SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
DOLLAR GENERAL
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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5) Total fee paid:
N/A
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[_] Fee paid previously with preliminary materials:
N/A
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
N/A
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2) Form, Schedule or Registration Statement No.:
N/A
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3) Filing Party:
N/A
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4) Date Filed:
N/A
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[GRAPHIC - DOLLAR GENERAL CORPORATION LETTERHEAD]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 2002
The Annual Meeting of Shareholders (the "Annual Meeting") of Dollar General
Corporation (the "Company") will be held at the Goodlettsville City Hall
auditorium, 105 South Main Street, Goodlettsville, Tennessee, on February 20,
2002 at 10:00 a.m. local time, for the following purposes:
1. To elect ten directors to serve until the next Annual Meeting and until
their successors are duly elected and qualified;
2. To consider and act upon one shareholder proposal;
3. To ratify the appointment of Ernst & Young LLP as independent accountants
for 2001; and
4. To transact such other business as properly may come before the meeting or
any adjournments thereof.
Only shareholders of record at the close of business on January 11, 2002
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,
January 14, 2002 Larry K. Wilcher
General Counsel and Corporate Secretary
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Whether or not you expect to be physically present at the Annual Meeting, please
vote your proxy as soon as possible. You may vote your proxy electronically or
by phone according to the instructions on the enclosed card, or sign, date and
return the enclosed printed proxy card in the enclosed business reply envelope.
No postage is necessary if the proxy is mailed within the United States. You may
revoke the proxy at any time before it is voted.
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2
DOLLAR GENERAL CORPORATION
100 Mission Ridge
Goodlettsville, Tennessee 37072
Telephone (615) 855-4000
Proxy Statement for
Annual Meeting of Shareholders
The enclosed proxy is solicited by the Board of Directors of Dollar General
Corporation (the "Company") for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the Goodlettsville City Hall auditorium, 105
South Main Street, Goodlettsville, Tennessee on February 20, 2002 at 10:00 a.m.
local time, and any adjournment thereof. This proxy material was first mailed to
shareholders on or about January 22, 2002.
The mailing address of the principal executive office of the Company is 100
Mission Ridge, Goodlettsville, Tennessee 37072-2170.
All valid proxies that are timely received will be voted in accordance with
the recommendations of the Board of Directors unless otherwise specified on the
proxy. Any shareholder 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 or by duly executing a proxy bearing a later date.
Only holders of the Company's common stock, $0.50 par value per share (the
"Common Stock"), of record at the close of business on January 11, 2002 (the
"Record Date"), are entitled to vote at the Annual Meeting. On such date, the
Company had 332,577,284 issued and outstanding shares of Common Stock, the
holders of which are entitled to one vote for each share held. Attendance at the
Annual Meeting will be limited to shareholders or their proxy holders and the
Company's invited guests.
Throughout this statement "2000" refers to the Company's fiscal year ended
February 2, 2001, "1999" refers to the Company's fiscal year ended January 28,
2000, and "1998" refers to the Company's fiscal year ended January 29, 1999. All
share amounts have been adjusted to reflect the effects of all common stock
splits declared on or before the Record Date.
3
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PROPOSAL NO. 1: ELECTION OF DIRECTORS
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Directors are elected each year to hold office until the next Annual
Meeting and until their successors are duly elected and qualified. The current
Board of Directors consists of ten members. At its February 26, 2001, meeting
the Board of Directors nominated each of the current directors as nominees to
stand for election at the Annual Meeting, which nominations were confirmed by
the Board on December 14, 2001.
In the election of directors, pursuant to Tennessee law, each share of
Common Stock entitles its holder to cast one vote for each director nominee.
Unless contrary instructions are received, the enclosed proxy will be voted in
favor of electing the nominees listed below. Each nominee has consented to be a
candidate and to serve if elected. While the Board of Directors 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.
4
The nominees for the Board of Directors are as follows:
Director
Name Age Since
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Dennis C. Bottorff 57 1998
Barbara L. Bowles 54 2000
James L. Clayton 67 1988
Reginald D. Dickson 55 1993
E. Gordon Gee 57 2000
John B. Holland 69 1988
Barbara M. Knuckles 53 1995
Cal Turner 61 1966
David M. Wilds 61 1991
William S. Wire, II 69 1989
Certain information concerning each of the nominees is set forth below:
Mr. Bottorff currently serves as Chairman of Council Capital Management,
Inc., which position he has held since January 2001. He previously served as
Chairman of AmSouth Bancorporation, a bank holding company, and prior to that,
as President and Chief Executive Officer of First American Corporation from 1991
to 1999. He was also First American's Chairman from 1995 to 1999. Mr. Bottorff
is a director of Ingram Industries, a privately-held provider of wholesale
distribution, inland marine transportation and insurance services. He also
serves as a director of Memx, Inc., an optical systems component manufacturer.
Ms. Bowles currently serves as President of The Kenwood Group, an equity
investment advisory firm that she founded in 1989. She also founded The Kenwood
Growth and Income Fund in 1996. She previously served as Vice President of
Kraft, Inc. from 1984 to 1989. Ms. Bowles is a director of Black & Decker
Corporation, Wisconsin Energy Corporation, Georgia Pacific Corp., and the
Chicago Urban League. She is also a trustee of Fisk University.
Mr. Clayton has served as Chairman of Clayton Homes, Inc. since 1956 and
also served as its Chief Executive Officer from 1956 to 1999. Clayton Homes,
Inc. manufactures, sells, finances and insures manufactured homes. Mr. Clayton
is Chairman and Chief Executive Officer of FSB Bank Shares, Inc., a bank holding
company, and is a Director and Regional Chairman of Branch Banking and Trust Co.
Additionally, Mr. Clayton is a director of Chateau Communities, Inc., a
manufactured housing property management real estate investment trust.
Mr. Dickson has served as Chairman of Buford, Dickson, Harper & Sparrow,
Inc., Investment Advisors, and President Emeritus of Inroads, Inc., a non-profit
organization supporting minority education since 1996. Mr. Dickson served as
President and Chief Executive Officer of Inroads, Inc. from 1983 to 1993.
Dr. Gee has served as Chancellor of Vanderbilt University since 2000. He
previously served as President of Brown University from 1998 until 2000. Prior
to that, Dr. Gee served as President of The Ohio State University from 1990
until 1998. Dr. Gee is a director of The Limited, Inc., Intimate Brands, Inc.,
Allmerica Financial Corp., Hasbro, Inc., and Massey Energy, Inc.
5
Mr. Holland served as President and Chief Operating Officer of Fruit of the
Loom, Inc., a manufacturer of underwear and other soft goods, from 1985 until
his retirement in February 1996, at which time he became a consultant to that
corporation. In 1999, Mr. Holland returned to Fruit of the Loom as a director
and Executive Vice President, Operations. Fruit of the Loom filed a petition for
bankruptcy on December 29, 1999. Mr. Holland also serves as President of Dunree
Capital, Inc.
Ms. Knuckles has served as Director of Development and Corporate Relations
for North Central College in Naperville, Illinois since 1992. From 1988 to 1992,
Ms. Knuckles was a private investor managing several family businesses. She
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.
Mr. Turner is the Chairman and Chief Executive Officer of the Company. He
joined the Company in 1965 and has held the office of Chief Executive Officer
since 1977. Mr. Turner became Chairman of the Board in 1989 and President in
1977.
Mr. Wilds currently serves as Managing Partner of 1st Avenue Partners,
L.P., a private equity partnership, which position he has held since 1998. From
1995 to 1998, Mr. Wilds was President of Nelson Capital Partners III, L.P., a
merchant banking company. 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. Wire 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 is a director of Genesco, Inc. and American Endoscopy
Services, Inc.
COMMITTEES OF THE BOARD. The Company currently has a Executive Compensation
and Corporate Governance Committee (the "CGC Committee") and an Audit Committee.
The CGC Committee consists of Messrs. Bottorff, Gee, Wilds and Wire
(Chairman). The CGC Committee reviews and recommends changes in the Company's
corporate governance policies and practices, provides advice and assistance
regarding corporate compliance matters, reviews the compensation policies of the
Company and compensation programs in which officers may participate, 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 shareholders
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). A full statement of qualifications and an
indication of the person's willingness to serve must accompany the
recommendations. The CGC Committee also administers the Company's stock option
plans, excluding the 1993 Outside Directors' Plan and the 1995 Outside
Directors' Stock Option Plan, which are administered by a Director Compensation
Committee made up of the Company's Chief Executive Officer, President and Vice
President/Chief Administrative Officer. At least once a year, the CGC Committee
specifically reviews the standards of performance of the Chief Executive Officer
for compensation purposes. (See "Report of the Executive
6
Compensation and Corporate Governance Committee of the Board of Directors on
Executive Compensation.") The CGC Committee met four times during 2000.
The Audit Committee is composed of Messrs. Clayton, Dickson and Holland
(Chairman), and Ms. Bowles and Ms. Knuckles. The Board of Directors has adopted
and approved a formal written charter for the Audit Committee (which is attached
to this proxy statement as Appendix "A"). The functions of the Audit Committee
include providing advice and assistance regarding accounting, auditing, and
financial reporting practices of the Company. Annually, the Audit Committee
recommends to the Board of Directors a firm of independent certified public
accountants to serve as auditors. The Audit Committee reviews with the auditors
the scope and results of their annual audit, fees in connection with their audit
and non-audit services, and the independence of the Company's auditors. (See
"Report of the Audit Committee"). The Audit Committee met four times during
2000.
The Board of Directors has taken action such that, following the conclusion
of the Annual Meeting, a new Compensation Committee will be established and the
name of the existing Corporate Governance and Compensation Committee will be
changed to the "Nominating and Corporate Governance Committee." The new
Compensation Committee will be responsible for reviewing and monitoring the
Company's compensation and human resources policies, programs and plans. The
Nominating and Corporate Governance Committee will be responsible solely for
corporate governance and related matters (including recommending to the full
Board officer and director candidates). The Board of Directors has not yet
determined which directors will be appointed to these two committees.
During 2000, 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 of Directors or any
committee thereof. Committee chairpersons receive an additional $250 for each
committee meeting attended. Compensation for telephonic meetings is one-half the
above rates. Directors who are officers of the Company do not receive any
separate compensation for attending Board or committee meetings. In addition,
the directors who are not employees of the Company are entitled to receive
nonqualified options for the purchase of Common Stock pursuant to the Company's
1998 Stock Incentive Plan.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. A non-employee
director may defer all or a part of any fees normally paid by the Company to the
director pursuant to a voluntary nonqualified compensation deferral plan. The
compensation eligible for deferral includes the annual retainer, meeting and
other fees, as well as any per diem compensation for special assignments, earned
by a director for his or her service to the Board or one of its committees. The
compensation deferred is credited to a liability account, which is then invested
at the option of the director, in either an account which mirrors the
performance of a fund selected by the CGC Committee, or in a phantom stock
account which mirrors the performance of the Common Stock. In accordance with a
director's election made at the time of the deferral, the deferred compensation
will be paid in a lump sum or in annual installments, or a combination of both
upon a director's resignation or termination from the Board. All deferred
compensation will be immediately due and payable upon a "change in control" (as
defined in the deferred compensation plan) of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During 2000,
the CGC Committee was comprised of Messrs. Bottorff, Gee, 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 during 2000. No executive officer of the Company
served 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.
7
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VOTE REQUIRED
The affirmative vote of a plurality of the votes cast by the shareholders
entitled to vote at the meeting is required for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES LISTED ABOVE.
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PROPOSAL NO. 2: SHAREHOLDER PROPOSAL REGARDING
EQUAL EMPLOYMENT OPPORTUNITY INFORMATION
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A shareholder, Calvert Asset Management Company, Inc., has notified the
Company of its intention to propose the following resolution at the Annual
Meeting. Proxy regulations require the Company to present the proposed
resolution and supporting statement. Following the shareholder's proposed
resolution and supporting statement is the response of the Company's Board of
Directors. The shareholder recommends you vote for this proposal; however, the
Company's Board of Directors unanimously recommends you vote AGAINST this
proposal. The text of the proposed resolution from Calvert Asset Management
Company, Inc., is as follows:
"Equal employment is a key issue for shareholders. The bipartisan Glass
Ceiling Commission Study released in 1995 states that a positive diversity
record also has a positive impact on the bottom line. This study is important
for shareholders because it explains that many corporations in the United States
select for advancement from less than 50% of the total talent available in our
workforce.
1. Women and minorities comprise 57 percent of the work force, yet
represent only 3 percent of executive management positions.
2. Women who were awarded more than half of all MBA degrees represent
less than 5 percent of senior-level management positions.
These statistics show the limits placed on selecting the most talented
people for top management positions. Neglecting the importance of diversity
impacts the bottom line because of the real costs of discrimination cases, the
potential loss of government contracts and the financial ramifications of a
damaged corporate image:
1. In 1996, Texaco settled the largest racial discrimination lawsuit in
U. S. history, costing a reported $170 million to the company and
stockholders. Texaco's public image was tarnished and the company
faced a consumer boycott.
2. In 1996, the Wall Street Journal reported that Shoney's earnings for
fiscal year 1992 posted a loss of $16.6 million as a result of
settling a racial discrimination suit for $134.5 million.
3. In 1997, Denny's reported it was still trying to win back its minority
customers, lost after a 1992 discrimination complaint.
8
4. In 1998, Smith Barney agreed to spend $15 million on diversity
programs to settle a case brought by plaintiffs charging sexual
harassment.
More than 150 major employers publicly report their work force diversity to
their shareholders. Examples include Disney/ABC, USAir, Intel, Monsanto, and
Texaco. These companies and many others regularly provide reports describing
diversity progress and challenges. Often companies will also include this
information in their annual reports.
RESOLVED: The shareholders request that our company prepare, at
reasonable cost, a report to shareholders, which may omit
confidential information to be made available to shareholders
four months from the date of the annual meeting, which includes:
1. The consolidated EEO-1 report in standard federal government
categories according to gender and race in each of the nine
major EEOC-defined categories for the previous three years;
2. A description of any policies and programs oriented
specifically toward increasing the number of managers who
are qualified females and/or ethnic minorities;
3. A description of the company's efforts to increase its
business with female and minority suppliers and
service-providers;
4. A general description of how the company publicizes its
diversity policies and programs to employees, merchandise
suppliers and service providers.
BOARD OF DIRECTORS' RESPONSE:
THE BOARD HAS CONSIDERED THIS PROPOSAL AND RECOMMENDS THAT SHAREHOLDERS VOTE
"AGAINST" IT FOR THE FOLLOWING REASONS:
The Company believes in the dignity of work and the dignity of every
person. The Company firmly supports diversity in the workplace as evidenced by
its policies and programs. For example, the Company focuses its recruiting and
retention efforts on all people without regard to race, gender or other such
characteristics. The Company's representation of women and minorities on the
Board of Directors and at senior management levels reflects this policy.
The Company has already considered the principles set forth by the Glass
Ceiling Commission, and the standing committees of the Board of Directors review
various Company policies and programs that support workplace diversity. The
Board of Directors also considers workforce issues relating to the effective
recruitment of, and opportunities for, women and minorities.
In policy statements distributed to all employees, the Company makes clear
that all employees have the right to work in an environment free from all forms
of discrimination and conduct which can be considered harassing, coercive or
disruptive. The Company values and respects the rights of each employee and will
not tolerate discrimination or harassment based on race, color, religion, sex,
national origin, age, disability, citizenship status or any other characteristic
protected by law.
9
In addition to publishing the Company's "zero tolerance"
anti-discrimination and harassment policy and distributing it to employees
regularly, the Company regularly publishes notices to employees of the Company's
mechanisms for reporting any form of discrimination or harassment, which
includes a toll-free hotline linked directly to corporate headquarters.
Since the Company's commitment to equal opportunity employment is part of
its ordinary business operations, the time and expense involved in the process
of gathering data and producing reports as requested by the proponents would do
nothing to further the Company's equal employment efforts, and therefore would
not be a prudent use of the Company's resources.
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VOTE REQUIRED
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To approve the shareholder proposal above, the votes cast for the shareholder
proposal must exceed the votes cast against it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL.
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PROPOSAL NO. 3: RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
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The accounting firm of Ernst & Young LLP ("Ernst & Young") has been
selected as the independent public accountants for the Company for the fiscal
year ending February 1, 2002. Although the selection of accountants does not
require ratification, the Board of Directors has directed that the appointment
of Ernst & Young be submitted to the shareholders for ratification due to the
significance of their appointment by the Company. If the shareholders do not
ratify the appointment of Ernst & Young, the Board of Directors will reconsider
the appointment of independent accountants. A representative of Ernst & Young
will be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
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VOTE REQUIRED
The affirmative vote of a plurality of the votes cast by the shareholders
entitled to vote at the meeting is required for the ratification of the
appointment of independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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EXECUTIVE OFFICERS
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The Company's executive officers as of December 14, 2001, are:
Executive
Officer
Name Age Position Since
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Cal Turner 61 Chairman and 1966
Chief Executive Officer
Donald S. Shaffer 58 President and 2001
Chief Operating Officer
Bruce Ash 52 Vice President, 1999
Information & Administrative Services
Melissa Buffington 43 Vice President and 1999
Chief Administrative Officer
Jim Hagan 42 Executive Vice President and 2001
Chief Financial Officer
Tom Hartshorn 50 Executive Vice President, 1992
Merchandising
Bob Layne 35 Vice President 2001
Merchandising Support
Stonie O'Briant 46 Executive Vice President, 1995
Operations
Robert A. Lewis 40 Vice President, Controller 2001
Jeff Sims 50 Vice President, 1999
Distribution
Bob Warner 51 Vice President, 1998
General Merchandising Manager
All executive officers of the Company serve at the pleasure of the Board of
Directors. Messrs. Turner, Hartshorn and O'Briant have been employed by the
Company as executive officers for more than the past five years.
11
The following is a brief summary of the business experience of the
executive officers:
Mr. Turner joined the Company in 1965 and was elected President and Chief
Executive Officer in 1977. Mr. Turner has served as Chairman of the Board and
Chief Executive Officer since January 1989.
Mr. Shaffer joined the Company as President and Chief Operating Officer in
May 2001. From 2000 to 2001, Mr. Shaffer served as President and Chief Executive
Officer of Heilig-Meyers Company, a retailer of home furnishings and bedding,
and as its President and Chief Operating Officer from 1999 to 2000.
Heilig-Meyers Company filed a petition for bankruptcy on August 16, 2000. From
1997 to 1998, Mr. Shaffer served as Chairman and Chief Executive Officer of
Western Auto Supply Company, a wholesaler of automotive parts and a subsidiary
of Sears, Roebuck and Co. From 1994 to 1996, Mr. Shaffer served as President and
Chief Executive Officer of Sears Canada Inc., a retailer of general merchandise
and a majority-owned subsidiary of Sears, Roebuck and Co.
Mr. Ash joined the Company as Vice President, Information Services in
September 1999. Before joining the Company, Mr. Ash served as Senior Vice
President of Systems at Talbot's, a retailing company, for 10 years.
Ms. Buffington was named Vice President and Chief Administrative Officer in
February 2001. She joined the Company as Vice President, Human Resources in
November 1999. Before joining the Company, Ms. Buffington served as Executive
Vice President, Human Resources of First American Corporation, a bank holding
company. Ms. Buffington joined First American in 1992 as Vice President,
Strategic Planning.
Mr. Hagan joined the Company as Executive Vice President and Chief
Financial Officer in March 2001. From June 2000 through March 2001, Mr. Hagan
served as Chief Financial Officer of Central Parking Corporation, a provider of
parking and transportation management services. From April 1999 through June
2000, Mr. Hagan served as Executive Vice President and Chief Financial Officer
of Saturn Retail Enterprises, an owner/operator of Saturn automobile dealerships
and a wholly owned indirect subsidiary of General Motors Corporation. He served
as Executive Vice President and Chief Financial Officer of Bruno's Inc., a
supermarket operator, from May 1996 through April 1999, which company filed a
petition for bankruptcy in January of 1998. Mr. Hagan also previously served as
Executive Vice President and Chief Financial Officer of Revco D.S., Inc.
Mr. Hartshorn was named Executive Vice President, Merchandising in February
2001. Since February 2000, he served as Senior Vice President, Logistics and
Merchandising Operations. He joined the Company as Vice President, Operations in
1992 and was named Vice President, Merchandising Operations in 1993. Before
joining the Company, he was director of store operations for McCrory/TG&Y, a
retailing company, where he held various management positions in operations
since 1968.
Mr. Layne was named Vice President, Merchandising Support in February 2001.
He joined the Company in 1985 and served various positions including staff
attorney, senior director of administration and most recently, Corporate
Secretary.
12
Mr. O'Briant was named Executive Vice President, Operations in February
2001. Since February 2000, he served as Executive Vice President, Merchandising.
Mr. O'Briant joined the Company in 1991 as Hardlines Merchandise Manager, was
named General Merchandise Manager in 1992, Vice President, Merchandising in
1995, and Senior Vice President, Merchandising in 1998. Before joining Dollar
General, Mr. O'Briant had 17 years of service with Fred's, Inc., a discount
retailer, where he served in a number of executive management positions
including Vice President, Hardlines, Vice President, Softlines and Vice
President, Household Products.
Mr. Lewis joined the Company as Vice President, Controller in October,
2001. From May 1999 through September 2001, Mr. Lewis served as Group Vice
President, overseeing operational, planning and administrative functions for Lux
Corp., an apparel retailer doing business as "Mr. Rags" and a wholly owned
subsidiary of Claire's Stores, Inc. Mr. Lewis served as Vice President of
Finance from 1996 until May 1999, and as Controller from November 1988 until May
1999, for Claire's Stores, Inc., a retailer of popular-priced fashion
accessories and apparel.
Mr. Sims was named Vice President, Distribution in March 1999. Before
joining the Company, Mr. Sims served with Hills Department Stores, a mass
merchandising company, in various management positions including Senior Vice
President, Logistics from 1997 to 1999. From 1995 to 1996, Mr. Sims served as
Vice President, Logistics for Thorn Services International, a rent-to-own
services company. From 1992 to 1994, Mr. Sims served as Vice President,
Logistics for Lesco, Inc., a manufacturer and distributor of industrial
products.
Mr. Warner was named Vice President, General Merchandising Manager in
November 1998. Mr. Warner joined the Company in 1989 as a hardware buyer. Mr.
Warner has held various management positions with the Company including
Hardlines Divisional Merchandise Manager, Director of Products and Processes and
General Merchandise Manager.
13
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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The following table sets forth certain information concerning persons who,
as of December 14, 2001, were known by management to be beneficial owners of
more than five percent of the Company's common stock. Unless otherwise
indicated, each person for whom information is provided had sole voting and
investment power over the shares of common stock listed opposite his or her
name. Computations are based on 332,577,284 shares of Common Stock outstanding
as of December 14, 2001.
14
Amount and Nature Percent of
Name and Address of of Beneficial Shares
Beneficial Owner Ownership Outstanding
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Cal Turner, Jr. 48,148,818(1) 14.9%
100 Mission Ridge
Goodlettsville, TN 37072-2170
James Stephen Turner 41,087,516(2) 12.7%
138 Second Avenue
Nashville, TN 37201
Turner Children Trust(3) dated January 21, 1980, Cal 31,625,784 9.51%
Turner, Jr. and James Stephen Turner, Co-Trustees
100 Mission Ridge
Goodlettsville, TN 37072-2170
Capital Research and Management Company 31,133,000(4) 9.36%
333 South Hope Street
Los Angeles, CA 90071
Wellington Management Company, LLP 24,626,675(5) 7.40%
75 State Street
Boston, MA 02109
(1) Includes 41,449,796 shares held by various trusts and foundations (the
largest of which is the "Turner Children Trust" shown in this table) for
which Cal Turner, Jr. is a trustee; 727,587 shares held by Cal Turner,
Jr.'s wife; 21,403 shares held in Company retirement and deferred
compensation plans (IRA & 401(k)); direct ownership of 5,714,094 shares;
and 235,938 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days. Cal Turner, Jr. has
sole voting and investment power with respect to 5,971,435 shares of Common
Stock and shared voting and investment power with respect to 41,449,796
shares of Common Stock. Cal Turner, Jr. disclaims ownership of the shares
held by the various trusts and foundations, except to the extent of his
pecuniary interests.
(2) Includes 38,694,207 shares held by various trusts and foundations (the
largest of which is the "Turner Children Trust" shown in this table) for
which James Stephen Turner is a trustee; and 56,445 shares held by James
Stephen Turner's wife. James Stephen Turner has sole voting and investment
power with respect to 2,336,864 shares of Common Stock and shared voting
and investment power with respect to 38,694,207 shares of Common Stock.
James Stephen Turner disclaims ownership of the shares held by the various
trusts and foundations, except to the extent of his pecuniary interests.
(3) The co-trustees of the "Turner Children Trust" are Cal Turner, Jr. and
James Stephen Turner.
(4) According to a Form 13-F (effective September 30, 2001) filed by Capital
Research and Management Company on November 14, 2001, it has shared
investment power with respect to 31,133,000 shares of Common Stock, but
does not have sole or shared voting power over any of the shares of Common
Stock. The Company is unable to ascertain more recent information about
this entity's holdings.
(5) According to a Form 13-F (effective September 30, 2001) filed by Wellington
Management Company, LLP on November 14, 2001, it has sole investment power
with respect to 20,813,241 shares of common stock, shared investment power
with respect to 3,813,434 shares of Common Stock, sole voting power with
respect to 10,777,173 shares of Common Stock, shared voting power with
respect to 3,013,309 shares of Common Stock and no voting power with regard
to 10,836,193 shares of Common Stock. The Company is unable to ascertain
more recent information about this entity's holdings.
15
--------------------------------------------------------------------------------
SECURITY OWNERSHIP BY OFFICERS AND DIRECTORS
--------------------------------------------------------------------------------
The following table sets forth certain information as of December 14, 2001,
concerning all directors and nominees, the executive officers named in the
Summary Compensation Table 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 beneficially
owned. Computations are based on 332,577,284 shares of Common Stock outstanding
as of December 14, 2001.
Nominee/Executive Shares Beneficially Percent of
Officers Owned Shares
Outstanding(1)
--------------------------------------------------------------------------------
Dennis C. Bottorff 15,621 (2) *
Barbara L. Bowles 4,150 (3) *
James L. Clayton 478,623 (4) *
Reginald D. Dickson 59,512 (5) *
E. Gordon Gee 6,308 (6) *
John B. Holland 503,304 (7) *
Barbara M. Knuckles 20,664 (8) *
David M. Wilds 269,665 (9) *
William S. Wire, II 49,457 (10) *
Cal Turner, Jr. 48,148,818 (11) 14.9%
Brian Burr 25,500 (15) *
Bob Carpenter 1,627,142 (12, 15) *
Tom Hartshorn 630,936 (13) *
Stonie O'Briant 328,614 (14) *
Earl Weissert 31,313 (15) *
All directors and executive 51,101,338 (16, 17) 15.8%
officers as a group (20
persons)
(1) *Denotes less than 1% of class.
(2) Includes 13,669 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(3) Includes 3,150 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(4) Includes 67,738 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(5) Includes 39,726 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(6) Includes 6,308 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(7) Includes 33,476 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
16
(8) Includes 13,938 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(9) Includes 67,738 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(10) Includes 33,476 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(11) Includes 235,938 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days, and also includes
shares beneficially owned as set forth under "Security Ownership of Certain
Beneficial Owners."
(12) Includes 656,628 shares issuable upon the exercise of outstanding options
or options exercisable within 60 days, and 494,449 shares for which Mr.
Carpenter has shared voting and investment rights as a Co-Trustee of the
Calister Turner, III 1994 Generation Skipping Trust.
(13) Includes 445,427 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(14) Includes 238,041 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(15) Denotes that executive officer has left the Company.
(16) Includes 1,680,723 shares issuable upon the exercise of outstanding options
currently exercisable or exercisable within 60 days.
(17) Includes only those individuals who were directors or executive officers as
of December 14, 2001.
17
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The following table provides information as to annual, long-term or other
compensation paid or accrued during 2000, 1999 and 1998, for the CEO and the
persons who, at the end of 2000, were the other four most highly-compensated
executive officers of the Company (collectively, the "Named Executive Officers")
or those who are otherwise required to be included in this table.
SUMMARY COMPENSATION TABLE
================================================================================
Long-term
Annual Compensation Compensation Awards
----------------------------------------- ------------------------------
Securities
Other Annual Restricted Underlying
Name and Principal Compensation Stock Options All Other
Position Year Salary ($) Bonus ($) ($)(1) Awards ($) (#)(2) Compensation(3)
========================= ==== ========== ========= ============ ========== =========== ===============
Cal Turner, Jr., Chairman 2000 775,029 356,500 22,080 0 205,168 166,084
and Chief Executive 1999 766,667 485,750 12,866 0 205,995 156,782
Officer 1998 704,167 528,000 8,153 0 209,608 151,410
-------------------------- ---- ------- ------- ------ ----- ------- -------
Brian Burr, Executive 2000 333,346 149,500 56,444 0 66,061 26,843
Vice President and Chief 1999 320,833 88,500 16,704 0 88,375 19,951
Financial Officer(4) 1998 137,500 0 0 0 180,541 0
-------------------------- ---- ------- ------- ------ ----- ------- -------
Bob Carpenter, President 2000 337,512 126,500 19,049 0 164,555 51,551
and Chief Operating 1999 270,833 147,500 13,664 0 74,159 39,219
Officer(5) 1998 230,833 138,000 8,738 0 67,430 32,150
-------------------------- ---- ------- ------- ------ ----- ------- -------
Tom Hartshorn, Executive 2000 201,674 85,100 3,584 0 96,340 21,785
Vice President, 1999 181,249 100,300 4,081 0 48,750 7,731
Merchandising 1998 167,083 110,400 3,502 0 48,961 4,177
-------------------------- ---- ------- ------- ------ ----- ------- -------
Stonie O'Briant, 2000 245,842 103,500 5,758 0 66,061 21,139
Executive Vice President, 1999 219,167 112,100 4,059 0 74,159 19,995
Operations 1998 186,667 117,300 2,525 0 135,975 18,404
-------------------------- ---- ------- ------- ------ ----- ------- -------
Earl Weissert Executive 2000 297,510 170,000 23,463 0 66,061 32,270
Vice President, 1999 201,875 0 93,467 0 121,229 0
Operations(6) 1998 0 0 0 0 0 0
==================================================================================================================================
----------
(1) The amounts reported in this column include gross-ups for tax
reimbursements and $42,831 reimbursed to Mr. Burr for relocation expenses
in 2000.
(2) Includes options granted under the Stock Plus program, which awards grants
to key employees who maintain a specified level of stock ownership, as well
as options granted under the Stock Incentive Program which are tied to
employee and company performance. All share amounts have been adjusted to
reflect all common stock splits as of the date of this report.
(3) Includes contributions to retirement and deferred compensation plans in
2000, 1999 and 1998.
(4) Mr. Burr left the Company in February 2001.
(5) Mr. Carpenter retired effective as of October 1, 2001.
(6) Mr. Weissert left the Company in January 2001.
18
--------------------------------------------------------------------------------
OPTIONS GRANTED IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
The following table provides information as to options granted to the Named
Executive Officers during 2000. The Company granted no Stock Appreciation Rights
in 2000, and no Named Executive Officer holds any Stock Appreciation Rights.
19
================================================================================
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Appreciation for
Individual Grants Option Term
-------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees In Price Expiration
Name Granted (#)(1) 2000 (%) ($/Share) Date 5% ($) 10% ($)
--------------- --------------- ------------- --------- ---------- --------- ---------
Cal Turner, Jr. 109,425 3.54 $ 21.25 4/4/2010 1,462,357 3,705,899
54,712 $ 21.25 4/4/2010 731,172 1,852,933
41,031 $ 17.31 6/5/2010 446,670 1,131,950
--------------- ------- ---- ------- --------- --------- ---------
Brian Burr 33,593 1.14 $ 21.25 4/4/2010 448,937 1,137,695
16,793 $ 21.25 4/4/2010 224,422 568,729
15,675 $ 17.31 6/5/2010 170,641 432,437
--------------- ------- ---- ------- --------- --------- ---------
Bob Carpenter 25,713 2.84 $ 14.65 2/21/2010 236,902 600,356
12,861 $ 14.65 2/21/2010 118,492 300,283
19,040 $ 14.65 2/21/2010 175,421 444,552
9,523 $ 14.65 2/21/2010 87,738 222,346
74,125 $ 21.25 4/4/2010 990,607 2,510,393
23,293 $ 17.31 6/5/2010 253,571 642,600
--------------- ------- ---- ------- --------- --------- ---------
Tom Hartshorn 9,852 1.66 $ 14.65 2/21/2010 90,769 230,028
4,921 $ 14.65 2/21/2010 45,339 114,897
13,553 $ 14.65 2/21/2010 124,868 316,440
6,772 $ 14.65 2/21/2010 62,393 158,115
33,593 $ 21.25 4/4/2010 448,937 1,137,695
16,793 $ 21.25 4/4/2010 224,422 568,729
10,856 $ 17.31 6/5/2010 118,180 299,492
--------------- ------- ---- ------- --------- --------- ---------
Stonie O'Briant 33,593 1.14 $ 21.25 4/4/2010 448,937 1,137,695
16,793 $ 21.25 4/4/2010 224,422 568,729
15,675 $ 17.31 6/5/2010 170,641 432,437
--------------- ------- ---- ------- --------- --------- ---------
Earl Weissert 33,593 1.14 $ 21.25 4/4/2010 448,937 1,137,695
16,793 $ 21.25 4/4/2010 224,422 568,729
15,675 $ 17.31 6/5/2010 170,641 432,437
================================================================================
----------
(1) Options granted under the Stock Incentive Program will vest nine and
one-half years from the date of grant. These options may vest on an
accelerated basis upon the attainment of individual and Company performance
goals. Each Named Executive Officer met Company stock ownership
requirements to receive additional grants under the Stock Plus Program.
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 goal one, (2) Stock Incentive Program grants
which for purposes of accelerated vesting are tied to earnings goal two and
(3) Stock Plus Program grants. All share amounts and prices have been
adjusted to reflect all common stock splits as of the date of this report.
20
--------------------------------------------------------------------------------
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 2000.
================================================================================
Value of Unexercised
Number of Securities Underlying In-the-Money
Unexercised Options at Fiscal Options at Fiscal Year-End
Year End ($)
Name Shares Value
Acquired on Realized
Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
--------------- ------------ -------- ----------- ------------- ----------- --------------
Cal Turner, Jr. 357,621 2,443,516 41,200 864,542 0 4,739,865
--------------- ------- --------- ------- ------ --------- ---------
Brian Burr 0 0 142,160 192,813 244,839 138,135
--------------- ------- --------- ------- ------ --------- ---------
Bob Carpenter 0 0 398,000 377,354 4,549,116 1,803,830
--------------- ------- --------- ------- ------ --------- ---------
Tom Hartshorn 50,000 870,975 388,814 246,879 4,710,304 1,232,515
--------------- ------- --------- ------- ------ --------- ---------
Stonie O'Briant 142,712 2,100,002 172,916 255,250 814,101 1,015,369
--------------- ------- --------- ------- ------ --------- ---------
Earl Weissert 0 0 18,750 0 0 0
================================================================================
--------------------------------------------------------------------------------
EMPLOYEE RETIREMENT PLAN
--------------------------------------------------------------------------------
The Dollar General Corporation 401(k) Savings and Retirement Plan (the
"401(k) Plan") became effective on January 1, 1998. Balances in two earlier
plans were transferred into the 401(k) Plan.
The Company makes a discretionary annual contribution, which has generally
been equal to 2% of each eligible employee's compensation. Seventy-five percent
of this 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
contribution from the Company. However, participants may elect to contribute
between 1% and 15% of their annual salary, up to a maximum annual contribution
of $10,500. The Company will match fifty percent of employee contributions, up
to 6% of annual salary.
The 401(k) Plan covers substantially all employees, including the Named
Executive Officers, subject to certain eligibility requirements. 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 the
vesting schedule below:
----------
(1) Market value of underlying securities at exercise, minus the exercise
price.
21
Employee Contributions Immediately Vested
Dollar General Discretionary 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 February 2, 2001, Messrs. Turner, Carpenter, Burr, O'Briant,
Hartshorn and Weissert had 35, 19, 2, 9, 9 and 1 years of credited service,
respectively. The estimated present value of benefits under the plan as of
January 1, 2001, was $723,768 for Cal Turner, Jr.; $343,971 for Bob Carpenter;
$200,117 for Brian Burr; $125,709 for Stonie O'Briant; $122,817 for Tom
Hartshorn; and $12,592 for Earl Weissert. Upon retirement, each participant has
the option of taking a lump sum or an average annual payment over a 10-year
period.
--------------------------------------------------------------------------------
OTHER EXECUTIVE BENEFITS
--------------------------------------------------------------------------------
The Company offers the Supplemental Executive Retirement Plan (the "SERP")
and Compensation Deferral Plan (the "CDP") to certain key employees who are
determined to be eligible by the CGC Committee. Pursuant to the CDP,
participants make annual elections to defer up to 100% of base pay, reduced by
any deferrals to the qualified plan, and up to 100% of bonus. All participants
are 100% vested for all compensation deferrals. Pursuant to the SERP, the
Company makes an annual contribution 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 have actual investment funds to choose from which mirror the
investment options available in the 401(k) Plan. The SERP is non-qualified and
is, therefore, not subject to certain requirements under ERISA. The estimated
present value of benefits under the SERP and CDP as of January 1, 2001, was
$4,528,108 for Cal Turner, Jr.; $668,307 for Bob Carpenter; $165,393 for Brian
Burr; $332,748 for Stonie O'Briant; $117,815 for Tom Hartshorn; and $44,224 for
Earl Weissert.
--------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT AND OTHERS; ADVANCE FOR EXPENSES
--------------------------------------------------------------------------------
John B. Holland, a director of the Company, was a director and executive
officer of Fruit of the Loom, Inc., a manufacturer of underwear and other soft
goods during 2000. In 2000, the Company purchased approximately $53.5 million in
goods from Fruit of the Loom, Inc.
22
The Board of Directors has authorized the Company, pursuant to the
Company's By-laws and Section 48-18-504 and Section 48-18-507 of the Tennessee
Business Corporation Act, to advance to the Chairman and Chief Executive Officer
and to certain officers, employees and agents of the Company reasonable
expenses, including legal fees, for representation in connection with legal
proceedings and investigations arising out of the Company's April 30, 2001,
announcement of its intention to restate certain previously released financial
information. Such advances have been made pursuant to a written undertaking by
each such person to repay in full the amounts advanced if it is ultimately
determined that such person is not entitled to indemnification by the Company in
connection with such legal proceedings and investigations. No interest is being
charged on these advances. Because the legal proceedings are at an early stage,
the Company cannot reasonably estimate the total amount of expenses that may
ultimately be advanced, either to any individual officer, employee or agent or
in the aggregate.
23
--------------------------------------------------------------------------------
REPORT OF THE EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The Executive Compensation and Corporate Governance Committee prepared the
following executive compensation report.
What is the Company's compensation philosophy?
The Company has adopted the concept of pay-for-performance, linking
management compensation, Company performance and shareholder return. This
strategy reflects the Company's desire to reward results that are consistent
with the key goals of the Company and its shareholders. The CGC Committee and
the Company believe that combining the variable, direct and indirect pay
components of the Company's compensation program enables the Company to attract,
retain and motivate result-oriented employees to achieve higher levels of
performance.
What is the Company's 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 or long-term incentive, is
significant enough to serve as a strong incentive for excellent performance.
Additionally, performance-based compensation, through the grants of stock
options to employees, serves to increase employee ownership of the Company.
What is the Company's direct compensation philosophy?
Though performance-based compensation is 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, the market and the job's 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 approved by the CGC Committee.
What is the Company's indirect compensation philosophy?
The Company's indirect compensation programs are intended to protect
employees from extreme financial hardship in the event of a catastrophic illness
or injury and to provide limited income security for retirement years. The
Company believes that its 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 believes its retirement plans should provide limited income
security at retirement for the typical employee. Employees are also invited to
share in ownership of the Company through
24
participation in the Dollar General Direct Stock Purchase Plan and the Dollar
General Corporation 401(k) Savings and Retirement Plan.
How are the Company's officers compensated?
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 that encourages a team approach to accomplish corporate objectives and
to create value for shareholders.
The executive officers' compensation for 2000 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 that is based on company
performance and linked to a percentage of the executive officer's salary. The
long-term incentives are performance-accelerated stock options. Incentive pay
awarded to the Chief Executive Officer and the other Named Executive Officers is
determined by Company performance goals that are established annually. The CGC
Committee's approach to base compensation is to offer competitive (although
slightly lower than median) salaries to the Chief Executive Officer and the
other Named Executive Officers in comparison with market practices. Base
salaries have become a relatively smaller component of the total executive
officer compensation package as compared with the Company's pay-for-performance
component. The 2000 average base salaries for the Named Executive Officers (not
including the Chief Executive Officer) increased 13% over 1999 base salaries.
(Note: This included increases in salary due to promotions of three of the
incumbents during the year.)
How does the Company determine the CEO's and the other Named Executive
Officers' salary increases?
The increase in base salaries in 2000 was determined based upon:
o a review of peer group comparison data (using the peer group
compensation survey published by Hewitt, formerly known as the MCS
survey);* and
o 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 Chief
Executive Officer and the other Named Executive Officers.
----------
* The peer group compensation survey is published annually by Hewitt
(formerly known as the MCS survey). The 2000 survey included the following
mass-merchandising companies: Ames Department Stores, Consolidated Stores,
K-Mart Stores, Target Stores, Garden Ridge, Shopko Stores, Ross Stores, TJX
Companies, Value City and Wal-Mart Stores. For the past eleven 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
is therefore unavailable), is used for Company performance comparison
purposes.
25
Please explain the Company's annual cash bonus program.
The Company's annual cash bonus program for the executive officers makes up
the short-term incentive component of the executive officers' cash compensation.
The payment of annual cash bonuses is based on both objective and subjective
criteria. All full-time employees are eligible to receive a cash bonus.
Objective criteria for executive officers and corporate office employees
include actual earnings improvement goals established by the CGC Committee at
the end of the prior fiscal year. The Company uses earnings improvement for
determining target goals for the executive officers' variable pay for two
primary 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
shareholders. The objective criteria for field-based employees are primarily
based upon store performance.
In order for an executive officer or corporate office employee to receive a
cash bonus under the cash bonus program effective for 2000, the Company had to
meet CGC Committee-established earnings improvement goals, each exceeding the
prior year's performance. For executive officers, 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
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
improvement over the prior year.
Subjective performance criteria include the results of each employee's
annual performance and productivity improvement reviews. Each employee's
performance is reviewed pursuant to the Company's Performance Review Process.
The Performance Review Process is a comprehensive program that focuses on total
performance improvement by concentrating on development goals that tie to
performance improvement areas identified in the performance review. Development
goals emphasize skill enhancement, leadership development, performance
improvement and career goal aspirations of employees. Performance goals focus on
the key results required to actively pursue the Company's mission. Development
and performance goals are set annually for each management employee with the
employee's supervisor, and the payment of an annual bonus is dependent upon the
employee achieving his/her individual goals. That is, Company performance is not
the sole criterion by which an employee's annual cash bonus payout is
determined. Two factors determine whether an employee receives an annual cash
bonus: (a) the Company must achieve an established earnings goal; and (b) the
individual must achieve a satisfactory performance evaluation based upon the
above-described Performance Review Process factors. Therefore, equal weight is
given to each of these factors.
Based on performance during 2000, executive officers will not receive a
cash bonus in 2001. Executive officers received 46% of their annual salaries as
cash bonuses in 1999.
26
Please explain the Company's Employee Stock Incentive Program.
The Company grants non-qualified stock options under the 1998 Stock
Incentive Plan. Stock options are awarded to the executive officers, department
directors, field management (including store managers and assistant store
managers) and other personnel considered to be in key positions, as approved by
the CGC Committee. The Company uses stock options as an incentive for
outstanding performance and to encourage stock ownership.
Executive officers, department directors and other key employees receive
"performance-accelerated" stock options with annual accelerated-vesting
schedules tied to the achievement of corporate performance goals (as measured by
earnings improvement) and individual performance goals (as measured by the
Performance Review Process).
In 2000, because the Company did not meet its stock option program
performance goals, the eligible employees did not vest on an accelerated basis
in the options under this program. In 1999, each eligible employee vested in the
maximum number of options, which could vest on an accelerated basis under this
program because (1) the Company met its stock option program earnings goals and
(2) each eligible employee achieved his or her previously established
performance goals.
What is a "performance-accelerated" stock option?
To further encourage outstanding performance, the CGC Committee adopted a
compensation program that ties the acceleration of stock option vesting to
earnings goals. Each eligible employee receives stock option grants with a
nine-and-one-half year vesting schedule. However, if the eligible employee meets
his/her individual goals and the Company meets or exceeds its established
---
earnings goal, then the stock option grant tied to that goal will vest on an
accelerated basis.
How does the Company determine how many stock options to grant?
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 employees' scope of accountability, their
strategic and operational responsibilities and competitive compensation data.
How does the Company encourage officers to own Company stock?
The CGC Committee established a stock option program called the Stock Plus
Program. This program, which is composed of option grants under the 1993
Employee Stock Incentive Plan, the 1995 Employee Stock Incentive Plan and the
1998 Stock Incentive Plan, awards executive officers and other key employees, as
determined by the CGC Committee, additional stock options as an incentive for
meeting Company stock ownership targets. Stock ownership targets are generally
equal to at least two-and-one-half times salary and must be maintained for at
least a year prior to receiving a Stock Plus grant. The Chief Executive Officer
is required to maintain ownership of four times his salary to be eligible to
participate in this program. In 2000 and 1999, each executive officer vested in
the maximum number of Stock Plus Program options.
27
How is the Chief Executive Officer compensated?
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. 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 annual salary for 2000 was 4% lower than the median of the industry
comparison group. The CEO did not receive an increase in his annual salary in
2000.
The CGC Committee believes the CEO should have some compensation at risk in
order to encourage performance that maximizes shareholder return; therefore, it
has created a significant opportunity for additional compensation through
performance-accelerated incentives. The performance-accelerated compensation for
which the CEO is eligible takes the form of both short-term and long-term
incentives. Like other executive officers, the CEO is eligible for a cash bonus
(the short-term incentive component) based on the attainment of individual goals
and Company earnings improvement goals. Also like 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 component). The Stock Incentive
Program stock options, which have a nine-and-one-half year vesting schedule, can
be accelerated to an earlier vesting date if certain CGC Committee-established
Company earnings improvement goals and individual performance goals are
achieved.
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 salary for the CEO that is at or below the median for CEOs of
the peer-group compensation survey participants and has emphasized the
pay-for-performance components of the CEO's total compensation package. When
determining the pay-for-performance component of the CEO's compensation package,
the CGC Committee takes 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 (the cash bonus
component), the CEO's total possible cash-bonus incentive is 100% of his salary.
To be eligible for a cash bonus, the CEO must achieve personal performance goals
established by the CGC Committee, and the Company must meet at least one of its
earnings improvement goals. If the CEO meets his individual performance goals
and the Company meets its CGC 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 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 performance falling between the "target" and "stretch" goals is on a
graduated scale (from 26% to 99% of salary) commensurate with the earnings
performance.
28
Because the Company did not meet the target earnings goal set for 2000, the
CEO did not receive a cash bonus that would have been paid in 2001. Because the
Company exceeded its "target" earnings goal set for 1999, but did not achieve
its "stretch" earnings goal established for awarding cash bonus, the CEO's
short-term incentive compensation program rewarded the CEO with a cash bonus
(paid in 2000) of 46% of his annual salary.
The CEO's long-term incentive compensation program for 2000 rewarded the
CEO with stock option grants up to approximately three to four-and-one-half
times his annual salary. In 2000, because the CGC Committee-established stock
option program goals were not met, the CEO will not vest in any shares available
in his stock option grants on an accelerated basis.
The CEO also participates in the Company's Stock Plus program. This program
rewards the CEO with additional stock options if he maintains a level of Company
stock ownership equal to at least four times his salary.
How is the Company addressing Internal Revenue Code limits on the
deductibility of executive compensation?
The Omnibus Budget Reconciliation Act of 1993 (the "Act") places a
$1,000,000 limit on the amount of certain types of compensation for each of the
Company's executive officers that will be considered tax deductible. The Company
believes that its stock plans, under which stock option grants were made to the
executive officers, comply with the Internal Revenue Service's regulations on
the deductibility limit. The Company currently has an agreement with the CEO
that will result in the deferral of non-performance-related compensation in
excess of the $1,000,000 limit to a year in which the limit would not be
exceeded. The Company continues to consider modifications to other compensation
programs in light of the Act.
William S. Wire, II - Chairman
David M. Wilds
Dennis C. Bottorff
E. Gordon Gee
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
--------------------------------------------------------------------------------
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report by reference therein.
During 2000, the Audit Committee of the Board of Directors developed a
charter for the Audit Committee (the "Charter"), which was originally adopted by
the full Board of Directors on April 24, 2000, and was amended by the Board on
November 12, 2001. The complete text of the Charter, which reflects standards
set forth in the SEC regulations and New York Stock Exchange rules, is
reproduced in Appendix "A" to this proxy statement.
29
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:
1. Serve as an independent and objective body to monitor the Company's
internal control system.
2. Review and appraise the audit efforts of the Company's independent
accountants and internal auditing department.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department and the Board of Directors.
Every member of the Audit Committee is "independent," as that term is
defined in the New York Stock Exchange listing standards. (On April 23, 2001,
the Board of Directors confirmed Mr. Holland's independence, notwithstanding the
Company's business relationship with Fruit of the Loom further described below.
See "Transactions with Management; Expenses.") The Audit Committee has
implemented procedures to devote the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Audit Committee's
charter. To carry out its responsibilities, the Audit Committee met four (4)
times during 2000.
In overseeing the preparation of the Company's financial statements, the
Audit Committee met with both management and the Company's outside auditors to
review and discuss all financial statements prior to their issuance and to
discuss significant accounting issues. Management advised the Audit Committee
that all financial statements were prepared in accordance with generally
accepted accounting principles, and the Audit Committee discussed the statements
with both management and the outside auditors. The Audit Committee's review
included discussion with the Company's independent auditors of matters required
to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication with Audit Committees).
With respect to the Company's outside auditors, the Audit Committee, among
other things, discussed with Ernst & Young LLP (the Company's independent
auditors), matters relating to its independence, including the written
disclosures made, and the letter from the Company's independent auditors
delivered to the Audit Committee as required by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees).
Finally, the Audit Committee continued to monitor the scope and adequacy of
the Company's internal auditing program, including proposals for adequate
staffing and to strengthen internal procedures and controls where appropriate.
30
On the basis of these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the Board approve the inclusion of
the Company's audited financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended February 2, 2001, for filing with the
Securities and Exchange Commission.
John B. Holland - Chairman
Barbara M. Knuckles
Reginald D. Dickson
James L. Clayton
Barbara L. Bowles
--------------------------------------------------------------------------------
COMMON STOCK PERFORMANCE
--------------------------------------------------------------------------------
As a part of the executive compensation information presented in this Proxy
Statement, the Securities and Exchange Commission requires the Company to
prepare a performance graph that compares its cumulative total shareholders'
return during the previous five years with a performance indicator of the
overall stock market and the Company's peer group. For the overall stock market
performance indicator, the Company uses the S&P 500 Index. For the peer group
stock market performance indicator, the Company uses the stock market results of
the publicly held participants of the compensation survey published by Hewitt
used by the CGC Committee when reviewing and establishing the Company's
executive compensation policies. See "Report of the Executive Compensation and
Corporate Governance Committee of the Board of Directors on Executive
Compensation."
[GRAPHIC - CHART PLOTTED POINTS LISTED BELOW]
Cumulative Total Return
------------------------------------------------------------------------
1/96 1/97 1/98 1/99 1/00 1/01
DOLLAR GENERAL CORPORATION 100.00 156.86 289.23 311.16 332.89 384.05
S&P 500 100.00 126.34 160.34 212.43 234.41 232.30
PEER GROUP 100.00 126.42 205.62 417.85 502.88 532.64
31
--------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
--------------------------------------------------------------------------------
The 2002 annual meeting of shareholders will be held on June 3, 2002.
Shareholder proposals intended for presentation at the 2002 annual meeting of
shareholders must be received by Larry K. Wilcher, General Counsel and Corporate
Secretary, at 100 Mission Ridge, Goodlettsville, Tennessee 37072-2170 not later
than March 15, 2002 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.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
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 10% 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 2000.
--------------------------------------------------------------------------------
PEOPLE WITH DISABILITIES
--------------------------------------------------------------------------------
If you are disabled and would like to participate in the Annual Meeting,
the Company can provide reasonable assistance. Please write to the Corporate
Secretary at least two weeks before the Annual Meeting.
--------------------------------------------------------------------------------
CONDUCT OF THE ANNUAL MEETING
--------------------------------------------------------------------------------
The Company is not currently aware of any business to be acted upon at the
Annual Meeting other than the three matters described herein. Under Tennessee
law, no other business aside from procedural matters may be raised at the Annual
Meeting unless proper notice has been given to the shareholders. If such other
business is properly raised, your proxies have authority to vote as they think
best, including to adjourn the meeting.
The Chairman has broad authority to conduct the Annual Meeting so that the
business of the meeting is carried out in an orderly and timely manner. In doing
so, he has broad discretion to establish reasonable rules for discussion,
comments and questions during the meeting. The Board of Directors has decided
that the Annual Meeting will be conducted in accordance with the American Bar
Association's "Handbook for the Conduct of Shareholders' Meetings" published in
2000, including the supplemental rules thereto. The Chairman is also entitled to
rely upon applicable law regarding disruptions or disorderly conduct to ensure
that the Annual Meeting proceeds in a manner that is fair to all participants.
32
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
Change in Independent Accountant
On September 14, 2001, Dollar General Corporation (the "Company") dismissed
Deloitte & Touche LLP ("Deloitte & Touche") as its independent accountant. The
Company's decision was approved by both the Audit Committee of the Board of
Directors and by the Company's Board of Directors. Deloitte & Touche's reports
on the Company's financial statements for fiscal years 1998 and 1999 contained
no adverse opinion or disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope, or accounting principles. Deloitte & Touche has
not issued an audit report on any of the Company's financial statements since
January 28, 2000, the Company's 1999 fiscal year end.
Also on September 14, the Company retained the services of
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as its new independent
accountant to audit the Company's financial statements. The retention of
PricewaterhouseCoopers was recommended by the Audit Committee and approved, by
resolution, by the Board. PricewaterhouseCoopers orally consented to serve as
the Company's independent accountant.
On September 20, 2001, prior to the Company's announcement of its retention
of PricewaterhouseCoopers in a Form 8-K, PricewaterhouseCoopers resigned as the
Company's independent accountant because of an irreconcilable conflict of
interest that was previously unknown to the PricewaterhouseCoopers
representatives associated with the Dollar General engagement.
PricewaterhouseCoopers has advised the Company that its resignation was not
related in any respect to the matters on which the Company consulted with
PricewaterhouseCoopers prior to its engagement to serve as the Company's
independent accountant, or any matter respecting the Company that came to its
attention subsequent to its retention.
Neither the Audit Committee nor the Company's Board of Directors have been
provided information relating to the nature of PricewaterhouseCoopers' conflict.
As a result, the Audit Committee and the Board were not in a position to
recommend or to approve or disapprove of PricewaterhouseCoopers' resignation.
PricewaterhouseCoopers has never issued any opinion on the Company's
financial statements.
33
On September 21, 2001, Ernst & Young LLP ("Ernst & Young") advised the
Company that it was prepared to serve as the Company's independent accountant,
subject to the completion of certain acceptance procedures which it expected to
successfully conclude. On October 5, 2001, the Company retained Ernst & Young as
the Company's independent accountants. The retention of Ernst & Young was
recommended by the Audit Committee and approved by the Board of Directors of the
Company.
Disagreement with Prior Independent Accountant -- Deloitte & Touche
During the Company's two most recent fiscal years and through the date of
this report, there were no disagreements with Deloitte & Touche on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Deloitte & Touche would have caused it to make reference to the subject matter
of the disagreement in its report on the Company's financial statements,
provided however:
In the course of preparing to restate its financial statements for fiscal
years 1998 and 1999, as well as revising the previously released unaudited
financial information for fiscal year 2000 (collectively, the "Restatements"),
the Company has more closely examined its previous accounting practices with
regard to certain synthetic lease facilities entered into in 1997 and 1999 with
respect to its use and occupancy of certain real property, including
approximately 400 stores, two of the Company's distribution centers and the
Company's corporate headquarters in Goodlettsville, Tennessee (the "Synthetic
Leases"). After review and consultations with outside accountants from KPMG LLP,
the Company has determined that its previous treatment of the Synthetic Leases
as operating leases for accounting purposes was in error. The Company has
therefore restated its financial statements to treat these leases as capital
leases. The Company and representatives from KPMG LLP, as well as the Audit
Committee of the Board of Directors, through its representatives, have discussed
the subject of the accounting treatment for Synthetic Leases with Deloitte &
Touche. At the time of its termination, Deloitte & Touche had expressed the view
that it had not been provided sufficient information by the Company to conclude
that the Company's previous treatment of Synthetic Leases as operating leases
was in error.
Disagreement with Prior Independent Accountant -- PricewaterhouseCoopers
During the Company's two most recent fiscal years and through the date of
this report, there were no disagreements with PricewaterhouseCoopers on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of PricewaterhouseCoopers would have caused it to make reference to
the subject matter of the disagreement in its report on the Company's financial
statements.
Other Reportable Events -- Deloitte & Touche
During the Company's two most recent fiscal years and through the date of
this report, there were no "reportable events," by Deloitte & Touche, as that
term is defined in Item 304(a)(1)(v) of Regulation S-K, provided however:
34
As discussed in further detail in our Annual Report on Form 10-K, the
Company and the Audit Committee of the Board of Directors became aware of
certain accounting issues that have caused the Company to restate its financial
statements. Following a report from the Company to Deloitte & Touche in April
2001 on its discovery of these issues, Deloitte & Touche gave the Company notice
as provided under Section 10A of the Securities Exchange Act of 1934 (the
"Exchange Act") that such issues may have included "illegal acts" as that term
is defined in the Exchange Act. The Audit Committee of the Board of Directors
conducted an investigation of these matters, assisted by its outside counsel,
Dechert Price & Rhoads, and the independent accounting firm Arthur Andersen LLP,
in order to assure that the Audit Committee was adequately informed with respect
to the issues raised by the Restatements. On the Audit Committee's
recommendation and with the Board of Directors' approval, the Company has
implemented certain appropriate interim remedial actions in response to the
matters included in the Audit Committee's review.
In connection with these events, Deloitte & Touche has informed the Company
that information has come to its attention that, if further investigated, (i)
may materially impact the fairness or reliability of its previously issued audit
reports and the underlying financial statements as well as the financial
statements to be issued for the Company's 2000 fiscal year; (ii) may cause it to
be unwilling to rely on the representations of certain members of management;
and (iii) due to Deloitte & Touche's dismissal, it will be unable to conduct
such further investigation or resolve these issues to its satisfaction.
Other Reportable Events -- PricewaterhouseCoopers
During the Company's two most recent fiscal years and through the date of
this report, there were no "reportable events," by PricewaterhouseCoopers, as
that term is defined in Item 304(a)(1)(v) of Regulation S-K.
Authorization to Respond to Successor Independent Accountant
The Company has authorized Deloitte & Touche and PricewaterhouseCoopers to
respond fully to the inquiries of Ernst & Young concerning these issues.
Consultations with Independent Accountant -- PricewaterhouseCoopers
Prior to its retention as the Company's independent accountant,
PricewaterhouseCoopers was engaged as accounting consultants by counsel for the
Company advising a special committee of the Board of Directors with respect to
certain shareholder derivative lawsuits currently pending against the Company
and several current and former members of its Board of Directors and management.
In connection with this engagement, counsel directed PricewaterhouseCoopers to
consult with Company personnel regarding the appropriate accounting treatment
for the Synthetic Leases. In oral communications, PricewaterhouseCoopers
provided the special committee a preliminary view, based on information made
available to it by the Company, that the Synthetic Leases should be treated as
capital leases for accounting purposes. The Company's consultation with Deloitte
& Touche on the
35
subject of the accounting treatment for Synthetic Leases and Deloitte & Touche's
views thereon are discussed above under the caption "Disagreement with Prior
Independent Accountant."
In addition, in connection with its work relating to the shareholder
derivative litigation, counsel directed PricewaterhouseCoopers to consult with
Company personnel on the application of the accounting standards to the
valuation of certain deferred state income tax liabilities.
PricewaterhouseCoopers, in oral communications, gave the special committee its
preliminary views that the applicable accounting standards require the Company
to determine deferred income tax liabilities using differentiated rates as
opposed to a consolidated tax rate. After review and consultations with KPMG LLP
and taking into account the oral observations received from
PricewaterhouseCoopers, the Company has restated its financial statements
accordingly. The Company did not consult with Deloitte & Touche on this subject.
Other than with respect to the two preceding matters, the Company has not
consulted with PricewaterhouseCoopers regarding either (i) the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's financial
statements, and either a written report was provided to the Company or oral
advice was provided that PricewaterhouseCoopers concluded was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue, or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a
reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation
S-K.
PricewaterhouseCoopers was not requested to and did not perform an
engagement under Statement on Auditing Standards No. 50 with respect to either
consultation.
Consultations with Independent Accountant -- Ernst & Young
During the two most recent fiscal years and during the current fiscal year
prior to their engagement as the Company's independent accountants, the Company
consulted with Ernst & Young on various tax related matters which, the Company
has been advised by Ernst & Young, did not involve matters that are the subject
of Item 304(a)(2)(i) or (ii) of Regulation S-K.
Restatement and Appearance of Auditors
For reasons set forth in detail in the Company's accompanying Annual Report
on Form 10-K, the Company is restating by means of that Report its audited
financial statements for fiscal years 1998 and 1999. The Company's audited
financial results for fiscal year 2000 also restate the unaudited financial
information for the fiscal year 2000 that had been previously released by the
Company. The Company was assisted in these efforts by the accounting firm of
Ernst & Young, which audited the restated financial statements for fiscal years
1998 and 1999 and the financial statements for fiscal year 2000. Representatives
of Ernst & Young are expected to be present at the Annual Meeting. They will
have the opportunity to make a statement if they desire, and are expected to be
available to respond to appropriate questions.
36
Accounting Fees
The Company has been billed $3,831,790 for professional services provided
by Ernst & Young relating to its audit of the Company's financial statements for
the 1998, 1999 and 2000 fiscal years. The following table sets forth amounts
billed to the Company by Ernst & Young for audit work relating to the audit of
the Company's financial statements for the 2000 fiscal year, and for other
services rendered attributable to such year.
Services Provided Fee Amount
--------------------------------------------------------------------------------
Audit Fees................................ $1,277,000
All Other Fees............................ 96,011
Total..................................... $1,373,011
--------------------------------------------------------------------------------
The following table sets forth amounts billed to the Company by Deloitte &
Touche for audit work relating to the Company's financial statements for the
2000 fiscal year and review of the Company's fiscal 2000 interim financial
statements ("Audit Fees"), and for other services rendered during such year.
Services Provided Fee Amount
--------------------------------------------------------------------------------
Audit Fees................................ $237,800
All Other Fees............................ 487,691
Total..................................... $725,491
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
--------------------------------------------------------------------------------
The Securities and Exchange Commission ("SEC") has issued a new rule that
became effective December 4, 2000 regarding the delivery of proxy statements and
information statements to households. This rule is intended to complement a
previously issued ruling on the delivery of disclosure documents to households
issued December 20, 1999. Together these rules spell out the conditions under
which annual reports, information statements, proxy statements, prospectuses and
other disclosure documents of a particular company that would otherwise be
mailed in separate envelopes to more than one person at a shared address may be
mailed as one copy in one envelope addressed to all holders at that address. In
accordance with that rule, Dollar General Corporation began "householding" all
annual reports and proxy and information statements effective January 1, 2002.
If you are a registered shareholder and you choose not to have your annual
reports and proxy and information statements sent to a single household address
as described above, you must "opt-out" by marking the designated box on the
enclosed proxy card. If you choose to "opt-out" of the householding program at a
future date, please write to Investor Relations, Dollar General Corporation, 100
Mission Ridge, Goodlettsville, Tennessee 37072 or call us at (615) 855-4000. We
will cease householding your annual reports and proxy and information statements
within 30 days after receiving your request. If we do not receive instructions
to remove your account(s) from this service, your account(s) will continue to be
"householded" until you notify us otherwise. You may also contact us at the
above address and telephone number if you are a registered shareholder subject
to householding and would like to receive a separate copy of this proxy
statement and the Company's consolidated Annual Report and Annual Report on Form
10-K. We will deliver such materials promptly upon receipt of your request.
37
If you own your Dollar General stock in nominee name (such as through a
broker), information regarding householding of disclosure documents should be
forwarded to you by your broker.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. In addition to
this solicitation by mail, proxies may be solicited personally and by mail,
telephone or telegraph, by officers, directors and regular employees of the
Company, without extra compensation. 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 has
retained Morrow & Co., Inc. to solicit proxies in connection with the Annual
Meeting, for which services the Company expects to pay $5,000 plus
disbursements. Proxies may be voted by returning the printed proxy card, or by
voting via telephone or Internet. For more information about how to vote your
proxy, please see the instructions on your proxy card.
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. Each shareholder 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 Company's consolidated Annual Report and Annual Report on Form 10-K is
being mailed to shareholders with this proxy statement.
--------------------------------------------------------------------------------
Whether or not you expect to be physically present at the Annual
Meeting, please vote your proxy as soon as possible. You may vote your
proxy electronically or by phone according to the instructions on the
enclosed card, or you may sign, date and return the enclosed printed
proxy card in the enclosed business reply envelope. No postage is
necessary if the proxy is mailed within the United States.
--------------------------------------------------------------------------------
38
Appendix A
DOLLAR GENERAL CORPORATION
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
Corporation's systems of internal controls regarding finance, accounting, and
ethics that management and the Board have established; and the Corporation's
auditing, accounting and financial reporting processes generally. Consistent
with this function, the Audit Committee should encourage continuous improvement
of, and should foster adherence to, the Corporation's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the
Corporation's internal control system.
o Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV. of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and be
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the
Committee. Members of the Audit Committee shall be considered independent if
they have no relationship to the Corporation that may interfere with the
exercise of their independence from management and the Corporation. Examples of
such relationships include:
o a director being employed by the Corporation or any of its affiliates
for the current year or any of the past five years;
o a director accepting any compensation from the Corporation or any of
its affiliates other than compensation for board service or benefits
under a tax-qualified retirement plan;
39
o a director being a member of the immediate family of an individual who
is, or has been in any of the past five years, employed by the
Corporation or any of its affiliates as an executive officer;
o a director being a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which
the Corporation made, or from which the Corporation received, payments
that are or have been significant to the Corporation or business
organization in any of the past five years;
o a director being employed as an executive of another company where any
of the Corporation's executives serves on that company's compensation
committee.
A director who has one or more of these relationships may be appointed to the
Audit Committee, if the Board, under exceptional and limited circumstances,
determines that membership on the Committee by the individual is required by the
best interests of the Corporation and its shareholders, and the Board discloses,
in the next annual proxy statement subsequent to such determination, the nature
of the relationship and the reasons for that determination.
Each member of the Committee shall be financially literate and must be able to
read and understand fundamental financial statements, including the Company's
balance sheet, income statement, and cash flow statement or must become able to
do so within a reasonable period of time after appointment to the Committee.
At least one member of the Committee shall have related financial expertise, and
must have had past employment experience in finance or accounting, requisite
professional certification in accounting or any other comparable experience or
background that results in that individual's financial sophistication. Such
experience may include being or having been a chief executive officer, chief
financial officer or other senior officer with financial reporting oversight
responsibilities.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee shall meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
40
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual audited financial statements and any
reports or other financial information submitted to any governmental body,
or the public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review with financial management and the independent accountants the Form
10-Q prior to its filing.
4. Review the regular internal reports to management prepared by the internal
auditing department and management's response.
Independent Accountants
5. Recommend to the Board of Directors the selection of the independent
accountants (which firm is ultimately accountable to the Audit Committee
and the Board), considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants. On
an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
8. Obtain from the independent accountants assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
9. Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, relating
to the conduct of the audit.
Financial Reporting Processes
10. In consultation with the independent accountants and the internal auditors,
review the integrity of the organization's financial reporting processes,
both internal and external.
11. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in
its financial reporting.
12. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the internal auditing department.
41
13. Prepare the report required by the rules of the Securities and Exchange
Commission to be included with the Corporation's annual proxy statement,
including, but not limited to, whether the Audit Committee recommended to
the Board that the audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the last fiscal year for
filing with the Securities and Exchange Commission.
Process Improvement
14. Establish regular and separate reporting to the Audit Committee by each of
management, the independent accountants and the internal auditors regarding
any significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
15. Following completion of the annual audit, review separately with
management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or access to
required information.
16. Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
17. Review with the independent accountants, the internal auditing department
and management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented. (This review should be conducted at an appropriate of time
subsequent to implementation of changes or improvements, as decided by the
Committee.)
18. Review the Corporation's business interruption/disaster recovery program
and provide oversight that management applies the program in a manner
consistent with business functions.
Ethical and Legal Compliance
19. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
20. Review management's monitoring of the Corporation's compliance with the
organization's Ethical Code, and review management's system of ensuring
that the Corporation's financial statements, reports and other financial
information disseminated to governmental organizations, and the public
satisfy legal requirements.
21. Review activities, organizational structure, and qualifications of the
internal audit department.
22. Review, with the Corporation's General Counsel, legal matters that could
have a significant impact on the organization's financial statements.
42
23. Perform any other activities consistent with this Charter, the
Corporation's By-Laws and governing law, as the Committee or the Board
deems necessary or appropriate.
While the Audit Committee has the responsibilities and duties set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
accountants. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent accountants or to assure compliance with laws and regulations and
the Corporation's Code of Ethical Conduct.
43
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 2002
The Annual Meeting of Shareholders (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 February 20,
2002 at 10:00 a.m. local time for the purposes stated on the reverse side.
Only shareholders of record at the close of business on January 11, 2002, 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,
Larry K. Wilcher
General Counsel and Corporate Secretary
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Whether or not you expect to be physically present at the Annual Meeting, please
vote your proxy as soon as possible. You may vote your proxy electronically or
by phone according to the instructions on the enclosed card, or sign, date and
return the enclosed printed proxy card in the enclosed business reply envelope.
No postage is necessary if the proxy is mailed within the United States. You may
revoke the proxy at any time before it is voted.
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DOLLAR GENERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Dollar General Corporation, a Tennessee
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement dated January 14, 2002, and hereby
appoints Cal Turner and Larry K. Wilcher, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Shareholders of Dollar General Corporation to be held on February 20, 2002, at
10:00 a.m. local time, in the Goodlettsville City Hall Auditorium, located at
105 South Main Street, Goodlettsville, Tennessee and at any adjournment(s)
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side of this proxy card.
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[GRAPHIC - LOGO - DOLLAR GENERAL CORPORATION]
DOLLAR GENERAL CORPORATION
PROXY SERVICES
P. O. BOX 9142
FARMINGDALE, NY 11735-9769
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Dollar General Corporation, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS DOLLAR KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DOLLAR GENERAL CORPORATION
Proposal 1 - Election of Directors
1. To elect ten directors to serve until the next Annual Meeting and until
their successors are elected and qualified:
01) Dennis C. Bottorff, 02) Barbara L. Bowles, 03) James L. Clayton,
04) Reginald D. Dickson, 05) E. Gordon Gee, 06) John B. Holland,
07) Barbara M. Knuckles, 08) Cal Turner, 09) David M. Wilds, and
10) William S. Wire, II
For Withold For all To withhold authority to vote, mark "For All Except"
All All Except and write the nominee's number on the line below
[ ] [ ] [ ] ----------------------------------------------------
Vote On Proposals
Proposal 2 - To consider and act upon
one shareholder proposal regarding equal
employment opportunity information
For Against Abstain
[ ] [ ] [ ]
Proposal 3 - Ratification of the appointment
of Ernst & Young LLP as independent public
accountants
For Against Abstain
[ ] [ ] [ ]
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Signature (PLEASE SIGN WITHIN BOX) Date Signature (JOINT OWNERS) Date