DOLLAR GENERAL CORPORATION
Nashville, Tennessee
Telephone (615) 783-2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 1998
The Annual Meeting of Stockholders (the "Annual Meeting") of
Dollar General Corporation (the "Company") will be held in the
Goodlettsville City Hall Auditorium, 105 South Main Street,
Goodlettsville, Tennessee, on June 1, 1998 at 10:00 a.m. local time, for
the following purposes:
1. To approve a change in the state of incorporation of the Company
from Kentucky to Tennessee by approving an Agreement and Plan of Merger
between the Company and its wholly-owned Tennessee subsidiary, Dollar
General Corporation-TN ("DGTN"), pursuant to which the Company will be
merged into DGTN with DGTN being the surviving corporation. Upon
effectiveness of the Merger, DGTN's name will be changed to Dollar
General Corporation, the name under which the Company has operated since
its incorporation in 1968.
2. To elect nine (9) directors to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified;
3. To approve an amendment to the Company's Amended and Restated
Articles of Incorporation increasing the number of authorized shares of
the Company's Common Stock from 200,000,000 to 500,000,000 shares;
4. To consider and act upon a proposal to approve the Company's
1998 Stock Incentive Plan;
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
15, 1998 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
/S/Robert C. Layne
Robert C. Layne
Corporate Secretary
April 29, 1998
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>
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 (the "Annual Meeting") to be held in the Goodlettsville City Hall
Auditorium, 105 South Main Street, Goodlettsville, Tennessee, on June 1, 1998
at 10:00 a.m. local time, and any adjournment thereof. This proxy material was
first mailed to stockholders on or about April 29, 1998.
The mailing address of the principal executive office of the
Company is 104 Woodmont Boulevard, Suite 500, Nashville, Tennessee
37205. The Company also maintains an office at 427 Beech Street,
Scottsville, Kentucky 42164.
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 Series A Convertible Junior Preferred
Stock, no par value per share (the "Series A Preferred Stock"), of
record at the close of business on April 15, 1998, are entitled to vote
at the Annual Meeting. On such date, the Company had 167,398,977 issued
and 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 issued
and outstanding shares of Series A Preferred Stock, the holders of which
are entitled to 15.26 votes for each share of Series A Preferred Stock
held (an aggregate voting power equal to 26,180,145 shares of Common
Stock) and to cumulative voting in the election of directors. Pursuant
to the Company's Amended and Restated Articles of Incorporation (the
"Articles"), 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 reflects the five-for-four
stock split declared by the Board of Directors on February 23, 1998 and
paid on March 23, 1998 to stockholders of record on March 9, 1998. All
references to shares of Common Stock have been adjusted accordingly.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning
persons, who as of January 31, 1998 (unless noted as of a more recent
date) are known by management to be beneficial owners of more than five
percent (5%) of the Company's Common Stock and/or Series A Preferred
Stock. Unless otherwise indicated, the person for whom information is
provided had sole voting and investment power over the Common Stock
and/or Series A Preferred Stock beneficially owned.
Amount and Nature of
Name and Address of Common Stock/Series A
Beneficial Owner Preferred Stock (1) Percent of Class
Cal Turner, Jr. 29,128,650/1,715,742 (2) 17.4% / 100%
104 Woodmont Blvd.
Suite 500
Nashville, TN 37205
James Stephen Turner 25,499,093/1,643,037 (3) 15.3% / 95.8%
138 Second Avenue
Nashville, TN 37201
Turner Children Trust 24,623,749/1,613,742 (4) 14.7% / 94.1%
dated January 21, 1980,
Cal Turner, Jr. and
James Stephen Turner,
Co-Trustees
104 Woodmont Blvd.
Suite 355
Nashville, TN 37205
Provident Investment 12,810,686/NA 7.7% / NA
Council, Inc. (5)
300 North Lake Avenue
Pasadena, CA 91101-4022
W. P. Stewart and 12,318,725/NA 7.4% / NA
Co., Inc. (6)
527 Madison Avenue
New York, NY 10022
____________________
(1) The Common Stock is the only equity security of the Company
registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended. The Series A Preferred Stock (i) is convertible into
Common Stock pursuant to the terms and conditions set forth in the
Articles (currently, the conversion ratio is 15.26 shares of Common
Stock for each share of Series A Preferred Stock) and (ii) votes with
the Common Stock on all matters presented to the holders of Common
Stock.
(2) Includes 24,623,749 shares of Common Stock issuable upon
conversion of the Series A Preferred Stock held by the Turner Children
Trust (for which Cal Turner, Jr. serves as Co-Trustee); 1,109,390 shares
of Common Stock issuable upon conversion of the Series A Preferred Stock
held by the Cal Turner Family Foundation (for which Cal Turner, Jr.
serves as Trustee); 447,006 shares of Common Stock issuable upon
conversion of the Series A Preferred Stock held by the Turner Foundation
for Lindsey Wilson College, Inc. (for which Cal Turner, Jr. serves as
Co-Trustee), 522,498 shares of Common Stock held by various trusts and
foundations for which Cal Turner, Jr. has sole voting and investment
power; 372,525 shares of Common Stock held by Cal Turner, Jr.'s wife;
5,580 shares of Common Stock held in the Employee Stock Ownership Plan;
and 287,726 shares of Common Stock which may be acquired upon the
exercise of options which are currently exercisable or exercisable
within 60 days of the date hereof. Cal Turner, Jr. disclaims ownership
of the shares of Common Stock and/or Series A Preferred Stock held by
the various trusts and foundations, except to the extent of his
pecuniary interests.
(3) Includes 24,623,749 shares of Common Stock
issuable upon conversion of the Series A Preferred Stock held by the
Turner Children Trust (for which James Stephen Turner serves as
Co-Trustee); 447,006 shares of Common Stock issuable upon conversion of
the Series A Preferred Stock held by the Turner Foundation for Lindsey
Wilson College, Inc. (for which James Stephen Turner serves as a
Co-Trustee); 264,123 shares of Common Stock held by various trusts and
foundations for which James Stephen Turner has sole voting and
investment power; and 28,900 shares of Common Stock held by James
Stephen Turner's wife. James Stephen Turner disclaims ownership of the
shares of Common Stock and/or Series A Preferred Stock held by the
various trusts and foundations, except to the extent of his pecuniary
interests.
(4) The shares of Common Stock represented are the number
of shares issuable upon conversion of the Series A Preferred Stock held
by the Turner Children Trust. See notes (2) and (3) above.
(5) Pursuant to the Schedule 13G filed on February 10, 1998. Shares have
been adjusted to reflect the March 23, 1998 five-for-four Common Stock
split. Provident Investment Council, Inc. claims sole voting power on
10,148,454 shares and sole dispositive power on 12,810,686 shares.
(6) Pursuant to the Schedule 13G filed on March 23, 1998. Shares have been
adjusted to reflect the March 23, 1998 five-for-four Common Stock split.
<PAGE>
SECURITY OWNERSHIP BY OFFICERS AND DIRECTORS
The following table sets forth certain information as of January
31, 1998 (unless noted as of a more recent date) concerning all
directors and nominees, the executive officers named in the Summary
Compensation Table (the "Named Executive Officers") and all executive
officers and directors as a group. Unless otherwise indicated, the
persons for whom information is provided had sole voting and investment
power over the shares of Common Stock and/or Series A Preferred Stock
beneficially owned. Computations are based on 167,066,013 shares of
Common Stock and 1,715,742 shares of Series A Preferred Stock
outstanding as of January 31, 1998.
<TABLE>
Shares of
Series A
Director Preferred Shares of
or Stock Percent Common Stock Percent
Nominee/Executive Officer Beneficially of Beneficially of
Officers Age Since Owned Class Owned Class
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Bottorff 53 1998 -- -- 1,000 (2) *
James L. Clayton 64 1988 -- -- 235,500 (3) *
Reginald D. Dickson 52 1993 -- -- 27,582 (4) *
John B. Holland 66 1988 -- -- 295,968 (5) *
Barbara M. Knuckles 50 1995 -- -- 5,562 (6) *
Wallace N. Rasmussen 83 1990 -- -- 37,538 (7) *
Cal Turner 82 1955 -- -- 3,401,322 (8) 2.0%
David M. Wilds 57 1991 -- -- 134,502 (9) *
William S. Wire, II 66 1989 -- -- 35,732 (10) *
Cal Turner, Jr. 58 1966 1,715,742 100.0% 29,128,650 (11) 17.4%
Bob Carpenter 50 1981 -- -- 664,915 (12) *
Bruce Krysiak 48 1997 -- -- 220,140 (13) *
Phil Richards 50 1996 -- -- 111,176 (14) *
Leigh Stelmach 58 1989 -- -- 451,791 (15) *
All directors and
executive officers
as a group
(20 persons) -- -- 1,715,742 100.0% 36,570,447 (16) 21.6%
</TABLE>
____________________
(1) * Denotes less than 1% of class.
(2) Includes shares of Common Stock beneficially owned by Mr. Bottorff
as of the date of his appointment to the Board of Directors on April 27,
1998.
(3) Includes 146,769 shares of Common Stock issuable upon the
exercise of outstanding options currently exercisable or exercisable
within 60 days.
(4) Includes 17,817 shares of Common Stock issuable upon
the exercise of outstanding options currently exercisable or exercisable
within 60 days.
(5) Includes 146,769 shares of Common Stock issuable
upon the exercise of outstanding options currently exercisable or
exercisable within 60 days and 49,169 shares owned by Mr. Holland's
spouse.
(6) Includes 2,862 shares of Common Stock issuable upon the
exercise of outstanding options currently exercisable or exercisable
within 60 days.
(7) Includes 10,007 shares of Common Stock issuable upon
the exercise of outstanding options currently exercisable or exercisable
within 60 days. Mr. Rasmussen will not stand for reelection.
(8) Includes 3,401,210 shares beneficially owned by trusts established for
the benefit of Mr. Turner's children for which Mr. Turner serves as
Trustee. Mr. Turner is the father of Cal Turner, Jr.
(9) Includes 97,598 shares of Common Stock issuable upon the exercise
of outstanding options currently exercisable or exercisable within 60
days and 1,125 shares owned by Mr. Wilds' daughter.
(10) Includes 27,548 shares of Common Stock issuable upon the exercise
of outstanding options currently exercisable or exercisable within 60
days.
(11) See Note 2 on page 2. Cal Turner, Jr. is the son of Mr.
Turner.
(12) Includes 330,912 shares of Common Stock issuable upon the
exercise of outstanding options currently exercisable or exercisable
within 60 days. Also includes 257,862 shares for which Mr. Carpenter has
voting and investment rights as a Co-Trustee of the Calister Turner, III
1994 Generation Skipping Trust.
(13) Includes 198,656 shares of Common Stock issuable upon the exercise of
outstanding options currently exercisable or exercisable within 60 days.
Mr. Krysiak resigned effective April 1, 1998.
(14) Includes 77,425 shares of Common Stock issuable upon the exercise of
outstanding options currently exercisable or exercisable within 60 days.
(15) Includes 324,342 shares of Common Stock issuable upon the exercise of
outstanding options currently exercisable or exercisable within 60 days.
(16) Includes 2,449,710 shares of Common Stock issuable upon the exercise
of outstanding options currently exercisable or exercisable within 60 days.
<PAGE>
PROPOSAL NO. 1: CHANGE IN DOMICILE
For the reasons set forth below, the Board of Directors of the
Company believes that the best interests of the Company and its
stockholders will be served by changing the Company's domicile from
Kentucky to Tennessee. The Board of Directors approved the change in
domicile at its meeting on February 23, 1998. This change, if approved
by the stockholders, would be accomplished by merging the Company with
and into its newly formed Tennessee subsidiary, Dollar General
Corporation-TN ("DGTN"), with such subsidiary being the surviving
corporation. Upon effectiveness of the Merger, DGTN's name will be
changed to Dollar General Corporation, the name under which the Company
has operated since its incorporation.
Principal Reasons for the Proposed Change in Domicile
Through the change in domicile, the Company intends effectively
to align its administrative resources within the State of Tennessee
where portions of its corporate headquarters have been located since
1987 and where it is currently building a new corporate office that will
house all administrative functions, and to avail itself of the more
beneficial tax structure of Tennessee. In addition to this and other
tangible cost savings, the Board of Directors believes that Tennessee
law is more favorable to the long-term interests of the Company. In
light of these facts, the Board of Directors believes it is in the best
interests of the Company and its stockholders to change its domicile
from Kentucky to Tennessee.
AGREEMENT AND PLAN OF MERGER
The Company will be merged with and into the Company's
wholly-owned subsidiary, DGTN, pursuant to the terms of the proposed
Agreement and Plan of Merger (the "Plan"), a copy of which is attached
as Exhibit A to these materials (the "Merger"). Upon the completion of
the Merger, the owner of each outstanding share of Common Stock of the
Company will automatically own one share of DGTN's Common Stock, so that
the holders of the Company's Common Stock will own a corresponding
number of DGTN's Common Stock. The owner of each outstanding share of
Series A Preferred Stock of the Company will continue to hold such
number of shares of Series A Preferred Stock, which upon conversion at
the currently applicable conversion rate will convert into 15.26 shares
of DGTN's Common Stock. Each outstanding certificate representing a
share or shares of Company Common Stock or Series A Preferred Stock will
continue to represent the same number of shares of DGTN's stock,
respectively. THUS IT WILL NOT BE NECESSARY FOR STOCKHOLDERS OF THE
COMPANY TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF DGTN. The Common Stock of the Company will continue to
be listed on the New York Stock Exchange (the "NYSE") without
interruption and delivery of existing stock certificates of the Company
will constitute "good delivery" of the shares of DGTN in transactions on
the NYSE subsequent to the Merger.
Under the Plan, DGTN's Charter and Bylaws will be the Charter
and Bylaws of the surviving corporation, copies of which are attached
hereto as Exhibit B and Exhibit C, respectively. Differences between
the Company's Articles and Bylaws and DGTN's Charter and Bylaws
primarily are the result of differences between Kentucky and Tennessee
law, except as set forth below. See "Principal Differences Between
Applicable Laws of Kentucky and Tennessee and Material Differences in
Incorporation Documents." The discussion contained below in this Proxy
Statement is qualified in its entirety by reference to Exhibit B and
Exhibit C.
ABANDONMENT
Notwithstanding a favorable vote of the stockholders, the
Company reserves the right by action of the Board of Directors to
abandon the change in domicile prior to its effectiveness if it
determines that such abandonment is in the best interests of the
Company. The Board of Directors has made no determination as to any
circumstances which may prompt a decision to abandon the change in
domicile.
NO CHANGE WILL BE MADE IN THE NAME, BUSINESS OR PHYSICAL LOCATION OF THE
COMPANY
The change in domicile will effect a change in the legal
domicile of the Company and other changes of a legal nature, the most
significant of which are described in this Proxy Statement. However,
the change in domicile will not result in any significant change in the
name, business, management, location of the principal corporate offices,
assets, liabilities or net worth of the Company. The management of the
Company, including all directors and officers, will not be affected by
the change in domicile and will assume identical positions with DGTN
(subject to the stockholders' election of directors pursuant to the
election of directors proposal set forth in this proxy statement).
Moreover, as noted above, it is anticipated that after the change in
domicile, the shares of Common Stock of the surviving corporation will
be traded without interruption on the NYSE.
PRINCIPAL DIFFERENCES BETWEEN APPLICABLE LAWS OF KENTUCKY AND TENNESSEE
AND MATERIAL DIFFERENCES IN INCORPORATION DOCUMENTS
General. Upon consummation of the Merger, DGTN's Charter and
Bylaws will be the Charter and Bylaws of the surviving company.
Accordingly, the Company and the rights of its stockholders will be
governed by Tennessee law and by DGTN's Charter and Bylaws which differ
from Kentucky law and the Company's Articles and Bylaws in a number of
respects. DGTN's Charter and Bylaws contain substantially the same
provisions as presently contained in the Company's existing Articles and
Bylaws, except for changes made to reflect (and, in the opinion of the
board of directors, to benefit from) differences between Tennessee and
Kentucky law. The principal differences between the applicable laws of
Kentucky and Tennessee are set forth in the following discussion
together with a discussion of the material differences between the
Company's Articles and Bylaws and DGTN's Charter and Bylaws.
This summary does not purport to be a complete statement of the
differences between Kentucky law and Tennessee law and the summary is
qualified in its entirety by reference to the provisions of these laws.
Stockholders of the Company are advised to consult with their own legal
counsel regarding all such matters. Before voting on this proposal,
stockholders should carefully read the following sections of this Proxy
Statement, which describe certain revisions, purposes and effects of the
change from the Company's current Articles and Bylaws to DGTN's proposed
Charter and Bylaws (attached as Exhibit B and Exhibit C).
Cumulative voting for directors. Under Kentucky law, cumulative
voting for directors is mandatory. Accordingly, the Company's Bylaws
provide that directors shall not be elected in any other manner. Under
Tennessee Law, cumulative voting for directors is allowed only if
expressly adopted in the charter. Unless otherwise provided, directors
are elected by a plurality of votes cast by the shares entitled to vote
in an election at which a quorum is present. DGTN's Charter does not
adopt cumulative voting; therefore, directors are elected by a plurality
of votes cast by the shares entitled to vote in an election at which a
quorum is present.
Authorized capital stock. The Company's Articles provide for
authorized capital stock, consisting of 200,000,000 shares of Common
Stock, 1,715,742 shares of Series A Preferred Stock and 3,284,258
shares of undesignated preferred stock. In addition, the stockholders
at this Annual Meeting, in the event this Proposal 1 is not approved,
are being requested to approve an amendment to increase the authorized
Common Stock from 200,000,000 to 500,000,000 shares. The Charter of
DGTN provides for 500,000,000 shares of Common Stock, $.50 par value per
share, 1,715,742 shares of Series A Preferred Stock and 10,000,000
shares of undesignated preferred stock. The undesignated preferred
stock can be designated, authorized and issued without stockholder
approval.
Tax on capital stock. The Company's Board of Directors believes
that there are two significant tax advantages to moving its domicile to
Tennessee.
(1) Under Kentucky law, a corporation is required to pay an
organization tax (a) upon its incorporation in the state (calculated
on the total authorized shares) and (b) each time the corporation
increases its authorized shares (calculated on the total increase in
authorized shares). Under Tennessee law, corporations do not incur an
organization or similar tax based on authorized shares. Accordingly, if
the Company increases its authorized shares from 200,000,000 shares to
500,000,000 shares, under Kentucky law, the increase will cost the
Company approximately $600,000. In addition, the Company would continue
to be subject to such tax on any subsequent increase in its authorized
capital stock. Under Tennessee law, the Company will incur no such tax
for the increase in authorized shares.
(2) Unlike Tennessee law, Kentucky law requires corporations to pay an
annual intangibles tax. Last year, this intangibles tax cost the
Company approximately $28,885. Under Tennessee law, the Company will
incur no such tax.
Number of directors. The Company's Bylaws give the Board of
Directors the power to increase or decrease the number of directors
(provided the number is between three (3) and fifteen (15)). Under
Kentucky law, however, the board of directors cannot increase or
decrease the number of directors to a number greater than thirty percent
(30%) of the total number of existing directors without stockholder
approval. Under Tennessee law, the number of directors may be specified
in or fixed in accordance with the charter or bylaws. The charter or
bylaws may give the board the authority to fix or change the number of
directors, including an increase or decrease in the number of directors,
without limitation as to the percentage increase or decrease. Absent
such a provision, only the stockholders may fix or change the number of
directors. DGTN's Bylaws provide that the Board of Directors may fix,
change or determine the number of Directors.
Removal of directors. Under Kentucky law, stockholders may
remove, at a meeting called for such purpose, one or more directors with
or without cause unless the articles of incorporation provide that
directors may be removed only for cause. The Company's Articles do not
provide that directors may be removed only for cause. Under Tennessee
law stockholders may also remove, at a meeting called for such purpose,
one or more directors with or without cause unless the charter provides
that directors may be removed only for cause. DGTN's Charter provides
that directors may be removed only for cause. Tennessee law also
provides that if allowed by the charter, any or all of the directors, at
a meeting called for such purpose, may be removed for cause by a vote of
a majority of the entire board of directors. DGTN's Charter provides
that any or all of the directors, at a meeting called for such purpose,
may be removed for cause by a vote of a majority of the entire board of
directors. In addition, Tennessee law provides that any court of record
having equity jurisdiction in the county where the corporation's
principal office is located may remove a director in a proceeding
commenced either by the corporation or by its stockholders holding at
least ten percent of the outstanding shares of any class if the court
finds that the director engaged in fraudulent or dishonest conduct, or
gross abuse of authority or discretion with respect to the corporation
and that removal is in the best interest of the corporation.
Right of corporation to acquire its own shares. Both Kentucky
and Tennessee law allow a corporation to acquire its own shares, with
such shares constituting authorized but unissued shares. Tennessee law
provides that if such reacquired shares are of a class or a series, the
preferences, limitations and relative rights of which were determined by
the board of directors, the shares will have the same preferences,
limitations and relative rights as the shares so acquired, provided that
if the charter so provides, such authorized but unissued shares may
instead constitute or be included in a class of shares with respect to
which the board may again determine the preferences, limitations, and
relative rights.
Conditions under which stockholder liability attaches. Both
Kentucky and Tennessee law provide that a stockholder may become
personally liable for the acts or debts of a corporation only by reason
of his own acts or conduct. Tennessee law further provides that any
person becoming an assignee or transferee of shares or of a subscription
for shares, in good faith and without knowledge or notice that the full
consideration therefor has not been paid will not be personally liable
for any unpaid portion. The transferor will, however, remain liable
whether the assignment or transfer was voluntary or involuntary.
Tennessee law also provides that no person holding shares as collateral
security will be personally liable as a stockholder, but the person
pledging such shares will be considered the holder and will be liable
and that no executor, administrator, guardian, trustee, or other
fiduciary will be personally liable as a stockholder, but the estate and
funds in the hands of such executor, administrator, guardian, trustee,
or other fiduciary will be liable.
Dissenters' rights. Under Kentucky law, a stockholder does not
have the right to dissent from, and obtain payment of the fair value of
his shares in the event of an amendment to the articles of incorporation
that alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities. In contrast, under Tennessee
law, a stockholder does have the right to dissent from an amendment that
alters or amends his preemptive rights.
Under Kentucky law, a stockholder has the right to dissent
regardless of whether or not the corporation's shares are listed on an
exchange. Under Tennessee law, however, a stockholder is denied the
right to dissent if the corporation's shares are listed on an exchange
registered under Sect. 6 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). The Company's shares are listed on the NYSE,
therefore, as a Tennessee corporation (which the Company will become in
the Merger), no dissenters' rights would arise in a transaction like the
one in this Proposal 1. See "- Rights of Dissenting Stockholders."
Amendment of articles of incorporation or charter by board of
directors and stockholders. Under Kentucky law and Tennessee law, a
corporation's Board of Directors, without stockholder action, may make
certain administrative amendments to its articles of incorporation that
do not impact the substantive rights of its stockholders. Tennessee law
also allows the adoption, without stockholder approval, of amendments:
(1) designating or changing the address of the principal office of the
corporation and (2) deleting the initial principal office, if an annual
report is on file with the secretary of state.
Under both Kentucky law and Tennessee law, unless the
corporation's articles of incorporation or charter requires a greater
vote, an amendment to the articles of incorporation or charter must be
approved by: (i) a majority of the votes entitled to be cast by any
voting group with respect to which the amendment would create
dissenters' rights and (ii) a majority of the votes of all other voting
groups entitled to vote on the amendment. The Company's Articles do not
provide for a greater vote. DGTN's Charter, however, does require a
supermajority (2/3) vote to amend, alter, change or repeal any
provisions of its Charter in a manner inconsistent with Articles 9 and
12 of its Charter.
Amendment of bylaws by board of directors and stockholders.
Under Kentucky law and Tennessee law, a corporation's board of directors
may amend or repeal the corporation's bylaws unless its articles of
incorporation or charter reserves the power exclusively to its
stockholders. The Company's Articles vest the authority to make bylaws
in the Board of Directors subject to the power of the stockholders to
change or repeal such bylaws. DGTN's Bylaws provide that its Bylaws may
be altered, amended, repealed or restated, and new Bylaws may be
adopted, at any meeting of the stockholders by the affirmative vote of a
majority of the shares represented at such a meeting, or by the
affirmative vote of a majority of the members of the Board of Directors
who are present at any regular or special meeting. In addition, a
supermajority (2/3) vote is required to amend, alter, change repeal or
adopt any provision as part of DGTN's Bylaws in a manner inconsistent
with Articles 9 and 12 of its Charter.
Stockholder nominations. Neither Kentucky law nor the Company's
Bylaws specify the procedures and timing of stockholder nominations and
proposals at stockholders' meetings. Similarly, Tennessee law does not
specify procedures and timing for stockholder nominations and proposals
at stockholders' meetings. DGTN's Bylaws, however, require advance
notice for nominations in the election of directors and the proposal of
business at a stockholders' meeting.
Notice of director nominations must be submitted in writing to
the Secretary not later than 120 days in advance of the anniversary date
of the proxy statement for the previous year's annual meeting (in the
case of a special meeting -- within 10 days of a stockholder's request
to fill a vacancy or within 10 days of notice of such a meeting). The
notice must contain such information regarding each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission (the "SEC") and must
contain additional information about the stockholder giving the notice.
Notice of proposals must be submitted in writing to the
Secretary within the time limits specified by Rule 14a- 8 of the Rules
and Regulations of the SEC. The notice must contain a description of
the proposal and must contain additional information about the
stockholder giving the notice. The advance notification requirements in
the election of directors will ensure that the Board can carry out its
responsibilities of reviewing the composition of the Board and having
adequate information regarding qualifications and backgrounds of
nominees for directors. Similarly, the advance notification
requirements for proposals are designed to insure that the Board has a
sufficient time to review such a proposal and include the proposal in
the proxy materials for the meeting. Although these provisions do not
give the Board of Directors any power to approve or disapprove
stockholder nominations for the election of directors or stockholder
proposals, they may have the effect of precluding a contest for the
election of directors if the established procedures are not followed and
may discourage or deter a third party from conducting a solicitation of
proxies to elect its own slate of directors, without regard to whether
this might be harmful or beneficial to DGTN and its stockholders.
Special meeting of stockholders. Under Kentucky law, a special
meeting of stockholders may be held if 33% of the votes entitled to be
cast make a demand for such a meeting. Under Tennessee law, a special
meeting of stockholders requires the vote of only 10% of the
corporation's stockholders unless its charter provides otherwise. DGTN's
Charter and Bylaws each require the demand of at least 20% of the
stockholders entitled to vote to call a special meeting. In addition,
under DGTN's Bylaws, the written demand must include all statements
necessary to make a statement of purpose not incomplete, false or
misleading, and include any other information specified in Schedule 14A,
Rule 14a-3, Rule 14a-8, or Rule 14a-11 of the Rules and Regulations of
the SEC, and must be accompanied by a certified check for fifty thousand
dollars ($50,000) payable to the Company to cover the Company's expenses
in connection with such meeting, including the preparation of proxy
materials for its stockholders.
Action without a meeting. Under Kentucky law, the action of all
stockholders entitled to vote is required for the election of directors
without a meeting and without prior notice. For any other action
Kentucky law requires the action of 80% of the votes entitled to be
cast. Tennessee law requires the consent of all stockholders entitled
to vote and the affirmative vote of the number of shares necessary to
authorize the action at a meeting in order to take an action without a
meeting.
Restrictions on committee powers. Kentucky law expressly
prohibits committees from authorizing distributions, approving or
proposing to stockholders action that must be approved by stockholders,
exercising the authority of the board of directors to amend the articles
of incorporation or approving a plan of merger not requiring stockholder
approval. Tennessee law provides that committees may declare
distributions according to a formula or method prescribed by the board
of directors and does not restrict the ability of committees to approve
or propose to stockholders action that must be approved by stockholders
to exercise the authority of the board of directors to amend the charter
and to approve a plan of merger not requiring stockholder approval.
Limitation of liability of directors. Under Both Kentucky and
Tennessee law, a corporation's articles of incorporation or charter may
contain a provision which, subject to the limitations described below,
limits or eliminates a director's personal liability to the corporation
or its stockholders for monetary damages for breach of his or her
fiduciary duty. Kentucky law prohibits the limitation of liability of a
director for (i) any transaction from which the director derives an
improper personal benefit, (ii) any transaction in which the director's
personal financial interest is in conflict with the financial interests
of the corporation or its stockholders, (iii) any acts or omissions not
in good faith or which involve knowing misconduct or a knowing violation
of law or (iv) unlawful distributions. Tennessee law prohibits the
limitation of liability of a director for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii)
any acts or omissions not in good faith or which involve knowing
misconduct or a knowing violation of law or (iii) unlawful
distributions.
Indemnification. Kentucky law and Tennessee law both contain
provisions setting forth conditions under which a corporation may
indemnify its directors, officers, employees and agents against
liability incurred in a proceeding and may pay or reimburse the party's
reasonable expenses.
The Company's Articles are silent about indemnification;
however, under the Company's Bylaws, the Company must indemnify a
Director or Officer of the Company, who is a party to a proceeding
because he is or was a Director or Officer, against liability incurred
and must advance reasonable expenses. In addition, Kentucky law and the
Company's Bylaws provide that statutory indemnification is not exclusive
of other rights of Directors and Officers under Kentucky law, the
Company's Articles or Bylaws, resolutions of its stockholders or
Directors or an agreement providing for indemnification. Kentucky law
adds that this nonexclusivity applies both to a Director or Officer's
actions in his official capacity and to his actions in other capacities
while holding office.
Like Kentucky law and the Company's Bylaws, DGTN's Charter and
Bylaws require DGTN to indemnify its directors and officers, employees,
agents and trustees, who are parties to a proceeding because of their
position with DGTN, against all liability and for all expenses and loss
incurred. Tennessee law and DGTN's Charter and Bylaws provide that
statutory indemnification is not exclusive unless a final adjudication
establishes a Director's liability for: (1) a breach of his duty of
loyalty; (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law or (3) unlawful
distributions.
ANTITAKEOVER STATUTES
Business combinations. The Kentucky Business Combination Act
(the "KY-Business Combination Act") provides that a party owning 10% or
more of stock in a corporation (an "interested shareholder") cannot
engage in a business combination with the corporation unless the
combination (i) takes place at least five years after the interested
shareholder first acquired 10% or more of the corporation, or (ii)
either (A) is approved by at least 80% of the votes entitles to be cast
by outstanding shares of voting stock of the corporation, voting
together as a single group and two-thirds of the votes entitled to be
cast by holders of voting stock other than voting stock beneficially
owned by the interested shareholder who is, or whose affiliate is, a
party to the business combination or by an affiliate or associate of the
interested shareholder, voting together as a single group or (B)
satisfies certain fairness conditions specified in the KY-Business
Combination Act. These restrictions apply unless: (i) the business
combination is approved by the corporation's independent directors
before the stockholder becomes an interested shareholder, or (ii) the
corporation enacts an amendment to its articles of incorporation or its
bylaws to remove itself entirely from the KY-Business Combination Act at
least two years before the stockholder becomes an interested shareholder
with the approval of at least 80% of the votes entitled to be cast by
persons, if any, who are not interested shareholders of the corporation,
voting together as a single group. Neither the Company's Articles nor
its Bylaws remove it from coverage under the KY-Business Combination
Act.
The Tennessee Business Combination Act (the "TN-Business
Combination Act") provides that a party owning 10% or more of the stock
in a corporation (an "interested shareholder") cannot engage in a
business combination with the corporation unless the combination (i)
takes place at least five years after the interested shareholder first
acquired 10% or more of the corporation, or (ii) either (A) is approved
by at least two-thirds of the non-interested voting shares of the
corporation or (B) satisfies certain fairness conditions specified in
the TN-Business Combination Act. These restrictions apply unless: (i)
the business combination is approved by the target corporation's board
of directors before the stockholder becomes an interested shareholder,
or (ii) the corporation enacts a charter amendment or bylaw to remove
itself entirely from the TN-Business Combination Act at least two years
before the stockholder becomes an interested shareholder with the
approval of a majority of the stockholders who have held shares for more
than one year prior to the vote. Neither DGTN's Charter nor its Bylaws
remove it from coverage under the TN-Business Combination Act.
Other constituencies. Kentucky law requires a corporation's
board of directors in discharging its duties in the context of a
business combination to consider, in addition to the interest of the
corporation's stockholders, any of the following: (a) the interest of
the corporation's employees, suppliers, creditors and customers; (b) the
economy of the state and nation; (c) community and societal
considerations; and (d) the long-term as well as short-term interests of
the corporation and its stockholders, including the possibility that
these interests may be best served by the continued independence of the
corporation.
Tennessee law provides an exemption from liability for officers
and directors of resident domestic corporations who do not approve
proposed business combinations or charter amendments and bylaws removing
their corporations from the TN-Business Combination Act's coverage as
long as the officers and directors act in "good faith belief" that the
proposed business combination would adversely affect their corporation's
employees, customers, suppliers, or the communities in which their
corporation operates and such factors are permitted to be considered by
the board of directors under the charter. DGTN's Charter does not
provide for these factors to be considered.
Control share acquisitions. Kentucky law contains no provision
with respect to control share acquisitions.
The Tennessee Control Share Acquisition Act (the "TN-CSAA")
strips a purchaser's shares of voting rights if an acquisition of shares
in a Tennessee corporation brings the purchaser's voting power to a
one-fifth, one-third or a majority level of all voting power if the
corporation's charter or bylaws contain an election to be governed by
the TN- CSAA. Neither DGTN's Charter, nor its Bylaws elect to be
governed by the TN-CSAA.
Greenmail. Kentucky law contains no provision with respect to Greenmail.
The Tennessee Greenmail Act (the "TN-GA") applies to any
corporation chartered under the laws of Tennessee which has a class of
voting stock registered or traded on a national securities exchange or
registered with the SEC pursuant to Section 12(g) of the 1934 Act, as
amended. The TN-GA provides that it is unlawful for any corporation to
purchase, either directly or indirectly, any of its shares at a price
above their market value, from any person who holds more than 3% of the
class of the securities purchased if such person has held such shares
for less than two years, unless either the purchase is first approved by
the affirmative vote of a majority of the outstanding shares of each
class of voting stock issued by the corporation or the corporation makes
an offer of at least equal value per share to all holders of shares of
such class.
TAX CONSEQUENCES OF CHANGE IN DOMICILE
The proposed change in domicile accomplished by the Merger will
be a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, (1) no gain or loss will be
recognized for Federal income tax purposes by the stockholders of the
Company as a result; and (2) the basis and holding period for the stock
of DGTN received by the stockholders of the Company in exchange for the
Company's stock will be the same as the basis and holding period of the
stock of the Company exchanged therefor. The change in domicile will
have no Federal income tax effect on the Company or on DGTN. State,
local and foreign income tax consequences to stockholders may vary from
the Federal tax consequences described above, and stockholders should
consult their own tax advisors as to the effect of the Change in
Domicile under applicable state, local or foreign income tax laws.
RIGHTS OF DISSENTING STOCKHOLDERS
Dissenting holders of the Company's stock who comply with the
procedural requirements of Kentucky law described herein will be
entitled to receive the fair value of their shares if the Merger is
affected. Any holder of the Company's stock electing to exercise such
right of dissent must file with the Company prior to the taking of the
vote on the Plan at the Annual Meeting, a written notice of his or her
intent to demand payment for his or her shares if the Merger is
effectuated, and must not vote in favor of the Plan.
The following discussion is qualified in its entirety by
reference to Sections 271B.13-010 through 271B.13-310 of the Kentucky
Business Corporation Act of 1988 (the "KY-BCA"), a copy of which is
attached hereto as Exhibit D.
General. A stockholder of the Company is entitled under the
KY-BCA to dissent from and obtain payment of the fair value of his
shares in connection with the Merger. A record stockholder may assert
dissenters' rights as to fewer than all the shares registered in his
name only if he dissents with respect to all shares beneficially owned
by any one person and notifies the Company in writing of the name and
address of each person on whose behalf he asserts dissenters' rights.
The rights of a partial dissenter will be determined as if the shares as
to which he dissents and his other shares were registered in the names
of different stockholders. A beneficial stockholder may assert
dissenters' rights as to shares held on his behalf only if (i) he
submits to the Company the record stockholder's written consent to the
dissent not later than the time the beneficial stockholder asserts
dissenters' rights and (ii) he does so with respect to all shares of
which he is the beneficial stockholder or over which he has the power to
direct the vote.
Any stockholder who wishes to assert dissenters' rights (i) must
deliver to the Company, at the address stated on the cover hereof,
attention: Secretary, before the vote is taken at the Meeting, written
notice of his intent to demand payment for his shares if the Merger is
effectuated and (ii) must not vote in favor of the Merger. A
stockholder who does not satisfy the requirements of the foregoing
sentence shall not be entitled to payment for his shares under the
KY-BCA..
Dissenters' notice. If the Merger is authorized at the Annual
Meeting, the Company will deliver a written dissenters' notice (the
"Dissenters' Notice") to all stockholders who properly notified the
Company of their intent to demand payment for their shares and did not
vote in favor of the Merger as specified in the preceding paragraph. The
Dissenter's Notice will be sent no later than 10 days after the date of
the Annual Meeting and will contain the following:
1. The address where the payment demand must be sent.
2. The address where and the time when certificates for certificated
shares must be deposited.
3. Information for holders of uncertificated shares as to the extent
that transfer of such shares will be restricted after the payment demand
is received.
4. A form for demanding payment that (i) includes the date of the first
announcement to news media or stockholders of the terms of the Merger
(which was April 29, 1998) and (ii) requires the stockholder asserting
dissenters' rights to certify whether or not he acquired beneficial
ownership of the shares before that date.
5. A date by which the Company must receive the payment demand (which
date may not be fewer than 30 or more than 60 days after the date the
Dissenters' Notice is delivered). 6. A copy of KY-BCA Section
271B.13-220.
Duty to demand payment. After receipt of the Dissenters' Notice
from the Company, a stockholder must: (i) submit a demand for payment (a
"payment demand"), (ii) certify whether he acquired beneficial ownership
of the shares before April 29, 1998 and (iii) deposit his certificates
as specified in the Dissenters' Notice. A stockholder who does not
submit a payment demand or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, will not be
entitled to payment for his shares. The Company may restrict the
transfer of uncertificated shares from the date the demand for their
payment is received until the Merger is completed. If the Company does
not complete the Merger within 60 days of the date set for demanding
payment and depositing share certificates, it must return deposited
certificates and release the transfer restrictions imposed on
uncertificated shares. The Company must send a new Dissenters' Notice
if it thereafter completes the Merger.
Payment. Except as described below, as soon as the Merger
is effective or upon receipt of a payment demand, the Company will pay
each dissenter who has submitted a payment demand and complied with the
requirements of the KY-BCA summarized above the amount the Company
estimates to be the fair value of his shares, plus accrued interest. The
payment will be accompanied by (i) a balance sheet, income statement and
statement of changes in shareholders' equity for the most recent fiscal
year and the latest available interim financial statements, if any, (ii)
a statement of the Company's estimate of the fair value of the shares,
(iii) an explanation of how the interest was calculated and (iv) a
statement of the dissenter's right to demand payment as specified below.
Fair value with respect to a dissenter's shares, means the value of the
shares immediately before the Merger, excluding any appreciation or
depreciation in anticipation of the Merger unless such exclusion would
be inequitable. Interest is calculated from the date of the Merger until
the date of payment at the average rate currently paid by the Company on
its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
After-acquired shares. The payment required to be made by the
KY-BCA as referred to in the preceding paragraph may be withheld from a
dissenter unless he was the beneficial owner of the shares before April
29, 1998. If such payment is withheld, the Company may elect to estimate
the fair value of the shares, plus accrued interest, and offer to pay
that amount to each dissenter who agrees to accept it in full
satisfaction of his demand. Such an offer would be accompanied by a
statement of the estimate of the fair value, an explanation of how
interest was calculated and a statement of the dissenter's right to
demand payment as described below.
Dissatisfied stockholder. Within 30 days after receipt of
payment or offer of payment, the dissenting stockholder either (i) must
accept the Company's payment or offer, (ii) must notify the Company in
writing of his own estimate of the fair value of the shares (and accrued
interest) and payment demand of the fair value so estimated (less any
payment previously received), or (iii) must reject the Company's offer
and demand payment of the fair value of the shares (and accrued
interest). If a dissenting stockholder and the Company cannot agree as
to the fair value of such dissenter's shares, the Company must, 60 days
after receiving the payment demand, commence a proceeding in the Circuit
Court of Jefferson County, Kentucky, to determine the fair value and
accrued interest of such shares.
If the Company fails to commence such a proceeding within such
60 day time period, the Company must pay to each dissenting stockholder
whose demand remains unsettled the amount such dissenting stockholder
demands as fair value. The court may appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question
of fair value. All dissenters whose demands remain unsettled will be
made parties to the court proceeding. Each such dissenter will be
entitled to a judgment (i) for the amount, if any, by which the court
finds the fair value of his shares, plus interest, exceeds the amount
paid by the Company, or (ii) for the fair value, plus accrued interest,
of his after-acquired shares for which the Company elected to withhold
payment.
The court in an appraisal proceeding is required to assess all
costs of the proceeding against the Company, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds to be equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in demanding
payment. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds
equitable: (1) against the Company and in favor of any or all
dissenters if the court finds the company did not substantially comply
with the requirements of the KY-BCA; or (2) against either the Company
or a dissenter, in favor of the other party, if the court finds that the
party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith. If the court finds that the services
of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated, and that the fees for those services
should not be assessed against the Company, the court may award to these
counsel reasonable fees to be paid out of the amount awarded the
dissenters.
In perfecting a stockholder's right to dissent, neither a vote
against the Plan nor a proxy directing such a vote will be deemed to
satisfy the requirement that a written notice of an intent to demand
payment be delivered to the Company prior to the taking of the vote
thereon. However, a stockholder who has delivered such written notice
before the taking of the vote thereon will not be deemed to have waived
his or her right to dissent either by failing to vote against the Plan
or by failing to furnish a proxy directing such vote.
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 and the holders of the Company's Series A Preferred Stock
(on an converted basis) represented and entitled to vote at the Annual
Meeting are required to adopt Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER THAT WOULD, AMONG OTHER THINGS, CHANGE THE
COMPANY'S DOMICILE FROM KENTUCKY TO TENNESSEE BY MEANS OF A MERGER INTO
A NEWLY FORMED, WHOLLY-OWNED TENNESSEE SUBSIDIARY.
NOTE: IF PROPOSAL 1 IS APPROVED BY THE STOCKHOLDERS, THEN PROPOSAL 3
BECOMES NULL AND VOID AS THE EFFECT OF THE MERGER WILL AUTOMATICALLY
INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY AS SET FORTH ABOVE.
HOWEVER, THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1 AND 3.
<PAGE>
PROPOSAL NO. 2: 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 current Board of Directors consists of ten
members. At its February 1998 meeting, the Board of Directors nominated
each of the current directors as nominees to stand for election at the
Meeting, with the exception of Mr. Wallace N. Rasmussen who will not
stand for re-election.
In the election of directors, pursuant to Kentucky law 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 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.
Certain information concerning each of the nominees is set forth
below:
Dennis C. Bottorff serves as Chairman and Chief Executive
Officer of First American Corporation, a bank holding company. Mr.
Bottorff served as President of First American Corporation from 1991
through 1994. Mr. Bottorff serves as a director for Ingram Industries,
a privately-held provider of wholesale distribution, inland marine
transportation, and insurance services.
James L. Clayton serves as Chairman and 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 also serves as Chairman of
BankFirst (formerly First Heritage Bank) and has held such position
since 1992. In addition, Mr. Clayton is a director of Chateau
Communities, Inc., a manufactured housing company.
Reginald D. Dickson is Chairman of Buford, Dickson, Harper &
Sparrow, Inc., investment advisors, 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, a bank holding company.
John B. Holland served as President and Chief Operating Officer
of Fruit of the Loom, Inc., a manufacturer of underwear and other soft
goods, until his retirement in February 1996, at which time he became a
consultant to that corporation.
Barbara M. Knuckles is Director of Corporate and External
Relations for North Central College in Naperville, Illinois. From 1988
to 1992, Ms. Knuckles was a private investor managing several family
businesses. Ms. Knuckles serves as a member of the board of directors of
J. R. Short Milling Company, a privately-held specialty corn-milling
company, and Harris Bank of Naperville, Illinois.
Cal Turner, the founder of the Company, served as President from
1955 until 1977 and Chairman of the Board until December 1988. He is
currently a consultant to the Company.
Cal Turner, Jr. is the Chairman and Chief Executive Officer of
the Company. Mr. Turner joined the Company in 1955 and has held the
office of Chief Executive Officer since 1977. Mr. Turner has served as
Chairman of the Board since January 1989 and served as President from
1977 to 1997. Mr. Turner is a member of the board of directors of
First American Corporation and Thomas Nelson, Inc., a publishing
company.
David M. Wilds is president of Nelson Capital Partners III,
L.P., a merchant banking company. From 1995 to 1998, Mr. Wilds was a
principal for Nelson Capital Corporation. From 1990 to 1995, Mr. Wilds
served as Chairman of the Board of Cumberland Health Systems, Inc., an
owner and operator of psychiatric hospitals. Mr. Wilds is a director of
Mattress Giant Corporation, a retail company; Inphact Inc., a
teleradiology company; ActaMed, a healthcare software company; and
Feldkircher Wire Fabricating Company, a metal fabricating company.
William S. Wire, II served from 1986 until his retirement in
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 1986 to 1993. Mr. Wire
serves as a director of First American Corporation, and Genesco, Inc.
COMMITTEES OF THE BOARD. The Company has a Corporate Governance
and Compensation Committee ("CGC Committee") and an Audit Committee.
In fiscal 1998, the CGC Committee consisted of Messrs.
Rasmussen, Wilds and Wire (Chairman), The CGC Committee reviews and
recommends policies and practices for the Company's corporate governance
profile and 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 (as required by the
bylaws). The 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, the 1993 Outside Directors'
Plan, and the 1995 Outside Directors' Stock Option Plan which are
administered by Cal Turner and Cal Turner, Jr. At least one time per
year, the CGC Committee specifically reviews the standards of
performance of the 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 1998.
The Audit Committee is composed of Messrs. Clayton, Dickson,
Holland (Chairman) and Ms. Knuckles. The functions of the Audit
Committee include providing advice and assistance regarding accounting,
auditing, corporate compliance and financial reporting practices of the
Company. Annually, the Audit Committee recommends 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 four times during fiscal 1998.
During fiscal 1998, 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 plus $1,250 for attending each regular meeting of the Board or
any committee. Committee Chairmen receive an additional $1,250 for each
committee meeting attended. 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 meetings,
or committee meetings if requested by the committee to participate
therein. In addition, the directors who are not employees of the
Company are entitled to receive nondiscretionary options for the
purchase of Common Stock pursuant to the 1995 Outside Directors' Stock
Option Plan.
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 a lump sum of the accumulated account, as follows: (a)
upon attaining age 65 or any age thereafter; (b) in the event of total
disability; (c) in the event of death; or (d) in the event of voluntary
termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During fiscal 1998, the CGC Committee was comprised of Messrs.
Rasmussen, Wilds and Wire. None of these persons has at any time been
an officer or employee of the Company or any subsidiary of the Company.
No executive officer of the Company served during fiscal 1998 as a
member of a compensation committee or as a director of any entity of
which any of the Company's Directors served as an executive officer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES LISTED ABOVE.
<PAGE>
PROPOSAL NO. 3 AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED ARTICLES
OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The approval an amendment to the Company's Articles which would
increase the number of authorized shares of Common Stock, $.50 par value
per share, to 500,000,000 shares from 200,000,000 shares. The following
summary of the proposed amendment should be read in conjunction with,
and is qualified in its entirety by reference to, the complete text of
the proposed amendment which is attached hereto as Exhibit E.
EXPLANATION OF AND REASONS FOR AMENDMENT
The Board of Directors believes that it is advisable to increase
the authorized number of shares of Common Stock in order to have such
additional shares available to the Company for, among other things,
possible issuances in connection with such activities as stock splits
and stock dividends, implementation of employee benefit plans, public
offerings of shares for cash, and acquisitions of other companies. As
of January 30, 1998 (as adjusted for the March 1998 stock split), the
Company had a total of 167,066,013 shares of Common Stock issued and
outstanding, and in addition, 5,457,166 shares of Common Stock remained
reserved for issuance under the Company's stock option plans. Except
for the shares issuable under the Company's stock option plans, the
Company has no agreements or understandings regarding the issuance of
any shares of Common Stock.
Under the provisions of Kentucky law, the Board of Directors
generally may issue authorized but unissued shares of Common Stock
without stockholder approval. Having a substantial number of authorized
but unissued shares of Common Stock that are not reserved for specific
purposes would allow the Company to take prompt action with respect to
corporate opportunities that develop, without the delay and expense of
convening a special meeting of stockholders for the purpose of approving
an increase in the Company's capitalization. The issuance of additional
shares of Common Stock may, depending on the circumstances under which
such shares are issued, reduce stockholder's equity per share and may
reduce the percentage ownership of Common Stock by existing
stockholders. It is not the present intention of the Board of Directors
to seek stockholder approval prior to any issuance of Common Stock that
would become authorized by the amendment unless otherwise required by
law or regulation. Frequently, opportunities arise that require prompt
action, and it is the belief of the Board of Directors that the delay
necessitated for stockholder approval of a specific issuance could be to
the detriment of the Company and its stockholders.
When issued, the additional shares of Common Stock authorized by
the amendment will have the same rights and privileges as the shares of
Common Stock currently authorized and outstanding. Holders of Common
Stock have no preemptive rights and, accordingly, stockholders would not
have any preferential rights to purchase any of the additional shares of
Common Stock when such shares are issued.
If the stockholders approve the change in the Company's domicile
as set forth in Proposal 1, the increase in authorized shares will be
effected as a result of the Merger and the provisions of DGTN's Charter.
See "Proposal 1: Change in Domicile." If the increase in the number of
authorized shares of Common Stock is approved by the stockholders but
the stockholders do not approve the change in the Company's domicile
then the Company's Articles will be amended solely to affect the
increase in the number of authorized shares of Common Stock to
500,000,000 from 200,000,000 shares.
Vote Required. Under Kentucky law, the affirmative votes of the
holders of a majority of the votes cast by the holders of the Company's
Common Stock and the holders of the Company's Series A Preferred Stock
(on an as converted basis) represented and entitled to vote at the
Meeting is required to adopt Proposal 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION.
<PAGE>
PROPOSAL 4 APPROVAL OF DOLLAR GENERAL CORPORATION 1998 STOCK INCENTIVE PLAN
The following is a summary of the 1998 Stock Incentive Plan (the
"1998 Incentive Plan"). This summary is qualified in its entirety by
the actual terms of the 1998 Incentive Plan, which is attached hereto as
Exhibit F and incorporated herein by reference.
DESCRIPTION OF THE PLAN
The Company believes that a key element of director, officer,
and 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
directors, officers, and employees, thereby providing substantial
motivation for superior performance. In that regard, the Board of
Directors and the stockholders previously approved certain plans under
which there were outstanding options for the purchase of 12,918,124
shares and there were 5,457,166 shares available for future grant at
January 31, 1998. Upon recommendation by the CGC Committee, on April
27, 1998, the Board of Directors has adopted, subject to stockholder
approval, the 1998 Incentive Plan and has recommended its submission to
the Company's stockholders.
Under the 1998 Incentive Plan, the CGC Committee has the
authority to grant to employees and consultants of the Company, and the
Board of Directors has the authority to grant to directors who are not
employed by the Company ("Outside Directors"), the following types of
awards: (1) stock options; (2) stock appreciation rights; and/or (3)
restricted stock. The CGC Committee has the power to delegate authority
to the Company's CEO or to a committee composed of officers of the
Company to grant, on behalf of the CGC Committee, non-qualified stock
options, subject to such guidelines as the CGC Committee may determine
from time to time. Pursuant to the 1998 Incentive Plan, 6,000,000
shares of Common Stock have been reserved and, upon stockholder
approval, will be available for issuance, which may include authorized
and unissued shares or treasury shares. The CGC Committee desires to
make grants to employees at the store level and throughout the Company
to more fully align employees' interests with the interests of the
Company's stockholders.
The maximum number of shares of Common Stock for which awards
may be made under the 1998 Incentive Plan to any officer of the Company
or other person whose compensation may be subject to the limitations on
deductibility under Section 162(m) of the Code is 500,000 during any
single year. As of the date hereof, no awards have been made under the
1998 Incentive Plan. Any shares as to which an option or other award
expires, lapses unexpired, or is forfeited, terminated, or canceled may
become subject to a new option or other award. No grant under the 1998
Incentive Plan shall have an exercise period of more than ten years.
The 1998 Incentive Plan also provides for automatic grants of
non-qualified stock options to Outside Directors pursuant to the
following formula: (i) the annual retainer for an Outside Director
(determined with reference to the rate of annual retainer in effect on
the date the non-qualified stock option is granted), divided by (ii) the
fair market value of a share of Common Stock on the date of the 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 non-qualified stock option granted hereunder shall be the fair
market value on the date of the grant. Such options will vest with
respect to all shares on the first anniversary of the date of grant, if
such Outside Director is still serving as a director on such date. All
options automatically granted to an Outside Director will enable the
optionee to purchase shares of Common Stock at the fair market value of
the Common Stock on the date of grant. Outside Directors will not be
able to transfer or assign their options without the prior written
consent of the Board of Directors other than (i) transfers by the
optionee to a member of his or her immediate family or a trust for the
benefit of the optionee or a member of his or her immediate family, or
(ii) transfers by will or by the laws of descent and distribution.
Options automatically granted to Outside Directors will have a term of
ten years from the date of grant. The exercise price may be paid in
cash, shares of Common Stock, or a combination thereof. No awards shall
be made hereunder until awards are no longer made pursuant to the 1995
Outside Directors Stock Option Plan.
Incentive stock options ("ISOs") and non-qualified stock options
may be granted for such number of shares as the CGC Committee may
determine and may be granted alone, in conjunction with, or in tandem
with other awards under the 1998 Incentive Plan or cash awards outside
the 1998 Incentive Plan. A stock option will be exercisable at such
times and subject to such terms and conditions as the CGC Committee will
determine. In the case of an ISO, however, the term will be no more
than ten years after the date of grant (five years in the case of ISOs
for certain 10% shareholders). The option price for an ISO will not be
less than 100% (110% in the case of certain 10% shareholders) of the
fair market value of the Common Stock as of the date of grant and for
any non- qualified stock option will not be less than 50% of the fair
market value as of the date of grant. ISOs granted under the 1998
Incentive Plan may not be transferred or assigned other than by will or
by the laws of descent and distribution. No ISOs may be granted on or
after the tenth anniversary of the earlier of the effectiveness of the
1998 Incentive Plan or shareholder approval thereof. Non-qualified
stock options and stock appreciation rights may not be transferred or
assigned without the prior written consent of the CGC Committee other
than (i) transfers by the optionee to a member of his or her immediate
family or a trust for the benefit of the optionee or a member of his or
her immediate family, or (ii) transfers by will or by the laws of
descent and distribution.
Stock appreciation rights may be granted under the 1998
Incentive Plan in conjunction with all or part of a stock option and
will be exercisable only when the underlying stock option is
exercisable. Once a stock appreciation right has been exercised, the
related portion of the stock option underlying the stock option
appreciation right will terminate. Upon the exercise of a stock
appreciation right, the Company will pay to the employee or consultant
in cash, Common Stock, or a combination thereof (the method of payment
to be at the discretion of the CGC Committee), an amount equal to the
excess of the fair market value of the Common Stock on the exercise date
over the option price, multiplied by the number of stock appreciation
rights being exercised.
Restricted stock awards may be granted alone, in addition to, or
in tandem with, other awards under the 1998 Incentive Plan or cash
awards made outside the 1998 Incentive Plan. The provisions attendant
to a grant of restricted stock may vary from participant to participant.
In making an award of restricted stock, the CGC Committee will determine
the periods during which the restricted stock is subject to forfeiture
and may provide such other awards designed to guarantee a minimum value
for such stock. The CGC Committee may also impose such other conditions
and restrictions on the shares of restricted stock as it deems
appropriate, including the satisfaction of one or more of the following
performance criteria: (i) pre-tax income or after-tax income; (ii)
operating cash flow; (iii) operating profit; (iv) return on equity,
assets, capital, or investment; (v) earnings or book value per share;
(vi) sales or revenues; (vii) operating expenses; (viii) Common Stock
price appreciation; and (ix) implementation, management, or completion
of critical projects or processes (the "Performance Goals"). The
Performance Goals may include a threshold level of performance below
which no payment will be made (or will occur), and a maximum level of
performance above which no additional payment will be made (or at which
full vesting will occur). Each of the Performance Goals will be
determined, to the extent applicable, in accordance with generally
accepted accounting principles and will be subject to certification by
the CGC Committee; provided, that the CGC Committee will have the
authority to make equitable adjustments to the Performance Goals in
recognition of unusual or non- recurring events affecting the Company.
The CGC Committee may provide that such restrictions will lapse with
respect to specified percentages of the awarded shares of restricted
stock on successive future dates. During the restriction period, the
employee or consultant may not sell, transfer, pledge, or assign the
restricted stock but will be entitled to vote the restricted stock and
to receive, at the election of the CGC Committee, cash or deferred
dividends. No restricted stock awards will be issued pursuant to the
1998 Incentive Plan in excess of 100,000 shares of Common Stock.
If there is a change in control or a potential change of control
of the Company, stock appreciation rights and any stock options which
are not then exercisable, will become fully exercisable and vested and
the restrictions and deferral limitations applicable to restricted stock
and other stock-based awards may lapse and such shares and awards will
be deemed fully vested. For purposes of the 1998 Incentive Plan, a
change of control is defined generally to include (i) any person or
entity, other than the Company or a wholly-owned subsidiary of the
Company, becoming the beneficial owner of the Company's securities
having 35% or more of the combined voting power of the then outstanding
securities that may be cast for the election of directors; (ii) in
connection with a cash tender, exchange offer, merger or other business
combination, sale of assets or contested election, less than a majority
of the combined voting power of the then outstanding securities of the
Company entitled to vote generally in the election of directors being
held in the aggregate by the holders of the Company's securities
entitled to vote generally in the election of directors of the Company
immediately prior to such transaction; and (iii) during any period of
two consecutive years, individuals who at the beginning of any such
period constitute the Board ceasing to constitute at least a majority
thereof, unless the election of each director first elected during such
period was approved by a vote of at least two-thirds of the directors of
the Company then still in office who were directors of the Company at
the beginning of any such period. Stock options, stock appreciation
rights, and restricted stock will, unless otherwise determined by the
CGC Committee in its sole discretion, be cashed out on the basis of the
change in control price (as defined in the 1998 Incentive Plan and as
described below). The change in control price will be the highest price
per share paid in any transaction reported on the NYSE or paid or
offered to be paid in any bona fide transaction relating to a change in
control or potential change in control at any time during the
immediately preceding 60-day period, as determined by the CGC Committee.
The Board may amend, alter, or discontinue the 1998 Incentive
Plan, provided that no amendment may be made which would impair the
rights of an optionee or participant under an award made under the 1998
Incentive Plan without the participant's consent. No award may be
granted pursuant to the 1998 Incentive Plan on or after the tenth
anniversary of the effective date of the plan, but awards granted prior
to such tenth anniversary may be extended beyond that date.
Because awards under the 1998 Incentive Plan are at the
discretion of the CGC Committee, the benefits that will be awarded under
the 1998 Incentive Plan to persons other than Outside Directors are not
currently determinable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the Federal income tax
aspects of awards made under the 1998 Incentive 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.
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 mid-term or 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, mid-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.
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 depreciation) after date of
exercise is treated either as short-term, mid-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.
Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of a stock appreciation right.
When the stock appreciation right 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 stock appreciation right, the post-exercise
appreciation or depreciation will be treated in the same manner
discussed above under "-Non-Qualified Stock Options."
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, mid-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.
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.
The 1998 Incentive Plan is not intended to be a "qualified plan"
under Section 401(a) of the Code.
Vote Required. Under Kentucky law, the affirmative votes of the
holders of a majority of the votes cast by the holders of the Company's
Common Stock and the holders of the Company's Series A Preferred Stock
(on an as converted basis) represented and entitled to vote at the
Annual Meeting are required to adopt Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION AND
APPROVAL OF THE 1998 STOCK INCENTIVE PLAN.
<PAGE>
REPORT OF THE CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The three-member Corporate Governance and Compensation Committee
(the "CGC 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 its
stockholders. The CGC 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 result-orientated
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 unit)
performance. The performance-based component, whether annual incentive
or long-term incentive, is significant enough to serve as a strong
incentive for excellent performance. 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 industry, market and strategic importance to the
Company. This method of valuation allows the Company to respond to
changes in its employment needs and changes in the labor market.
Increases in base pay require a satisfactory or better level of
performance as determined by the CGC Committee.
3. INDIRECT COMPENSATION PHILOSOPHY
The Company's indirect-compensation programs are intended to
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 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 Employee Stock Purchase Plan and the
Company's 401(k) plan.
B. EXECUTIVE OFFICER COMPENSATION
Under the supervision of the CGC Committee, the Company has
developed compensation policies 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 1998 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-accelerated stock options. Incentive pay
awarded to the CEO and the other Named Executive Officers was controlled
by Company performance goals which are established annually. While the
CGC 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 compared with the Company's
pay-for-performance component. The fiscal 1998 average base salaries
for the Named Executive Officers (not including the CEO or President)
increased 8.6%. The increase in base salaries in fiscal 1998 was
determined based upon recommendations made by the human resources
department to the CGC Committee, a review of peer group comparison data
(using the peer group compensation survey published by Management
Compensation Services)(1) and the subjective analysis of the CGC
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) The peer group compensation survey is published annually
by Management Compensation Services. The 1996 survey included
the following mass-merchandising companies: Ames Department
Stores, Bradlees, Caldor, Consolidated Stores, Dayton Hudson,
Filene's Basement, Garden Ridge, Hills Department Stores, K-Mart
Stores, Mac Frugal's Bargains/Closeouts, Meijer, Montgomery
Ward, Pamida, Quality Stores, Ross Stores, Sears Roebuck,
Service Merchandise, ShopKo Stores, TJX Companies, Venture
Stores and Wal-Mart Stores, For the past eight years the
Company has used this well-known peer-group annual salary survey
when reviewing and establishing the Company's executive
compensation policies. Because the Company uses this survey for
executive compensation comparison and because the Company ties
executive compensation directly to Company performance, the same
peer group survey, with the exception of those companies that
are not publicly traded (and for which stock comparison data are
therefore unavailable), is used for Company performance
comparison purposes.
1. ANNUAL CASH BONUSES
The Company's annual cash bonus opportunity for the executive
officers makes up the short-term incentive component of their 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 CGC
Committee at the end of the prior fiscal year. The Company uses
earnings-per-share improvement for determining target goals for the
executive officers' variable pay for primarily two reasons: first, it is
a defined measure of total Company performance and second, it is a
measure that can be easily identified and reviewed by stockholders.
In order for an officer to receive a cash bonus under the cash
bonus incentive program effective for fiscal 1998, the Company had to
meet committee-established earnings-per-share goals, each exceeding the
prior year's performance. If the Company reached the "target" goal,
which was considered by the CGC Committee to be challenging, then 25% of
salary was to be awarded to each executive officer as a cash bonus. If
the Company reached the "stretch" goal, which was considered by the
Committee to be extremely challenging, then 75% of salary was to be
awarded to each executive officer as a cash bonus. The percentage of
salary awarded for earnings-per- share performance falling between the
"target" and "stretch" goals is on a graduated scale (from 26% of salary
to 74% of salary) commensurate with the earnings-per-share performance.
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" ("KDAs") and "Key Result Areas"
("KRAs"). 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: (a) The Company must achieve
an established earnings-per-share goal; and (b) the individual must
achieve a satisfactory performance evaluation based upon the
above-described PDP factors. Therefore, equal weight is given to each
of these factors.
Because the Company exceeded its target goal but did not meet
its stretch goal for fiscal 1998, the executive officers will receive
69% of their annual salaries as cash bonuses (paid in fiscal 1999).
Because the Company reached its stretch goal for fiscal 1997, the
executive officers received the maximum cash bonus award for fiscal 1997
(paid in fiscal 1998).
2. EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1989 Employee Stock Incentive Plan ("1989 Plan"),
1993 Employee Stock Incentive Plan ("1993 Plan") and 1995 Employee Stock
Incentive Plan ("1995 Plan") award non-qualified performance-accelerated
stock options to the executive officers, department directors and other
personnel considered to be in key positions, as approved by the CGC
Committee.
The CGC Committee granted performance-accelerated stock options
under its Stock Incentive Program with annual accelerated-vesting
schedules based on the achievement of corporate performance goals (as
measured by earnings-per-share) and individual performance goals (as
measured by the Company's PDP). To further encourage outstanding
performance, the CGC Committee adopted a compensation program that ties
the acceleration of stock option vesting to earnings-per-share goals.
Each executive officer receives stock option grants with a nine and
one-half year vesting schedule. However, if the executive officer meets
his individual goal and the Company meets or exceeds its established
earnings-per-share goal then the stock option grant tied to that goal
will vest earlier than nine and one-half years. If the CGC
Committee-established earnings-per-share goal for the Stock Incentive
Program is met, then grants tied to that fiscal year's performance will
vest on an accelerated basis.
In determining the number of the shares subject to stock options
granted to the employees eligible to participate in the stock incentive
plans, the CGC 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. 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 CGC
Committee has decided to place greater emphasis on the performance-based
component of compensation, it pays lower-than-average salaries for the
CEO and other executive officers but sets incentive compensation
multiples at or above the high end of the peer group survey ranges for
these positions. Specifically, the CGC 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, the CGC Committee established a stock-option
program called the Stock Plus Program. This program, which is composed
of option grants under the 1989 Plan, the 1993 Plan and the 1995 Plan,
awards each executive officer additional stock options if the executive
officer maintains from May 1 to April 30 of the grant year a level of
Company-stock ownership (determined by the fair market value as set by
the NYSE trading price at the close of business on April 1) equal to at
least two and one-half times his or her salary. The CEO is required to
maintain ownership of four times his salary to be eligible to
participate in this program.
Because (1) the Company exceeded its stock option program
earnings-per-share goals for fiscal 1998, (2) each named executive
officer achieved his previously-established performance goals, and (3)
each Named Executive Officer met the ownership requirements of the Stock
Plus Program, the maximum number of options which could vest on an
accelerated basis or otherwise in fiscal 1998 became fully vested.
Because (1) the Company exceeded its stock option program
earnings-per-share goals for fiscal 1997, (2) each named executive
officer achieved his previously-established performance goals, and (3)
each Named Executive Officer met the ownership requirements of the Stock
Plus Program, the maximum number of options which could vest on an
accelerated basis or otherwise in fiscal 1997 became fully vested.
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 CGC Committee considers the CEO's prior-year performance and
expected future contributions to the Company as well as peer-industry
survey results published annually. The CEO's salary, which was not
increased in fiscal 1998, was 22.4% lower than the industry comparison
group median.
The CGC 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 goals. Also like the other executive officers, the
CEO is eligible for Stock Incentive program non-qualified
performance-accelerated stock options and stock-ownership-based Stock
Plus Program stock options (the long-term incentive). The Stock
Incentive Program stock options, which have a nine and one-half year
vesting schedule, can be accelerated to an earlier year upon the
attainment of Committee-established earnings-per-share goals, and
individual performance goals.
The CGC 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 CGC Committee has established a 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
CGC 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.
Under the Company's short-term incentive program (cash bonus),
the CEO's total possible cash-bonus incentive is 100% of his salary. To
be eligible for an earnings-per-share cash bonus award, the CEO must
achieve personal performance goals established by the CGC Committee, and
the Company must meet at least one of its cash bonus program
earnings-per-share goals. If the CEO meets his individual performance
goals and the Company meets its Committee-established cash bonus program
"target" goal, the CEO will receive a cash bonus equal to 25% of his
annual salary. If the CEO's individual goals are met and the CGC
Committee-established cash bonus program "stretch" earnings-per-share
goal is met, then the CEO will receive a cash bonus equal to 100% of his
annual salary. The percentage of salary awarded for earnings-per-share
performance falling between the "target" and "stretch" goals is on a
graduated scale (from 26% to 99% of salary) commensurate with the
earnings- per-share performance.
Because the Company exceeded its target earnings-per-share goal
set for fiscal 1998, but did not achieve its stretch earnings-per-share
goal established for awarding cash bonus, the CEO's short-term incentive
compensation program rewarded the CEO with a cash bonus (paid in fiscal
1999) of 88% of his annual salary. Because the Company reached its cash
bonus "target" earnings-per-share goals for fiscal 1997, the CEO was
paid a cash bonus of 100% of his annual salary in fiscal 1998 for fiscal
1997 performance.
The CEO's long-term incentive compensation program effective for
fiscal 1998 rewards the CEO with stock option grants up to approximately
three to four and one-half times his annual salary. If the CGC
Committee- established stock option program "target" earnings-per-share
goal is met and the CEO meets his individual performance standard, he
will vest on an accelerated basis in a stock option grant that
represents approximately 67% of the total non-Stock-Plus stock option
benefit. If both individual and earnings-per-share goals are met, then
the CEO will vest on an accelerated basis in the grants tied to that
fiscal year's performance.
The CEO also participates in the Company's Stock Plus program.
This program, which is composed of option grants under the 1989 Plan,
the 1993 Plan and the 1995 Plan, rewards the CEO with additional stock
options if the CEO maintains a level of Company-stock ownership equal to
at least four times his salary.
For fiscal 1998 and 1997, because the Company exceeded the
Committee-established stock option program earnings-per-share goal, the
CEO met his performance standard and the CEO met the Company stock
ownership requirement, the CEO vested, on an accelerated basis, in the
maximum number of the available stock option grants.
D. DEDUCTIBILITY.
The CGC 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, compensation
pursuant to the Company's stock plans should qualify as
"performance-based" and therefore, should be excluded from the
$1,000,000 limit. Other forms of compensation provided by the Company
to its executives, however, are not excluded from such limit. The
Company currently has an agreement with the CEO which will result in the
deferral of compensation in excess of the $1,000,000 limit to a year in
which the limit would not be exceeded.
William S. Wire, II - Committee Chairman
Wallace N. Rasmussen
David M. Wilds
<PAGE>
COMMON STOCK PERFORMANCE
As a part of the executive compensation information presented in
this Proxy Statement, the SEC requires the Company to prepare a
performance graph that compares its cumulative total stockholders'
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 Mid-Cap 400 Index. For the peer group stock market performance
indicator, the Company has chosen to use the stock market results of the
publicly-held participants of the compensation survey published by
Management Compensation Services used by the CGC Committee when
reviewing and establishing the Company's executive compensation
policies. See "Report of the Corporate Governance and Compensation
Committee of the Board of Directors on Executive Compensation."
[PERFORMANCE GRAPH REPRESENTING THE FOLLOWING
INFORMATION HAS BEEN OMITTED FROM THIS ELECTRONIC FILING]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG DOLLAR GENERAL CORPORATION, THE S&P MIDCAP 400 INDEX AND A PEER GROUP
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION
Peer Group Cumulative
Total Return (Weighted
Average by Market Value) 1/31/93 1/31/94 1/31/95 1/31/96 1/31/97 1/31/98
<S> <C> <C> <C> <C> <C> <C>
Dollar General Corporation 100 153 228 222 348 642
Peer Group 100 95 81 88 112 171
S&P MIDCAP 400 100 115 110 144 176 220
</TABLE>
* $100 INVESTED ON 1/31/93 IN STOCK OR INDEX - INCLUDING
REINVESTEMENT OF DIVIDENDS.
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term
or other compensation paid or accrued during fiscal years 1998, 1997 and
1996 for the Company's CEO and the persons who, at the end of fiscal
1998, were the other four most highly- compensated executive officers of
the Company (collectively the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE> Long-Term
Annual Compensation Compensation Awards
------------------------------ ------------------------
Other Annual Restricted Securities All Other
Fiscal Salary Bonus Compensation Stock Underlying Compensation
Name and Principal Position Year ($) ($) ($) (1) Awards ($) Options (#) (2) ($) (3)
<S> <C> <C> <C> <C> <C> <C> <C>
Cal Turner, Jr. and 1998 599,129 600,000 9,076 0 183,105 64,315
Chief Executive Officer 1997 586,564 0 9,425 0 294,270 60,795
1996 537,500 500,000 9,508 0 287,726 59,420
Bob Carpenter, Chief 1998 195,000 135,000 8,169 0 62,255 6,350
Administrative Officer and 1997 174,168 0 9,305 0 100,538 6,000
Chief Counsel 1996 157,500 112,500 8,534 0 96,783 6,000
Bruce Krysiak, President 1998 386,630 0 48,048 0 173,182 6,350
(5) 1997 32,219 0 0 $339,625 (6) 546,871 0
1996 0 0 0 0 0 0
Phil Richards, Chief 1998 200,000 150,000 5,715 0 89,271 6,350
Financial Officer 1997 116,667 0 88,144 0 323,790 0
1996 0 0 0 0 0 0
Leigh Stelmach, Executive 1998 293,750 206,250 9,070 0 62,255 6,350
Vice President Operations 1997 270,314 0 9,588 0 100,538 6,000
1996 251,250 168,750 8,851 0 96,783 6,000
</TABLE>
___________________________
(1) The amounts reported in this column reflect gross-ups for tax
reimbursements.
(2) The Stock Incentive Program and Stock Plus Program stock option
grants granted in fiscal 1998 will vest nine and one-half years after
the date of grant provided the executive officer is still employed by
the Company. The vesting dates for each Stock Incentive Program grant
can be accelerated to April 1 in the year immediately following the
associated year-end if the individual officer meets his individual
performance goals and the Company meets its earnings-per-share goals set
for that year. The Stock Plus Program grants require the holder to
maintain a specified level of Company stock ownership for vesting to be
accelerated.
(3) Includes $5,600 contributed in fiscal 1998, $5,250 in fiscal 1997
and fiscal 1996 to each eligible executive officer's retirement account.
Includes a $750 contribution to each eligible executive officer's
Employee Stock Ownership Plan account in fiscal 1998, fiscal 1997 and
fiscal 1996. Includes for Mr. Turner the following amounts paid as
premiums on a split-dollar life insurance policy: 1998: $57,964, 1997:
$54,795, and 1996: $53,420.
(4) Effective January 31, 1997, Mr. Turner resigned as President and
continues in his capacity as Chairman and Chief Executive Officer.
(5) Mr. Krysiak resigned from the Company effective April 1, 1998.
(6) Represents the value of 21,484 shares granted pursuant to Mr. Krysiak's
restricted stock agreement.
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table provides information as to options granted
to the Named Executive Officers during fiscal 1998. The Company granted
no Stock Appreciation Rights in fiscal 1998, and no Named Executive
Officer holds any Stock Appreciation Rights.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
-------------------------------------------------------------------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees In or Base
Options Granted Fiscal Year Price Expiration
Name (#) (1) 1998 (%) ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Cal Turner, Jr. 97,656 5.7% $20.96 3/21/07 $2,435,732 $6,172,623
48,827 $20.96 3/21/07
36,621 $21.92 6/02/07
Bob Carpenter 33,202 1.9% $20.96 3/21/07 $ 828,140 $2,098,668
16,601 $20.96 3/21/07
12,451 $21.92 6/02/07
Bruce Krysiak (2) 65,000 5.4% $20.96 3/21/07 $2,328,520 $5,900,928
32,500 $20.96 3/21/07
75,682 $21.92 6/02/07
Phil Richards 33,202 2.8% $20.96 3/21/07 $1,200,569 $3,042,477
16,601 $20.96 3/21/07
39,467 $21.92 6/02/07
Leigh Stelmach 33,202 1.9% $20.96 3/21/07 $ 828,140 $2,098,668
16,601 $20.96 3/21/07
12,451 $21.92 6/02/07
</TABLE>
(1) These granted options are to be vested on an accelerated basis upon
the attainment of individual and Company performance (earnings-per-
share) goals. Accelerated vesting for a portion of the grants to each
Named Executive Officer (the Stock Plus Program grants) is based on
company-stock ownership goals. The above-identified stock option grants
for each Named Executive Officer are listed in the following order: (1)
Stock Incentive Program grants which, for purposes of accelerated
vesting are tied to earnings-per-share goal one, (2) Stock Incentive
Program grants which, for purposes of accelerated vesting are tied to
earnings-per-share goal two, and (3) Stock Plus Program grants.
(2) Mr. Krysiak resigned effective April 1, 1998. As a result, the options
to purchase of Common Stock which were granted in fiscal 1998 were
cancelled.
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND YEAR-END VALUES
The following table provides information as to options exercised or held
by the named executive officers during fiscal 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year End Options at Fiscal Year-end
-------------------------------------------------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) (1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Cal Turner, Jr. 670,533 7,402,215 0 911,011 0 12,198,661
Bob Carpenter 158,281 2,446,800 234,128 303,635 4,485,721 4,054,831
Bruce Krysiak 143,140 1,618,453 101,000 97,656 (2) 1,342,492 1,298,043 (2)
Phil Richards 165,935 2,264,313 0 247,126 0 2,308,279
Leigh Stelmach 51,561 998,227 155,852 303,635 3,087,213 4,054,831
</TABLE>
(1) Market value of underlying securities at exercise or
year-end, minus the exercise price.
(2) As a result of Mr. Krysiak's resignation, effective April 1, 1998,
all previously unvested options granted for the purchase of Common Stock
were cancelled, except those that would vest on or before April 1, 1998.
<PAGE>
EMPLOYEE RETIREMENT PLAN
In fiscal 1998, the Company combined its two existing retirement
plans, the Dollar General Money Purchase Retirement Plan and the Dollar
General Employee Stock Ownership Program, to create a new retirement
program. The Dollar General Corporation 401(k) Savings and Retirement
Plan (the "401(k) Plan") became effective on January 1, 1998. Balances
in the two earlier plans were transferred into the 401(k) Plan and the
other plans were terminated.
The Company will make an automatic annual contribution equal to
2% of each eligible employee's compensation. Seventy-five percent of
this automatic contribution will be made in cash, while the remaining
twenty-five percent will be contributed in the Company's Common Stock.
Eligible employees are not required to make any additional contributions
in order to receive this automatic contribution from the Company.
However, participants may elect to contribute between one and fifteen
percent of their annual salary, up to a maximum annual contribution of
$10,500. The Company will match 50% of employee contributions, up to
6%.
The 401(k) Plan covers substantially all employees, subject to
certain eligibility requirements, including the Named Executive
Officers. The 401(k) Plan is subject to the Employee Retirement and
Income Security Act ("ERISA").
A participant's right to claim a distribution of his or her
account balance is dependent on ERISA guidelines, Internal Revenue
Service regulations, and a vesting schedule as follows:
Employee Contributions Immediately Vested
Dollar General Automatic
Contribution (2%) Immediately Vested
Employer Matching Contribution At the end of the 1st - 3rd Years 0% Vested
At the end of the 4th Year 40% Vested
At the end of the 5th Year 100% Vested
As of January 31, 1998, Messrs. Cal Turner, Jr., Bob Carpenter,
Bruce Krysiak, Phil Richards and Leigh Stelmach had 32, 17, 0, 1, and 8
years of credited service, respectively. The estimated present value of
benefits under the plan as of January 31, 1998 was $314,460 for Cal
Turner, Jr., $123,638 for Bob Carpenter, $5,600 for Bruce Krysiak,
$5,600 for Phil Richards, and $72,442 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 BENEFITS
Since 1988, the Company has provided the Master Retirement Plan for
Select Key Employees (the "Select Retirement Plan"), a salary
continuation plan for eligible employees. On January 1, 1998, the
Company started a new Supplemental Retirement Plan (the "SERP") to
replace the Select Retirement Plan. Balances in the Select Retirement
Plan were transferred to the new SERP Plan and the old plan is being
terminated.
The SERP Plan will be available to the same select key employees
as the old plan. Other employees may be designated by the CGC Committee
to participate. The Company will make a contribution annually to all
participants who are actively employed on December 31. The contribution
percentage is based on age plus service where:
Age plus Service Percent of Base plus Bonus
Non-Officer Officers
<40 2.0% 3.0%
40-59 3.0% 4.5%
60-79 5.0% 7.5%
80 or more 8.0% 12.0%
Participants will have phantom investment funds to choose from
which mirror the investment options available in the 401(k) Plan.
Participants will be 100% vested at the earlier of ten (10) years of
service or age 50. 100% vesting will also occur upon death or total and
permanent disability. The SERP is non-qualified and therefore not
subject to ERISA. The estimated present value of benefits under the
SERP as of January 1, 1998 was $787,948 for Cal Turner, Jr., $114,909
for Bob Carpenter, $0 for Bruce Krysiak, $7,182 for Phil Richards, and
$86,182 for Leigh Stelmach.
Commensurate with the new SERP, the Company also offered a new
Compensation Deferral Plan (the "Deferral Plan"). The Deferral Plan is
available to select key employees as designated by the CGC Committee.
Participants may defer up to 50% of base pay, reduced by any deferrals
to the qualified plan, and up to 100% of bonus. Elections to defer must
be made prior to January 1st of the following year. Participants may
elect to have deferrals and earnings for the current Deferral Plan Year
paid out in a lump sum prior to retirement or termination, but no sooner
than five (5) years following the end of the current Deferral Plan Year.
Participants will have phantom investment funds to choose from which
mirror the investment options available in the 401(k) Plan. All
participants are 100% vested for all compensation deferrals.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
John B. Holland, a director of the Company, was President and
Chief Operating Officer of Fruit of the Loom, Inc., a manufacturer of
underwear and other soft goods, until his retirement in February 1996.
In fiscal 1998, the Company purchased approximately $36,698,919 in goods
from Fruit of the Loom, Inc.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholder proposals intended for presentation at the 1999
annual meeting of stockholders must be received by Robert C. Layne,
Corporate Secretary, at 104 Woodmont Boulevard, Suite 300, Nashville,
Tennessee 37205 not later than December 29, 1998 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 SEC.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act and the disclosure requirements of
Item 405 of Regulation S-K of the Rules and Regulations of the SEC
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 SEC, 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 1998 with the exception
of Mr. Ron Humphrys who exercised a stock option during April 1997 that
was reported in June 1997, Mr. Krysiak who received a restricted stock
grant in January 1997 that was reported in April 1997, and Ms. Susan
Milana who made two purchases during September 1997 that were reported
in November 1997.
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" will be counted as
present for purposes of determining a quorum, but will not be counted as
votes in favor of or against a particular proposal. If a broker or
nominee holding shares in "street" name indicates on the proxy that it
does have discretionary authority to vote on a particular matter, those
shares will not be voted with respect to that matter and will be
disregarded for the purpose of determining the total number of votes
cast with respect to a proposal.
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, Registrar and Transfer Company, 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 Annual 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 with this proxy
statement. A copy of the Company's Annual Report on Form 10-K for the
year ended January 30, 1998 (as filed with the SEC) is available without
charge to any stockholder upon request. Requests for the Company's
Annual Report on Form 10-K should be directed to Robert C. Layne,
Corporate Secretary.
Whether or not you expect to be present at the Annual Meeting of
Stockholders in person, please sign, date and return the enclosed proxy
promptly in the enclosed business reply envelope. No postage is
necessary if the proxy is mailed within the United States.
2
19
31
=========
EXHIBIT A
=========
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as
of the _____ day of ____ 1998 by and between Dollar General
Corporation-TN, a Tennessee corporation ("New Dollar General"), and
Dollar General Corporation, a Kentucky corporation ("Old Dollar
General") (collectively, the "Constituent Corporations").
RECITALS
WHEREAS, all of the issued and outstanding shares of capital
stock of New Dollar General are owned beneficially and of record by Old
Dollar General;
WHEREAS, the sole purpose of the Plan of Merger embodied herein
is to effect a migratory merger within the meaning of Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended; and
WHEREAS, each of the Constituent Corporations has, subject to
approval by their respective shareholders, adopted the plan of merger
embodied in this Agreement, and the Constituent Corporations and their
respective Boards of Directors deem it advisable and in the best
interest of each of the Constituent Corporations that Old Dollar General
be merged with and into New Dollar General pursuant to the applicable
corporation laws of Tennessee and Kentucky.
AGREEMENT
NOW, THEREFORE, the Constituent Corporations do hereby agree to
merge, on the terms and conditions herein provided, as follows:
1. The Merger.
1.1 Governing Law. Old Dollar General shall be merged into New
Dollar General in accordance with the applicable laws of the
State of Tennessee and the Commonwealth of Kentucky. "Dollar
General Corporation-TN" shall be the name of the surviving
corporation and shall be governed by the laws of the State of
Tennessee.
1.2 Effective Date. The "Effective Date" of the merger shall be,
and such term as used herein shall mean the date on which the
Articles of Merger prepared in accordance herewith are filed in
the office of the Secretary of State of the State of Tennessee
and the Articles of Merger prepared in accordance herewith are
filed in the office of the Secretary of State of the
Commonwealth of Kentucky, all after satisfaction of the
requirements of applicable laws of the states prerequisite to
such filings.
2. Share Conversion.
2.1 Stock of Old Dollar General. On the Effective Date, each share
of Common Stock of Old Dollar General issued and outstanding
immediately prior to the merger shall automatically be converted
into and become, without further action by the holder thereof,
one share of Common Stock of New Dollar General. On the
Effective Date, each share of Series A Convertible Junior
Preferred Stock of Old Dollar General issued and outstanding
immediately prior to the merger shall automatically be converted
into and become, without further action by the holder thereof,
one share of Series A Convertible Junior Preferred Stock of New
Dollar General. As of and after the Effective Date, each
outstanding certificate which, prior to the Effective Date
represented shares of Common Stock of Old Dollar General shall
be deemed for all purposes to evidence ownership of, and to
represent an equal number of shares of Common Stock of New
Dollar General.
2.2 Stock of New Dollar General. Upon the Effective Date, by virtue
of the merger and without any action on the part of the holder
thereof, each share of Common Stock of New Dollar General
outstanding immediately prior thereto shall be canceled and
returned to the status of authorized but unissued shares.
3. Effect of the Merger.
3.1 Rights, Privileges, Etc. On the Effective Date, New Dollar
General, without further act, deed or other transfer, shall
retain or succeed to, as the case may be, and possess and be
vested with all the rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private
nature, of the Constituent Corporations; all property of every
description and every interest therein and all debts and other
obligations of or belonging to or due to the Constituent
Corporations on whatever account shall thereafter be taken and
deemed to be held by or transferred to, as the case may be, or
vested in New Dollar General without further act or deed; title
to any real estate, or any interest therein, vested in the
Constituent Corporations shall not revert or in any way be
impaired by reason of this merger, and all of the rights of
creditors of the Constituent Corporations shall be preserved
unimpaired, and all liens upon the property of the Constituent
Corporations shall be preserved unimpaired, and such debts,
liabilities, obligations and duties of the Constituent
Corporations shall thenceforth remain with or attach to, as the
case may be, New Dollar General and may be enforced against it
to the same extent as if all of such debts, liabilities,
obligations and duties had been incurred or contracted by it.
3.2 Employee Benefit Plans. On the Effective Date, New Dollar
General will automatically assume all obligations of Old Dollar
General under any and all employee benefit plans in effect as of
the Effective Date or with respect to which employee rights or
accrued benefits are outstanding as of the Effective Date.
3.3 Charter and Bylaws. The Charter of New Dollar General as in
effect on the Effective Date shall, from and after the Effective
Date, be and continue to be the Charter of New Dollar General
without change or amendment until thereafter amended in
accordance with the provisions thereof and applicable laws. The
Bylaws of New Dollar General as in effect on the Effective Date
shall, from and after the Effective Date, be and continue to be
the Bylaws of New Dollar General without change or amendment
until thereafter amended in accordance with the provisions
thereof, the Charter of New Dollar General and applicable laws.
3.4 Upon the Effective Date, the Charter of New Dollar General is
hereby amended by deleting Article 1 in its entirety and
substituting in lieu thereof the following:
"The name of the Corporation shall be Dollar General Corporation."
3.5 Directors and Officers. The directors and officers of Old Dollar
General shall be the directors and officers of New Dollar
General on the Effective Date, and such directors and officers
shall serve until they are removed or replaced in accordance
with the Charter and Bylaws of New Dollar General.
3.6 Options, Warrants and Rights. Each outstanding option, warrant
or right to acquire shares of Common Stock of Old Dollar General
which is not exercised prior to the Effective Date shall, at the
Effective Date, be converted into the right to acquire the same
number of shares of Common Stock of New Dollar General subject
to the terms, conditions and provisions for adjustment to which
such options, warrants or rights were previously subject.
3.7 Further Action. From time to time, as and when requested by New
Dollar General, or by its successors or assigns, any party
hereto shall execute and deliver or cause to be executed and
delivered all such deeds and other instruments, and shall take
or cause to be taken all such further or other actions, as New
Dollar General, or its successors or assigns, may deem necessary
or desirable in order to vest in and confirm to New Dollar
General, and its successors or assigns, title to and possession
of all the property, rights, privileges, powers and franchises
referred to herein and otherwise to carry out the intent and
purposes of this Agreement.
IN WITNESS WHEREOF, this Agreement, having first been duly
approved by resolutions of the Board of Directors of each of the
Constituent Corporations, is hereby executed on behalf of each of the
Constituent Corporations by their respective officers hereunto duly
authorized.
DOLLAR GENERAL CORPORATION,
a Kentucky corporation
By:
Its:
Attest:
By:
Its:
DOLLAR GENERAL CORPORATION-TN,
a Tennessee corporation
By:
Its:
Attest:
By:
Its:
<PAGE>
=========
EXHIBIT B
=========
CHARTER OF DOLLAR GENERAL CORPORATION-TN
1. The name of the corporation is Dollar General Corporation-TN.
2. The corporation is for profit.
3. The duration of the corporation is perpetual.
4. The street address and zip code of the corporation's principal
office in Tennessee will be:
104 Woodmont Boulevard, Suite 500
Nashville, Tennessee 37205
County of Davidson
5. (a) The name of the corporation's registered agent is Robert C. Layne.
(b) The street address, zip code, and county of the corporation's
registered office and
registered agent in Tennessee shall be:
104 Woodmont Boulevard, Suite 500
Nashville, Tennessee 37205
County of Davidson
6. The corporation is organized to do any and all things and to exercise
any and all powers, rights, and privileges that a corporation may now
or hereafter be organized to do or to exercise under the Tennessee
Business Corporation Act, as amended from time to time.
7. The maximum number of shares of stock the corporation is authorized
to issue is:
(a) Five hundred million (500,000,000) shares of common
stock, $.50 par value per share, which shall be entitled to one
vote per share and, upon dissolution of the corporation, shall
be entitled to receive the net assets of the corporation.
(b) One million seven hundred fifteen thousand seven hundred
forty-two (1,715,742) shares of Series A Convertible Junior
Preferred Stock, $.50 par value per share. The following is a
statement of the powers, designations, preferences and relative,
participating, optional and other special rights of the Series A
Convertible Junior Preferred Stock and the qualifications,
limitations and restrictions of the Series A Convertible Junior
Preferred Stock.
(i) Voting Rights. Each share of Series A Convertible Junior
Preferred Stock shall entitle the holder thereof to vote with
the holders of the shares of Common Stock of the Corporation on
all matters submitted to a vote of the holders of the shares of
Common Stock of the Corporation and to have the number of votes
as such holder would have upon conversion of the Series A
Convertible Junior Preferred Stock to Common Stock as provided
in paragraph (iv)(C)(4). The holders of the Series A Convertible
Junior Preferred Stock shall vote separately as a class only on
such matters that require a class vote by law.
(ii) Dividends. Subject to the rights of the holders of any
shares of any series of preferred stock ranking superior to the
Series A Convertible Junior Preferred Stock with respect to
dividends, the holders of Series A Convertible Junior Preferred
Stock shall be entitled to receive cash dividends out of funds
legally available therefor, if, when and as cash dividends are
declared by the Board of Directors and paid out of funds legally
available therefor with respect to the Common Stock, in an
amount equal to ninety percent (90%) of the dividend paid per
share of Common Stock times the number of shares of Common Stock
that the holder of the Series A Convertible Junior Preferred
Stock would be entitled to receive upon conversion pursuant to
paragraph (iv)(C)(4) for each share of Series A Convertible
Junior Preferred Stock then held ("Participating Dividends").
If the Board of Directors shall declare a cash dividend on the
Common Stock, the Board of Directors shall simultaneously
declare a Participating Dividend on the Series A Convertible
Junior Preferred Stock.
(iii) Liquidation, Merger, Etc.
(A) In the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation,
after payment in full of all amounts due and owing to
creditors and holders of superior rights of any series or
class of preferred stock, if any, the holders of Series A
Convertible Junior Preferred Stock shall first be entitled,
before any distribution is made upon any shares of Common
Stock of the Corporation, to receive a preferential payment
from the assets of the Corporation of cash or property (to
the extent of funds legally available therefor) equal to
$.50 per share (the "Series A Preference Amount") of Series
A Convertible Junior Preferred Stock, such amount payable
with respect to one share of Series A Convertible Junior
Preferred Stock being sometimes referred to as the "Series A
Liquidation Payment" and with respect to all shares of
Series A Convertible Junior Preferred Stock being sometimes
referred to as the "Series A Liquidation Payments." If upon
such liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series A Convertible
Junior Preferred Stock shall be insufficient to permit
payment to the holders of Series A Convertible Junior
Preferred Stock of the Series A Liquidation Payments, then
the entire assets of the Corporation to be so distributed
shall be distributed ratably among the holders of Series A
Convertible Junior Preferred Stock.
(B) Upon any such liquidation, dissolution or winding-up
of the Corporation, after the holders of Series A
Convertible Junior Preferred Stock shall have been paid the
Series A Liquidation Payments in full and the payment of any
other distribution that may be required with respect to any
series of preferred stock that may from time to time come
into existence ranking on a parity with or senior to the
Series A Convertible Junior Preferred Stock, the remaining
net assets of the Corporation shall be distributed to the
holders of stock ranking on liquidation junior to the Series
A Convertible Junior Preferred Stock. Written notice of such
liquidation, dissolution or winding-up, stating a payment
date and, to the extent known, the amount of the Series A
Liquidation Payments and the place where said Series A
Liquidation Payments shall be payable, shall be given by
first class mail (postage prepaid), by telecopy, by
overnight courier, or by telex, not less than ten (10)
calendar days prior to the payment date stated therein, to
the holders of record of the Series A Convertible Junior
Preferred Stock, such notice to be addressed to each such
holder at the address shown on the stock transfer records of
the Corporation.
(C) In case outstanding shares of Series A Convertible
Junior Preferred Stock shall be subdivided (by stock split,
stock dividend or otherwise) into a greater number of shares
of Series A Convertible Junior Preferred Stock, the relevant
Series A Preference Amount in effect immediately prior to
each such subdivision shall, simultaneously with the
effectiveness of such subdivision, be proportionately
reduced, and, conversely, in the case outstanding shares of
Series A Convertible Junior Preferred Stock shall be
combined into a smaller number of shares of Series A
Convertible Junior Preferred Stock, the relevant Series A
Preference Amount in effect immediately prior to each such
combination, shall, simultaneously with the effectiveness of
such combination, be proportionately increased.
(D) Whenever the distribution provided for in this
Paragraph (iii) shall be payable in property other than
cash, the value of such distribution shall be the fair
market value of such property as determined in good faith by
the Board of Directors of the Corporation.
(iv) Conversion.
(A) Right of Conversion. At the option of the
holder thereof, at any time following the second
anniversary of the date the shares of Series A
Convertible Junior Preferred stock are issued (the
"Initial Issuance Date"), each share of Series A
Convertible Junior Preferred Stock may be converted
into shares of fully paid and nonassessable Common
Stock at the Conversion Rate (as hereinafter
defined), determined as hereinafter provided, in
effect on the date the certificate is surrendered
for conversion. The option to convert shares of the
Series A Convertible Junior Preferred Stock may be
exercised by surrendering to the Corporation or any
transfer agent for the Series A Convertible Junior
Preferred Stock the certificate or certificates for
the shares of Series A Convertible Junior Preferred
Stock so to be converted, with the notice of
conversion on such certificate duly completed and
executed. Shares shall be deemed to have been
converted immediately prior to the close of business
on the day of surrender of such shares in the manner
herein prescribed for conversion and the person
entitled to receive the Common Stock issuable upon
such conversion shall be treated for all purposes as
the record holder of such Common Stock as of such
date. The holder of Series A Convertible Junior
Preferred Stock, upon surrender of such certificates
for conversion, shall not thereafter receive any
Participating Dividend except any Participating
Dividend for which the record date preceded the
conversion date and the payment date shall be
subsequent to the conversion date.
(B) Automatic Conversion of Series A Convertible
Junior Preferred Stock Upon the Sale and Transfer
Pursuant to a Foreclosure by a Third Party, Upon
Dissolution or Termination of a Holder, or Upon the
Merger, Consolidation, Share Exchange of the
Corporation or Sale of All or Substantially All of
the Corporation's Assets.
(1) Upon the sale and transfer pursuant to a
foreclosure by a third party (not to include any
CTS Shareholder, a direct beneficiary (as of the
Initial Issuance Date) of the Turner Children
Trust dated January 21, 1980, or a wholly owned
entity of one of the direct beneficiaries) of a
security interest in shares of Series A
Convertible Junior Preferred Stock, such shares
of Series A Convertible Junior Preferred Stock
shall be converted automatically into the number
of shares of Common Stock into which such shares
of Series A Convertible Junior Preferred Stock
are then convertible pursuant to Paragraph
(iv)(C) on the date of such foreclosure without
any further action by the holder or transferee of
such shares of Series A Convertible Junior
Preferred Stock and whether or not the
certificates representing such shares are
surrendered to the Corporation or its transfer
agent for the Series A Convertible Junior
Preferred Stock. In order to receive a Common
Stock certificate, the transferee of the shares
of Series A Convertible Junior Preferred Stock
shall surrender to the Corporation or its
transfer agent for the Series A Convertible
Junior Preferred Stock the certificate or
certificates representing such shares properly
endorsed or accompanied by proper instruments of
assignment, duly executed by or on behalf of the
record holder of such certificate or
certificates. Certificates representing the
shares of Common Stock into which such shares of
Series A Convertible Junior Preferred Stock were
so converted will be issued as soon as
practicable.
(2) Except for the distribution of shares of
Series A Convertible Junior Preferred Stock upon
the dissolution of the initial holder of the
Series A Convertible Junior Preferred Stock, upon
the dissolution or termination of a holder of
Series A Convertible Junior Preferred Stock, such
shares of Series A Convertible Junior Preferred
Stock held by such holder shall be converted
automatically into the number of shares of Common
Stock into which such shares of Series A
Convertible Junior Preferred Stock are then
convertible pursuant to Paragraph (iv)(C) on the
date of such dissolution or termination without
any further action by the holder of such shares
of Series A Convertible Junior Preferred Stock
and whether or not the certificates representing
such shares are surrendered to the Corporation or
its transfer agent for the Series A Convertible
Junior Preferred Stock. In order to receive a
Common Stock certificate, the distributee or
distributees of such shares of Series A
Convertible Junior Preferred Stock shall
surrender to the Corporation or its transfer
agent for the Series A Convertible Junior
Preferred Stock the certificate or certificates
representing such shares accompanied by evidence
of the dissolution or termination of the record
holder of such shares and duly executed
instructions for the transfer of such shares.
Certificates representing the shares of Common
Stock into which such shares of Series A
Convertible Junior Preferred Stock were so
converted will be issued as soon as practicable.
(3) In the event of any merger,
consolidation or share exchange of the
Corporation into or with any other corporation or
entity, in which the Corporation is not the
surviving entity (except for purposes of a merger
effected exclusively for the purpose of changing
the domicile of the Corporation), or sale of all
or substantially all of the assets of the
Corporation, all outstanding shares of Series A
Convertible Junior Preferred Stock shall be
automatically converted immediately prior to
consummation of such event into the number of
shares of Common Stock specified in Paragraph
(iv)(C)(4) (regardless of the date of such
merger, consolidation, share exchange, sale of
all or substantially all of the Corporation's
assets) without any further action by the holder
of such shares and whether or not the
certificates representing such shares are
surrendered to the Corporation or its transfer
agent for the Series A Convertible Junior
Preferred Stock. The agent responsible for the
receipt of certificates representing shares of
the Corporation's Common Stock and the payment or
distribution of the consideration to be received
by the shareholders of the Corporation in such
merger, consolidation or share exchange shall be
instructed to receive and treat certificates
representing the Series A Convertible Junior
Preferred Stock as if such certificates
represented the applicable number of shares of
Common Stock. In a transaction involving the
sale of all or substantially all of the assets of
the Corporation, certificates representing shares
of Series A Convertible Junior Preferred Stock
shall be treated as set forth in subparagraphs
(1) and (2) above.
(C) Conversion Rate. The number of shares of
Common Stock issuable upon conversion of each share
of Series A Convertible Junior Preferred Stock (the
"Conversion Rate") shall be as follows, subject to
adjustment as provided in paragraph (iv)(F):
(1) From the Initial Issuance Date through
the third anniversary date thereof, one share of
the Series A Convertible Junior Preferred Stock
shall be convertible into 4.5 shares of Common
Stock;
(2) From the day following the third
anniversary date of the Initial Issuance Date
through the fourth anniversary date thereof, one
share of the Series A Convertible Junior
Preferred Stock shall be convertible into a 4.625
shares of Common Stock;
(3) From the day following the fourth
anniversary date of the Initial Issuance Date
through the fifth anniversary date thereof, one
share of the Series A Convertible Junior
Preferred Stock shall be convertible into 4.75
shares of Common Stock; and
(4) After the fifth anniversary date of the
Initial Issuance Date, one share of the Series A
Convertible Junior Preferred Stock shall be
convertible into 5.0 shares of Common Stock.
(D) No Fractional Shares to be Issued. No
fractional shares of Common Stock nor scrip
representing fractional shares shall be issued upon
the conversion of the Series A Convertible Junior
Preferred Stock. If more than one share of Series A
Convertible Junior Preferred Stock shall be
surrendered for conversion at one time by the same
holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on
the basis of the aggregate number of Series A
Convertible Junior Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of
any share or shares of Series A Convertible Junior
Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction based on the
fair value of such share.
(E) Extraordinary Event.
(1) Upon the occurrence of an Extraordinary
Common Stock Event (defined below), the holders of
the Series A Convertible Junior Preferred Stock
shall participate in any such Extraordinary Common
Stock Event at the rate equal to the then
applicable conversion rate as set forth in
paragraph (iv)(C)(4) for each share of Series A
Convertible Junior Preferred Stock. An
"Extraordinary Common Stock Event" shall mean (a)
the issuance of additional shares of Common Stock
as a dividend or other distribution on outstanding
Common Stock, (b) a stock split or subdivision of
outstanding share of Common Stock into a greater
number of shares of Common Stock, or (c) a reverse
stock split or combination of outstanding shares
of Common Stock into a smaller number of shares of
Common Stock.
(2) Upon the occurrence of a Recapitalization
(defined below) of the Corporation or the payment
of a special dividend, defined herein as a cash
dividend other than a regular periodic cash
dividend paid in an amount exceeding 200% of any
cash dividend paid per share within the
immediately preceding fiscal year (a "Special
Dividend"), the holders of the Series A
Convertible Junior Preferred Stock shall
participate in any such Recapitalization or
Special Dividend with the Common Stock on an as
converted basis as determined at the then
applicable conversion rate set forth in paragraph
(iv)(C)(4) for each share of Series A Convertible
Junior Preferred Stock. Recapitalization is
defined herein as any recapitalization,
reorganization or reclassification of the Common
Stock of the Corporation.
(F) Adjustment to Conversion Rate. Upon the
occurrence of an Extraordinary Common Stock Event as
defined in (iv)(E)(1), the relevant Conversion Rates
set forth in Paragraph (iv)(C) above shall be
proportionately increased or decreased accordingly.
(G) Corporation Will Reserve Stock for Conversion.
The Corporation shall at all times reserve and keep
available out of its authorized Common Stock, solely
for the purpose of issuance upon conversion of the
Series A Convertible Junior Preferred Stock as herein
provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all
outstanding Series A Convertible Junior Preferred
Stock. All shares of Common Stock which shall be so
issuable shall be duly authorized and, when issued
upon conversion of the Series A Convertible Junior
Preferred Stock, shall be validly issued, fully paid
and nonassessable.
(H) No Charge for Conversion. The issuance of
certificates for shares of Common Stock upon the
conversion of any shares of the Series A Convertible
Junior Preferred Stock shall be made without charge to
the converting holder of the Series A Convertible
Junior Preferred Stock for such certificates, and such
certificates shall be issued in the name of, or in
such names as may be directed by, the holder of the
Series A Convertible Junior Preferred Stock; provided,
however, that the Corporation shall not be required to
pay any taxes or other governmental charges which may
be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a
name other than that of the record holder of the
Series A Convertible Junior Preferred Stock, and the
Corporation shall not be required to issue or deliver
such certificates unless or until the person or
persons requesting the issuance thereof shall have
paid to the Corporation the amount of such tax or
other governmental charge or shall have established to
the satisfaction of the Corporation that such tax or
other governmental charge has been paid or provided
for. The Corporation may also require, as a condition
to the issuance and delivery of any such certificate,
an opinion of counsel acceptable to the Corporation to
the effect that the proposed transfer (as allowable
under Paragraph (vii) hereof) either does not require
registration, or that an exemption from registration
is available, under federal or any applicable state
securities law.
(v) Ranking. The Series A Convertible Junior
Preferred Stock shall rank junior to all other
series or classes of preferred stock of the
Corporation.
(vi) No Redemption. The shares of Series A
Convertible Junior Preferred Stock shall not be
redeemable at the option of the holder or the
Corporation.
(vii) Transferability. Except for the
distribution of shares of Series A Convertible
Junior Preferred Stock upon the dissolution of the
initial holder of the Series A Convertible Junior
Preferred Stock, the holders of the shares of Series
A Convertible Junior Preferred Stock may not sell,
exchange, give, devise or otherwise dispose of,
either voluntarily or involuntarily, or by operation
of law (including a transfer pursuant to equitable
distribution proceedings) any of the shares of
Series A Convertible Junior Preferred Stock;
provided, however, that the holders of the Series A
Convertible Junior Preferred Stock may grant a
security interest therein and provided further that
the shares of Series A Convertible Junior Preferred
Stock may be transferred to one or more of the
original distributees of the original holder thereof
or to one or more of the direct beneficiaries (as of
the Initial Issuance Date) of the Turner Children
Trust dated January 21, 1980.
(viii) Right of First Refusal Upon Foreclosure,
Dissolution of a Holder or Following the Death of a
Holder.
(A) In the event of an automatic conversion of shares
of Series A Convertible Junior Preferred Stock into
shares of Common Stock pursuant to the provisions of
Paragraph (iv)(B)(1) hereof as a result of the sale and
transfer pursuant to a foreclosure by a third party (not
to include any CTS Shareholder, any direct beneficiary of
the Turner Children Trust dated January 21, 1980, or a
wholly owned entity of one of the direct beneficiaries
any entity affiliated with such person(s) or entity) of a
security interest in such shares, the Corporation shall
have the right of first refusal to purchase such shares
of Common Stock. The holder of shares of Series A
Convertible Junior Preferred Stock that are the subject
of a foreclosure proceeding shall give the Corporation
thirty (30) days' prior written notice (the "Foreclosure
Notice") of such pending foreclosure proceeding. The
Foreclosure Notice shall state the name, address and
telephone number of the party instituting the foreclosure
proceedings (the "Foreclosuring Party") as well as the
scheduled date of foreclosure. During the period
following the receipt of the Foreclosure Notice and prior
to the consummation of the foreclosure, the Corporation
may elect to purchase the shares of Common Stock issuable
upon the automatic conversion by giving the Foreclosing
Party written notice prior to foreclosure of its intent
to purchase such shares and stating the date (the
"Closing Date") that such purchase shall be consummated,
which shall be a date within ten (10) calendar days of
the sale and transfer pursuant to the foreclosure. The
purchase price per share for the shares of Common Stock
to be purchased shall be the closing sale price of the
Common Stock on the last trading day preceding the
Closing Date as quoted on any national securities
exchange on which the Corporation's Common Stock is
listed, on The Nasdaq National Market, or, if price
quotations for the Common Stock are not available on any
such national securities exchange or The Nasdaq National
Market, the mean between the closing bid and asked price
of the Common Stock on the over-the-counter market as
reported by the National Quotation Bureau, Incorporated,
or, if no bid quotation is available on the
over-the-counter market, the fair value of such Common
Stock as determined in good faith by the Board of
Directors.
(B) In the event of an automatic conversion of shares
of Series A Convertible Junior Preferred Stock into
shares of Common Stock pursuant to the provisions of
paragraph (iv)(B)(2) hereof as a result of the
termination or dissolution of the holder of Series A
Convertible Junior Preferred Stock, the Corporation shall
have the right of first refusal to purchase such shares
of Common Stock. The holder of shares of Series A
Convertible Junior Preferred Stock shall give the
Corporation thirty (30) days' prior written notice (the
"Dissolution Notice") of such pending dissolution. The
Dissolution Notice shall state the scheduled date of
termination or dissolution. During the period following
receipt of the Dissolution Notice and prior to
consummation of such termination or dissolution, the
Corporation may elect to purchase the shares of Common
Stock, issuable upon the automatic conversion by giving
the holder written notice prior to termination or
dissolution of its intent to purchase such shares and
stating the date (the "Closing Date") that such purchase
shall be consummated, which shall be a date within ten
(10) calendar days of the termination or dissolution.
The purchase price per share for the shares of Common
Stock to be purchased hereunder shall be the same as set
forth in Paragraph (viii)(A) above.
(C) In the event of the death of a holder of Series A
Convertible Junior Preferred Stock, the subsequent
conversion thereof, if any, by the estate (the "Estate")
of such holder of such shares into Common Stock and any
proposed sale of all or a portion thereof by the Estate,
the Corporation shall have the right of first refusal to
purchase such shares of Common Stock from the Estate.
The Estate shall give the Corporation thirty (30) days'
prior written notice of its intent to sell all or a
portion of the underlying Common Stock (or if previously
converted, notice of its intent to sell) stating the
proposed sale date. During such thirty-day period
following notice of the Estate's intentions to sell all
or a portion of the underlying Common Stock, the
Corporation may elect to purchase such shares of Common
Stock by giving the estate written notice prior to the
sale date of its intent to purchase such shares and
stating the date that such purchase shall be consummated,
which date shall be within ten (10) days of the requested
date of conversion or sale if previously converted. The
purchase price per share shall be determined as set forth
in Paragraph (viii)(A) above. (ix) Notices of Record
Date. In the event of:
(A) any taking by the Corporation of a record of
the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any share of stock of any class or any other
securities or property, or to receive any other right;
or
(B) any recapitalization of the Corporation, any
reclassification of the capital stock of the
Corporation, any merger or consolidation of the
Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other
corporation, or any other entity or person; or
(C) any voluntary or involuntary dissolution,
liquidation or winding- up of the Corporation; then
and in each such event the Corporation shall mail or
cause to be mailed to each holder of Series A
Convertible Junior Preferred Stock a notice specifying
(1) the date on which any such record is to be taken
for the purpose of such dividend, distribution or
right and a description of such dividend, distribution
or right, (2) the date on which any such
reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become
effective and (3) the time, if any, that is to be
fixed, as to when the holders of record of Common
Stock (or other securities) for securities or other
property deliverable upon such reorganization,
reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be sent by first class
mail (postage prepaid), or by telecopy or overnight
courier or by telex, at least ten (10) calendar days
prior to the date specified in such notice on which
such action is to be taken.
(x). Status of Converted Series A Convertible Junior
Preferred Stock. No share(s) of Series A Convertible
Junior Preferred Stock acquired by the Corporation by
reason of repurchase, conversion or otherwise shall
be reissued as Series A Convertible Junior Preferred
Stock, and all such acquired shares shall (1) be
canceled, retired and eliminated from the Series A
Convertible Junior Preferred Stock and (2) shall
become authorized and unissued shares of the
Corporation's undesignated preferred stock set forth
in Paragraph (c) of Article 7 of the Corporation's
Charter, as amended. No further corporate action by
the Corporation shall be necessary to reduce the
authorized number of shares of the Series A
Convertible Junior Preferred Stock solely as a result
of the conversion of shares of the Series A
Convertible Junior Preferred Stock.
(c) Ten million (10,000,000) shares of preferred stock, no
par value per share. Shares of preferred stock may be
issued from time to time in one or more classes or
series, each such class or series to be so designated as
to distinguish the shares thereof from the shares of all
other classes and series. The Board of Directors is
hereby vested with the authority to divide preferred
stock into classes or series and to fix and determine
the relative rights, preferences, qualifications, and
limitations of the shares of any class or series so
established.
8. The shareholders of the corporation shall not have preemptive rights.
9. All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation shall be managed
under the direction of, a Board of Directors. A director shall hold
office until the annual meeting of shareholders for the year in which
his or her term expires and until his or her successor shall be
elected and shall qualify; subject, however, to prior death,
resignation, retirement, disqualification, or removal from office.
Any vacancy on the Board of Directors, including a vacancy that
results from an increase in the number of directors or a vacancy that
results from the removal of a director with cause, may be filled only
by the Board of Directors.
Any director may be removed from office but only for cause and only
by (a) the affirmative vote of the holders of a majority of the
voting power of the shares entitled to vote in the election of
directors, considered for this purpose as one class, unless a vote of
a special voting group is otherwise required by law, or (b) the
affirmative vote of a majority of the entire Board of Directors then
in office.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders, the
election, term of office, filling of vacancies, and other features of
such directorships shall be governed by the terms of this Charter
applicable thereto.
Notwithstanding any other provision of this Charter, the affirmative
vote of holders of two-thirds of the voting power of the shares
entitled to vote at an election of directors shall be required to
amend, alter, change or repeal, or to adopt any provisions as part of
this Charter or as part of the corporation's Bylaws inconsistent with
the purpose and intent of this Article 9.
10.To the fullest extent permitted by the Tennessee Business Corporation
Act as in effect on the date hereof, and as hereafter amended from
time to time, a director of the corporation shall not be liable to
the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director. If the Tennessee Business
Corporation Act or any successor statute is amended after adoption of
this provision to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Tennessee Business Corporation Act,
as so amended from time to time, or such successor statute. Any
repeal or modification of this Article 10 by the shareholders of the
corporation shall not affect adversely any right or protection of a
director of the corporation existing at the time of such repeal or
modification or with respect to events occurring prior to such time.
11.The corporation shall indemnify every person who is or was a party or
is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he or she is or was a
director or officer or is or was serving at the request of the
corporation as a director, officer, employee, agent, or trustee of
another corporation or of a partnership, joint venture, trust,
employee benefit plan, or other enterprise, including service on a
committee formed for any purpose (and, in each case, his or her
heirs, executors, and administrators), against all expense,
liability, and loss (including counsel fees, judgments, fines, ERISA
excise taxes, penalties, and amounts paid in settlement) actually and
reasonably incurred or suffered in connection with such action, suit,
or proceeding, to the fullest extent permitted by applicable law, as
in effect on the date hereof and as hereafter amended. Such
indemnification may include advancement of expenses in advance of
final disposition of such action, suit, or proceeding, subject to the
provision of any applicable statute.
The indemnification and advancement of expenses provisions of this
Article 11 shall not be exclusive of any other right that any person
(and his or her heirs, executors, and administrators) may have or
hereafter acquire under any statute, this Charter, the corporation's
Bylaws, resolution adopted by the shareholders, resolution adopted by
the Board of Directors, agreement, or insurance, purchased by the
corporation or otherwise, both as to action in his or her official
capacity and as to action in another capacity. The corporation is
hereby authorized to provide for indemnification and advancement of
expenses through its Bylaws, resolution of shareholders, resolution
of the Board of Directors, or agreement, in addition to that provided
by this Charter.
12.The corporation shall hold a special meeting of shareholders only in
the event of (a) a call of the Board of Directors of the corporation
or the officers authorized to do so by the Bylaws of the corporation,
or (b) the holders of at least twenty percent of all the votes
entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date, and deliver to the corporation's
secretary one or more written demands for the meeting describing the
purpose or purposes for which it is to be held, which shall be held
upon the call of the Board of Directors.
Notwithstanding any other provision of this Charter, the affirmative
vote of holders of two-thirds of the voting power of the shares
entitled to vote at an election of directors shall be required to
amend, alter, change or repeal, or to adopt any provisions as part of
this Charter or as part of the corporation's Bylaws inconsistent with
the purpose and intent of this Article 12.
DOLLAR GENERAL CORPORATION - TN
By:
Name:
Title:
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EXHIBIT C
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BYLAWS OF DOLLAR GENERAL CORPORATION-TN (the "Corporation")
ARTICLE I.
OFFICES
The Corporation may have such offices, either within or without
the State of Tennessee, as the Board of Directors may designate or as
the business of the Corporation may require from time to time.
ARTICLE II.
SHAREHOLDERS
2.1 Annual Meeting.
An annual meeting of the shareholders of the Corporation
shall be held on such date as may be determined by the Board of
Directors. The business to be transacted at such meeting shall be the
election of directors and such other business as shall be properly
brought before the meeting.
2.2 Special Meetings.
A special meeting of shareholders shall be held on call
of the Board of Directors or if the holders of at least twenty percent
(20%) of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
Corporation's Secretary one (1) or more written demands for the meeting
describing the purpose or purposes for which such special meeting is to
be held, including all statements necessary to make any statement of
such purpose not incomplete, false or misleading, and include any other
information specified in Schedule 14A, Rule 14a- 3, Rule 14a-8, or Rule
14a-11 of the Rules and Regulations of the Securities and Exchange
Commission and which written request shall be accompanied by a certified
check for fifty thousand dollars ($50,000) payable to the Corporation to
cover the Corporation's expenses in connection with such meeting,
including the preparation of proxy materials or information statements
and the mailing of notices and proxy materials to shareholders. Only
business within the purpose or purposes described in the meeting notice
may be conducted at a special shareholders' meeting.
2.3 Place of Meetings.
The Board of Directors may designate any place, either
within or without the State of Tennessee, as the place of meeting for
any annual meeting or for any special meeting. If no place is fixed by
the Board of Directors, the meeting shall be held at the principal
office of the Corporation.
2.4 Notice of Meetings; Waiver.
(a) Notice. Notice of the date, time and place of
each annual and special share- holders' meeting and, in the case of a
special meeting, a description of the purpose or purposes for which the
meeting is called, shall be given no fewer than ten (10) days nor more
than two (2) months before the date of the meeting. Such notice shall
comply with the requirements of Article XI of these Bylaws. (b)
Waiver. A shareholder may waive any notice required by law, the
Corporation's Charter (the "Charter") or these Bylaws before or after
the date and time stated in such notice. Except as provided in the next
sentence, the waiver must be in writing, be signed by the shareholder
entitled to the notice and be delivered to the Corporation for inclusion
in the minutes or filing with the corporate records. A shareholder's
attendance at a meeting: (1) waives objection to lack of notice or
defective notice of the meeting, unless the shareholder at the beginning
of the meeting (or promptly upon his or her arrival) objects to holding
the meeting or transacting business at the meeting and (2) waives
objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is
presented.
2.5 Record Date.
The Board of Directors shall fix as the record date for
the determination of shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote or to take any other
action, a date not more than seventy (70) days before the meeting or
action requiring a determination of shareholders.
A record date fixed for a shareholders' meeting is
effective for any adjournment of such meeting unless the Board of
Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than four (4) months after the date fixed for
the original meeting.
2.6 Shareholders' List.
After the record date for a meeting has been fixed, the
Corporation shall prepare an alphabetical list of the names of all
shareholders who are entitled to notice of a shareholders' meeting. Such
list will show the address of and number of shares held by each
shareholder. The shareholders' list will be available for inspection by
any shareholder, beginning two (2) business days after notice of the
meeting is given for which the list was prepared and continuing through
the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be
held. A shareholder or his or her agent or attorney is entitled on
written demand to inspect and, subject to the requirements of the
Tennessee Business Corporation Act (the "Act"), to copy the list, during
regular business hours and at his or her expense, during the period it
is available for inspection.
2.7 Voting of Shares.
Unless otherwise provided by the Act or the Charter,
each outstanding share is entitled to one (1) vote on each matter voted
on at a shareholders' meeting. Only shares are entitled to vote.
Unless otherwise provided in the Charter, directors are
elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
2.8 Proxies.
A shareholder may vote his or her shares in person or by
proxy. A shareholder may appoint a proxy to vote or otherwise act for
him or her by signing an appointment either personally or through an
attorney-in-fact. An appointment of a proxy is effective when received
by the Secretary or other officer or agent authorized to tabulate votes.
An appointment is valid for eleven (11) months unless another period is
expressly provided in the appointment form. An appointment of a proxy
is revocable by the shareholder unless the appointment form
conspicuously states that it is irrevocable, and the appointment is
coupled with an interest.
2.9 Acceptance of Shareholder Documents.
If the name signed on a shareholder document (a vote,
consent, waiver, or proxy appointment) corresponds to the name of a
shareholder, the Corporation, if acting in good faith, is entitled to
accept such shareholder document and give it effect as the act of the
shareholder. If the name signed on such shareholder document does not
correspond to the name of a shareholder, the Corporation, if acting in
good faith, is nevertheless entitled to accept such shareholder document
and to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of a fiduciary
representing the shareholder and, if the Corporation requests, evidence
of fiduciary status acceptable to the Corporation has been presented
with respect to such shareholder document;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation
requests, evidence of this status acceptable to the Corporation has been
presented with respect to the shareholder document;
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in- fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to such shareholder document; or
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one
(1) of the co-owners, and the person signing appears to be acting on
behalf of all the co-owners.
The Corporation is entitled to reject a shareholder
document if the Secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has a reasonable basis for doubt
about the validity of the signature on such shareholder document or
about the signatory's authority to sign for the shareholder.
2.10 Action Without Meeting.
Action required or permitted by the Act to be taken at a
shareholders' meeting may be taken without a meeting. If all
shareholders entitled to vote on the action consent to taking such
action without a meeting, the affirmative vote of the number of shares
that would be necessary to authorize or take such action at a meeting is
the act of the shareholders.
The action must be evidenced by one (1) or more written
consents describing the action taken, at least one of which is signed by
each shareholder entitled to vote on the action in one (1) or more
counterparts, indicating such signing shareholder's vote or abstention
on the action and delivered to the Corporation for inclusion in the
minutes or for filing with the corporate records.
If the Act or the Charter requires that notice of a
proposed action be given to nonvoting shareholders and the action is to
be taken by consent of the voting shareholders, then the Corporation
shall give its nonvoting shareholders written notice of the proposed
action at least ten (10) days before such action is taken. Such notice
shall contain or be accompanied by the same material that would have
been required to be sent to nonvoting shareholders in a notice of a
meeting at which the proposed action would have been submitted to the
shareholders for action.
2.11 Presiding Officer and Secretary.
Meetings of the shareholders shall be presided over by
the Chairman, or if the Chairman is not present or if the Corporation
shall not have a Chairman, by the Vice Chairman, the President, or Chief
Executive Officer, or if neither the Chairman, the Vice Chairman, the
President, nor the Chief Executive Officer is present, by a chairman
chosen by a majority of the shareholders entitled to vote at such
meeting. The Secretary or, in the Secretary's absence, an Assistant
Secretary shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, a majority of the
shareholders entitled to vote at such meeting shall choose any person
present to act as secretary of the meeting.
2.12 Notice of Nominations.
Nominations for the election of directors may be made by
the Board of Directors or a committee appointed by the Board of
Directors authorized to make such nominations or by any shareholder
entitled to vote in the election of directors generally. Any such
shareholder nomination may be made, however, only if written notice of
such nomination has been given, either by personal delivery or the
United States mail, postage prepaid, to the Secretary of the Corporation
not later than (a) with respect to an election to be held at an annual
meeting of shareholders, one hundred twenty days in advance of the
anniversary date of the proxy statement for the previous year's annual
meeting, and (b) with respect to an election to be held at a special
meeting of shareholders for the election of directors called other than
by written request of a shareholder, the close of business on the tenth
day following the date on which notice of such meeting is first given to
shareholders, and (c) in the case of a special meeting of shareholders
duly called upon the written request of a shareholder to fill a vacancy
or vacancies (then existing or proposed to be created by removal at such
meeting), within ten business days of such written request. In the case
of any nomination by the Board of Directors or a committee appointed by
the Board of Directors authorized to make such nominations, compliance
with the proxy rules of the Securities and Exchange Commission shall
constitute compliance with the notice provisions of the preceding
sentence.
In the case of any nomination by a shareholder, each
such notice shall set forth: (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director, (i) the
name, age, business address, and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class
and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies with respect to
nominees for election as directors, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if elected); and
(b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such shareholder, and (ii)
the class and number of shares of the Corporation which are beneficially
owned by such shareholder; and (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The
presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure.
2.13 Notice of New Business.
At an annual meeting of the shareholders only such new
business shall be conducted, and only such proposals shall be acted
upon, as have been properly brought before the meeting. To be properly
brought before the annual meeting such new business must be (a)
specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
shareholder. For a proposal to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation, and the proposal
and the shareholder must comply with Rule 14a-8 under the Securities
Exchange Act of 1934. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices
of the Corporation within the time limits specified by Rule 14a-8.
A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially
owned by the shareholder, and (d) any financial interest of the
shareholder in such proposal.
Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 2.13. The
presiding officer of the meeting shall, if the facts warrant, determine
and declare to the meeting that new business or any shareholder proposal
was not properly brought before the meeting in accordance with the
provisions of this Section 2.13, and if he or she should so determine,
he or she shall so declare to the meeting and any such business or
proposal not properly brought before the meeting shall not be acted upon
at the meeting. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers,
directors and committees, but in connection with such reports, no new
business shall be acted upon at such annual meeting unless stated and
filed as herein provided.
2.14 Conduct of Meetings.
Meetings of the shareholders generally shall follow
accepted rules of parliamentary procedure subject to the following:
(a) The presiding officer of the meeting shall have
absolute authority over the matters of procedure, and there shall be no
appeal from the ruling of the presiding officer. If, in his or her
absolute discretion, the presiding officer deems it advisable to
dispense with the rules of parliamentary procedure as to any meeting of
shareholders or part thereof, he or she shall so state and shall state
the rules under which the meeting or appropriate part thereof shall be
conducted.
(b) If disorder should arise which prevents the
continuation of the legitimate business of the meeting, the presiding
officer may quit the chair and announce the adjournment of the meeting,
and upon so doing, the meeting will immediately be adjourned.
(c) The presiding officer may ask or require that
anyone not a bona fide shareholder or proxy leave the meeting.
(d) The resolution or motion shall be considered for
vote only if proposed by a shareholder or a duly authorized proxy and
seconded by a shareholder or duly authorized proxy other than the
individual who proposed the resolution or motion.
(e) Except as the President, Chief Executive
Officer, or chairman may permit, no matter shall be presented to the
meeting which has not been submitted for inclusion in the agenda at
least thirty (30) days prior to the meeting.
ARTICLE III.
DIRECTORS
3.1 Powers and Duties.
All corporate powers shall be exercised by or under the
authority of and the business and affairs of the Corporation managed
under the direction of the Board of Directors.
3.2 Number and Term.
(a) Number. The Board of Directors shall consist of
no fewer than three (3) or more than fifteen (15) members. The exact
number of directors, within the minimum and maximum, or the range for
the size of the Board, or whether the size of the Board shall be fixed
or variable range may be fixed, changed or determined from time to time
by the Board of Directors.
(b) Term. Directors shall be elected at the first
annual shareholders' meeting and at each annual meeting thereafter. The
terms of the initial directors shall expire at the first shareholders'
meeting at which directors are elected. The terms of all other
directors expire at the next annual shareholders' meeting following
their election. Despite the expiration of a director's term, he shall
continue to serve until his successor is elected and qualifies or until
there is a decrease in the number of directors.
3.3 Meetings; Notice.
The Board of Directors may hold regular and special
meetings either within or without the State of Tennessee. The Board of
Directors may permit any or all directors to participate in a regular or
special meeting by, or conduct the meeting through the use of, any means
of communication by which all directors participating may simultaneously
hear each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.
(a) Regular Meetings. Unless the Charter otherwise
provides, regular meetings of the Board of Directors may be held without
notice of the date, time, place or purpose of the meeting.
(b) Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman, the President or a majority
of the directors. Unless the Charter otherwise provides, special
meetings must be preceded by at least twenty-four (24) hours' notice of
the date, time and place of the meeting but need not describe the
purpose of such meeting. Such notice shall comply with the requirements
of Article XI of these Bylaws.
(c) Adjourned Meetings. Notice of an adjourned
meeting need not be given if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken,
and if the period of adjournment does not exceed one (1) month in any
one (1) adjournment. (d) Waiver of Notice. A director may waive any
required notice before or after the date and time stated in the notice.
Except as provided in the next sentence, the waiver must be in writing,
signed by the director, and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him or her of such meeting unless the director at the
beginning of the meeting (or promptly upon his or her arrival) objects
to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
3.4 Quorum.
Unless the Charter requires a greater number, a quorum
of the Board of Directors consists of a majority of the fixed number of
directors if the Corporation has a fixed board size or a majority of the
number of directors prescribed, or if no number is prescribed, the
number in office immediately before the meeting begins, if the
Corporation has a variable range board.
3.5 Voting.
If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act of the
Board of Directors, unless the Charter or these Bylaws require the vote
of a greater number of directors. A director who is present at a
meeting of the Board of Directors when corporate action is taken is
deemed to have assented to such action unless:
(i) he or she objects at the beginning of the meeting (or
promptly upon his or her arrival) to holding the meeting or transacting
business at the meeting;
(ii) his or her dissent or abstention from the action taken
is entered in the minutes of the meeting; or
(iii) he or she delivers written notice of his or her dissent
or abstention to the presiding officer of the meeting before its
adjournment or to the Corporation immediately after adjournment of the
meeting. The right of dissent or abstention is not available to a
director who votes in favor of the action taken.
3.6 Action Without Meeting.
Unless the Charter otherwise provides, any action
required or permitted by the Act to be taken at a Board of Directors
meeting may be taken without a meeting. If all directors consent to
taking such action without a meeting, the affirmative vote of the number
of directors that would be necessary to authorize or take such action at
a meeting is the act of the Board of Directors. Such action must be
evidenced by one or more written consents describing the action taken,
at least one of which is signed by each director, indicating the
director's vote or abstention on the action, which consents shall be
included in the minutes or filed with the corporate records reflecting
the action taken. Action taken by consent is effective when the last
director signs the consent, unless the consent specifies a different
effective date.
3.7 Compensation.
Directors and members of any committee created by the
Board of Directors shall be entitled to such reasonable compensation for
their services as directors and members of such committee as shall be
fixed from time to time by the Board, and shall also be entitled to
reimbursement for any reasonable expenses incurred in attending meetings
of the Board or of any such committee meetings. Any director receiving
such compensation shall not be barred from serving the Corporation in
any other capacity and receiving reasonable compensation for such other
services.
3.8 Resignation.
A director may resign at any time by delivering written
notice to the Board of Directors, the Chairman, President or to the
Corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date.
3.9 Vacancies.
Unless the Charter otherwise provides, if a vacancy
occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors or a vacancy resulting from the
removal of a director with or without cause, either the shareholders or
the Board of Directors may fill such vacancy. If the vacancy is filled
by the shareholders, it shall be filled by a plurality of the votes cast
at a meeting at which a quorum is present. If the directors remaining
in office constitute fewer than a quorum of the Board of Directors, they
may fill such vacancy by the affirmative vote of a majority of all the
directors remaining in office.
3.10 Removal of Directors.
(a) By Shareholders. The shareholders may remove
one (1) or more directors with or without cause unless the Charter
provides that directors may be removed only for cause. If cumulative
voting is authorized, a director may not be removed if the number of
votes sufficient to elect him or her under cumulative voting is voted
against his or her removal. If cumulative voting is not authorized, a
director may be removed only if the number of votes cast to remove him
or her exceeds the number of votes cast not to remove him or her.
(b) By Directors. If so provided by the Charter,
any of the directors may be removed for cause by the affirmative vote of
a majority of the entire Board of Directors.
(c) General. A director may be removed by the
shareholders or directors only at a meeting called for the purpose of
removing him or her, and the meeting notice must state that the purpose,
or one (1) of the purposes, of the meeting is removal of directors.
ARTICLE IV.
COMMITTEES
Unless the Charter otherwise provides, the Board of Directors
may create one (1) or more committees, each consisting of one (1) or
more members. All members of committees of the Board of Directors which
exercise powers of the Board of Directors must be members of the Board
of Directors and serve at the pleasure of the Board of Directors.
The creation of a committee and appointment of a member or
members to it must be approved by the greater of (i) a majority of all
directors in office when the action is taken or (ii) the number of
directors required by the Charter or these Bylaws to take action.
Unless otherwise provided in the Act, to the extent specified by
the Board of Directors or in the Charter, each committee may exercise
the authority of the Board of Directors. All such committees and their
members shall be governed by the same statutory requirements regarding
meetings, action without meetings, notice and waiver of notice, quorum
and voting requirements as are applicable to the Board of Directors and
its members.
ARTICLE V.
OFFICERS
5.1 Number.
The officers of the Corporation shall be a Chairman, a
Vice Chairman, a President, a Chief Executive Officer, a Chief Financial
Officer, a Secretary and such other officers, including Vice Presidents,
as may be from time to time appointed by the Board of Directors or by
the Chairman with the Board of Directors' approval. One person may
simultaneously hold more than one office except the President may not
simultaneously hold the office of Secretary.
5.2 Appointment.
The principal officers shall be appointed annually by
the Board of Directors at the first meeting of the Board following the
annual meeting of the shareholders, or as soon thereafter as is
conveniently possible. Each officer shall serve at the pleasure of the
Board of Directors and until his or her successor shall have been
appointed, or until his or her death, resignation or removal.
5.3 Resignation and Removal.
An officer may resign at any time by delivering notice
to the Corporation. Such resignation is effective when such notice is
delivered unless such notice specifies a later effective date. An
officer's resignation does not affect the Corporation's contract rights,
if any, with the officer.
The Board of Directors may remove any officer at any
time with or without cause, but such removal shall not prejudice the
contract rights, if any, of the person so removed.
5.4 Vacancies.
Any vacancy in an office for any reason may be filled
for the unexpired portion of the term by the Board of Directors.
5.5 Duties.
(a) Chairman. The Chairman shall preside at all
meetings of the shareholders and the Board of Directors and shall see
that all orders and resolutions of the Board of Directors are carried
into effect.
(b) Chief Executive Officer. The Chief Executive
Officer of the Corporation shall have general supervision over the
active management of the business of the Corporation.
(c) President. The President shall have the general
powers and duties of supervision and management usually vested in the
office of the President of a corporation and shall perform such other
duties as the Board of Directors may from time to time prescribe.
(d) Vice President. The Vice President or Vice
Presidents (if any) shall be active executive officers of the
Corporation, shall assist the Chairman, the Chief Executive Officer and
the President in the active management of the business, and shall
perform such other duties as the Board of Directors may from time to
time prescribe.
(e) Chief Financial Officer. The Chief Financial
Officer shall have the custody of the Corporation's funds and
securities, shall keep or cause to be kept full and accurate account of
receipts and disbursements in books belonging to the Corporation, and
shall deposit or cause to be deposited all monies and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse or cause to be disbursed the funds of
the Corporation as required in the ordinary course of business or as may
be ordered by the Board, taking proper vouchers for such disbursements,
and shall render to the Chairman, the President, the Chief Executive
Officer, and directors at the regular meetings of the Board, or whenever
they may require it, an account of all of his or her transactions as
Chief Financial Officer and the financial condition of the Corporation.
He or she shall perform such other duties as may be incident to the
office or as prescribed from time to time by the Board of Directors.
(f) Secretary and Assistant Secretary. The
Secretary or Assistant Secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and shall prepare and
record all votes and all minutes of all such meetings in a book to be
kept for that purpose. He or she shall also perform like duties for any
committee when required. The Secretary or Assistant Secretary shall
give, or cause to be given, notice of all meetings of the shareholders
and of the Board of Directors when required, and unless directed
otherwise by the Board of Directors, shall keep a stock record
containing the names of all persons who are shareholders of the
Corporation, showing their place of residence and the number of shares
held by each of them. The Secretary or Assistant Secretary shall have
the responsibility of authenticating records of the Corporation. The
Secretary or Assistant Secretary shall perform such other duties as may
be prescribed from time to time by the Board of Directors.
(g) Other Officers. Other officers appointed by the
Board of Directors shall exercise such powers and perform such duties as
may be delegated to them.
(h) Delegation of Duties. In case of the absence or
disability of any officer of the Corporation or of any person authorized
to act in his or her place, the Board of Directors may from time to time
delegate the powers and duties of such officer to any officer, or any
director, or any other person whom it may select, during such period of
absence or disability.
5.6 Indemnification, Advancement of Expenses and Insurance.
(a) Indemnification and Advancement of Expenses.
The Corporation shall indemnify and advance expenses to each director
and officer of the Corporation, or any person who may have served at the
request of the Corporation's Board of Directors or its President or
Chief Executive Officer as a director or officer of another corporation
(and, in either case, such person's heirs, executors and
administrators), to the full extent allowed by the laws of the State of
Tennessee, both as now in effect and as hereafter adopted. The
Corporation may indemnify and advance expenses to any employee or agent
of the Corporation who is not a director or officer (and such person's
heirs, executors and administrators) to the same extent as to a director
or officer, if the Board of Directors determines that doing so is in the
best interests of the Corporation. (b) Non-Exclusivity of Rights.
The indemnification and expense advancement provisions of subsection (a)
of this Section 5.6 shall not be exclusive of any other right which any
person (and such person's heirs, executors and administrators) may have
or hereafter acquire under any statute, provision of the Charter,
provision of these Bylaws, resolution adopted by the shareholders,
resolution adopted by the Board of Directors, agreement, or insurance
(purchased by the Corporation or otherwise), both as to action in such
person's official capacity and as to action in another capacity.
(c) Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any individual who is
or was a director, officer, employee or agent of the Corporation, or
who, while a director, officer, employee or agent of the Corporation, is
or was serving at the request of the Corporation's Board of Directors or
its Chief Executive Officer as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any expense,
liability or loss whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under this
Article or the Act.
ARTICLE VI.
SHARES OF STOCK
6.1 Shares with or without Certificates.
The Board of Directors may authorize that some or all of
the shares of any or all of the Corporation's classes or series of stock
be evidenced by a certificate or certificates of stock. The Board of
Directors may also authorize the issue of some or all of the shares of
any or all of the Corporation's classes or series of stock without
certificates. The rights and obligations of shareholders with the same
class and/or series of stock shall be identical whether or not their
shares are represented by certificates.
(a) Shares with Certificates. If the Board of
Directors chooses to issue shares of stock evidenced by a certificate or
certificates, each individual certificate shall include the following on
its face: (i) the Corporation's name, (ii) the fact that the Corporation
is organized under the laws of the State of Tennessee, (iii) the name of
the person to whom the certificate is issued, (iv) the number of shares
represented thereby, (v) the class of shares and the designation of the
series, if any, which the certificate represents, and (vi) such other
information as applicable law may require or as may be lawful.
If the Corporation is authorized to issue different
classes of shares or different series within a class, the designations,
relative rights, preferences and limitations determined for each series
(and the authority of the Board of Directors to determine variations for
future series) shall be summarized on the front or back of each
certificate. Alternatively, each certificate shall state on its front
or back that the Corporation will furnish the shareholder this
information in writing, without charge, upon request.
Each certificate of stock issued by the Corporation
shall be signed (either manually or in facsimile) by any two officers of
the Corporation. If the person who signed a certificate no longer holds
office when the certificate is issued, the certificate is nonetheless
valid.
(b) Shares without Certificates. If the Board of
Directors chooses to issue shares of stock without certificates, the
Corporation, if required by the Act, shall, within a reasonable time
after the issue or transfer of shares without certificates, send the
shareholder a written statement of the information required on
certificates by Section 6.1(a) of these Bylaws and any other information
required by the Act.
6.2 Subscriptions for Shares.
Subscriptions for shares of the Corporation shall be
valid only if they are in writing. Unless the subscription agreement
provides otherwise, subscriptions for shares, regardless of the time
when they are made, shall be paid in full at such time, or in such
installments and at such periods, as shall be determined by the Board of
Directors. All calls for payment on subscriptions shall be uniform as
to all shares of the same class or of the same series, unless the
subscription agreement specifies otherwise.
6.3 Transfers.
Transfers of shares of the capital stock of the
Corporation shall be made only on the books of the Corporation by (i)
the holder of record thereof, (ii) by his or her legal representative,
who, upon request of the Corporation, shall furnish proper evidence of
authority to transfer, or (iii) his or her attorney, authorized by a
power of attorney duly executed and filed with the Secretary of the
Corporation or a duly appointed transfer agent. Such transfers shall be
made only upon surrender, if applicable, of the certificate or
certificates for such shares properly endorsed and with all taxes
thereon paid.
6.4 Lost, Destroyed or Stolen Certificates.
No certificate for shares of stock of the Corporation
shall be issued in place of any certi- ficate alleged to have been lost,
destroyed or stolen except on production of evidence, satisfactory to
the Board of Directors, of such loss, destruction or theft, and, if the
Board of Directors so requires, upon the furnishing of an indemnity bond
in such amount and with such terms and such surety as the Board of
Directors may in its discretion require.
ARTICLE VII.
CORPORATE ACTIONS
7.1 Contracts.
Unless otherwise required by the Board of Directors, the
Chairman, the President, the Chief Executive Officer or any Vice
President shall execute contracts or other instruments on behalf of and
in the name of the Corporation. The Board of Directors may from time to
time authorize any other officer, assistant officer or agent to enter
into any contract or execute any instrument in the name of and on behalf
of the Corporation as it may deem appropriate, and such authority may be
general or confined to specific instances.
7.2 Loans.
No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name
unless authorized by the Chairman, the President, the Chief Executive
Officer, the Chief Financial Officer or the Board of Directors. Such
authority may be general or confined to specific instances.
7.3 Checks, Drafts, Etc.
Unless otherwise required by the Board of Directors, all
checks, drafts, bills of exchange and other negotiable instruments of
the Corporation shall be signed by either the Chairman, the President,
the Chief Executive Officer, a Vice President or such other officer,
assistant officer or agent of the Corporation as may be authorized so to
do by the Board of Directors. Such authority may be general or confined
to specific business, and, if so directed by the Board, the signatures
of two or more such officers may be required.
7.4 Deposits.
All funds of the Company not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such
banks or other depositories as the Board of Directors may authorize.
7.5 Voting Securities Held by the Corporation.
Unless otherwise required by the Board of Directors, the
Chairman, the President or the Chief Executive Officer shall have full
power and authority on behalf of the Corporation to attend any meeting
of security holders, or to take action on written consent as a security
holder, of other corpora- tions in which the Corporation may hold
securities. In connection therewith the Chairman, the President, or the
Chief Executive Officer shall possess and may exercise any and all
rights and powers incident to the ownership of such securities which the
Corporation possesses. The Board of Directors may, from time to time,
confer like powers upon any other person or persons.
7.6 Dividends.
The Board of Directors may, from time to time, declare,
and the Corporation may pay, dividends on its outstanding shares of
capital stock in the manner and upon the terms and conditions provided
by applicable law. The record date for the determination of
shareholders entitled to receive the payment of any dividend shall be
determined by the Board of Directors, but which in any event shall not
be less than ten (10) days prior to the date of such payment.
ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the
Board of Directors, and in the absence of such determination, shall be
the calendar year.
ARTICLE IX.
CORPORATE SEAL
The Corporation shall not have a corporate seal.
ARTICLE X.
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended, repealed or restated, and
new Bylaws may be adopted, at any meeting of the shareholders by the
affirmative vote of a majority of the stock represented at such meeting,
or by the affirmative vote of a majority of the members of the Board of
Directors who are present at any regular or special meeting.
ARTICLE XI.
NOTICE
Unless otherwise provided for in these Bylaws, any notice
required shall be in writing except that oral notice is effective if it
is reasonable under the circumstances and not prohibited by the Charter
or these Bylaws. Notice may be communicated in person; by telephone,
telegraph, teletype or other form of wire or wireless communication; or
by mail or private carrier. If these forms of personal notice are
impracticable, notice may be communicated by a newspaper of general
circulation in the area where published; or by radio, television or
other form of public broadcast communication. Written notice to a
domestic or foreign corporation authorized to transact business in
Tennessee may be addressed to its registered agent at its registered
office or to the corporation or its secretary at its principal office as
shown in its most recent annual report or, in the case of a foreign
corporation that has not yet delivered an annual report, in its
application for a certificate of authority.
Written notice to shareholders, if in a comprehensible form, is
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address shown in the Corporation's current record of
shareholders. Except as provided above, written notice, if in a
comprehensible form, is effective at the earliest of the following: (a)
when received; (b) five (5) days after its deposit in the United States
mail, if mailed correctly addressed and with first class postage affixed
thereon; (c) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt
is signed by or on behalf of the addressee; or (d) twenty (20) days
after its deposit in the United States mail, as evidenced by the
postmark if mailed correctly addressed, and with other than first class,
registered or certified postage affixed. Oral notice is effective when
communicated if communicated in a comprehensible manner.
<PAGE>
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EXHIBIT D
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Dissenters' Rights
Right to Dissent and Obtain Payment for Shares
271B.13-010 DEFINITIONS.--As used in this subtitle:
1. "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
2. "Dissenter" means a shareholder who is entitled to
dissent from corporate action under KRS 271B.13-020 and who exercises
that right when and in the manner required by KRS 271B.13- 200 to
271B.13-280.
3. "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action
unless exclusion would be inequitable. In any transaction subject to
the requirements of KRS 271B.12-210 or exempted by KRS 271B.12-220(2),
"fair value" shall be at least an amount required to be paid under KRS
271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
4. "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or, if
none, at a rate that is fair and equitable under all the circumstances.
5. "Record shareholder" means the person in whose name
shares are registered in the records of the corporation or the
beneficial owner of shares to the extent of the rights granted by a
nominee certificate on file with a corporation.
6. "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee as the
record shareholder.
7. "Shareholder" means the record shareholder or the
beneficial shareholder.
271B.13-020 RIGHT TO DISSENT.-- (1) A shareholder shall be
entitled to dissent from, and obtain payment of the fair value of his
shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party:
1. If shareholder approval is required for the
merger by KRS 271B.11-030 or the articles of incorporation and the
shareholder is entitled to vote on the merger; or
2. If the corporation is a subsidiary that is
merged with its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the
usual and regular course of business, if the shareholder is entitled to
vote on the sale or exchange, including a sale in dissolution, but not
including a sale pursuant to court order or a sale for cash pursuant to
a plan by which all or substantially all of the net proceeds of the sale
will be distributed to the shareholders within one (1) year after the
date of sale;
(d) An amendment of the articles of incorporation
that materially and adversely affects rights in respect of a dissenter's
shares because it:
1. Alters or abolishes a preferential right of the
shares to a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect
of redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
3. Excludes or limits the right of the shares to
vote on any matter other than limitation by dilution through issuance of
shares or other securities with similar voting rights; or
4. Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so created
is to be acquired for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of
KRS 271B.12-210 or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, bylaws, or
a resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.
(2) A shareholder entitled to dissent and obtain payment for
his shares under this chapter shall not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
271B.13-030 DISSENT BY NOMINEE AND BENEFICIAL OWNERS.--(1)
a record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection shall be determined as if the shares as to which
he dissents and his other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights
as to shares held on his behalf only if:
(a) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which
he is the beneficial shareholder or over which he has power to direct
the vote.
Procedure for Exercise of Dissenters' Rights
271B.13-200 NOTICE OF DISSENTERS' RIGHTS.--(1) If proposed
corporate action creating dissenters' rights under KRS 271B.13-020 is
submitted to a vote at a shareholders' meeting, the meeting notice must
state that shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall undertake to
provide a copy of this subtitle to any shareholder entitled to vote at
the shareholders' meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under
KRS 271B.13-020 is taken without a vote of shareholders, the corporation
shall notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice
described in KRS 271B.13-220.
271B.13-210 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If
proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote
is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated; and
(b) Shall not vote his shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section shall not be entitled to payment for his
shares under this chapter.
271B.13-220 DISSENTERS' NOTICE.--(1) If proposed corporate
action creating dissenters' rights under KRS 271B.13-020 is authorized
at a shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the requirements of
KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten
(10) days after the date the proposed corporate action was authorized by
the shareholders, or, if no shareholder authorization was obtained, by
the board of directors, and shall:
(a) State where the payment demand must be sent and
where and when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment
demand is received;
(c) Supply a form for demanding payment that
includes the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action and requires
that the person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive
the payment demand, which date may not be fewer than thirty (30), nor
more than sixty (60) days after the date the notice provided in
subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 DUTY TO DEMAND PAYMENT.--(1) A shareholder who
is sent a dissenters' notice described in KRS 271B.13-220 shall demand
payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice
pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit his
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his
share certificates under subsection (1) of this section shall retain all
other rights of a shareholder until these rights are canceled or
modified by the taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the
dissenters' notice, shall not be entitled to payment for his shares
under this subtitle.
271B.13-240 SHARE RESTRICTIONS.--(1) The corporation may
restrict the transfer of uncertificated shares from the date the demand
for their payment is received until the proposed corporate action is
taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as
to uncertificated shares shall retain all other rights of a shareholder
until these rights are cancelled or modified by the taking of the
proposed corporate action.
271B.13-250 PAYMENT.--(1) Except as provided in KRS
271B.13-270, as soon as the proposed corporate action is taken, or upon
receipt of a payment demand, the corporation shall pay each dissenter
who complied with KRS 271B.13-230 the amount the corporation estimates
to be the fair value of his shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of
a fiscal year ending not more than sixteen (16) months before the date
of payment, an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(b) A statement of the corporation's estimate of the
fair value of the shares;
(c) An explanation of how the interest was
calculated; and
(d) A statement of the dissenter's right to demand
payment under KRS 271B.13-280.
271B.13-260 FAILURE TO TAKE ACTION.--(1) If the corporation
does not take the proposed action within sixty (60) days after the date
set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action, it
shall send a new dissenters' notice under KRS 271B.13-220 and repeat the
payment demand procedure.
271B.13-270 AFTER-ACQUIRED SHARES.--(1) A corporation may
elect to withhold payment required by KRS 271B.13-250 from a dissenter
unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate
action.
(2) To the extent the corporation elects to withhold payment
under subsection (1) of this section, after taking the proposed
corporate action, it shall estimate the fair value of the shares, plus
accrued interest, and shall pay this amount to each dissenter who agrees
to accept it in full satisfaction of his demand. The corporation shall
send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a
statement of the dissenters' right to demand payment under KRS
271B.13-280.
271B.13-280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH
PAYMENT OR OFFER.--(1) A dissenter may notify the corporation in
writing of his own estimate of the fair value of his shares and amount
of interest due, and demand payment of his estimate (less any payment
under KRS 271B.13-250), or reject the corporation's offer under KRS
271B.13-270 and demand payment of the fair value of his shares and
interest due, if:
(a) The dissenter believes that the amount paid
under KRS 271B.13-250 or offered under KRS 271B.13-270 is less than the
fair value of his shares or that the interest due is incorrectly
calculated;
(b) The corporation fails to make payment under KRS
271B.13-250 within sixty (60) days after the date set for demanding
payment; or
(c) The corporation, having failed to take the
proposed action, does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares within sixty
(60) days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under
this section unless he shall notify the corporation of his demand in
writing under subsection (1) of this section within thirty (30) days
after the corporation made or offered payment for his shares.
Judicial Appraisal of Shares
271B.13-300 COURT ACTION.--(1) If a demand for payment
under KRS 271B.13-280 remains unsettled, the corporation shall commence
a proceeding within sixty (60) days after receiving the payment demand
and petition the court to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding
within the sixty (60) day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the
circuit court of the county where a corporation's principal office (or,
if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state
where the registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters (whether or
not residents of this state) whose demands remain unsettled parties to
the proceeding as in an action against their shares and all parties
shall be served with a copy of the petition. Nonresidents may be served
by registered or certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section shall be plenary and
exclusive. The court may appoint one (1) or more persons as appraisers
to receive evidence and recommend decision on the question of fair
value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters shall be entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be
entitled to judgment:
(a) For the amount, if any, by which the court finds
the fair value of his shares, plus interest, exceeds the amount paid by
the corporation; or
(b) For the fair value, plus accrued interest, of
his after-acquired shares for which the corporation elected to withhold
payment under KRS 271B.13-270.
271B.13-310 COURT COSTS AND COUNSEL FEES.--(1) The court in
an appraisal proceeding commenced under KRS 271B.13-300 shall determine
all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess
the costs against the corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment
under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the court
finds equitable:
(a) Against the corporation and in favor of any or
all dissenters, if the court finds the corporation did not substantially
comply with the requirements of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter,
in favor of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this
subtitle.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similar
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel reasonable
fees to be paid out of the amounts awarded the dissenters who were
benefitted.
<PAGE>
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EXHIBIT E
=========
ARTICLES OF AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION OF THE DOLLAR GENERAL CORPORATION
Pursuant to the provisions of KRS Section 271B.10-030, the
undersigned Corporation hereby adopts the following Articles of
Amendment to its Restated Articles of Incorporation:
First: The Name of the Corporation is Dollar General
Corporation;
Second: The Restated Articles of Incorporation of the
Corporation was filed on November 3, 1968 in the Office of the
Secretary of State of Kentucky;
Third: The following amendment to the Restated Articles
of Incorporation set forth in Paragraph Fifth hereof was adopted by the
vote of the holders of a majority of the shares of the Common Stock and
Series A Convertible Junior Preferred Stock, voting together as one
class, outstanding on the 15th day of April, 1998, as required by KRS
Section 271B.10-030 at the annual meeting of the shareholders of the
Corporation on June 1, 1998.
Fourth: The number of shares entitled to vote thereon was
167,398,977 shares (including the Series A Convertible Junior Preferred
Stock which votes on an as if converted basis). The number of shares
voting for the adoption of the Articles of Amendment was _______ and the
number of shares voting against the Articles of Amendment was ______.
Fifth: The Restated Articles of Incorporation of the
Corporation (as heretofore amended) is hereby further amended as
follows:
The entire introductory paragraph of Article V is deleted and
replaced with the following paragraph: The Corporation is authorized to
issue three classes of stock in the following number of shares: (i)
500,000,000 shares of common stock, $.50 par value per share (the
"Common Stock"), (ii) 1,715,742 shares of Series A Convertible Junior
Preferred Stock (the "Series A Preferred Stock"), and (iii) 3,284,258
shares of no par value preferred stock (the "Preferred Stock").
IN TESTIMONY WHEREOF, Dollar General Corporation does hereby
file in triplicate originals these Articles of Amendment to the Restated
Articles of Incorporation through its Chief Executive Officer, Cal
Turner, Jr., and its Secretary, Robert C. Layne, the ____ day of
________, 1998. DOLLAR GENERAL CORPORATION
BY:___________________________
Cal Turner, Jr.
Chief Executive Officer and
Chairman
BY:____________________________
Robert C. Layne
Secretary
<PAGE>
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EXHIBIT F
=========
DOLLAR GENERAL CORPORATION
1998 STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions.
The purpose of the Dollar General Corporation 1998 Stock
Incentive Plan (the "Plan") is to enable Dollar General Corporation (the
"Corporation") to attract, retain and reward key employees of and
consultants to the Corporation and its Subsidiaries and Affiliates, and
directors who are not also employees of the Corporation, and to
strengthen the mutuality of interests between such key employees,
consultants, and directors by awarding such key employees, consultants,
and directors performance-based stock incentives and/or other equity
interests or equity- based incentives in the Corporation, as well as
performance-based incentives payable in cash. The provisions of the
Plan are intended to satisfy the requirements of Section 16(b) of the
Exchange Act, and shall be interpreted in a manner consistent with the
requirements thereof, as now or hereafter construed, interpreted, and
applied by regulations, rulings, and cases. The Plan is also designed
so that awards granted hereunder intended to comply with the
requirements for "performance-based" compensation under Section 162(m)
of the Code may comply with such requirements. The creation and
implementation of the Plan will not diminish or prejudice other
compensation plans or programs approved from time to time by the Board.
For purposes of the Plan, the following terms shall be defined
as set forth below:
A. "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.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the
Plan.
D. "Change in Control" has the meaning provided in Section
9(b) of the Plan.
E. "Change in Control Price" has the meaning provided in
Section 9(d) of the Plan.
F. "Common Stock" means the Corporation's Common Stock,
$.50 par value per share.
G. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2
of the Plan.
I. "Corporation" means Dollar General Corporation, a
corporation organized under the laws of the State of Tennessee, or any
successor corporation.
J. "Disability" means disability as determined under the
Corporation's Group Long Term Disability Insurance Plan.
K. "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 or
as may be approved by the Committee.
L. "Effective Date" has the
meaning provided in Section 13 of the Plan.
M. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor thereto.
N. "Fair Market Value" means with respect to the Common
Stock, as of any given date or dates, unless otherwise determined by the
Committee in good faith, the reported closing price of a share of Common
Stock on the NYSE or such other market or exchange as is the principal
trading market for the Common Stock, or, if no such sale of a share of
Common Stock is reported on Nasdaq or other exchange or principal
trading market on such date, the fair market value of a share of Common
Stock as determined by the Committee in good faith.
O. "Incentive Stock Option" means any Stock Option intended
to be and designated as an "Incentive Stock Option" within the meaning
of Section 422 of the Code.
P. "Immediate Family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive
relationships.
Q. "Non-Employee Director" means a member of the Board who
is a Non- Employee Director within the meaning of Rule 16b-3(b)(3)
promulgated under the Exchange Act and an outside director within the
meaning of Treasury Regulation Sec. 162-27(e)(3) promulgated under the
Code.
R. "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
S. "Normal Retirement" means retirement from active
employment with the Corporation and any Subsidiary or Affiliate on or
after age 65.
T. "NYSE" means the New York Stock Exchange.
U. "Outside Director" means a member of the Board who is
not an officer or employee of the Corporation or any Subsidiary or
Affiliate of the Corporation.
V. "Outside Director Option" means an award to an Outside
Director under Section 8 below.
W. "Performance Goals" means performance goals based on one
or more of the following criteria: (i) pre-tax income or after-tax
income; (ii) operating cash flow; (iii) operating profit; (iv) return on
equity, assets, capital, or investment; (v) earnings or book value per
share; (vi) sales or revenues; (vii) operating expenses; (viii) Common
Stock price appreciation; and (ix) implementation, management, or
completion of critical projects or processes. Where applicable, the
Performance Goals may be expressed in terms of attaining a specified
level of the particular criteria or the attainment of a percentage
increase or decrease in the particular criteria, and may be applied to
one or more of the Corporation or any Subsidiary, or a division or
strategic business unit of the Corporation, or may be applied to the
performance of the Corporation relative to a market index, a group of
other companies, or a combination thereof, all as determined by the
Committee. The Performance Goals may include a threshold level of
performance below which no payment will be made (or no vesting will
occur), levels of performance at which specified payments will be made
(or specified vesting will occur), and a maximum level of performance
above which no additional payment will be made (or at which full vesting
will occur). Each of the foregoing Performance Goals shall be
determined, to the extent applicable, in accordance with generally
accepted accounting principles and shall be subject to certification by
the Committee; provided, that the Committee shall have the authority to
make equitable adjustments to the Performance Goals in recognition of
unusual or non-recurring events affecting the Corporation or any
Subsidiary or the financial statements of the Corporation or any
Subsidiary, in response to changes in applicable laws or regulations, or
to account for items of gain, loss, or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or
related to the disposal of a segment of business or related to a change
in accounting principles.
X. "Plan" means this Dollar General Corporation 1998 Stock
Incentive Plan, as amended from time to time.
Y. "Restricted Stock" means an award of shares of Common
Stock that is subject to restrictions under Section 7 of the Plan.
Z. "Restriction Period" has the meaning provided in Section
7 of the Plan.
AA. "Retirement" means Normal or Early Retirement.
BB. "Section 162(m) Maximum" has the meaning provided in
Section 3(a) hereof.
CC. "Stock Appreciation Right" means the right pursuant to
an award granted under Section 6 below to surrender to the Corporation
all (or a portion) of a Stock Option in exchange for an amount equal to
the difference between (i) the Fair Market Value, as of the date such
Stock Option (or such portion thereof) is surrendered, of the shares of
Common Stock covered by such Stock Option (or such portion thereof),
subject, where applicable, to the pricing provisions in Section
6(b)(ii), and (ii) the aggregate exercise price of such Stock Option (or
such portion thereof).
DD. "Stock Option" or "Option" means any option to purchase
shares of Common Stock (including Restricted Stock, if the Committee so
determines) granted pursuant to Section 5 below.
EE. "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.
Except as provided below, the Plan shall be administered by a
Committee of not less than two Non- Employee Directors, 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 Non-Employee
Directors. The initial Committee shall be the Corporate Governance and
Compensation Committee of the Board. In the event there are not at
least two Non-Employee Directors on the Board, the Plan shall be
administered by the Board and all references herein to the Committee
shall refer to the Board.
The Committee shall have the power to delegate authority to the
Corporation's Chief Executive Officer, or to a committee composed of
executive officers of the Corporation, to grant, on behalf of the
Committee, Non- Qualified Stock Options exercisable at Fair Market Value
on the date of grant, subject to such guidelines as the Committee may
determine from time to time; provided, however that (i) options may only
be granted pursuant to such delegated authority for the purposes
specified by the Committee, which may include attracting new employees,
awarding outstanding performance, or retaining employees, (ii) the
Committee shall specify the maximum number of shares that may be granted
for purposes of attracting any single new employee at any specified
level and the maximum number that may be granted to any other employee
for any other purpose, (iii) options to purchase no more than 100,000
shares may be granted in any fiscal year pursuant to such delegated
authority, and (iv) a report of each grant of an option pursuant to such
delegated authority shall be presented to the Committee at the first
meeting of the Committee following such grant. Options granted pursuant
to such delegated authority in accordance herewith shall be deemed, to
the extent permitted under applicable law, to have been granted by the
Committee for all purposes under the Plan.
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: (i) Stock Options, (ii) Stock Appreciation
Rights, and/or (iii) Restricted Stock.
In particular, the Committee, or the Board, as the case may be,
shall have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees of and consultants
to the Corporation and its Subsidiaries and Affiliates to whom Stock
Options, Stock Appreciation Rights, and/or Restricted Stock may from
time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non- Qualified Stock Options, Stock Appreciation Rights, and/or
Restricted Stock, or any combination thereof, are to be granted
hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each
such award granted hereunder;
(d) 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 or waiver of forfeiture restrictions
regarding any Stock Option or other award and/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;
(e) to determine whether and under what circumstances a
Stock Option may be settled in cash or Restricted Stock under Section
5(l) or (m), as applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan are to be
made, and operate, on a tandem basis vis-a-vis other awards under the
Plan and/or cash awards made outside of the Plan;
(g) 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);
(h) to determine the terms, conditions, and restrictions of
any Performance Goals and the number of Options, Stock Appreciation
Rights, or shares of Restricted Stock subject thereto;
(i) to determine whether to require payment of tax
withholding requirements in shares of Common Stock subject to the award;
and
(j) to impose any holding period required to satisfy Section
16 under the Exchange Act.
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; and, except as expressly set forth herein or
otherwise required by law, 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.
(k) As of the Effective Date, the aggregate number of shares
of Common Stock that may be issued under the Plan shall be 6,000,000
shares. The shares of Common Stock issuable under the Plan may consist,
in whole or in part, of authorized and unissued shares or treasury
shares. No officer of the Corporation or other person whose
compensation may be subject to the limitations on deductibility under
Section 162(m) of the Code shall be eligible to receive awards pursuant
to this Plan relating to in excess of 500,000 shares of Common Stock in
any fiscal year (the "Section 162(m) Maximum").
(l) If any shares of Common Stock that have been optioned
cease to be subject to a Stock Option, or if any shares of Common Stock
that are subject to any Restricted Stock granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to
such shares of Common Stock, or any such award otherwise terminates
without a payment being made to the participant in the form of Common
Stock, such shares shall again be available for distribution in
connection with future awards under the Plan.
(m) 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, an appropriate substitution or adjustment shall be
made in the maximum number of shares that may be awarded under the Plan,
in the number and option price of shares subject to outstanding Options
granted under the Plan, in the Performance Goals, in the number of
shares underlying Outside Director Options to be granted under Section 8
hereof, in the Section 162(m) Maximum, and in the number of shares
subject to other outstanding awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be
a whole number. An adjusted option price shall also be used to
determine the amount payable by the Corporation upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility.
Officers, other key employees and Outside Directors of and
consultants to the Corporation and its Subsidiaries and Affiliates who
are responsible for or contribute to the management, growth and/or
profitability of the business of the Corporation and/or its Subsidiaries
and Affiliates are eligible to be granted awards under the Plan.
Outside Directors are eligible to receive awards pursuant to Section 8
and not pursuant to any other provisions of the Plan.
SECTION 5. Stock Options.
Stock Options may be granted alone, in addition to, or in tandem
with other awards granted under the Plan and/or cash awards made outside
of the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve.
Stock 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. No
Incentive Stock Option shall be granted on or following the tenth
anniversary of the earlier of (i) the effectiveness of the Plan or (ii)
the date of shareholder approval of the Plan.
The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors
and consultants 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.
(a) Option Price. The option price per share of Common
Stock purchasable under a Stock 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 Subsidiaries, 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.
(b) Option Term. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option (Incentive or Non-Qualified)
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
Subsidiaries or parent corporations, no Incentive Stock Option shall be
exercisable more than five years) after the date the Option is granted.
(c) Exercisability. Stock 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. The Committee may provide
that a Stock Option shall vest over a period of future service at a rate
specified at the time of grant, or that the Stock Option is exercisable
only in installments. If the Committee provides, in its sole
discretion, that any Stock 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.
(d) Method of Exercise. Subject to whatever installment
exercise restrictions apply under Section 5(c), Stock 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 shares of Common Stock already owned by the
optionee or, in the case of a Non-Qualified Stock Option, shares of
Restricted Stock or shares subject to such Option or another award
hereunder (in each case valued at the Fair Market Value of the Common
Stock on the date the Option is exercised). If payment of the exercise
price is made in part or in full with Common Stock, the Committee may
award to the employee a new Stock Option to replace the Common Stock
which was 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 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).
(e) Transferability of Options. No Non-Qualified Stock
Option shall be transferable by the optionee without the prior written
consent of the Committee other than (i) transfers by the Optionee to a
member of his or her Immediate Family or a trust for the benefit of the
optionee or a member of his or her Immediate Family, or (ii) transfers
by will or by the laws of descent and distribution. 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.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock
Option or an optionee who elects to make a disqualifying disposition (as
defined in Section 422(a)(1) of the Code) of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option, the Committee in
its discretion may award at the time of grant or thereafter the right to
receive upon exercise of such Stock 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.
(g) Termination by Death. Subject to Section 5(k), 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 Stock 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) 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 other period as
the Committee may specify at or after grant) from the date of such death
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section
5(k), 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 Stock 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 (i) three years (or such
other period as the Committee may specify at or after grant) from the
date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter, in
the case of a Non-Qualified Stock Option and (ii) one year from the date
of termination of employment or until the expiration of the stated term
of such Stock 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 (i) above (or other such period as the
Committee shall specify at or after 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 Stock Option, whichever period
is 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.
(i) Termination by Reason of Retirement. Subject to Section
5(k), 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 Stock 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 (i) three
years (or such other period as the Committee may specify at or after
grant) from the date of such termination of employment or the expiration
of the stated term of such Stock Option, whichever period is the
shorter, in the case of a Non-Qualified Stock Option and (ii) three
months from the date of such termination of employment or the expiration
of the stated term of such Stock Option, whichever period is the
shorter, in the event of an Incentive Stock Option; provided however,
that, if the optionee dies within the period specified in (i) above (or
other such period as the Committee shall specify at or after 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 Stock Option,
whichever period is 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.
(j) Other Termination. Subject to Section 5(k), 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 Stock Option
shall thereupon terminate, except that such Stock Option may be
exercised, to the extent otherwise then exercisable, for the lesser of
three months or the balance of such Stock Option's term if the
involuntary termination is without Cause. For purposes of this Plan,
"Cause" means (i) a felony conviction of a participant or the failure of
a participant to contest prosecution for a felony, or (ii) 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, in each case as determined by the
Committee, in its sole direction. Unless otherwise determined by the
Committee, 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 Stock 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
Stock Option's term.
(k) 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 Common Stock with respect to which all Incentive
Stock Options are exercisable for the first time by such participant
during any calendar year (under all such plans of the Company and any
Subsidiary) to exceed $100,000. To the extent permitted under Section
422 of the Code or the applicable regulations thereunder or any
applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is terminated by
reason of death, Disability, or Retirement and (y) the portion of any
Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Section 5(g), (h) or (i),
applied 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" during such post-
termination period under Section 422, such excess shall be treated as a
Non- Qualified Stock Option; and
(ii) 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 by reason of the
$100,000 limitation contained in Section 422(d) of the Code shall be
treated as a Non-Qualified Stock Option.
(l) Buyout Provisions. The Committee may at any time offer
to buy out for a payment in cash, 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.
(m) 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 regard to the
forfeiture restrictions involved.
(n) 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 six months prior to
its expiration if the conditions to exercise have not theretofore been
satisfied.
SECTION 4. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of such
Stock Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of the grant of such Stock Option. A Stock
Appreciation Right or applicable portion thereof granted with respect to
a given Stock Option shall terminate and no longer be exercisable upon
the termination or exercise of the related Stock 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 Stock Option. A Stock Appreciation Right
may be exercised by an optionee, subject to Section 6(b), in accordance
with the procedures established by the Committee for such purpose. Upon
such exercise, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock 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) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate shall be exercisable in accordance with the provisions of
Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash and/or shares of
Common Stock equal in value to the excess of the Fair Market Value of
one share of Common Stock over the option price per share specified in
the related Stock 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. When
payment is to be made in shares, the number of shares to be paid shall
be calculated on the basis of the Fair Market Value of the shares on the
date of exercise. When payment is to be made in cash, such amount shall
be calculated on the basis of the Fair Market Value of the Common Stock
on the date of exercise.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be
transferable under Section 5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related 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.
(v) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/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.
(vi) 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.
SECTION 1. 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 and/or cash awards made outside 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)), 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). The Committee
may condition the grant of Restricted Stock upon the attainment of
specified Performance Goals or such other factors as the Committee may
determine, in its sole discretion. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(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 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) The purchase price for shares of Restricted Stock
shall be established by the Committee and may be zero.
(ii) 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).
(iii) 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 (or a transferee permitted by Section 12(h) hereof),
and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award.
(iv) 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.
(v) The maximum number of shares eligible for issuance
pursuant to this Section 7 shall be 100,000.
(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) In accordance with 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, the attainment
of Performance Goals, or such other factors or criteria as the Committee
may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i), 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), in additional Restricted Stock to the extent shares
are available under Section 3, or otherwise reinvested. Pursuant to
Section 3 above, stock dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that are
subject to the same restrictions and other terms and conditions that
apply to the shares with respect to which such dividends are issued. If
the Committee so determines, the award agreement may also impose
restrictions on the right to vote and the right to receive dividends.
(iii) 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) 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 (or a transferee permitted by
Section 12(h) hereof) promptly.
(d) Minimum Value Provisions. In order to better ensure
that award payments actually reflect the performance of the Corporation
and service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Common Stock to the
recipient of a restricted stock award, subject to such performance,
future service, deferral, and other terms and conditions as may be
specified by the Committee.
SECTION 2. Awards to Outside Directors.
(a) The provisions of this Section 8 shall apply only to
awards to Outside Directors in accordance with this Section 8. The
Committee shall have no authority to determine the timing of or the
terms or conditions of any award under this Section 8. No awards shall
be made hereunder until awards are no longer made pursuant to the 1995
Outside Directors Stock Option Plan.
(b) A Non-Qualified Stock Option will be awarded hereunder
pursuant to the following formula: Each Outside Director shall receive
an annual Non-Qualified Stock Option for the purchase of shares of
Common 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 Non-Qualified Stock Option is
granted) by (ii) the Fair Market Value of a share of Common Stock on the
date of the 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 Non- Qualified Stock Option granted hereunder
shall be the Fair Market Value on the date of grant.
(c) Each Outside Director Option shall vest and become
exercisable on the first anniversary of the date of grant if the grantee
is still a member of the Board on such date, but shall not be
exercisable before such date except as provided in Section 9.
(d) No Outside Director Option shall be exercisable prior to
vesting. Each Outside Director Option shall expire, if unexercised, on
the tenth anniversary of the date of grant. The exercise price may be
paid in cash or in shares of Common Stock, including shares of Common
Stock subject to the Outside Director Option.
(e) Outside Director Options shall not be transferable
without the prior written consent of the Board other than (i) transfers
by the optionee to a member of his or her Immediate Family or a trust
for the benefit of optionee or a member of his or her Immediate Family,
or (ii) transfers by will or by the laws of descent and distribution.
(f) Recipients of Outside Director Options shall enter into
a stock option agreement with the Corporation setting forth the exercise
price and other terms as provided herein.
(g) Upon termination of an Outside Director's service as a
director of the Corporation, (i) all Outside Director Options shall be
governed by the provisions of Sections 5(g), 5(i), and 5(j) hereof as if
Outside Directors were employees of the Corporation, except that there
shall be no discretion to accelerate the vesting of any Outside Director
Options in connection with the termination of service of any individual
Outside Director.
(h) Outside Director Options shall be subject to Section 9.
The number of shares and the exercise price per share of each Outside
Director Option theretofore awarded shall be adjusted automatically in
the same manner as the number of shares and the exercise price for Stock
Options under Section 3(c) hereof at any time that Stock Options are
adjusted as provided in Section 3(c). The number of shares underlying
Outside Director Options to be awarded in the future shall be adjusted
automatically in the same manner as the number of shares underlying
outstanding Stock Options are adjusted under Section 3(c) hereof at any
time that Stock Options are adjusted under Section 3(c) hereof.
(i) Any applicable withholding taxes shall be paid in shares
of Common Stock subject to the Outside Director Option valued as
the Fair Market Value of such shares unless the Corporation agrees to
accept payment in cash in the amount of such withholding taxes.
(j) The Board, in its sole discretion, may determine to
reduce the size of any Outside Director Option prior to grant or to
postpone the vesting and exercisability of any Outside Director Option
prior to grant.
SECTION 9. Change in Control Provisions.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 9(b); or
(2) a "Potential Change in Control" as defined in Section
9(c), but only if and to the extent so determined by the Committee or
the Board at or after grant (subject to any right of approval expressly
reserved by the Committee or the Board at the time of such
determination);
(i) subject to the limitations set forth below in this
Section 9(a), the following acceleration provisions shall apply:
(a) Any Stock Appreciation Right, Stock Option or
Outside Director Option awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested.
(b) The restrictions applicable to any Restricted Stock
in each case to the extent not already vested under the Plan, shall
lapse and such shares and awards shall be deemed fully vested.
(ii) subject to the limitations set forth below in this
Section 9(a), the value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock and Outside Director Options in
each case to the extent vested, shall, unless otherwise determined Board
or by the Committee in its sole discretion prior to any Change in
Control, be cashed out on the basis of the "Change in Control Price" as
defined in Section 9(d) 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 Board or Committee may determine prior to the Change in
Control.
(iii) The Board or the Committee may impose additional
conditions on the acceleration or valuation of any award in the award
agreement.
(b) Definition of Change in Control. For purposes of
Section 9(a), 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 35% 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, sales 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 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. For
purposes of Section 9(a), 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 as defined in Section 9(b); 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 5% 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. For purposes of this Section
9, "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
Potential or actual 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 Stock Appreciation Rights or, where applicable,
the date on which a cash out occurs under Section 9(a)(ii).
SECTION 10. Amendments and Termination.
The Board may at any time amend, alter or discontinue the Plan
without shareholder approval to the fullest extent permitted by the
Exchange Act and the Code; provided, however, that no amendment,
alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock
Appreciation Right, Restricted Stock or Outside Director Option
theretofore granted, without the participant's consent.
The Committee may amend the terms of any Stock Option or other
award theretofore granted, prospectively or retroactively, but, subject
to Section 3 above, no such amendment shall impair the rights of any
holder without the holder's consent. The Committee may also substitute
new Stock Options for previously granted Stock Options (on a one for one
or other basis), including previously granted Stock Options having
higher option exercise prices. Solely for purposes of computing the
Section 162(m) Maximum, if any Stock Options or other awards previously
granted to a participant are canceled and new Stock Options or other
awards having a lower exercise price or other more favorable terms for
the participant are substituted in their place, both the initial Stock
Options or other awards and the replacement Stock Options or other
awards will be deemed to be outstanding (although the canceled Stock
Options or other awards will not be exercisable or deemed outstanding
for any other purposes).
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 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) The Committee may require each person purchasing shares
pursuant to a Stock 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.
All certificates for shares of Common Stock or other securities
delivered under the Plan shall be subject to such stop-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) 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) 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) 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 Common Stock, including Common Stock that
is 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) 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 for such reinvestment (taking into account then outstanding
Stock Options and other Plan awards).
(f) 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.
(g) 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 as 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.
(h) In addition to any other restrictions on transfer that
may be applicable under the terms of this Plan or the applicable award
agreement, no Stock Option, Stock Appreciation Right, Restricted Stock
Award or other right issued under this Plan is transferable by the
participant without the prior written consent of the Committee, or, in
the case of an Outside Director, the Board, other than (i) transfers by
an optionee to a member of his or her Immediate Family or a trust for
the benefit of the optionee or a member of his or her Immediate Family
or (ii) transfers by will or by the laws of descent and distribution.
The designation of a beneficiary will not constitute a transfer.
(i) The Committee may, at or after grant, condition the
receipt of any payment in respect of any award or the transfer of any
shares subject to an award on the satisfaction of a six-month holding
period, if such holding period is required for compliance with Section
16 under the Exchange Act.
SECTION 13. Effective Date of Plan.
The Plan shall be effective as of the date of approval of the
Plan by a majority of the votes cast by the holders of the Corporation's
Common Stock (the "Effective Date").
<PAGE>
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FORM OF PROXY
======================================================================
REVOCABLE PROXY
DOLLAR GENERAL CORPORATION
X PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
JUNE 1, 1998
This Proxy is solicited on behalf of the Board of Directors. The
undersigned hereby appoints Cal Turner, Jr. and Robert C. Layne, or
either of them, with full power of substitution, as proxies, and hereby
authorizes them to represent and to vote, as designated, all the shares
of Common Stock of Dollar General Corporation held by the undersigned on
April 15, 1998, at the Annual Meeting of Stockholders to be held the
Goodlettsville City Hall Auditorium, 105 South Main Street,
Goodlettsville, TN, on June 1, 1998 at 10:00 a.m., local time, and any
adjournments thereof.
For Against Abstain
1. Approval of Change in Domicile. _____ _____ _____
For For All
Except Withhold
2. The election as directors of all nomi- _____ _____ _____
nees listed:
Dennis C. Bottorff Reginald D. Dickson
James L. Clayton Barbara M. Knuckles
John B. Holland Cal Turner
Cal Turner, Jr. David M. Wilds
William S. Wire, II
INSTRUCTION:
1. To withhold authority to vote for any individual nominee, write that
nominee's name in the space provides below:
________________________________________________________________
2. If you wish to vote cumulatively, indicate below how you want your
votes allocated among the nominees.
________________________________________________________________
For Against Abstain
3. Increase in Authorized Shares of
Common Stock. _____ _____ _____
4. Approval of the 1998 Stock Incentive
Plan. _____ _____ _____
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
Please be sure to sign and date this Proxy in the box below.
Date ______________
____________________________________________________________________
Stockholder sign above Co-holder(if any) sign above
Detach above card, sign, date and mail in postage paid envelope
provided.
DOLLAR GENERAL CORPORATION
This Proxy when properly executed will be voted in the manner directed
herein by the signed stockholder. If no direction is made, this Proxy
will be voted for Proposals 1, 2, 3 and 4.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
