhodes, | | * | |||
David B. | | * | |||
Richard W. | * | ||||
David M. | | * | |||
Todd J. | | * | |||
| | * | |||
Gregory A. | | * | |||
All current directors and executive officers as a group (16 persons)(1)(2)(3) | * |
percentage of outstanding stock owned by each named person and by the group but not for the purpose of computing the percentage ownership of any other person.
PROPOSAL 2:VOTE REGARDING CHARTER AMENDMENT
What am I being asked to approve?
Our Board of Directors is recommending that you approve an amendment to our Amended and Restated Charter, referred to herein as the charter amendment, to provide for majority voting in uncontested elections of directors. The disclosure below is a summary of the purpose and effect of the charter amendment, as well as the text of the charter amendment.
What is a majority voting standard for the election of directors?
Under a majority voting standard for the election of directors, a director nominee will not be elected unless the number of votes cast "for" his or her election exceed the number of votes cast "against" his or her election.
How are director nominees currently elected to our Board of Directors?
The Tennessee Business Corporation Act provides that, unless otherwise specified in a company's charter, a director is elected by a plurality of the votes cast in the election. Because our existing charter does not specify the voting standard required in director elections, our directors currently are elected by a plurality vote as described under "Proposal 1".
Why should I approve the charter amendment?
In making its recommendation, our Board of Directors and the CNG Committee carefully considered the advantages of both majority and plurality voting standards for the election of directors, analyzed current corporate governance trends, including the standards for voting in director elections in place at other Fortune 500 companies, and evaluated the appropriateness of a majority voting standard in light of our overall corporate governance structure.
Our Board of Directors and the CNG Committee also considered the benefits of retaining a plurality voting standard, including the greater certainty that the annual election will result in a full and duly elected Board. By contrast, a majority voting standard carries with it the possibility that (i) the CEO or another management director might fail to be elected, (ii) our ability to comply with NYSE listing standards and SEC requirements with respect to independent directors may be impaired, and (iii) the triggering of a possible "change in control" may occur due to the failure of a majority of the directors to be elected. Nevertheless, we believe that generally requiring directors to be elected by a majority of the votes cast both ensures that only directors with broad acceptability among our voting shareholders will be elected and enhances the accountability of each elected director to our shareholders. On balance, our Board and the CNG Committee concluded that a majority vote standard would be in our and our shareholders' best interests and would conform our director election voting standards with a large percentage of our peer companies.
Under a majority voting standard, shareholders will also be entitled to "abstain" from voting in the election of a director. Abstentions and broker non-votes will have no effect in determining whether the required affirmative majority vote has been obtained. In the case of a contested election, that is, an election for which the number of nominees exceeds the number of directors to be elected, directors will continue to be elected by a plurality of the votes cast by our shareholders entitled to vote in the election.
What happens if an incumbent director nominee fails to receive a majority of the votes cast for his or her election in an uncontested election?
Under Tennessee law, a director continues in office until a successor is elected and qualified, even if the director is not reelected in an uncontested election. To address the status of a "holdover" incumbent director who fails to receive a majority of the votes cast for his or her election in an uncontested election, we intend to implement a director resignation policy to be set forth in our Corporate Governance Guidelines. This policy will require a director to tender his or her resignation upon receiving, in an uncontested election, a greater number of votes cast against his or her election than in favor of his or her election. The Board has adopted this policy through amendments to the Corporate Governance Guidelines that are contingent upon and will be effective immediately following the approval of the charter amendment by the shareholders.
Under the resignation policy, the Board, taking into account the recommendation of the Nominating and Governance Committee, will determine whether to accept a tendered resignation. The Nominating and Governance Committee and the Board of Directors, in making their decisions, may consider any factor or other information that they deem relevant, including whether the "holdover" director's resignation may result in any adverse impact to us, including under any NYSE or SEC board or committee composition requirement. The Board will be required to publicly disclose its decision and its rationale. The director who tenders his or her resignation will not be permitted to participate in deliberations of or voting by the Nominating and Governance Committee or the Board regarding his or her resignation.
If the Board rejects the offered resignation, the director will continue to serve until the next annual shareholders' meeting and until his or her successor is duly elected or his or her resignation or removal in accordance with our Bylaws. If the Board accepts the offered resignation, or if a nominee for director, who is not an incumbent director, is not elected, then the Board, in its sole discretion, may fill any resulting vacancy or decrease the size of the Board, in each case pursuant to the provisions of our Bylaws.
How would the charter amendment read?
The proposed charter amendment would amend our current charter by inserting a new Article 10 in the form set forth below immediately following Article 9 of our current charter:
"10. Except as provided in Article 9 or in the case of a contested election, a nominee for director shall be elected by the affirmative vote of a majority of the votes cast in favor of or against the election of such nominee by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. For purposes of this Article 10, "affirmative vote of a majority of the votes cast" shall mean that the number of votes cast in favor of the election of such nominee exceeds the number of votes cast against the election of such nominee; abstentions and broker non-votes shall not be deemed to be votes cast for purposes of tabulating the vote. In a contested election, a nominee for director shall be elected by a plurality of the votes cast by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. An election shall be considered "contested" if there are more nominees for election than positions on the Board of Directors to be filled by election at the meeting. The determination of the number of nominees for purposes of this subsection shall be made as of (i) the expiration of the time fixed by the Amended and Restated Bylaws of the corporation, as the same may be amended from time to time, for advance notice by a shareholder of an intention to nominate directors, or (ii) absent such a provision, at a time publicly announced by the Board of
Directors which is not more than 14 days before notice is given of the meeting at which the election is to occur."
What vote is required to approve the charter amendment and, if approved, when will the charter amendment be effective?
The charter amendment will be approved if the votes cast in favor of adopting the charter amendment exceed the votes cast against it. If approved, the charter amendment will become effective upon the filing of articles of amendment with the Tennessee Secretary of State. We would make such a filing promptly after the annual meeting. If approved, nominees to our Board of Directors will be elected under a majority voting standard beginning at the next meeting of shareholders at which directors are elected.
What does the Board of Directors recommend?
Our Board unanimously recommends that you voteFOR approval of the charter amendment.
The Audit Committee of our Board of Directors has:
Based on these reviews and discussions, the Audit Committee unanimously recommended to the Board of Directors that Dollar General's audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended February 1, 2013January 30, 2015 for filing with the SEC.
While the Audit Committee has the responsibilities and powers set forth in its charter, the Audit Committee does not have the duty to plan or conduct audits or to determine that Dollar General's financial statements are complete, accurate, or in accordance with generally accepted accounting principles. Dollar General's management and independent auditor have this responsibility. The Audit Committee also does not have the duty to assure compliance with laws and regulations or with the policies of the Board of Directors.
This report has been furnished by the members of the Audit Committee:
The above Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Dollar General filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Dollar General specifically incorporates this report by reference therein.
PROPOSAL 3:2:
RATIFICATION OF APPOINTMENT OF AUDITORS
Who is responsible for the selection of the independent auditor?
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditor that is retained to audit our financial statements.
Who has the Audit Committee selected as the independent registered public accounting firm?
The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firmauditor for the 20132015 fiscal year. Ernst & Young LLP has served in that capacity since October 2001. The Audit Committee and the Board of Directors believe that the continued retention of Ernst & Young LLP is in the best interests of Dollar General and our shareholders.
Will representatives of Ernst & Young LLP attend the annual meeting?
Representatives of Ernst & Young LLP have been requested and are expected to attend the annual meeting. These representatives will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
What does the Board of Directors recommend?
Our Board unanimously recommends that you voteFOR the ratification of Ernst & Young LLP as our independent registered public accounting firmauditor for the 20132015 fiscal year. The Audit Committee is not bound by a vote either for or against the firm. If the shareholders do not ratify this appointment, our Audit Committee will consider that result in selecting our independent registered public accounting firmauditor in the future.
What fees were paid to the independent registered public accounting firmauditor in 20122014 and 2011?2013?
The following table sets forthbelow lists the aggregate fees for professional audit services rendered to us by Ernst & Young LLP for the audit of our consolidated financial statements for the past two fiscal years and fees billed for other services rendered by Ernst & Young LLP during the past two fiscal years:
Service | 2012 Aggregate Fees Billed ($) | 2011 Aggregate Fees Billed ($) | 2014 Aggregate Fees Billed ($) | 2013 Aggregate Fees Billed ($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees(1) | 2,057,071 | 1,973,644 | ||||||||||||
Audit-Related Fees(2) | 29,500 | 29,500 | ||||||||||||
Tax Fees(3) | 1,995,318 | 1,547,980 | ||||||||||||
All Other Fees(4) | 6,000 | 6,000 | ||||||||||||
Audit Fees(1) | 2,071,205 | 2,313,782 | ||||||||||||
Audit-Related Fees(2) | 30,000 | 30,000 | ||||||||||||
Tax Fees(3) | 1,652,136 | 1,503,918 | ||||||||||||
All Other Fees(4) | 1,920 | 1,920 |
How does the Audit Committee pre-approve services provided by the independent registered public accounting firm?auditor?
The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm.auditor. Where feasible, the Committee considers and, when appropriate, pre-approves services at regularly scheduled meetings after disclosure by management and the independent registered public accounting firmauditor of the nature of the proposed services, the estimated fees (when available), and their opinions that the services will not impair the independence of the independent registered public accounting firm.auditor. The Committee's chairpersonchairman (or any Committee member if the chairpersonchairman is unavailable) may pre-approve such services in between Committee meetings, and must report to the Committee at its next meeting with respect to all services so pre-approved. The Committee pre-approved 100% of the services provided by Ernst & Young LLP during 20122014 and 2011.2013.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The United StatesU.S. securities laws require our executive officers, directors, and greater than 10% shareholders to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based solely upon a review of these reports furnished to us during and with respect to 2012,2014, or written representations that no Form 5 reports were required, we believe that each of those persons filed, on a timely basis, the reports required by Section 16(a) of the Securities Exchange Act, of 1934 except that (1) each of Mr. Flanigan, Mr. Ravener and Mr. VasosMs. Taylor filed 1 late Form 4 to report 2, 2 and 1 acquisitions, respectively,acquisition of performance-based stock options to purchase shares of Dollar General common stock resulting from the accelerated vesting in connection with the saleachievement of shares of our common stock by certain of our shareholders pursuant to a Rule 10b5-1 trading plan; and (2) Mr. Jones filed 1 late Form 4 to report a decrease in a short position in a basket of stocks, that may be deemed to be beneficially owned directly by Goldman Sachs International and indirectly by The Goldman Sachs Group, Inc., that includes shares of Dollar General common stock. Mr. Jones is a managing director of Goldman, Sachs & Co., a wholly-owned subsidiary of The Goldman Sachs Group, Inc. Mr. Jones disclaims beneficial ownership of the shares involved in the transaction except to the extent of his pecuniary interest therein.financial performance targets.
SHAREHOLDER PROPOSALS
FOR 20142016 ANNUAL MEETING
To be considered for inclusion in our proxy materials relating to the 20142016 annual meeting of shareholders, eligible shareholders must submit proposals that comply with relevant SEC regulations no later than December 12, 2013.4, 2015. To introduce other new business at the 20142016 annual meeting, you must provide written notice to us no earlier than the close of business on January 29, 201428, 2016 and no later than the close of business on February 28, 2014,27, 2016, and comply with the advance notice provisions of our Bylaws. If we are not notified of a shareholder proposal by February 28, 2014,27, 2016, then the proxies held by our management may provide the discretion to vote against such shareholder proposal even though the proposal is not discussed in our proxy materials sent in connection with the 20142016 annual meeting of shareholders.
Shareholder proposals should be mailed to Corporate Secretary, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TNTennessee 37072. Shareholder proposals that are not included in our proxy materials will not be considered at any annual meeting of shareholders unless such proposals have complied with the requirements of our Bylaws.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY IF YOU ARE NOT VOTING BY INTERNET OR PHONE, TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. |