Document:

Exhibit
10.2

 

STOCK OPTION AGREEMENT

 

THIS AGREEMENT, dated as of July 6, 2007 (the “Grant
Date”) is made by and between Dollar General Corporation, a Tennessee
corporation (hereinafter referred to as the “Company”), and the
individual whose name is set forth on the signature page hereof, who is  an employee of the Company or a Subsidiary
or Affiliate of the Company, hereinafter referred to as the “Optionee”.  Any capitalized terms herein not otherwise
defined in Article I shall have the meaning set forth in the 2007 Stock
Incentive Plan for Key Employees of Dollar General Corporation and its
Affiliates (the “Plan”).

 

WHEREAS, the Company wishes to carry out the Plan,
the terms of which are hereby incorporated by reference and made a part of this
Agreement; and

 

WHEREAS, the Compensation Committee of the Board of
the Company (or, if no such committee is appointed, the Board) (the “Committee”)
has determined that it would be to the advantage and best interest of the
Company and its shareholders to grant the Option provided for herein to the
Optionee as an incentive for increased efforts during his term of office with
the Company or its Subsidiaries or Affiliates, and has advised the Company
thereof and instructed the undersigned officers to issue said Option;

 

NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Whenever the following terms are used in this
Agreement, they shall have the meaning specified below unless the context
clearly indicates to the contrary.

 

Section 1.1.   Base Price

 

“Base Price” shall mean $5.00.

 

Section 1.2.    Cause

 

“Cause” shall mean “Cause” as such term may be defined in any
employment agreement or change-in-control agreement in effect at the time of
termination of employment between the Optionee and the Company or any of its
Subsidiaries or Affiliates, or, if there is no such employment or
change-in-control agreement, “Cause” shall mean, with respect to an Optionee: (i) any
act involving fraud or dishonesty; (ii) any material breach of any SEC or
other law or regulation or any Company policy governing trading or dealing with
stock, securities, investments or the like or with inappropriate disclosure or “tipping”
relating to any stock; (iii) other than as required by law, the carrying
out of any activity or the making of any public statement which prejudices or reduces
the good name and standing of the Company or its affiliates or would bring any
one of these into public contempt or ridicule; (iv) attendance at work in
a state of intoxication or otherwise being found in possession at his place of
work of any prohibited drug or substance, possession of which would amount to a
criminal offense; (v) assault or other act of violence; or (vi) conviction
of, or a plea of nolo contendere to, any felony
whatsoever or any misdemeanor that would preclude employment under the Company’s
hiring policy.

 

 

Section 1.3.   Closing
Date

 

“Closing Date” shall have
the same meaning as that term is defined in the Merger Agreement.

 

Section 1.4.   Disability

 

“Disability” shall mean “Disability” as such term is
defined in any employment agreement between Optionee and the Company or any of
its Subsidiaries, or, if there is no such employment agreement, “Disability” as
defined in the long-term disability plan of the Company.

 

Section 1.5.   Fiscal
Year

 

“Fiscal Year” shall mean each of the 2007, 2008,
2009, 2010, and 2011 fiscal years of the Company.

 

Section 1.6.   Good
Reason

 

“Good Reason” shall mean “Good Reason” as such term
may be defined in any employment agreement or change-in-control agreement in
effect at the time of termination of employment between the Optionee and the
Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment or change-in-control agreement, “Good Reason” shall mean (i) reduction
by the Company in Participant’s base salary or target bonus level; (ii) the
Company fails to continue in effect any significant Company-sponsored
compensation plan or benefit (without replacing it with a similar plan or with
a compensation equivalent), unless such action is in connection with
across-the-board plan changes or terminations similarly affecting at least
ninety-five percent (95%) of all executive employees of the Company; (iii) the
Company’s principal executive offices shall be moved to a location outside the
middle-Tennessee area, or Participant is required to be based anywhere other
than the Company’s principal executive offices; (iv) without Participant’s
written consent, the assignment to Participant by the Company of duties
inconsistent with, or the significant reduction of the title, powers and
functions associated with, Participant’s position, titles or offices as
described in the employment agreement, unless such action is the result of a
restructuring or realignment of duties and responsibilities by the Company, for
business reasons, that leaves Participant at the same compensation and officer
level (i.e., Vice President, Senior Vice President, or Executive Vice
President, etc.) and with a similar level of responsibility, or unless such
action is the result of Participant’s failure to meet pre-established and
objective performance criteria; (v) any material breach by the Company of
this Agreement; or (vi) the failure of any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume expressly
and agree to perform the agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had
taken place.  In each case other than any
isolated, insubstantial and inadvertent failure by the Company that is not in
bad faith and is cured within ten (10) business days after the Participant
gives the Company notice of such event.

 

Section 1.7.    Management Stockholder’s Agreement

 

“Management Stockholder’s Agreement” shall mean that
certain Management Stockholder’s Agreement between the Optionee and the
Company.

 

2

 

Section 1.8.   Merger
Agreement

 

“Merger Agreement” shall mean the Agreement and Plan of Merger by and
among Buck Holdings, L.P., Buck Acquisition Corp. and Dollar General Corporation,
dated March 11, 2007.

 

Section 1.9.   Option

 

“Option” shall mean the aggregate of the Time Option
and the Performance Option granted under Section 2.1 of this Agreement.

 

Section 1.10.   Performance
Option

 

“Performance Option” shall mean the right and option
to purchase, on the terms and conditions set forth herein, all or any part of
an aggregate of the number of shares of Common Stock set forth on the signature
page hereof opposite the term Performance Option.

 

Section 1.11.   Secretary

 

“Secretary” shall mean the Secretary of the Company.

 

Section 1.12.   Sponsor
IRR

 

 “Sponsor IRR”
shall mean, on any given date, a pretax compounded annual internal rate of
return of at least 25% realized by the Sponsors or any of their affiliates
after the Closing Date on any Shares held by the Sponsors or any of their
affiliates, on a per Share, fully diluted basis, based on the amount invested
by the Sponsors in the equity securities of the Company.  For the avoidance of doubt, (a) any
calculation of Sponsor IRR will for purposes of Section 3.1(c)(ii) and
3.1(d) be calculated solely with respect to Sponsor Shares (as defined
herein) actually sold or otherwise disposed of in the applicable transaction,
and (b) Sponsor IRR will not be calculated taking into account the receipt
by the Sponsor or any of its affiliates of any management, monitoring,
transaction or other fees payable to such parties in connection with their
separate letter agreement with the Company, and shall only take into account
actual distributions paid on the shares of Common Stock indirectly held by such
parties.

 

Section 1.13.   Sponsor
Return

 

“Sponsor Return” shall mean, on any given date, all cash proceeds
actually received by the Sponsors or any of their affiliates after the Closing
Date, including the receipt of any cash dividends or other cash distributions
thereon, on a per Share, fully diluted basis, in an amount that equals or
exceeds the product of 2.5 and the Base Price. 
For the avoidance of doubt, (a) any calculation of Sponsor Return
will for purposes of Section 3.1(c)(ii) and 3.1(d) be calculated
solely with respect to Sponsor Shares actually sold or otherwise disposed of in
the applicable transaction, and (b) Sponsor Return will not be calculated
taking into account the receipt by the Sponsor or any of its affiliates of any
management, monitoring, transaction or other fees payable to such parties in
connection with their separate letter agreement with the Company, and shall
only take into account actual distributions paid on the shares of Common Stock
indirectly held by such parties.

 

Section 1.14.   Time
Option

 

“Time Option” shall mean the right and option to
purchase, on the terms and conditions set forth herein, all or any part of an aggregate
of the number of shares of Common Stock set forth on the signature page hereof
opposite the term Time Option.

 

3

 

ARTICLE II

GRANT OF OPTIONS

 

Section 2.1.  Grant
of Options

 

For good and valuable consideration, on and as of
the date hereof the Company irrevocably grants to the Optionee the following
Stock Options:  (a) the Time Option
and (b) the Performance Option, in each case on the terms and conditions
set forth in this Agreement.

 

Section 2.2.  Exercise
Price

 

Subject to Section 2.4, the exercise price of
the shares of Common Stock covered by the Option (the “Exercise Price”) shall
be as set forth on the signature page hereof, which shall be the Base
Price if such Option is granted at the time of the closing of the transactions
contemplated by the Merger Agreement or the Fair Market Value if the Option is
granted thereafter.

 

Section 2.3.  No
Guarantee of Employment

 

Nothing in this Agreement or in the Plan shall
confer upon the Optionee any right to continue in the employ of the Company or
any Subsidiary or Affiliate or shall interfere with or restrict in any way the
rights of the Company and its Subsidiaries or Affiliates, which are hereby
expressly reserved, to terminate the employment of the Optionee at any time for
any reason whatsoever, with or without cause, subject to the applicable
provisions of, if any, the Optionee’s employment agreement with the Company or
offer letter provided by the Company to the Optionee.

 

Section 2.4.  Adjustments
to Option

 

The Option shall be subject to the adjustment
provisions of Sections 8 and 9 of the Plan, provided, however,
that in the event of the payment of an extraordinary dividend by the Company to
its stockholders, then: the Exercise Prices of the Option shall be reduced by
the amount of the dividend paid, but only to the extent the Committee
determines it to be permitted under applicable tax laws and not have adverse
tax consequences to the Optionee under Section 409A of the Code; and, if
such reduction cannot be fully effected due to such tax laws and it will not
have adverse tax consequences to the Optionee, then the Company shall pay to
the Optionee a cash payment, on a per Share basis, equal to the balance of the
amount of the dividend not permitted to be applied to reduce the Exercise Price
of the applicable Option as follows: (a) for each Share subject to a
vested Option, immediately upon the date of such dividend payment; and (b), for
each Share subject to an unvested Option, on the date on which such Option
becomes vested and exercisable with respect to such Share.

 

ARTICLE III

 

PERIOD OF EXERCISABILITY

 

Section 3.1.  Commencement
of Exercisability

 

(a)           So
long as the Optionee continues to be employed by the Company or any other
Service Recipients, the Option shall become exercisable pursuant to the
following schedules:

 

4

 

(i)            Time Option.  The Time Option shall become vested and
exercisable with respect to 20% of the Shares subject to such Option on each of
the first five anniversaries of the Closing Date.

 

(ii)           Performance Option.  The Performance Option shall
be eligible to become vested and exercisable as to 20% of the Shares subject to
such Option at the end of each of the five Fiscal Years if the Company, on a
consolidated basis, achieves its annual EBITDA targets as set forth in Schedule
A attached hereto (each an “EBITDA Target”) for the given Fiscal
Year.  Notwithstanding the foregoing, in
the event that an EBITDA Target is not achieved in a particular Fiscal Year,
then that portion of the Performance Option that was eligible to vest but
failed to vest due to the Company’s failure to achieve its EBITDA Target shall
nevertheless vest and become exercisable at the end of any subsequent Fiscal
Years (or the 2012 Fiscal Year) if the cumulative EBITDA Target (each a “Cumulative
EBITDA Target”) set forth on Schedule A attached hereto is achieved
on a cumulative basis at the end of such Fiscal Year (or the 2012 Fiscal Year)
with respect to all then completed Fiscal Years;

 

(b)           Notwithstanding
any of the foregoing, upon a termination of the Optionee’s employment at any
time by reason of death or Disability:

 

(i)            that
20% portion of the Time Option that would have become exercisable on the next
anniversary date of the Closing Date if the Optionee had remained employed with
the Company or the applicable Service Recipient through such date will become
vested and exercisable; and

 

(ii)           that
20% portion of the Performance Option, if any, that would have become exercisable
in respect of the Fiscal Year in which the Optionee’s employment terminates if
the Optionee had remained employed with the Company or the applicable Service
Recipient through such date, shall remain outstanding through the date the
Company determines whether the Annual Performance Target or Cumulative EBITDA
Target is met for such Fiscal Year, and shall become exercisable on such date if and only if, and only to the extent that, the Annual
Performance Target or Cumulative EBITDA Target is met for such Fiscal Year in
accordance with Section 3.1(a)(ii) above; provided, however, that if such Annual Performance Target or
Cumulative EBITDA Target is not met for such Fiscal Year, that portion of the
Performance Option shall remain unvested and shall be forfeited upon such date.

 

(c)           Notwithstanding
any of Section 3.1(a) or (b) above, upon the earlier occurrence
of a Change in Control:

 

(i)            the
Time Option shall become immediately exercisable as to 100% of the shares of
Common Stock subject to such Option immediately prior to a Change in Control
(but only to the extent such Option has not otherwise terminated or become
exercisable); and

 

(ii)           the
Performance Option shall become immediately exercisable as to 100% of the
shares of Common Stock subject to such Option immediately prior to a Change in
Control (but only to the extent such Option has not otherwise terminated or
become exercisable) if as a result of the Change in Control, (x) the Sponsor
achieves the Sponsor IRR on 100% of the Sponsors’ aggregate investment,
directly or indirectly, in the equity securities of the Company (the “Sponsor
Shares”) and (y) the Sponsor earns an Sponsor
Return on 100% of the Sponsor Shares; provided, however, that in the event that
there occurs a Change in Control wherein more than 50% but less than 100% of
the Common Stock or other voting securities of the Company or Buck Holdings,
L.P. is sold or otherwise disposed of, then, the Performance Option will become
vested (to the extent not already previously vested pursuant to Section 3.1(a) or
(d)) up to the same percentage of Sponsor Shares on which such Sponsor Return
and Sponsor IRR has been so achieved.

 

5

 

(d)           Notwithstanding
any of Section 3.1(a), (b) or (c) above, if after a Public
Offering (as such term is defined in the Management Stockholder’s Agreement),
the Sponsor or its affiliates, through one transaction or a series of
transactions, sells Shares and achieves the Sponsor Return and the Sponsor IRR
on any percentage of Sponsor Shares, so long as the Optionee has remained
employed with the Company or the applicable Service Recipient through the
relevant sale date, then, the Performance Option will become vested (to the
extent not already previously vested pursuant to Section 3.1(a) or
(c)) up to the same percentage of Sponsor Shares on which such Sponsor Return
and Sponsor IRR has been so achieved.

 

(e)           Notwithstanding
the foregoing but except as provided in Section 3.1(b), no Option shall
become exercisable as to any additional shares of Common Stock following the
termination of employment of the Optionee for any reason and any Option, which
is unexercisable as of the Optionee’s termination of employment, shall
immediately expire without payment therefor.

 

Section 3.2.  Expiration
of Option

 

Except as otherwise provided in Section 5 or 6
of the Management Stockholder’s Agreement, the Optionee may not exercise the
Option to any extent after the first to occur of the following events:

 

(a)           The
tenth anniversary of the Closing Date so long as the Optionee remains employed
with the Company or any Service Recipient through such date;

 

(b)           The
first anniversary of the date of the Optionee’s termination of employment with
the Company and all Service Recipients, if the Optionee’s employment is
terminated by reason of death or Disability (unless earlier terminated as
provided in Section 3.2(h) below);

 

(c)           Immediately
upon the date of the Optionee’s termination of employment by the Company and
all Service Recipients for Cause;

 

(d)           Immediately
upon the date of the Optionee’s termination of employment by the Company and
all Service Recipients by the Optionee without Good Reason (except due to death
or Disability);

 

(e)           One
hundred and eighty (180) days after the date of an Optionee’s termination of
employment by the Company and all Service Recipients without Cause (for any
reason other than as set forth in Section 3.2(b));

 

(f)            One
hundred and eighty (180) days after the date of an Optionee’s termination of
employment with the Company and all Service Recipients by the Optionee for Good
Reason;

 

(g)           The
date the Option is terminated pursuant to Section 6 or 7 of the Management
Stockholder’s Agreement; or

 

(h)           At the
discretion of the Company, if the Committee so determines pursuant to Section 9
of the Plan.

 

6

 

ARTICLE IV

EXERCISE OF OPTION

 

Section 4.1.  Person
Eligible to Exercise

 

During the lifetime of the Optionee, only the
Optionee (or his or her duly authorized legal representative) may exercise an
Option or any portion thereof.  After the
death of the Optionee, any exercisable portion of an Option may, prior to the
time when an Option becomes unexercisable under Section 3.2, be exercised
by his personal representative or by any person empowered to do so under the
Optionee’s will or under the then applicable laws of descent and distribution.

 

Section 4.2.  Partial
Exercise

 

Any exercisable portion of an Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any
time prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.2; provided, however, that any partial
exercise shall be for whole shares of Common Stock only.

 

Section 4.3.  Manner
of Exercise

 

An Option, or any exercisable portion thereof, may
be exercised solely by delivering to the Secretary or his office all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.2:

 

(a)           Notice
in writing signed by the Optionee or the other person then entitled to exercise
the Option or portion thereof, stating that the Option or portion thereof is
thereby exercised, such notice complying with all applicable rules established
by the Committee;

 

(b)           (i) Full
payment (in cash or by check or by a combination thereof) for the shares with
respect to which such Option or portion thereof is exercised or (ii) indication
that the Optionee elects to have the number of Shares that would otherwise be
issued to the Optionee reduced by a number of Shares having an equivalent Fair
Market Value to the payment that would otherwise be made by Optionee to the
Company pursuant to clause (i) of this subsection (b);

 

(c)           (i) Full
payment (in cash or by check or by a combination thereof) to satisfy the
minimum withholding tax obligation with respect to which such Option or portion
thereof is exercised; or (ii) solely in the event that the Optionee’s
employment terminates under circumstances identified in Section 3.2(b), (e) or
(f) above, notice in writing that the Optionee elects to have the number
of Shares that would otherwise be issued to the Optionee reduced by a number of
Shares having an equivalent Fair Market Value to the payment that would
otherwise be made by Optionee to the Company pursuant to clause (i) of
this subsection (c);

 

(d)           A bona
fide written representation and agreement, in a form satisfactory to the
Committee, signed by the Optionee or other person then entitled to exercise
such Option or portion thereof, stating that the shares of Common Stock are
being acquired for his own account, for investment and without any present
intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act of 1933, as amended (the “Act”),
and then applicable rules and regulations thereunder, and that the
Optionee or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless from
any loss, damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is 

 

7

 

contrary to the representation
and agreement referred to above; provided, however, that the
Committee may, in its reasonable discretion, take whatever additional actions
it deems reasonably necessary to ensure the observance and performance of such
representation and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations; and

 

(e)           In the
event the Option or portion thereof shall be exercised pursuant to Section 4.1
by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the option.

 

Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on exercise of an
Option does not violate the Act, and may issue stop-transfer orders covering
such shares.  Share certificates
evidencing stock issued on exercise of this Option shall bear an appropriate
legend referring to the provisions of subsection (d) above and the
agreements herein. The written representation and agreement referred to in
subsection (d) above shall, however, not be required if the shares to be
issued pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares.

 

Section 4.4.  Conditions
to Issuance of Stock Certificates

 

The shares of stock deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares, which have then been reacquired by the
Company.  Such shares shall be fully paid
and nonassessable.  The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased (if certified, or if not certified, register the issuance of
such shares on its books and records) upon the exercise of an Option or portion
thereof prior to fulfillment of all of the following conditions:

 

(a)           The
obtaining of approval or other clearance from any state or federal governmental
agency which the Committee shall, in its reasonable and good faith discretion,
determine to be necessary or advisable;

 

(b)           The
execution by the Optionee of the Management Stockholder’s Agreement and a Sale
Participation Agreement; and

 

(c)           The
lapse of such reasonable period of time following the exercise of the Option as
the Committee may from time to time establish for reasons of administrative
convenience or as may otherwise be required by applicable law.

 

Section 4.5.  Rights
as Stockholder

 

Except as otherwise provided in Section 2.4 of
this Agreement, the holder of an Option shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of the Option or any portion thereof unless and
until certificates representing such shares shall have been issued by the
Company to such holder or the Shares have otherwise been recorded in the
records of the Company as owned by such holder.

 

8

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1.  Administration

 

The Committee shall have the power to interpret the
Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules.  All
actions taken and all interpretations and determinations made by the Committee
shall be final and binding upon the Optionee, the Company and all other
interested persons.  No member of the
Committee shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or the Option.  In its absolute discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan and this Agreement.

 

Section 5.2.  Option
Not Transferable

 

Neither the Option nor any interest or right therein
or part thereof shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

 

Section 5.3.  Notices

 

Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his signature hereto.  By a notice given pursuant to this Section 5.3,
either party may hereafter designate a different address for notices to be
given to him.  Any notice, which is
required to be given to the Optionee, shall, if the Optionee is then deceased,
be given to the Optionee’s personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 5.3.  Any notice
shall have been deemed duly given when (i) delivered in person, (ii) enclosed
in a properly sealed envelope or wrapper addressed as aforesaid, deposited
(with postage prepaid) in a post office or branch post office regularly
maintained by the United States Postal Service, or (iii) enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable
non-public mail carrier.

 

Section 5.4.  Titles;
Pronouns

 

Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Agreement.  The masculine pronoun shall
include the feminine and neuter, and the singular the plural, where the context
so indicates.

 

9

 

Section 5.5.  Applicability
of Plan, Management Stockholder’s Agreement and Sale Participation Agreement

 

The Option and the shares of Common Stock issued to
the Optionee upon exercise of the Option shall be subject to all of the terms
and provisions of the Plan, the Management Stockholder’s Agreement and a Sale
Participation Agreement, to the extent applicable to the Option and such
Shares.

 

Section 5.6.  Amendment

 

Subject to Section 10 of the Plan, this
Agreement may be amended only by a writing executed by the parties hereto,
which specifically states that it is amending this Agreement.

 

Section 5.7.  Governing
Law

 

The laws of the State of
Delaware shall govern the interpretation, validity and performance of the terms
of this Agreement regardless of the law that might be applied under principles
of conflicts of laws.

 

Section 5.8.  Arbitration

 

In
the event of any controversy among the parties hereto arising out of, or
relating to, this Agreement which cannot be settled amicably by the parties,
such controversy shall be finally, exclusively and conclusively settled by
mandatory arbitration conducted expeditiously in accordance with the American
Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place
within the Nashville, Tennessee metropolitan area.  The decision of the arbitrator shall be final
and binding upon all parties hereto and shall be rendered pursuant to a written
decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be
entered in any court having jurisdiction thereof.  Each party shall bear its own legal fees and
expenses, unless otherwise determined by the arbitrator.

 

 

[Signatures on next page.]

 

10

 

IN WITNESS WHEREOF, this Agreement has been executed
and delivered by the parties hereto.

 

	
   

  	
  DOLLAR
  GENERAL CORPORATION

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
					

 

11

 

Option Grants:

 

	
  Aggregate number of shares
  of Common Stock 

  
	
  for which the Time Option granted hereunder is 

  
	
  exercisable                                     :

  	
   

  	
   

  

 

	
  Aggregate number of shares
  of Common Stock 

  
	
  for which the Performance Option 

  
	
  granted hereunder is
  exercisable:

  	
   

  	
   

  

 

	
  Exercise Price of all options:

  	
  $5.00 per share

  
	
   

  	
   

  
	
  Grant
  Date:

  	
  July     ,
  2007

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

 

[Signature Page of
Stock Option Agreement]

 

12

 

Schedule A

Annual and
Cumulative Performance Targets

 

The Annual and Cumulative
Performance Targets are based on the Company’s achievement of the following
EBITDA targets for the following Fiscal Years:

 

	
  Fiscal Year

  	
   

  	
  Annual Performance Target

  	
   

  	
  Cumulative Performance Target

  	
   

  
	
  2007

  	
   

  	
  $

  	
  700,000,000

  	
  (1)

  	
   

  	
   

  
	
  2008

  	
   

  	
  $

  	
  828,000,000

  	
   

  	
  $

  	
  1,528,000,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  961,000,000

  	
   

  	
  $

  	
  2,489,000,000

  	
   

  
	
  2010

  	
   

  	
  $

  	
  1,139,000,000

  	
   

  	
  $

  	
  3,628,000,000

  	
   

  
	
  2011

  	
   

  	
  $

  	
  1,350,000,000

  	
   

  	
  $

  	
  4,978,000,000

  	
   

  

 

“EBITDA” shall mean earnings
before interest, taxes, depreciation and amortization plus transaction,
management and/or similar fees paid to the Sponsor and/or its Affiliates. The
Board shall, fairly and appropriately, adjust the calculation of EBITDA to
reflect, to the extent not contemplated in the management plan, the following:
acquisitions, divestitures, any change required by GAAP relating to share-based
compensation or for other changes in GAAP promulgated by accounting standard
setters that, in each case, the Board in good faith determines require
adjustment of EBITDA. The Board’s determination of such adjustment shall be
based on the Company’s accounting as set forth in its books and records and on
the financial plan of the Company pursuant to which the Annual Performance
Targets were originally established.

 

If the Company makes an
acquisition in any year, the Annual Performance Target for such year and
Cumulative Performance Target for such year and subsequent years will be
adjusted, fairly and appropriately, by the amount of EBITDA in the plan for the
target presented to the Board at the time the acquisition is approved by the
Board. Annual Performance Targets and Cumulative Performance Targets will also
be fairly and appropriately adjusted by the Board, in consultation with
management, to the extent not contemplated in the plan for the following: any
divestitures, major capital investment programs, any change required by GAAP
relating to share-based compensation or other changes in GAAP promulgated by
accounting standard setters. In the event that any of the foregoing action is
taken, such adjustment shall be only the amount deemed reasonably necessary by
the Board, in the exercise of its good faith judgment, after consultation of
the Company’s accountants, to accurately reflect the direct and measurable
effect such event has on such Annual Performance Targets and Cumulative
Performance Targets. The intent of such adjustments is to keep the probability
of achieving the Annual Performance Targets and Cumulative Performance Targets
the same as if the event triggering such adjustment had not 

 

(1) The Board will make a good faith
determination of the adjustments to the EBITDA targets for Alpha
costs and other one time expenses after consulting with the CEO and CFO.

 

13

 

occurred. The Board’s determination of such
necessary adjustment shall be made within 60 days following the completion or
closing of such event, and shall be based on the Company’s accounting as set
forth in its books and records and on the Company’s financial plan pursuant to
which the Annual Performance Targets and Cumulative Performance Targets were
originally established.

 

14Exhibit 10.3

FORM OF

OPTION ROLLOVER AGREEMENT

 

OPTION ROLLOVER AGREEMENT dated as of the date indicated on Schedule
I hereto (this “Option Rollover Agreement”) between Dollar General
Corporation, a Tennessee corporation (the “Company”), and the individual
listed on Schedule I hereto (the “Management Stockholder”).

 

WHEREAS, on March 11, 2007, the Company, Buck
Holdings, L.P., a Delaware limited partnership (“Parent”) and Buck Acquisition
Corp., a Tennessee corporation and a direct wholly owned subsidiary of Parent (“Merger
Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”),
pursuant to which Merger Sub will merge with and into the Company (the “Merger”)
with the Company continuing as the surviving corporation (the effective time of
such merger, the “Effective Time”);

 

WHEREAS, the Management Stockholder currently holds options to acquire
shares of common stock, par value $0.50 per share, of the Company (“DG
Options”), all of which shall become fully vested upon consummation of the
Merger, pursuant to one or more of the following plans: the Company’s 1993
Employee Stock Incentive Plan, 1995 Employee Stock Incentive Plan, 1995 Stock
Option Plan for Outside Directors, and 1998 Stock Incentive Plan, and
Employment Agreement with David A. Perdue effective as of April 2, 2003
(the “DG Plans”), and has agreed, as of the Effective Time, to retain
certain of such DG Options (the “Rollover Options”) in lieu of receiving
the consideration specified in Section 2.3 of the Merger Agreement with
respect to such options, subject to the terms and conditions of this Option
Rollover Agreement; and

 

WHEREAS, the Management Stockholder desires to make an investment in
the equity securities of the Company in connection with the Merger, and the
Company desires to allow the Management Stockholder to make such an investment.

 

NOW THEREFORE, in consideration of the foregoing, and the covenants and
promises and representations set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged and
accepted, the parties hereto agree, subject to the Company’s acceptance of the
Management Stockholder’s execution of this Agreement, to the following:

 

1.             The Management Stockholder
acknowledges that, in consideration of, among other good and valuable
consideration, including the Management Stockholder’s obligation pursuant to
the Management Stockholder’s Agreement to make an investment in the Company,
the Company has offered the Management Stockholder the opportunity to, among
other good and valuable consideration, satisfy such obligation to invest, in
whole or in part, pursuant to the “roll over” of certain of the DG Options held
by Management Stockholder (the “Rollover”).

 

2.             The Management Stockholder further
acknowledges and agrees that from and after the Effective Time:

 

 

(a)           pursuant to the terms of the Merger
Agreement and the DG Plans, any DG Options, to the extent not exercised prior
to the Merger and not otherwise part of the Management Stockholder’s Rollover
(such options being the “Cancelled Options”), will be cancelled
immediately prior to the Effective Time and will thereafter represent only the
right to receive a cash
payment equal to the product of (x) the number of shares of common stock
of the Company underlying the options immediately prior to the Effective Time,
multiplied by (y) the amount (if any) by which $22.00 exceeds the per
share option exercise price relating
to such Cancelled Options,
without interest and less any applicable withholding taxes (the “Option Payment”), and will no longer be
exercisable for any securities of the Company, Parent or any of their
respective subsidiaries, successors or assigns, all in accordance with the
terms of the Merger Agreement; and

 

(b)           in accordance with the Merger
Agreement and the DG Plans, the Management Stockholder shall have no right to
receive payments in respect of any Cancelled Options, the exercise price of
which are equal to or greater than $22.00 per share (i.e., the Management
Stockholder’s “out of the money” Options); and

 

(c)           subject to the payment of the Option Payment, all of the
Management Stockholder’s rights and claims in respect of the Cancelled Options
(including the Management Stockholder’s “out of the money” Options) shall
terminate in all respects; and

 

(d)           all of the Management Stockholder’s
rights and claims in respect of the Management Stockholder’s DG Options that
are (and solely to the extent) permitted pursuant to this Agreement to become
Rollover Options as of the Effective Time (as defined in the Merger Agreement)
shall be limited to (i) the terms of the agreements or instruments
evidencing the grant of such awards and the applicable DG Plan governing such
awards, as amended as provided by this Agreement, and (ii) the terms and
conditions of a Management Stockholder’s Agreement, to be entered into by and
between the Company and the undersigned Management Stockholder effective as of
the Effective Time, and a Sale Participation Agreement, to be entered into by
and between the Management Stockholder and Parent, effective as of the
Effective Time.

 

3.             The Management Stockholder hereby
represents and warrants to the Company that the Management Stockholder is the
sole record and beneficial owner of the DG Options and that the Management Stockholder
has not sold, transferred, conveyed, pledged or hypothecated any interest in
the DG Options, and the Management Stockholder agrees not to take any action
that would cause the foregoing representations and warranties not to be true as
of the Effective Time.

 

4.             The Management Stockholder agrees
to retain, as Rollover Options, DG Options as set forth on Schedule I.  However, no DG Option with a Total Rollover
Value that is a negative number will be retained as a Rollover Option.  For purposes of this Option Rollover
Agreement, “Total Rollover Value” shall mean, with respect to a DG
Option immediately prior to the Effective Time, the excess of (a) the
product of (i) $22.00 and (ii) the number of shares of common stock
of the Company subject to such option over (b) the aggregate exercise
price per share of such option.

 

2

 

5.             The terms of the Rollover Options
shall be amended, effective immediately upon the Effective Time, to provide for
the following:  each Rollover Option
shall be hereby adjusted such that (i) the exercise price per share of the
common stock of the Company (“Common Stock”) underlying each Rollover
Option will be as set forth on Exhibit A and (ii) the number of
shares of Common Stock underlying each Rollover Option will be equal to the
number set forth on Exhibit A.  For
the avoidance of doubt, for each Rollover Option, the adjustment referenced in
this Section 5 will not result in any difference between (i) the
excess of the product of (x) the fair market value of one share of Common
Stock as it exists immediately after the Effective Time and (y) the number
of shares of Common Stock subject to the Rollover Option immediately after the
Effective Time, over the aggregate exercise price per share of such Rollover
Option immediately after the Effective Time as compared to (ii) the Total
Rollover Value of the Rollover Option immediately prior to the Effective
Time.  In addition, the ratio of the
exercise price to the fair market value of the shares of Common Stock subject
to each Rollover Option immediately after the Effective Time will not be
greater than the ratio of the exercise price to the fair market value of the
shares subject to the Rollover Option immediately prior to the Effective Time.

 

6.             This Option Rollover Agreement
shall be governed by and construed in accordance with the laws of the State of
Tennessee, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.

 

7.             This Option Rollover Agreement may
be executed in counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.

 

[Signatures on
next page.]

 

3

 

Schedule
I

 

OPTION
ROLLOVER ELECTION FORM

 

Name of Management
Stockholder:
                                                                 

 

Do you wish to “roll over” certain of your options
to purchase shares of Common Stock of the Company which you currently hold for
options to purchase shares of common stock in the Surviving Corporation
pursuant to the Option Rollover Agreement? 
Please note that
you may not rollover a portion of a given grant.  Only whole grants may be rolled over.

o Yes    o No

If yes, please select either
A or B below:

 

A.                                   o  I, Management Stockholder, agree to rollover ALL
of the DG Options (as defined in the Option Rollover Agreement), other than DG
Options the exercise price of which are equal to or greater than $22.00 per share
(i.e., “out of the money” Options”)

 

B.                                     o I, Management
Stockholder, agree to rollover each DG Option identified in the chart below
that I have designated by checking the box in the far right column:

 

	
  Date of

  OptionGrant

  	
   

  	
  Expiration Date

  	
   

  	
  Number of

  Shares of

  Common Stock 

  of DG subject to

  the Grant

  	
   

  	
  Exercise Price

  Per Share

  	
   

  	
  Aggregate

  Spread Value at 

  time of Closing

  	
   

  	
  Please check the

  box to the right of

  each DG Option

  that you wish to

  rollover

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  

 

4

 

Executed this     
day of       , 2007 by:

 

 

	
   

  	
   

  
	
  Management Stockholder:

  

 

 

Accepted this     
day of         , 2007 by:

 

 

DOLLAR GENERAL
CORPORATION

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Exhibit A

 

	
  Exercise Price of the 

  DG Options

  	
   

  	
  Number of Shares

  Underlying the DG

  Options

  	
   

  	
  Adjusted Exercise Price of

  Rollover Options

  	
   

  	
  Number of Shares

  Underlying

  the Rollover Options

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

7

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