DOLLAR GENERAL CORPORATION
Nashville, Tennessee
Telephone (615) 783-2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 1995
The Annual Meeting of Stockholders of Dollar General
Corporation will be held in the auditorium of Dollar General
Corporation, 427 Beech Street, Scottsville, Kentucky, on June 5,
1995, at 11:00 a.m., local time, for the following purposes:
1. To elect nine (9) directors to serve until the next
Annual Meeting of Stockholders and until their successors are duly
elected and qualified;
2. To consider and act upon a proposal to ratify, confirm
and approve the Company's 1995 Employee Stock Incentive Plan;
3. To consider and act upon a proposal to ratify, confirm
and approve the Company's 1995 Outside Directors Stock Option Plan;
4. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for the current fiscal
year; and
5. To transact such other business as properly may come
before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on April
14, 1995 are entitled to notice of and to vote at the Annual
Meeting. Your attention is directed to the Proxy Statement
accompanying this notice for a more complete statement regarding
matters to be acted upon at the Annual Meeting.
By order of the Board of
Directors
April 28, 1995 BOB CARPENTER,
Chief Administrative Officer and
Corporate Secretary
We urge you to attend the Annual Meeting. Whether you plan to
attend, please complete, date and sign the enclosed proxy card and
return it in the enclosed postage-paid envelope. You may revoke
the proxy at any time before it is voted.
<PAGE>1
DOLLAR GENERAL CORPORATION
Nashville, Tennessee
Telephone (615) 783-2000
Proxy Statement for
Annual Meeting of Stockholders
The enclosed proxy is solicited by the Board of Directors of
Dollar General Corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held in the corporate auditorium at
Dollar General Corporation, 427 Beech Street, Scottsville,
Kentucky, on June 5, 1995, at 11:00 a.m., local time, and any
adjournment thereof. This proxy material was first mailed to
stockholders on or about April 28, 1995.
The purposes of the Annual Meeting are: to elect nine(9)
directors; to approve the 1995 Employee Stock Incentive Plan; to
approve the 1995 Outside Directors Stock Option Plan; to ratify
the appointment of Coopers & Lybrand L.L.P. as the Company s
independent accountants for the current fiscal year; and to
transact such other business as may properly be brought before the
Annual Meeting or and adjournment thereof. The Board of Directors
recommends a vote FOR the election of the nominees as directors,
FOR each of the stock plans and FOR
the appointment of Coopers & Lybrand L.L.P.
All valid proxies which are received will be voted in
accordance with the recommendations of the Board of Directors
unless otherwise specified thereon. Any stockholder giving a proxy
is entitled to revoke it by giving the Secretary of the Company
written notice of such revocation at any time before it has been
voted.
Only holders of the Company's common stock, $.50 par value per
share (the "Common Stock"), and of Series A Convertible Junior
Preferred Stock, no par value (the "Series A Preferred Stock"), of
record at the close of business on April 14, 1995 are entitled to
vote at the meeting. On such date, the Company had 67,365,900
outstanding shares of Common Stock, the holders of which are
entitled to one vote for each share held and to cumulative voting
in the election of directors. On such date, the Company had
1,715,742 (or an aggregate voting power equal to 10,723,387 shares
of Common Stock) issued and outstanding shares of Series A
Preferred Stock, the holders of which are entitled to 6.25 votes
for each share of Series A Preferred Stock held and to cumulative
voting in the election of directors. Pursuant to the Company's
Restated Articles of Incorporation, each share of Series A
Preferred Stock shall entitle the holder thereof to vote with the
holders of Common Stock on all matters submitted to a vote of the
holders of the Common Stock. The number of shares of Common Stock
issued and outstanding, and the voting rights of the holders of the
Series A Preferred Stock, reflect the five-for-four stock split
declared by the Board of Directors February 6, 1995, paid March 6,
1995 to stockholders of record on February 23, 1995. All
references to shares of Common Stock have been adjusted
accordingly.
The mailing address of the principal executive office of the
Company is 104 Woodmont Boulevard, Suite 500, Nashville, Tennessee
37205. The Company also maintains a company operations office at
427 Beech Street, Scottsville, Kentucky 42164.
<PAGE>2<PAGE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information furnished to the Company as of January 31, 1995 concerning persons who are
the beneficial owners of more than five percent (5%) of the Company's Common Stock and/or Series A Preferred Stock.
Amount and Nature of Beneficial Percent of Class - Common
Name and Address of Ownership-Common Stock/Series Stock/Series A Preferred
Beneficial Owner A Preferred Stock() Stock
<S> <C> <C>
Cal Turner, Jr. 13,093,838/1,715,7429() 19.5%/100.0%
104 Woodmont Blvd.,
Suite 500
Nashville, TN 37205
James Stephen Turner 11,468,970/1,643,037() 17.1%/95.8%
138 Second Avenue,
Suite 500
Nashville, TN 37201
Turner Children Trust dated 10,085,887/1,613,742() 15.0%/94.1%
January 21, 1980, Cal Turner,
Jr. and James Stephen Turner,
Co-Trustees
104 Woodmont Blvd., Suite 355
Nashville, TN 37205
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP BY OFFICERS AND DIRECTORS
The following table contains certain information (furnished by the individuals named) concerning each of the nominees, the
executive officers named in the Summary Compensation Table and all executive officers and directors as a group.
Shares of Stock Beneficially Owned on January
31, 1995
Director
Nominee/Executive or Off. Series A(1) Percent of Common Percent of
Officers Age Principal Occupation Since Preferred Class Stock Class(2)
<S> <C> <C> <C> <C> <C> <C> <C>
James L.Clayton 61 Chairman and CEO, 1989 185,5313(3) *
Clayton Homes, Inc.
James D. Cockman 62 Chairman and CEO, Ocean 1988 10,814(4) *
Fresh Express International,
Inc.
Reginald D. Dickson 49 Chairman New Age Bank Corp. 1993 11,716(5) *
and President Emeritus,
Inroads, Inc.
John B. Holland 63 President and COO, Fruit of 1988 108,052(6) *
Fruit of the Loom, Inc.
Wallace N. Rasmussen 80 Retired Chairman of the 1990 17,768(7) *
Board, Beatrice Foods, Inc.
Cal Turner 79 Chairman Emeritus of the 1955 1,433,557(8) 2.1
Company
Cal Turner, Jr. 55 Chairman, President and 1966 1,715,742(9) 100.0% 13,093,839(10)19.5%(11)
Chief Executive Officer
David M. Wilds 54 Principal, Nelson Capital 1991 45,947(12)*
Corp.
William S. Wire, II 63 Retired Chairman of Genesco, 1989 39,233(13)*
Inc.
(1)Reflects the Series A Preferred Stock issued August 22,1994.
(2)Unless otherwise noted in the following footnotes, the persons for whom information is provided had sole voting and investment
power over the shares of Common Stock or Series A Preferred Stock shown as beneficially owned. Computations are based upon
67,186,39 shares of Common Stock and 1,715,742 shares of Series A Preferred Stock outstanding as of January 3, 1995. * - denotes
less than 1% of class.
(3) Includes options to acquire 56,021 shares of the Company's Common Stock which are currently exercisable or exercisable within
60 days.
(4) Includes options to acquire 7,187 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
(5) Includes options to acquire 7,560 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
(6) Includes options to acquire 7,560 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
(7) Includes options to acquire 7,187 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
(8) Includes 1,433,527 shares for which Mr. Turner has sole voting and investment rights as trustee of trusts established for the
benefit of his children.
(9) See Notes 1 and 2 on page 2. Cal Turner, Jr.is the sone of Cal Turner.
(10)See Notes 1 and 2 on page 2.
(11)Percentage of class reflects Common Stock beneficially owned, including full conversion of the Series A Preferred Stock.
(12)Includes options to acquire 35,880 shares of the Company's Common Stock which are currently exercisable or exercisable within
60 days.
(13)Includes options to acquire 35,880 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
SECURITY OWNERSHIP BY OFFICERS AND DIRECTORS (CONTINUED)
The following table contains certain information (furnished by the individuals named) concerning each of the nominees, the
executive officers named in the Summary Compensation Table and all executive officers and directors as a group.
Shares of Stock Beneficially Owned on January
31, 1995
Director
Nominee/Executive or Off. Series A(2) Percent of Common Percent of
Officers Age Principal Occupation Since Preferred Class Stock Class(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Bob Carpenter 47 Vice President and 1981 237,134(1) *
Chief Administrative
Officer
Mike Ennis 41 Vice President, Merchandising 1988 114,398(2) *
Operations
C. Kent Garner 48 Vice President and Chief 1992 143,104(3) *
Financial Officer
Leigh Stelmach 55 Executive Vice President, 1989 126,215(4) *
Operations
All directors and executive
officers as a group (20 persons) 1,715,742(5) 100.0% 16,804,765(6) 25.0%
(1) Includes options to acquire 88,652 shares of the Company's Common Stock which are currently exercisable or exercisable within
60 days. Also includes 116,821 shares for which Mr. Carpenter has shared voting and investment rights as a Co-Trustee of the
Calister Turner, III 1994 Generation Skipping Trust.
(2) Includes options to acquire 31,640 shares of the Company's Common Stock which are currently exercisable or exercisable within 60
days.
(3) Includes options to acquire 124,292 shares of the Company's Common Stock which are currently exercisable or exercisable within
60 days.
(4) Includes options to acquire 43,358 shares of the Company's Common Stock which are currently exercisable or exercisable within
60 days.
(5) See Notes 1 and 2 on page 2.
(6) Includes 826,482 shares of the Company's Common Stock subject to option exercise which are currently exercisable or
exercisable within 60 days and full conversion of the Series A Preferred Stock deemed to be beneficially held by Cal Turner, Jr.
</TABLE>
<PAGE
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Directors are elected each year to hold office until the next
annual meeting of stockholders and until their successors are duly
elected and qualified. The Company's bylaws provide for a minimum
of three and a maximum of fifteen directors, the exact number to be
set by the Board of Directors. The current Board of Directors
consists of nine members, and at its March 1995 meeting the Board
of Directors nominated those same nine individuals to stand for
election at the 1995 Annual Meeting of Stockholders.
In the election of directors, pursuant to the Kentucky
Business Corporation Act, each stockholder shall have the right to
cast as many votes in the aggregate as he shall hold shares of
Common Stock (or Series A Preferred Stock as adjusted for its
voting rights) multiplied by the number of directors to be elected;
and each stockholder may cast the whole number of votes for any one
nominee or distribute such votes among two or more nominees.
Unless contrary instructions are received, the enclosed proxy will
be voted in favor of electing as directors the nominees listed
below. Each nominee has consented to be a candidate and to serve,
if elected. While the Board has no reason to believe that any
nominee will be unable to accept nomination or election as a
director, if such an event should occur, the proxies will be voted
with discretionary authority for a substitute or substitutes as
shall be designated by the current Board of Directors.
The following sets forth certain information concerning each
of the nominees:
James L. Clayton has served for more than the past five years
as Chief Executive Officer of Clayton Homes, Inc. Clayton Homes,
Inc. produces, sells and finances manufactured homes. Mr. Clayton
served as President of Clayton Homes, Inc. from 1956 through 1993.
Mr. Clayton has served as Chairman of First Heritage Bank since
1992, is a director of ROC Communities, Inc., a manufactured homes
company and Goody's Family Clothing, Inc.
James D. Cockman, Chairman and Chief Executive Officer of
Ocean Fresh Express International, Inc., has served as an executive
of the following divisions of Sara Lee Corporation: Chairman, Food
Service (1989 to September, 1992); Chairman, President and Chief
Executive Officer, PYA/Monarch, Inc. (1985 to 1989). Mr. Cockman
is also a member of the boards of directors of Clayton Homes, Inc.
and Ryan's Family Steak House, a family restaurant chain.
Reginald D. Dickson is Chairman of the New Age Bank Corp. and
President Emeritus of Inroads, Inc., a non-profit organization
supporting minority education. Mr. Dickson served as President
and Chief Executive Officer of Inroads, Inc. from 1983 to 1993. He
also serves as a director of First American Corporation, Nashville,
Tennessee.
John B. Holland has served since 1992 as President and Chief
Operating Officer of Fruit of the Loom, Inc., a manufacturer of
underwear and other soft goods. Mr. Holland has served since 1975
as Chairman and Chief Executive Officer of Union Underwear Co.,
Inc., a subsidiary of Fruit of the Loom, Inc. Mr. Holland is a
member of the board of directors of National City Bank Kentucky, a
bank holding company, and Fruit of the Loom, Inc.
Wallace N. Rasmussen served as Chairman of the Board and Chief
Executive Officer of Beatrice Foods, Inc. until his retirement in
June, 1979, at which time he became a consultant to that
corporation. He serves as a member of the board of directors of
Shoney's, Inc., a family restaurant chain, and NationsBank -
Tennessee, N.A.
<PAGE>6
Cal Turner, founder of the Company, served as Chairman of the
Board from 1955 until December, 1988. He is currently a consultant
to the Company. See "Transactions with Management and Others."
Cal Turner, Jr. joined the Company in 1965 and was elected
President and Chief Executive Officer in 1977. Mr. Turner has
served as Chairman of the Board since January, 1989. Mr. Turner is
a member of the board of directors of First American Corporation,
Nashville, Tennessee, Thomas Nelson, Inc., a publishing company,
and Shoney's Inc.
David M. Wilds is a principal of Nelson Capital Corp. From
1990 to 1995, Mr. Wilds served as Chairman of the Board of
Cumberland Health Systems, Inc., an owner and operator of
psychiatric hospitals. From 1969 until 1990, Mr. Wilds was a
partner with J. C. Bradford & Co., an investment banking company.
Mr. Wilds is also a director of LDDS Communications, Inc.
William S. Wire, II served from 1986 until January 31, 1994 as
Chairman of the Board of Genesco, Inc., a manufacturer, wholesaler
and retailer of footwear and clothing. Mr. Wire served as Chief
Executive Officer of Genesco, Inc. from April, 1986 to January 31,
1993. Mr. Wire serves as a director of First American Corporation,
Nashville, Tennessee and Genesco, Inc.
COMMITTEES OF THE BOARD. The Company has a Corporate
Governance and Compensation Committee ("CGC Committee") and an
Audit Committee. The current members of the CGC Committee are
Messrs. Wire (Chairman), Wilds and Rasmussen. The CGC Committee
reviews and recommends policies and practices for the Corporation's
corporate governance profile. The CGC Committee sets the total
compensation of, and reports to the Board of Directors initial and
proposed salary changes paid to all executive officers and any
employee whose annual compensation exceeds that of the lowest paid
executive officer. The CGC Committee reviews the compensation
policies of the Company and compensation programs in which officers
may participate. In addition, the CGC Committee develops general
criteria concerning the qualifications and selection of Board
members and officers, and recommends candidates for such positions
to the Board of Directors. The CGC Committee will consider persons
recommended by stockholders as potential nominees for directors, if
the names of such persons are submitted in writing to the Chairman
of the CGC Committee or the Secretary of the Company. These
recommendations must be accompanied by a full statement of
qualifications and an indication of the person's willingness to
serve.
The CGC Committee also administers the Company's stock option
plans, excluding the 1988 Outside Directors' Plan and the 1993
Outside Directors' Plan which are administered by Cal Turner and
Cal Turner, Jr. At least annually, the CGC Committee specifically
reviews the standards of performance of the President and Chief
Executive Officer ("CEO") for compensation purposes. (See "Report
of the Corporate Governance and Compensation Committee of the Board
of Directors on Executive Compensation.") The CGC Committee met
four times during fiscal 1995.
The Audit Committee is composed of Messrs. Holland (Chairman),
Cockman, Clayton and Dickson. The functions of the Audit Committee
include providing advice and assistance regarding accounting,
auditing, corporate compliance and financial reporting practices of
the Company. Each year it will recommend to the Board a firm of
independent certified public accountants to serve as auditors. The
Audit Committee will review with the auditors the scope and results
of their annual audit, fees in connection with their audit and
nonaudit services, and the independence of the Company's auditors.
The Audit Committee met three times during fiscal 1995.
<PAGE>7
During fiscal 1995, the Board of Directors held five meetings.
All directors attended more than 75% of the aggregate number of
meetings of the Board and committees on which they serve.
COMPENSATION OF DIRECTORS. Directors receive a $5,000
quarterly retainer, an additional $1,250 for attending each regular
meeting of the Board, and an additional $1,250 for members
attending each committee meeting. Committee Chairmen receive an
additional $250 per Committee meeting. Compensation for telephonic
meetings is one-half the above rates. Board members who are
officers of the Company do not receive any separate compensation
for attending Board or committee meetings. In addition, the
directors who are not employees of the Company are entitled to
receive stock options pursuant to the terms of the Company's 1993
Outside Directors Stock Option Plan. Subject to stockholder
approval, the non-employee directors shall be entitled to receive
stock option grants pursuant to the 1995 Outside Directors Stock
Option Plan. Each non-employee director is entitled to the
nondiscretionary grants set forth therein. See Proposal No. 3 and
Exhibit B attached hereto.
DEFERRED COMPENSATION PLAN FOR DIRECTORS. In December 1993,
the Board of Directors unanimously approved a voluntary,
nonqualified compensation plan for Director compensation. All
outside Directors are eligible to participate in the plan. Under
the plan, each Director may voluntarily defer receipt of all or a
part of any fees normally paid by the Company to the Director. The
fees eligible for deferral are defined as retainer, Board meeting
fees and committee meeting fees. The compensation deferred is
credited to a liability account which is increased quarterly at a
minimum rate of 6% per year. The benefits will be paid, upon
termination from the Board, as deferred compensation to the
Director as follows: (a)upon attaining age 65 or any age
thereafter as a lump sum of the accumulated account; (b) in the
event of total disability, as a lump sum of the accumulated
account; (c) in the event of death, as a lump sum of the
accumulated account; or (d) in the event of voluntary termination,
as a lump sum of the accumulated account.
<PAGE>8
REPORT OF THE CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The three-member Corporate Governance and Compensation
Committee of the Board of Directors ("Committee") prepared the
following executive compensation report.
A. COMPENSATION PHILOSOPHY
The Company has adopted the concept of pay-for-performance
linking management compensation, Company performance and
stockholder return. This strategy reflects the Company's desire to
pay for results that are consistent with the key goals of the
Company and the stockholders. The Committee and the Company
believe that combining variable, direct and indirect pay components
of its compensation program enables the Company to attract, retain
and motivate results-oriented employees to achieve higher levels of
performance.
1. VARIABLE COMPENSATION PHILOSOPHY
At nearly all levels of the Company, a significant portion of
pay is variable, being contingent upon Company (or store)
performance. The performance-based component, whether annual
incentive or long-term incentive, is significant enough to serve as
a strong incentive. Additionally, performance-based compensation
through the granting of stock options to employees serves to
increase employee ownership of the Company.
2. DIRECT COMPENSATION PHILOSOPHY
Though performance-based compensation is to be emphasized,
base pay is competitive. The Company believes base pay should
relate to the skills required to perform a job and to the value of
each job performed relative to the market, industry, and strategic
importance to the Company. This method of valuation allows the
Company to respond to changes in its needs and changes in the labor
market. Increases in base pay require a satisfactory or better
level of performance as determined by the Committee.
3. INDIRECT COMPENSATION PHILOSOPHY
The Company's indirect-compensation programs protect its
employees from extreme financial hardship in the event of a
catastrophic illness or injury and provide limited income security
for retirement years. Health, life and disability benefit programs
should provide competitive levels of protection without
jeopardizing the Company's position as a low-cost retailer. The
Company manages health care costs aggressively and enlists employee
assistance in cost management. Employees have various
opportunities to share in health care cost- reductions and are
encouraged to adopt healthy lifestyles.
The Company's retirement benefit plans should provide limited
income security at retirement for the typical employee. The
Employee Stock Ownership Plan reflects the Company's commitment to
widespread stock ownership of the Company by employees at all
levels of employment. Employees are also invited to share in
ownership of the Company through participation in the Dollar
General Stock Purchase Plan.
<PAGE>9
B. EXECUTIVE OFFICER COMPENSATION
Under the supervision of the Committee, the Company has
developed compensation polices and programs designed to provide
competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals. The Company is
committed to creating an incentive for its employees to contribute
to the overall results of the Company thereby encouraging a team
approach toward accomplishment of corporate objectives and creating
value for stockholders.
The executive officers' compensation for fiscal 1995 reflected
the Company's increasing emphasis on tying pay to both short-term
and long-term incentives. The short-term incentive is an annual
cash bonus based on a percentage of the executive officer's salary.
The long-term incentives are performance-based stock options.
Incentive pay awarded to the CEO and the other officers named in
the Summary Compensation Table in fiscal 1995 (or the "Named
Executive Officers") was controlled by Company performance goals
which are established annually. While the Committee's approach to
base compensation is to offer competitive (although slightly lower-
than-average) salaries to the CEO and the other Named Executive
Officers in comparison with market practices, base salaries have
become a relatively smaller element in the total executive officer
compensation package as the Company's pay-for-performance component
plays a more significant role. The fiscal 1995 average base
salaries for the Named Executive Officers (not including the CEO)
increased 12%. The increase in base salaries in fiscal 1995 was
determined based upon recommendations made by the human resources
department to the Committee, a review of peer group comparison data
(using the peer group compensation survey published by Management
Compensation Services) and the subjective analysis of the
Committee after evaluating the recommendations, peer group data,
the Company's overall performance and the respective individual
performance criteria of the Named Executive Officers.
1. ANNUAL CASH BONUSES
The Company's annual cash bonuses paid to the executive
officers make up the short-term incentive component of their fiscal
1995 cash compensation. The payment of annual cash bonuses is
based on both objective and subjective criteria.
Objective criteria include actual earnings per share results
versus target earnings per share results as established by the
Committee at the end of the prior fiscal year. The Company uses
earnings per share improvement for determining target goals for the
executive officer's variable pay for primarily two reasons: First,
it is a defined measure of total Company performance and second, it
can be easily identified and reviewed by stockholders.
<PAGE>10
Under the cash bonus incentive program effective for cash
bonuses paid in fiscal 1995, there were two earnings per share
goals established by the Committee, both of which exceeded the
prior year's performance. If the Company reached the first
established or "target" goal, which was considered by the Committee
to be challenging, then 50% of the total possible payout was
awarded. If the Company reached the second or "stretch" goal,
which was considered by the Committee to be extremely challenging,
then the total possible payout was awarded.
In fiscal 1995, the Committee approved an enhancement to the
existing program, which will be applicable for fiscal 1996, that
establishes an additional earnings-per-share goal between the
target goal and stretch goal and enhances the cash bonuses
available for participants. Under the enhanced program, if the
target goal is met, the executive officer will receive 25% of
salary as a cash bonus. If the mid-level goal is met, the
executive officer will receive 50% of fiscal 1996 salary as a cash
bonus and, if the stretch goal is met, the executive officer will
receive 75% of fiscal 1996 salary as a cash bonus. The enhanced
program for the CEO differs. If the Company meets or exceeds its
stretch earnings-per-share goal, the CEO's cash bonus will be equal
to 100% of his salary.
Subjective performance criteria include the results of each
executive officer's performance review pursuant to the Company's
Performance Development Process ("PDP"). The Company's PDP is a
comprehensive program that focuses on total performance improvement
by concentrating on "Key Development Areas" ("KDA") and "Key Result
Areas" ("KRA"). KDAs emphasize skill enhancement, leadership
development, and career goal aspirations of employees. KRAs focus
on the key results required to actively pursue the Company's
mission. KDAs and KRAs are set annually for each management
employee by the employee's supervisor, and the payment of an annual
bonus is dependent upon each executive officer achieving his
individual goals. That is, Company performance is not the sole
criterion by which an executive officer's annual cash bonus payout
is determined. Two factors determine whether an executive officer
would receive an annual cash bonus: (1) the Company must achieve
an established earnings-per-share improvement goal; AND (2) the
individual must achieve a satisfactory performance evaluation based
upon the above-described PDP factors. Therefore, full weight is
given to each of these factors. For each executive officer, both
Company and individual goals for fiscal 1995 were met or exceeded.
Because the Company exceeded its stretch earnings-per-share
improvement goals for fiscal 1995, and because each executive
officer achieved his previously-established subjective performance
goals, the maximum cash bonus award was paid. This cash bonus
component represents 30% of the total cash compensation paid to
each executive officer.
2. EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1989 Employee Stock Incentive Plan ("1989
Plan") and 1993 Employee Stock Incentive Plan ("1993 Plan") award
non-qualified performance-based stock options to the executive
officers, department directors and other personnel considered to be
in key positions, as approved by the Compensation Committee.
In fiscal 1994, the Committee granted performance-based stock
options under its "Stock Incentive" program with three annual
vesting schedules (fiscal 1995, fiscal 1996 and fiscal 1997) based
on corporate performance goals (as measured by earnings-per-share
improvement) and individual performance goals (as measured by a
comprehensive review process, the "PDP"). To further encourage
outstanding performance, the Committee adopted a compensation
program that ties stock option awards to target and stretch
earnings-per-share goals. If the Committee-established target
earnings per share goal is met and the individual performance goals
are met, 67% of the total possible stock option benefit (based on
stock options with a fair market value of approximately three times
salary) will be earned. If the Committee-established stretch
earnings-per-share goal is met and the individual performance goals
are met, 100% of the total possible stock option benefit (based on
stock options with a fair market value of approximately four and
one-half times salary) will be earned. Except for certain stock
options
<PAGE>11
granted to Mr. Garner, all stock options granted in fiscal years
1993, 1994 and 1995 to the officers identified in the summary
compensation table were granted at market price.
In fiscal 1993, the Company hired Mr. Garner to take the
position of Chief Financial Officer. His initial salary was deemed
to be below-market for such a position; however, he was awarded
stock options at an exercise price below the then current market
price (as provided for in the 1989 and 1993 Plan). The value of
the below-market portion of the options granted to Mr. Garner is
presented in the summary compensation table in the "Other Annual
Compensation" column.
In fiscal 1995, the Committee approved an enhancement to the
existing stock option program that establishes incremental
earnings-per-share goals between the target goal and stretch goal.
Under the enhanced program, if the target goal is exceeded but the
stretch goal is not met, then a payout greater than 50% of the
total possible payout but less than 100% of the total possible
payout is awarded. The percentage payout above 50% of the total
possible payout increases commensurately with the rate at which the
target goal is exceeded up to the total possible payout that is
tied to the Committee-established stretch goal.
In determining the number of the shares subject to stock
options granted to the employees eligible to participate in the
Plan, the Committee takes into account the respective scope of
accountability, the strategic and operational responsibilities of
such employees, as well as the salary levels of such employees.
Compensation data from the Management Compensation Services
compensation survey reveals that annual stock grants (calculated as
grant price times the number of shares granted) are typically
expressed as a multiple of salary. For the CEO, annual grant
amounts fall within a range of one to three times the CEO's annual
salary, and executive officer's grant amounts fall within a range
of one-half to one and one-half times the executive officer's
salary. Because the Committee has decided to place greater
emphasis on the performance-based component of compensation, it
pays lower-than-average salaries for the CEO and executive officers
but sets incentive compensation multiples at or above the high end
of the peer group survey ranges for these positions. Specifically,
the Committee has established an incentive compensation multiple of
approximately three to four and one-half times salary for
determining annual stock option grants for the CEO and the other
executive officers. These options are valued by multiplying the
option exercise price (fair market value at the time of grant) by
the number of shares granted.
In addition, in fiscal 1995 the Committee established a stock-
option program called the "Stock Plus" program. This program,
which is composed of option grants under the 1989 Plan and the 1993
Plan, awards additional stock options to executive officers who
maintain a level of Company-stock ownership (determined by the fair
market value as set by the New York Stock Exchange trading price at
the close of business on April 1) equal to at least two and one-
half times their salary. The CEO is required to maintain ownership
of four times his salary to be eligible to participate in this
program. Each executive officer earns additional options for the
purchase of Common Stock equal to 25% of the annual number of
options for the purchase of Common Stock earned by the executive
officer through the Stock Incentive program if he maintains his
required ownership level from May 1 to April 30 of the vesting
year. Because the stock options available under the Stock Plus
program are based on the number of Stock Incentive program options
that vest in a given year, if the Company fails to meet any of its
earnings-per-share goals or the executive officer fails to meet his
individual performance goals, the Stock Plus stock options will not
be awarded even if the executive officer has maintained his
required level of Company-stock
<PAGE>12
ownership. That is, the Stock Plus program rewards the CEO and the
Named Executive Officers with a premium of 25% of the number of
options for the purchase of Common Stock shares that vest under the
provisions of the Stock Incentive program if he maintains the
required level of Company stock.
Because (1) the Company exceeded its stretch earnings-per-
share improvement goals for fiscal 1995, (2) each named executive
officer achieved his previously-established subjective performance
goals and (3) each Named Executive Officer met the ownership
requirements to be eligible for the Stock Plus program grants, the
maximum number of options which could vest in fiscal 1995 became
fully vested. These grants do not provide for the power to
accelerate vesting by the Committee based upon the achievement of
only one of the two vesting criteria--each must be met or the
options designated for that year are canceled.
C. CHIEF EXECUTIVE OFFICER COMPENSATION
As with the other executive officers, the CEO's compensation
reflects the Company's increasing emphasis on tying compensation to
both short-term and long-term performance goals. When determining
the CEO's salary, the Committee considers the CEO's prior year
performance and expected future contributions to the Company as
well as peer-industry survey results published annually. As
compared to the industry comparison group, the CEO's salary was 6%
less than the group median. The 19% increase in the CEO's salary
in 1995 was a result of the Committee's decision to reward him for
his leadership and the Company's outstanding performance as
measured by, but not limited to, such factors as earnings-per-share
improvement, sales and profit increases and expense reduction. The
CEO's salary increase is also a result of the Committee's effort to
bring his salary closer to the industry average which, prior to the
increase, was 22% below the comparison year peer-industry average.
The Committee, believing that the CEO should have some
compensation at risk in order to encourage performance that
maximizes stockholder return, has created a significant opportunity
for additional compensation through performance-based incentives.
The performance-based compensation for which the CEO is eligible
takes the form of both short-term and long-term incentives. Like
the other executive officers, the CEO is eligible for a cash bonus-
- -the short-term incentive--based on the attainment of individual
goals and earnings-per-share improvement goals. In fiscal 1995,
this incentive linked 30% of the CEO's total cash compensation to
performance. Also like the other executive officers, the CEO is
eligible for non-qualified performance-based stock options--the
long-term incentive--awarded upon the attainment of Committee-
established earnings-per-share improvement goals, individual
performance goals and, for "Stock Plus" program eligibility,
certain ownership level requirements.
The Committee believes that in order to maximize the CEO's
performance, a substantial portion of the CEO's compensation should
be tied directly to overall Company performance. Consistent with
this philosophy, the Committee has established a slightly lower-
than-average salary for the CEO (as compared to CEOs of the peer-
group compensation survey participants) while emphasizing the pay-
for-performance components of the CEO's total compensation package.
When considering the CEO's pay-for-performance component of his
compensation package, the Committee took into consideration prior
pay-for-performance awards. The Committee determined that based on
the CEO's individual performance and the performance of the
Company, it was important to continue its incentive compensation
program in a manner that is competitive in the industry and that
continues to motivate and reward outstanding performance. In fact,
in fiscal 1995, upon reviewing the CEO's fiscal 1994 performance,
and the CEO's compensation package including past stock option
grants, the Committee decided to grant him additional stock options
under the Stock Incentive program as a reward for past outstanding
performance and as an incentive for future outstanding performance.
Like all Stock Incentive program grants, vesting is
<PAGE>13
contingent upon both the Company's achievement of earnings-per-
share goals and the CEO's achievement of individual performance
goals. This additional grant is set forth in the stock option
grant table in the "number of options granted" column.
The CEO's short-term incentive compensation program effective
for performance of fiscal 1994 and paid in fiscal 1995 rewarded the
CEO with a cash bonus of 50% of his annual salary. To be eligible
for this cash bonus award, the CEO was required to achieve personal
performance goals established by the Committee, and the Company had
to meet its stretch earnings-per-share goal.
The CEO's long-term incentive compensation program effective
for fiscal 1995 rewards the CEO with stock option grants up to
approximately three to four and one-half times his annual salary.
If the Committee-established "target" earnings-per-share goals are
met and the CEO meets his individual performance goals, he will
earn 67% of the total possible payout (based on three times his
annual salary). If both individual and "stretch" earnings per
share goals are met, then the CEO will earn 100% of the total
possible stock option benefit (based on four and one-half times his
annual salary).
In fiscal 1995, the Committee enhanced both its short-term
incentive program (cash bonus) and long-term incentive program
(stock option grants). Under the Company's enhanced cash bonus
program, the Committee added a "mid-level" earnings-per-share goal
between the target goal and stretch goal and increased the CEO's
total possible cash-bonus incentive to 100% of his salary. To be
eligible for this cash bonus award, the CEO must achieve personal
performance goals established by the Committee, and the Company
must meet at least one of its earnings-per-share goals. If the CEO
meets his individual performance goals and the Company meets its
Committee-established "target" goal, the CEO will receive a cash
bonus equal to 25% of his annual salary. If the CEO's individual
goals and the Committee-established "mid-level" earnings-per-share
goal is met, then the CEO will receive a cash bonus equal to 50% of
his annual salary. If the CEO's individual goals are met and the
Committee-established "stretch" earnings-per-share goal is met,
then the CEO will receive a cash bonus equal to 100% of his annual
salary.
The Committee's enhancement to the existing Stock Incentive
program establishes incremental earnings-per-share goals between
the target earnings-per-share goal and stretch earnings-per-share
goal. Under the enhanced program, if the target goal is exceeded
but the stretch goal is not met, then a payout greater than 50% of
the total possible payout but less than 100% of the total possible
payout is awarded. The percentage payout above 50% of the total
possible payout increases commensurately with the rate at which the
target goal is exceeded up to the total possible payout that is
tied to the Committee-established stretch goal.
The CEO is also eligible to participate in the Company's Stock
Plus program. This program, which is composed of option grants
under the 1989 Plan and the 1993 Plan, rewards the CEO with
additional stock options if he maintains a level of Company-stock
ownership equal to at least four times his salary. The CEO earns
additional options for the purchase of Common Stock equal to 25% of
the maximum number of options for the purchase of Common Stock that
he earns through the Stock Incentive program if he maintains his
required ownership level from May 1 to April 30 of the vesting
year. Because the stock options available under the Stock Plus
program are based on the number of Stock Incentive program options
that vest in a given year, if the Company fails to meet any of its
earnings per share goals or the executive officer fails to meet his
individual performance goals, the Stock Plus stock options will not
be rewarded even if the executive officer has maintained his
required level of Company-stock ownership. That is, the Stock Plus
program rewards the CEO with a premium of 25% of the shares that
vest under the provisions of the Stock Incentive program if he
maintains the required level of Company stock.
<PAGE>14
For fiscal 1995, the Company exceeded its established
performance goals with a 26.6% increase in total store sales, a
13.5% increase in same-store sales and a 47.9% increase in earnings
per share. Because the Company exceeded the Committee-established
"stretch" earnings-per-share improvement goals, the CEO achieved
previously-established subjective performance goals, and the CEO
met the share ownership requirement, he received the maximum amount
of the available variable component.
D. DEDUCTIBILITY
The Committee continues to analyze the potential impact of the
$1,000,000 limit on the deductibility of executive compensation for
federal income tax purposes enacted as part of the 1993 Omnibus
Budget Reconciliation Act ("OBRA"). Under the regulations proposed
by the Department of the Treasury, particularly the transition
rules, compensation pursuant to the Company's stock plans should
qualify as "performance-based" and, therefore, excluded from the
$1,000,000 limit. The Board has proposed certain per-participant
limitations on grants pursuant to the proposed 1995 Employee Stock
Incentive Plan (see Proposal No. 2) so that awards of stock options
should be considered "performance based" following expiration of
the transition rules.
Other forms of compensation provided by the Company to its
executives, however, are not excluded from such limit. Because the
Company does not believe it is in any immediate danger of losing
any deductions, no definitive determinations have been made by the
Committee as to whether it will approve any compensation
arrangements that will cause the $1,000,000 limit to be exceeded in
the future.
William S. Wire, II - Committee Chairman
Wallace N. Rasmussen
David M. Wilds
<PAGE>15
COMMON STOCK PERFORMANCE
As a part of the executive compensation information presented
in this Proxy Statement, the Securities and Exchange Commission
requires the Company to prepare a performance graph that compares
its cumulative total shareholders' return during the previous five
years with a performance indicator of the overall stock market and
the Company's peer group. For the overall stock market performance
indicator, the Company has chosen to use the S&P Midcap 400 index.
For the peer group, the Company has chosen to use the publicly-held
participants of the compensation survey published by Management
Compensation Services used by the Committee when reviewing and
establishing the Company's executive compensation policies.
<TABLE>
<CAPTION>
1/90 1/91 1/92 1/93 1/94 1/95
<S> <C> <C> <C> <C> <C> <C>
Dollar General 100 122 308 467 715 1066
Corporation
Peer Group (see 100 112 193 244 231 198
Note 1)
S & P Midcap 400 100 108 158 176 203 193
</TABLE>
<PAGE>16
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or other compensation during fiscal 1995, 1994 and 1993 for
the Company's Chief Executive Officer and the persons who, at the end of fiscal 1995, were the other four most highly-compensated
executive officers of the Company (collectively the "Named Executive Officers"). The Company awarded no SARs in fiscal 1995, and no
Named Executive Officer holds any SARs. (Please see table notes on following page.
Annual Compensation Long-Term Compensation
Awards Payouts
Re-
Other stricted Sec. All
Annual Stock Under- Other
Name and Principal Fiscal Salary Bonus Comp. Awards lying LTIP Comp.
Position Year ($) ($) ($) ($) Options Pay ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cal Turner, Jr., 1995 474,220 200,000 10,034 312,741 59,420
Chairman, President 1994 400,000 177,500 10,599 357,420 92,509
and Chief Executive 1993 355,000 177,500 12,133 -0- 86,838
Officer
Bob Carpenter, Chief 1995 147,083 70,000 8,773 41,317 6,000
Administrative Officer, 1994 140,000 62,500 8,625 165,466 14,903
Corporate Secretary and 1993 125,000 62,500 6,677 -0- 11,650
Chief Counsel
Mike Ennis, Vice 1995 139,379 62,500 2,636 30,153 6,000
President 1994 125,000 44,800 2,636 120,623 15,148
Merchandising 1993 112,000 44,800 1,146 -0- 9,830
Operations
C. Kent Garner, 1995 166,720 80,000 830,942 41,317 6,000
Chief Financial 1994 155,274 -0- 294,834 165,466 1,179
Officer 1993 9,952 -0- 1,027 170,897 -0-
Leigh Stelmach, 1995 212,832 87,500 8,851 41,317 6,000
Executive Vice 1994 175,000 75,000 8,851 165,466 8,254
President Operations 1993 150,000 75,000 3,858 -0- 8,010
</TABLE>
<PAGE>17
NOTES TO SUMMARY COMPENSATION TABLE:
OTHER ANNUAL COMPENSATION - The amounts reported in this column
reflect gross-ups for tax reimbursements. The 1995 amount reported
for Mr. Garner includes $825,315 representing the above-market
value of stock options paid or payable to him during this period
(see Corporate Governance and Executive Compensation Committee
Report for a discussion of Mr. Garner's stock option grants) and a
$5,727 gross-up for tax reimbursement. The 1994 amount reported
for Mr. Garner includes $228,825 representing the above-market
value of stock options paid or payable to him during this period
(see Corporate Governance and Executive Compensation Committee
Report for a discussion of Mr. Garner's stock option grants), a
$5,727 gross-up for tax reimbursement, the forgiveness of a $56,600
relocation loan, and $3,782 in other perquisites. The 1993 amount
reported for Mr. Garner reflects the forgiveness of a $1,027
moving-expenses loan.
SECURITIES UNDERLYING OPTIONS - The Stock Incentive Program options
granted in fiscal 1994 and 1995 are to vest in three increments
upon the attainment of individual and Company performance
(earnings-per-share improvement) goals established for fiscal years
1995, 1996 and 1997. The Stock Plus program options granted in
fiscal 1995 are to vest in fiscal 1996 upon the holder s
maintaining the required stock ownership level, the holder s
attaining individual perform fully vested.
RESTRICTED STOCK AWARDS - The Company granted no restricted stock
awards in fiscal 1995, fiscal 1994 or fiscal 1993. No executive
officer holds any restricted stock awards.
LTIP PAYOUTS - None paid.
ALL OTHER COMPENSATION - Includes $5,250 contributed to each
executive officer's retirement account in fiscal 1995, $8,254
contributed to each executive officer's retirement account in
fiscal 1994 and $8,010 contributed to each executive officer's
retirement account in fiscal 1993 (with the exception of Mr. Garner
who was ineligible because of length of service to receive a
contribution in fiscal 1994 or fiscal 1993). Includes the
Company's contribution to each executive officer's Employee Stock
Ownership Plan (ESOP) account for the following fiscal years: Mr.
Turner: 1995 - $750, 1994 - $8,965, 1993 - $3,836; Mr. Carpenter:
1995 - $750, 1994 - $6,649, 1993 - $3,640; Mr. Ennis: 1995 - $750,
1994 - $6,894, 1993 - $1,820; Mr. Garner: 1995 - $750, 1994 -
$1,179, 1993 - $-0-; Mr. Stelmach: 1995 - $750, 1994 - $6,867, 1993
- - $3,897. Includes for Mr. Turner the following amounts paid as
premiums on a split-dollar life insurance policy: 1995 - $53,420,
1994 - $75,290 and 1993, $75,290.
<PAGE>18
<PAGE>
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table provides information as to options granted to the Named Executive Officers during fiscal 1995. The Company
granted no SARs in fiscal 1995.
& of Potential
Total Realizable Value
No.of Options at Assumed
Securities Granted to Exercise Rates of Stock
Underlying Employees or Price Appreciation
Options in Fiscal Base Price Expiration for Option Term(1)
Name Granted(#)(2) Year 1995 ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <
Cal 312,741 40.24% $19.28 4/11/04 $3,792,012 $9,609,704
Turner, Jr.
Bob 41,317 2.67% $19.04 3/21/04 $ 494,736 $1,253,758
Carpenter
Mike 30,153 1.95% $19.04 3/21/04 $ 361,057 $ 914,988
Ennis
C. Kent 41,317 2.67% $19.04 3/21/04 $ 494,736 $1,253,758
Garner
Leigh 41,317 2.67% $19.04 3/21/04 $ 494,736 $1,253,758
(1) Based on actual option term and annual compounding.
(2) Grants for exercutive officers and stock grants based on personal performance goals, corporate performance goals, and personal
ownership. In addition, Cal Turner, Jr. received additional performance-based stock options. Of the 312,741 shares granted,,7
178,709, although tied to performance are not tied to personal ownership. See Corporate Governance
and Compensation Committee report for discussion of these grants.
</TABLE>
<PAGE>19
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND AND YEAR-END OPTION VALUES
The following table provides information as to options exercised or held by the Named Executive Officers during fiscal 1995.
Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value Fiscal Year-End(#) Fiscal Year-End($)
Name Exercise(#) Realized($)* Exercis. Unexercis. Exercis. Unexercis.*
<S> <C> <C> <C> <C> <C> <C>
Cal Turner, Jr. 353,061 $6,978,355 -0- 670,161 -0- $3,793,829
Bob Carpenter 135,333 $2,470,254 45,293 206,783 $911,852 $1,396,840
Mike Ennis 82,022 $1,433,743 -0- 150,776 -0- $1,018,409
C. Kent Garner 89,963 $1,099,080 80,934 206,783 $1,202,938 $1,396,840
Leigh Stelmach 164,043 $2,782,480 -0- 206,783 -0- $1,396,840
*Market value of underlying securities at exercise or year-end, minus the exercise price.
</TABLE>
<PAGE>20
EMPLOYEE RETIREMENT PLAN
The Company has a non-contributory defined contribution plan
which covers substantially all employees, including the Named
Executive Officers. The plan provides retirement, disability,
termination and death benefits. Each year, as of December 31, the
Company contributes for the benefit of each eligible participating
employee 3-1/2% of calendar year gross wages to such participant's
retirement account under the plan. At least once each year, each
participating employee's retirement account is adjusted to reflect
investment gains or losses.
A participating employee will be paid the full value of his
account if the employee retires at the normal retirement age of 65,
dies while an active member of the plan, or becomes totally and
permanently disabled. If a participating employee leaves the
Company for reasons other than retirement, death or disability, the
employee will be entitled to the full value of his vested pension
account. The employee's right to all or part of the value of his
retirement account will depend on his years of service with the
Company as provided in the following chart:
Years of Credited Non-forfeitable
Service Percentage
Less than 4 0%
4 40%
5 or more 00%
As of January 31, 1995, Messrs. Cal Turner, Jr., Bob
Carpenter, Mike Ennis, C. Kent Garner and Leigh Stelmach had 29,
14, 7, 2 and 5 years of credited service, respectively. The
estimated present value of benefits under the plan as of January
31, 1995 was $222,250 for Cal Turner, Jr., $77,939 for Bob
Carpenter, $42,713 for Mike Ennis, $13,399 for C. Kent Garner and
$35,762 for Leigh Stelmach. Upon retirement, each participant has
the option of taking a lump sum or an average annual payment over a
ten-year period.
OTHER EXECUTIVE BENEFIT PLANS
Since 1988, the Company has provided the Master Retirement
Plan for Select Key Employees a salary continuation plan (the
"Select Retirement Plan"), for eligible employees which will
continue to operate in fiscal 1996. The Select Retirement Plan
generally provides for an annual retirement benefit of 100% of the
employee's salary on the date of entry into the plan with
adjustments based on certain subsequent salary increases. The
retirement benefit for each eligible participant, which cannot
exceed an amount greater than the cash value of the life insurance
policy for such participant, is payable over 10 years commencing at
age 65. The Select Retirement Plan also provides that in the event
an employee dies while in the employ of the Company after entering
the Select Retirement Plan but before retirement, his beneficiaries
will receive 50% of such employee's salary annually, for a period
of 10 years. The Named Executive Officers are eligible to
participate in the Select Retirement Plan, which is funded by life
insurance purchased by the Company and payable to the Company on
the life of the employee. Participants in the Select Retirement
Plan are vested only upon reaching retirement age or, if retirement
occurs prior to age 65, the Compensation Committee may decide in
its sole discretion whether to pay benefits under the plan equal to
a value no greater than the cash value of the life insurance policy
for such person. Directors of the Company who are not also
executive officers or employees do not participate in the Select
Retirement Plan. If the annual salary levels reported in the
Summary Compensation Table
<PAGE>21
for the Named Executive Officers were applicable at retirement, the
estimated annual benefits payable over a ten-year period for
Messrs. Cal Turner, Jr., Bob Carpenter, Mike Ennis, C. Kent Garner
and Leigh Stelmach are $474,220, $147,082, $139,379, $166,720, and
$212,832, respectively.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Cal Turner, Chairman Emeritus, is engaged as a consultant to
the Company and receives annual compensation of $60,000. This
amount is for consulting services unrelated to Mr. Turner's service
as a member of the Company's Board of Directors.
On August 22, 1994, the Company announced the issuance of
1,715,742 shares of a newly authorized series of convertible junior
preferred stock, as approved by the Board of Directors. The shares
of Series A Convertible Junior Preferred Stock (the "Series A
Preferred Stock") were issued in exchange for the 8,578,710
(10,723,387 split adjusted) shares of Dollar General Common Stock,
owned by C.T.S., Inc., a personal holding company controlled by
members of the Turner family (founders of the Company). The
exchange, negotiated and recommended by a special committee of
independent directors of the Company's Board of Directors, came in
response to a request from C.T.S., Inc. to consider a transaction
to meet certain estate planning needs of the Turner family. In
connection with the exchange, the Board of Directors obtained an
opinion from its financial advisor that the exchange was fair, from
a financial point of view, to the stockholders of the Company.
The Articles of Amendment to the Restated Articles of
Incorporation setting forth the terms, rights and conditions of the
Series A Preferred Stock were approved by the Board of Directors.
The Series A Preferred Stock was designated from the undesignated
preferred stock previously authorized by the Company's
stockholders. The transaction was effected through an Exchange
Agreement dated August 22, 1994 by and among the Company,
Dolgencorp, Inc., a wholly-owned subsidiary of the Company, C.T.S.,
Inc. and the shareholders of C.T.S., Inc. On August 22, 1994, the
Company filed with the Securities and Exchange Commission a Current
Report on Form 8-K detailing this exchange transaction and
including copies of the Exchange Agreement, the Articles of
Amendment to the Restated Articles of Incorporation and
Registration Rights Agreement which contain the terms and
conditions of the exchange, the rights and preferences of the
Series A Preferred Stock and certain limited registration rights
for the underlying Common Stock for the benefit of the
beneficiaries of the Turner Children Trust.
John B. Holland, a director, is President and Chief Operating
Officer of Fruit of the Loom, Inc., a manufacturer of underwear and
other soft goods. In fiscal 1995, the Company purchased
approximately $28,500,000 in goods from Fruit of the Loom, Inc.
During 1986, the Company moved certain of its executive
personnel to Nashville, Tennessee. In connection with such
relocation, the Company agreed to make a loan to Cal Turner, Jr. to
assist in the purchase of a new home. The loan is in the form of a
junior mortgage secured by the real property and home. The
mortgage will be fully paid upon a 15-year amortization of the
loan. The borrower is liable for the unpaid balance of the
mortgage at all times. The Company will forgive a portion of the
amortized principal and interest annually, and such amount will be
included as income to the borrower. The Company's agreement to
periodically forgive mortgage amounts will terminate if the
borrower leaves the Company. In the opinion of management, the
loan was made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and
<PAGE>22
does not involve more than the normal risk of collectability or
present other unfavorable features. The outstanding loan carries
an annual interest rate of 9.0% and the amount forgiven by the
Company last year was $30,100.50. On January 31, 1995, the current
balance of this junior mortgage was $84,933.00. The largest
aggregate amount of indebtedness outstanding at any time during
fiscal 1995 was $93,933.00.
PROPOSAL NO. 2: APPROVAL OF THE 1995 EMPLOYEE STOCK INCENTIVE PLAN
The Board believes that a key element of officer and key
employee compensation is stock-based incentive compensation. Such
compensation advances the interests of the Company by encouraging,
and providing for, the acquisition of equity interests in the
Company by officers and key employees, thereby providing
substantial motivation for superior performance. In order to
provide the Board with greater flexibility, to adapt to changing
economic and competitive conditions, and to implement stock-based
compensation strategies which will attract and retain those
employees who are important to the long term success of the
Company, the Board, at its March, 1995 meeting, adopted, subject to
stockholder approval, the 1995 Employee Stock Incentive Plan (the
"1995 Employee Plan"). If approved by the stockholders, the 1995
Employee Plan will become effective as of March 27, 1995 and will
terminate ten years after that date. The full text of the 1995
Employee Plan is reproduced and attached to this proxy statement as
Exhibit A.
The 1995 Employee Plan authorizes the issuance of up to
2,900,000 shares of the Company's Common Stock, subject to
adjustment for events affecting all of the outstanding Common
Stock. The 1995 Employee Plan shall be administered by the
Company's Corporate Governance and Compensation Committee(the
"Committee") and all grants made are at the discretion of the
Committee.
The 1995 Employee Plan is proposed because of the limited
number of shares remaining available for grant under the 1989 and
1993 Plans. Assuming full vesting of the maximum number of shares
granted under the 1989 and 1993 Plans, essentially all shares
authorized under the 1989 and 1993 Plans shall be allocated. The
1995 Employee Plan will allow the Committee the flexibility to
continue the Company s stock-based compensation strategy to incent
those employees who are important to the long term success of the
Company.
Awards under the 1995 Employee Plan may be made to officers
and key employees of the Company, its subsidiaries and affiliates
(currently approximately 245 persons), but may not be granted to
any director who is a member of the Committee (as defined in the
1995 Employee Plan) or to any other director unless the director is
also a regular employee of the Company, it subsidiaries or
affiliates. The 1995 Employee Plan imposes no limit on the number
of officers and other key employees to whom awards may be made.
The 1995 Employee Plan does limit the number of shares that
may be granted to any one person in a single fiscal year to options
for the purchase of 500,000 shares. Under OBRA, compensation
expense with respect to stock options, stock appreciation rights
and other stock-based awards having an exercise price that is
greater than or equal to the fair market value of the underlying
stock at the time of grant are exempt from the $1,000,000
limitation on deductibility if, among other things, the options or
stock appreciation rights are granted pursuant to a plan approved
by stockholders which contains a per person limit on the number of
shares underlying stock-based award which may be granted during a
specific period to a particular executive. This limitation to the
plan is anticipated to make stock-based compensation to Named
Executive Officers not subject to the limitations of OBRA.
<PAGE>23
The Committee will have the authority to grant the following
type of awards under the 1995 Employee Plan: (1) Stock Options; (2)
Stock Appreciation Rights; (3) Restricted Stock and (4) Other
Stock-Based Awards.
1. Stock Options. Incentive stock options ("ISOs") and non-
qualified stock options may be granted for such number of shares as
the Committee will determine and may be granted alone, in
conjunction with, or in tandem with, other awards under the 1995
Employee Plan, but subject to the per person limitation on awards.
A stock option will be exercisable at such times and subject
to such terms and conditions as the Committee will determine and
over a term to be determined by the Committee, which term will be
no more than ten years after the date of grant, or no more than
five years in the case of an ISO awarded to certain 10%
shareholders. The option price for any ISO will not be less than
100% (110% in the case of certain 10% shareholders) of the fair
market value of the Company's Common Stock as of the date of grant
and for any non-qualified stock option, will be not less than 50%
of the fair market value as of the date of grant. Payment of the
option price may be in cash, or, in the case of a non-qualified
stock option, as determined by the Committee, in shares of Company
Common Stock having a fair market value equal to the option price.
Upon termination of an optionholder's employment for cause,
such employee's stock options will terminate. If an optionholder's
employment is involuntarily terminated without cause, stock options
will be exercisable for three months following termination or until
the end of the option period, whichever is shorter. Upon the
disability of an employee, stock options will be exercisable within
the lesser of the remainder of the option period or, in the case of
a non-qualified stock option, three years and, in the case of an
ISO, one year from the date of disability. Upon the retirement of
an employee, stock options will be exercisable within the lesser of
the remainder of the option period or, in the case of a non-
qualified stock option, three years and, in the case of an ISO,
three months from the date of retirement. Upon the retirement of
an employee, stock options will be exercisable within the lesser of
the remainder of the option period or, in the case of a non-
qualified stock option, three years and, in the case of an ISO,
three months from the date of retirement. Upon the death of an
employee, stock options will be exercisable by the deceased
employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death.
Unless otherwise determined by the Committee, only options which
are exercisable on the date of termination, death, disability, or
retirement may be subsequently exercised.
2. Stock Appreciation Rights. Stock appreciation rights
("SARs") may be granted alone or in conjunction with all or part of
a stock option. Once a SAR has been exercised, the related portion
of the stock option, if any, underlying the SAR will terminate.
Upon the exercise of an SAR, the Committee will pay to the employee
in cash, Company Common Stock or a combination thereof (the method
of payment to be at the discretion of the Committee), an amount of
money equal to the excess between the fair market value of the
stock on the exercise date and the SAR exercise price, multiplied
by the number of SARs being exercised. An SAR granted in tandem
with all or part of a stock option will be exercisable only when
the underlying option is exercisable, subject to any conditions
specified by the Committee at the time of grant.
3. Restricted Stock. Restricted stock may be granted alone,
in conjunction with, or in tandem with, other awards under the 1995
Employee Plan and may be conditioned upon the attainment of
specific performance goals or such other factors as the Committee
may determine. Upon the termination of the
<PAGE>24
employee's employment for any reason during the restriction period,
all restricted stock either will vest or be subject to forfeiture,
in accordance with the terms and conditions of the initial award.
During the restriction period, the employee will have the right to
vote the restricted stock and to receive any cash dividends. At
the time of award, the Committee may require the deferral and
reinvestment of any cash dividends in the form of additional shares
of restricted stock. Stock dividends will be treated as additional
shares of restricted stock and will be subject to the same terms
and conditions as the initial grant.
4. Other Stock-Based Awards. The Committee may also grant
other types of awards that are valued, in whole or in part, by
reference to or otherwise based on the Company's Common Stock.
These awards may be granted alone, in addition to, or in tandem
with, stock options, SARs and restricted stock. Such awards will
be made upon terms and conditions as the Committee may in its
discretion provide.
Federal Income Tax Aspects of the 1995 Employee Plan. The
following is a brief summary of the federal income tax aspects of
awards made under the 1995 Employee Plan based upon the federal
income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive, and does not describe state or local tax
consequences.
1. Incentive Stock Options. No taxable income is realized
by the participant upon the grant or exercise of an ISO. If Common
Stock is issued to a participant pursuant to the exercise of an
ISO, and if no disqualifying disposition of the shares is made by
the participant within two years of the date of grant or within one
year after the transfer of the shares to the participant, then: (a)
upon the sale of the shares, any amount realized in excess of the
option price will be taxed to the participant as a long-term
capital gain, and any loss sustained will be a capital loss, and
(b) no deduction will be allowed to the Company for federal income
tax purposes. The exercise of an ISO will give rise to an item of
tax preference that may result in an alternative minimum tax
liability for the participant unless the participant makes a
disqualifying disposition of the shares received upon exercise.
If Common Stock acquired upon the exercise of an ISO is
disposed of prior to the expiration of the holding periods
described above, then generally: (a) the participant will realize
ordinary income in the year of disposition in an amount equal to
the excess, if any, of the fair market value of the shares at
exercise (or, if less, the amount realized on the disposition of
the shares) over the option price paid for such shares, and (b) the
Company will be entitled to deduct any such recognized amount. Any
further gain or loss realized by the participant will be taxed as
short-term or long-term capital gain or loss, as the case may be,
and will not result in any deduction by the Company.
Subject to certain exceptions for disability or death, if an
ISO is exercised more than three months following the termination
of the participant's employment, the option will generally be taxed
as a non-qualified stock option.
2. Non-Qualified Stock Options. Except as noted below, with
respect to non-qualified stock options: (a) no income is realized
by the participant at the time the option is granted; (b) generally
upon exercise of the option, the participant realizes ordinary
income in an amount equal to the difference between the option
price paid for the shares and the fair market value of the shares
on the date of exercise and the Company will be entitled to a tax
deduction in the same amount; and (c) at disposition, any
appreciation (or
<PAGE>25
depreciation) after the date of exercise is treated either as
short-term or long-term capital gain or loss, depending upon the
length of time that the participant has held the shares. See
"Restricted Stock" for tax rules applicable where the spread value
of an option is settled in an award of restricted stock.
3. Stock Appreciation Rights. No income will be realized by
a participant in connection with the grant of an SAR. When the SAR
is exercised, the participant will generally be required to include
as taxable ordinary income in the year of exercise an amount equal
to the amount of cash and the fair market value of any shares
received. The Company will be entitled to a deduction at the time
and in the amount included in the participant's income by reason of
the exercise. If the participant receives Common Stock upon
exercise of a SAR, the post-exercise appreciation or depreciation
will be treated in the same manner discussed above under "Non-
Qualified Stock Options."
4. Restricted Stock. A participant receiving restricted
stock generally will recognize ordinary income in the amount of the
fair market value of the restricted stock at the time the stock is
no longer subject to forfeiture, less the consideration paid for
the stock. However, a participant may elect, under Section 83(b)
of the Code within 30 days of the grant of the stock, to recognize
taxable ordinary income on the date of grant equal to the excess of
the fair market value of the shares of restricted stock (determined
without regard to the restrictions) over the purchase price of the
restricted stock. Thereafter, if the shares are forfeited, the
participant will be entitled to a deduction, refund, or loss, for
tax purposes only, in an amount equal to the purchase price of the
forfeited shares regardless of whether he made a Section 83(b)
election. With respect to the sale of shares after the forfeiture
period has expired, the holding period to determine whether the
participant has long-term or short-term capital gain or loss
generally begins when the restriction period expires and the tax
basis for such shares will generally be based on the fair market
value of such shares on such date. However, if the participant
makes an election under Section 83(b), the holding period will
commence on the date of grant, the tax basis will be equal to the
fair market value of shares on such date (determined without regard
to restrictions), and the Company generally will be entitled to a
deduction equal to the amount that is taxable as ordinary income to
the participant in the year that such income is taxable.
5. Dividends and Dividend Equivalents. Dividends paid on
restricted stock generally will be treated as compensation that is
taxable as ordinary income to the participant, and will be
deductible by the Company. If, however, the participant makes a
Section 83(b) election, the dividends will be taxable as ordinary
income to the participant but will not be deductible by the
Company.
6. Other Stock-Based Awards. The federal income tax
treatment of other stock-based awards will depend on the nature of
any such award and the restrictions applicable to such award. Such
an award may, depending on the conditions applicable to the award,
be taxable as an option, an award of restricted stock, or in a
manner not described herein.
Section 162(m) Provisions. OBRA, passed by Congress in 1993,
imposes a limitation, included as Section 162(m) of the Code, on
the deductibility of certain compensation paid to the chief
executive officer and certain other executive officers of publicly
traded companies. Compensation paid to these officers in excess of
$1,000,000 cannot be claimed as a tax deduction by such companies
unless such compensation qualifies for an exemption as performance-
based compensation under Section 162(m) of the Code. It is
anticipated that
<PAGE>26
compensation in respect of stock options and SARs granted under the
1995 Employee Plan will qualify for an exemption as performance-
based compensation under Section 162(m) of the Code, if the
exercise price per share for such options and SARs is at least
equal to the fair market value per share of the Common Stock on the
date of grant. Other awards (if any) granted under the 1995
Employee Plan are not expected to qualify for an exemption as
performance-based compensation.
Other Provisions of the 1995 Employee Plan. Options and other
rights that may be granted under the 1995 Employee Plan will vest
and become immediately exercisable (to the extent not theretofore
vested and exercisable and the restrictions and forfeiture
provisions applicable to restricted stock and other stock-based
awards will lapse) if:
(a) any person or entity (including a "group" as defined
in Section 13 (d) (3) of the Exchange Act), other than the
Company or a wholly owned subsidiary of the Company or an
employee benefit plan of the Company or any of its
subsidiaries, becomes the beneficial owner of the Company's
securities having 20% or more of the combined voting power of
all securities that may be cast in the election of directors
of the Company;
(b) as a result of or in connection with a cash tender
or exchange offer, merger or other business combination, sale
of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined
voting power of the then outstanding securities of the Company
or any successor entity entitled to vote generally in the
election of directors or any such successor are held in the
aggregate by holders of the Company's securities entitled to
vote generally in the election of directors immediately prior
to such transaction;
(c) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of Directors cease for any reason to constitute the
majority thereof, unless the election or nomination for
election of such individuals was approved by a vote of at
least two-thirds of the directors then still in office who
were directors at the beginning of such period; or
(d) the Committee determines that a potential change in
control has occurred as a result of either (i) shareholder
approval of an agreement that would result in one of the
events described above or (ii) the acquisition of beneficial
ownership by any person, entity or group (other than the
Company, any of its subsidiaries or any Company employee
benefit plan) of the Company's securities representing 10% or
more of the combined voting power of the then outstanding
securities.
Following the occurrence of any event that would result in the
acceleration of vesting and exercisability as described above, the
holders of stock options and other rights (to the extent that they
have been held for at least six months in the case of options and
other rights held by executive officers and directors or other
persons subject to Section 16 of the Exchange Act) will, unless
otherwise determined by the Committee, receive cash equal to the
difference between the highest price paid per share of Common Stock
in any transaction during the 60 days prior to the change in
control or potential change in control event and the exercise price
of the option or other right.
The 1995 Employee Plan may be amended by the Company's Board
of Directors; provided, however, that the approval of the Company's
shareholders shall be required for any amendment that would (a)
increase the total number of shares
<PAGE>27
of Common Stock reserved for the purposes of the 1995 Employee Plan
or increase the number of shares that may be issued thereunder to
any single participant in any year or over the life of the 1995
Employee Plan (except as a result of a stock split, stock dividend
or similar change in the capital structure of the Company affecting
the Common Stock); (b) materially increase the benefits accruing to
participants under the 1995 Employee Plan or (c) materially modify
the requirements as to eligibility for participation in the 1995
Employee Plan.
In March 1995, the Committee authorized options for the
purchase of Common Stock under the 1995 Employee Plan subject to
shareholder approval at the 1995 Annual Meeting. These options
were granted to employees, none of whom were executive officers.
This grant information is presented in the table below.
1995 Employee Stock Incentive Plan
Name and Position Dollar Value Number of Units
Non-Executive Officer
Employee Group $6,093,937 232,150
The 1995 Employee Plan will expire on March 27, 2005.
On April 14, 1995, the last reported sale price of the
Company's Common Stock reported on the New York Stock Exchange was
$25.375 per share.
Vote Required: The affirmative vote of the holders of a
majority of the Company's Common Stock (including the Series A
Preferred Stock voting with the Common Stock) present and entitled
to vote at the Annual Meeting is required to approve the 1995
Employee Plan. The Board of Directors recommends a vote FOR
ratification and approval of the 1995 Employee Plan.
PROPOSAL NO. 3: THE 1995 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Company believes that a key element to ensuring its
continued success and advancing value to its stockholders, is its
ability to attract and retain the highest quality of experienced
person as directors of the Company. The Company believes that a
crucial step to achieving this goal is to provide such directors
with the incentive for outstanding performance inherent in stock
options and to increase the opportunity for proprietary interest in
the Company through stock ownership.
The Board, at its March 1995 meeting, adopted, subject to
stockholder approval, the 1995 Outside Directors Stock Option Plan
(The "1995 Outside Directors Plan"). If approved by the
stockholders, the 1995 Outside Directors Plan will become effective
as of March 27, 1995 and will terminate ten years after that date.
The full text of the 1995 Outside Directors Plan is reproduced and
attached to this proxy statement as Exhibit B.
The 1995 Outside Directors Plan authorizes the issuance of up
to 450,000 shares of the Company's Common Stock. The 1995 Outside
Directors Plan provides for a grant of an option to each non-
employee director (currently 7 persons) once each year based upon
the following nondiscretionary formula (as set forth in the plan):
Each non-employee director s annual option grant will be equal to
the number of shares determined by dividing (i) the annual retainer
for such non-employee director payable during the year in which the
grant is made by (ii) the fair market value of a share of Common
Stock on the date of the option grant, multiplying the result (the
quotient) by three (3) in the case of an option grant to a non-
employee director other than the Chairman of the Board,
<PAGE>28
or by four in the case of the Chairman of the Board (only in the
event the Chairman is not an employee), rounding the resulting
number of shares up to the nearest whole share. All options
granted under the 1995 Outside Directors Plan will have an exercise
price per share equal to the fair market value of the underlying
Common Stock of the Company on the dates of grant. No options may
be granted under the 1995 Outside Directors Plan after March 26,
2005, and no option will be exercisable more than ten years after
it is granted. Additionally, no option will be exercisable prior
to the optionee having completed at least one year of continual
service as a director after the date such option is granted.
The number of shares subject to each option and the exercise
price will be adjusted upon the occurrence of certain changes in
the Company's capital structure as a result of a stock dividend,
stock split or similar transaction affecting the Common Stock.
Each option will vest one year following the date of grant and will
expire on the tenth year following the date of grant. If the
optionholder's service as a director terminates by reason of death
or disability, the options will be exercisable for a period of
three years following the date of death or one year following the
date of disability, but in no event later than the expiration date
of the option. If an optionholder's service as a director
terminates for cause, the options will immediately terminate. If
an optionholder's service as director terminates for any reason
other than death, disability or cause, the options will remain
exercisable for a period of one year, but in no event later than
the expiration date of the option. Options granted under the 1995
Outside Directors Plan will be treated in the same way as non-
qualified stock options under the 1995 Employee Plan for federal
income tax purposes.
The Board of Directors may amend the 1995 Outside Directors
Plan; provided, however, that (a) no change in any option
theretofore granted may be made that would impair the rights of an
optionholder without the optionholder's consent; (b) amendments may
be made not more than once every six months other than to comport
with changes in the Code, the Employee Retirement Income Security
Act of 1974 or the rules thereunder, and (c) the approval of the
shareholders of the Company will be required for any amendment that
would materially increase the benefits accruing to participants,
increase the number of shares that may be issued under the 1995
Outside Directors Plan (except as a result of a stock dividend,
stock split or other change in the capital structure of the
Company) or extend the term of the 1995 Outside Directors Plan.
On April 14, 1995, the last reported sales price of the
Company's Common Stock reported on the New York Stock Exchange was
$25.375 per share.
Vote Required: The affirmative vote of the holders of a
majority of the Company's Common Stock (including the Series A
Preferred Stock voting with the Common Stock) present and entitled
to vote at the Annual Meeting is required to approve the 1995
Outside Directors Plan. The Board of Directors recommends a vote
FOR ratification and approval of the 1995 Outside Directors Plan.
PROPOSAL NO. 4: RATIFICATION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Coopers &
Lybrand L.L.P. to serve as its independent auditor for the current
fiscal year. Coopers & Lybrand L.L.P. has served as the Company's
independent auditor for more than the past 30 years. The Company
has no information that Coopers & Lybrand L.L.P. has any direct or
material indirect financial interest in the Company or any of its
subsidiaries, in the capacity of promoter, underwriter, voting
trustee, director, officer or employee.
<PAGE>29
Representatives of Coopers & Lybrand L.L.P. are expected to be
present at the Annual Meeting and will be given the opportunity to
make a statement if they desire to do so and to respond to
appropriate questions.
Vote Required. Under Kentucky law, the affirmative vote of
the holders of a majority of the votes cast by the holders of the
Company's Common Stock represented and entitled to vote at the
Annual Meeting is required to adopt Proposal 4.
The Board of Directors recommends a vote FOR approval of this
appointment.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Stockholders' proposals intended for presentation at the 1996
Annual Meeting of Stockholders must be received by Bob Carpenter,
Chief Administrative Officer and Corporate Secretary, at 104
Woodmont Boulevard, Suite 500, Nashville, Tennessee 37205 not later
than December 29, 1995 for inclusion in the proxy statement and
form of proxy relating to that meeting. All such proposals must be
in writing and mailed by certified mail, return receipt requested,
and must comply with Rule 14a-8 of Regulation 14A of the proxy
rules of the Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934 and the
disclosure requirements of Item 405 of Regulation S-K require the
Company's executive officers and directors, and any person who owns
more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission,
the applicable market or exchange upon which the Company's shares
are listed, and the Company. Based solely on the Company's review
of copies of such forms it has received and based on written
representations from certain reporting persons that they were not
required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten
percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during fiscal 1995
with the exception that James L. Clayton did not timely report on
Form 4 a sale of 2,000 shares of stock sold by his wife. With
respect to the inadvertent omission, the required Form 4 has been
filed.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies
will be voted in accordance with the instructions set forth on the
back side of the proxy card. Abstentions and "non-votes" are counted
as present only for purposes of determining a quorum. Abstentions
and "non-votes" will be treated as votes against the proposed 1995
Employee Stock Incentive Plan and the 1995 Outside Directors Stock
Option Plan. Because directors are elected by a plurality of the
votes cast, abstentions are not considered in the election of
directors. In addition, the ratification of Coopers & Lybrand L.L.P.
is determined by the number of votes cast; therefore, an absention
or withholding of authority to vote will have no effect on such
outcome. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another
proposal because the nominee does not have discretionary voting power
and has not received instruction from the beneficial owner.
<PAGE>30
OTHER MATTERS
The cost of soliciting proxies will be borne by the Company. In
addition to this solicitation by mail, proxies may be solicited by
officers, directors and regular employees of the Company, without
extra compensation, personally and by mail, telephone or telegraph.
Brokers, nominees, fiduciaries and other custodians will be requested
to forward soliciting material to the beneficial owners of shares and
will be reimbursed for their expenses. The Company's regularly
retained investor relations firm, Corporate Communications, Inc., may
also be called upon to solicit proxies by telephone and mail.
The Board of Directors is not aware of any matter to be
submitted for consideration at the Annual Meeting other than those
set forth in the accompanying notice. If any other matter properly
comes before the meeting for action, proxies will be voted on such
matter in accordance with the best judgment of the persons named as
proxies. Any stockholder has the unconditional right to revoke his
or her proxy at any time prior to the voting thereof by giving the
Secretary of the Company written notice of such revocation.
The Annual Report of the Company is mailed herewith. A copy of
the Company's Annual Report on Form 10-K for the year ended January
31, 1995 (as filed with the Securities and Exchange Commission) is
available without charge to any stockholder on request. Requests for
the Company's Annual Report on Form 10-K should be directed to Bob
Carpenter, Chief Administrative Officer and Corporate Secretary.
Whether or not you expect to be present at the meeting in
person, please sign, date and return the enclosed proxy promptly in
the enclosed business reply envelopment. No postage is necessary if
the proxy is mailed in the United States.
Exhibit A
DOLLAR GENERAL CORPORATION
1995 EMPLOYEE STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions.
(a) Purpose. The purpose of the Plan is to enable the
Corporation to attract, retain and reward officers and key employees
of and consultants to the Corporation and its Subsidiaries and
Affiliates, and strengthen the mutuality of interests between such
individuals and the Corporation's shareholders, by offering such
officers, key employees and consultants Options or other rights with
respect to shares of Common Stock of the Corporation. The creation
of the Plan shall not diminish or prejudice other compensation
programs approved from time to time by the Board.
(b) Definitions. For purposes of the Plan, the following terms
are defined as set forth below:
(i) "Affiliate" means any entity other than the Corporation and
its Subsidiaries that is designated by the Board as a participating
employer under the Plan, provided that the Corporation directly or
indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity or at least 20% of the ownership
interests in such entity.
(ii) "Board" means the Board of Directors of the Corporation.
(iii) "Capital Transaction" has the meaning provided in
Section 3(b) of the Plan.
(iv) "Cause" has the meaning provided in Section 5(b)(x) of the
Plan.
(v) "Change in Control" has the meaning provided in Section
9(b) of the Plan.
(vi) "Change in Control Price" has the meaning provided in
Section 9(d) of the Plan.
(vii) "Common Stock" means the Corporation's Common Stock,
$.50 par value.
(viii) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(ix) "Commission" means the Securities and Exchange Commission.
(x) "Committee" means the Committee referred to in Section 2 of
the Plan.
(xi) "Corporation" means Dollar General, a corporation organized
under the laws of the State of Kentucky, or any successor
corporation.
<PAGE>2
(xii) "Disability" means disability as determined under the
Corporation's long-term disability insurance policy or, if there is
no such definition, as reasonably determined by the Committee.
(xiii) "Disinterested Person" has the meaning set forth in
Rule 16b-3(c)(2)(i) as promulgated by the Commission under the
Exchange Act, or any successor definition adopted by the Commission.
(xiv) "Early Retirement" means retirement, for purposes of
this Plan with the express consent of the Corporation at or before
the time of such retirement, from active employment with the
Corporation and any Subsidiary or Affiliate prior to age 65, in
accordance with any applicable early retirement policy of the
Corporation then in effect.
(xv) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor thereto.
(xvi) "Fair Market Value" means the reported closing price
of the Common Stock on The New York Stock Exchange, or such other
exchange or over the counter market on or through which the Common
Stock trades on the relevant date or, if no shares of Common Stock
are traded on that date, the reported closing price on the next
preceding date on which shares were traded. In the event that
trading in the shares of Common Stock is no longer reported on The
New York Stock Exchange, or such other exchange or market, Fair
Market Value shall be determined by such other method as the
Committee in good faith deems appropriate without regard to any
restriction other than a restriction which, by its terms, will never
lapse.
(xvii) "Incentive Stock Option" means any Option intended to
be and designated as an "Incentive Stock Option" within the meaning
of Section 422 of the Code.
(xviii) "Non-Qualified Stock Option" means any Option that is
not an Incentive Stock Option.
(xix) "Normal Retirement" means retirement from active
employment with the Corporation and any Subsidiary or Affiliate on or
after age 65.
(xx) "Option" means any option to purchase shares of Common
Stock granted pursuant to Section 5 below.
(xxi) "Other Stock-Based Award" means an award under
Section 8 below that is valued in whole or in part by reference to,
or is otherwise based on, Common Stock.
(xxii) "Plan" means this Dollar General Corporation 1995
Employee Stock Incentive Plan, as amended from time to time in
accordance herewith.
<PAGE>3
(xxiii) "Restriction Period" has the meaning provided in
Section 7(c)(i) of the Plan.
(xxiv) "Restricted Stock" means an award of shares of Common
Stock that is subject to restrictions under Section 7 of the Plan.
(xxv) "Retirement" means Normal Retirement or Early
Retirement.
(xxvi) "Stock Appreciation Right" means the right granted under
Section 6 of the Plan.
(xxvii) "Subsidiary" means any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
SECTION 2. Administration.
(a) The Committee. The Plan shall be administered by a
Committee of not less than two Disinterested Persons, who shall be
appointed by the Board and who shall serve at the pleasure of the
Board. The functions of the Committee specified in the Plan may be
exercised by an existing Committee of the Board composed exclusively
of Disinterested Persons. The initial Committee shall be the
Compensation Committee of the Board.
(b) Authority of the Committee. The Committee shall have
authority to grant, pursuant to the terms of the Plan, to officers,
other key employees and consultants eligible under Section 4 hereof:
Options, Stock Appreciation Rights, Restricted Stock and Other
Stock-Based Awards.
In particular, the Committee shall have the authority,
consistent with the terms of the Plan:
(i) to select the officers and other key employees of and
consultants to the Corporation and its Subsidiaries and Affiliates
to whom Options, Stock Appreciation Rights, Restricted Stock or
Other Stock-Based Awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock or Other Stock-Based Awards, or any combination
thereof, are to be granted hereunder to one or more eligible
employees;
(iii) to determine the number of shares to be covered by
each such award granted hereunder;
<PAGE>4
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction
or limitation, or any vesting, acceleration of vesting or waiver of
forfeiture restrictions regarding any Option or other award or the
shares of Common Stock relating thereto, based in each case on such
factors as the Committee shall determine, in its sole discretion)
and to amend or waive any such terms and conditions to the extent
permitted by Section 10 hereof;
(v) to determine whether and under what circumstances an
Option or Stock Appreciation Right may be settled in cash or
Restricted Stock under Section 5(b)(xiii) hereof, instead of shares
of Common Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants or other awards under the Plan are to be
made, and operate, on a tandem basis vis-a-vis other awards under
the Plan, or on an additive basis;
(vii) to determine whether, to what extent and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral period); and
(viii) to determine whether to require payment of any
withholding requirements in shares of Common Stock.
The Committee shall have the authority to adopt, alter and repeal
such rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the
administration of the Plan.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall
be final and binding on all persons, including the Corporation and
Plan participants.
SECTION 3. Shares of Common Stock Subject to Plan.
(a) Shares of Common Stock Reserved Under Plan. The aggregate
number of shares of Common Stock reserved and available for
distribution under the Plan shall be 2,900,000 shares. Such shares
of Common Stock may consist, in whole or in part, of authorized and
unissued shares or treasury shares. The aggregate number of shares
of Common Stock that may be granted to any individual pursuant to any
award under the Plan shall be 500,000 in any one year.
<PAGE>5
If any Option or Stock Appreciation Right expires or is forfeited
without exercise, or if any shares of Common Stock that are subject
to any Restricted Stock or Other Stock-Based Award granted hereunder
are forfeited prior to the payment of any dividends, if applicable,
with respect to such shares of Common Stock, such shares shall again
be available for distribution in connection with future awards under
the Plan. If dividends have been paid to the grantee with respect to
the shares of Common Stock subject to such forfeited award, such
shares shall not be available for distribution in connection with
future awards under the Plan.
(b) Adjustment in Certain Events. In the event of any merger,
reorganization, consolidation, recapitalization, extraordinary cash
dividend, stock dividend, stock split or other change in corporate
structure affecting the Common Stock (a "Capital Transaction"), a
substitution or adjustment will be made in the aggregate number of
shares reserved for issuance under the Plan, the number that may be
granted to any individual in any year or over the life of the Plan
and the number and price (if applicable) of shares subject to
outstanding awards granted under the Plan, so as to provide each
holder of an award under this Plan with the same rights on exercise
or distribution of the benefits of such award that such holder would
have received if such holder had exercised or received a distribution
of the benefits of such award immediately prior to the occurrence of
such Capital Transaction; provided, however, that the number of
shares subject to any award shall always be a whole number. In the
event of any dispute as to any substitution or adjustment made under
this Section 3(b), the decision of the Committee shall be final and
binding on all persons, including the Corporation and Plan
participants.
SECTION 4. Eligibility.
Officers and other key employees of and consultants to the
Corporation and its Subsidiaries and Affiliates (but excluding
members of the Committee and any person who serves only as a
director) who are responsible for or contribute to the management,
growth or profitability of the business of the Corporation and its
Subsidiaries and Affiliates are eligible to be granted awards under
the Plan. Incentive Stock Options may only be granted to persons who
are employees of the Corporation or a Subsidiary of the Corporation.
SECTION 5. Options.
(a) Administration. Options may be granted alone, in addition to
or in tandem with other awards granted under the Plan. Any Option
granted under the Plan shall be in such form as the Committee may
from time to time approve.
Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock
Options may be granted only to individuals who are employees of the
Corporation or any Subsidiary of the Corporation.
<PAGE>6
The Committee shall have the authority to grant to any optionee
(subject to the limitation set forth in the paragraph above)
Incentive Stock Options, Non-Qualified Stock Options, or both types
of Options (in each case with or without Stock Appreciation Rights).
(b) Terms and Conditions. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable.
(i) Option Price. The option price per share of Common Stock
purchasable under an Option shall be determined by the Committee at
the time of grant but shall be not less than 100% (or, in the case
of any employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or
of any of its subsidiary or parent corporations, not less than 110%)
of the Fair Market Value of the Common Stock at grant, in the case
of Incentive Stock Options, and not less than 50% of the Fair Market
Value of the Common Stock at grant, in the case of Non-Qualified
Stock Options.
(ii) Option Term. The term of each Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable
more than ten years (or, in the case of an employee who owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or any of its subsidiary or
parent corporations, more than five years) after the date the Option
is granted.
(iii) Exercisability. Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant; provided, however,
that except as provided in Section 5(b)(vii), (viii) and (ix) hereof
and Section 9 hereof, unless otherwise determined by the Committee
at or after grant, no Option shall be exercisable prior to the first
anniversary date of the granting of the Option. The Committee may
provide that an Option shall vest over a period of future service at
a rate specified at the time of grant, or that the Option is
exercisable only in installments. If the Committee provides, in its
sole discretion, that any Option is exercisable only in
installments, the Committee may waive such installment exercise
provisions at any time at or after grant in whole or in part, based
on such factors as the Committee shall determine, in its sole
discretion. The Committee may establish performance conditions or
other conditions to the exercisability of any Options, as determined
by the Committee in its sole discretion, which conditions may be
waived by the Committee in its sole discretion.
<PAGE>7
(iv) Method of Exercise. Subject to whatever installment or
other exercise restrictions apply under Section 5(b)(iii) hereof,
Options may be exercised in whole or in part at any time during the
option period, by giving written notice of exercise to the
Corporation specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as
the Committee may accept. As determined by the Committee, in its
sole discretion, at or (except in the case of an Incentive Stock
Option) after grant, payment in full or in part may also be made in
the form of unrestricted shares of Common Stock already owned by the
optionee or, in the case of the exercise of a Non-Qualified Stock
Option or Restricted Stock subject to an award hereunder (based in
each case, on the Fair Market Value of the Common Stock on the date
the option is exercised, as determined by the Committee). If
payment of the exercise price is made in part or in full with shares
of Common Stock, the Committee may (subject to the availability of
additional shares reserved for issuance under Section 3 above) award
to the optionee a new Option to replace the shares of Common Stock
which were surrendered.
If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted
Stock, such Restricted Stock (and any replacement shares relating
thereto) shall remain (or be) restricted in accordance with the
original terms of the Restricted Stock award in question, and any
additional shares of Common Stock received upon the exercise shall
be subject to the same forfeiture restrictions, unless otherwise
determined by the Committee, in its sole discretion, at or after
grant.
No shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the rights
to dividends or other rights of a shareholder with respect to shares
subject to the Option when the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has
given the representation described in Section 12(a) hereof.
(v) Non-Transferability of Incentive Stock Options.
Notwithstanding any other provision of this Plan, no Incentive Stock
Option shall be transferable by the optionee otherwise than by will
or by the laws of descent and distribution, and all Incentive Stock
Options shall be exercisable, during the optionee's lifetime, only
by the optionee.
(vi) Bonus for Taxes. In the case of a Non-Qualified Stock
Option, the Committee in its discretion may award at the time of
grant or thereafter the right to receive upon exercise of such
Option a cash bonus calculated to pay part or all of the federal and
state, if any, income tax incurred by the optionee upon such
exercise.
(vii) Termination by Death. Subject to Section 5(b)(xi)
hereof, if an optionee's employment by the Corporation and any
Subsidiary or (except in the case of an Incentive Stock Option)
Affiliate terminates by reason of death, any Option held by such
optionee may thereafter be exercised, to the extent such Option was
exercisable at the time of death or (except in the case of an
Incentive Stock Option)
<PAGE>8
on such accelerated basis as the Committee may determine at or after
grant (or except in the case of an Incentive Stock Option, as may be
determined in accordance with procedures established by the
Committee) by the legal representative of the estate or by the
legatee of the optionee under the will of the optionee, for a period
of one year (or such shorter period as the Committee may specify at
grant) from the date of such death or until the expiration of the
stated term of such Option, whichever period is the shorter.
(viii) Termination by Reason of Disability. Subject to
Section 5(b)(xi) hereof, if an optionee's employment by the
Corporation and any Subsidiary or (except in the case of an
Incentive Stock Option) Affiliate terminates by reason of
Disability, any Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the
time of termination or (except in the case of an Incentive Stock
Option) on such accelerated basis as the Committee may determine at
or after grant (or, except in the case of an Incentive Stock Option,
as may be determined in accordance with procedures established by
the Committee), for a period of (A) three years (or such shorter
period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term
of such Option, whichever period is the shorter, in the case of a
Non-Qualified Stock Option and (B) one year from the date of
termination of employment or until the expiration of the stated term
of such Option, whichever period is shorter, in the case of an
Incentive Stock Option; provided, however, that, if the optionee
dies within the period specified in clause (A) above (or such other
period as the Committee shall specify at grant), any unexercised
Non-Qualified Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or
until the expiration of the stated term of such Option, whichever
period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise period applicable to Incentive
Stock Options, but before the expiration of any period that would
apply if such Stock Option were a Non-Qualified Stock Option, such
Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(ix) Termination by Reason of Retirement. Subject to
Section 5(b)(xi) hereof, if an optionee's employment by the
Corporation and any Subsidiary or (except in the case of an
Incentive Stock Option) Affiliate terminates by reason of Normal or
Early Retirement, any Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the
time of such Retirement or (except in the case of an Incentive Stock
Option) on such accelerated basis as the Committee may determine at
or after grant (or, except in the case of an Incentive Stock Option,
as may be determined in accordance with procedures established by
the Committee), for a period of (A) three years (or such shorter
period as the Committee may specify at grant) from the date of such
termination of employment or the expiration of the stated term of
such Option, whichever period is the shorter, in the case of a Non-
Qualified Stock Option and (B) three months from the date of such
termination of employment or the expiration of the stated term of
such Option, whichever period is the shorter, in the event of an
Incentive Stock Option;
<PAGE>9
provided, however, that, if the optionee dies within the period
specified in clause (A) above (or such shorter period as the
Committee may specify at grant), any unexercised Non-Qualified Stock
Option held by such optionee shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a
period of 12 months from the date of such death or until the
expiration of the stated term of such Option, whichever period is
the shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise period applicable to Incentive Stock
Options, but before the expiration of the period that would apply
if such Stock Option were a Non-Qualified Stock Option, the option
will thereafter be treated as a Non-Qualified Stock Option.
(x) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee)
at or (except in the case of an Incentive Stock Option) after grant,
if an optionee's employment by the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate is
involuntarily terminated for any reason other than death, Disability
or Normal or Early Retirement, the Option shall thereupon terminate,
except that such Option may be exercised, to the extent otherwise
then exercisable, for the lesser of three months or the balance of
such Option's term if the involuntary termination is without Cause.
For purposes of this Plan, "Cause" means (A) a felony conviction of
a participant or the failure of a participant to contest prosecution
for a felony, or (B) a participant's willful misconduct or
dishonesty, which is directly and materially harmful to the business
or reputation of the Corporation or any Subsidiary or Affiliate. If
an optionee voluntarily terminates employment with the Corporation
and any Subsidiary or (except in the case of an Incentive Stock
Option) Affiliate (except for Disability, Normal or Early
Retirement), the Option shall thereupon terminate; provided,
however, that the Committee at grant or (except in the case of an
Incentive Stock Option) thereafter may extend the exercise period in
this situation for the lesser of three months or the balance of such
Option's term.
(xi) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive
Stock Options shall be interpreted, amended or altered, nor shall
any discretion or authority granted under the Plan be so exercised,
so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any
Incentive Stock Option under such Section 422.
No Incentive Stock Option shall be granted to any participant
under the Plan if such grant would cause the aggregate Fair Market
Value (as of the date the Incentive Stock Option is granted) of the
shares of Common Stock with respect to which all Incentive Stock
Options are exercisable for the first time by such optionee during
any calendar year (under all such plans of the Corporation and any
Subsidiary) to exceed $100,000.
<PAGE>10
To the extent permitted under Section 422 of the Code or the
applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement:
a. if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of
such option that is not exercisable as an "incentive stock
option" under Section 422 of the Code by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be
treated as a Non-Qualified Stock Option;
b. if for any other reason the portion of any Incentive
Stock Option that is otherwise exercisable without regard to
the $100,000 limitation contained in Section 422(d) of the
Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" under
Section 422 of the Code, such excess shall be treated as a Non-
Qualified Stock Option; and
c. the Committee shall have the right, with the consent
of the optionee, to treat an Incentive Stock Option that cannot
be exercised, for any other reason, as an "incentive stock
option" under Section 422 of the Code as a Non-Qualified Stock
Option.
(xii) Performance and Other Conditions. The Committee may
condition the exercise of any Option upon the attainment of
specified performance goals or other factors as the Committee may
determine, in its sole discretion. Unless specifically provided in
the option agreement, any such conditional Option shall vest
immediately prior to its expiration if the conditions to exercise
have not theretofore been satisfied. The shares of Common Stock
acquired pursuant to any conditional Option shall not be
transferable by an optionee subject to Section 16(a) of the Exchange
Act within six months of the date such Option first becomes
exercisable.
(xiii) Settlement Provisions. If the option agreement so
provides at grant or (except in the case of an Incentive Stock
Option) is amended after grant and prior to exercise to so provide
(with the optionee's consent), the Committee may require that all or
part of the shares to be issued with respect to the spread value of
an exercised Option take the form of Restricted Stock, which shall
be valued on the date of exercise on the basis of the Fair Market
Value (as determined by the Committee) of such Restricted Stock
determined without regards to the forfeiture restrictions involved.
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted
alone or in conjunction with all or part of any Option granted under
the Plan. In the case of a Non-Qualified
<PAGE>11
Stock Option, such rights may be granted either at or after the time
of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of
such Option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Option,
subject to such provisions as the Committee may specify at grant
where a Stock Appreciation Right is granted with respect to less than
the full number of shares covered by a related Option.
A Stock Appreciation Right may be exercised by the grantee, subject
to Section 6(b) hereof, in accordance with the procedures established
by the Committee for such purpose. Upon such exercise, the grantee
shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b) hereof. Options relating to exercised
Stock Appreciation Rights shall no longer be exercisable to the
extent that the related Stock Appreciation Rights have been
exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by
the Committee, including the following:
(i) Exercise Provisions for Tandem Grants. A Stock
Appreciation Right granted in conjunction with all or part of any
Option shall be exercisable only at such time or times and to the
extent that the Option to which it relates shall be exercisable in
accordance with the provisions of Section 5 and this Section 6 of
the Plan; provided, however, that any Stock Appreciation Right
granted to a grantee subject to Section 16(a) of the Exchange Act
shall be subject to the further limitations set forth in Section
6(b)(v) and, if applicable, Section 6(b)(vi) below.
(ii) Payment on Exercise. Upon the exercise of a Stock
Appreciation Right, a grantee shall be entitled to receive an amount
in cash or shares of Common Stock (or a combination of cash and
shares of Common Stock) equal in value to the excess of the Fair
Market Value of one share of Common Stock over the price per share
specified in the Stock Appreciation Right or related Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(iii) Use of Authorized Shares. Upon the exercise of a
Stock Appreciation Right, any shares of Common Stock issued
thereunder or with respect to which a cash payment was made shall be
deemed to have been exercised for the purpose of the limitation set
forth in Section 3 of the Plan on the number of shares of Common
Stock to be issued under the Plan.
<PAGE>12
(iv) Payment based on Change in Control Price. Unless
otherwise determined by the Committee at grant, in the event of a
Change in Control or a Potential Change in Control, the amount to be
paid upon the exercise of a Stock Appreciation Right shall be based
on the Change in Control Price, subject to such terms and conditions
as the Committee may specify at grant.
(v) Restrictions on Exercise by Persons Subject to Section
16(a). The exercise of Stock Appreciation Rights held by grantees
who are subject to Section 16(a) of the Exchange Act shall comply
with Rule 16b-3(e) thereunder. In particular, such Stock
Appreciation Rights shall be exercisable only pursuant an
irrevocable election made at least six months prior to the date of
exercise or within the applicable ten business day "window" periods
specified in Rule 16b-3(e)(3). Stock Appreciation Rights held by
grantees who are subject to Section 16(a) of the Exchange Act shall
not be exercisable for the first six months after the date of grant.
(vi) Performance and Other Conditions. The Committee may
condition the exercise of any Stock Appreciation Right upon the
attainment of specified performance goals or other factors as the
Committee may determine, in its sole discretion. Unless
specifically provided in the applicable award agreement, any such
conditional Stock Appreciation Right shall vest immediately prior to
its expiration, if the conditions to exercise have not theretofore
been satisfied. A conditional Stock Appreciation Right held by a
grantee subject to Section 16(a) of the Exchange Act shall not be
exercisable until the expiration of six months following the
satisfaction of the condition giving rise to such Stock Appreciation
Right.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted
under the Plan. The Committee shall determine the eligible persons
to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares of Restricted Stock to be awarded
to any person, the price (if any) to be paid by the recipient of
Restricted Stock (subject to Section 7(b) hereof), the time or times
within which such awards may be subject to forfeiture, and the other
terms, restrictions and conditions of the awards in addition to those
set forth in Section 7(c) hereof.
The Committee may condition the grant or vesting of Restricted Stock
upon the attainment of specified performance goals or other factors
as the Committee may determine, in its sole discretion.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such
award, unless and until such recipient has executed
<PAGE>13
an agreement evidencing the award and has delivered a fully executed
copy thereof to the Corporation, and has otherwise complied with the
applicable terms and conditions of such award.
(i) Purchase Price. The purchase price for shares of
Restricted Stock shall be established by the Committee and may be
zero.
(ii) Acceptance of Awards. Awards of Restricted Stock must be
accepted within a period of 60 days (or such shorter period as the
Committee may specify at grant) after the award date, by executing
a Restricted Stock award agreement and paying whatever price (if
any) is required under Section 7(b)(i) hereof.
(iii) Stock Certificates. Each participant receiving a
Restricted Stock award shall be issued a stock certificate in
respect of such shares of Restricted Stock. Such certificate shall
be registered in the name of such participant, and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
(iv) Custody of Stock Certificates. The Committee shall
require that the stock certificates evidencing such shares be held
in custody by the Corporation until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Stock award,
the participant shall have delivered a stock power, endorsed in
blank, relating to the shares of Common Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) Restriction Period. Subject to the provisions of this
Plan and the award agreement, during a period set by the Committee
commencing with the date of such award (the "Restriction Period"),
the participant shall not be permitted to sell, transfer, pledge,
assign or otherwise encumber shares of Restricted Stock awarded
under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in whole
or in part, based on service, performance or other factors or
criteria as the Committee may determine, in its sole discretion.
(ii) Dividends. Except as provided in this paragraph (ii),
Section 7(c)(i) hereof and the award agreement, the participant
shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Corporation, including the right
to vote the shares, and the right to receive any cash dividends.
The Committee, in its sole discretion, as determined at the time of
award, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested, subject to
Section 12(e) hereof, in additional Restricted Stock to the extent
shares are available under Section 3 hereof, or otherwise
reinvested. Pursuant to Section 3 hereof, stock dividends issued
with respect to Restricted Stock shall be treated as additional
shares of Restricted Stock
<PAGE>14
that are subject to the same restrictions and other terms and
conditions that apply to the shares of Restricted Stock with respect
to which such dividends are issued.
(iii) Vesting and Forfeiture. Subject to the applicable
provisions of the award agreement and this Section 7, upon
termination of a participant's employment with the Corporation and
any Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or be
forfeited, in accordance with the terms and conditions established
by the Committee at or after grant.
(iv) Delivery of Shares on Termination of Restriction Period.
If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted
shares shall be delivered to the participant promptly.
SECTION 8. Other Stock-Based Awards.
(a) Administration. Other Stock-Based Awards valued by reference
to shares of Common Stock may be granted either alone or in addition
to or in tandem with Options, Stock Appreciation Rights or Restricted
Stock granted under the Plan; provided that no such Other Stock-Based
Awards may be granted in tandem with Incentive Stock Options if that
would cause such Incentive Stock Options not to qualify as "incentive
stock options" pursuant to Section 422 of the Code.
Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at
which such awards shall be made, the number of shares of Common Stock
to be awarded pursuant to such awards, and all other conditions of
the awards. The Committee may also provide for the grant of shares
of Common Stock upon the completion of a specified performance
period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant
to this Section 8 shall be subject to the following terms and
conditions:
(i) Restriction on Transfer. Subject to the provisions of
this Plan and the award agreement referred to in Section 8(b)(v)
below, shares subject to awards under this Section 8 may not be
sold, assigned, transferred, pledged or otherwise encumbered prior
to the date on which the shares are issued, or, if later, the date
on which any applicable restriction, performance or deferral period
lapses.
<PAGE>15
(ii) Dividends and Interest. Subject to the provisions of this
Plan and the award agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under this Section 8
shall be entitled to receive, currently or on a deferred basis,
interest or dividends or interest or dividend equivalents with
respect to the number of shares covered by the award, as determined
at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional shares of Common Stock
or otherwise reinvested.
(iii) Vesting and Forfeiture. Any award under this Section
8 and any shares of Common Stock covered by any such award shall
vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
(iv) Waiver of Vesting or Forfeiture Provisions. In the event
of the participant's Retirement, Disability or death, or in cases of
special circumstances, the Committee may, in its sole discretion,
waive in whole or in part any or all of the remaining limitations
imposed hereunder (if any) with respect to any or all of an award
under this Section 8.
(v) Awards Agreements. Each award under this Section 8 shall
be confirmed by, and subject to the terms of, an agreement between
the Corporation and the participant.
(vi) Purchase Price. Shares of Common Stock (including
securities convertible into shares of Common Stock) issued on a
bonus basis under this Section 8 may be issued for no cash
consideration. The purchase price of shares of Common Stock
(including securities convertible into shares of Common Stock)
purchased pursuant to a purchase right awarded under this Section 8
shall be determined by the Committee in its sole discretion on the
date of grant.
SECTION 9. Change in Control Provisions.
(a) Impact of Event. In the event of a Change in Control or
Potential Change in Control, the following acceleration and valuation
provisions shall apply if so determined by the Committee in its sole
discretion:
(i) Acceleration of Vesting. Any Stock Appreciation Rights
and any Option awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested; provided, however,
that Stock Appreciation Rights held by persons subject to Section
16(a) under the Exchange Act shall not become exercisable until six
months after the date of grant.
(ii) Lapse of Other Restrictions. The restrictions and
deferral limitations applicable to any Restricted Stock and Other
Stock-Based Awards, in each case
<PAGE16)
to the extent not already vested under the Plan, shall lapse and
such shares and awards shall be deemed fully vested.
(iii) Cash-Out Provisions. Except as otherwise provided in
Section 9(a)(iv) below, the value of all outstanding Options, Stock
Appreciation Rights, Restricted Stock and Other Stock-Based Awards
shall, unless otherwise determined by the Committee in its sole
discretion at or (except in the case of an Incentive Stock Option)
after grant but prior to any Change in Control, be cashed out on the
basis of the Change in Control Price as of the date such Change in
Control or such Potential Change in Control is determined to have
occurred or such other date as the Committee may determine prior to
the Change in Control.
(iv) Cash-Out Provisions for Statutory Insiders. In the case
of any Options, Stock Appreciation Rights, Restricted Stock and
Other Stock-Based Awards held by any person subject to Section 16(a)
of the Exchange Act, the value of all such Options, Stock
Appreciation Rights, Restricted Stock or Other Stock-Based Awards,
in each case to the extent that they have been held for at least six
months, shall be cashed out on the basis of the Change in Control
Price as of the date of such Change in Control or such Potential
Change in Control is determined to have occurred. The Committee
shall have the right (A) to cause any right to receive the Change in
Control Price to be cancelled with respect to all or any grantee(s)
who are subject to Section 16(a) of the Exchange Act if payment of
the Change in Control Price to such grantee(s) would cause liability
under Section 16 of the Exchange Act, and (B) to determine whether
the change in Control Price shall be paid in cash or in shares of
capital stock (including the capital stock of any acquiring
corporation) to grantees who are subject to Section 16(a) of the
Exchange Act.
(b) Definition of Change in Control. A "Change in Control" means
the happening of any of the following:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, other than the Corporation or
a wholly-owned subsidiary thereof or any employee benefit plan of
the Corporation or any of its Subsidiaries, becomes the beneficial
owner of the Corporation's securities having 20% or more of the
combined voting power of the then outstanding securities of the
Corporation that may be cast for the election of directors of the
Corporation (other than as a result of an issuance of securities
initiated by the Corporation in the ordinary course of business); or
(ii) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power of
the then outstanding securities of the Corporation or any successor
corporation or entity entitled to vote generally in the election of
the directors of the Corporation or such other corporation or entity
after such transaction are held in the aggregate by the
<PAGE>17
holders of the Corporation's securities entitled to vote generally
in the election of directors of the Corporation immediately prior to
such transaction; or
(iii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Corporation's shareholders, of each director of the Corporation
first elected during such period was approved by a vote of at least
two-thirds of the directors of the Corporation then still in office
who were directors of the Corporation at the beginning of any such
period.
(c) Definition of Potential Change in Control. A "Potential Change
in Control" means the happening of any one of the following:
(i) The approval by shareholders of an agreement by the
Corporation, the consummation of which would result in a Change in
Control of the Corporation; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Corporation or a Subsidiary or any Corporation employee benefit plan
(including any trustee of such plan acting as such trustee)) of
securities of the Corporation representing 10% or more of the
combined voting power of the Corporation's outstanding securities
and the adoption by the Committee of a resolution to the effect that
a Potential Change in Control of the Corporation has occurred for
purposes of this Plan.
(d) Change in Control Price. The "Change in Control Price" means
the highest price per share paid in any transaction reported on The
New York Stock Exchange or such other exchange or market as is the
principal trading market for the Common Stock, or paid or offered in
any bona fide transaction related to a Change in Control or Potential
Change in Control of the Corporation at any time during the 60 day
period immediately preceding the occurrence of the Change in Control
(or, where applicable, the occurrence of the Potential Change in
Control event), in each case as determined by the Committee except
that, in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, such price shall be based
only on transactions reported for the date on which the optionee
exercises such Incentive Stock Option or Stock Appreciation Rights
or, where applicable, the date on which a cash out occurs under
Section 9(a)(iii) or (iv) hereof.
SECTION 10. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would
impair the rights of an optionee or participant under an Option,
Stock Appreciation Right, Restricted Stock award or Other Stock-Based
Award theretofore granted, without the optionee's or participant's
consent. In addition, no amendment
<PAGE>18
or alteration shall be made without the approval of the Corporation's
shareholders, if such amendment or alteration would:
(a) except as provided in Section 3(b) of the Plan, increase the
total number of shares of Common Stock reserved for the purpose of
the Plan;
(b) materially increase the benefits accruing to participants under
the Plan; or
(c) materially modify the requirements as to eligibility for
participation in the Plan.
The Committee may amend the terms of any Option or other award
theretofore granted, prospectively or retroactively, but, subject to
Section 3(b) above, no such amendment shall impair the rights of any
holder without the holder's consent. The Committee may also
substitute new Options for previously granted Options (on a one for
one or other basis), including previously granted Options having
higher option exercise prices.
Subject to the above provisions, the Board shall have broad
authority to amend the Plan to take into account changes in
applicable securities and tax laws and accounting rules, as well as
other developments.
SECTION 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made
to a participant or optionee by the Corporation, nothing contained
herein shall give any such participant or optionee any rights that
are greater than those of a general creditor of the Corporation. In
its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under
the Plan to deliver shares of Common Stock or payments in lieu of or
with respect to awards hereunder; provided, however, that, unless the
Committee otherwise determines with the consent of the affected
participant, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
SECTION 12. General Provisions.
(a) Securities Law Restrictions. The Committee may require each
person purchasing shares of Common Stock pursuant to an Option or
other award under the Plan to represent to and agree with the
Corporation in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
<PAGE>19
All certificates for shares of Common Stock or other securities
delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Other Compensation Arrangements. Nothing contained in this
Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to shareholder approval if such
approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) No Right to Continued Employment. The adoption of the Plan
shall not confer upon any employee of the Corporation or any
Subsidiary or Affiliate any right to continued employment with the
Corporation or a Subsidiary or Affiliate, as the case may be, nor
shall it interfere in any way with the right of the Corporation or a
Subsidiary or Affiliate to terminate the employment of any of its
employees at any time.
(d) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the participant for
Federal income tax purposes with respect to any award under the Plan,
the participant shall pay to the Corporation, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal,
state, or local taxes of any kind required by law to be withheld with
respect to such amount. The Committee may require withholding
obligations to be settled with shares of Common Stock, including
shares of Common Stock that are part of the award that gives rise to
the withholding requirement. The obligations of the Corporation
under the Plan shall be conditional on such payment or arrangements
and the Corporation and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the participant.
(e) Dividends. The actual or deemed reinvestment of dividends or
dividend equivalents in additional Restricted Stock (or other types
of Plan awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are available under
Section 3 hereof for such reinvestment (taking into account then
outstanding Options and other Plan awards).
(f) Restrictions on Transfer. In addition to any other
restrictions on transfer that may be applicable under the terms of
this Plan or the applicable award agreement, no Option, Stock
Appreciation Right, Restricted Stock award, or Other Stock-Based
Award or other right issued under this Plan is transferable by the
participant other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended. The designation of a beneficiary
will not constitute a transfer.
<PAGE>20
(g) Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the
laws of the State of Tennessee, without regard to the principles of
conflicts of law thereof.
(h) Buyout Provisions. The Committee may at any time offer to buy
out for a payment in cash, shares of Common Stock, or Restricted
Stock an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
optionee at the time that such offer is made.
(i) Award Provisions May Differ. The provisions of awards need not
be the same with respect to each recipient.
(j) Liability and Indemnification of Board and Committee Members.
The members of the Committee and the Board shall not be liable to any
employee or other person with respect to any determination made
hereunder in a manner that is not inconsistent with their legal
obligations as members of the Board. In addition to such other
rights of indemnification a they may have as directors or as members
of the Committee, the members of the Committee shall be indemnified
by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with
any appeal therein, to which they or any of them may be a party by
reason of any action taken or failure to act under or in connection
with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Corporation)
or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding, the Committee
member shall in writing offer the Corporation the opportunity, at its
own expense, to handle and defend the same.
SECTION 13. Effective Date of Plan.
The Plan was previously adopted by the Board, subject to approval by
the shareholders of the Corporation on June 5, 1995.
SECTION 14. Term of Plan.
No Stock Option, Stock Appreciation Right, Restricted Stock award or
Other Stock-Based Award shall be granted pursuant to the Plan on or
after the tenth anniversary of the date of adoption of the Plan by
the Board, but awards granted prior to such tenth anniversary may be
extended beyond that date.
353578.01
Exhibit B
DOLLAR GENERAL CORPORATION
1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. Purpose
The purposes of the Plan are to advance the interests of the
Company and its shareholders by attracting and retaining the
highest quality of experienced persons as Outside Directors and to
align the interests of the Outside Directors more closely with the
interests of the Company's shareholders.
2. Definitions
For purposes of the Plan, the following terms shall have the
meanings indicated below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(c) "Committee" shall mean the members of the Board not
eligible to participate in the Plan.
(d) "Company" shall mean Dollar General Corporation, a
corporation organized under the laws of the State of
Kentucky, or any successor corporation.
(e) "Disability" means permanent and total disability within
the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
(f) "Exercise Date" shall mean the date on which the Company
receives the notice of exercise of an Option from an
Optionee as set forth in Section 7(d).
(g) "Fair Market Value" means the reported closing price of
the Stock on the New York Stock Exchange, or such other
exchange or over the counter market on or through which
the Stock trades on the relevant date or, if no shares of
Stock are traded on that date, the reported closing price
on the next preceding date on which shares were traded.
In the event that trading in the shares of Stock is no
longer reported on the New York Stock Exchange, or such
other exchange or market, Fair Market Value shall be
determined by such other method
<PAGE>2
as the Committee in good faith deems appropriate without
regard to any restriction other than a restriction which,
by its terms, will never lapse.
(h) "Option" shall mean an option granted to an Outside
Director pursuant to the Plan.
(i) "Optionee" shall mean an Outside Director who has been
granted an Option pursuant to the Plan.
(j) "Outside Director" shall mean any member of the Board who
has not served as an employee of the Company at any time
during the two-year period preceding the date on which an
Option is granted to such Optionee.
(k) "Plan" shall mean the 1995 Stock Option Plan for Outside
Directors.
(l) "Stock" shall mean the Common Stock, $.50 par value, of
the Company.
3. Administration
The Plan shall be administered by the Committee. The
Committee is authorized to interpret the Plan and may from time to
time adopt such rules and regulations, not inconsistent with the
provisions of the Plan, as it may deem advisable to carry out the
Plan; provided, however, that the Committee shall have no
discretion with respect to designating the recipient of an Option,
the number of shares of Stock that are subject to an Option or the
per share exercise price for an Option. All decisions made by the
Committee in construing the provisions of the Plan shall be final.
4. Eligibility
Each Outside Director shall be eligible to participate under
the Plan.
5. Stock Subject to the Plan
Subject to adjustment as provided in Paragraph 9, not more
than 450,000 shares of Stock may be issued with respect to the
Options granted under the Plan. Such shares that are reserved for
issuance under the Plan are authorized but unissued shares of
Stock. Shares of Stock subject to an Option shall, upon the
expiration or termination of any such Option to the extent
unexercised, again be available for grant under the Plan.
<PAGE>3
6. Grant of Options
Options will be awarded under this Plan pursuant to the
following formula: Each Outside Director shall receive an annual
Option for the purchase of Stock determined by dividing (i) the
annual retainer for an Outside Director (determined with reference
to the rate of annual retainer in effect on the date the Options
are granted) by (ii) the Fair Market Value of a share of Stock on
the date of the Option grant, multiplying the result (the quotient)
by three, rounding the resulting number of shares up to the nearest
whole share. In the event an Outside Director serves as Chairman
of the Board, the multiplier in the preceding sentence shall be
four in lieu of three. The exercise price of each Option granted
under this Plan shall be the Fair Market Value on the date of
grant.
7. Terms and Conditions of Options
(a) Term
Options shall vest on the first anniversary of the date
of grant and shall be exercisable in whole or part at any
time upon fulfillment of the vesting period. In no event
may an Option be exercisable:
(i) Until the Optionee shall have completed at
least one year of continued service as a director of the
Company after the date such Option is granted; or
(ii) For more than ten years from the date of grant.
Whether an authorized leave of absence shall constitute
termination of service as a director shall be determined
by the Committee. In the event of the death or
Disability of an Optionee during his service as a
director, all his unexercised Options shall immediately
become exercisable and may be exercised (by his personal
representative in the event of such death) for a period
of three years following the date of such death or one
year following the date of such Disability, but in no
event after the respective expiration dates of such
Options. In the event of the termination of an
Optionee's service as a director for cause, any Options
held by him under the Plan not theretofore exercised
shall terminate immediately upon such termination of
service as a director and may not be exercised
thereafter. The Committee in its sole discretion may
determine that an Optionee's service as a director was
terminated for cause, if it finds that the Optionee
willfully violated any of the Company's policies on
ethical business conduct or engaged in any activity or
conduct during his service as a director
<PAGE>4
which was inimical to the best interests of the Company.
If an Optionee's service as a director is terminated for
any reason other than by his death or Disability or by
the Company for cause, his Options, to the extent then
exercisable, may be exercised within one year immediately
following the date of termination, but in no event after
the respective expiration dates of such Options.
(b) Exercise of Options
An Option shall be exercised by delivering to the
Corporate Secretary of the Company a written notice of
exercise in the form prescribed by the Corporate
Secretary for use from time to time. Such notice of
exercise shall indicate the number of shares for which
the Option is to be exercised and shall be accompanied by
the full exercise price for the portion of the Option to
be exercised.
(c) Form of Payment
The exercise price may be paid in cash (including
certified or cashier's check, bank draft or money order),
Stock which is free and clear of all liens, claims or
other encumbrances by third parties, or a combination of
Stock and cash. The Stock so delivered shall be valued at
the Fair Market Value as of the Exercise Date. No shares
of Stock shall be issued or delivered until full payment
therefor has been made.
(d) Non-Transferability
No Option shall be assignable or transferable by the
Optionee, except by will or pursuant to applicable laws
of descent and distribution. During the life of an
Optionee, an Option shall be exercisable only by such
Optionee or such Optionee's legal representative.
<PAGE>5
(e) No Rights as Shareholders
Neither an Optionee nor an Optionee's legal
representative shall have any rights as shareholders of
the Stock unless and until certificates for shares of
Stock are registered in his or her name in satisfaction
of a duly exercised Option.
8. Withholding Taxes
Whenever the Company grants, issues or transfers shares of
Stock under the Plan, the Company shall have the right to require
the Optionee to remit to the Company an amount sufficient to
satisfy any federal, state and local withholding tax requirements
prior to the delivery of any certificate for such shares. The
Company shall have the right to retain sufficient shares of Stock
to cover the amount of any tax required by any government to be
withheld or otherwise deducted or paid with respect to the exercise
of the Options. The Stock so retained shall be valued at the Fair
Market Value as of the date of such retention.
9. Capital Adjustments and Corporate Reorganizations
In the event of any change in the outstanding shares of Stock
by reason of a stock dividend, split or combination, or
recapitalization or reclassification, or reorganization, merger or
consolidation, in which the Company is the surviving corporation or
other similar change affecting the Stock, the number of shares then
subject to Options and for which Options may thereafter be granted
and the price per share of Stock payable upon exercise or surrender
of such Options shall be appropriately adjusted by the Committee to
reflect such change. No fractional shares shall be issued as a
result of such adjustment. In the event of a dissolution of the
Company or a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the Company by action of
its Board shall either (i) terminate outstanding and unexercised
Options as of the effective date of such dissolution, merger or
consolidation by giving notice to each Optionee of its intention to
do so and permitting the exercise, during the period prior to such
effective date to be specified by the Committee, of all outstanding
and unexercised Options or portions thereof; provided, however,
that no Option shall become exercisable hereunder either after the
expiration date thereof or prior to six (6) months from the date of
grant thereof, or (ii) in the case of such reorganization, merger
or consolidation, arrange for an appropriate substitution of shares
or other securities of the corporation with which the Company is
reorganized, merged or consolidated in lieu of the shares which are
subject to any outstanding and unexercised Options.
10. Effective Date and Term of the Plan
The Plan shall be effective as of March 27, 1995. Subject to
Section 11 hereof, the Board in its discretion may terminate the
Plan at any time with respect to any shares for which Options have
not theretofore been granted. Except with respect to Options then
outstanding, if not sooner forfeited or terminated, the Plan shall
terminate upon, and no further Options shall be granted after March
26, 2005.
<PAGE>6
11. Amendments
The Board shall have the right to alter or amend the Plan or
any part thereof from time to time provided that:
(a) no change in any Option theretofore granted may be made
which would impair the rights of an Optionee without the
consent of such Optionee;
(b) Plan provisions may not be amended more than once every
(6) six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the
rules thereunder; and
(c) the Board may not make any alteration or amendment which
would materially increase the benefits accruing to
participants under the Plan, increase the aggregate
number of shares of Stock which may be issued pursuant to
provisions of the Plan or extend the terms of the Plan,
without the approval of the shareholders of the Company.
