Document:

Exhibit 10.36

  

 

 STOCK OPTION AGREEMENT
 

 

 THIS AGREEMENT, dated as of the date indicated on Schedule B hereto (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 Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates, as such Plan may be amended from time to time (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 $8.75.
 

 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 of the Optionee involving fraud or dishonesty, or any willful failure to perform reasonable duties assigned to the Optionee which failure is not cured within 10 business days after receipt from the Company of written notice of such failure; (ii) any material breach by the Optionee of any securities or other law or regulation or any Company policy governing trading or dealing with stock, securities, investments or the like, inappropriate disclosure or “tipping” relating to any stock, securities or investments or the like, (iii) other than as required by law, the carrying out by the Optionee of any activity, or the Optionee making any public statement, which prejudices or ridicules the good name and standing of the Company or its affiliates (including any limited partner of Parent) or would bring such persons into public contempt or ridicule; (iv) attendance by the Optionee at work in a state of intoxication or the Optionee otherwise being found in 
 

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 possession at the Management Stockholder’s place of work of any prohibited drug or substance, possession of which would amount to a criminal office; (v) any assault or other act of violence by the Management Stockholder; or (vi) the Optionee being indicted for any crime constituting (x) any felony whatsoever or (y) any misdemeanor that would preclude employment under the Company’s hiring policy.
 

 Section 1.3.
 Closing Date
 “Closing Date” shall mean July 6, 2007.
 

 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 fiscal years of the Company set forth on Schedule A attached hereto.
 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) a reduction in the Optionee’s base salary or target bonus level; or (ii) the relocation by the Company of the Optionee’s principal place of employment to a site outside a fifty mile radius from the current site of the Optionee’s principal place of employment.  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.
 Section 1.8.
 Option
 “Option” shall mean the aggregate of the Time Option and the Performance Option granted under Section 2.1 of this Agreement.
 Section 1.9.
 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 Schedule B hereof opposite the term Performance Option.
 

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 Section 1.10.
 Pro Rata Fraction 
 “Pro Rata Fraction” shall mean a fraction, the numerator of which equals the number of calendar months in the first Fiscal Year that the Optionee is employed with (in the case of a new employee), or is employed in the promoted position giving rise to the Option grant by (in the event of a promoted employee), the Company or any Service Recipient and the denominator of which is equal to 12; provided, that an Optionee shall only be deemed to have been employed in any given calendar month if the Optionee commences initial employment (in the event of a new employee) or commences employment into the promoted position (in the event of a promoted employee) with the Company or any Service Recipient on or before the fifteenth (15th) day of any calendar month occurring in the first Fiscal Year.  In the event an Optionee commences employment (whether initial or promoted) with the Company or any Service Recipient after the fifteenth day of any given calendar month, then the numerator of the foregoing fraction shall only include those calendar months immediately following the calendar month in which the Optionee commences such employment (whether initial or promoted).
 

 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) 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) 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 Schedule B hereof opposite the term Time Option.
 

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 ARTICLE II
  
 GRANT OF OPTIONS
 

 Section 2.1.
 Grant of Options
 For good and valuable consideration, on and as of the Grant Date 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 Schedule B hereof, which shall be the Fair Market Value on the Grant Date.
 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:
 (i)
 Time Option.  The Time Option shall become vested and exercisable with respect to 25% of the Shares subject to such Option on each of the first four anniversaries of the Grant Date.
 

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 (ii)
 Performance Option.  If the Company, on a consolidated basis, achieves its annual EBITDA targets as set forth in Schedule A attached hereto (each an “EBITDA Target” or “Annual Performance Target”) for the applicable given Fiscal Year, then the Performance Option shall be eligible to become vested and exercisable as to a percentage of the Shares subject to such Option at the end of each of the five Fiscal Years as follows:
 (A)
 in respect of the first Fiscal Year, a Pro Rata Fraction of 25% of the Shares subject to the Option (the “Initial Tranche”);
 (B)
 in respect of each of the second through fourth Fiscal Years, 25% of the Shares subject to the Option; and
 (C)
 in respect of the fifth Fiscal Year, the portion of the Initial Tranche in excess of the Pro Rata Fraction of the Initial Tranche that did not become vested in respect of the first 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 if the cumulative EBITDA Target set forth on Schedule A attached hereto (each a “Cumulative EBITDA Target”) is achieved on a cumulative basis at the end of such Fiscal Year with respect to all then completed Fiscal Years.  For the avoidance of doubt, except as otherwise provided in Section 3.1(b) below, no portion of the Performance Option shall become vested and exercisable at any time unless the Optionee remains employed with the Company or the applicable Service Recipient through the date on which it is determined that the applicable EBITDA Target or Cumulative EBITDA Target of the immediately preceding Fiscal Year has been achieved.
 (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 25% portion of the Time Option that would have become exercisable on the next anniversary date of the  Grant 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 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
 

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 (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 a 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)) up to the same percentage of Sponsor Shares on which such Sponsor Return and Sponsor IRR has been so achieved. 
 (d)
 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.
 (e)
  Notwithstanding any other provision of this Section 3.1 or of this Agreement, in the event that the Optionee does not contribute to the Company, in exchange for shares of Common Stock, the Minimum Investment, as set forth on  Schedule B  hereof, no portion of the Time Option or the Performance Option shall become vested and exercisable, and the Option will expire, without payment therefor, on the earlier to occur of a Change in Control or the tenth anniversary of the Grant Date. 
 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 Grant 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 of7 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)
 Ninety (90) 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)
 Ninety (90) days after the date of an Optionee’s termination of employment with the Company and all Service Recipients by the Optionee for Good Reason;
 

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 (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.
 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 or her office or designee 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 
 

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 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 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 certificated, or if not certificated, 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
 (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.
 

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 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.
 Section 5.5.
 Applicability of Plan and Management Stockholder’s 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 and the Management Stockholder’s Agreement, to the extent applicable to the Option and such Shares.
 

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 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 pages.]
 

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

 	 	 	 	 
	  
	 DOLLAR GENERAL CORPORATION

	  
	  
	  

	  
	  
	  

	  
	 By:
	 /s/ S. Lanigan

	  
	  
	  

	  
	 Name:
	 Susan Lanigan

	  
	  
	  

	  
	 Title:
	 Executive Vice President &

	  
	  
	 General Counsel

  

 

 ADDRESS:
 

 Dollar General Corporation
 100 Mission Ridge
 Goodlettsville, TN 37072
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 [Signature Page of Stock Option Agreement]
 

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	 OPTIONEE:

	  
	  
	  

	  
	  
	  

	  
	 /s/ John W. Flanigan

	  
	 John W. Flanigan

	  
	  

	  
	 ADDRESS:

	  
	  

	  
	 3100 West End Circle, Apt. 303

	  
	 Nashville, TN 37203

  

 

 

 

 

 

 

 

 

 

 

 

 [Signature Page of Stock Option Agreement]
 

 

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 Schedule A to Stock Option Agreement
 Annual EBITDA Targets and Cumulative EBITDA Targets
 
 

 	 	 	 
	 Fiscal Year
  
	 Annual Performance Target
	 Cumulative EBITDA Target

	 2010
  
	 [    ]
	 N/A

	 2011
  
	 [    ]
	 [    ]

	 2012
  
	 [    ]
	 [    ]

	 2013
  
	 [    ]
	 [    ]

	 2014
  
	 [    ]
	 [    ]

	 2015
  
	 N/A
	 [    ]

  

 "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 EBITDA 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 EBITDA 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 EBITDA Targets. The intent of such adjustments is to keep the probability of achieving the Annual Performance Targets and Cumulative EBITDA Targets the same as if the event triggering such adjustment had not 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 EBITDA Targets were originally established.
 

 

 

 
 

 

 Schedule B to Stock Option Agreement
 Grant Date:
  March 24, 2010 
 Exercise Price of Options:
 $25.25
 Option Grants:
 

 Aggregate number of shares of Common Stock 
 for which the Time Option granted hereunder is 
 exercisable:
 49,759
 

 Aggregate number of shares of Common Stock
 for which the Performance Option 
 granted hereunder is exercisable:
  
 49,759
 

  Minimum Investment  : 
  $158,325.00Exhibit 10.37

  SUBSCRIPTION AGREEMENT
 This Subscription Agreement (this “Agreement”) is entered into as of March 24, 2010 among Dollar General Corporation, a Tennessee corporation (the “Company”), and the undersigned person (the “Management Stockholder”) (the Company and the Management Stockholder being hereinafter collectively referred to as the “Parties”).  All capitalized terms not immediately defined are hereinafter defined in Section 4(b) of this Agreement.
 WHEREAS, the Management Stockholder has been selected by the Company (i) to purchase additional shares of Common Stock, $0.875 par value per share (the “Common Stock”), from the Company for cash (the “Purchased Stock”); and (ii) to receive additional options to purchase shares of Common Stock (the “Options”) pursuant to the terms set forth below and the terms of the 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates (the “Option Plan”) and the Stock Option Agreement, dated as of the date hereof, entered into by and between the Company and the Management Stockholder (the “Option Agreement”); and 
 WHEREAS, prior to the date hereof, the Management Stockholder purchased shares of Common Stock and received options to purchase Common Stock (the “Prior Investment”) and, in connection therewith, the Management Stockholder entered into a Management Stockholder’s Agreement with the Company (a “Management Stockholder’s Agreement”) and a Sale Participation Agreement (as defined herein).
 NOW THEREFORE, to implement the foregoing and in consideration of the mutual agreements contained herein, the Parties agree as follows:
 1.
 Issuance of Purchased Shares; Options.
 (a)
 Subject to the terms and conditions hereinafter set forth, the Management Stockholder hereby subscribes for and shall purchase, as of the date the Company receives such purchase price from the Management Stockholder prior to 5 p.m. GMT (such time, the “Close of Business”), or if the purchase price is received following the Close of Business, the next business day thereafter (either such date, the “Effective Date”), and the Company shall issue and deliver to the Management Stockholder as of the Effective Date, the number of shares of Purchased Stock at a per share purchase price (such price, with respect to the shares of Purchased Stock, the “Base Price”), in each case as set forth on Schedule I hereto.
 (b)
 As set forth in the Option Plan and the Option Agreement, as of March 24, 2010 the Company granted to the Management Stockholder Options to acquire the number of shares of Common Stock as set forth on Schedule I hereto, at an initial per share exercise price equal to the Base Price, and the Parties shall, to the extent not previously done so, execute and deliver to each other copies of the Option Agreement.
 (c)
 The Company shall have no obligation to sell any Purchased Stock to any person who (i) is a resident or citizen of a state or other jurisdiction in which the sale of the Common Stock to him or her would constitute a violation of the securities or “blue sky” laws of such jurisdiction or (ii) is not an employee or director of the Company or its subsidiaries as of the Effective Date.
 

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 2.
       Management Stockholder’s Representations, Warranties and Agreements. 
 (a)
         The Management Stockholder agrees and acknowledges that he will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of (any of the foregoing acts being referred to herein as a “transfer”) any shares of Purchased Stock and, at the time of exercise, Common Stock issuable upon exercise of Options (“Option Stock”; together with all Purchased Stock and any other Common Stock otherwise acquired and/or held by the Management Stockholder Entities as of or after the date hereof, “Stock”), except as otherwise provided for in the Management Stockholder’s Agreement.  If the Management Stockholder is an Affiliate of the Company, the Management Stockholder also agrees and acknowledges that he or she will not transfer any shares of the Stock unless:
 (i)  the transfer is pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations in effect thereunder (the “Act”), and in compliance with applicable provisions of state securities laws; or
 (ii)  (A) counsel for the Management Stockholder (which counsel shall be reasonably acceptable to the Company) shall have furnished the Company with an opinion or other advice, reasonably satisfactory in form and substance to the Company, that no such registration is required because of the availability of an exemption from registration under the Act and (B) if the Management Stockholder is a citizen or resident of any country other than the United States, or the Management Stockholder desires to effect any transfer in any such country, counsel for the Management Stockholder (which counsel shall be reasonably satisfactory to the Company) shall have furnished the Company with an opinion or other advice reasonably satisfactory in form and substance to the Company to the effect that such transfer will comply with the securities laws of such jurisdiction.
 (b)
         The Management Stockholder acknowledges that he has been advised that (i) a restrictive legend in the form heretofore set forth shall be placed on the certificates (if any) representing the Stock and (ii) a notation shall be made in the appropriate records of the Company indicating that the Stock is subject to restrictions on transfer and appropriate stop transfer restrictions will be issued to the Company’s transfer agent, if any, with respect to the Stock.  
 (c)
         If any shares of the Stock are to be disposed of in accordance with Rule 144 under the Act or otherwise, the Management Stockholder shall promptly notify the Company of such intended disposition and shall deliver to the Company at or prior to the time of such disposition such documentation as the Company may reasonably request in connection with such sale and take any actions reasonably requested by the Coordination Committee prior to any such sale (provided that such instructions shall not have a disproportionate adverse impact on the Management Stockholder vis-á-vis any other shareholders of the Company or limited partners of Parent) and, in the case of a disposition pursuant to Rule 144, shall deliver to the Company an executed copy of any notice on Form 144 required to be filed with the SEC.
 (d)
         The Management Stockholder agrees that, if any shares of the Stock are offered to the public pursuant to an effective registration statement under the Act (other than registration of securities issued on Form S-8, S-4 or any successor or similar form), the 
 

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 Management Stockholder will not effect any public sale or distribution of any shares of the Stock not covered by such registration statement from the time of the receipt of a notice from the Company that the Company has filed or imminently intends to file such registration statement to, or within 180 days (or such shorter period as may be consented to by the managing underwriter or underwriters) in the case of the IPO and 90 days (or in an underwritten offering such shorter period as may be consented to by the managing underwriter or underwriters, if any) in the case of any other Public Offering after, the effective date of such registration statement, unless otherwise agreed to in writing by the Company.
 (e)
         The Management Stockholder represents and warrants that (i) with respect to the Purchased Stock and Option Stock, the Management Stockholder has received and reviewed the available information relating to such Stock, including having received and reviewed the documents related thereto, certain of which documents set forth the rights, preferences and restrictions relating to the Options and the Stock underlying the Options and the Management Stockholder has relied solely on such information.
 (f)
         The Management Stockholder further represents and warrants that (i) the Management Stockholder’s financial condition is such that the Management Stockholder can afford to bear the economic risk of holding the Stock for an indefinite period of time and has adequate means for providing for the Management Stockholder’s current needs and personal contingencies, (ii) the Management Stockholder can afford to suffer a complete loss of his or her investment in the Stock, (iii) the Management Stockholder understands and has taken cognizance of all risk factors related to the purchase of the Stock, and (iv) the Management Stockholder’s knowledge and experience in financial and business matters are such that the Management Stockholder is capable of evaluating the merits and risks of the Management Stockholder’s purchase of the Stock as contemplated by this Agreement.
 (g)
         For avoidance of doubt, the Stock shall constitute “Stock” for purposes of the Management Stockholders Agreement.
 3.
      The Company’s Representations and Warranties and Covenants.  The Company represents and warrants to the Management Stockholder that (i) this Agreement has been duly authorized, executed and delivered by the Company and is enforceable against the Company in accordance with its terms and (ii) the Stock, when issued and delivered in accordance with the terms hereof and the other agreements contemplated hereby, will be duly and validly issued, fully paid and nonassessable. 
 4.
      Definitions.
 (a)
 Definitions.  All capitalized terms used in this Agreement and not defined herein shall have such meaning as such terms are defined in the Option Plan.  Terms used herein and as listed below shall be defined as follows:
 “Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations in effect thereunder.
  “Agreement” shall have the meaning set forth in the introductory paragraph.
 

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 “Base Price” shall have the meaning set forth in Section 1(a) hereof.
 “Close of Business” shall have the meaning set forth in Section 1(a) hereof. 
 “Common Stock” shall have the meaning set forth in the first recital.
 “Company” shall have the meaning set forth in the introductory paragraph.
 “Effective Date” shall have the meaning set forth in Section 1(a) hereof.
 “Investors” shall mean, collectively, the KKR 2006 Fund L.P. and its affiliated investment funds, KKR PEI Investments, L.P., GS Capital Partners VI Fund, L.P., GS Capital Partners VI Parallel, L.P., GS Capital Partners VI GmbH& Co. KG, GS Capital Partners VI Offshore Fund, L.P. and Goldman Sachs DGC Investors, L.P., Citigroup Capital Partners II Employee Master Fund, L.P., Citigroup Capital Partners II 2007 Citigroup Investment, L.P., Citigroup Capital Partners II Onshore, L.P., Citigroup Capital Partners II Cayman Holdings, L.P. and CPE Co-Investment (Dollar General LLC) and certain other investors in Parent.
 “Management Stockholder” shall have the meaning set forth in the introductory paragraph. 
 “Management Stockholder’s Agreement” shall have the meaning set forth in the second recital.
 “Options” shall have the meaning set forth in the first recital.
 “Option Plan” shall have the meaning set forth in the first recital.
 “Option Stock” shall have the meaning set forth in Section 2(a) hereof.
 “Parties” shall have the meaning set forth in the introductory paragraph.
 “Person” shall mean “person,” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.
 “Public Offering” shall mean the sale of shares of Common Stock to the public subsequent to the date hereof pursuant to a registration statement under the Act which has been declared effective by the SEC (other than a registration statement on Form S-4, S-8 or any other similar form).
 “Purchased Stock” shall have the meaning set forth in the first recital.
 “Sale Participation Agreement” shall mean that certain sale participation agreement entered into by and between the Management Stockholder and the Investors.
 “Stock” shall have the meaning set forth in Section 2(a) hereof. 
 5.
      Rights to Negotiate Repurchase Price.  Nothing in this Agreement shall be deemed to restrict or prohibit the Company from purchasing, redeeming or otherwise acquiring for value shares of Stock or Options from the Management Stockholder, at any time, upon such terms and conditions, and for such price, as may be mutually agreed upon in 
 

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 writing between the Parties, whether or not at the time of such purchase, redemption or acquisition circumstances exist which specifically grant the Company the right to purchase, or the Management Stockholder the right to sell, shares of Stock or any Options under the terms of this Agreement; provided that no such purchase, redemption or acquisition shall be consummated, and no agreement with respect to any such purchase, redemption or acquisition shall be entered into, without the prior approval of the Board.
 6.
      Recapitalizations, etc.  The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Stock or the Options, to any and all shares of capital stock of the Company or any capital stock, partnership units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or substitution of the Stock or the Options by reason of any stock dividend, split, reverse split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise.
 7.
      Management Stockholder’s Employment by the Company.  Nothing contained in this Agreement or in any other agreement entered into by the Company and the Management Stockholder contemporaneously with the execution of this Agreement (i) obligates the Company or any subsidiary of the Company to employ the Management Stockholder in any capacity whatsoever or (ii) prohibits or restricts the Company (or any such subsidiary) from terminating the employment of the Management Stockholder at any time or for any reason whatsoever, with or without Cause, and the Management Stockholder hereby acknowledges and agrees that neither the Company nor any other person has made any representations or promises whatsoever to the Management Stockholder concerning the Management Stockholder’s employment or continued employment by the Company or any subsidiary of the Company.
 8.
      Binding Effect.  The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns.  No provision of this Agreement is intended to or shall confer upon any Person other than the Parties any rights or remedies hereunder or with respect hereto.
 9.
      Amendment.  This Agreement may be amended by the Company at any time upon notice to the Management Stockholder thereof.
 10.
      Closing.  Except as otherwise provided herein, the closing of each purchase and sale of shares of Stock pursuant to this Agreement shall take place at the principal office of the Company on the tenth business day following delivery of the notice by either Party to the other of its exercise of the right to purchase or sell such Stock hereunder.
 11.
      Applicable Law; Jurisdiction; Arbitration; Legal Fees.
 (a)
         The laws of the State of Tennessee applicable to contracts executed and to be performed entirely in such state shall govern the interpretation, validity and performance of the terms of this Agreement.
 (b)
         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 
 

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 conducted expeditiously in accordance with the American Arbitration Association rules by a single independent arbitrator.  Such arbitration process shall take place in Nashville, TN. 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.
 (c)
         In the event of any arbitration or other disputes with regard to this Agreement or any other document or agreement referred to herein, each Party shall pay its own legal fees and expenses, unless otherwise determined by the arbitrator.    
 12.
     Miscellaneous.
 (a)
         In this Agreement all references to “dollars” or “$” are to United States dollars and the masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.
 (b)
         If any provision of this Agreement shall be declared illegal, void or unenforceable by any court of competent jurisdiction, the other provisions shall not be affected, but shall remain in full force and effect.
 13.
     Notices.  All notices and other communications provided for herein shall be in writing.  Any notice or other communication hereunder shall be deemed duly given (i) upon electronic confirmation of facsimile, (ii) one (1) business day following the date sent when sent by overnight delivery and (iii) five (5) business days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid, in each case as follows:
 (a)
       If to the Company, to it at the following address:
 Dollar General Corporation
100 Mission Ridge
Goodlettsville, TN  37072
Attention:  General Counsel
Telecopy:  (615) 855-5180
 

 with copies to:
 Kohlberg Kravis Roberts & Co. L.P.
2800 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Attention:  Michael Calbert
Telecopy:  (650) 233-6553

and

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention:  Marni J. Lerner, Esq.
Telecopy:  (212) 455-2502
 

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 (b)
         If to the Management Stockholder, to the Management Stockholder at the address set forth below under the Management Stockholder’s signature;
 or at such other address as either party shall have specified by notice in writing to the other.
 

 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

 	 	 	 
	  
	  

	  
	 DOLLAR GENERAL CORPORATION

	  
	  
	 

	  
	 By:
	 /s/ S. Lanigan

	  
	  
	 Name: Susan S. Lanigan

	  
	  
	 Title:    Executive Vice President and
            General Counsel

  

 	 	 	 	 
	  
	  
	  

	  
	  
	 MANAGEMENT STOCKHOLDER

	  
	  
	 
/s/ John W. Flanigan

	  
	 Name:
	 John W. Flanigan

	  
	 Address:
	 3100 West End Circle, Apt. 303

	  
	  
	 Nashville, TN 37203

  

 

 

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 Schedule I
 

 

 Management Stockholder:   John W. Flanigan
 

 

 PURCHASED STOCK
 

 Number of shares of Purchased Stock:  5,388
 

 Base Price: $ 29.38
 

 OPTIONS
 

 Number of shares of Common Stock underlying Options:  99,518

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