# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE

SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	February	1,	2008

# DOLLAR	GENERAL	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

TENNESSEE

(State	or	other	jurisdiction	of incorporation	or	organization)

100	MISSION	RIDGE

(Address	of	principal	executive	offices,	zip	code)

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:	None

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:		None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes	[		]			No	[X]

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.		Yes	[			]	No	[X]

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days. Yes	[			]	No	[X]

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.	[X]

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the	definitions	of "large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Exchange	Act).		Yes	[		]		No	[X]

The	aggregate	fair	market	value	of	the	registrant's	common	stock	outstanding	and	held	by	non-affiliates	as	of	August	3,	2007	was	$663,400,	all	of	which	was	owned	by employees	of	the	registrant	and	not	traded	on	a	public	market.	For	this	purpose,	directors,	executive	officers	and	greater	than	10%	record	shareholders	are	considered	the	affiliates	of the	registrant.

# INTRODUCTION

# General

February	2,	2007,	February	3,	2006,	January	28,	2005,	and	January	30,	2004,	respectively.		All	of	the	discussion	and	analysis	in	this	report	should	be	read	with,	and	is	qualified	in its	entirety	by,	the	Consolidated	Financial	Statements	and	related	notes.

# Forward	Looking	Statements

"Forward-looking	statements"	within	the	meaning	of	the	federal	securities	laws	are	included	throughout	this	report,	particularly	under	the	headings	"Business"	and "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operation,"	among	others.	You	can	identify	these	statements	because	they	are	not	solely	statements of	historical	fact	or	they	use	words	such	as	"may,"	"will,"	"should,"	"expect,"	"believe,"	"anticipate,"	"project,"	"plan,"	"expect,"	"estimate,"	"objective,"	"forecast,"	"goal," "intend,"	"will	likely	result,"	or	"will	continue"	and	similar	expressions	that	concern	our	strategy,	plans	or	intentions.	For	example,	all	statements	relating	to	our	estimated	and projected	earnings,	costs,	expenditures,	cash	flows	and	financial	results,	our	plans	and	objectives	for	future	operations,	growth	or	initiatives,	or	the	expected	outcome	or	impact	of pending	or	threatened	litigation	are	forward-looking	statements.

All	forward-looking	statements	are	subject	to	risks	and	uncertainties	that	may	change	at	any	time,	so	our	actual	results	may	differ	materially	from	those	that	we	expected. We	derive	many	of	these	statements	from	our	operating	budgets	and	forecasts,	which	are	based	on	many	detailed	assumptions	that	we	believe	are	reasonable.	However,	it	is	very difficult	to	predict	the	impact	of	known	factors,	and	we	cannot	anticipate	all	factors	that	could	affect	our	actual	results.	Important	factors	that	could	cause	actual	results	to	differ materially	from	the	expectations	expressed	in	our	forward-looking	statements	are	disclosed	under	"Risk	Factors"	in	Part	I,	Item	1A	and	elsewhere	in	this	document	(including, without	limitation,	in	conjunction	with	the	forward-looking	statements	themselves	and	under	the	heading	"Critical	Accounting	Policies	and	Estimates").	All	written	and	oral forward-looking	statements	we	make	in	the	future	are	expressly	qualified	in	their	entirety	by	these	cautionary	statements	as	well	as	other	cautionary	statements	that	we	make	from time	to	time	in	our	other	SEC	filings	and	public	communications.	You	should	evaluate	all	of	our	forward-looking	statements	in	the	context	of	these	risks	and	uncertainties.

The	important	factors	referenced	above	may	not	contain	all	of	the	material	factors	that	are	important	to	you.	In	addition,	we	cannot	assure	you	that	we	will	realize	the results	or	developments	we	expect	or	anticipate	or,	even	if	substantially	realized,	that	they	will	result	in	the	consequences	or	affect	us	or	our	operations	in	the	way	we	expect.	The forward-looking	statements	included	in	this	report	are	made	only	as	of	the	date	hereof.	We	undertake	no	obligation	to	publicly	update	or	revise	any	forward-looking	statement	as	a result	of	new	information,	future	events	or	otherwise,	except	as	otherwise	required	by	law.

# PART	I

# ITEM	1. BUSINESS

We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	8,222	stores	located	in	35	states,	primarily	in	the	southern,	southwestern,	midwestern	and eastern	United	States,	as	of	February	29,	2008.		We	serve	a	broad	customer	base	and	offer	a	focused	assortment	of	everyday	items,	including	basic	consumable	merchandise	and other	home,	apparel	and	seasonal	products.		A	majority	of	our	products	are	priced	at	$10	or	less	and	approximately	30%	of	our	products	are	priced	at	$1	or	less.

We	offer	a	compelling	value	proposition	for	our	customers	based	on	convenient	store	locations,	easy	in	and	out	shopping	and	quality	name	brand	and	private	label merchandise	at	highly	competitive	everyday	low	prices.	We	believe	our	combination	of	value	and	convenience	distinguishes	us	from	other	discount,	convenience	and	drugstore retailers,	who	typically	focus	on	either	value	or	convenience.	Our	business	model	is	focused	on	strong	and	sustainable	sales	growth,	attractive	margins	and	limited	maintenance capital	expenditure	and	working	capital	needs,	which	results	in	significant	cash	flow	from	operations	(before	interest).

We	were	founded	in	1939	as	J.L.	Turner	and	Son,	Wholesale.		We	opened	our	first	dollar	store	in	1955,	when	we	were	first	incorporated	as	a	Kentucky	corporation	under the	name	J.L.	Turner	&	Son,	Inc.		We	changed	our	name	to	Dollar	General	Corporation	in	1968	and	reincorporated	as	a	Tennessee	corporation	in	1998.

We	have	expanded	rapidly	in	recent	years,	increasing	our	total	number	of	stores	from	5,540	as	of	February	1,	2002,	to	8,229	as	of	February	2,	2007,	an	8.2%	compounded annual	growth	rate	("CAGR").		Over	the	same	period,	we	grew	our	net	sales	from	$5.3	billion	to	$9.2	billion	(11.5%	CAGR),	driven	by	growth	in	number	of	stores	as	well	as	same store	sales	growth.	In	the	fourth	quarter	of	fiscal	2006,	we	announced	our	plans	to	slow	new	store	growth	in	2007	and	to	close	approximately	400	stores	in	order	to	improve	our profitability	and	to	enable	us	to	focus	on	improving	the	performance	of	existing	stores.	In	2007,	we	opened	365	new	stores	and	closed	400	stores.	We	also	relocated	or	remodeled 300	existing	stores.	We	generated	net	sales	in	2007	of	$9.5	billion,	an	increase	of	3.5%	over	2006,	including	a	same-store	sales	increase	of	2.1%.

# Merger	with	KKR

On	July	6,	2007,	we	completed	a	merger	(the	"Merger")	in	which	our	former	shareholders	received	$22.00	in	cash,	or	approximately	$6.9	billion	in	total,	for	each	share	of our	common	stock	held.	In	addition,	fees	and	expenses	related	to	the	Merger	and	the	related	financing	transactions	totaling	$102.6	million,	principally	consisting	of	investment banking	fees,	management	fees,	legal	fees	and	stock	compensation	expense	($39.4	million),	are	reflected	in	the	2007	results	of	operations.	As	a	result	of	the	Merger,	we	are	a subsidiary	of	Buck	Holdings,	L.P.	("Parent"),	a	Delaware	limited	partnership	controlled	by	investment	funds	affiliated	with	Kohlberg	Kravis	Roberts	&	Co.,	L.P.	("KKR"	or "Sponsor").	KKR,	GS	Capital	Partners	VI

Fund,	L.P.	and	affiliated	funds	(affiliates	of	Goldman,	Sachs	&	Co.),	Citi	Private	Equity,	Wellington	Management	Company,	LLP,	CPP	Investment	Board	(USRE	II)	Inc.,	and	other equity	co-investors	(collectively,	the	"Investors")	indirectly	own	a	substantial	portion	of	our	capital	stock	through	their	investment	in	Parent.

The	Merger	consideration	was	funded	through	the	use	of	our	available	cash,	cash	equity	contributions	from	the	Investors,	equity	contributions	of	certain	members	of	our management	and	the	debt	financings	discussed	below.	Our	outstanding	common	stock	is	now	owned	by	Parent	and	certain	members	of	management.	Our	common	stock	is	no	longer registered	with	the	Securities	and	Exchange	Commission	("SEC")	and	is	no	longer	traded	on	a	national	securities	exchange.

We	entered	into	the	following	debt	financings	in	conjunction	with	the	Merger:

·		We	entered	into	a	credit	agreement	and	related	security	and	other	agreements	consisting	of	a	$2.3	billion	senior	secured	term	loan	facility,	which	matures	on	July	6,	2014 (the	"Term	Loan	Facility").

·		We	entered	into	a	credit	agreement	and	related	security	and	other	agreements	consisting	of	a	senior	secured	asset-based	revolving	credit	facility	of	up	to	$1.125	billion	(of which	$432.3	million	was	drawn	at	closing	and	$132.3	million	was	paid	down	on	the	same	day),	subject	to	borrowing	base	availability,	which	matures	July	6,	2013	(the "ABL	Facility"	and,	with	the	Term	Loan	Facility,	the	"New	Credit	Facilities").

# Overall	Business	Strategy

Our	mission	is	"Serving	Others."	To	carry	out	this	mission,	we	have	developed	a	business	strategy	of	providing	our	customers	with	a	focused	assortment	of	everyday	low priced	merchandise	in	a	convenient,	small-store	format.

Our	Customers.		In	general,	we	locate	our	stores	and	base	our	merchandise	selection	on	the	needs	of	households	seeking	value	and	convenience,	with	an	emphasis	on	rural and	small	markets.	However,	much	of	our	merchandise,	intended	to	serve	the	basic	consumable,	household,	apparel	and	seasonal	needs	of	these	targeted	customers,	also	appeals	to	a much	broader	and	higher	income	customer	base.

Our	Stores.	The	traditional	Dollar	General®	store	has,	on	average,	approximately	6,900	square	feet	of	selling	space	and	generally	serves	customers	who	live	within	five miles	of	the	store.		Of	our	8,222	stores	operating	as	of	February	29,	2008,	more	than	half	serve	communities

with	populations	of	20,000	or	less.		We	believe	that	our	target	customers	prefer	the	convenience	of	a	small,	neighborhood	store	with	a	focused	merchandise	assortment	at	value prices.	Our	Dollar	General	Market®	stores	are	larger	than	the	average	Dollar	General	store,	having	on	average	approximately	17,000	square	feet	of	selling	space,	and	carry,	among other	items,	an	expanded	assortment	of	grocery	products	and	perishable	items.		As	of	February	29,	2008,	we	operated	57	Dollar	General	Market	stores.

Our	Merchandise.		Our	merchandising	strategy	combines	a	low-cost	operating	structure	with	a	focused	assortment	of	products,	consisting	of	quality	basic	consumable, household,	apparel	and	seasonal	merchandise	at	competitive	everyday	low	prices.	Our	strategic	combination	of	name	brands,	quality	private	label	products	and	other	great	value brands	allows	us	to	offer	our	customers	a	compelling	value	proposition.	We	believe	our	merchandising	strategy	and	focused	assortment	generate	frequent	repeat	customer	purchases and	encourage	customers	to	shop	at	our	stores	for	their	everyday	household	needs.

Our	Prices.		We	distribute	quality,	consumable	merchandise	at	everyday	low	prices.		Our	strategy	of	a	low-cost	operating	structure	and	a	focused	assortment	of merchandise	allows	us	to	offer	quality	merchandise	at	competitive	prices.		As	part	of	this	strategy,	we	emphasize	even-dollar	prices	on	many	of	our	items.		In	the	typical	Dollar General	store,	the	majority	of	the	products	are	priced	at	$10	or	less,	with	approximately	30%	of	the	products	priced	at	$1	or	less.

Our	Cost	Controls.	We	aggressively	manage	our	overhead	cost	structure	and	typically	seek	to	locate	stores	in	neighborhoods	where	rental	and	operating	costs	are	relatively low.		Our	stores	typically	have	low	fixed	costs,	with	lean	staffing	of	usually	two	to	three	employees	in	the	store	at	any	time.		In	2005	and	2006,	we	implemented	"EZstore TM ",	our initiative	designed	to	improve	inventory	flow	from	our	distribution	centers,	or	DCs,	to	consumers.	EZstore	has	allowed	us	to	reallocate	store	labor	hours	to	more	customer-focused activities,	improving	the	work	content	in	our	stores.

We	also	attempt	to	control	operating	costs	by	implementing	new	technology	when	feasible,	including	improvements	in	recent	years	to	our	store	labor	scheduling	and	store replenishment	systems	in	addition	to	other	improvements	to	our	supply	chain	and	warehousing	systems.

Recent	Strategic	Initiatives—Project	Alpha.		In	2007,	we	executed	strategic	initiatives	launched	in	the	fourth	quarter	of	2006	aimed	at	improving	our	merchandising	and real	estate	strategies,	which	we	refer	to	collectively	as	"Project	Alpha."	Project	Alpha	was	based	upon	a	comprehensive	analysis	of	the	performance	of	each	of	our	stores	and	the impact	of	our	inventory	management	model	on	our	ability	to	effectively	serve	our	customers.

The	execution	of	this	merchandising	initiative	has	moved	us	away	from	our	traditional	inventory	packaway	model,	where	unsold	seasonal,	apparel	and	home	products inventory	items	were	stored	on-site	and	returned	to	the	sales	floor	to	be	sold	year	after	year,	until	the	items	were	eventually	sold,	damaged	or	discarded.		Project	Alpha	is	an	attempt to	better	meet	our	customers'	needs	and	to	ensure	an	appealing,	fresh	merchandise	selection.	In	connection	with	this	initiative,	in	fiscal	2007	we	began	taking	end-of-season markdowns	on	current-year	non-replenishable

merchandise.	With	limited	and	planned	exceptions,	we	eliminated,	through	end-of-season	and	other	markdowns,	our	seasonal,	home	products	and	basic	clothing	packaway merchandise	and	out	of	season	current	year	merchandise	by	the	end	of	fiscal	2007.	In	addition	to	allowing	us	to	carry	newer,	fresher	merchandise,	particularly	in	our	seasonal, apparel	and	home	categories,	we	believe	this	strategy	change	has	enhanced	the	appearance	of	our	stores	and	will	continue	to	positively	impact	customer	satisfaction	as	well	as	our store	employees'	ability	to	manage	stores.

Project	Alpha	also	encompassed	significant	improvements	to	our	real	estate	practices.	We	are	fully	integrating	the	functions	of	site	selection,	lease	renewals,	relocations, remodels	and	store	closings	and	have	defined	and	are	implementing	rigorous	analytical	processes	for	decision-making	in	those	areas.	As	a	first	step	in	our	initiative	to	revitalize	our store	base,	we	performed	a	comprehensive	real	estate	review	resulting	in	the	identification	of	approximately	400	underperforming	stores,	all	of	which	we	closed	by	mid-2007.	These closings	were	in	addition	to	stores	that	are	typically	closed	in	the	normal	course	of	business,	which	over	the	last	10	years	constituted	approximately	1%	to	2%	of	our	store	base	per year.	We	believe	our	rate	of	store	closings	should	return	to	historic	levels	in	2008	and	future	years.		While	we	believe	we	have	significant	opportunities	for	future	store	growth,	we have	moderated	our	new	store	growth	rate	to	enable	us	to	focus	on	improving	the	performance	of	existing	stores.	Those	efforts	include	increasing	the	number	of	store	remodels	and relocations	in	order	to	improve	productivity	and	enhance	the	shopping	experience	for	our	customers.

As	a	result	of	opening	new	stores	and	remodeling	existing	stores,	as	of	February	29,	2008,	over	1,000	stores	are	operating	in	our	racetrack	format,	which	is	designed	with improved	merchandise	adjacencies	and	wider,	more	open	aisles	to	enhance	the	overall	guest	shopping	experience.	We	plan	to	continue	to	enhance	this	new	store	layout	to	further drive	sales	growth	and	margin	enhancements	through	improved	merchandising.

# Our	Industry

We	compete	in	the	deep	discount	segment	of	the	U.S.	retail	industry.	Our	competitors	include	traditional	"dollar	stores,"	as	well	as	other	retailers	offering	discounted convenience	items.	The	"dollar	store"	sector	differentiates	itself	from	other	forms	of	retailing	in	the	deep	discount	segment	by	offering	consistently	low	prices	in	a	convenient, small-store	format.	Unlike	other	formats	that	have	suffered	with	the	rise	of	Wal-Mart	and	other	discount	supercenters,	the	"dollar	store"	sector	has	grown	despite	the	presence	of	the discount	supercenters.		We	believe	it	is	our	substantial	convenience	advantage,	at	prices	comparable	to	those	of	supercenters,	that	allows	Dollar	General	to	compete	so	effectively.

We	believe	that	there	is	considerable	room	for	growth	in	the	"dollar	store"	sector.	According	to	AC	Nielsen,	"dollar	stores"	have	been	able	to	increase	their	penetration across	all	income	brackets	in	the	last	6	years.	Though	traditional	"dollar	stores"	have	high	customer	penetration,	according	to	Information	Resources,	Inc.	"IRI,"	the	sector	as	a whole	accounts	for	only	approximately	1.2%	of	total	consumer	product	goods	spending,	which	we	believe	leaves	ample	room	for	growth.	Our	merchandising	initiatives	are	aimed	at increasing	our	stores'	share	of	customer	spending.

See	"Our	Competitive	Strengths"	and	"Competition"	below	for	additional	information	regarding	our	competitive	situation.

# Our	Competitive	Strengths

Market	Leader	in	an	Attractive	Sector	with	a	Growing	Customer	Base.		We	are	the	largest	discount	retailer	in	the	U.S.	by	number	of	stores,	with	8,222	stores	in	35	states	as of	February	29,	2008.		We	are	the	largest	player	in	the	U.S.	small	box	deep	discount	segment,	with	sales	in	excess	of	1.4	times	that	of	our	nearest	competitor	in	2007.		We	believe	we are	well	positioned	to	further	increase	our	market	share	as	we	continue	to	execute	our	business	strategy	and	implement	our	operational	initiatives.		Our	target	customers	are	those seeking	value	and	convenience.		According	to	Nielsen	Media	Research	as	of	mid-2007,	approximately	64%	of	households	shopped	at	least	once	at	a	discount	store	(up	from	59%	in 2001).

Consistent	Sales	Growth	and	Strong	Cash	Flow	Generation.	For	18	consecutive	years,	we	have	experienced	positive	annual	same	store	sales	growth.		Approximately	two- thirds	of	our	net	sales	come	from	the	sale	of	consumable	products,	which	are	less	susceptible	to	economic	pressures	(such	as	increased	fuel	costs	and	unemployment),	with	the remaining	one-third	comprised	mainly	of	seasonal,	basic	clothing	and	home	products	which	are	subject	to	little	trend	or	fashion	risk.		We	have	a	low	cost	operating	model	with attractive	operating	margins,	low	capital	expenditures	and	low	working	capital	needs,	resulting	in	generation	of	significant	cash	flow	from	operations	(before	interest).

Differentiated	Value	Proposition.	Our	ability	to	deliver	highly	competitive	everyday	low	prices	in	a	convenient	location	and	shopping	format	provides	our	customers	with	a compelling	shopping	experience	and	distinguishes	us	from	other	discount	retailers,	as	well	as	convenience	and	drugstore	retailers.

Compelling	Unit	Economics.		The	traditional	Dollar	General	store	size,	design	and	location	requires	an	initial	investment	of	approximately	$250,000	including	inventory. The	low	initial	investment	and	maintenance	capital	expenditures,	when	combined	with	strong	average	unit	volumes,	provide	for	a	quick	recovery	of	store	start-up	costs.		The	ability of	our	stores	to	generate	strong	cash	flows	with	minimal	investment	results	in	a	short	payback	period.

Efficient	Supply	Chain.		We	believe	our	distribution	network	is	an	integral	component	of	our	efforts	to	reduce	transportation	expenses	and	effectively	support	our growth.		In	recent	years,	we	have	made	significant	investments	in	technological	improvements	and	upgrades	which	have	increased	our	efficiency	and	capacity	to	support	our merchandising	and	operations	initiatives	as	well	as	future	store	growth.

Experienced	and	Motivated	Management	Team.		In	January	2008,	we	hired	Richard	Dreiling,	who	has	38	years	of	retail	experience,	to	serve	as	our	Chief	Executive Officer.		Over	the	past	two	years	we	strengthened	our	management	team	with	the	hiring	of	David	Beré,	our	President	and	Chief	Operating	Officer.	We	also	replaced	a	majority	of our	senior	merchandising	and	real	estate	teams.		In	connection	with	the	Merger,	we	entered	into	agreements	with	certain

members	of	management	pursuant	to	which	they	elected	to	invest	in	Dollar	General	in	an	aggregate	amount	of	approximately	$10.4	million.

# Seasonality

Our	business	is	seasonal	to	a	certain	extent.		Generally,	our	highest	sales	volume	occurs	in	the	fourth	quarter,	which	includes	the	Christmas	selling	season,	and	the	lowest occurs	in	the	first	quarter.		In	addition,	our	quarterly	results	can	be	affected	by	the	timing	of	new	store	openings	and	store	closings,	the	amount	of	sales	contributed	by	new	and existing	stores,	as	well	as	the	timing	of	certain	holidays.	We	purchase	substantial	amounts	of	inventory	in	the	third	quarter	and	incur	higher	shipping	costs	and	higher	payroll	costs	in anticipation	of	the	increased	sales	activity	during	the	fourth	quarter.		In	addition,	we	carry	merchandise	during	our	fourth	quarter	that	we	do	not	carry	during	the	rest	of	the	year,	such as	gift	sets,	holiday	decorations,	certain	baking	items,	and	a	broader	assortment	of	toys	and	candy.

The	following	table	reflects	the	seasonality	of	net	sales,	gross	profit,	and	net	income	(loss)	by	quarter	for	each	of	the	quarters	of	the	current	fiscal	year	as	well	as	each	of	the quarters	of	the	two	most	recent	fiscal	years.	All	of	the	quarters	reflected	below	are	comprised	of	13	weeks	with	the	exception	of	the	fourth	quarter	of	our	fiscal	year	ended	February 3,	2006,	which	was	comprised	of	14	weeks.

| (in	millions) | Quarter | Quarter | Quarter | Quarter |
| :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tFebruary\t1,\t2008(a) |  |  |  |  |
| Net\tsales | \t$2,275.3 | \t$2,347.6 | \t$2,312.8 | \t$2,559.6 |
| Gross\tprofit(b) | 633.1 | 623.2 | 646.8 | 740.4 |
| Net\tincome\t(loss)(b) | 34.9 | (70.1) | (33.0) | 55.4 |
| Year\tEnded\tFebruary\t2,\t2007 |  |  |  |  |
| Net\tsales | 2,151.4 | 2,251.1 | 2,213.4 | 2,554.0 |
| Gross\tprofit(b) | 584.3 | 611.5 | 526.4 | 646.0 |
| Net\tincome\t(loss)(b) | 47.7 | 45.5 | (5.3) | 50.1 |
| Year\tEnded\tFebruary\t3,\t2006 |  |  |  |  |
| Net\tsales | 1,977.8 | 2,066.0 | 2,057.9 | 2,480.5 |
| Gross\tprofit | 563.3 | 591.5 | 579.0 | 730.9 |
| Net\tincome | 64.9 | 75.6 | 64.4 | 145.3 |

(a) For	comparison	purposes,	the	2 nd 	quarter	includes	the	results	of	operations	for	Buck	Acquisition	Corp.	for	the	period	prior	to	the	Merger	from	March	6,	2007	(its	formation) through	July	7,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps),	and	the	2 nd 	quarter	reflects	the	combination	of	pre-Merger	and	post-Merger	results	of	Dollar General	Corporation	for	the	period	from	May	5,	2007	through	August	3,	2007.	We	believe	this	presentation	provides	a	more	meaningful	understanding	of	the	underlying business. (b) Results	for	the	3 	and	4 	quarters	of	2006	and	all	quarters	of	2007	reflect	the	impact	of	Recent	Strategic	Initiatives	as	discussed	in	further	detail	in	"Management's	Discussion rd th and	Analysis	of	Financial	Condition	and	Results	of	Operations."

# Merchandise

We	separate	our	merchandise	into	the	following	four	categories	for	reporting	purposes:	highly	consumable,	seasonal,	home	products,	and	basic	clothing.	Highly consumable	consists	of	packaged	food,	candy,	snacks	and	refrigerated	products,	health	and	beauty	aids,	home	cleaning	supplies	and	pet	supplies;	seasonal	consists	of	seasonal	and other	holiday-related	items,	toys,	stationery	and	hardware;	and	home	products	consists	of	housewares	and	domestics.	The	percentage	of	net	sales	of	each	of	our	four	categories	of merchandise	for	the	period	indicated	below	was	as	follows:

|  | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Highly\tconsumable | 66.5% | 65.7% | 65.3% |
| Seasonal | 15.9% | 16.4% | 15.7% |
| Home\tproducts | 9.2% | 10.0% | 10.6% |
| Basic\tclothing | 8.4% | 7.9% | 8.4% |

Our	home	products	and	seasonal	categories	typically	account	for	the	highest	gross	profit	margin,	and	the	highly	consumable	category	typically	accounts	for	the	lowest	gross profit	margin.

We	currently	maintain	approximately	5,400	core	stock-keeping	units,	or	SKUs,	per	store	and	an	additional	3,000	non-core	SKUs	that	get	rotated	in	and	out	of	the	store over	the	course	of	a	year.		In	2007,	we	reduced	the	number	of	non-core	SKUs.

We	purchase	our	merchandise	from	a	wide	variety	of	suppliers.	Approximately	12%	of	our	purchases	in	2007	were	from	The	Procter	&	Gamble	Company.		Our	next largest	supplier	accounted	for	approximately	6%	of	our	purchases	in	2007.		We	directly	imported	approximately	9%	of	our	purchases	at	cost	(15%	at	retail)	in	2007.

# The	Dollar	General	Store

The	average	Dollar	General	store	has	approximately	6,900	square	feet	of	selling	space	and	is	typically	operated	by	a	manager,	an	assistant	manager	and	two	or	more	sales clerks.		Approximately	47%	of	our	stores	are	located	in	strip	shopping	centers,	51%	are	in	freestanding	buildings	and	2%	are	in	downtown	buildings.	We	attempt	to	locate	primarily in	small	towns	or	in	neighborhoods	of	more	densely	populated	areas	where	occupancy	expenses	are	relatively	low.

We	generally	have	not	encountered	difficulty	locating	suitable	store	sites	in	the	past,	and	management	does	not	currently	anticipate	experiencing	material	difficulty	in finding	future	suitable	locations.

Our	recent	store	growth	is	summarized	in	the	following	table:

| Year | Stores	at<br>Beginning<br>of	Year | Stores<br>Opened | Stores<br>Closed | Net<br>Store<br>Increase/(Decrease) | Stores	at<br>End	of	Year |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2005 | 7,320 | 734 | 125(a) | 609 | 7,929 |
| 2006 | 7,929 | 537 | 237(b) | 300 | 8,229 |
| 2007 | 8,229 | 365 | 400(b) | \t(35) | 8,194 |

(a) Includes	41	stores	closed	as	a	result	of	hurricane	damage.

(b) Includes	128	stores	in	2006	and	275	stores	in	2007	closed	as	a	result	of	certain	recent	strategic	initiatives.

# Employees

As	of	February	29,	2008,	we	employed	approximately	71,500	full-time	and	part-time	employees,	including	divisional	and	regional	managers,	district	managers,	store managers,	and	DC	and	administrative	personnel.		Management	believes	our	relationship	with	our	employees	is	generally	good,	and	we	currently	are	not	a	party	to	any	collective bargaining	agreements.

# Competition

We	operate	in	the	discount	retail	merchandise	business,	which	is	highly	competitive	with	respect	to	price,	store	location,	merchandise	quality,	assortment	and	presentation, in-stock	consistency,	and	customer	service.		We	compete	with	discount	stores	and	with	many	other	retailers,	including	mass	merchandise,	grocery,	drug,	convenience,	variety	and other	specialty	stores.	These	other	retail	companies	operate	stores	in	many	of	the	areas	where	we	operate	and	many	of	them	engage	in	extensive	advertising	and	marketing	efforts. Our	direct	competitors	in	the	dollar	store	retail	category	include	Family	Dollar,	Dollar	Tree,	Fred's,	99	Cents	Only	and	various	local,	independent	operators.	Competitors	from	other retail	categories	include	Wal-Mart	Walgreens,	CVS,	Rite	Aid,	Target	and	Costco,	among	others.	Certain	of	our	competitors	have	greater	financial,	distribution,	marketing	and	other resources	than	we	do.

The	dollar	store	category	differentiates	itself	from	other	forms	of	retailing	by	offering	consistently	low	prices	in	a	convenient,	small-store	format.	We	believe	that	our prices	are	competitive	due	in	part	to	our	low	cost	operating	structure	and	the	relatively	limited	assortment	of	products	offered.	Historically,	we	have	minimized	labor	by	offering fewer	price	points	and	a	reliance	on	simple	merchandise	presentation.	We	maintain	strong	purchasing	power	due	to	our	leadership	position	in	the	dollar	store	retail	category	and	our focused	assortment	of	merchandise.

# Trademarks

Through	our	subsidiary,	Dollar	General	Merchandising,	Inc.,	we	own	marks	that	are	registered	with	the	United	States	Patent	and	Trademark	Office,	including	the trademarks	Dollar	General®,	Dollar	General	Market®,	Clover	Valley®,	American	Value®,	DG	Guarantee®	and	the	Dollar	General	price	point	designs,	along	with	certain	other trademarks.	We	attempt	to	obtain	registration	of	our	trademarks	whenever	practicable	and	to	pursue	vigorously	any	infringement	of	those	marks.		Our	trademark	registrations	have various	expiration	dates;	however,	assuming	that	the	trademark	registrations	are	properly	renewed,	they	have	a	perpetual	duration.

# Available	Information

Our	Web	site	address	is	www.dollargeneral.com.	We	make	available	through	this	address,	without	charge,	our	annual	report	on	Form	10-K,	quarterly	reports	on	Form	10- Q,	current	reports	on	Form	8-K	and	amendments	to	those	reports	filed	or	furnished	pursuant	to	Section	13(a)	or	15(d)	of	the	Exchange	Act	as	soon	as	reasonably	practicable	after they	are	electronically	filed	or	furnished	to	the	SEC.

# ITEM	1A. RISK	FACTORS

Investing	in	our	securities	involves	a	degree	of	risk.	Persons	buying	our	securities	should	carefully	consider	the	risks	described	below	and	the	other	information	contained in	this	report	and	other	filings	that	we	make	from	time	to	time	with	the	SEC,	including	our	consolidated	financial	statements	and	accompanying	notes.	Any	of	the	following	risks could	materially	and	adversely	affect	our	business,	financial	condition	or	results	of	operations.	In	addition,	the	risks	described	below	are	not	the	only	risks	facing	us.	Additional	risks and	uncertainties	not	currently	known	to	us	or	those	we	currently	view	to	be	immaterial	also	may	materially	and	adversely	affect	our	business,	financial	condition	or	results	of operations.	In	any	such	case,	the	trading	price	of	our	securities	could	decline	or	we	may	not	be	able	to	make	payments	of	principal	and	interest	on	our	outstanding	notes,	and	you may	lose	all	or	part	of	your	original	investment.

The	fact	that	we	have	substantial	debt	could	adversely	affect	our	ability	to	raise	additional	capital	to	fund	our	operations,	limit	our	ability	to	react	to	changes	in	the economy	or	our	industry,	expose	us	to	interest	rate	risk	to	the	extent	of	our	variable	rate	debt	and	prevent	us	from	meeting	our	obligations	under	our	outstanding	debt securities.

We	have	substantial	debt	which	could	have	important	consequences,	including:

·		making	it	more	difficult	for	us	to	make	payments	on	our	outstanding	debt;

·		increasing	our	vulnerability	to	general	economic	and	industry	conditions;

·		requiring	a	substantial	portion	of	our	cash	flow	from	operations	to	be	dedicated	to	the	payment	of	principal	and	interest	on	our	indebtedness,	therefore	reducing	our	ability to	use	our	cash	flow	to	fund	our	operations,	capital	expenditures	and	future	business	opportunities;

·		exposing	us	to	the	risk	of	interest	rate	fluctuations	as	certain	of	our	borrowings	bear	interest	based	on	market	interest	rates;

·		limiting	our	ability	to	obtain	additional	financing	for	working	capital,	capital	expenditures,	debt	service	requirements,	acquisitions	and	general	corporate	or	other	purposes; and

·		limiting	our	ability	to	adjust	to	changing	market	conditions	and	placing	us	at	a	competitive	disadvantage	compared	to	our	competitors	who	are	less	highly	leveraged.

In	addition,	the	borrowings	under	our	New	Credit	Facilities	bear	interest	at	variable	rates	and	other	debt	we	incur	also	could	be	variable-rate	debt.		If	market	interest	rates increase,	variable-rate	debt	will	create	higher	debt	service	requirements,	which	could	adversely	affect	our	cash	flow.		While	we	have	and	may	in	the	future	enter	into	agreements limiting	our	exposure	to	higher	interest	rates,	any	such	agreements	may	not	offer	complete	protection	from	this	risk.		We	and	our	subsidiaries	may	be	able	to	incur	substantial additional	indebtedness	in	the	future,	subject	to	the	restrictions	contained	in	our	New	Credit	Facilities	and	the	indentures	governing	our	debt	securities.		If	new	indebtedness	is	added to	our	current	debt	levels,	the	related	risks	that	we	now	face	could	intensify.

# Our	debt	agreements	contain	restrictions	that	limit	our	flexibility	in	operating	our	business.

Our	New	Credit	Facilities	and	the	indentures	governing	our	debt	securities	contain	various	covenants	that	limit	our	ability	to	engage	in	specified	types	of transactions.		These	covenants	limit	our	and	our	restricted	subsidiaries'	ability	to,	among	other	things:

·		incur	additional	indebtedness,	issue	disqualified	stock	or	issue	certain	preferred	stock;

·		pay	dividends	and	make	certain	distributions,	investments	and	other	restricted	payments;

·		create	certain	liens	or	encumbrances;

·		sell	assets;

·		enter	into	transactions	with	our	affiliates;

·		limit	the	ability	of	restricted	subsidiaries	to	make	payments	to	us;

·		merge,	consolidate,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets;	and

·		designate	our	subsidiaries	as	unrestricted	subsidiaries.

A	breach	of	any	of	these	covenants	could	result	in	a	default	under	the	agreement	governing	such	indebtedness.		Upon	our	failure	to	maintain	compliance	with	these covenants,	the	lenders	could	elect	to	declare	all	amounts	outstanding	thereunder	to	be	immediately	due	and	payable	and	terminate	all	commitments	to	extend	further	credit thereunder.		If	the	lenders	under	such	indebtedness	accelerate	the	repayment	of	borrowings,	we	cannot	assure	you	that	we	will	have	sufficient	assets	to	repay	those	borrowings,	as well	as	our	other	indebtedness,	including	our	outstanding	debt	securities.		We	have	pledged	a	significant	portion	of	our	assets	as	collateral	under	our	New	Credit	Facilities.		If	we were	unable	to	repay	those	amounts,	the	lenders	under	our	New	Credit	Facilities	could	proceed	against	the	collateral	granted	to	them	to	secure	that	indebtedness.	Additional borrowings	under	the	ABL	Facility	will,	if	excess	availability	under

that	facility	is	less	than	a	certain	amount,	be	subject	to	the	satisfaction	of	a	specified	financial	ratio.		Our	ability	to	meet	this	financial	ratio	can	be	affected	by	events	beyond	our control,	and	we	cannot	assure	you	that	we	will	meet	this	ratio	and	other	covenants.

# General	economic	factors	may	adversely	affect	our	financial	performance.

General	economic	conditions	in	one	or	more	of	the	markets	we	serve	may	adversely	affect	our	financial	performance.	A	general	slowdown	in	the	economy,	higher	interest rates,	higher	than	expected	fuel	and	other	energy	costs,	inflation,	higher	levels	of	unemployment,	higher	consumer	debt	levels,	higher	tax	rates	and	other	changes	in	tax	laws, tightening	of	the	credit	markets,	and	other	economic	factors	could	adversely	affect	consumer	demand	for	the	products	we	sell,	change	our	sales	mix	of	products	to	one	with	a	lower average	gross	profit	and	result	in	slower	inventory	turnover	and	greater	markdowns	on	inventory.	Higher	interest	rates,	higher	commodities	rates,	higher	fuel	and	other	energy	costs, transportation	costs,	inflation,	higher	costs	of	labor,	insurance	and	healthcare,	foreign	exchange	rate	fluctuations,	higher	tax	rates	and	other	changes	in	tax	laws,	changes	in	other	laws and	regulations	and	other	economic	factors	increase	our	cost	of	sales	and	selling,	general	and	administrative	expenses,	and	otherwise	adversely	affect	the	operations	and	operating results	of	our	stores.

# Our	plans	depend	significantly	on	initiatives	designed	to	improve	the	efficiencies,	costs	and	effectiveness	of	our	operations,	and	failure	to	achieve	or	sustain	these	plans could	affect	our	performance	adversely.

We	have	had,	and	expect	to	continue	to	have,	initiatives	(such	as	those	relating	to	marketing,	merchandising,	promotions,	sourcing,	shrink,	private	label,	store	operations and	real	estate)	in	various	stages	of	testing,	evaluation,	and	implementation,	upon	which	we	expect	to	rely	to	improve	our	results	of	operations	and	financial	condition.	These initiatives	are	inherently	risky	and	uncertain,	even	when	tested	successfully,	in	their	application	to	our	business	in	general.	It	is	possible	that	successful	testing	can	result	partially from	resources	and	attention	that	cannot	be	duplicated	in	broader	implementation.	Testing	and	general	implementation	also	can	be	affected	by	other	risk	factors	described	herein	that reduce	the	results	expected.	Successful	systemwide	implementation	relies	on	consistency	of	training,	stability	of	workforce,	ease	of	execution,	and	the	absence	of	offsetting	factors that	can	influence	results	adversely.	Failure	to	achieve	successful	implementation	of	our	initiatives	or	the	cost	of	these	initiatives	exceeding	management's	estimates	could	adversely affect	our	results	of	operations	and	financial	condition.

# Because	our	business	is	seasonal	to	a	certain	extent,	with	the	highest	volume	of	net	sales	during	the	fourth	quarter,	adverse	events	during	the	fourth	quarter	could materially	affect	our	financial	statements	as	a	whole.

We	generally	recognize	our	highest	volume	of	net	sales	during	the	Christmas	selling	season,	which	occurs	in	the	fourth	quarter	of	our	fiscal	year.	In	anticipation	of	this holiday,	we	purchase	substantial	amounts	of	seasonal	inventory	and	hire	many	temporary	employees.	A	seasonal	merchandise	inventory	imbalance	could	result	if	for	any	reason	our net	sales	during	the	Christmas	selling	season	were	to	fall	below	either	seasonal	norms	or	expectations.	If	for	any	reason	our	fourth	quarter	results	were	substantially	below expectations,	our	financial

performance	and	operating	results	could	be	adversely	affected	by	unanticipated	markdowns,	especially	in	seasonal	merchandise.	Lower	than	anticipated	sales	in	the	Christmas	selling season	would	also	negatively	affect	our	ability	to	absorb	the	increased	seasonal	labor	costs.

# We	face	intense	competition	that	could	limit	our	growth	opportunities	and	adversely	impact	our	financial	performance.

The	retail	business	is	highly	competitive.	We	operate	in	the	discount	retail	merchandise	business,	which	is	highly	competitive	with	respect	to	price,	store	location, merchandise	quality,	assortment	and	presentation,	in-stock	consistency,	and	customer	service.	This	competitive	environment	subjects	us	to	the	risk	of	adverse	impact	to	our	financial performance	because	of	the	lower	prices,	and	thus	the	lower	margins,	required	to	maintain	our	competitive	position.	Also,	companies	operating	in	the	discount	retail	merchandise sector	(due	to	customer	demographics	and	other	factors)	may	have	limited	ability	to	increase	prices	in	response	to	increased	costs	(including	vendor	price	increases).	This	limitation may	adversely	affect	our	margins	and	financial	performance.	We	compete	for	customers,	employees,	store	sites,	products	and	services	and	in	other	important	aspects	of	our	business with	many	other	local,	regional	and	national	retailers.	We	compete	with	retailers	operating	discount,	mass	merchandise,	grocery,	drug,	convenience,	variety	and	other	specialty stores.	Certain	of	our	competitors	have	greater	financial,	distribution,	marketing	and	other	resources	than	we	do.	These	other	competitors	compete	in	a	variety	of	ways,	including aggressive	promotional	activities,	merchandise	selection	and	availability,	services	offered	to	customers,	location,	store	hours,	in-store	amenities	and	price.	If	we	fail	to	respond effectively	to	competitive	pressures	and	changes	in	the	retail	markets,	it	could	adversely	affect	our	financial	performance.	See	"Business—Our	Industry,	—Competitive	Strengths, and	—Competition"	for	additional	discussion	of	our	competitive	situation.

Competition	for	customers	has	intensified	in	recent	years	as	larger	competitors	have	moved	into,	or	increased	their	presence	in,	our	geographic	markets.	We	remain vulnerable	to	the	marketing	power	and	high	level	of	consumer	recognition	of	these	larger	competitors	and	to	the	risk	that	these	competitors	or	others	could	venture	into	the	"dollar store"	industry	in	a	significant	way.	Generally,	we	expect	an	increase	in	competition.

# Natural	disasters,	unusually	adverse	weather	conditions,	pandemic	outbreaks,	boycotts	and	geo-political	events	could	adversely	affect	our	financial	performance.

The	occurrence	of	one	or	more	natural	disasters,	such	as	hurricanes	and	earthquakes,	unusually	adverse	weather	conditions,	pandemic	outbreaks,	boycotts	and	geo-political events,	such	as	civil	unrest	in	countries	in	which	our	suppliers	are	located	and	acts	of	terrorism,	or	similar	disruptions	could	adversely	affect	our	operations	and	financial performance.	These	events	could	result	in	physical	damage	to	one	or	more	of	our	properties,	increases	in	fuel	(or	other	energy)	prices,	the	temporary	or	permanent	closure	of	one	or more	of	our	stores	or	distribution	centers,	delays	in	opening	new	stores,	the	temporary	lack	of	an	adequate	work	force	in	a	market,	the	temporary	or	long-term	disruption	in	the supply	of	products	from	some	local	and	overseas	suppliers,	the	temporary	disruption	in	the	transport	of	goods	from	overseas,	delay	in	the	delivery	of	goods	to	our	distribution centers	or	stores,	the	temporary	reduction	in	the	availability	of	products	in	our	stores	and	disruption	to	our	information	systems.	These	events	also	can	have

indirect	consequences	such	as	increases	in	the	costs	of	insurance	following	a	destructive	hurricane	season.	These	factors	could	otherwise	disrupt	and	adversely	affect	our	operations and	financial	performance.

# Risks	associated	with	the	domestic	and	foreign	suppliers	from	whom	our	products	are	sourced	could	adversely	affect	our	financial	performance.

The	products	we	sell	are	sourced	from	a	wide	variety	of	domestic	and	international	suppliers.	Approximately	12%	of	our	purchases	in	2007	were	from	The	Procter	& Gamble	Company.	Our	next	largest	supplier	accounted	for	approximately	6%	of	our	purchases	in	2007.	We	directly	imported	approximately	9%	of	our	purchases	at	cost	in	2007,	but many	of	our	domestic	vendors	directly	import	their	products	or	components	of	their	products.	Political	and	economic	instability	in	the	countries	in	which	foreign	suppliers	are located,	the	financial	instability	of	suppliers,	suppliers'	failure	to	meet	our	supplier	standards,	labor	problems	experienced	by	our	suppliers,	the	availability	of	raw	materials	to suppliers,	merchandise	quality	or	safety	issues,	currency	exchange	rates,	transport	availability	and	cost,	inflation,	and	other	factors	relating	to	the	suppliers	and	the	countries	in	which they	are	located	or	from	which	they	import	are	beyond	our	control.	In	addition,	the	United	States'	foreign	trade	policies,	tariffs	and	other	impositions	on	imported	goods,	trade sanctions	imposed	on	certain	countries,	the	limitation	on	the	importation	of	certain	types	of	goods	or	of	goods	containing	certain	materials	from	other	countries	and	other	factors relating	to	foreign	trade	are	beyond	our	control.	Disruptions	due	to	labor	stoppages,	strikes	or	slowdowns,	or	other	disruptions,	involving	our	vendors	or	the	transportation	and handling	industries	also	may	negatively	affect	our	ability	to	receive	merchandise	and	thus	may	negatively	affect	sales.	These	and	other	factors	affecting	our	suppliers	and	our	access to	products	could	adversely	affect	our	financial	performance.	In	addition,	our	ability	to	obtain	indemnification	from	foreign	suppliers	may	be	hindered	by	the	manufacturers'	lack	of understanding	of	U.S.	product	liability	or	other	laws,	which	may	make	it	more	likely	that	we	may	be	required	to	respond	to	claims	or	complaints	from	customers	as	if	we	were	the manufacturer	of	the	products.	As	we	increase	our	imports	of	merchandise	from	foreign	vendors,	the	risks	associated	with	foreign	imports	will	increase.

# We	are	dependent	on	attracting	and	retaining	qualified	employees	while	also	controlling	labor	costs.

Our	future	performance	depends	on	our	ability	to	attract,	retain	and	motivate	qualified	employees.	Many	of	these	employees	are	in	entry-level	or	part-time	positions	with historically	high	rates	of	turnover.	Availability	of	personnel	varies	widely	from	location	to	location.	Our	ability	to	meet	our	labor	needs	generally,	including	our	ability	to	find qualified	personnel	to	fill	positions	that	become	vacant	at	our	existing	stores	and	distribution	centers,	while	controlling	our	labor	costs,	is	subject	to	numerous	external	factors, including	the	level	of	competition	for	such	personnel	in	a	given	market,	the	availability	of	a	sufficient	number	of	qualified	persons	in	the	work	force	of	the	markets	in	which	we	are located,	unemployment	levels	within	those	markets,	prevailing	wage	rates	and	changes	in	minimum	wage	laws,	changing	demographics,	health	and	other	insurance	costs	and changes	in	employment	legislation.	Increased	turnover	also	can	have	significant	indirect	costs,	including	more	recruiting	and	training	needs,	store	disruptions	due	to	management changeover	and	potential	delays	in	new	store	openings	or	adverse	customer

reactions	to	inadequate	customer	service	levels	due	to	personnel	shortages.	Competition	for	qualified	employees	exerts	upward	pressure	on	wages	paid	to	attract	such	personnel.	In addition,	to	the	extent	a	significant	portion	of	our	employee	base	unionizes,	or	attempts	to	unionize,	our	labor	costs	could	increase.	Our	ability	to	pass	along	those	costs	is constrained.

Also,	our	stores	are	decentralized	and	are	managed	through	a	network	of	geographically	dispersed	management	personnel.	Our	inability	to	effectively	and	efficiently operate	our	stores,	including	the	ability	to	control	losses	resulting	from	inventory	and	cash	shrinkage,	may	negatively	affect	our	sales	and/or	operating	margins.

# Our	planned	future	growth	will	be	impeded,	which	would	adversely	affect	sales,	if	we	cannot	open	new	stores	on	schedule	or	if	we	close	a	number	of	stores	materially	in excess	of	anticipated	levels.

Our	growth	is	dependent	on	both	increases	in	sales	in	existing	stores	and	the	ability	to	open	new	stores.	Our	ability	to	timely	open	new	stores	and	to	expand	into	additional market	areas	depends	in	part	on	the	following	factors:	the	availability	of	attractive	store	locations;	the	absence	of	occupancy	delays;	the	ability	to	negotiate	favorable	lease	terms;	the ability	to	hire	and	train	new	personnel,	especially	store	managers;	the	ability	to	identify	customer	demand	in	different	geographic	areas;	general	economic	conditions;	and	the availability	of	sufficient	funds	for	expansion.	In	addition,	many	of	these	factors	affect	our	ability	to	successfully	relocate	stores.	Many	of	these	factors	are	beyond	our	control.	In addition,	our	substantial	debt,	particularly	combined	with	the	recent	tightening	of	the	credit	markets,	has	made	it	more	difficult	for	our	real	estate	developers	to	obtain	loans	for	our build-to-suit	stores	and	to	locate	investors	for	those	properties	after	they	have	been	developed.	If	this	trend	continues,	it	could	materially	adversely	impact	our	ability	to	open	build- to-suit	stores	in	desirable	locations.

Delays	or	failures	in	opening	new	stores,	or	achieving	lower	than	expected	sales	in	new	stores,	or	drawing	a	greater	than	expected	proportion	of	sales	in	new	stores	from existing	stores,	could	materially	adversely	affect	our	growth.	In	addition,	we	may	not	anticipate	all	of	the	challenges	imposed	by	the	expansion	of	our	operations	and,	as	a	result,	may not	meet	our	targets	for	opening	new	stores	or	expanding	profitably.

Some	of	our	new	stores	may	be	located	in	areas	where	we	have	little	or	no	meaningful	experience.	Those	markets	may	have	different	competitive	conditions,	market conditions,	consumer	tastes	and	discretionary	spending	patterns	than	our	existing	markets,	which	may	cause	our	new	stores	to	be	less	successful	than	stores	in	our	existing	markets.

Some	of	our	new	stores	will	be	located	in	areas	where	we	have	existing	units.	Although	we	have	experience	in	these	markets,	increasing	the	number	of	locations	in	these markets	may	cause	us	to	over-saturate	markets	and	temporarily	or	permanently	divert	customers	and	sales	from	our	existing	stores,	thereby	adversely	affecting	our	overall	financial performance. 15

# We	are	dependent	upon	the	smooth	functioning	of	our	distribution	network,	the	capacity	of	our	distribution	centers,	and	the	timely	receipt	of	inventory.

We	rely	upon	the	ability	to	replenish	depleted	inventory	through	deliveries	to	our	distribution	centers	from	vendors	and	from	the	distribution	centers	to	our	stores	by various	means	of	transportation,	including	shipments	by	sea	and	truck.	Labor	shortages	in	the	transportation	industry	and/or	labor	inefficiencies	associated	with	certain	"driver	hours of	service"	regulations	adopted	by	the	Federal	Motor	Carriers	Safety	Administration	could	negatively	affect	transportation	costs.	In	addition,	long-term	disruptions	to	the	national and	international	transportation	infrastructure	that	lead	to	delays	or	interruptions	of	service	would	adversely	affect	our	business.

# The	efficient	operation	of	our	business	is	heavily	dependent	upon	our	information	systems.

We	depend	on	a	variety	of	information	technology	systems	for	the	efficient	functioning	of	our	business.	We	rely	on	certain	software	vendors	to	maintain	and	periodically upgrade	many	of	these	systems	so	that	they	can	continue	to	support	our	business.	The	software	programs	supporting	many	of	our	systems	were	licensed	to	us	by	independent software	developers.	The	inability	of	these	developers	or	us	to	continue	to	maintain	and	upgrade	these	information	systems	and	software	programs	would	disrupt	or	reduce	the efficiency	of	our	operations	if	we	were	unable	to	convert	to	alternate	systems	in	an	efficient	and	timely	manner.	In	addition,	costs	and	potential	problems	and	interruptions	associated with	the	implementation	of	new	or	upgraded	systems	and	technology	or	with	maintenance	or	adequate	support	of	existing	systems	could	also	disrupt	or	reduce	the	efficiency	of	our operations.	We	also	rely	heavily	on	our	information	technology	staff.	If	we	cannot	meet	our	staffing	needs	in	this	area,	we	may	not	be	able	to	fulfill	our	technology	initiatives	while continuing	to	provide	maintenance	on	existing	systems.

# We	are	subject	to	governmental	regulations,	procedures	and	requirements.	A	significant	change	in,	or	noncompliance	with,	these	regulations	could	have	a	material adverse	effect	on	our	financial	performance.

Our	business	is	subject	to	numerous	federal,	state	and	local	regulations.	Changes	in	these	regulations,	particularly	those	governing	the	sale	of	products,	may	require extensive	system	and	operating	changes	that	may	be	difficult	to	implement	and	could	increase	our	cost	of	doing	business.	Untimely	compliance	or	noncompliance	with	applicable regulations	or	untimely	or	incomplete	execution	of	a	required	product	recall	can	result	in	the	imposition	of	penalties,	including	loss	of	licenses	or	significant	fines	or	monetary penalties,	in	addition	to	reputational	damage.

# Our	current	insurance	program	may	expose	us	to	unexpected	costs	and	negatively	affect	our	financial	performance.

Historically,	our	insurance	coverage	has	reflected	deductibles,	self-insured	retentions,	limits	of	liability	and	similar	provisions	that	we	believe	are	prudent	based	on	the dispersion	of	our	operations.	However,	there	are	types	of	losses	we	may	incur	but	against	which	we	cannot	be	insured	or	which	we	believe	are	not	economically	reasonable	to	insure, such	as	losses	due	to	acts	of	war,	employee	and	certain	other	crime	and	some	natural	disasters.	If	we	incur	these	losses,	our	business	could	suffer.	Certain	material	events	may	result in	sizable	losses	for	the	insurance	industry	and	adversely	impact	the	availability	of	adequate	insurance	coverage	or	result	in

excessive	premium	increases.	To	offset	negative	insurance	market	trends,	we	may	elect	to	self-insure,	accept	higher	deductibles	or	reduce	the	amount	of	coverage	in	response	to these	market	changes.	In	addition,	we	self-insure	a	significant	portion	of	expected	losses	under	our	workers'	compensation,	automobile	liability,	general	liability	and	group	health insurance	programs.	Unanticipated	changes	in	any	applicable	actuarial	assumptions	and	management	estimates	underlying	our	recorded	liabilities	for	these	losses,	including expected	increases	in	medical	and	indemnity	costs,	could	result	in	materially	different	amounts	of	expense	than	expected	under	these	programs,	which	could	have	a	material	adverse effect	on	our	financial	condition	and	results	of	operations.	Although	we	continue	to	maintain	property	insurance	for	catastrophic	events,	we	are	effectively	self-insured	for	losses	up to	the	amount	of	our	deductibles.	If	we	experience	a	greater	number	of	these	losses	than	we	anticipate,	our	financial	performance	could	be	adversely	affected.

# Litigation	may	adversely	affect	our	business,	financial	condition	and	results	of	operations.

Our	business	is	subject	to	the	risk	of	litigation	by	employees,	consumers,	suppliers,	shareholders,	government	agencies,	or	others	through	private	actions,	class	actions, administrative	proceedings,	regulatory	actions	or	other	litigation.	The	outcome	of	litigation,	particularly	class	action	lawsuits	and	regulatory	actions,	is	difficult	to	assess	or	quantify. Plaintiffs	in	these	types	of	lawsuits	may	seek	recovery	of	very	large	or	indeterminate	amounts,	and	the	magnitude	of	the	potential	loss	relating	to	these	lawsuits	may	remain unknown	for	substantial	periods	of	time.	In	addition,	certain	of	these	lawsuits,	if	decided	adversely	to	us	or	settled	by	us,	may	result	in	liability	material	to	our	financial	statements	as a	whole	or	may	negatively	affect	our	operating	results	if	changes	to	our	business	operation	are	required.	The	cost	to	defend	future	litigation	may	be	significant.	There	also	may	be adverse	publicity	associated	with	litigation	that	could	negatively	affect	customer	perception	of	our	business,	regardless	of	whether	the	allegations	are	valid	or	whether	we	are ultimately	found	liable.	As	a	result,	litigation	may	adversely	affect	our	business,	financial	condition	and	results	of	operations.	See	Part	I,	Item	3	"Legal	Proceedings"	for	further details	regarding	certain	of	these	pending	matters.

In	addition,	from	time	to	time,	third	parties	may	claim	that	our	trademarks	or	product	offerings	infringe	upon	their	proprietary	rights.	Any	such	claim,	whether	or	not	it	has merit,	could	be	time-consuming	and	distracting	for	executive	management,	result	in	costly	litigation,	cause	changes	to	our	private	label	offerings	or	delays	in	introducing	new	private label	offerings,	or	require	us	to	enter	into	royalty	or	licensing	agreements.	As	a	result,	any	such	claim	could	have	a	material	adverse	effect	on	our	business,	results	of	operations	and financial	condition.

# The	Investors	control	us	and	may	have	conflicts	of	interest	with	us	now	or	in	the	future.

The	Investors	indirectly	own,	through	their	investment	in	Parent,	a	substantial	portion	of	our	common	stock.		As	a	result,	the	Investors	have	control	over	our	decisions	to enter	into	any	corporate	transaction	and	have	the	ability	to	prevent	any	transaction	that	requires	the	approval	of	shareholders	regardless	of	whether	others	believe	that	any	such transactions	are	in	our	own	best	interests.		For	example,	the	Investors	could	cause	us	to	make	acquisitions	that	increase	the	amount	of	indebtedness	that	is	secured	or	that	is	senior	to our	outstanding	debt	securities	or

to	sell	assets,	which	may	impair	our	ability	to	make	payments	under	our	outstanding	debt	securities.

Additionally,	the	Investors	are	in	the	business	of	making	investments	in	companies	and	may	from	time	to	time	acquire	and	hold	interests	in	businesses	that	compete	directly or	indirectly	with	us.		The	Investors	may	also	pursue	acquisition	opportunities	that	may	be	complementary	to	our	business	and,	as	a	result,	those	acquisition	opportunities	may	not be	available	to	us.		So	long	as	the	Investors,	or	other	funds	controlled	by	or	associated	with	the	Investors,	continue	to	indirectly	own	a	significant	amount	of	the	outstanding	shares	of our	common	stock,	even	if	such	amount	is	less	than	50%,	the	Investors	will	continue	to	be	able	to	strongly	influence	or	effectively	control	our	decisions.

# ITEM	2. PROPERTIES

As	of	February	29,	2008,	we	operated	8,222	retail	stores	located	in	35	states	as	follows:

Most	of	our	stores	are	located	in	leased	premises.		Individual	store	leases	vary	as	to	their	terms,	rental	provisions	and	expiration	dates.		The	majority	of	our	leases	are relatively	low-cost,	short-term	leases	(usually	with	initial	or	primary	terms	of	three	to	five	years)	often	with	multiple	renewal	options.	We	also	have	stores	subject	to	build-to-suit arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	between	7	and	10	years	with	multiple	renewal	options.	In	recent	years,	an	increasing	percentage	of	our new	stores	have	been	subject	to	build-to-suit	arrangements.	In	2007,	approximately	70%	of	our	new	stores	were	build-to-suit	arrangements.

As	of	February	29,	2008,	we	operated	nine	distribution	centers,	as	described	in	the	following	table:

| Location | Year<br>Opened | Approximate	Square<br>Footage | Approximate	Number<br>of	Stores	Served |
| :--- | :--- | :--- | :--- |
| Scottsville,\tKY | 1959 | 720,000 | 948 |
| Ardmore,\tOK | 1994 | 1,310,000 | 1,147 |
| South\tBoston,\tVA | 1997 | 1,250,000 | 779 |
| Indianola,\tMS | 1998 | 820,000 | 885 |
| Fulton,\tMO | 1999 | 1,150,000 | 1,093 |
| Alachua,\tFL | 2000 | 980,000 | 735 |
| Zanesville,\tOH | 2001 | 1,170,000 | 1,113 |
| Jonesville,\tSC | 2005 | 1,120,000 | 728 |
| Marion,\tIN | 2006 | 1,110,000 | 794 |

We	lease	the	distribution	centers	located	in	Oklahoma,	Mississippi	and	Missouri	and	own	the	other	six	distribution	centers.	Approximately	7.25	acres	of	the	land	on	which our	Kentucky	distribution	center	is	located	is	subject	to	a	ground	lease.	We	lease	additional	temporary	warehouse	space	as	necessary	to	support	our	distribution	needs.

Our	executive	offices	are	located	in	approximately	302,000	square	feet	of	leased	space	in	Goodlettsville,	Tennessee.

# ITEM	3. LEGAL	PROCEEDINGS

The	information	contained	in	Note	7	to	the	consolidated	financial	statements	under	the	heading	"Legal	proceedings"	contained	in	Part	II,	Item	8	of	this	report	is incorporated	herein	by	this	reference.

# ITEM	4. SUBMISSION	OF	MATTERS	TO	A	VOTE	OF	SECURITY	HOLDERS

No	matters	were	submitted	to	a	vote	of	shareholders	during	the	fourth	quarter	of	2007.

# PART	II

# ITEM	5. MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY	SECURITIES

Market	and	Dividend	Information.		Our	outstanding	common	stock	is	privately	held,	and	there	is	no	established	public	trading	market	for	our	common	stock.	There	were approximately	145	shareholders	of	record	of	our	common	stock	as	of	March	17,	2008.

Our	Board	of	Directors	declared	a	quarterly	dividend	in	the	amount	of	$0.05	per	share:

·		payable	on	or	before	October	19,	2006	to	common	shareholders	of	record	on	October	5,	2006;

·		payable	on	or	before	January	18,	2007	to	common	shareholders	of	record	on	January	4,	2007;	and

Our	Board	of	Directors	did	not	declare	a	dividend	thereafter.		See	Item	7,	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations— Liquidity	and	Capital	Resources"	for	a	description	of	the	restrictions	on	our	ability	to	pay	dividends.

Unregistered	Sales	of	Equity	Securities.		In	connection	with	the	Merger,	our	officer-level	employees	were	offered	the	opportunity	to	roll	over	portions	of	their	equity	and/or stock	options	and	to	purchase	additional	equity	of	Dollar	General.		In	connection	with	such	opportunity,	on	July	6,	2007	these	individuals	purchased	a	total	of	635,207	shares	of common	stock	having	an	aggregate	value	of	approximately	$3,176,035	and	exchanged	a	total	of	2,225,175	stock	options	outstanding	prior	to	the	Merger	for	1,920,543	vested options	to	purchase	shares	of	common	stock	(the	"Rollover	Options")	in	the	surviving	company	(the	"Rollover").	The	Rollover	Options	remain	outstanding	in	accordance	with	the terms	of	the	governing	stock	incentive	plan	and	grant	agreements	pursuant	to	which	the	holder	originally	received	the	stock	option	grants.	However,	immediately	after	the	Merger, the	exercise	price	and	number	of	shares	underlying	the	Rollover	Options	were	adjusted	as	a	result	of	the	Merger	and	the	exercise	price	for	all	of	the	options	was	adjusted	to	$1.25 per	option.

We	subsequently	offered	certain	other	employees	a	similar	investment	opportunity	to	participate	in	our	common	equity.		As	a	result,	on	September	20,	2007	and	October	5, 2007,	we	sold	15,000	shares	and	558,000	shares,	respectively,	of	our	common	stock	to	those	employees	for	a	purchase	price	of	$5	per	share.

In	connection	with	the	investment	discussed	above	and	the	Merger,	our	Board	of	Directors	adopted	a	new	stock	incentive	plan	pursuant	to	which	certain	of	our	officer-level and	other	employees	also	were	granted,	on	July	6,	2007,	September	20,	2007	and	October	5,	2007,	respectively,	new	non-qualified	stock	options	to	purchase	13,110,000	shares, 130,000	shares	and	4,150,000	shares	of	our	common	stock	at	a	per	share	exercise	price	of	$5,	which	represented	the	fair	market	value	of	one	share	of	our	common	stock	on	the	grant date.		Effective	January	21,	2008,	our	Board	also	granted	to	our	CEO,	Mr.	Dreiling,	non-qualified	stock	options	to	purchase	2.5	million	shares	of	our	common	stock	pursuant	to	the terms	of	the	new	stock	incentive	plan.	All	of	these	new	options	expire	no	later	than	10	years	following	the	grant	date.		In	addition,	half	of	the	options	will	vest	ratably	on	each	of	the five	anniversaries	of	July	6,	2007	solely	based	upon	continued	employment	over	that	time	period,	while	the	other	half	of	the	options	will	vest	based	both	upon	continued employment	and	upon	the	achievement	of	predetermined	performance	annual	or	cumulative	financial-based	targets	over	time	which	coincide	with	our	fiscal	year.	The	options	also have	certain	accelerated	vesting	provisions	upon	a	change	in	control	or	initial	public	offering,	as	defined	in	the	new	incentive	plan.

Effective	January	21,	2008,	our	Board	also	granted	to	Mr.	Dreiling	890,000	shares	of	restricted	common	stock	pursuant	to	the	terms	of	the	new	stock	incentive	plan.	The restricted	stock	will	vest	on	the	last	day	of	our	2011	fiscal	year	if	Mr.	Dreiling	remains	employed	by	us	through	that	date.	The	restricted	stock	also	has	certain	accelerated	vesting provisions	upon	a	change	in	control,	initial	public	offering,	termination	without	cause	or	due	to	death	or	disability,	or	resignation	for	good	reason,	all	as	defined	in	Mr.	Dreiling's employment	agreement.

The	share	issuances,	the	Rollover	Options	and	the	new	option	and	restricted	stock	grants	described	above	were	effected	without	registration	in	reliance	on	(1)	the exemptions	afforded	by	Section	4(2)	of	the	Securities	Act	of	1933,	as	amended	(the	"Securities	Act"),	because	the	sales	did	not	involve	any	public	offering,	(2)	Rule	701 promulgated	under	the	Securities	Act	for	shares	that	were	sold	under	a	written	compensatory	benefit	plan	or	contract	for	the	participation	of	our	employees,	directors,	officers, consultants	and	advisors,	and	(3)	Regulation	S	promulgated	under	the	Securities	Act	relating	to	offerings	of	securities	outside	of	the	United	States.

# ITEM	6. SELECTED	FINANCIAL	DATA

The	following	table	sets	forth	selected	consolidated	financial	information	of	Dollar	General	Corporation	as	of	the	dates	and	for	the	periods	indicated.		The	selected historical	statement	of	operations	data	and	statement	of	cash	flows	data	for	the	fiscal	years	ended	February	1,	2008,	February	2,	2007	and	February	3,	2006,	and	balance	sheet	data	as of	February	1,	2008	and	February	2,	2007	have	been	derived	from	our	historical	audited	consolidated	financial	statements	included	elsewhere	in	this	report.	The	selected	historical statement	of	operations	data	and	statement	of	cash	flows	data	for	the	fiscal	years	ended	January	28,	2005	and	January	30,	2004	and	balance	sheet	data	as	of	February	3,	2006, January	28,	2005,	and	January	30,	2004	presented	in	this	table	have	been	derived	from	audited	consolidated	financial	statements	not	included	in	this	report.

As	a	result	of	the	Merger,	purchase	accounting,	and	a	new	basis	of	accounting	beginning	on	July	7,	2007,	the	2007	financial	reporting	periods	presented	below	include	the 22-week	Predecessor	period	of	the	Company	from	February	3,	2007	to	July	6,	2007	and	the	30-week	Successor	period,	reflecting	the	merger	of	the	Company	and	Buck	Acquisition Corp.	("Buck")	from	July	7,	2007	to	February	1,	2008.		Buck's	results	of	operations	for	the	period	from	March	6,	2007	to	July	6,	2007	(prior	to	the	Merger	on	July	6,	2007)	are	also included	in	the	consolidated	financial	statements	for	the	periods	described	above,	where	applicable,	as	a	result	of	certain	derivative	financial	instruments	entered	into	by	Buck	prior to	the	Merger	as	further	described	below.		Other	than	these	financial	instruments,	Buck	had	no	assets,	liabilities,	or	operations	prior	to	the	Merger.	The	fiscal	years	presented	from 2003	to	2006	reflect	the	Predecessor.

Due	to	the	significance	of	the	Merger	and	related	transactions	that	occurred	in	2007,	the	2007	Successor	financial	information	may	not	be	comparable	to	that	of	previous periods	presented	in	the	accompanying	table.

The	information	set	forth	below	should	be	read	in	conjunction	with,	and	is	qualified	by	reference	to,	the	Consolidated	Financial	Statements	and	related	notes	included	in Part	II,	Item	8	of	this	report	and	the	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	included	in	Part	II,	Item	7	of	this	report.

(Amounts	in	millions,	excluding	number	of	stores	and	net	sales	per	square	foot)

|  | Successor |  | Fiscal	Year	Ended | Fiscal	Year	Ended | Fiscal	Year	Ended | Fiscal	Year	Ended |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | July\t7,\t2007 | February\t3, |  |  |  |  |
|  | through | 2007 |  |  |  |  |
|  | February\t1, | through | February\t2, | February\t3, | January\t28, | January\t30, |
|  | 2008\t(1) | July\t6,\t2007 | 2007\t(2) | 2006\t(3) | 2005 | 2004 |
| Statement\tof\tOperations\tData: |  |  |  |  |  |  |
| Net\tsales | \t$5,571.5 | \t$3,923.8 | \t$9,169.8 | \t$8,582.2 | \t$7,660.9 | \t$6,872.0 |
| Cost\tof\tgoods\tsold | 3,999.6 | 2,852.2 | 6,801.6 | 6,117.4 | 5,397.7 | 4,853.9 |
| Gross\tprofit | 1,571.9 | 1,071.6 | 2,368.2 | 2,464.8 | 2,263.2 | 2,018.1 |
| Selling,\tgeneral\tand\tadministrative\t(4) | 1,324.5 | 960.9 | 2,119.9 | 1,903.0 | 1,706.2 | 1,510.1 |
| Transaction\tand\trelated\tcosts | 1.2 | 101.4 | - | - | - | - |
| Operating\tprofit | 246.1 | 9.2 | 248.3 | 561.9 | 557.0 | 508.0 |
| Interest\tincome | (3.8) | (5.0) | (7.0) | (9.0) | (6.6) | (4.1) |
| Interest\texpense | 252.9 | 10.3 | 34.9 | 26.2 | 28.8 | 35.6 |
| Loss\ton\tinterest\trate\tswaps | 2.4 | - | - | - | - | - |
| Loss\ton\tdebt\tretirement,\tnet | 1.2 | - | - | - | - | - |
| Income\t(loss)\tbefore\ttaxes | (6.6) | 4.0 | 220.4 | 544.6 | 534.8 | 476.5 |
| Income\ttax\texpense\t(benefit) | (1.8) | 12.0 | 82.4 | 194.5 | 190.6 | 177.5 |
| Net\tincome\t(loss) | $(4.8) | $(8.0) | $137.9 | $350.2 | $344.2 | $299.0 |
| Statement\tof\tCash\tFlows\tData: |  |  |  |  |  |  |
| Net\tcash\tprovided\tby\t(used\tin): |  |  |  |  |  |  |
| Operating\tactivities | \t$239.6 | \t$201.9 | \t$405.4 | \t$555.5 | \t$391.5 | \t$514.1 |
| Investing\tactivities | (6,848.4) | (66.9) | (282.0) | (264.4) | (259.2) | (256.7) |
| Financing\tactivities | 6,709.0 | 25.3 | (134.7) | (323.3) | (245.4) | (43.3) |
| Total\tcapital\texpenditures | (83.6) | (56.2) | (261.5) | (284.1) | (288.3) | (140.1) |
| Other\tFinancial\tand\tOperating\tData: |  |  |  |  |  |  |
| Same\tstore\tsales\tgrowth | 1.9% | 2.6% | 3.3% | 2.2% | 3.2% | 4.0% |
| Number\tof\tstores\t(at\tperiod\tend) | 8,194 | 8,205 | 8,229 | 7,929 | 7,320 | 6,700 |
| Selling\tsquare\tfeet\t(in\tthousands\tat\tperiod |  |  |  |  |  |  |
| end) | 57,376 | 57,379 | 57,299 | 54,753 | 50,015 | 45,354 |
| Net\tsales\tper\tsquare\tfoot\t(5) | \t$165.4 | \t$163.9 | \t$162.6 | \t$159.8 | \t$159.6 | \t$157.5 |
| Highly\tconsumable\tsales | 66.4% | 66.7% | 65.7% | 65.3% | 63.0% | 61.2% |
| Seasonal\tsales | 16.3% | 15.4% | 16.4% | 15.7% | 16.5% | 16.8% |
| Home\tproduct\tsales | 9.1% | 9.2% | 10.0% | 10.6% | 11.5% | 12.5% |
| Basic\tclothing\tsales | 8.2% | 8.7% | 7.9% | 8.4% | 9.0% | 9.5% |
| Rent\texpense | \t$214.5 | \t$150.2 | \t$343.9 | \t$312.3 | \t$268.8 | \t$232.0 |
| Balance\tSheet\tData\t(at\tperiod\tend): |  |  |  |  |  |  |
| Cash\tand\tcash\tequivalents\tand\tshort-term |  |  |  |  |  |  |
| investments | \t$119.8 |  | \t$219.2 | \t$209.5 | \t$275.8 | \t$414.6 |
| Total\tassets | 8,656.4 |  | 3,040.5 | 2,980.3 | 2,841.0 | 2,621.1 |
| Total\tdebt | 4,282.0 |  | 270.0 | 278.7 | 271.3 | 282.0 |
| Total\tshareholders'\tequity | 2,703.9 |  | 1,745.7 | 1,720.8 | 1,684.5 | 1,554.3 |

(1) Includes	the	results	of	Buck	for	the	period	prior	to	the	Merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(its	formation)	through	July	6,	2007	and	the post-Merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.

(2) Includes	the	effects	of	certain	strategic	merchandising	and	real	estate	initiatives	as	further	described	in	"Management's	Discussion	and	Analysis	of	Financial	Condition and	Results	of	Operations."

(3) The	fiscal	year	ended	February	3,	2006	was	comprised	of	53	weeks.

(4) Penalty	expenses	of	$10	million	in	fiscal	2003	are	included	in	SG&A.

(5) For	the	fiscal	year	ended	February	3,	2006,	net	sales	per	square	foot	was	calculated	based	on	52	weeks'	sales.

# ITEM	7. MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

Accounting	Periods.		The	following	text	contains	references	to	years	2008,	2007,	2006	and	2005,	which	represent	fiscal	years	ending	or	ended	January	30,	2009,	February 1,	2008,	February	2,	2007	and	February	3,	2006,	respectively.	Our	fiscal	year	ends	on	the	Friday	closest	to	January	31.	Each	of	fiscal	years	2007	and	2006	were	and	fiscal	year	2008 will	be	52-week	accounting	periods,	while	fiscal	2005	was	a	53-week	accounting	period,	which	affects	the	comparability	of	certain	amounts	in	the	Consolidated	Financial Statements	and	financial	ratios	between	2005	and	the	other	fiscal	years	reflected	herein.		As	discussed	below,	we	completed	a	merger	transaction	on	July	6,	2007.		The	2007	52-week period	presented	includes	the	22-week	Predecessor	period	of	Dollar	General	Corporation	through	July	6,	2007	reflecting	the	historical	basis	of	accounting,	and	a	30-week	Successor period,	reflecting	the	impact	of	the	business	combination	and	associated	purchase	price	allocation	of	the	merger	of	Dollar	General	Corporation	and	Buck	Acquisition	Corp.	("Buck"), from	July	7,	2007	to	February	1,	2008.		For	comparison	purposes,	the	discussion	of	results	of	operations	below	is	generally	based	on	the	mathematical	combination	of	the	Successor and	Predecessor	periods	for	the	52-week	fiscal	year	ended	February	1,	2008	compared	to	the	Predecessor	2006	fiscal	year	ended	February	2,	2007,	which	we	believe	provides	a meaningful	understanding	of	the	underlying	business.		Transactions	relating	to	or	resulting	from	the	Merger	are	discussed	separately.		The	combined	results	do	not	reflect	the	actual results	we	would	have	achieved	absent	the	Merger	and	should	not	be	considered	indicative	of	future	results	of	operations.		This	discussion	and	analysis	should	be	read	with,	and	is qualified	in	its	entirety	by,	the	Consolidated	Financial	Statements	and	the	notes	thereto.	It	also	should	be	read	in	conjunction	with	the	Forward-Looking	Statements/Risk	Factors disclosures	set	forth	in	the	Introduction	and	in	Item	1A	of	this	report.

Purpose	of	Discussion.	We	intend	for	this	discussion	to	provide	the	reader	with	information	that	will	assist	in	understanding	our	company	and	the	critical	economic	factors that	affect	our	company.	In	addition,	we	hope	to	help	the	reader	understand	our	financial	statements,	the	changes	in	certain	key	items	in	those	financial	statements	from	year	to	year, and	the	primary	factors	that	accounted	for	those	changes,	as	well	as	how	certain	accounting	principles	affect	our	financial	statements.

On	July	6,	2007,	we	completed	a	merger	(the	"Merger")	in	which	our	former	shareholders	received	$22.00	in	cash,	or	approximately	$6.9	billion	in	total,	for	each	share	of our	common	stock	held.	As	a	result	of	the	Merger,	we	are	a	subsidiary	of	Buck	Holdings,	L.P.	("Parent"),	a	Delaware	limited	partnership	controlled	by	investment	funds	affiliated with	Kohlberg	Kravis	Roberts	&	Co.,	L.P.	("KKR"	or	"Sponsor").	KKR,	GS	Capital	Partners	VI	Fund,	L.P.	and	affiliated	funds	(affiliates	of	Goldman,	Sachs	&	Co.),	Citi	Private Equity,	Wellington	Management	Company,	LLP,	CPP	Investment	Board	(USRE	II)	Inc.,	and	other	equity	co-investors	(collectively,	the	"Investors")	indirectly	own	a	substantial portion	of	our	capital	stock	through	their	investment	in	Parent.

# Executive	Overview

We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	approximately	8,200	stores	located	in	35	states,	primarily	in	the	southern,	southwestern, midwestern	and	eastern	United	States.	We	serve	a	broad	customer	base	and	offer	a	focused	assortment	of	everyday	items,	including	basic	consumable	merchandise	and	other	home, apparel	and	seasonal	products.	A	majority	of	our	products	are	priced	at	$10	or	less	and	approximately	30%	of	our	products	are	priced	at	$1	or	less.	We	seek	to	offer	a	compelling value	proposition	for	our	customers	based	on	convenient	store	locations,	easy	in	and	out	shopping	and	quality	merchandise	at	highly	competitive	prices.	We	believe	our	combination of	value	and	convenience	distinguishes	us	from	other	discount,	convenience	and	drugstore	retailers,	who	typically	focus	on	either	value	or	convenience.

The	nature	of	our	business	is	seasonal	to	a	certain	extent.		Primarily	because	of	sales	of	holiday-related	merchandise,	sales	in	the	fourth	quarter	have	historically	been	higher than	sales	achieved	in	each	of	the	first	three	quarters	of	the	fiscal	year.		Expenses	and,	to	a	greater	extent,	operating	income,	vary	by	quarter.		Results	of	a	period	shorter	than	a	full year	may	not	be	indicative	of	results	expected	for	the	entire	year.		Furthermore,	the	seasonal	nature	of	our	business	may	affect	comparisons	between	periods.

In	November	2006,	we	completed	a	strategic	review	of	our	inventory	and	real	estate	strategies	and	announced	significant	changes	to	existing	company	practices,	which	we refer	to	as	"Project	Alpha."	At	that	time,	we	announced	our	decision	to	close	403	stores	which	did	not	meet	our	recently	developed	store	criteria,	in	addition	to	stores	closed	in	the ordinary	course	of	business,	and	to	slow	our	new	store	growth	rate.	We	made	this	decision	to	allow	ourselves	to	focus	on	our	merchandising	efforts	and	improvements	to	our execution	in	the	stores.	At	that	time,	we	also	announced	the	decision	to	eliminate,	with	limited	exceptions,	our	"packaway"	inventory	strategy,	which	was	our	historical	practice	of storing	unsold	merchandise	at	the	end	of	a	season	and	carrying	it	over	to	the	following	year.	All	of	the	403	stores	identified	for	closing	were	closed	by	the	end	of	July	2007,	and	all of	our	packaway	inventory	was	eliminated	by	the	end	of	the	2007	fiscal	year.	We	believe	that	the	elimination	of	packaway	inventory,	coupled	with	the	completion	in	2006	of	the implementation	of	our	EZstore TM 	process	(simplifying	the	way	we	stock	new	merchandise	in	our	stores),	contributed	to	our	ability	to	show	significant	improvements	in	the shopability	and	manageability	of	our	stores	in	2007.		We	believe	these	initiatives	also	led	to	our	successful	reduction	of	store	employee	turnover	in	2007,	including	significant improvement	at	the	critical	store	manager	and	district	manager	levels.

In	addition	to	the	initiatives	noted	above,	during	2007	we	worked	closely	with	KKR	to	refine	our	strategic	initiatives	and	set	goals	to	improve	our	operational	and	financial performance.	During	this	transition,	we	slowed	our	store	growth,	as	planned,	and	we	defined	very	specific	operational	and	financial	benchmarks	to	monitor	and	measure	our progress	against	our	goals.	Specifically,	in	2007,	we	focused	on	and	made	good	progress	on	improving	our	merchandising	and	category	management	processes,	refining	our	real estate	processes	and	improving	our	distribution	and	transportation	logistics.	In	addition,	we	accelerated	our	efforts	to	refine	our	pricing	strategy,	increase	direct	foreign	sourcing	and expand	our	private	label	offering.	All	of	these	initiatives	are	ongoing	and	we	continue	to	expect	them	to	positively	impact	our	gross	profit,	sales	productivity	and	capital	efficiency	in 2008	and	beyond.

It	is	important	for	you	to	read	our	more	detailed	discussion	of	financial	and	operating	results	below	under	"Results	of	Operations."	Basis	points	or	"bps"	amounts	referred	to below	are	equal	to	0.01	percent	as	a	percentage	of	sales.		Some	of	the	more	significant	highlights	of	the	2007	fiscal	year	are	as	follows:

·		Total	sales	increased	3.5%,	including	a	2.1%	increase	in	same-store	sales	compared	with	the	prior	year.	The	remaining	sales	increase	resulted	from	new	stores,	partially offset	by	the	impact	of	closed	stores.

·		Gross	profit,	as	a	percentage	of	sales,	increased	to	27.8%	compared	to	25.8%	in	2006.	This	increase	was	the	result	of	improved	purchase	markups,	decreased	markdowns, and	leverage	on	distribution	costs	impacted	by	improved	logistics.		The	2006	gross	profit	rate	was	significantly	impacted	by	merchandise	markdowns	as	a	result	of	our inventory	liquidation	and	store	closing	activities.

·		SG&A,	as	a	percentage	of	sales,	increased	to	24.1%	compared	to	23.1%.	Several	items	of	significance	affected	this	comparison,	including:	the	addition	of	leasehold intangibles	amortization	(non-cash)	of	25	bps;	an	excess	of	Project	Alpha-related

	SG&A	expenses	in	2007	over	2006	of	21	bps;	an	excess	of	2007	incentive	compensation	resulting	from	meeting	certain	financial	targets	over	2006	discretionary	bonuses of	18	bps;		the	impact	of	hurricane-related	insurance	proceeds	received	in	2006	of	14	bps;	an	accrued	loss	relating	to	the	restructuring	of	certain	distribution	center	leases as	a	result	of	the	Merger	of	13	bps;	and	other	SG&A	relating	to	or	resulting	from	the	Merger.

·		Other	items	affecting	our	2007	results	of	operations,	relating	to	or	resulting	from	the	Merger,	as	more	fully	described	below,	include	transaction	and	related	costs	of $102.6	million	and	a	significant	increase	in	interest	expense.

·		We	opened	365	new	stores,	closed	400	stores	(including	275	remaining	from	Project	Alpha)	and	relocated	or	remodeled	300	stores.	As	of	February	1,	2008,	we	operated 8,194	stores.

We	made	significant	progress	on	our	merchandising	and	operating	initiatives	in	2007,	including	clearing	our	stores	of	packaway	inventories	and	closing	our	low- performing	stores,	giving	us	a	strong	foundation	for	further	enhancements	in	2008.	These	changes	also	contributed	to	a	decrease	in	employee	turnover	and	a	dramatic	improvement in	the	overall	appearance	of	our	stores.	We	moved	forward	with	our	pricing	and	private	label	initiatives	and	enhanced	our	merchandising	analysis	tools	giving	us	a	better	platform for	decision-making.	We	accomplished	these	goals	while	making	a	significant	transition	in	the	financial	structure	of	the	Company.

2008	Priorities.	In	2008,	under	the	leadership	of	our	new	CEO,	we	plan	to	continue	to	deliver	value	to	our	customers	through	our	ability	to	deliver	highly	competitive prices	in	a	convenient	shopping	format.	Our	stores	provide	our	customers	with	a	compelling	shopping	experience,	low	everyday	prices	on	name	brand	and	other	quality	items	in	a convenient,	easy-to-shop	format.	We	plan	to	continue	to	improve	on	this	value/convenience	model	by	implementing	merchandising	and	operational	improvements.

# We	are	focused	on	further	improving	financial	performance	through:

·		Productive	sales	growth,	including	emphasis	on	increasing	shopper	frequency,	size	of	basket	and	productivity	per	square	foot.

·		Improving	our	gross	margins	through:	decreasing	inventory	shrink,	refining	our	pricing	strategy,	optimizing	our	merchandise	offering,	expanding	and	improving	our private	label	offering	and	improving	and	expanding	our	foreign	sourcing;

·		Improving	our	operational	processes,	for	example,	through	information	technology	and	work	management	and	leveraging	those	improvements	to	reduce	costs.

·		Strengthening	and	expanding	our	culture	of	serving	others.

In	addition,	we	plan	to	open	approximately	200	new	stores	and	to	remodel	or	relocate	approximately	400	stores.

Key	Financial	Metrics.	We	have	identified	the	following	as	our	most	critical	financial	metrics	for	2008:

·		Same-store	sales	growth	/	sales	per	square	foot

·		Gross	profit,	as	a	percentage	of	sales

·		Inventory	turnover

·		Cash	flow

·		Earnings	before	interest,	taxes	and	depreciation	and	amortization	("EBITDA")

Readers	should	refer	to	the	detailed	discussion	of	our	operating	results	below	for	additional	comments	on	financial	performance	in	the	current	year	periods	as	compared with	the	prior	year	periods.

# Results	of	Operations

The	following	discussion	of	our	financial	performance	is	based	on	the	Consolidated	Financial	Statements	set	forth	herein.	The	following	table	contains	results	of	operations data	for	the	2007,	2006	and	2005	fiscal	years,	and	the	dollar	and	percentage	variances	among	those	years.

|  |  |  |  | 2007	vs.	2006 | 2007	vs.	2006 | 2006	vs.	2005 | 2006	vs.	2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (amounts\tin\tmillions) | 2007\t(a) | 2006\t(b) | 2005\t(c) | $%\nchange | \tchange | $%\nchange | change |
| Net\tsales\tby\tcategory: |  |  |  |  |  |  |  |
| Highly\tconsumable | \t$6,316.8 | \t$6,022.0 | \t$5,606.5 | \t$294.8 | 4.9% | \t$415.5 | 7.4% |
| %\tof\tnet\tsales | 66.53% | 65.67% | 65.33% |  |  |  |  |
| Seasonal | 1,513.2 | 1,510.0 | 1,348.8 | 3.2 | 0.2 | 161.2 | 12.0 |
| %\tof\tnet\tsales | 15.94% | 16.47% | 15.72% |  |  |  |  |
| Home\tproducts | 869.8 | 914.4 | 907.8 | (44.6) | (4.9) | 6.5 | 0.7 |
| %\tof\tnet\tsales | 9.16% | 9.97% | 10.58% |  |  |  |  |
| Basic\tclothing | 795.4 | 723.5 | 719.2 | 72.0 | 9.9 | 4.3 | 0.6 |
| %\tof\tnet\tsales | 8.38% | 7.89% | 8.38% |  |  |  |  |
| Net\tsales | \t$9,495.2 | \t$9,169.8 | \t$8,582.2 | \t$325.4 | 3.5% | \t$587.6 | 6.8% |
| Cost\tof\tgoods\tsold | 6,851.8 | 6,801.6 | 6,117.4 | 50.2 | 0.7 | 684.2 | 11.2 |
| %\tof\tnet\tsales | 72.16% | 74.17% | 71.28% |  |  |  |  |
| Gross\tprofit | 2,643.5 | 2,368.2 | 2,464.8 | 275.3 | 11.6 | (96.6) | (3.9) |
| %\tof\tnet\tsales | 27.84% | 25.83% | 28.72% |  |  |  |  |
| Selling,\tgeneral\tand |  |  |  |  |  |  |  |
| administrative\texpenses | 2,285.4 | 2,119.9 | 1,903.0 | 165.5 | 7.8 | 217.0 | 11.4 |
| %\tof\tnet\tsales | 24.07% | 23.12% | 22.17% |  |  |  |  |
| Transaction\tand\trelated\tcosts | 102.6 | - | - | 102.6 | 100.0 | - | - |
| %\tof\tnet\tsales | 1.08% | - | - |  |  | - | - |
| Operating\tprofit | 255.4 | 248.3 | 561.9 | 7.2 | 2.9 | (313.6) | (55.8) |
| %\tof\tnet\tsales | 2.69% | 2.71% | 6.55% |  |  |  |  |
| Interest\tincome | (8.8) | (7.0) | (9.0) | (1.8) | 26.3 | 2.0 | (22.2) |
| %\tof\tnet\tsales | (0.09)% | (0.08)% | (0.10)% |  |  |  |  |
| Interest\texpense | 263.2 | 34.9 | 26.2 | 228.3 | 653.8 | 8.7 | 33.1 |
| %\tof\tnet\tsales | 2.78% | 0.38% | 0.31% |  |  |  |  |
| Loss\ton\tinterest\trate\tswaps, |  |  |  |  |  |  |  |
| net | 2.4 | - | - | 2.4 | 100.0 | - | - |
| %\tof\tnet\tsales | 0.03% | - | - |  |  |  |  |
| Loss\ton\tdebt\tretirements,\tnet | 1.2 | - | - | 1.2 | 100.0 | - | - |
| %\tof\tnet\tsales | 0.01% | - | - |  |  |  |  |
| Income\t(loss)\tbefore\tincome |  |  |  |  |  |  |  |
| taxes | (2.6) | 220.4 | 544.6 | (222.9) | (101.1) | (324.3) | (59.5) |
| %\tof\tnet\tsales | (0.03)% | 2.40% | 6.35% |  |  |  |  |
| Income\ttaxes | 10.2 | 82.4 | 194.5 | (72.2) | (87.6) | (112.1) | (57.6) |
| %\tof\tnet\tsales | 0.11% | 0.90% | 2.27% |  |  |  |  |
| Net\tincome\t(loss) | \t$(12.8) | \t$137.9 | \t$350.2 | \t$(150.7) | (109.3)% | \t$(212.2) | (60.6)% |

(a) The	amounts	in	the	2007	column	represent	the	mathematical	combination	of	the	Predecessor	through	July	6,	2007	and	Successor	from	July	7,	2007	through	February	1, 2008	as	included	in	the	consolidated	financial	statements.	These	results	also	include	the	operations	of	Buck	for	the	period	prior	to	the	Merger	from	March	6,	2007	(Buck's date	of	formation)	through	July	6,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps.)	This	presentation	does	not	comply	with	generally	accepted	accounting principles,	but	we	believe	this	combination	provides	a	meaningful	method	of	comparison.

(b) Includes	the	impacts	of	certain	strategic	initiatives	as	more	fully	described	in	the	"Executive	Overview"	above.

(c) The	fiscal	year	ended	February	3,	2006	was	comprised	of	53	weeks.

Net	Sales.		Net	sales	increased	$325.4	million,	or	3.5%,	in	2007,	primarily	representing	a	same-store	sales	increase	of	2.1%	for	2007	compared	to	2006.		Same-store	sales include	stores	that	have	been	open	for	13	months	and	remain	open	at	the	end	of	the	reporting	period.	The	increase	in	same-store	sales	accounted	for	$185.6	million	of	the	increase	in sales.	Sales	resulting	from	new	store	growth,	including	365	new	stores	in	2007,	were	partially	offset	by	the	impact	of	store	closings	in	2007	and	2006.	Increased	sales	of	highly consumables	accounted	for	$294.8	million	of	our	total	sales	increase,	resulting	from	successful	changes	over	the	past	year	to	our	consumables	merchandising	mix.	Sales	of	seasonal merchandise	and	apparel	increased	slightly	and	were	partially	offset	by	a	decrease	in	home	products	sales.	To	some	extent,	sales	in	these	more	discretionary	categories	were impacted	by	our	efforts	to	eliminate	our	packaway	strategy	by	the	end	of	2007	and	to	reduce	overall	inventory	levels.	In	addition,	we	believe	sales	of	seasonal	merchandise,	apparel and	home	products	were	negatively	affected	by	continued	economic	pressures	on	our	customers,	particularly	in	the	fourth	quarter.	The	increase	in	same-store	sales	represents	an increase	in	average	customer	purchase,	offset	by	a	slight	decrease	in	customer	traffic.

Increases	in	2006	net	sales	resulted	primarily	from	opening	additional	stores,	including	300	net	new	stores	in	2006,	and	a	same-store	sales	increase	of	3.3%	for	2006 compared	to	2005.	The	increase	in	same-store	sales	accounted	for	$265.4	million	of	the	increase	in	sales,	while	new	stores	were	the	primary	contributors	to	the	remaining	$322.2 million	sales	increase	during	2006.	The	increase	in	same-store	sales	is	primarily	attributable	to	an	increase	in	average	customer	purchase.	We	also	believe	that	the	strategic merchandising	and	real	estate	initiatives	discussed	above	in	the	"Executive	Overview"	had	a	positive	impact	on	net	sales	in	the	fourth	quarter.	By	merchandise	category,	our	sales increase	in	2006	compared	to	2005	was	primarily	attributable	to	the	highly	consumable	category,	which	increased	by	$415.5	million,	or	7.4%.	An	increase	in	sales	of	seasonal merchandise	of	$161.2	million,	or	12.0%,	also	contributed	to	overall	sales	growth.	We	believe	that	our	increased	sales	in	2006	were	supported	by	additions	to	our	product	offerings and	increased	promotional	activities,	including	the	use	of	advertising	circulars	and	clearance	activities.

As	discussed	above,	we	monitor	our	sales	internally	by	the	following	four	major	categories:	highly	consumable,	seasonal,	home	products	and	basic	clothing.	The	highly consumable	category	has	a	lower	gross	profit	rate	than	the	other	three	categories	and	has	grown	significantly	over	the	past	several	years.	We	expect	the	move	away	from	our packaway	inventory	strategy	to	have	a	positive	impact	on	sales	in	our	non-consumable	merchandise	categories.	Because	of	the	impact	of	sales	mix	on	gross	profit,	we	continually review	our	merchandise	mix	and	strive	to	adjust	it	when	appropriate.	Maintaining	an	appropriate	sales	mix	is	an	integral	part	of	achieving	our	gross	profit	and	sales	goals.

Gross	Profit.		The	gross	profit	rate	increased	by	201	basis	points	in	2007	as	compared	with	2006	due	to	a	number	of	factors,	including:	an	increase	in	purchase	markups, resulting	primarily	from	a	change	in	mix	of	items	and	higher	vendor	rebates;	lower	markdowns,	including	markdowns	from	retail	and	below	cost	markdowns	(as	discussed	below, markdowns	in	2006	included	significant	markdowns	and	below	cost	adjustments	relating	to	the	initial	launch	of	Project	Alpha);	and	improved	leverage	on	distribution	and transportation	costs	driven	by 30

logistics	efficiencies.		Offsetting	the	factors	listed	above	was	an	increase	in	our	shrink	rate	in	2007	as	compared	to	2006.

The	gross	profit	rate	decline	in	2006	as	compared	with	2005	was	due	primarily	to	a	significant	increase	in	markdown	activity	as	a	percentage	of	sales,	including	below-cost markdowns,	as	a	result	of	our	inventory	liquidation	and	store	closing	initiatives.	While	we	believe	these	initiatives	had	a	positive	impact	on	sales,	they	had	a	negative	impact	on	our gross	profit	rate	in	2006.	In	total,	our	gross	profit	rate	declined	by	289	basis	points	to	25.8%	in	2006	compared	to	28.7%	in	2005.	Significantly	impacting	our	gross	profit	rate,	as	a result	of	the	related	effect	on	cost	of	goods	sold,	were	total	markdowns	of	$279.1	million	at	cost	taken	during	2006,	compared	with	total	markdowns	of	$106.5	million	at	cost	taken in	2005.	The	2006	markdowns	reflect	$179.9	million	at	cost	taken	during	the	fourth	quarter	of	2006	compared	to	$39.0	million	markdowns	at	cost	taken	during	the	fourth	quarter	of 2005.	Other	factors	included,	but	were	not	limited	to:	a	decrease	in	the	markups	on	purchases,	primarily	attributable	to	purchases	of	highly	consumable	products	(including nationally	branded	products,	which	generally	have	lower	average	markups);	and	an	increase	in	our	shrink	rate.

Selling,	General	and	Administrative	("SG&A")	Expense.		SG&A	expense	increased	$165.5	million,	or	7.8%,	in	2007	from	the	prior	year,	and	increased	as	a	percentage	of sales	to	24.1%	in	2007	from	23.1%	in	2006.	SG&A	in	2007	includes:	$23.4	million	related	to	amortization	of	leasehold	intangibles	capitalized	in	connection	with	the	revaluation	of assets	at	the	date	of	the	Merger;	$27.2	million	of	accrued	administrative	employee	incentive	compensation	expense	resulting	from	meeting	certain	financial	targets	(compared	to $9.6	million	of	discretionary	bonuses	in	2006);	approximately	$54	million	of	expenses	relating	to	the	closing	of	stores	and	the	elimination	of	our	packaway	inventory	strategy (compared	to	approximately	$33	million	in	2006)	and	an	accrued	loss	of	approximately	$12.0	million	relating	to	the	probable	restructuring	of	certain	distribution	center	leases.	In addition,	SG&A	in	2007	includes	approximately	$4.8	million	of	KKR-related	consulting	and	monitoring	fees.	SG&A	expense	in	2006	was	partially	offset	by	insurance	proceeds	of $13.0	million	received	during	the	year	related	to	losses	incurred	due	to	Hurricane	Katrina.

The	increase	in	SG&A	expense	as	a	percentage	of	sales	in	2006	as	compared	with	2005	was	due	to	a	number	of	factors,	including	increases	in	the	following	expense categories:		impairment	charges	on	leasehold	improvements	and	store	fixtures	totaling	$9.4	million,	including	$8.0	million	related	to	the	planned	closings	of	approximately	400 underperforming	stores,	128	of	which	closed	in	2006	and	the	remainder	of	which	closed	in	2007,	lease	contract	terminations	totaling	$5.7	million	related	to	these	stores;	higher	store occupancy	costs	(increased	12.1%)	due	to	higher	average	monthly	rentals	associated	with	our	leased	store	locations;	higher	debit	and	credit	card	fees	(increased	40.6%)	due	to	the increased	customer	usage	of	debit	cards	and	the	acceptance	of	VISA	credit	and	check	cards	at	all	locations;	higher	administrative	labor	costs	(increased	29.9%)	primarily	related	to additions	to	our	executive	team,	particularly	in	merchandising	and	real	estate,	and	the	expensing	of	stock	options;	higher	advertising	costs	(increased	198.3%)	related	primarily	to the	distribution	of	several	advertising	circulars	in	the	year	and	to	promotional	activities	related	to	the	inventory	clearance	and	store	closing	activities	discussed	above;	and	higher incentive	compensation	primarily	related	to	the	$9.6	million	discretionary	bonus	authorized	by	the	Board	of	Directors	for	the	2006	fiscal	year.		These 31

increases	were	partially	offset	by	insurance	proceeds	of	$13.0	million	received	during	the	period	related	to	losses	incurred	due	to	Hurricane	Katrina,	and	depreciation	and amortization	expenses	that	remained	relatively	constant	in	fiscal	2006	as	compared	to	fiscal	2005.

Transaction	and	Related	Costs.	The	$102.6	million	of	expenses	recorded	in	2007	reflect	$63.2	million	of	expenses	related	to	the	Merger,	such	as	investment	banking	and legal	fees	as	well	as	$39.4	million	of	compensation	expense	related	to	stock	options,	restricted	stock	and	restricted	stock	units	which	were	fully	vested	immediately	prior	to	the Merger.

Interest	Income.		Interest	income	in	2007	consists	primarily	of	interest	on	short-term	investments.	The	increase	in	2007	from	2006	resulted	from	higher	levels	of	cash	and short	term	investments	on	hand,	primarily	in	the	first	half	of	the	year.	The	decrease	in	2006	compared	to	2005	was	due	primarily	to	the	acquisition	of	the	entity	which	held	legal	title to	the	South	Boston	distribution	center	in	June	2006	and	the	related	elimination	of	the	note	receivable	which	represented	debt	issued	by	this	entity	from	which	we	formerly	leased the	South	Boston	distribution	center.

Interest	Expense.	Interest	expense	increased	by	$228.3	million	in	2007	as	compared	to	2006	due	to	interest	on	long-term	obligations	incurred	to	finance	the	Merger.	See further	discussion	under	"Liquidity	and	Capital	Resources"	below.		We	had	outstanding	variable-rate	debt	of	$787.0	million,	after	taking	into	consideration	the	impact	of	interest	rate swaps,	as	of	February	1,	2008.	The	remainder	of	our	outstanding	indebtedness	at	February	1,	2008	was	fixed	rate	debt.

The	increase	in	interest	expense	in	2006	was	primarily	attributable	to	increased	interest	expense	of	$6.5	million	under	a	revolving	credit	agreement	primarily	due	to increased	borrowings,	an	increase	in	tax-related	interest	of	$4.1	million,	offset	by	a	reduction	in	interest	expense	associated	with	the	elimination	of	a	financing	obligation	on	the South	Boston	distribution	center.

Loss	on	Interest	Rate	Swaps.	During	2007,	we	recorded	an	unrealized	loss	of	$4.1	million	related	to	the	change	in	the	fair	value	of	interest	swaps	prior	to	the	designation	of such	swaps	as	cash	flow	hedges	in	October	2007.	This	loss	is	offset	by	earnings	of	$1.7	million	under	the	contractual	provisions	of	the	swap	agreements.

Loss	on	Debt	Retirements,	Net.	During	2007,	we	recorded	$6.2	million	of	expenses	related	to	consent	fees	and	other	costs	associated	with	a	tender	offer	for	certain	notes payable	maturing	in	June	2010	("2010	Notes").	Approximately	99%	of	the	2010	Notes	were	retired	as	a	result	of	the	tender	offer.	The	costs	related	to	the	tender	of	the	2010	Notes were	partially	offset	by	a	$4.9	million	gain	resulting	from	the	repurchase	of	$25.0	million	of	our	11.875%/12.625%	Senior	Subordinated	Notes,	due	July	15,	2017.

The	income	tax	rate	for	the	Successor	period	ended	February	1,	2008	is	a	benefit	of	26.9%.		This	benefit	is	less	than	the	expected	U.S.	statutory	rate	of	35%	due	to	the incurrence	of	state	income	taxes	in	several	of	the	group's	subsidiaries	that	file	their	state	income	tax	returns	on	a	separate	entity	basis	and	the	election	to	include,	effective	February 3,	2007,	income	tax	related	interest	and	penalties	in	the	amount	reported	as	income	tax	expense.

The	income	tax	rate	for	the	Predecessor	period	ended	July	6,	2007	is	an	expense	of	300.2%.		This	expense	is	higher	than	the	expected	U.S.	statutory	rate	of	35%	due principally	to	the	non-deductibility	of	certain	acquisition	related	expenses.

The	2006	income	tax	rate	was	higher	than	the	2005	rate	by	1.7%.		Factors	contributing	to	this	increase	include	additional	expense	related	to	the	adoption	of	a	new	tax system	in	the	State	of	Texas;	a	reduction	in	the	contingent	income	tax	reserve	due	to	the	resolution	of	contingent	liabilities	that	is	less	than	the	decrease	that	occurred	in	2005;	an increase	in	the	deferred	tax	valuation	allowance;	and	an	increase	related	to	a	non-recurring	benefit	recognized	in	2005	related	to	an	internal	restructuring.		Offsetting	these	rate increases	was	a	reduction	in	the	income	tax	rate	related	to	federal	income	tax	credits.		Due	to	the	reduction	in	our	2006	income	before	tax,	a	small	increase	in	the	amount	of	federal income	tax	credits	earned	yielded	a	much	larger	percentage	reduction	in	the	income	tax	rate	for	2006	versus	2005.

# Effects	of	Inflation

We	believe	that	inflation	and/or	deflation	had	a	minimal	impact	on	our	overall	operations	during	2007,	2006	and	2005.

# Liquidity	and	Capital	Resources

Current	Financial	Condition	/	Recent	Developments.	During	the	past	three	years,	we	have	generated	an	aggregate	of	approximately	$1.4	billion	in	cash	flows	from operating	activities.	During	that	period,	we	expanded	the	number	of	stores	we	operate	by	approximately	12%	(874	stores)	and	incurred	approximately	$685	million	in	capital expenditures.	As	noted	above,	we	made	certain	strategic	decisions	which	slowed	our	growth	in	2007.

At	February	1,	2008,	we	had	total	outstanding	debt	(including	the	current	portion	of	long-term	obligations)	of	$4.282	billion.		We	also	had	an	additional	$769.2	million available	for	borrowing	under	our	new	senior	secured	asset-based	revolving	credit	facility	at	that	date.		Our	liquidity	needs	are	significant,	primarily	due	to	our	debt	service	and other	obligations.

Management	believes	our	cash	flow	from	operations	and	existing	cash	balances,	combined	with	availability	under	the	New	Credit	Facilities	(described	below),	will	provide sufficient	liquidity	to	fund	our	current	obligations,	projected	working	capital	requirements	and	capital	spending	for	a	period	that	includes	the	next	twelve	months.

# New	Credit	Facilities

Overview.	On	July	6,	2007,	in	connection	with	the	Merger,	we	entered	into	two	senior	secured	credit	agreements,	each	with	Goldman	Sachs	Credit	Partners	L.P.,	Citicorp Global	Markets	Inc.,	Lehman	Brothers	Inc.	and	Wachovia	Capital	Markets,	LLC,	each	as	joint	lead	arranger	and	joint	bookrunner.		The	CIT	Group/Business	Credit,	Inc.	is administrative	agent	under	the	senior	secured	credit	agreement	for	the	asset-based	revolving	credit	facility	and	Citicorp	North	America,	Inc.	is	administrative	agent	under	the	senior secured	credit	agreement	for	the	term	loan	facility.

The	New	Credit	Facilities	provide	financing	of	$3.425	billion,	consisting	of:

·		$2.3	billion	in	a	senior	secured	term	loan	facility;	and

·		a	senior	secured	asset-based	revolving	credit	facility	of	up	to	$1.125	billion	(of	which	up	to	$350.0	million	is	available	for	letters	of	credit),	subject	to	borrowing	base availability.

The	term	loan	credit	facility	consists	of	two	tranches,	one	of	which	is	a	"first-loss"	tranche,	which,	in	certain	circumstances,	is	subordinated	in	right	of	payment	to	the	other tranche	of	the	term	loan	credit	facility.

We	are	the	borrower	under	the	term	loan	credit	facility,	the	primary	borrower	under	the	asset-based	credit	facility	and,	in	addition,	certain	subsidiaries	of	ours	are designated	as	borrowers	under	this	facility.		The	asset-based	credit	facility	includes	borrowing	capacity	available	for	letters	of	credit	and	for	short-term	borrowings	referred	to	as swingline	loans.

The	New	Credit	Facilities	provide	that	we	have	the	right	at	any	time	to	request	up	to	$325.0	million	of	incremental	commitments	under	one	or	more	incremental	term	loan facilities	and/or	asset-based	revolving	credit	facilities.	The	lenders	under	these	facilities	are	not	under	any	obligation	to	provide	any	such	incremental	commitments	and	any	such addition	of	or	increase	in	commitments	will	be	subject	to	our	not	exceeding	certain	senior	secured	leverage	ratios	and	certain	other	customary	conditions	precedent.		Our	ability	to obtain	extensions	of	credit	under	these	incremental	commitments	will	also	be	subject	to	the	same	conditions	as	extensions	of	credit	under	the	New	Credit	Facilities.

The	amount	from	time	to	time	available	under	the	senior	secured	asset-based	credit	facility	(including	in	respect	of	letters	of	credit)	shall	not	exceed	the	sum	of	the	tranche A	borrowing	base	and	the	tranche	A-1	borrowing	base.	The	tranche	A	borrowing	base	equals	the	sum	of	(i)	85%	of	the	net	orderly	liquidation	value	of	all	our	eligible	inventory	and that	of	each	guarantor	thereunder	and	(ii)	90%	of	all	our	accounts	receivable	and	credit/debit	card	receivables	and	that	of	each	guarantor	thereunder,	in	each	case,	subject	to	a	reserve equal	to	the	principal	amount	of	the	2010	Notes	that	remain	outstanding	at	any	time	and	other	customary	reserves	and	eligibility	criteria.	An	additional	10%	to	12%	of	the	net	orderly liquidation	value	of	all	our	eligible	inventory	and	that	of	each	guarantor	thereunder	is	made	available	to	us	in	the	form	of	a	"last	out"	tranche	in	respect	of	which	we	may	borrow	up to	a	maximum	amount	of	$125.0 34

million.	Borrowings	under	the	asset-based	credit	facility	will	be	incurred	first	under	the	last	out	tranche,	and	no	borrowings	will	be	permitted	under	any	other	tranche	until	the	last out	tranche	is	fully	utilized.	Repayments	of	the	senior	secured	asset-based	revolving	credit	facility	will	be	applied	to	the	last	out	tranche	only	after	all	other	tranches	have	been	fully paid	down.

Interest	Rate	and	Fees.	Borrowings	under	the	New	Credit	Facilities	bear	interest	at	a	rate	equal	to	an	applicable	margin	plus,	at	our	option,	either	(a)	LIBOR	or	(b)	a	base rate	(which	is	usually	equal	to	the	prime	rate).		The	applicable	margin	for	borrowings	is	(i)	under	the	term	loan	facility,	2.75%	with	respect	to	LIBOR	borrowings	and	1.75%	with respect	to	base-rate	borrowings	and	(ii)	as	of	February	1,	2008	under	the	asset-based	revolving	credit	facility	(except	in	the	last	out	tranche	described	above),	1.50%	with	respect	to LIBOR	borrowings	and	0.50%	with	respect	to	base-rate	borrowings	and	for	any	last	out	borrowings,	2.25%	with	respect	to	LIBOR	borrowings	and	1.25%	with	respect	to	base-rate borrowings.		The	applicable	margins	for	borrowings	under	the	asset-based	revolving	credit	facility	(except	in	the	case	of	last	out	borrowings)	are	subject	to	adjustment	each	quarter based	on	average	daily	excess	availability	under	the	asset-based	revolving	credit	facility.

In	addition	to	paying	interest	on	outstanding	principal	under	the	New	Credit	Facilities,	we	are	required	to	pay	a	commitment	fee	to	the	lenders	under	the	asset-based revolving	credit	facility	in	respect	of	the	unutilized	commitments	thereunder.	At	February	1,	2008	the	commitment	fee	rate	was	0.375%	per	annum.	The	commitment	fee	rate	will	be reduced	(except	with	regard	to	the	last	out	tranche)	to	0.25%	per	annum	at	any	time	that	the	unutilized	commitments	under	the	asset-based	credit	facility	are	equal	to	or	less	than 50%	of	the	aggregate	commitments	under	the	asset-based	revolving	credit	facility.	We	must	also	pay	customary	letter	of	credit	fees.

Prepayments.	The	senior	secured	credit	agreement	for	the	term	loan	facility	requires	us	to	prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with:

·		50%	of	our	annual	excess	cash	flow	(as	defined	in	the	credit	agreement)	commencing	with	the	fiscal	year	ending	on	or	about	January	31,	2008	(which	percentage	will	be reduced	to	25%	and	0%	if	we	achieve	and	maintain	a	total	net	leverage	ratio	of	6.0	to	1.0	and	5.0	to	1.0,	respectively);

·		100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other	dispositions	of	property	in	excess	of	$25.0	million	in	the	aggregate	and	subject	to	our	right	to reinvest	the	proceeds;	and

·		100%	of	the	net	cash	proceeds	of	any	incurrence	of	debt,	other	than	proceeds	from	debt	permitted	under	the	senior	secured	credit	agreement.

The	mandatory	prepayments	discussed	above	will	be	applied	to	the	term	loan	facility	as	directed	by	the	senior	secured	credit	agreement.

In	addition,	the	senior	secured	credit	agreement	for	the	asset-based	revolving	credit	facility	requires	us	to	prepay	the	asset-based	revolving	credit	facility,	subject	to	certain exceptions,	with:

·		100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other	dispositions	of	revolving	facility	collateral	(as	defined	below)	in	excess	of	$1.0	million	in	the aggregate	and	subject	to	our	right	to	reinvest	the	proceeds;	and

·		to	the	extent	such	extensions	of	credit	exceed	the	then	current	borrowing	base	(as	defined	in	the	senior	secured	credit	agreement	for	the	asset-based	revolving	credit facility).

We	may	be	obligated	to	pay	a	prepayment	premium	on	the	amount	repaid	under	the	term	loan	facility	if	the	term	loans	are	voluntarily	repaid	in	whole	or	in	part	before	July 6,	2009.	We	may	voluntarily	repay	outstanding	loans	under	the	asset-based	revolving	credit	facility	at	any	time	without	premium	or	penalty,	other	than	customary	"breakage"	costs with	respect	to	LIBOR	loans.

An	event	of	default	under	the	senior	secured	credit	agreements	will	occur	upon	a	change	of	control	as	defined	in	the	senior	secured	credit	agreements	governing	our	New Credit	Facilities.		Upon	an	event	of	default,	indebtedness	under	the	New	Credit	Facilities	may	be	accelerated,	in	which	case	we	will	be	required	to	repay	all	outstanding	loans	plus accrued	and	unpaid	interest	and	all	other	amounts	outstanding	under	the	New	Credit	Facilities.

Letters	of	Credit.	$350.0	million	of	our	asset-based	revolving	credit	facility	is	available	for	letters	of	credit.

Amortization.	Beginning	September	30,	2009,	we	are	required	to	repay	installments	on	the	loans	under	the	term	loan	credit	facility	in	equal	quarterly	principal	amounts	in an	aggregate	amount	per	annum	equal	to	1%	of	the	total	funded	principal	amount	at	July	6,	2007,	with	the	balance	payable	on	July	6,	2014.	There	is	no	amortization	under	the	asset- based	revolving	credit	facility.	The	entire	principal	amounts	(if	any)	outstanding	under	the	asset-based	revolving	credit	facility	are	due	and	payable	in	full	at	maturity,	on	July	6, 2013,	on	which	day	the	commitments	thereunder	will	terminate.

Guarantee	and	Security.	All	obligations	under	the	New	Credit	Facilities	are	unconditionally	guaranteed	by	substantially	all	of	our	existing	and	future	domestic	subsidiaries (excluding	certain	immaterial	subsidiaries	and	certain	subsidiaries	designated	by	us	under	our	senior	secured	credit	agreements	as	"unrestricted	subsidiaries"),	referred	to, collectively,	as	U.S.	Guarantors.

All	obligations	and	related	guarantees	under	the	term	loan	credit	facility	are	secured	by:

·		a	second-priority	security	interest	in	all	existing	and	after-acquired	inventory,	accounts	receivable,	and	other	assets	arising	from	such	inventory	and	accounts	receivable, of	the	Company	and	each	U.S.	Guarantor	(the	"Revolving	Facility	Collateral"),	subject	to	certain	exceptions;

·		a	first	priority	security	interest	in,	and	mortgages	on,	substantially	all	of	our	and	each	U.S.	Guarantor's	tangible	and	intangible	assets	(other	than	the	Revolving	Facility Collateral);	and

·		a	first-priority	pledge	of	100%	of	the	capital	stock	held	by	the	Company,	or	any	of	our	domestic	subsidiaries	that	are	directly	owned	by	us	or	one	of	the	U.S.	Guarantors and	65%	of	the	voting	capital	stock	of	each	of	our	existing	and	future	foreign	subsidiaries	that	are	directly	owned	by	us	or	one	of	the	U.S.	Guarantors.

All	obligations	and	related	guarantees	under	the	asset-based	credit	facility	are	secured	by	the	Revolving	Facility	Collateral,	subject	to	certain	exceptions.

Certain	Covenants	and	Events	of	Default.	The	senior	secured	credit	agreements	contain	a	number	of	covenants	that,	among	other	things,	restrict,	subject	to	certain exceptions,	our	ability	to:

·		incur	additional	indebtedness;

·		pay	dividends	and	distributions	or	repurchase	our	capital	stock;

·		make	investments	or	acquisitions;

·		repay	or	repurchase	subordinated	indebtedness	(including	the	senior	subordinated	notes	discussed	below)	and	the	senior	notes	discussed	below;

·		amend	material	agreements	governing	our	subordinated	indebtedness	(including	the	senior	subordinated	notes	discussed	below)	or	our	senior	notes	discussed	below;	and

·		change	our	lines	of	business.

The	senior	secured	credit	agreements	also	contain	certain	customary	affirmative	covenants	and	events	of	default.

At	February	1,	2008,	we	had	$102.5	million	of	borrowings,	$28.8	million	of	commercial	letters	of	credit,	and	$69.2	million	of	standby	letters	of	credit	outstanding	under our	asset-based	revolving	credit	facility.

# Senior	Notes	due	2015	and	Senior	Subordinated	Toggle	Notes	due	2017

indenture,	dated	as	of	July	6,	2007	(the	"senior	indenture"),	and	$725	million	aggregate	principal	amount	of	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the "senior	subordinated	notes"),	which	mature	on	July	15,	2017,	pursuant	to	an	indenture,	dated	as	of	July	6,	2007	(the	"senior	subordinated	indenture").	The	senior	notes	and	the senior	subordinated	notes	are	collectively	referred	to	herein	as	the	"notes."	The	senior	indenture	and	the	senior	subordinated	indenture	are	collectively	referred	to	herein	as	the "indentures."

Interest	on	the	notes	is	payable	on	January	15	and	July	15	of	each	year,	commencing	January	15,	2008.	Interest	on	the	senior	notes	will	be	payable	in	cash.	Cash	interest	on the	senior	subordinated	notes	will	accrue	at	a	rate	of	11.875%	per	annum,	and	PIK	interest	(as	that	term	is	defined	below)	will	accrue	at	a	rate	of	12.625%	per	annum.	The	initial interest	payment	on	the	senior	subordinated	notes	will	be	payable	in	cash.	For	any	interest	period	thereafter	through	July	15,	2011,	we	may	elect	to	pay	interest	on	the	senior subordinated	notes	(i)	in	cash,	(ii)	by	increasing	the	principal	amount	of	the	senior	subordinated	notes	or	issuing	new	senior	subordinated	notes	("PIK	interest")	or	(iii)	by	paying interest	on	half	of	the	principal	amount	of	the	senior	subordinated	notes	in	cash	interest	and	half	in	PIK	interest.	After	July	15,	2011,	all	interest	on	the	senior	subordinated	notes	will be	payable	in	cash.

The	notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future	direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the	obligations under	our	New	Credit	Facilities.

We	may	redeem	some	or	all	of	the	notes	at	any	time	at	redemption	prices	described	or	set	forth	in	the	indentures.	We	repurchased	$25.0	million	of	the	11.875%/12.625% senior	subordinated	toggle	notes	in	the	fourth	quarter	of	2007.

Change	of	Control.	Upon	the	occurrence	of	a	change	of	control,	which	is	defined	in	the	indentures,	each	holder	of	the	notes	has	the	right	to	require	us	to	repurchase	some	or all	of	such	holder's	notes	at	a	purchase	price	in	cash	equal	to	101%	of	the	principal	amount	thereof,	plus	accrued	and	unpaid	interest,	if	any,	to	the	repurchase	date.

Covenants.	The	indentures	contain	covenants	limiting,	among	other	things,	our	ability	and	the	ability	of	our	restricted	subsidiaries	to	(subject	to	certain	exceptions):

·		incur	additional	debt,	issue	disqualified	stock	or	issue	certain	preferred	stock;

·		pay	dividends	on	or	make	certain	distributions	and	other	restricted	payments;

·		enter	into	transactions	with	affiliates;

·		make	payments	to	us;

·		consolidate,	merge,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets;	and

Events	of	Default.	The	indentures	also	provide	for	events	of	default	which,	if	any	of	them	occurs,	would	permit	or	require	the	principal	of	and	accrued	interest	on	the	notes to	become	or	to	be	declared	due	and	payable.

Registration	Rights	Agreement.	On	July	6,	2007,	we	entered	into	a	registration	rights	agreement	with	respect	to	the	notes.		In	the	registration	rights	agreement,	we	agreed	to use	commercially	reasonable	efforts	to	register	with	the	SEC	new	senior	notes	having	substantially	identical	terms	as	the	senior	notes	and	new	senior	subordinated	notes	having substantially	identical	terms	as	the	senior	subordinated	notes.		We	filed	this	registration	statement	with	the	SEC,	and	it	was	declared	effective,	in	the	fourth	quarter	of	fiscal 2007.		We	subsequently	commenced	the	offer	to	exchange	the	new	senior	notes	and	the	new	senior	subordinated	notes	for	each	of	the	outstanding	senior	notes	and	the	outstanding senior	subordinated	notes,	respectively.	The	exchange	offer	expired	on	March	17,	2008.		All	of	the	outstanding	senior	notes	and	senior	subordinated	notes	were	tendered	in	the exchange	offer.

# Adjusted	EBITDA

Under	the	New	Credit	Facilities	and	the	indentures,	certain	limitations	and	restrictions	could	occur	if	we	are	not	able	to	satisfy	and	remain	in	compliance	with	specified financial	ratios.	Management	believes	the	most	significant	of	such	ratios	is	the	senior	secured	incurrence	test	under	the	New	Credit	Facilities.		This	test	measures	the	ratio	of	the senior	secured	debt	to	Adjusted	EBITDA.	This	ratio	would	need	to	be	no	greater	than	4.25	to	1	to	avoid	such	limitations	and	restrictions.	As	of	February	1,	2008,	this	ratio	was	3.4 to	1.	Senior	secured	debt	is	defined	as	our	total	debt	secured	by	liens	or	similar	encumbrances	less	cash	and	cash	equivalents.		EBITDA	is	defined	as	income	(loss)	from	continuing operations	before	cumulative	effect	of	change	in	accounting	principle	plus	interest	and	other	financing	costs,	net,	provision	for	income	taxes,	and	depreciation	and	amortization. Adjusted	EBITDA	is	defined	as	EBITDA,	further	adjusted	to	give	effect	to	adjustments	required	in	calculating	this	covenant	ratio	under	our	New	Credit	Facilities.	EBITDA	and Adjusted	EBITDA	are	not	presentations	made	in	accordance	with	GAAP,	are	not	measures	of	financial	performance	or	condition,	liquidity	or	profitability,	and	should	not	be considered	as	an	alternative	to	(1)	net	income,	operating	income	or	any	other	performance	measures	determined	in	accordance	with	GAAP	or	(2)	operating	cash	flows	determined	in accordance	with	GAAP.	Additionally,	EBITDA	and	Adjusted	EBITDA	are	not	intended	to	be	measures	of	free	cash	flow	for	management's	discretionary	use,	as	they	do	not consider	certain	cash	requirements	such	as	interest	payments,	tax	payments	and	debt	service	requirements	and	replacements	of	fixed	assets.

Our	presentation	of	EBITDA	and	Adjusted	EBITDA	has	limitations	as	an	analytical	tool,	and	should	not	be	considered	in	isolation	or	as	a	substitute	for	analysis	of	our results	as	reported	under	GAAP.	Because	not	all	companies	use	identical	calculations,	these	presentations	of	EBITDA	and	Adjusted	EBITDA	may	not	be	comparable	to	other similarly	titled	measures	of 39

other	companies.	We	believe	that	the	presentation	of	EBITDA	and	Adjusted	EBITDA	is	appropriate	to	provide	additional	information	about	the	calculation	of	this	financial	ratio	in the	New	Credit	Facilities.	Adjusted	EBITDA	is	a	material	component	of	this	ratio.	Specifically,	non-compliance	with	the	senior	secured	indebtedness	ratio	contained	in	our	New Credit	Facilities	could	prohibit	us	from	being	able	to	incur	additional	secured	indebtedness,	other	than	the	additional	funding	provided	for	under	the	senior	secured	credit	agreement and	pursuant	to	specified	exceptions,	to	make	investments,	to	incur	liens	and	to	make	certain	restricted	payments.

The	calculation	of	Adjusted	EBITDA	under	the	New	Credit	Facilities	is	as	follows:

# Other	Considerations

Our	inventory	balance	represented	approximately	44%	of	our	total	assets	exclusive	of	goodwill	and	other	intangible	assets	as	of	February	1,	2008.	Our	proficiency	in managing	our	inventory	balances	can	have	a	significant	impact	on	our	cash	flows	from	operations	during	a	given	fiscal	year.	We	have	made	more	efficient	inventory	management	a strategic	priority,	as	more	fully	discussed	in	the	"Executive	Overview"	above.

During	2006	and	2005,	the	Predecessor's	Board	of	Directors	authorized	the	repurchase	of	up	to	$500	million	and	10	million	shares,	respectively,	of	the	Predecessor's outstanding	common	stock.	These	authorizations	allowed	purchases	in	the	open	market	or	in	privately	negotiated	transactions	from	time	to	time,	subject	to	market	conditions.	During 2006,	we	purchased	approximately	4.5	million	shares	pursuant	to	the	2005	authorization	at	a	total	cost	of	$79.9	million.	During	2005,	we	purchased	approximately	15.0	million shares	pursuant	to	the	2005	and	a	prior	authorization	at	a	total	cost	of	$297.6	million.

We	may	seek,	from	time	to	time,	to	retire	the	notes	(as	defined	above)	through	cash	purchases	on	the	open	market,	in	privately	negotiated	transactions	or	otherwise.	Such repurchases,	if	any,	will	depend	on	prevailing	market	conditions,	our	liquidity	requirements,	contractual	restrictions	and	other	factors.	The	amounts	involved	may	be	material.

The	following	table	summarizes	our	significant	contractual	obligations	and	commercial	commitments	as	of	February	1,	2008	(in	thousands):

(a) Represents	obligations	for	interest	payments	on	long-term	debt	and	capital	lease	obligations,	and	includes	projected	interest	on	variable	rate	long-term	debt,	based	upon 2007	year	end	rates.

(b) We	retain	a	significant	portion	of	the	risk	for	our	workers'	compensation,	employee	health	insurance,	general	liability,	property	loss	and	automobile	insurance.	As	these obligations	do	not	have	scheduled	maturities,	these	amounts	represent	undiscounted	estimates	based	upon	actuarial	assumptions.	Reserves	for	workers'	compensation	and general	liability	which	existed	as	of	the	Merger	date	were	discounted	in	order	to	arrive	at	estimated	fair	value.		All	other	amounts	are	reflected	on	an	undiscounted	basis	in our	consolidated	balance	sheets.

(c) Operating	lease	obligations	are	inclusive	of	amounts	included	in	deferred	rent	and	closed	store	obligations	in	our	consolidated	balance	sheets.

(d) We	entered	into	a	monitoring	agreement,	dated	July	6,	2007,	with	affiliates	of	certain	of	our	Investors	pursuant	to	which	those	entities	will	provide	management	and advisory	services.		Such	agreement	has	no	contractual	term	and	for	purposes	of	this	schedule	is	presumed	to	be	outstanding	for	a	period	of	five	years.

(e) Commercial	commitments	include	information	technology	license	and	support	agreements,	supplies,	fixtures,	letters	of	credit	for	import	merchandise,	and	other	inventory purchase	obligations.

(f) Purchase	obligations	include	legally	binding	agreements	for	software	licenses	and	support,	supplies,	fixtures,	and	merchandise	purchases	excluding	such	purchases	subject to	letters	of	credit.

In	2007	and	2006,	our	South	Carolina-based	wholly	owned	captive	insurance	subsidiary,	Ashley	River	Insurance	Company	("ARIC"),	had	cash	and	cash	equivalents	and investments	balances	held	pursuant	to	South	Carolina	regulatory	requirements	to	maintain	a	specified	percentage	of	ARIC's	liability	and	equity	balances	(primarily	insurance liabilities)	in	the	form	of	certain	specified	types	of	assets	and,	as	such,	these	investments	are	not	available	for	general	corporate	purposes.	At	February	1,	2008,	these	cash	and	cash equivalents	balances	and	investments	balances	were	$11.9	million	and	$51.5	million,	respectively.

During	2005,	we	incurred	significant	losses	caused	by	Hurricane	Katrina,	primarily	inventory	and	fixed	assets,	in	the	form	of	store	fixtures	and	leasehold	improvements. We	reached	final	settlement	of	our	related	insurance	claim	in	2006	and	received	proceeds	totaling	$21.0	million	due	to	these	losses,	including	$13.0	million	in	2006	and	$8.0	million in	2005,	and	have	utilized	a	portion	of	these	proceeds	to	replace	lost	assets.	Insurance	proceeds	related	to	fixed	assets	are	included	in	cash	flows	from	investing	activities	and proceeds	related	to	inventory	losses	and	business	interruption	are	included	in	cash	flows	from	operating	activities.

Legal	actions,	claims	and	tax	contingencies.	As	described	in	Note	7	to	the	Consolidated	Financial	Statements,	we	are	involved	in	a	number	of	legal	actions	and	claims, some	of	which	could	potentially	result	in	material	cash	payments.		Adverse	developments	in	those	actions	could	materially	and	adversely	affect	our	liquidity.		As	discussed	in	Note	5 we	also	have	certain	income	tax-related	contingencies	as	more	fully	described	below	under	"Critical	Accounting	Policies	and	Estimates."	Future	negative	developments	could	have	a material	adverse	effect	on	our	liquidity.

Considerations	regarding	distribution	center	leases.	The	Merger	and	certain	of	the	related	financing	transactions	may	be	interpreted	as	giving	rise	to	certain	trigger	events (which	may	include	events	of	default)	under	our	three	distribution	center	leases.	In	that	event,	our	additional	cost	of	acquiring	the	underlying	land	and	building	assets	could approximate	$112	million.		At	this	time,	we	do	not	believe	such	issues	would	result	in	the	purchase	of	these	distribution	centers;	however,	the	payments	associated	with	such	an outcome	would	have	a	negative	impact	on	our	liquidity.	To	minimize	the	uncertainty	associated	with	such	possible	interpretations,	we	are	negotiating	the	restructuring	of	these leases	and	the	related	underlying	debt.	We	have	concluded	that	a	probable	loss	exists	in	connection	with	the	restructurings	and	have	recorded	associated	SG&A	expenses	in	the Successor	financial	statements	for	the	period	ended	February	1,	2008	totaling	$12.0	million.	The	ultimate	resolution	of	these	negotiations	may	result	in	changes	in	the	amounts	of such	losses,	which	changes	may	be	material.

Credit	ratings.		On	June	12,	2007	Standard	&	Poor's	revised	our	long-term	debt	rating	to	B,	and	left	our	long-term	debt	ratings	on	negative	watch.		Moody's	revised	our long-term	debt	rating	to	B3	with	a	stable	outlook.		These	current	ratings	are	considered	non-investment	grade.		Our	current	credit	ratings,	as	well	as	future	rating	agency	actions, could	(1)	negatively	impact	our	ability	to	obtain	financings	to	finance	our	operations	on	satisfactory	terms;	(2)	have	the	effect	of	increasing	our	financing	costs;	and	(3)	have	the effect	of	increasing	our	insurance	premiums	and	collateral	requirements	necessary	for	our	self-insured	programs.

# Cash	flows

The	discussion	of	the	cash	flows	from	operating,	investing	and	financing	activities	included	below	for	2007	is	generally	based	on	the	combination	of	the	Predecessor	and Successor	for	the	52-week	period	ended	February	1,	2008,	which	we	believe	provides	a	more	meaningful	understanding	of	our	liquidity	and	capital	resources	for	the	time	period presented.

Cash	flows	from	operating	activities.		Cash	flows	from	operating	activities	for	2007	compared	to	2006	increased	by	$36.2	million,	notwithstanding	a	decline	in	net	income (loss)	of	$150.8	million,	as	described	in	detail	under	"Results	of	Operations"	above,	and	which	is	partially	attributable	to	$102.6	million	of	Transaction	and	related	costs	in	2007. Other	significant	components	of	the	change	in	cash	flows	from	operating	activities	in	2007	as	compared	to	2006	were	changes	in	inventory	balances,	which	decreased	by approximately	10%	during	2007	compared	to	a	decrease	of	approximately	3%	during	2006.	Inventory	levels	in	the	seasonal	category	declined	by	$84.5	million,	or	24%,	in	2007 compared	to	a	$6.7	million,	or	2%,	increase	in	2006.	The	highly	consumable	category	declined	by	$42.4	million,	or	6%,	in	2007	compared	to	a	$63.2	million,	or	10%,	increase	in 2006.	The	home	products	category	increased	by	$3.5	million,	or	2%,	in	2007	as	compared	to	a	$52.5	million,	or	25%,	decline	in	2006.	The	basic	clothing	category	decreased	by $20.3	million,	or	9%,	in	2007	as	compared	to	a	$59.5	million,	or	21%,	decrease	in	2006.	In	addition	to	inventory	changes	the	decline	in	net	income	was	a	principal	factor	in	the reduction	in	income	taxes	paid	in	2007	as	compared	to	2006.	Also	offsetting	the	decline	in	net	income	were	changes	in	accrued	expenses	in	2007	as	compared	to	2006,	which increased	primarily	due	to	income	tax	related	reserves,	accrued	interest,	incentive	compensation	accrual,	the	accrued	loss	in	connection	with	the	ongoing	negotiations	to	restructure our	distribution	center	leases,	and	accruals	for	lease	liabilities	on	closed	stores.

Cash	flows	from	operating	activities	for	2006	compared	to	2005	declined	by	$150.1	million.	The	most	significant	component	of	the	decline	in	cash	flows	from	operating activities	in	2006	as	compared	to	2005	was	the	reduction	in	net	income,	as	described	in	detail	under	"Results	of	Operations"	above.	Partially	offsetting	this	decline	are	certain noncash	charges	included	in	net	income,	including	below-cost	markdowns	on	inventory	balances	and	property	and	equipment	impairment	charges	totaling	$78.1	million,	and	a	$13.8 million	increase	in	noncash	depreciation	and	amortization	charges	in	2006	as	compared	to	2005.	In	addition,	the	reduction	in	2006	year	end	inventory	balances	reflect	the	effect	of below-cost	markdowns	and	our	efforts	to	sell	through	excess	inventories,	as	compared	with	increases	in	2005	and	2004.		Seasonal	inventory	levels	increased	by	2%	in	2006	as compared	to	a	10%	increase	in	2005,	home	products	inventory	levels	declined	by	25%	in	2006	as	compared	to	a	2%	increase	in	2005,	while	basic	clothing	inventory	levels	declined by	21%	in	2006	as	compared	to	a	5%	decline	in	2005.	Total	merchandise	inventories	at	the	end	of	2006	were	$1.43	billion	compared	to	$1.47	billion	at	the	end	of	2005,	a	2.9% decrease	overall,	and	a	6.4%	decrease	on	a	per	store	basis,	reflecting	both	our	focus	on	liquidating	packaway	merchandise	and	the	effect	of	below-cost	markdowns.

Cash	flows	from	investing	activities.	The	Merger,	as	discussed	in	more	detail	above,	required	cash	payments	of	approximately	$6.7	billion,	net	of	cash	acquired	of	$350 million.	Significant	components	of	property	and	equipment	purchases	in	2007	included	the	following	approximate	amounts:	$60	million	for	improvements,	upgrades,	remodels	and relocations	of	existing	stores;	$45	million	for	new	stores;	and	$30	million	for	distribution	and	transportation-related	capital	expenditures.	During	2007,	we	opened	365	new	stores and	remodeled	or	relocated	300	stores. 43

During	2007	we	purchased	a	secured	promissory	note	for	$37.0	million	which	represents	debt	issued	by	a	third-party	entity	from	which	we	lease	our	distribution	center	in Ardmore,	Oklahoma.	Purchases	and	sales	of	short-term	investments	in	2007,	which	equaled	net	sales	of	$22.1	million,	primarily	reflect	our	investment	activities	in	our	captive insurance	subsidiary,	and	all	purchases	of	long-term	investments	are	related	to	the	captive	insurance	subsidiary.

Cash	flows	used	in	investing	activities	totaling	$282.0	million	in	2006	were	primarily	related	to	capital	expenditures	and,	to	a	lesser	degree,	purchases	of	long-term investments.	Significant	components	of	our	property	and	equipment	purchases	in	2006	included	the	following	approximate	amounts:	$66	million	for	distribution	and	transportation- related	capital	expenditures	(including	approximately	$30	million	related	to	our	distribution	center	in	Marion,	Indiana	which	opened	in	2006);	$66	million	for	new	stores;	$50 million	for	the	EZstore TM 	project;	and	$38	million	for	capital	projects	in	existing	stores.	During	2006	we	opened	537	new	stores	and	remodeled	or	relocated	64	stores.

Purchases	and	sales	of	short-term	investments	in	2006,	which	equaled	net	sales	of	$1.9	million,	reflect	our	investment	activities	in	tax-exempt	auction	rate	securities	as	well as	investing	activities	of	our	captive	insurance	subsidiary.	Purchases	of	long-term	investments	are	related	to	the	captive	insurance	subsidiary.

Significant	components	of	our	purchases	of	property	and	equipment	in	2005	included	the	following	approximate	amounts:	$102	million	for	distribution	and	transportation- related	capital	expenditures;	$96	million	for	new	stores;	$47	million	related	to	the	EZstore TM 	project;	$18	million	for	certain	fixtures	in	existing	stores;	and	$15	million	for	various systems-related	capital	projects.	During	2005,	we	opened	734	new	stores	and	relocated	or	remodeled	82	stores.	Distribution	and	transportation	expenditures	in	2005	included	costs associated	with	the	construction	of	our	new	distribution	centers	in	South	Carolina	and	Indiana.

Net	sales	of	short-term	investments	in	2005	of	$34.1	million	primarily	reflect	our	investment	activities	in	tax-exempt	auction	rate	securities.	Purchases	of	long-term investments	are	related	to	our	captive	insurance	subsidiary.

Capital	expenditures	during	2008	are	projected	to	be	approximately	$200	to	$220	million.		We	anticipate	funding	2008	capital	requirements	with	cash	flows	from operations	and	our	revolving	credit	facility,	if	necessary.	Significant	components	of	the	2008	capital	plan	include	growth	initiatives	as	well	as	continued	investment	in	our	existing store	base,	plans	for	remodeling	and	relocating	approximately	400	stores,	additional	investments	in	our	supply	chain,	and	leasehold	improvements	and	fixtures	and	equipment	for approximately	200	new	stores.	We	plan	to	undertake	these	expenditures	in	order	to	improve	our	infrastructure	and	enhance	our	cash	generated	from	operating	activities.

Cash	flows	from	financing	activities.		To	finance	the	Merger,	we	issued	long-term	debt	of	approximately	$4.2	billion	and	issued	common	stock	in	the	amount	of approximately	$2.8	billion.	We	incurred	costs	associated	with	the	issuance	of	Merger-related	long-term	debt	of	$87.4	million.	As	discussed	above,	we	completed	a	cash	tender	offer for	our	2010	Notes.	Approximately	99%	of	the	2010	Notes	were	validly	tendered	resulting	in	repayments	of	long-term	debt	and	related	consent	fees	in	the	amount	of	$215.6	million. Borrowings,	net	of	repayments,	under	our	new	asset-based	revolving	credit	facility	in	2007	totaled	$102.5	million.

Cash	flows	used	in	financing	activities	during	2006	included	the	repurchase	of	approximately	4.5	million	shares	of	our	common	stock	at	a	total	cost	of	$79.9	million,	cash dividends	paid	of	$62.5	million,	or	$0.20	per	share,	on	our	outstanding	common	stock,	and	$14.1	million	to	reduce	our	outstanding	capital	lease	and	financing	obligations.	These uses	of	cash	were	partially	offset	by	proceeds	from	the	exercise	of	stock	options	during	2006	of	$19.9	million.

During	2005,	we	repurchased	approximately	15.0	million	shares	of	our	common	stock	at	a	total	cost	of	$297.6	million,	paid	cash	dividends	of	$56.2	million,	or	$0.175	per share,	on	our	outstanding	common	stock,	and	expended	$14.3	million	to	reduce	our	outstanding	capital	lease	and	financing	obligations.	Also	in	2005,	we	received	proceeds	of	$14.5 million	from	the	issuance	of	a	tax	increment	financing	in	conjunction	with	the	construction	of	our	new	distribution	center	in	Indiana	and	proceeds	from	the	exercise	of	stock	options of	$29.4	million.

The	borrowings	and	repayments	under	the	revolving	credit	agreements	in	2007,	2006	and	2005	were	primarily	a	result	of	activity	associated	with	periodic	cash	needs.

# Critical	Accounting	Policies	and	Estimates

The	preparation	of	financial	statements	in	accordance	with	GAAP	requires	management	to	make	estimates	and	assumptions	that	affect	reported	amounts	and	related disclosures.		In	addition	to	the	estimates	presented	below,	there	are	other	items	within	our	financial	statements	that	require	estimation,	but	are	not	deemed	critical	as	defined	below. We	believe	these	estimates	are	reasonable	and	appropriate.	However,	if	actual	experience	differs	from	the	assumptions	and	other	considerations	used,	the	resulting	changes	could have	a	material	effect	on	the	financial	statements	taken	as	a	whole.

Management	believes	the	following	policies	and	estimates	are	critical	because	they	involve	significant	judgments,	assumptions,	and	estimates.	Management	has	discussed the	development	and	selection	of	the	critical	accounting	estimates	with	the	Audit	Committee	of	our	Board	of	Directors,	and	the	Audit	Committee	has	reviewed	the	disclosures presented	below	relating	to	those	policies	and	estimates.

Merchandise	Inventories.	Merchandise	inventories	are	stated	at	the	lower	of	cost	or	market	with	cost	determined	using	the	retail	last-in,	first-out	("LIFO")	method.	Under our	retail	inventory	method	("RIM"),	the	calculation	of	gross	profit	and	the	resulting	valuation	of	inventories	at	cost	are	computed	by	applying	a	calculated	cost-to-retail	inventory ratio	to	the	retail	value	of	sales.	The	RIM	is	an	averaging	method	that	has	been	widely	used	in	the	retail	industry	due	to	its	practicality.	Also,	it	is	recognized	that	the	use	of	the	RIM will	result	in	valuing	inventories	at	the	lower	of	cost	or	market	("LCM")	if	markdowns	are	currently	taken	as	a	reduction	of	the	retail	value	of	inventories.

Inherent	in	the	RIM	calculation	are	certain	significant	management	judgments	and	estimates	including,	among	others,	initial	markups,	markdowns,	and	shrinkage,	which significantly	impact	the	gross	profit	calculation	as	well	as	the	ending	inventory	valuation	at	cost.	These	significant	estimates,	coupled	with	the	fact	that	the	RIM	is	an	averaging process,	can,	under	certain	circumstances,	produce	distorted	cost	figures.	Factors	that	can	lead	to	distortion	in	the	calculation	of	the	inventory	balance	include:

·		applying	the	RIM	to	a	group	of	products	that	is	not	fairly	uniform	in	terms	of	its	cost	and	selling	price	relationship	and	turnover;

·		applying	the	RIM	to	transactions	over	a	period	of	time	that	include	different	rates	of	gross	profit,	such	as	those	relating	to	seasonal	merchandise;

·		inaccurate	estimates	of	inventory	shrinkage	between	the	date	of	the	last	physical	inventory	at	a	store	and	the	financial	statement	date;	and

·		inaccurate	estimates	of	LCM	and/or	LIFO	reserves.

Factors	that	reduce	potential	distortion	include	the	use	of	historical	experience	in	estimating	the	shrink	provision	(see	discussion	below)	and	recent	improvements	in	the LIFO	analysis	whereby	all	SKUs	are	considered	in	the	index	formulation.	As	part	of	this	process	we	also	perform	an	inventory-aging	analysis	for	determining	obsolete	inventory. Our	policy	is	to	write	down	inventory	to	an	LCM	value	based	on	various	management	assumptions	including	estimated	markdowns	and	sales	required	to	liquidate	such	aged inventory	in	future	periods.	Inventory	is	reviewed	on	a	quarterly	basis	and	adjusted	as	appropriate	to	reflect	write-downs	determined	to	be	necessary.

Factors	such	as	slower	inventory	turnover	due	to	changes	in	competitors'	tactics,	consumer	preferences,	consumer	spending	and	unseasonable	weather	patterns,	among other	factors,	could	cause	excess	inventory	requiring	greater	than	estimated	markdowns	to	entice	consumer	purchases,	resulting	in	an	unfavorable	impact	on	our	consolidated financial	statements.	Sales	shortfalls	due	to	the	above	factors	could	cause	reduced	purchases	from	vendors	and	associated	vendor	allowances	that	would	also	result	in	an	unfavorable impact	on	our	consolidated	financial	statements.

We	calculate	our	shrink	provision	based	on	actual	physical	inventory	results	during	the	fiscal	period	and	an	accrual	for	estimated	shrink	occurring	subsequent	to	a	physical inventory	through	the	end	of	the	fiscal	reporting	period.	This	accrual	is	calculated	as	a	percentage	of	sales	at	each	retail	store,	at	a	department	level,	and	is	determined	by	dividing the	book-to-physical	inventory	adjustments	recorded	during	the	previous	twelve	months	by	the	related	sales	for	the	same	period	for	each	store.	To	the	extent	that	subsequent	physical inventories	yield	different	results	than	this	estimated	accrual,	our	effective	shrink	rate	for	a	given	reporting	period	will	include	the	impact	of	adjusting	the	estimated	results	to	the actual	results.	Although	we	perform	physical	inventories	in	virtually	all	of	our	stores	on	an	annual	basis,	the	same	stores	do	not	necessarily	get	counted	in	the	same	reporting	periods from	year	to	year,	which	could	impact	comparability	in	a	given	reporting	period.

Goodwill	and	Indefinite-Lived	Intangible	Assets.	Under	SFAS	142,	"Goodwill	and	Other	Intangible	Assets",	we	are	required	to	test	goodwill	and	intangible	assets	with indefinite	lives	for	impairment	annually,	or	more	frequently	if	impairment	indicators	occur.	Significant	judgments	required	in	this	testing	process	may	include	projecting	future	cash flows,	determining	appropriate	discount	rates	and	other	assumptions.	Projections	are	based	on	management's	best	estimate	given	recent	financial	performance,	market	trends, strategic	plans	and	other	available	information.	Changes	in	these	estimates	and	assumptions	could	materially	affect	the	determination	of	fair	value	or	impairment.	Future	indicators	of impairment	could	result	in	an	asset	impairment	charge.

Purchase	Accounting.	The	Merger	was	accounted	for	as	a	reverse	acquisition	in	accordance	with	the	purchase	accounting	provisions	of	SFAS	141,	"Business Combinations,"	under	which	our	assets	and	liabilities	have	been	accounted	for	at	their	estimated	fair	values	as	of	the	date	of	the	Merger.	The	aggregate	purchase	price	was	allocated to	the	tangible	and	intangible	assets	acquired	and	liabilities	assumed,	based	upon	an	assessment	of	their	relative	fair	values	as	of	the	date	of	the	Merger.	These	estimates	of	fair values,	the	allocation	of	the	purchase	price	and	other	factors	related	to	the	accounting	for	the	Merger	are	subject	to	significant	judgments	and	the	use	of	estimates.

Property	and	Equipment.	Property	and	equipment	are	recorded	at	cost.	We	group	our	assets	into	relatively	homogeneous	classes	and	generally	provide	for	depreciation	on	a straight-line	basis	over	the	estimated	average	useful	life	of	each	asset	class,	except	for	leasehold	improvements,	which	are	amortized	over	the	shorter	of	the	applicable	lease	term	or the	estimated	useful	life	of	the	asset.	Certain	store	and	warehouse	fixtures,	when	fully	depreciated,	are	removed	from	the	cost	and	related	accumulated	depreciation	and	amortization accounts.	The	valuation	and	classification	of	these	assets	and	the	assignment	of	useful	depreciable	lives	involves	significant	judgments	and	the	use	of	estimates.

Impairment	of	Long-lived	Assets.	We	review	the	carrying	value	of	all	long-lived	assets	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the carrying	value	of	an	asset	may	not	be	recoverable.	In	accordance	with	Statement	of	Financial	Accounting	Standards	("SFAS")	144,	"Accounting	for	the	Impairment	or	Disposal	of Long-Lived	Assets,"	we	review	for	impairment	stores	open	more	than	two	years	for	which	current	cash	flows	from	operations	are	negative.	Impairment	results	when	the	carrying value	of	the	assets	exceeds	the	undiscounted	future	cash	flows	over	the	life	of	the	lease.	Our	estimate	of	undiscounted	future	cash	flows	over	the	lease	term	is	based	upon	historical operations	of	the	stores	and	estimates	of	future	store	profitability	which	encompasses	many	factors	that	are	subject	to	variability	and	are	difficult	to	predict.	If	a	long-lived	asset	is found	to	be	impaired,	the	amount	recognized	for	impairment	is	equal	to	the	difference	between	the	carrying	value	and	the	asset's	fair	value.	The	fair	value	is	estimated	based primarily	upon	future	cash	flows	(discounted	at	our	credit	adjusted	risk-free	rate)	or	other	reasonable	estimates	of	fair	market	value.

Insurance	Liabilities.	We	retain	a	significant	portion	of	the	risk	for	our	workers'	compensation,	employee	health	insurance,	general	liability,	property	loss	and	automobile coverage.	These	costs	are	significant	primarily	due	to	the	large	employee	base	and	number	of	stores.	At	the	date	of	the	Merger	this	liability	was	discounted	in	accordance	with purchase	accounting	standards.	Subsequent	to	the	Merger,	provisions	are	made	to	this	insurance	liability	on	an	undiscounted	basis	based	on	actual	claim	data	and	estimates	of incurred	but	not	reported	claims	developed	using	actuarial	methodologies	based	on	historical	claim	trends.	If	future	claim	trends	deviate	from	recent	historical	patterns,	we	may	be required	to	record	additional	expenses	or	expense	reductions,	which	could	be	material	to	our	future	financial	results.

Contingent	Liabilities	–	Income	Taxes	Income	tax	reserves	are	determined	using	the	methodology	established	by	the	Financial	Accounting	Standards	Board	("FASB") Interpretation	48,	Accounting	for	Uncertainty	in	Income	Taxes	–	An	Interpretation	of	FASB	Statement	109	("FIN	48").		FIN	48,	which	we	adopted	on	February	3,	2007,	requires companies	to	assess	each	income	tax	position	taken	using	a	two	step	process.		A	determination	is	first	made	as	to	whether	it	is	more	likely	than	not	that	the	position	will	be	sustained, based	upon	the	technical	merits,	upon	examination	by	the	taxing	authorities.		If	the	tax	position	is	expected	to	meet	the	more	likely	than	not	criteria,	the	benefit	recorded	for	the	tax position	equals	the	largest	amount	that	is	greater	than	50%	likely	to	be	realized	upon	ultimate	settlement	of	the	respective	tax	position.		Uncertain	tax	positions	require determinations	and	estimated	liabilities	to	be	made	based	on	provisions	of	the	tax	law	which	may	be	subject	to	change	or	varying	interpretation.		If	our	determinations	and	estimates prove	to	be	inaccurate,	the	resulting	adjustments	could	be	material	to	our	future	financial	results.

Contingent	Liabilities	-	Legal	Matters.	We	are	subject	to	legal,	regulatory	and	other	proceedings	and	claims.	We	establish	liabilities	as	appropriate	for	these	claims	and proceedings	based	upon	the	probability	and	estimability	of	losses	and	to	fairly	present,	in	conjunction	with	the	disclosures	of	these	matters	in	our	financial	statements	and	SEC filings,	management's	view	of	our	exposure.	We	review	outstanding	claims	and	proceedings	with	external	counsel	to	assess	probability	and	estimates	of	loss.	We	re-evaluate	these assessments	on	a	quarterly	basis	or	as	new	and	significant	information	becomes	available	to	determine	whether	a	liability	should	be	established	or	if	any	existing	liability	should	be adjusted.	The	actual	cost	of	resolving	a	claim	or	proceeding	ultimately	may	be	substantially	different	than	the	amount	of	the	recorded	liability.	In	addition,	because	it	is	not permissible	under	GAAP	to	establish	a	litigation	liability	until	the	loss	is	both	probable	and	estimable,	in	some	cases	there	may	be	insufficient	time	to	establish	a	liability	prior	to	the actual	incurrence	of	the	loss	(upon	verdict	and	judgment	at	trial,	for	example,	or	in	the	case	of	a	quickly	negotiated	settlement).	See	Note	7	to	the	Consolidated	Financial	Statements.

Lease	Accounting	and	Excess	Facilities.	The	majority	of	our	stores	are	subject	to	short-term	leases	(usually	with	initial	or	primary	terms	of	3	to	5	years)	with	multiple renewal	options

when	available.	We	also	have	stores	subject	to	build-to-suit	arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	10	years	with	multiple	renewal	options. Approximately	half	of	our	stores	have	provisions	for	contingent	rentals	based	upon	a	percentage	of	defined	sales	volume.	We	recognize	contingent	rental	expense	when	the achievement	of	specified	sales	targets	is	considered	probable.	We	recognize	rent	expense	over	the	term	of	the	lease.	We	record	minimum	rental	expense	on	a	straight-line	basis	over the	base,	non-cancelable	lease	term	commencing	on	the	date	that	we	take	physical	possession	of	the	property	from	the	landlord,	which	normally	includes	a	period	prior	to	store opening	to	make	necessary	leasehold	improvements	and	install	store	fixtures.	When	a	lease	contains	a	predetermined	fixed	escalation	of	the	minimum	rent,	we	recognize	the	related rent	expense	on	a	straight-line	basis	and	record	the	difference	between	the	recognized	rental	expense	and	the	amounts	payable	under	the	lease	as	deferred	rent.	We	also	receive tenant	allowances,	which	we	record	as	deferred	incentive	rent	and	amortize	as	a	reduction	to	rent	expense	over	the	term	of	the	lease.	We	reflect	as	a	liability	any	difference	between the	calculated	expense	and	the	amounts	actually	paid.	Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the	applicable	lease	term	or	the	estimated	useful life	of	the	asset.

For	store	closures	(excluding	those	associated	with	a	business	combination)	where	a	lease	obligation	still	exists,	we	record	the	estimated	future	liability	associated	with	the rental	obligation	on	the	date	the	store	is	closed	in	accordance	with	SFAS	146,	"Accounting	for	Costs	Associated	with	Exit	or	Disposal	Activities."	Based	on	an	overall	analysis	of store	performance	and	expected	trends,	management	periodically	evaluates	the	need	to	close	underperforming	stores.	Liabilities	are	established	at	the	point	of	closure	for	the	present value	of	any	remaining	operating	lease	obligations,	net	of	estimated	sublease	income,	and	at	the	communication	date	for	severance	and	other	exit	costs,	as	prescribed	by	SFAS	146. Key	assumptions	in	calculating	the	liability	include	the	timeframe	expected	to	terminate	lease	agreements,	estimates	related	to	the	sublease	potential	of	closed	locations,	and estimation	of	other	related	exit	costs.	If	actual	timing	and	potential	termination	costs	or	realization	of	sublease	income	differ	from	our	estimates,	the	resulting	liabilities	could	vary from	recorded	amounts.	These	liabilities	are	reviewed	periodically	and	adjusted	when	necessary.

Share-Based	Payments.	Our	share-based	stock	option	awards	are	valued	on	an	individual	grant	basis	using	the	Black-Scholes-Merton	closed	form	option	pricing	model. The	application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	valuation	of	stock	options,	which	affects	compensation	expense	related to	these	options.	These	assumptions	include	the	term	that	the	options	are	expected	to	be	outstanding,	an	estimate	of	the	volatility	of	our	stock	price	(which	is	based	on	a	peer	group of	publicly	traded	companies),	applicable	interest	rates	and	the	dividend	yield	of	our	stock.	Other	factors	involving	judgments	that	affect	the	expensing	of	share-based	payments include	estimated	forfeiture	rates	of	share-based	awards.	If	our	estimates	differ	materially	from	actual	experience,	we	may	be	required	to	record	additional	expense	or	reductions	of expense,	which	could	be	material	to	our	future	financial	results.

# Adoption	of	Accounting	Standard

We	adopted	the	provisions	of	FIN	48	effective	February	3,	2007.		The	adoption	resulted	in	an	$8.9	million	decrease	in	retained	earnings	and	a	reclassification	of	certain amounts	between	deferred	income	taxes	and	other	noncurrent	liabilities	to	conform	to	the	balance	sheet	presentation	requirements	of	FIN	48.		As	of	the	date	of	adoption,	the	total reserve	for	uncertain	tax	benefits	was	$77.9	million.		This	reserve	excludes	the	federal	income	tax	benefit	for	the	uncertain	tax	positions	related	to	state	income	taxes	which	is	now included	in	deferred	tax	assets.		As	a	result	of	the	adoption	of	FIN	48,	the	reserve	for	interest	expense	related	to	income	taxes	was	increased	to	$15.3	million	and	a	reserve	for potential	penalties	of	$1.9	million	related	to	uncertain	income	tax	positions	was	recorded.		As	of	the	date	of	adoption,	approximately	$27.1	million	of	the	reserve	for	uncertain	tax positions	would	impact	our	effective	income	tax	rate	if	we	were	to	recognize	the	tax	benefit	for	these	positions.		After	the	Merger	and	the	related	application	of	purchase	accounting, no	portion	of	the	reserve	for	uncertain	tax	positions	that	existed	as	of	the	date	of	adoption	would	impact	our	effective	tax	rate	but	would,	if	subsequently	recognized,	reduce	the amount	of	goodwill	recorded	in	relation	to	the	Merger.

Subsequent	to	the	adoption	of	FIN	48,	we	elected	to	record	income	tax	related	interest	and	penalties	as	a	component	of	the	provision	for	income	tax	expense.

# Accounting	Pronouncements

In	March	2008,	the	FASB	issued	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	161,	"Disclosures	about	Derivative	Instruments	and	Hedging	Activities",	an amendment	of	FASB	Statement	No.	133.	SFAS	161	applies	to	all	derivative	instruments	and	nonderivative	instruments	that	are	designated	and	qualify	as	hedging	instruments pursuant	to	paragraphs	37	and	42	of	SFAS	133	and	related	hedged	items	accounted	for	under	SFAS	133.	SFAS	161	requires	entities	to	provide	greater	transparency	through additional	disclosures	about	how	and	why	an	entity	uses	derivative	instruments,	how	derivative	instruments	and	related	hedged	items	are	accounted	for	under	SFAS	133	and	its related	interpretations,	and	how	derivative	instruments	and	related	hedged	items	affect	an	entity's	financial	position,	results	of	operations,	and	cash	flows.	SFAS	161	is	effective	as of	the	beginning	of	an	entity's	first	fiscal	year	that	begins	after	November	15,	2008.		We	currently	plan	to	adopt	SFAS	161	during	our	2009	fiscal	year.		No	determination	has	yet been	made	regarding	the	potential	impact	of	this	standard	on	our	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	141(R),	"Business	Combinations".	The	new	standard	establishes	the	requirements	for	how	an	acquirer	recognizes	and measures	in	its	financial	statements	the	identifiable	assets	acquired,	the	liabilities	assumed,	and	any	non-controlling	interest	(formerly	minority	interest)	in	an	acquiree;	provides updated	requirements	for	recognition	and	measurement	of	goodwill	acquired	in	the	business	combination	or	a	gain	from	a	bargain	purchase;	and	provides	updated	disclosure requirements	to	enable	users	of	financial	statements	to	evaluate	the	nature	and	financial	effects	of	the	business	combination.	This	Statement	applies	prospectively	to	business combinations	for	which	the	acquisition	date	is	on	or	after	the	beginning	of	the	first	annual	reporting	period	beginning	on	or	after	December	15,	2008.	Early	adoption	is	not allowed.		This	standard	is	not	expected	to	impact	our	financial	statements	unless	a	qualifying	transaction	is	consummated	subsequent	to	the	effective	date.

In	February	2007	the	FASB	issued	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities-Including	an	amendment	of	FASB	Statement	No. 115"	(SFAS	159).	SFAS	159	permits	entities	to	choose	to	measure	many	financial	instruments	and	certain	other	items	at	fair	value.	It	provides	entities	with	the	opportunity	to mitigate	volatility	in	reported	earnings	caused	by	measuring	related	assets	and	liabilities	differently	without	having	to	apply	complex	hedge	accounting	provisions.	SFAS	159	is effective	as	of	the	beginning	of	an	entity's	first	fiscal	year	that	begins	after	November	15,	2007.	We	currently	plan	to	adopt	SFAS	159	during	our	2008	fiscal	year.		We	are	in	the process	of	evaluating	the	potential	impact	of	this	standard	on	our	consolidated	financial	statements.

In	September	2006,	the	FASB	issued	SFAS	157,	"Fair	Value	Measurements."	SFAS	157	provides	guidance	for	using	fair	value	to	measure	assets	and	liabilities.	The standard	also	requires	expanded	information	about	the	extent	to	which	companies	measure	assets	and	liabilities	at	fair	value,	the	information	used	to	measure	fair	value,	and	the effect	of	fair	value	measurements	on	earnings.	The	standard	applies	whenever	other	standards	require	(or	permit)	assets	or	liabilities	to	be	measured	at	fair	value.	The	standard	does not	expand	the	use	of	fair	value	in	any	new	circumstances.	SFAS	157	is	effective	for	financial	statements	issued	for	fiscal	years	beginning	after	November	15,	2007,	and	interim periods	within	those	fiscal	years.	For	non-financial	assets	and	liabilities,	the	effective	date	has	been	delayed	to	fiscal	years	beginning	after	November	15,	2008.	We	currently	expect to	adopt	SFAS	157	during	our	2008	and	2009	fiscal	years.	We	are	in	the	process	of	evaluating	the	potential	impact	of	this	standard	on	our	consolidated	financial	statements.

# ITEM	7A. QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

# Financial	Risk	Management

We	are	exposed	to	market	risk	primarily	from	adverse	changes	in	interest	rates.	To	minimize	this	risk,	we	may	periodically	use	financial	instruments,	including	derivatives. As	a	matter	of	policy,	we	do	not	buy	or	sell	financial	instruments	for	speculative	or	trading	purposes	and	all	derivative	financial	instrument	transactions	must	be	authorized	and executed	pursuant	to	approval	by	the	Board	of	Directors.	All	financial	instrument	positions	taken	by	us	are	intended	to	be	used	to	reduce	risk	by	hedging	an	underlying	economic exposure.	Because	of	high	correlation	between	the	derivative	financial	instrument	and	the	underlying	exposure	being	hedged,	fluctuations	in	the	value	of	the	financial	instruments are	generally	offset	by	reciprocal	changes	in	the	value	of	the	underlying	economic	exposure.	The	financial	instruments	we	use	are	straightforward	instruments	with	liquid	markets.

# Interest	Rate	Risk

We	manage	our	interest	rate	risk	through	the	strategic	use	of	fixed	and	variable	interest	rate	debt	and,	from	time	to	time,	derivative	financial	instruments.	Our	principal interest	rate	exposure	relates	to	outstanding	amounts	under	our	New	Credit	Facilities.	Our	New	Credit	Facilities	provide	for	variable	rate	borrowings	of	up	to	$3,425.0	million including	availability	of	$1,125.0	million	under	our	senior	secured	asset-based	revolving	credit	facility,	subject	to	the	borrowing	base.		In	order	to	mitigate	a	portion	of	the	variable rate	interest	exposure	under	the	New	Credit	Facilities,	we	entered	into	interest	rate	swaps	with	affiliates	of	Goldman,	Sachs	&	Co.,	Lehman	Brothers	Inc.	and	Wachovia	Capital Markets,	LLC.	Pursuant	to	the	swaps,	which	became	effective	on	July	31,	2007,	we	swapped	three	month	LIBOR	rates	for	fixed	interest	rates	which	will	result	in	the	payment	of	a fixed	rate	of	7.68%	on	a	notional	amount	of	$2,000.0	million	which	will	amortize	on	a	quarterly	basis	until	maturity	at	July	31,	2012.	At	February	1,	2008,	the	notional	amount	was $1,630.0	million.

A	change	in	interest	rates	on	variable	rate	debt	impacts	our	pre-tax	earnings	and	cash	flows;	whereas	a	change	in	interest	rates	on	fixed	rate	debt	impacts	the	economic	fair value	of	debt	but	not	our	pre-tax	earnings	and	cash	flows.		Our	derivatives	qualify	for	hedge	accounting	as	cash	flow	hedges.		Therefore,	changes	in	market	fluctuations	related	to	the effective	portion	of	these	cash	flow	hedges	do	not	impact	our	pre-tax	earnings	until	the	accrued	interest	is	recognized	on	the	derivatives	and	the	associated	hedged	debt.		Based	on our	outstanding	debt	as	of	February	1,	2008	and	assuming	that	our	mix	of	debt	instruments,	derivative	instruments	and	other	variables	remain	the	same,	the	annualized	effect	of	a one	percentage	point	change	in	variable	interest	rates	would	have	a	pretax	impact	on	our	earnings	and	cash	flows	of	approximately	$7.9	million.

The	interest	rate	swaps	are	accounted	for	in	accordance	with	SFAS	No.	133	"Accounting	for	Derivative	Instruments	and	Hedging	Activities",	as	amended	and	interpreted (collectively,	"SFAS	133").		SFAS	133	establishes	accounting	and	reporting	standards	for	derivative	instruments	and	hedging	activities.	SFAS	133	requires	that	all	derivatives	be recognized	as	either	assets	or	liabilities	at	fair	value.	Beginning	October	12,	2007,	we	are	accounting	for	the	swaps	described	above	as	cash	flow	hedges	and	record	the	effective portion	of	changes	in	fair	value	of	the	swaps	within	accumulated	other	comprehensive	income.

Subsequent	to	the	2007	fiscal	year	end,	we	entered	into	a	$350.0	million	step-down	interest	rate	swap	which	became	effective	February	28,	2008	in	order	to	mitigate	an additional	portion	of	the	variable	rate	interest	exposure	under	the	New	Credit	Facilities.		We	entered	into	the	swap	with	Wachovia	Capital	Markets	and	we	swapped	one	month LIBOR	rates	for	fixed	interest	rates,	which	will	result	in	the	payment	of	a	fixed	rate	of	5.58%	on	a	notional	amount	of	$350.0	million	for	the	first	year	and	$150.0	million	for	the second	year.

# ITEM	8.		 FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

# Report	of	Independent	Registered	Public	Accounting	Firm

# To	the	Board	of	Directors	and	Shareholders	of

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Dollar	General	Corporation	and	subsidiaries	as	of	February	1,	2008	(Successor)	and	February	2,	2007 (Predecessor),	and	the	related	consolidated	statements	of	operations,	shareholders'	equity,	and	cash	flows	for	the	periods	from	March	6,	2007	to	February	1,	2008	(Successor), February	3,	2007	to	July	6,	2007	(Predecessor)	and	for	the	years	ended	February	2,	2007	and	February	3,	2006	(Predecessor).		These	financial	statements	are	the	responsibility	of	the Company's	management.		Our	responsibility	is	to	express	an	opinion	on	these	financial	statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	We	were	not	engaged	to	perform	an	audit	of	the Company's	internal	control	over	financial	reporting.	Our	audits	included	consideration	of	internal	control	over	financial	reporting	as	a	basis	for	designing	audit	procedures		that	are appropriate	in	the	circumstances,	but	not	for	the	purpose	of	expressing	an	opinion	on	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting.		Accordingly,	we express	no	such	opinion.	An	audit	also	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements,	assessing	the	accounting principles	used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for our	opinion.

In	our	opinion,	the	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	consolidated	financial	position	of	Dollar	General	Corporation	and subsidiaries	at	February	1,	2008	(Successor)	and	February	2,	2007	(Predecessor),	and	the	consolidated	results	of	their	operations	and	their	cash	flows	for	the	periods	from	March	6, 2007	to	February	1,	2008	(Successor),	February	3,	2007	to	July	6,	2007	(Predecessor)	and	for	the	years	ended	February	2,	2007	and	February	3,	2006	(Predecessor),	in	conformity with	U.S.	generally	accepted	accounting	principles.

As	discussed	in	Notes	1	and	9	to	the	consolidated	financial	statements,	effective	February	4,	2006,	the	Company	changed	its	method	of	accounting	for	stock-based compensation	in	connection	with	the	adoption	of	Statement	of	Financial	Accounting	Standards	No.	123(R),	"Share-Based	Payment".

As	discussed	in	Notes	1	and	5	to	the	consolidated	financial	statements,	effective	February	3,	2007,	the	Company	changed	its	method	of	accounting	for	uncertain	tax positions	in	connection	with	the	adoption	of	FASB	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes".

Ernst	&	Young	LLP

Nashville,	Tennessee

# CONSOLIDATED	BALANCE	SHEETS

# (In	thousands	except	per	share	amounts)

|  | Successor<br>February	1,<br>2008 | Predecessor<br>February	2,<br>2007 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $100,209 | $189,288 |
| Short-term\tinvestments | 19,611 | 29,950 |
| Merchandise\tinventories | 1,288,661 | 1,432,336 |
| Income\ttaxes\treceivable | 32,501 | 9,833 |
| Deferred\tincome\ttaxes | 17,297 | 24,321 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 59,465 | 57,020 |
| Total\tcurrent\tassets | 1,517,744 | 1,742,748 |
| Net\tproperty\tand\tequipment | 1,274,245 | 1,236,874 |
| Goodwill | 4,344,930 | 2,337 |
| Intangible\tassets,\tnet | 1,370,557 | 86 |
| Other\tassets,\tnet | 148,955 | 58,469 |
| Total\tassets | $8,656,431 | $3,040,514 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Current\tportion\tof\tlong-term\tobligations | $3,246 | $8,080 |
| Accounts\tpayable | 551,040 | 555,274 |
| Accrued\texpenses\tand\tother | 300,956 | 253,558 |
| Income\ttaxes\tpayable | 2,999 | 15,959 |
| Total\tcurrent\tliabilities | 858,241 | 832,871 |
| Long-term\tobligations | 4,278,756 | 261,958 |
| Deferred\tincome\ttaxes | 486,725 | 41,597 |
| Other\tliabilities | 319,714 | 158,341 |
| Commitments\tand\tcontingencies\nRedeemable\tcommon\tstock | 9,122 | - |
| Shareholders'\tequity: |  |  |
| Preferred\tstock,\tShares\tauthorized:\t1,000,000 | - |  |
| Series\tB\tjunior\tparticipating\tpreferred\tstock,\tstated |  |  |
| value\t$0.50\tper\tshare;\tShares\tauthorized: |  |  |
| 10,000;\tIssued:\tNone |  | - |
| Common\tstock;\t$0.50\tpar\tvalue,\t1,000,000\tshares\tauthorized, |  |  |
| 555,482\tshares\tissued\tand\toutstanding\tat\tFebruary\t1,\t2008\tand |  |  |
| 500,000\tshares\tauthorized,\t312,436\tshares\tissued\tand |  |  |
| outstanding\tat\tFebruary\t2,\t2007,\trespectively. | 277,741 | 156,218 |
| Additional\tpaid-in\tcapital | 2,480,062 | 486,145 |
| Retained\tearnings\t(accumulated\tdeficit) | (4,818) | 1,103,951 |
| Accumulated\tother\tcomprehensive\tloss | (49,112) | (987) |
| Other\tshareholders'\tequity | - | 420 |
| Total\tshareholders'\tequity | 2,703,873 | 1,745,747 |
| Total\tliabilities\tand\tshareholders'\tequity | $8,656,431 | $3,040,514 |

The	accompanying	notes	are	an	integral	part	of	the	consolidated	financial	statements.

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

# (In	thousands)

|  | through | February	3,	2007 |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | February\t1,\t2008 | through | February\t2, | February\t3, |
|  | (a) | July\t6,\t2007 | 2007 | 2006 |
|  | (30\tweeks) | (22\tweeks) | (52\tweeks) | (53\tweeks) |
| Net\tsales | \t$5,571,493 | \t$3,923,753 | \t$9,169,822 | \t$8,582,237 |
| Cost\tof\tgoods\tsold | 3,999,599 | 2,852,178 | 6,801,617 | 6,117,413 |
| Gross\tprofit | 1,571,894 | 1,071,575 | 2,368,205 | 2,464,824 |
| Selling,\tgeneral\tand\tadministrative | 1,324,508 | 960,930 | 2,119,929 | 1,902,957 |
| Transaction\tand\trelated\tcosts | 1,242 | 101,397 | - | - |
| Operating\tprofit | 246,144 | 9,248 | 248,276 | 561,867 |
| Interest\tincome | (3,799) | (5,046) | (7,002) | (9,001) |
| Interest\texpense | 252,897 | 10,299 | 34,915 | 26,226 |
| Loss\ton\tinterest\trate\tswaps | 2,390 | - | - | - |
| Loss\ton\tdebt\tretirement,\tnet | 1,249 | - | - | - |
| Income\t(loss)\tbefore\tincome\ttaxes | (6,593) | 3,995 | 220,363 | 544,642 |
| Income\ttax\texpense\t(benefit) | (1,775) | 11,993 | 82,420 | 194,487 |
| Net\tincome\t(loss) | \t$(4,818) | \t$(7,998) | \t$137,943 | \t$350,155 |

(a) Includes	the	results	of	operations	of	Buck	Acquisition	Corp.	for	the	period	prior	to	its	merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(its	formation) through	July	6,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps),	and	the	post-merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007 through	February	1,	2008.		See	Notes	1	and	2.

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  | Common<br>Stock<br>Shares | Common<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings | Other<br>Comprehensive<br>Loss | Other<br>Shareholders'<br>Equity | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Predecessor\tBalances, |  |  |  |  |  |  |  |
| January\t28,\t2005 | 328,172 | \t$164,086 | \t$421,600 | \t$1,102,457 | \t$(973) | \t$(2,705) | \t$1,684,465 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |
| Net\tincome | - | - | - | 350,155 | - | - | 350,155 |
| Reclassification\tof\tnet\tloss |  |  |  |  |  |  |  |
| on\tderivatives | - | - | - | - | 179 | - | 179 |
| Comprehensive\tincome |  |  |  |  |  |  | 350,334 |
| Cash\tdividends,\t$0.175\tper |  |  |  |  |  |  |  |
| common\tshare | - | - | - | (56,183) | - | - | (56,183) |
| Issuance\tof\tcommon\tstock |  |  |  |  |  |  |  |
| under\tstock\tincentive |  |  |  |  |  |  |  |
| plans | 2,249 | 1,125 | 28,280 | - | - | - | 29,405 |
| Tax\tbenefit\tfrom\tstock |  |  |  |  |  |  |  |
| option\texercises | - | - | 6,457 | - | - | - | 6,457 |
| Repurchases\tof\tcommon |  |  |  |  |  |  |  |
| stock | (14,977) | (7,489) | - | (290,113) | - | - | (297,602) |
| Sales\tof\tcommon\tstock\tby |  |  |  |  |  |  |  |
| employee\tdeferred |  |  |  |  |  |  |  |
| compensation\ttrust,\tnet |  |  |  |  |  |  |  |
| (42\tshares) | - | - | 95 | - | - | 788 | 883 |
| Issuance\tof\trestricted\tstock |  |  |  |  |  |  |  |
| and\trestricted\tstock\tunits, |  |  |  |  |  |  |  |
| net | 249 | 125 | 5,151 | - | - | (5,276) | - |
| Amortization\tof\tunearned |  |  |  |  |  |  |  |
| compensation\ton |  |  |  |  |  |  |  |
| restricted\tstock\tand |  |  |  |  |  |  |  |
| restricted\tstock\tunits | - | - | - | - | - | 2,394 | 2,394 |
| Acceleration\tof\tvesting\tof |  |  |  |  |  |  |  |
| stock\toptions\t(see\tNote\t9) | - | - | 938 | - | - | - | 938 |
| Other\tequity\ttransactions | (14) | (7) | (138) | (151) | - | - | (296) |
| Predecessor\tBalances, |  |  |  |  |  |  |  |
| February\t3,\t2006 | 315,679 | \t$157,840 | \t$462,383 | \t$1,106,165 | \t$(794) | \t$(4,799) | \t$1,720,795 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |
| Net\tincome | - | - | - | 137,943 | - | - | 137,943 |
| Reclassification\tof\tnet\tloss |  |  |  |  |  |  |  |
| on\tderivatives | - | - | - | - | 188 | - | 188 |
| Comprehensive\tincome |  |  |  |  |  |  | 138,131 |
| Cash\tdividends,\t$0.20\tper |  |  |  |  |  |  |  |
| common\tshare | - | - | - | (62,472) | - | - | (62,472) |
| Issuance\tof\tcommon\tstock |  |  |  |  |  |  |  |
| under\tstock\tincentive |  |  |  |  |  |  |  |
| plans | 1,573 | 786 | 19,108 | - | - | - | 19,894 |
| Tax\tbenefit\tfrom\tshare- |  |  |  |  |  |  |  |
| based\tpayments | - | - | 2,513 | - | - | - | 2,513 |
| Repurchases\tof\tcommon |  |  |  |  |  |  |  |
| stock | (4,483) | (2,242) | - | (77,705) | - | - | (79,947) |
| Purchases\tof\tcommon\tstock |  |  |  |  |  |  |  |
| by\temployee\tdeferred |  |  |  |  |  |  |  |
| compensation\ttrust,\tnet\t(3 |  |  |  |  |  |  |  |
| shares) | - | - | (2) | - | - | 40 | 38 |
| Reversal\tof\tunearned |  |  |  |  |  |  |  |
| compensation\tupon |  |  |  |  |  |  |  |
| adoption\tof\tSFAS\t123(R) |  |  |  |  |  |  |  |
| (see\tNote\t9) | (364) | (182) | (4,997) | - | - | 5,179 | - |
| Share-based\tcompensation |  |  |  |  |  |  |  |
| expense | - | - | 7,578 | - | - | - | 7,578 |
| Vesting\tof\trestricted\tstock |  |  |  |  |  |  |  |
| and\trestricted\tstock\tunits | 149 | 75 | (75) | - | - | - | - |
| Transition\tadjustment\tupon |  |  |  |  |  |  |  |
| adoption\tof\tSFAS\t158 | - | - | - | - | (381) | - | (381) |
| Other\tequity\ttransactions | (118) | (59) | (363) | 20 | - | - | (402) |
| Predecessor\tBalances, |  |  |  |  |  |  |  |
| February\t2,\t2007 | 312,436 | \t$156,218 | \t$486,145 | \t$1,103,951 | \t$(987) | \t$420 | \t$1,745,747 |
| Adoption\tof\tFIN\t48 | - | - | - | (8,917) | - | - | (8,917) |
| Predecessor\tBalances\tas |  |  |  |  |  |  |  |
| adjusted,\tFebruary\t2,\t2007 | 312,436 | 156,218 | 486,145 | 1,095,034 | (987) | 420 | 1,736,830 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |
| Net\tloss | - | - | - | (7,998) | - | - | (7,998) |
| Reclassification\tof\tnet\tloss |  |  |  |  |  |  |  |
| on\tderivatives | - | - | - | - | 76 | - | 76 |
| Comprehensive\tloss | - | - | - | - | - | - | (7,922) |
| Cash\tdividends,\t$0.05\tper |  |  |  |  |  |  |  |
| common\tshare | - | - | - | (15,710) | - | - | (15,710) |
| Issuance\tof\tcommon\tstock |  |  |  |  |  |  |  |
| under\tstock\tincentive |  |  |  |  |  |  |  |
| plans | 2,496 | 1,248 | 40,294 | - | - | - | 41,542 |
| Tax\tbenefit\tfrom\tstock |  |  |  |  |  |  |  |
| option\texercises | - | - | 3,927 | - | - | - | 3,927 |
| Share-based\tcompensation |  |  |  |  |  |  |  |
| expense | - | - | 45,458 | - | - | - | 45,458 |
| Vesting\tof\trestricted\tstock |  |  |  |  |  |  |  |
| and\trestricted\tstock\tunits | 126 | 63 | (63) | - | - | - | - |

| Other	equity	transactions | (28) | (13) | (580) | (48) | - | 7 | (634) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Elimination\tof\tPredecessor |  |  |  |  |  |  |  |
| equity\tin\tconnection\twith |  |  |  |  |  |  |  |
| Merger\t(see\tNotes\t1\tand |  |  |  |  |  |  |  |
| 2) | (315,030) | (157,516) | (575,181) | (1,071,278) | 911 | (427) | (1,803,491) |
| Predecessor\tBalances\nsubsequent\tto\tMerger | \t$- | \t$- | \t$- | \t$- | \t$- | \t$- | \t$- |

|  | Common<br>Stock<br>Shares | Common<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings | Other<br>Comprehensive<br>Loss | Other<br>Shareholders'<br>Equity |  | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Successor\tcapital |  |  |  |  |  |  |  |  |
| contribution,\tnet | 554,035 | 277,018 | 2,476,958 | - | - |  | - | 2,753,976 |
| Comprehensive\tloss: |  |  |  |  |  |  |  |  |
| Net\tloss | - | - | - | (4,818) | - |  | - | (4,818) |
| Unrealized\tnet\tloss\ton |  |  |  |  |  |  |  |  |
| hedged\ttransactions | - | - | - | - | (49,112) |  | - | (49,112) |
| Comprehensive\tloss |  |  |  |  |  |  |  | (53,930) |
| Issuance\tof\tcommon\tstock |  |  |  |  |  |  |  |  |
| under\tstock\tincentive |  |  |  |  |  |  |  |  |
| plans | 574 | 287 | (287) | - | - |  | - | - |
| Issuance\tof\trestricted |  |  |  |  |  |  |  |  |
| common\tstock\tunder |  |  |  |  |  |  |  |  |
| stock\tincentive\tplans | 890 | 445 | (445) | - | - |  | - | - |
| Repurchases\tof\tcommon |  |  |  |  |  |  |  |  |
| stock | (17) | (9) | 9 | - | - |  | - | - |
| Share-based\tcompensation |  |  |  |  |  |  |  |  |
| expense | - | - | 3,827 | - | - |  | - | 3,827 |
| Successor\tBalances, |  |  |  |  |  |  |  |  |
| February\t1,\t2008 | 555,482 | \t$277,741 | \t$2,480,062 | \t$(4,818) | \t$(49,112) |  | - | \t$2,703,873 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | Successor | Predecessor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | July\t7,\t2007 |  |  |  |
|  | through | February\t3,\t2007 |  |  |
|  | February\t1,\t2008\n(a) | through\nJuly\t6,\t2007 | Year\tEnded\nFebruary\t2,\t2007 | Year\tEnded\nFebruary\t3,\t2006 |
|  | (30\tweeks) | (22\tweeks) | (52\tweeks) | (53\tweeks) |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |
| Net\tincome\t(loss) | \t$(4,818) | \t$(7,998) | \t$137,943 | \t$350,155 |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |  |
| Depreciation\tand\tamortization | 150,213 | 83,917 | 200,608 | 186,824 |
| Deferred\tincome\ttaxes | 19,551 | (20,874) | (38,218) | 8,244 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | - | (3,927) | (2,513) | 6,457 |
| Loss\ton\tdebt\tretirement,\tnet | 1,249 | - | - | - |
| Noncash\tshare-based\tcompensation | 3,827 | 45,433 | 7,578 | 3,332 |
| Noncash\tunrealized\tloss\ton\tinterest\trate\tswap | 3,705 | - | - | - |
| Noncash\tinventory\tadjustments\tand\tasset\timpairments | - | - | 78,115 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |
| Merchandise\tinventories | 79,469 | 16,424 | (28,057) | (97,877) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 3,739 | (6,184) | (5,411) | (10,630) |
| Accounts\tpayable | (41,395) | 34,794 | 53,544 | 87,230 |
| Accrued\texpenses\tand\tother\tliabilities | 16,061 | 52,995 | 38,353 | 40,376 |
| Income\ttaxes | 7,348 | 2,809 | (35,165) | (26,017) |
| Other | 655 | 4,557 | (1,420) | 7,391 |
| Net\tcash\tprovided\tby\toperating\tactivities | 239,604 | 201,946 | 405,357 | 555,485 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |
| Merger,\tnet\tof\tcash\tacquired | (6,738,391) | - | - | - |
| Purchases\tof\tproperty\tand\tequipment | (83,641) | (56,153) | (261,515) | (284,112) |
| Purchases\tof\tshort-term\tinvestments | (3,800) | (5,100) | (49,675) | (132,775) |
| Sales\tof\tshort-term\tinvestments | 21,445 | 9,505 | 51,525 | 166,850 |
| Purchases\tof\tlong-term\tinvestments | (7,473) | (15,754) | (25,756) | (16,995) |
| Purchases\tof\tpromissory\tnotes | (37,047) | - | - | - |
| Insurance\tproceeds\trelated\tto\tproperty\tand\tequipment | - | - | 1,807 | 1,210 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | 533 | 620 | 1,650 | 1,419 |
| Net\tcash\tused\tin\tinvesting\tactivities | (6,848,374) | (66,882) | (281,964) | (264,403) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |
| Issuance\tof\tcommon\tstock | 2,759,540 | - | - | - |
| Borrowings\tunder\trevolving\tcredit\tfacility | 1,522,100 | - | 2,012,700 | 232,200 |
| Repayments\tof\tborrowings\tunder\trevolving\tcredit\tfacility | (1,419,600) | - | (2,012,700) | (232,200) |
| Issuance\tof\tlong-term\tobligations | 4,176,817 | - | - | 14,495 |
| Repayments\tof\tlong-term\tobligations | (241,945) | (4,500) | (14,118) | (14,310) |
| Debt\tissuance\tcosts | (87,392) | - | - | - |
| Payment\tof\tcash\tdividends | - | (15,710) | (62,472) | (56,183) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | - | 41,546 | 19,894 | 29,405 |
| Repurchases\tof\tcommon\tstock | (541) | - | (79,947) | (297,602) |
| Tax\tbenefit\tof\tstock\toptions | - | 3,927 | 2,513 | - |
| Other\tfinancing\tactivities | - | - | (584) | 892 |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 6,708,979 | 25,263 | (134,714) | (323,303) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 100,209 | 160,327 | (11,321) | (32,221) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tperiod | - | 189,288 | 200,609 | 232,830 |
| Cash\tand\tcash\tequivalents,\tend\tof\tperiod | \t$100,209 | \t$349,615 | \t$189,288 | \t$200,609 |
| Supplemental\tcash\tflow\tinformation: |  |  |  |  |
| Cash\tpaid\t(received)\tfor: |  |  |  |  |
| Interest | \t$226,738 | \t$11,246 | \t$24,180 | \t$25,747 |
| Income\ttaxes | \t$(30,574) | \t$26,012 | \t$155,825 | \t$205,802 |
| Supplemental\tschedule\tof\tnoncash\tinvesting\tand\tfinancing\tactivities: |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment\tawaiting\tprocessing\tfor\tpayment,\tincluded\tin |  |  |  |  |
| Accounts\tpayable | \t$20,449 | \t$13,544 | \t$18,094 | \t$24,750 |
| Exchange\tof\tshares\tand\tstock\toptions\tin\tbusiness\tcombination | \t$7,685 | \t$-\t \t$-\t \t$- | \t$-\t \t$-\t \t$- | \t$-\t \t$-\t \t$- |
| Purchases\tof\tproperty\tand\tequipment\tunder\tcapital\tlease\tobligations | \t$592 | \t$1,036 | \t$5,366 | \t$7,197 |
| Elimination\tof\tfinancing\tobligations\t(See\tNote\t7) | \t$-\t \t$- | \t$-\t \t$- | \t$46,608 | \t$- |
| Elimination\tof\tpromissory\tnotes\treceivable\t(See\tNote\t7) | \t$-\t \t$- | \t$-\t \t$- | \t$46,608 | \t$- |

(a) Includes	the	cash	flows	of	Buck	Acquisition	Corp.	for	the	period	prior	to	its	merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(its	formation)	through July	6,	2007	(which	were	zero),	and	the	post-merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.		See	Notes	1	and	2.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1. Basis	of	presentation	and	accounting	policies

# Basis	of	presentation

These	notes	contain	references	to	the	years	2008,	2007,	2006,	and	2005,	which	represent	fiscal	years	ending	or	ended	January	30,	2009,	February	1,	2008,	February	2, 2007,	and	February	3,	2006,	respectively.	Fiscal	2008	will	be,	and	each	of	fiscal	years	2007	and	2006	were,	a	52-week	accounting	period	while	fiscal	2005	was	a	53-week	accounting period.	The	Company's	fiscal	year	ends	on	the	Friday	closest	to	January	31.	The	consolidated	financial	statements	include	all	subsidiaries	of	the	Company,	except	for	its	not-for- profit	subsidiary	the	assets	and	revenues	of	which	are	not	material.		Intercompany	transactions	have	been	eliminated.

Dollar	General	Corporation	(the	"Company")	was	acquired	on	July	6,	2007	through	a	Merger	(as	defined	and	discussed	in	greater	detail	in	Note	2	below)	accounted	for	as	a reverse	acquisition.		Although	the	Company	continued	as	the	same	legal	entity	after	the	Merger,	the	accompanying	consolidated	financial	statements	are	presented	for	the "Predecessor"	and	"Successor"	relating	to	the	periods	preceding	and	succeeding	the	Merger,	respectively.		As	a	result	of	the	Company	applying	purchase	accounting	and	a	new	basis of	accounting	beginning	on	July	7,	2007,	the	financial	reporting	periods	presented	are	as	follows:

·		The	2007	periods	presented	include	the	22-week	Predecessor	period	of	the	Company	from	February	3,	2007	to	July	6,	2007	and	the	30-week	Successor	period,	reflecting the	merger	of	the	Company	and	Buck	Acquisition	Corp.	("Buck")	from	July	7,	2007	to	February	1,	2008.

·		Buck's	results	of	operations	for	the	period	from	March	6,	2007	to	July	6,	2007	(prior	to	the	Merger	on	July	6,	2007)	are	also	included	in	the	consolidated	financial statements	for	the	Successor	period	described	above	as	a	result	of	certain	derivative	financial	instruments	entered	into	by	Buck	prior	to	the	Merger,	as	further	described below.		Other	than	these	financial	instruments,	Buck	had	no	assets,	liabilities,	or	operations	prior	to	the	Merger.

·		The	2006	and	2005	periods	presented	reflect	the	Predecessor.		The	consolidated	financial	statements	for	the	Predecessor	periods	have	been	prepared	using	the	Company's historical	basis	of	accounting.		As	a	result	of	purchase	accounting,	the	pre-Merger	and	post-Merger	consolidated	financial	statements	are	not	comparable.

The	Company	leases	three	of	its	distribution	centers	("DCs")	from	lessors,	which	meet	the	definition	of	a	Variable	Interest	Entity	("VIE")	as	described	by	Financial Accounting	Standards	Board	("FASB")	Interpretation	46,	"Consolidation	of	Variable	Interest	Entities"	("FIN	46"),	as	revised.	One	of	these	DCs	has	been	recorded	as	a	financing obligation	whereby	the	property	and	equipment,	along	with	the	related	lease	obligations,	are	reflected	in	the	consolidated	balance	sheets.		The	land	and	buildings	of	the	other	two DCs	have	been	recorded	as	operating	leases	in	accordance	with	Statement	of	Financial	Accounting	Standards	("SFAS")	13,

"Accounting	for	Leases."		The	Company	is	not	the	primary	beneficiary	of	these	VIEs	and,	accordingly,	has	not	included	these	entities	in	its	consolidated	financial	statements.

# Business	description

The	Company	sells	general	merchandise	on	a	retail	basis	through	8,194	stores	(as	of	February	1,	2008)	located	primarily	in	the	southern,	southwestern,	midwestern	and eastern	United	States.		The	Company	has	DCs	in	Scottsville,	Kentucky;	Ardmore,	Oklahoma;	South	Boston,	Virginia;	Indianola,	Mississippi;	Fulton,	Missouri;	Alachua,	Florida; Zanesville,	Ohio;	Jonesville,	South	Carolina	and	Marion,	Indiana.

The	Company	purchases	its	merchandise	from	a	wide	variety	of	suppliers.	Approximately	12%	of	the	Company's	purchases	in	2007	were	made	from	The	Procter	& Gamble	Company.	The	Company's	next	largest	supplier	accounted	for	approximately	6%	of	the	Company's	purchases	in	2007.

# Cash	and	cash	equivalents

Cash	and	cash	equivalents	include	highly	liquid	investments	with	insignificant	interest	rate	risk	and	original	maturities	of	three	months	or	less	when	purchased.		Such investments	primarily	consist	of	money	market	funds,	certificates	of	deposit	(which	may	include	foreign	time	deposits),	and	commercial	paper.		The	carrying	amounts	of	these	items are	a	reasonable	estimate	of	their	fair	value	due	to	the	short	maturity	of	these	investments.	The	Company	held	foreign	time	deposits	of	$5.2	million	as	of	February	1,	2008.

Payments	due	from	banks	for	third-party	credit	card,	debit	card	and	electronic	benefit	transactions	classified	as	cash	and	cash	equivalents	totaled	approximately	$13.9 million	and	$11.6	million	at	February	1,	2008	and	February	2,	2007,	respectively.

The	Company's	cash	management	system	provides	for	daily	investment	of	available	balances	and	the	funding	of	outstanding	checks	when	presented	for payment.		Outstanding	but	unpresented	checks	totaling	approximately	$107.9	million	and	$122.3	million	at	February	1,	2008	and	February	2,	2007,	respectively,	have	been	included in	Accounts	payable	in	the	consolidated	balance	sheets.		Upon	presentation	for	payment,	these	checks	are	funded	through	available	cash	balances	or	the	Company's	credit	facilities.

The	Company	has	certain	cash	and	cash	equivalents	balances	that,	along	with	certain	other	assets,	are	being	held	as	required	by	certain	insurance-related	regulatory requirements	and	are	therefore	not	available	for	general	corporate	purposes,	as	further	described	below	under	"Investments	in	debt	and	equity	securities."

# Investments	in	debt	and	equity	securities

The	Company	accounts	for	its	investment	in	debt	and	marketable	equity	securities	in	accordance	with	SFAS	115,	"Accounting	for	Certain	Investments	in	Debt	and	Equity Securities,"	and	accordingly,	classifies	them	as	held-to-maturity,	available-for-sale,	or	trading.		Debt

securities	categorized	as	held-to-maturity	are	stated	at	amortized	cost.		Debt	and	equity	securities	categorized	as	available-for-sale	are	stated	at	fair	value,	with	any	unrealized	gains and	losses,	net	of	deferred	income	taxes,	reported	as	a	component	of	Accumulated	other	comprehensive	loss.		Trading	securities	(primarily	mutual	funds	held	pursuant	to	deferred compensation	and	supplemental	retirement	plans,	as	further	discussed	in	Note	8)	are	stated	at	fair	value,	with	changes	in	fair	value	recorded	in	income	as	a	component	of	Selling, general	and	administrative	("SG&A")	expense.

In	general,	the	Company	invests	excess	cash	in	shorter-dated,	highly	liquid	investments	such	as	money	market	funds,	certificates	of	deposit,	and	commercial	paper.		Such securities	have	been	classified	either	as	held-to-maturity	or	available-for-sale,	depending	on	the	type	of	securities	purchased	(debt	versus	equity)	as	well	as	the	Company's	intentions with	respect	to	the	potential	sale	of	such	securities	before	their	stated	maturity	dates.		Given	the	short	maturities	of	such	investments	(except	for	those	securities	described	in	further detail	below),	the	carrying	amounts	approximate	the	fair	values	of	such	securities.

In	2006	and	prior	years,	the	Company	invested	in	tax-exempt	auction	rate	securities,	which	are	debt	instruments	having	longer-dated	(in	some	cases,	many	years)	legal maturities,	but	with	interest	rates	that	are	generally	reset	every	28-35	days	under	an	auction	system.		Because	auction	rate	securities	are	frequently	re-priced,	they	trade	in	the	market like	short-term	investments.		As	available-for-sale	securities,	these	investments	are	carried	at	fair	value,	which	approximates	cost	given	that	the	average	duration	of	such	securities held	by	the	Company	is	less	than	40	days.		Despite	the	liquid	nature	of	these	investments,	the	Company	categorizes	them	as	short-term	investments	instead	of	cash	and	cash equivalents	due	to	the	underlying	legal	maturities	of	such	securities.		However,	they	have	been	classified	as	current	assets	as	they	are	generally	available	to	support	the	Company's current	operations.	There	were	no	such	investments	outstanding	as	of	February	1,	2008	or	February	2,	2007.

In	2007	and	2006,	the	Company's	South	Carolina-based	wholly	owned	captive	insurance	subsidiary,	Ashley	River	Insurance	Company	("ARIC"),	had	investments	in	U.S. Government	securities,	obligations	of	Government	Sponsored	Enterprises,	short-	and	long-term	corporate	obligations,	and	asset-backed	obligations.	These	investments	are	held pursuant	to	South	Carolina	regulatory	requirements	to	maintain	certain	asset	balances	in	relation	to	ARIC's	liability	and	equity	balances	and,	as	such,	these	investments	are	not available	for	general	corporate	purposes.	The	composition	of	these	required	asset	balances	changes	periodically.	At	February	1,	2008,	the	total	of	these	balances	was	$63.4	million and	is	reflected	in	the	Company's	consolidated	balance	sheet	as	follows:	cash	and	cash	equivalents	of	$11.9	million,	short-term	investments	of	$19.6	million	and	long-term investments	included	in	other	assets	of	$31.9	million.

Historical	cost	information	pertaining	to	investments	in	mutual	funds	by	participants	in	the	Company's	supplemental	retirement	and	compensation	deferral	plans	classified as	trading	securities	is	not	readily	available	to	the	Company.

On	February	1,	2008	and	February	2,	2007,	held-to-maturity,	available-for-sale	and	trading	securities	consisted	of	the	following	(in	thousands):

| Successor |  | Gross	Unrealized | Gross	Unrealized | Estimated |
| :--- | :--- | :--- | :--- | :--- |
| February\t1,\t2008 | Cost | Gains | Losses | Fair\tValue |
| Held-to-maturity\tsecurities |  |  |  |  |
| Bank\tand\tcorporate\tdebt | $24,254 | $244 | $107 | $24,391 |
| U.S.\tGovernment\tsecurities | 16,652 | 676 | - | 17,328 |
| Obligations\tof\tGovernment\tsponsored\tenterprises | 9,834 | 40 | - | 9,874 |
| Asset-backed\tsecurities | 1,815 | 21 | 5 | 1,831 |
| Other\tdebt\tsecurities\t(see\tNote\t7) | 33,453 | - | 709 | 32,744 |
|  | 86,008 | 981 | 821 | 86,168 |
| Trading\tsecurities\nEquity\tsecurities | 15,066 | - | - | 15,066 |
| Total\tdebt\tand\tequity\tsecurities | $101,074 | $981 | $821 | $101,234 |

| Predecessor |  | Gross	Unrealized | Gross	Unrealized | Estimated |
| :--- | :--- | :--- | :--- | :--- |
| February\t2,\t2007 | Cost | Gains | Losses | Fair\tValue |
| Held-to-maturity\tsecurities |  |  |  |  |
| Bank\tand\tcorporate\tdebt | $100,386 | $2 | $80 | $100,308 |
| U.S.\tGovernment\tsecurities | 17,026 | 1 | 29 | 16,998 |
| Obligations\tof\tGovernment\tsponsored\tenterprises | 9,192 | 3 | 9 | 9,186 |
| Asset-backed\tsecurities | 2,833 | 4 | 10 | 2,827 |
|  | 129,437 | 10 | 128 | 129,319 |
| Available-for-sale\tsecurities\nEquity\tsecurities | 13,512 | - | - | 13,512 |
| Trading\tsecurities\nEquity\tsecurities | 13,591 | - | - | 13,591 |
| Total\tdebt\tand\tequity\tsecurities | $156,540 | $10 | $128 | $156,422 |

On	February	1,	2008	and	February	2,	2007,	these	investments	were	included	in	the	following	accounts	in	the	consolidated	balance	sheets	(in	thousands):

|  | Held-to- | Available- |  |
| :--- | :--- | :--- | :--- |
| Successor\nFebruary\t1,\t2008 | Maturity\nSecurities | for-Sale\nSecurities | Trading\nSecurities |
| Cash\tand\tcash\tequivalents | $1,000 | $- | $- |
| Short-term\tinvestments | 19,611 | - | - |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | - | - | 2,166 |
| Other\tassets,\tnet | 31,944 | - | 12,900 |
| Long-term\tobligations\t(see\tNote\t7) | 33,453 | - | - |
|  | $86,008 | $- | $15,066 |

| Predecessor<br>February	2,	2007 | Held-to-<br>Maturity<br>Securities | Available-<br>for-Sale<br>Securities | Trading<br>Securities |
| :--- | :--- | :--- | :--- |
| Cash\tand\tcash\tequivalents | $79,764 | $13,512 | $- |
| Short-term\tinvestments | 29,950 | - | - |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | - | - | 1,090 |
| Other\tassets,\tnet | 19,723 | - | 12,501 |
|  | $129,437 | $13,512 | $13,591 |

The	contractual	maturities	of	held-to-maturity	securities	as	of	February	1,	2008	were	as	follows	(in	thousands):

| Successor | Cost | Fair	Value |
| :--- | :--- | :--- |
| Less\tthan\tone\tyear | \t$20,522 | \t$20,614 |
| One\tto\tthree\tyears | 31,021 | 31,790 |
| Greater\tthan\tthree\tyears | 34,465 | 33,764 |
|  | \t$86,008 | \t$86,168 |

For	the	years	ended	February	1,	2008,	February	2,	2007	and	February	3,	2006,	gross	realized	gains	and	losses	on	the	sales	of	available-for-sale	securities	were	not material.		The	cost	of	securities	sold	is	based	upon	the	specific	identification	method.

# Merchandise	inventories

Inventories	are	stated	at	the	lower	of	cost	or	market	with	cost	determined	using	the	retail	last-in,	first-out	("LIFO")	method.	Under	the	Company's	retail	inventory	method ("RIM"),	the	calculation	of	gross	profit	and	the	resulting	valuation	of	inventories	at	cost	are	computed	by	applying	a	calculated	cost-to-retail	inventory	ratio	to	the	retail	value	of sales.		The	excess	of	current	cost	over	LIFO	cost	was	approximately	$6.1	million	at	February	1,	2008	and	$4.3	million	at	February	2,	2007.	Current	cost	is	determined	using	the retail	first-in,	first-out	method.		The	Company's	LIFO	reserves	were	adjusted	to	zero	at	July	6,	2007	as	a	result	of	the	Merger.	The	Successor	recorded	LIFO	reserves	of	$6.1	million during	2007.	LIFO	reserves	of	the	Predecessor	decreased	$1.5	million	and	$0.5	million	in	2006	and	2005,	respectively.		Costs	directly	associated	with	warehousing	and	distribution are	capitalized	into	inventory.

In	2005,	the	Company	expanded	the	number	of	inventory	departments	it	utilizes	for	its	gross	profit	calculation	from	10	to	23.	The	impact	of	this	change	in	estimate	on	the Company's	consolidated	2005	results	of	operations	was	an	estimated	reduction	of	gross	profit	and	a	corresponding	decrease	to	inventory,	at	cost,	of	$5.2	million.

# Store	pre-opening	costs

Pre-opening	costs	related	to	new	store	openings	and	the	construction	periods	are	expensed	as	incurred.

# Property	and	equipment

Property	and	equipment	are	recorded	at	cost.		The	Company	provides	for	depreciation	and	amortization	on	a	straight-line	basis	over	the	following	estimated	useful	lives:

| Land	improvements | 20 |
| :--- | :--- |
| Buildings | 39-40 |
| Furniture,\tfixtures\tand\tequipment | 3-10 |

Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the	applicable	lease	term	or	the	estimated	useful	life	of	the	asset.

# Impairment	of	long-lived	assets

When	indicators	of	impairment	are	present,	the	Company	evaluates	the	carrying	value	of	long-lived	assets,	other	than	goodwill,	in	relation	to	the	operating	performance	and future	cash	flows	or	the	appraised	values	of	the	underlying	assets.	In	accordance	with	SFAS	144,	"Accounting	for	the	Impairment	or	Disposal	of	Long-Lived	Assets,"	the	Company reviews	for	impairment	stores	open	more	than	two	years	for	which	current	cash	flows	from	operations	are	negative.	Impairment	results	when	the	carrying	value	of	the	assets	exceeds the	undiscounted	future	cash	flows	over	the	life	of	the	lease.	The	Company's	estimate	of	undiscounted	future	cash	flows	over	the	lease	term	is	based	upon	historical	operations	of	the stores	and	estimates	of	future	store	profitability	which	encompasses	many	factors	that	are	subject	to	variability	and	difficult	to	predict.	If	a	long-lived	asset	is	found	to	be	impaired, the	amount	recognized	for	impairment	is	equal	to	the	difference	between	the	carrying	value	and	the	asset's	fair	value.	The	fair	value	is	estimated	based	primarily	upon	future	cash flows	(discounted	at	the	Company's	credit	adjusted	risk-free	rate)	or	other	reasonable	estimates	of	fair	market	value.	Assets	to	be	disposed	of	are	adjusted	to	the	fair	value	less	the cost	to	sell	if	less	than	the	book	value.

The	Company	recorded	impairment	charges	included	in	SG&A	expense	of	approximately	$0.2	million	in	the	2007	Predecessor	period,	$9.4	million	in	2006	and	$0.6 million	in	2005	to	reduce	the	carrying	value	of	certain	of	its	stores'	assets	as	deemed	necessary	due	to	negative	sales	trends	and	cash	flows	at	these	locations.	The	majority	of	the 2006	charges	were	recorded	pursuant	to	certain	strategic	initiatives	discussed	in	Note	3.

# Goodwill	and	other	intangible	assets

The	Company	amortizes	intangible	assets	over	their	estimated	useful	lives	unless	such	lives	are	deemed	indefinite.	Amortizable	intangible	assets	are	tested	for	impairment based	on	undiscounted	cash	flows,	and,	if	impaired,	written	down	to	fair	value	based	on	either	discounted	cash	flows	or	appraised	values.	Intangible	assets	with	indefinite	lives	are tested	annually	for	impairment	and	written	down	to	fair	value	as	required.	No	impairment	of	intangible	assets	has	been	identified	during	any	of	the	periods	presented.

# Other	assets

Other	assets	consist	primarily	of	long-term	investments,	qualifying	prepaid	expenses,	debt	issuance	costs	which	are	amortized	over	the	life	of	the	related	obligations,	utility and	security	deposits	and	life	insurance	policies.	Such	debt	issuance	costs	increased	substantially	subsequent	to	the	Merger	as	further	discussed	in	Notes	2	and	6.

# Vendor	rebates

The	Company	accounts	for	all	cash	consideration	received	from	vendors	in	accordance	with	the	provisions	of	Emerging	Issues	Task	Force	Issue	("EITF")	02-16, "Accounting	by	a	Customer	(Including	a	Reseller)	for	Certain	Consideration	Received	from	a	Vendor."	Cash	consideration	received	from	a	vendor	is	generally	presumed	to	be	a rebate	or	an	allowance	and	is	accounted	for	as	a	reduction	of	merchandise	purchase	costs	and	recognized	in	the	statement	of	operations	at	the	time	the	goods	are	sold.	However, certain	specific,	incremental	and	otherwise	qualifying	SG&A	expenses	related	to	the	promotion	or	sale	of	vendor	products	may	be	offset	by	cash	consideration	received	from vendors,	in	accordance	with	arrangements	such	as	cooperative	advertising,	when	earned	for	dollar	amounts	up	to	but	not	exceeding	actual	incremental	costs.	The	Company recognizes	amounts	received	for	cooperative	advertising	on	performance,	"first	showing"	or	distribution,	consistent	with	its	policy	for	advertising	expense	in	accordance	with	the American	Institute	of	Certified	Public	Accountants	Statement	of	Position	93-7,	"Reporting	on	Advertising	Costs."

# Rent	expense

Rent	expense	is	recognized	over	the	term	of	the	lease.		The	Company	records	minimum	rental	expense	on	a	straight-line	basis	over	the	base,	non-cancelable	lease	term commencing	on	the	date	that	the	Company	takes	physical	possession	of	the	property	from	the	landlord,	which	normally	includes	a	period	prior	to	the	store	opening	to	make necessary	leasehold	improvements	and	install	store	fixtures.		When	a	lease	contains	a	predetermined	fixed	escalation	of	the	minimum	rent,	the	Company	recognizes	the	related	rent expense	on	a	straight-line	basis	and	records	the	difference	between	the	recognized	rental	expense	and	the	amounts	payable	under	the	lease	as	deferred	rent.		The	Company	also receives	tenant	allowances,	which	are	recorded	as	deferred	incentive	rent	and	are	amortized	as	a	reduction	to	rent	expense	over	the	term	of	the	lease.		Any	difference	between	the calculated	expense	and	the	amounts	actually	paid	are	reflected	as	a	liability,	with	the	current	portion	in	Accrued	expenses	and	other	and	the	long-term	portion	in	Other	liabilities	in the	consolidated	balance	sheets,	and	totaled	approximately	$3.7	million	(after	purchase	accounting	adjustment	due	to	the	Merger)	and	$30.4	million	at	February	1,	2008	and February	2,	2007,	respectively.

The	Company	recognizes	contingent	rental	expense	when	the	achievement	of	specified	sales	targets	are	considered	probable,	in	accordance	with	EITF	Issue	98-9, "Accounting	for	Contingent	Rent."	The	amount	expensed	but	not	paid	as	of	February	1,	2008	and	February	2,	2007	was	approximately	$8.3	million	and	$8.6	million,	respectively, and	is	included	in	Accrued	expenses	and	other	in	the	consolidated	balance	sheets	(See	Note	7).

Generally,	for	store	closures	where	a	lease	obligation	still	exists,	the	Company	records	the	estimated	future	liability	associated	with	the	rental	obligation	on	the	date	the store	is	closed	in	accordance	with	SFAS	146,	"Accounting	for	Costs	Associated	with	Exit	or	Disposal	Activities."	The	estimated	future	liability	associated	with	the	rental	obligation for	certain	store	closures	associated	with	the	Merger	were	based	on	EITF	95-3,	"Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business	Combination."	In	the	normal course	of	business,	based	on	an	overall	analysis	of	store	performance	and	expected	trends,	management	periodically	evaluates	the	need	to	close	underperforming	stores.	Liabilities are	established	at	the	point	of	closure	for	the	present	value	of	any	remaining	operating	lease	obligations,	net	of	estimated	sublease	income,	and	at	the	communication	date	for severance	and	other	exit	costs,	as	prescribed	by	SFAS	146.	Key	assumptions	in	calculating	the	liability	include	the	timeframe	expected	to	terminate	lease	agreements,	estimates related	to	the	sublease	potential	of	closed	locations,	and	estimation	of	other	related	exit	costs.	Liabilities	are	reviewed	periodically	and	adjusted	when	necessary.		The	closed	store liability	balance	at	February	1,	2008	and	February	2,	2007	was	$20.2	million	and	$5.4	million,	respectively.

# Accrued	expenses	and	other	liabilities

Accrued	expenses	and	other	consist	of	the	following:

| (In	thousands) | Successor<br>2007 | Predecessor<br>2006 |
| :--- | :--- | :--- |
| Compensation\tand\tbenefits | $60,720 | $41,957 |
| Insurance | 64,418 | 76,062 |
| Taxes\t(other\tthan\ttaxes\ton\tincome) | 55,990 | 50,502 |
| Other | 119,828 | 85,037 |
|  | $300,956 | $253,558 |

Other	accrued	expenses	primarily	include	the	current	portion	of	liabilities	for	deferred	rent,	freight	expense,	contingent	rent	expense,	interest,	electricity,	lease	contract termination	liabilities	for	closed	stores,	income	tax	related	reserves,	and	common	area	maintenance	charges.

# Insurance	liabilities

The	Company	retains	a	significant	portion	of	risk	for	its	workers'	compensation,	employee	health,	general	liability,	property	and	automobile	claim	exposures.		Accordingly, provisions	are	made	for	the	Company's	estimates	of	such	risks.		The	undiscounted	future	claim	costs	for	the	workers'	compensation,	general	liability,	and	health	claim	risks	are derived	using	actuarial	methods.		To	the	extent	that	subsequent	claim	costs	vary	from	those	estimates,	future	results	of	operations	will	be	affected.	Ashley	River	Insurance	Company (or	ARIC,	as	defined	above),	a	South	Carolina-based	wholly	owned	captive	insurance	subsidiary	of	the	Company,	charges	the	operating	subsidiary	companies	premiums	to	insure the	retained	workers'	compensation	and	non-property	general	liability	exposures.		Pursuant	to	South	Carolina	insurance	regulations,	ARIC	has	cash	and	cash	equivalents	and investment	balances	that	are	not	available	for	general	corporate	purposes,	as	further	described	above	under	"Investments	in	debt	and	equity	securities."	ARIC	currently	insures	no unrelated	third-party	risk.

As	a	result	of	the	Merger,	the	Company	recorded	its	assumed	self-insurance	reserves	as	of	the	Merger	date	at	their	present	value	in	accordance	with	SFAS	141,	"Business Combinations",	using	a	discount	rate	of	5.4%.	The	balance	of	the	resulting	discount	was	$18.7	million	at	February	1,	2008.	Other	than	for	reserves	assumed	in	a	business combination,	the	Company's	policy	is	to	record	self-insurance	reserves	on	an	undiscounted	basis.

# Other	liabilities

Other	non-current	liabilities	consist	of	the	following:

|  | Successor | Predecessor |
| :--- | :--- | :--- |
| (In\tthousands) | 2007 | 2006 |
| Compensation\tand\tbenefits | $13,744 | $15,344 |
| Insurance | 123,276 | 107,476 |
| Income\ttax\trelated\treserves | 78,277 | - |
| Derivatives | 82,319 | - |
| Other | 22,098 | 35,521 |
|  | $319,714 | $158,341 |

Other	liabilities	consist	primarily	of	deferred	rent,	lease	contract	termination	liabilities	for	closed	stores,	leasehold	interests	liabilities,	and	redeemable	stock	options.

# Fair	value	of	financial	instruments

The	carrying	amounts	reflected	in	the	consolidated	balance	sheets	for	cash,	cash	equivalents,	short-term	investments,	receivables	and	payables	approximate	their	respective fair	values.		At	February	1,	2008,	the	fair	value	of	the	Company's	debt,	excluding	capital	lease	obligations,	was	approximately	$3,782.6	million,	or	approximately	$489.2	million less	than	the	carrying	values	of	the	debt,	compared	to	a	fair	value	of	$265.7	million	at	February	2,	2007,	or	approximately	$14.0	million	greater	than	the	carrying	value.	The	fair value	(estimated	market	value)	of	the	debt	is	based	primarily	on	quoted	prices	for	those	or	similar	instruments.

The	fair	value	of	the	Company's	derivatives	reflects	the	estimated	amounts	that	the	Company	would	receive	or	pay	to	terminate	these	contracts	at	the	reporting	date	based upon	pricing	or	valuation	models	applied	to	current	market	information.	Interest	rate	swaps	are	valued	using	the	market	standard	methodology	of	netting	the	discounted	future	fixed cash	receipts	(or	payments)	and	the	discounted	expected	variable	cash	payments	(or	receipts).	The	variable	cash	payments	(or	receipts)	are	based	on	an	expectation	of	future	interest rates	derived	from	observed	market	interest	rate	curves.

# Derivative	financial	instruments

The	Company	accounts	for	derivative	financial	instruments	in	accordance	with	SFAS	No.	133	"Accounting	for	Derivative	Instruments	and	Hedging	Activities",	as amended	and	interpreted	(collectively,	"SFAS	133").	This	literature	requires	the	Company	to	recognize	all	derivative	instruments	on	the	balance	sheet	at	fair	value,	and	contains accounting	rules	for	hedging	instruments,	which	depend	on	the	nature	of	the	hedge	relationship.	All	financial	instrument	positions	taken	by	the	Company	are	intended	to	be	used	to reduce	risk	by	hedging	an	underlying	economic	exposure.

The	Company's	derivative	financial	instruments,	in	the	form	of	interest	rate	swaps,	are	related	to	variable	interest	rate	risk	exposures	associated	with	the	Company's	long- term	debt	and	were	entered	into	in	an	attempt	to	manage	that	risk.	The	counterparties	to	the	Company's	derivative	agreements	are	all	major	international	financial	institutions.	The Company	continually	monitors	its	position	and	the	credit	ratings	of	its	counterparties	and	does	not	anticipate	nonperformance	by	the	counterparties.	The	Company	does	not	offset fair	value	amounts	of	derivatives	and	associated	cash	collateral.

In	April	2007,	Buck	entered	into	interest	rate	swaps,	contingent	upon	the	completion	of	the	Merger,	on	a	portion	of	the	loans	anticipated	to	result	from	the	Merger.		The interest	rate	swaps	result	in	the	Company	paying	a	fixed	rate	of	7.683%	on	a	notional	amount	of	$2.0	billion	as	of	July	31,	2007,	with	the	notional	amount	of	these	swaps	amortizing on	a	quarterly	basis	through	July	31,	2012.		Such	notional	amount	was	$1.6	billion	as	of	February	1,	2008.	The	swaps	were	designated	as	cash	flow	hedges	on	October	12,	2007.		For the	period	prior	to	hedge	designation,	an	unrealized	loss	of	$3.7	million	for	the	Successor	period	has	been	recognized	in	Loss	on	interest	rate	swaps	in	the	consolidated	statements	of operations,	reflecting	the	changes	in	fair	value	of	the	swaps	prior	to	their	designation	as	qualifying	cash	flow	hedging	relationships,	which	were	offset	by	earnings	under	the contractual	provisions	of	the	swaps	of	$1.7	million	during	the	same	time	period.

As	of	February	1,	2008,	the	fair	value	of	the	interest	rate	swaps	of	($82.3)	million	was	recorded	in	non-current	Other	liabilities	on	the	consolidated	balance	sheet.	From	the date	the	swaps	were	designated	as	hedges,	the	effective	portion	of	the	change	in	fair	value	of	the	swaps	of	($78.6)	million	was	recorded	in	Other	comprehensive	income,	a	separate component	of	equity,	offset	by	related	income	taxes	of	$29.5	million.	The	Company	also	recorded	expense	related	to	hedge	ineffectiveness	of	$0.4	million	during	the	Successor period	ended	February	1,	2008.

# Share-based	payments

Effective	February	4,	2006,	the	Company	adopted	SFAS	123	(Revised	2004)	"Share	Based	Payment"	("SFAS	123(R)")	and	began	recognizing	compensation	expense	for share-based	compensation	based	on	the	fair	value	of	the	awards	on	the	grant	date.	SFAS	123(R)	requires	share-based	compensation	expense	recognized	since	February	4,	2006	to	be based	on:	(a)	grant	date	fair	value	estimated	in	accordance	with	the	original	provisions	of	SFAS	123,	"Accounting	for	Stock-Based	Compensation,"	for	unvested	options	granted prior	to	the	adoption	date	and	(b)	grant	date	fair	value	estimated	in	accordance	with	the	provisions	of	SFAS	123(R)	for	unvested	options	granted	after	the	adoption	date.	The Company	adopted	SFAS	123(R)	under	the	modified-prospective-transition	method	and,	therefore,	results	from	prior	periods	have	not	been	restated.

Prior	to	February	4,	2006,	the	Company	accounted	for	share-based	payments	using	the	intrinsic-value-based	recognition	method	prescribed	by	Accounting	Principles	Board Opinion	25,	"Accounting	for	Stock	Issued	to	Employees"	("APB	25"),	and	provided	pro	forma	disclosures	as	permitted	under	SFAS	123.	Because	options	were	granted	at	an exercise	price	equal	to	the	market	price	of	the	underlying	common	stock	on	the	grant	date,	compensation	cost	related	to	stock	options	was	generally	not	required	to	be	recorded	as	a reduction	to	net	income	prior	to	the	adoption	of	SFAS	123(R).

Under	SFAS	123(R),	forfeitures	are	estimated	at	the	time	of	valuation	and	reduce	expense	ratably	over	the	vesting	period.	This	estimate	is	adjusted	periodically	based	on the	extent	to	which	actual	forfeitures	differ,	or	are	expected	to	differ,	from	the	prior	estimate.	The	forfeiture	rate	is	the	estimated	percentage	of	options	granted	that	are	expected	to	be forfeited	or	canceled	before	becoming	fully	vested.	The	Company	bases	this	estimate	on	historical	experience	or	estimates	of	future	trends,	as	applicable.	An	increase	in	the forfeiture	rate	will	decrease	compensation	expense.	Under	SFAS	123,	the	Company	elected	to	account	for	forfeitures	when	awards	were	actually	forfeited.

SFAS	123(R)	also	requires	the	benefits	of	tax	deductions	in	excess	of	recognized	compensation	cost	to	be	reported	as	a	financing	cash	flow,	rather	than	as	an	operating	cash flow	as	required	prior	to	the	adoption	of	SFAS	123(R).

The	fair	value	of	each	option	grant	is	separately	estimated	and	amortized	into	compensation	expense	on	a	straight-line	basis	between	the	applicable	grant	date	and	each vesting	date.	The	Company	has	estimated	the	fair	value	of	all	stock	option	awards	as	of	the	grant	date	by	applying	the	Black-Scholes-Merton	option	pricing	valuation	model.	The application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	determination	of	compensation	expense.

The	Company	also	accounts	for	nonvested	restricted	stock	awards	in	accordance	with	the	provisions	of	SFAS	123(R).	The	Company	calculates	compensation	expense	as the	difference	between	the	market	price	of	the	underlying	stock	on	the	grant	date	and	the	purchase	price,	if	any,	and	recognizes	such	amount	on	a	straight-line	basis	over	the	period	in which	the	recipient	earns	the	nonvested	restricted	stock	and	restricted	stock	unit	award.	Under	the	provisions	of	SFAS	123(R),	unearned	compensation	is	not	recorded	within shareholders'	equity.

The	Company	has	elected	to	determine	its	excess	tax	benefit	pool	upon	adoption	of	SFAS	123(R)	in	accordance	with	the	provisions	of	FASB	Staff	Position	("FSP") 123(R)-3,	"Transition	Election	Related	to	Accounting	for	the	Tax	Effects	of	Share-Based	Payment	Awards."	Under	the	provisions	of	this	FSP,	the	cumulative	benefit	of	stock	option exercises	included	in	additional	paid-in	capital	for	the	periods	after	the	effective	date	of	SFAS	123	is	reduced	by	the	cumulative	income	tax	effect	of	the	pro	forma	stock	option expense	previously	disclosed	in	accordance	with	the	requirements	of	SFAS	123.	(The	provision	of	this	FSP	applied	only	to	options	that	were	fully	vested	before	the	date	of	adoption of	SFAS	123(R).	The	amount	of	any	excess	tax	benefit	for	options	that	are	either	granted	after	the	adoption	of	SFAS	123(R)	or	are	partially	vested	on	the	date	of	adoption	were computed	in	accordance	with	the	provisions	of	SFAS	123(R).)	The	amount	of	any	excess	deferred	tax	asset	over	the	actual	income	tax	benefit	realized	for	options	that	are	exercised after	the	adoption	of	SFAS	123(R)	will	be	absorbed	by	the	excess	tax	benefit	pool.	Income	tax	expense	will	be	increased	should	the	Company's	excess	tax	benefit	pool	be insufficient	to	absorb	any	future	deferred	tax	asset	amounts	in	excess	of	the	actual	tax	benefit	realized.	The	Company	has	determined	that	its	excess	tax	benefit	pool	was approximately	$68	million	as	of	the	adoption	of	SFAS	123(R)	on	February	4,	2006.		After	the	Merger	and	the	related	application	of	purchase	accounting,	the	excess	tax	benefit	pool has	been	reduced	to	zero.

# Revenue	and	gain	recognition

The	Company	recognizes	retail	sales	in	its	stores	at	the	time	the	customer	takes	possession	of	merchandise.		All	sales	are	net	of	discounts	and	estimated	returns	and	are presented	net	of	taxes	assessed	by	governmental	authorities	that	are	imposed	concurrent	with	those	sales.		The	liability	for	retail	merchandise	returns	is	based	on	the	Company's prior	experience.	The	Company	records	gain	contingencies	when	realized.

The	Company	began	gift	card	sales	in	the	third	quarter	of	2005.		The	Company	recognizes	gift	card	sales	revenue	at	the	time	of	redemption.		The	liability	for	the	gift	cards is	established	for	the	cash	value	at	the	time	of	purchase.	The	liability	for	outstanding	gift	cards	was	approximately	$1.2	million	and	$0.8	million	at	February	1,	2008	and	February	2, 2007,	respectively,	and	is	recorded	in	Accrued	expenses	and	other.	Through	February	1,	2008,	the	Company	has	not	recorded	any	breakage	income	related	to	its	gift	card	program. The	Company	will	continue	to	evaluate	its	current	breakage	policy	as	it	continues	to	gain	more	sufficient	company-specific	customer	experience.

# Advertising	costs

Advertising	costs	are	expensed	upon	performance,	"first	showing"	or	distribution,	and	are	reflected	net	of	qualifying	cooperative	advertising	funds	provided	by	vendors	in SG&A	expenses.	Advertising	costs	were	$23.6	million	$17.3	million,	$45.0	million	and	$15.1	million	in	the	2007	Successor	and	Predecessor	periods,	2006	and	2005, respectively.		These	costs	primarily	include	promotional	circulars,	targeted	circulars	supporting	new	stores,	television	and	radio	advertising,	in-store	signage,	and	costs	associated with	the	sponsorship	of	a	National	Association	for	Stock	Car	Auto	Racing	team.	Vendor	funding	for	cooperative	advertising	offset	reported	expenses	by	$6.6	million,	$2.0	million, $7.9	million	and	$0.8	million	in	the	2007	Successor	and	Predecessor	periods,	2006	and	2005,	respectively.

# Capitalized	interest

To	assure	that	interest	costs	properly	reflect	only	that	portion	relating	to	current	operations,	interest	on	borrowed	funds	during	the	construction	of	property	and	equipment	is capitalized.		Interest	costs	capitalized	were	approximately	$2.9	million	and	$3.3	million	in	2006	and	2005,	respectively.

# Income	taxes

The	Company	reports	income	taxes	in	accordance	with	SFAS	No.	109,	"Accounting	for	Income	Taxes"	("SFAS	109").		Under	SFAS	109,	the	asset	and	liability	method	is used	for	computing	the	future	income	tax	consequences	of	events	that	have	been	recognized	in	the	Company's	consolidated	financial	statements	or	income	tax	returns.		Deferred income	tax	expense	or	benefit	is	the	net	change	during	the	year	in	the	Company's	deferred	income	tax	assets	and	liabilities.

As	discussed	in	Note	5,	effective	February	3,	2007	the	Predecessor	modified	its	method	of	accounting	for	income	taxes	in	connection	with	the	adoption	of	FASB Interpretation	48,	Accounting	for	Uncertainty	in	Income	Taxes	–	An	Interpretation	of	FASB	Statement	109	("FIN	48").	The	adoption	resulted	in	an	$8.9	million	decrease	in	retained earnings	and	a	reclassification	of	certain	amounts	between	deferred	income	taxes	and	other	noncurrent	liabilities	to	conform	to	the	balance	sheet	presentation	requirements	of	FIN 48.	As	of	the	date	of	adoption,	the	total	reserve	for	uncertain	tax	benefits	was	$77.9	million.	This	reserve	excludes	the	federal	income	tax	benefit	for	the	uncertain	tax	positions related	to	state	income	taxes,	which	is	now	included	in	deferred	tax	assets.	As	a	result	of	the	adoption	of	FIN	48,	the	reserve	for	interest	expense	related	to	income	taxes	was increased	to	$15.3	million	and	a	reserve	for	potential	penalties	of	$1.9	million	related	to	uncertain	income	tax	positions	was	recorded.	As	of	the	date	of	adoption,	approximately $27.1	million	of	the	reserve	for	uncertain	tax	positions	would	impact	the	Company's	effective	income	tax	rate	if	the	Company	were	to	recognize	the	tax	benefit	for	these	positions. After	the	Merger	and	the	related	application	of	purchase	accounting,	no	portion	of	the	reserve	for	uncertain	tax	positions	that	existed	as	of	the	date	of	adoption	would	impact	our effective	tax	rate	but	would,	if	subsequently	recognized,	reduce	the	amount	of	goodwill	recorded	in	relation	to	the	Merger.

Subsequent	to	the	adoption	of	FIN	48,	the	Company	has	elected	to	record	income	tax	related	interest	and	penalties	as	a	component	of	the	provision	for	income	tax	expense.

Income	tax	reserves	are	determined	using	the	methodology	established	by	FIN	48.		FIN	48	requires	companies	to	assess	each	income	tax	position	taken	using	a	two	step process.		A	determination	is	first	made	as	to	whether	it	is	more	likely	than	not	that	the	position	will	be	sustained,	based	upon	the	technical	merits,	upon	examination	by	the	taxing authorities.		If	the	tax	position	is	expected	to	meet	the	more	likely	than	not	criteria,	the	benefit	recorded	for	the	tax	position	equals	the	largest	amount	that	is	greater	than	50%	likely to	be	realized	upon	ultimate	settlement	of	the	respective	tax	position.		Uncertain	tax	positions	require	determinations	and	estimated	liabilities	to	be	made	based	on	provisions	of	the tax	law	which	may	be	subject	to	change	or	varying	interpretation.		If	the	Company's	determinations	and	estimates	prove	to	be	inaccurate,	the	resulting	adjustments	could	be	material to	the	Company's	future	financial	results.

# Management	estimates

The	preparation	of	financial	statements	and	related	disclosures	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	requires	management	to make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	consolidated	financial statements	and	the	reported	amounts	of	revenues	and	expenses	during	the	reporting	periods.		Actual	results	could	differ	from	those	estimates.

In	March	2008,	the	FASB	issued	SFAS	No.	161,	"Disclosures	about	Derivative	Instruments	and	Hedging	Activities",	an	amendment	of	FASB	Statement	No.	133.	SFAS 161	applies	to	all	derivative	instruments	and	nonderivative	instruments	that	are	designated	and	qualify	as	hedging	instruments	pursuant	to	paragraphs	37	and	42	of	SFAS	133	and related	hedged	items	accounted	for	under	SFAS	133.	SFAS	161	requires	entities	to	provide	greater	transparency	through	additional	disclosures	about	how	and	why	an	entity	uses derivative	instruments,	how	derivative	instruments	and	related	hedged	items	are	accounted	for	under	SFAS	133	and	its	related	interpretations,	and	how	derivative	instruments	and related	hedged	items	affect	an	entity's	financial	position,	results	of	operations,	and	cash	flows.	SFAS	161	is	effective	as	of	the	beginning	of	an	entity's	first	fiscal	year	that	begins after	November	15,	2008.		The	Company	currently	plans	to	adopt	SFAS	161	during	its	2009	fiscal	year.		No	determination	has	yet	been	made	regarding	the	potential	impact	of	this standard	on	the	Company's	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	141(R),	"Business	Combinations".		The	new	standard	establishes	the	requirements	for	how	an	acquirer	recognizes	and measures	in	its	financial	statements	the	identifiable	assets	acquired,	the	liabilities	assumed,	and	any	non-controlling	interest	(formerly	minority	interest)	in	an	acquiree;	provides updated	requirements	for	recognition	and	measurement	of	goodwill	acquired	in	a	business	combination	or	a	gain	from	a	bargain	purchase;	and	provides	updated	disclosure requirements	to	enable	users	of	financial	statements	to	evaluate	the	nature	and	financial	effects	of	the	business	combination.		This	Statement	applies	prospectively	to	business combinations	for	which	the	acquisition	date	is	on	or	after	the	beginning	of	the	first	annual	reporting	period	beginning	on	or	after	December	15,	2008.		Early	adoption	is	not	allowed. This	standard	is	not	expected	to	impact	the	Company's	financial	statements	unless	a	qualifying	transaction	is	consummated	subsequent	to	the	effective	date.

In	February	2007,	the	FASB	issued	SFAS	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities	–	Including	an	amendment	of	FASB	Statement	No. 115"	("SFAS	159").		SFAS	159	permits	entities	to	choose	to	measure	many	financial	instruments	and	certain	other	items	at	fair	value.		It	provides	entities	with	the	opportunity	to mitigate	volatility	in	reported	earnings	caused	by	measuring	related	assets	and	liabilities	differently	without	having	to	apply	complex	hedge	accounting	provisions.		SFAS	159	is effective	as	of	the	beginning	of	an	entity's	first	fiscal	year	that	begins	after	November	15,	2007.		The	Company	currently	plans	to	adopt	SFAS	159	during	its	2008	fiscal	year.		The Company	is	in	the	process	of	evaluating	the	potential	impact	of	this	standard	on	its	financial	statements.

In	September	2006,	the	FASB	issued	SFAS	157,	"Fair	Value	Measurements"	("SFAS	157").		SFAS	157	provides	guidance	for	using	fair	value	to	measure	assets	and liabilities.		The	standard	also	requires	expanded	information	about	the	extent	to	which	companies	measure	assets	and	liabilities	at	fair	value,	the	information	used	to	measure	fair value,	and	the	effect	of	fair	value	measurements	on	earnings.		The	standard	applies	whenever	other	standards	require	(or	permit)	assets	or	liabilities	to	be	measured	at	fair	value.		The standard	does	not	expand	the	use	of	fair	value	in	any	new	circumstances	for	financial	assets	and	liabilities.		SFAS	157	is	effective	for	financial	statements	issued	for	fiscal	years beginning	after	November	15,	2007,	and	interim	periods	within	those	fiscal	years.		For	non-financial	assets	and	liabilities,	the	effective	date	has	been	delayed	to	fiscal	years beginning	after	November	15,	2008.		The	Company	currently	plans	to	adopt	SFAS	157	during	its	2008	and	2009	fiscal	years	as	appropriate.	The	Company	is	in	the	process	of evaluating	the	potential	impact	of	this	standard	on	its	financial	statements.

# Reclassifications

Certain	reclassifications	of	the	2006	amounts	have	been	made	to	conform	to	the	2007	presentation.

# 2. Merger

On	March	11,	2007,	the	Company	entered	into	an	Agreement	and	Plan	of	Merger	(the	"Merger	Agreement")	with	Buck	Holdings	L.P.,	a	Delaware	limited	partnership ("Parent"),	and	Buck,	a	Tennessee	corporation	and	wholly	owned	subsidiary	of	Parent.		Parent	is	and	Buck	was	(prior	to	the	Merger)	controlled	by	investment	funds	affiliated	with Kohlberg	Kravis	Roberts	&	Co.,	L.P.	("KKR").		On	July	6,	2007,	the	transaction	was	consummated	through	a	merger	(the	"Merger")	of	Buck	with	and	into	the	Company.	The Company	survived	the	Merger	as	a	subsidiary	of	Parent.		The	Company's	results	of	operations	after	July	6,	2007	include	the	effects	of	the	Merger.

The	aggregate	purchase	price	was	approximately	$7.1	billion,	including	direct	costs	of	the	Merger,	and	was	funded	primarily	through	debt	financings	as	described	more fully	below	in	Note	6	and	cash	equity	contributions	from	KKR,	GS	Capital	Partners	VI	Fund,	L.P.	and	affiliated	funds	(affiliates	of	Goldman,	Sachs	&	Co.),	Citi	Private	Equity, Wellington	Management	Company,	LLP,	CPP	Investment	Board	(USRE	II)	Inc.,	and	other	equity	co-investors	(collectively,	the	"Investors")	of	approximately	$2.8	billion	(553.4 million	shares	of	new	common	stock,	$0.50	par	value	per	share,	valued	at	$5.00	per	share).		Also	in	connection	with	the	Merger,	certain	of	the	Company's	management	employees invested,	and	were	issued	new	shares	representing	less	than	1%	of	the	outstanding	shares,	in	the	Company.		Pursuant	to	the	terms	of	the	Merger	Agreement,	the	former	holders	of	the Company's	common	stock,	par	value	$0.50	per	share,	received	$22.00	per	share,	or	approximately	$6.9	billion,	and	all	such	shares	were	acquired	as	a	result	of	the	Merger.	As	of February	1,	2008,	there	were	approximately	555,481,897	shares	of	Company	common	stock	outstanding,	a	portion	of	which	is	redeemable	as	further	discussed	below	in	Note	9.

As	discussed	in	Note	1,	the	Merger	was	accounted	for	as	a	reverse	acquisition	in	accordance	with	the	purchase	accounting	provisions	of	SFAS	141,	"Business Combinations".		Because	of	this	accounting	treatment,	the	Company's	assets	and	liabilities	have	properly	been	accounted	for	at	their	estimated	fair	values	as	of	the	Merger date.		The	aggregate	purchase	price	has	been	allocated	to	the	tangible	and	intangible	assets	acquired	and	liabilities	assumed	based	upon	an	assessment	of	their	relative	fair	values	as of	the	Merger	date.

The	allocation	of	the	purchase	price	is	as	follows	(in	thousands):

| Cash	and	cash	equivalents | $349,615 |
| :--- | :--- |
| Short-term\tinvestments | 30,906 |
| Merchandise\tinventories | 1,368,130 |
| Income\ttaxes\treceivable | 36,934 |
| Deferred\tincome\ttaxes | 57,176 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 63,204 |
| Property\tand\tequipment,\tnet | 1,301,119 |
| Goodwill | 4,344,930 |
| Intangible\tassets | 1,396,612 |
| Other\tassets,\tnet | 66,537 |
| Current\tportion\tof\tlong-term\tobligations | (7,088) |
| Accounts\tpayable | (585,518) |
| Accrued\texpenses\tand\tother | (306,394) |
| Income\ttaxes\tpayable | (84) |
| Long-term\tobligations | (267,927) |
| Deferred\tincome\ttaxes | (536,555) |
| Other\tliabilities | (215,906) |
| Total\tpurchase\tprice\tassigned | $7,095,691 |

The	purchase	price	allocation	as	of	February	1,	2008	included	approximately	$4.34	billion	of	goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes.		The goodwill	balance	at	February	1,	2008	increased	by	$21.3	million	over	the	balance	reported	at	August	3,	2007,	representing	a	refinement	of	the	purchase	price	allocation	related	to	the Merger.		The	February	1,	2008	purchase	price	allocation	also	included	approximately	$1.4	billion	of	other	intangible	assets,	as	follows:

|  | Estimated | Carrying | Accumulated |  |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Useful\tLife | Amount | Amortization | Net |
| Leasehold\tinterests | 2\tto\t17.5\tyears | $185,112 | $23,663 | $161,449 |
| Internally\tdeveloped\tsoftware | 3\tyears | 12,300 | 2,392 | 9,908 |
|  |  | 197,412 | 26,055 | 171,357 |
| Trade\tnames\tand\ttrademarks | Indefinite | 1,199,200 | - | 1,199,200 |
|  |  | $1,396,612 | $26,055 | $1,370,557 |

The	Company	recorded	amortization	expense	related	to	amortizable	intangible	assets	for	the	year-to-date	Successor	period	ended	February	1,	2008	of	$26.1	million	($23.7 million	of	which	is	included	in	rent	expense).		Amortizable	intangible	assets	will	be	amortized	over	a	weighted	average	period	of	5.4	years.

Fees	and	expenses	related	to	the	Merger	totaled	$102.6	million,	principally	consisting	of	investment	banking	fees,	legal	fees	and	stock	compensation	($39.4	million	as further	discussed	in	Note	9),	and	are	reflected	in	the	2007	results	of	operations.		Capitalized	debt	issuance	costs,	related	to	financing	the	Merger	of	$87.4	million	as	of	the	Merger date	are	reflected	in	other	long-term	assets	in	the	consolidated	balance	sheet.

The	following	represents	the	unaudited	pro	forma	results	of	our	consolidated	operations	as	if	the	Merger	had	occurred	on	February	4,	2006,	after	giving	effect	to	certain adjustments,	including	the	depreciation	and	amortization	of	the	assets	acquired	based	on	their	estimated	fair	values	and	changes	in	interest	expense	resulting	from	changes	in consolidated	debt	(in	thousands):

|  | Year	Ended | Year	ended |
| :--- | :--- | :--- |
|  | February\t1, | February\t2, |
| (In\tthousands) | 2008 | 2007 |
| Revenue | $9,495,246 | $9,169,822 |
| Net\tloss | (57,939) | (156,188) |

The	pro	forma	information	does	not	purport	to	be	indicative	of	what	the	Company's	results	of	operations	would	have	been	if	the	acquisition	had	in	fact	occurred	at	the beginning	of	the	periods	presented,	and	is	not	intended	to	be	a	projection	of	the	Company's	future	results	of	operations.

Subsequent	to	the	announcement	of	the	Merger	Agreement,	the	Company	and	its	directors,	along	with	other	parties,	were	named	in	seven	putative	class	actions	filed	in Tennessee	state	courts	alleging	claims	for	breach	of	fiduciary	duty	arising	out	of	the	proposed	Merger,	all	as	described	more	fully	under	"Legal	Proceedings"	in	Note	7	below.

# 3. Strategic	initiatives

During	2006,	the	Company	began	implementing	certain	strategic	initiatives	related	to	its	historical	inventory	management	and	real	estate	strategies,	as	more	fully	described below.

# Inventory	management

In	November	2006,	the	Company	undertook	an	initiative	to	discontinue	its	historical	inventory	packaway	model	for	virtually	all	merchandise	by	the	end	of	fiscal	2007. Under	the	packaway	model,	unsold	inventory	items	were	stored	on-site	and	returned	to	the	sales	floor	to	be	sold	year	after	year,	until	the	items	were	eventually	sold,	damaged	or discarded.	Through	end-of-season	and	other	markdowns,	this	initiative	resulted	in	the	elimination	of	seasonal,	home	products	and	basic	clothing	packaway	merchandise	to	allow	for increased	levels	of	newer,	current-season	merchandise.		In	connection	with	this	strategic	change,	in	the	third	quarter	of	2006	the	Company	recorded	a	reserve	for	lower	of	cost	or market	inventory	impairment	estimates	of	$63.5	million	and	incurred	higher	markdowns	and	writedowns	on	inventory	in	the	second	half	of	2006	and	in	2007	than	in	comparable prior-year	periods.		As	a	result	of	the	Merger	and	in	accordance	with	SFAS	141,	the	Company's	inventory	balances,	including	the	inventory	associated	with	this	strategic	change, were	adjusted	to	fair	value	and	the	related	reserve	was	eliminated.

# Exit	and	disposal	activities

In	November	2006,	the	Company	decided	to	close,	in	addition	to	those	stores	that	might	be	closed	in	the	ordinary	course	of	business,	approximately	400	stores	by	the	end of	fiscal	2007,	all	of	which	have	been	closed	as	of	February	1,	2008.		Additionally,	in	connection	with	the	Merger,	management	approved	and	completed	a	plan	to	close	an	additional 60	stores	prior	to	February	1,	2008.		The	Company	has	recorded	the	following	pre-tax	costs	associated	with	the	closing	of	these	approximately	460	stores	(in	millions):

|  |  | Incurred	in | Incurred	in | Merger |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total\t(a) | 2006 | 2007 | Additions\t(b) | Remaining |
| Lease\tcontract\ttermination\tcosts\t(c) | $34.3 | $5.7 | $16.3 | $12.3 | $- |
| One-time\temployee\ttermination\tbenefits | 1.0 | 0.3 | 0.5 | 0.2 | - |
| Other\tassociated\tstore\tclosing\tcosts | 8.6 | 0.2 | 7.2 | 1.2 | - |
| Inventory\tliquidation\tfees | 4.4 | 1.6 | 2.8 | - | - |
| Asset\timpairment\t&amp;\taccelerated\tdepreciation | 12.8 | 8.3 | 3.6 | 0.9 | - |
| Inventory\tmarkdowns\tbelow\tcost | 8.3 | 6.7 | 0.9 | 0.7 | - |
| Total | $69.4 | $22.8 | $31.3 | $15.3 | $- |

(b) These	amounts	were	recorded	as	assumed	liabilities	in	connection	with	the	Merger.

(c) Including	reversals	of	deferred	rent	accruals	totaling	$0.5	million,	of	which	$0.1	million	is	reflected	in	2006,	and	$0.4	million	is	reflected	in	2007.		Excludes	accretion	expense to	be	incurred	in	future	periods.

Other	associated	store	closing	costs	as	listed	in	the	table	above	primarily	include	the	removal	of	any	usable	assets	as	well	as	real	estate	consulting	and	other	services.

Liability	balances	related	to	exit	activities	discussed	above	are	as	follows	(in	millions):

|  | Balance, |  |  |  | Balance, |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | February\t2, | 2007 | 2007\tPayments | Merger | February\t1, |
|  | 2007 | Expenses\t(a) | and\tOther | Additions\t(b) | 2008 |
| Lease\tcontract\ttermination\tcosts | $5.0 | $16.9 | $14.1 | $12.3 | $20.1 |
| One-time\temployee\ttermination\tbenefits | 0.3 | 0.5 | 1.0 | 0.2 | - |
| Other\tassociated\tstore\tclosing\tcosts\t(c) | 0.2 | 7.2 | 7.6 | 1.2 | 1.0 |
| Inventory\tliquidation\tfees | 0.3 | 2.8 | 3.1 | - | - |
| Total | $5.8 | $27.4 | $25.8 | $13.7 | $21.1 |

(a) 2007	expenses	associated	with	exit	and	disposal	activities	are	included	in	selling,	general	and	administrative	("SG&A")	expenses	in	the	consolidated	statement	of	operations.

(c) Primarily	represents	store	closing	costs	including	removal	of	store	fixtures.

Property	and	equipment	is	recorded	at	cost	and	summarized	as	follows:

| (In	thousands) | Successor<br>2007 | Predecessor<br>2006 |
| :--- | :--- | :--- |
| Land\tand\tland\timprovements | $137,539 | $147,447 |
| Buildings | 516,482 | 437,368 |
| Leasehold\timprovements | 87,343 | 212,078 |
| Furniture,\tfixtures\tand\tequipment | 645,376 | 1,617,163 |
| Construction\tin\tprogress | 2,823 | 16,755 |
|  | 1,389,563 | 2,430,811 |
| Less\taccumulated\tdepreciation\tand\tamortization | 115,318 | 1,193,937 |
| Net\tproperty\tand\tequipment | $1,274,245 | $1,236,874 |

Depreciation	expense	related	to	property	and	equipment	was	approximately	$116.9	million	for	the	Successor	period	from	July	7,	2007	through	February	1,	2008	compared to	$83.5	million	for	the	February	3,	2007	through	July	6,	2007	Predecessor	period,	$199.6	million	for	2006	and	$186.1	million	for	2005.		Amortization	of	capital	lease	assets	is included	in	depreciation	expense.

The	provision	(benefit)	for	income	taxes	consists	of	the	following:

|  | Successor | Predecessor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | July\t7,\t2007 | February\t3,\t2007 |  |  |
|  | to | to |  |  |
| (In\tthousands) | February\t1,\t2008 | July\t6,\t2007 | 2006 | 2005 |
| Current: |  |  |  |  |
| Federal | \t$(25,726) | \t$31,114 | \t$101,919 | \t$175,344 |
| Foreign | 409 | 495 | 1,200 | 1,205 |
| State | 4,306 | 1,258 | 17,519 | 9,694 |
|  | (21,011) | 32,867 | 120,638 | 186,243 |
| Deferred: |  |  |  |  |
| Federal | 22,157 | (18,750) | (34,807) | 8,479 |
| Foreign | - | - | 13 | 17 |
| State | (2,921) | (2,124) | (3,424) | (252) |
|  | 19,236 | (20,874) | (38,218) | 8,244 |
|  | \t$(1,775) | \t$11,993 | \t$82,420 | \t$194,487 |

A	reconciliation	between	actual	income	taxes	and	amounts	computed	by	applying	the	federal	statutory	rate	to	income	before	income	taxes	is	summarized	as	follows:

|  | Successor | Successor |  |  | Predecessor |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Dollars\tin | July\t7,\t2007 | July\t7,\t2007 | February\t3,\t2007 | February\t3,\t2007 |  |  |  |  |
| thousands) | to\tFebruary\t1,\t2008 |  | to\tJuly\t6,\t2007 |  | 2006 | 2006 | 2005 | 2005 |
| U.S.\tfederal\tstatutory\trate |  |  |  |  |  |  |  |  |
| on\tearnings\tbefore |  |  |  |  |  |  |  |  |
| income\ttaxes | \t$(2,308) | 35.0% \t$ | 1,399 | 35.0% \t$ | 77,127 | 35.0% \t$ | 190,625 | 35.0% |
| State\tincome\ttaxes,\tnet\tof\tfederal |  |  |  |  |  |  |  |  |
| income\ttax\tbenefit | 904 | (13.7) | (1,135) | (28.4) | 5,855 | 2.7 | 6,223 | 1.1 |
| Jobs\tcredits,\tnet\tof\tfederal\tincome |  |  |  |  |  |  |  |  |
| taxes | (3,022) | 45.8 | (2,227) | (55.7) | (5,008) | (2.3) | (4,503) | (0.8) |
| Increase\t(decrease)\tin\tvaluation |  |  |  |  |  |  |  |  |
| allowances | - | - | 551 | 13.8 | 3,211 | 1.5 | (88) | (0.0) |
| Income\ttax\trelated\tinterest\texpense, |  |  |  |  |  |  |  |  |
| net\tof\tfederal\tincome\ttax\tbenefit | 2,738 | (41.5) | (172) | (4.3) | - | - | - | - |
| Nondeductible\ttransaction\tcosts | - | - | 13,501 | 337.9 | - | - | - | - |
| Other,\tnet | (87) | 1.3 | 76 | 1.9 | 1,235 | 0.5 | 2,230 | 0.4 |
|  | \t$(1,775) | 26.9% \t$ | 11,993 | 300.2% \t$ | 82,420 | 37.4% \t$ | 194,487 | 35.7% |

The	2006	income	tax	rate	was	higher	than	the	2005	rate	by	1.7%.		Factors	contributing	to	this	increase	include	additional	expense	related	to	the	adoption	of	a	new	tax system	in	the	State	of	Texas;	a	reduction	in	the	contingent	income	tax	reserve	due	to	the	resolution	of	contingent	liabilities	that	is	less	than	the	decrease	that	occurred	in	2005;	an increase	in	the	deferred	tax	valuation	allowance,	and	an	increase	related	to	a	non-recurring	benefit	recognized	in	2005	related	to	an	internal	restructuring.		Offsetting	these	rate increases	was	a	reduction	in	the	income	tax	rate	related	to	federal	income	tax	credits.		Due	to	the	reduction	in	the	Company's	2006	income	before	tax,	a	small	increase	in	the	amount of	federal	income	tax	credits	earned	yielded	a	much	larger	percentage	reduction	in	the	income	tax	rate	for	2006	versus	2005.

Deferred	taxes	reflect	the	effects	of	temporary	differences	between	carrying	amounts	of	assets	and	liabilities	for	financial	reporting	purposes	and	the	amounts	used	for income	tax	purposes.	Significant	components	of	the	Company's	deferred	tax	assets	and	liabilities	are	as	follows:

Net	deferred	tax	liabilities	are	reflected	separately	on	the	consolidated	balance	sheets	as	current	and	noncurrent	deferred	income	taxes.	The	following	table	summarizes	net deferred	tax	liabilities	as	recorded	in	the	consolidated	balance	sheets:

|  | Successor | Predecessor |
| :--- | :--- | :--- |
|  | February\t1, | February\t2, |
| (In\tthousands) | 2008 | 2007 |
| Current\tdeferred\tincome\ttax\tassets,\tnet | \t$17,297 | \t$24,321 |
| Noncurrent\tdeferred\tincome\ttax\tliabilities,\tnet | (486,725) | (41,597) |
| Net\tdeferred\ttax\tliabilities | \t$(469,428) | \t$(17,276) |

The	Company	has	a	federal	net	operating	loss	carryforward	as	of	February	1,	2008	of	approximately	$44.5	million	which	will	expire	in	2027.		The	Company	also	has	state net	operating	loss	carryforwards	that	total	approximately	$261.1	million	and	will	expire	beginning	in	2012	through	2027	and	state	tax	credit	carryforwards	of	approximately	$13.4 million	that	will	expire	beginning	in	2008	through	2027.

The	valuation	allowance	has	been	provided	principally	for	state	tax	credit	carryforwards.		The	full	amount	of	the	change	in	the	valuation	allowance	for	the	2007	Successor period,	a	decrease	of	$4.2	million,	was	recorded	as	an	adjustment	to	goodwill.	The	increase	of	$0.6	million	in	the	Predecessor	period	ended	July	6,	2007,	the	increase	of	$3.2	million in	2006	and	the	decrease	of	$0.1	million	in	2005	were	included	in	income	tax	expense	for	the	respective	periods.		Based	upon	expected	future	income	and	available	tax	planning strategies,	management	believes	that	it	is	more	likely	than	not	that	the	results	of	operations	will	generate	sufficient	taxable	income

to	realize	the	deferred	tax	assets	after	giving	consideration	to	the	valuation	allowance.	After	the	Merger,	the	full	benefit	of	any	reversal	of	the	valuation	allowance	will	reduce goodwill	and	not	income	tax	expense.

The	Predecessor	adopted	the	provisions	of	FIN	48	effective	February	3,	2007.		The	adoption	resulted	in	an	$8.9	million	decrease	in	retained	earnings	and	a	reclassification of	certain	amounts	between	deferred	income	taxes	and	other	noncurrent	liabilities	to	conform	to	the	balance	sheet	presentation	requirements	of	FIN	48.		As	of	the	date	of	adoption, the	total	reserve	for	uncertain	tax	benefits	was	$77.9	million.		This	reserve	excludes	the	federal	income	tax	benefit	for	the	uncertain	tax	positions	related	to	state	income	taxes,	which is	now	included	in	deferred	tax	assets.		As	a	result	of	the	adoption	of	FIN	48,	the	reserve	for	interest	expense	related	to	income	taxes	was	increased	to	$15.3	million	and	a	reserve	for potential	penalties	of	$1.9	million	related	to	uncertain	income	tax	positions	was	recorded.

In	the	Predecessor	period	ended	July	6,	2007,	the	Internal	Revenue	Service	completed	an	examination	of	the	Company's	federal	income	tax	returns	through	fiscal	year	2003 resulting	in	a	net	income	tax	refund.		There	are	no	unresolved	issues	related	to	this	examination.		None	of	the	Company's	federal	income	tax	returns	are	currently	under	examination by	the	Internal	Revenue	Service;	however,	fiscal	years	2004	and	later	are	still	subject	to	possible	examination	by	the	Internal	Revenue	Service.		The	Company	has	various	state income	tax	examinations	that	are	currently	in	progress.		The	estimated	liability	related	to	these	state	income	tax	examinations	is	included	in	the	Company's	reserve	for	uncertain	tax positions.		Generally,	the	Company's	tax	years	ended	in	2004	and	forward	remain	open	for	examination	by	the	various	state	taxing	authorities.

As	of	February	1,	2008,	the	total	reserves	for	uncertain	tax	benefits,	interest	expense	related	to	income	taxes	and	potential	income	tax	penalties	were	$96.6	million,	$19.7 million	and	$1.5	million,	respectively,	for	a	total	of	$117.8	million.		Of	this	amount,	$23.2	million	and	$78.3	are	reflected	in	current	liabilities	as	accrued	expenses	and	other	and	in other	noncurrent	liabilities,	respectively,	in	the	consolidated	balance	sheet	with	the	remaining	$16.3	million	reducing	deferred	tax	assets	related	to	net	operating	loss	carry	forwards.

The	change,	from	the	date	of	adoption,	through	the	end	of	the	Predecessor	period	ended	July	6,	2007	in	the	reserves	for	uncertain	tax	benefits,	interest	expense	related	to income	taxes	and	potential	income	tax	penalties	that	impacted	the	consolidated	statement	of	operations	was	a	net	increase	of	$10.4	million	and	$0.2	million	and	a	decrease	of	$0.4 million,	respectively.		The	change,	from	the	end	of	the	Predecessor	period	ended	July	6,	2007,	through	the	end	of	the	Successor	period	ended	February	1,	2008,	in	the	reserves	for uncertain	tax	benefits	and	interest	expense	related	to	income	taxes	that	impacted	the	consolidated	statement	of	operations	was	a	net	increase	of	$0.2	million	and	$4.2	million, respectively.			There	was	no	change	in	the	reserve	for	potential	income	tax	penalties	during	the	Successor	period.

The	Company	believes	that	it	is	reasonably	possible	that	the	reserve	for	uncertain	tax	positions	may	be	reduced	by	approximately	$64.8	million	in	the	coming	twelve months	as	a	result	of	the	settlement	of	currently	ongoing	state	income	tax	examinations	and	the	anticipated	filing	of	an	income	tax	accounting	method	change	request	that	is expected	to	resolve	certain	uncertainties	related	to	accounting	methods	employed	by	the	Company.		The	reasonably	possible	change	of	$64.8	million	is	included	in	both	current liabilities	($21.2	million)	and	other	noncurrent	liabilities	($43.6	million)	in	the	consolidated	balance	sheet	as	of	February	1,	2008.	Also,	as	of	February	1,	2008	(after	the	merger	and the	related	application	of	purchase	accounting),	approximately	$0.3	million	of	the	reserve	for	uncertain	tax	positions	would	impact	the	Company's	effective	income	tax	rate	if	the Company	were	to	recognize	the	tax	benefit	for	these	positions.

A	reconciliation	of	the	reserve	associated	with	uncertain	income	tax	positions	from	February	3,	2007	(the	date	of	adoption)	through	February	1,	2008	is	as	follows:

| (In	thousands) |  |
| :--- | :--- |
| Balance\tas\tof\tFebruary\t3,\t2007 | $77,864 |
| Increases\t–\ttax\tpositions\ttaken\tin\tthe\tcurrent\tyear | 19,568 |
| Increases\t–\ttax\tpositions\ttaken\tin\tprior\tyears | 1,149 |
| Decrease\t–\ttax\tpositions\ttaken\tin\tprior\tyears | (9) |
| Statute\texpirations | (185) |
| Settlements | (1,787) |
| Balance\tas\tof\tFebruary\t1,\t2008 | $96,600 |

# 6. Current	and	long-term	obligations

Current	and	long-term	obligations	consist	of	the	following:

|  | Successor | Predecessor |
| :--- | :--- | :--- |
| (In\tthousands) | February\t1,\t2008 | February\t2,\t2007 |
| Senior\tsecured\tterm\tloan\tfacility | \t$2,300,000 | \t$- |
| Senior\tsecured\tasset-based\trevolving\tcredit\tfacility | 102,500 | - |
| 10\t5/8%\tSenior\tNotes\tdue\tJuly\t15,\t2015,\tnet\tof\tdiscount\tof\t$22,083 | 1,152,917 | - |
| 11\t7/8/12\t5/8%\tSenior\tSubordinated\tNotes\tdue\tJuly\t15,\t2017 | 700,000 | - |
| 8\t5/8%\tNotes\tdue\tJune\t15,\t2010,\tnet\tof\tdiscount\tof\t$-\tand\t$146,\trespectively | 1,822 | 199,832 |
| Capital\tlease\tobligations | 10,268 | 55,711 |
| Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | 14,495 | 14,495 |
|  | 4,282,002 | 270,038 |
| Less:\tcurrent\tportion | (3,246) | (8,080) |
| Long-term\tportion | \t$4,278,756 | \t$261,958 |

On	July	6,	2007,	the	Company	entered	into	two	senior	secured	credit	agreements	(the	"New	Credit	Facilities").		The	New	Credit	Facilities	provide	financing	of	$3,425.0 million,	consisting	of	$2,300.0	million	in	a	senior	secured	term	loan	facility	which	matures	on	July	6,	2014,	and	a	senior	secured	asset-based	revolving	credit	facility	of	up	to $1,125.0	million,	subject	to	borrowing	base	availability,	which	matures	on	July	6,	2013.

Under	the	New	Credit	Facilities,	the	Company	has	the	right	at	any	time	to	request	up	to	$325.0	million	of	incremental	commitments	under	one	or	more	incremental	term loan	facilities	and/or	asset-based	revolving	credit	facilities,	subject	to	certain	conditions	and	subject	to	the	lender's	desire	to	extend	the	incremental	facilities.

The	amount	from	time	to	time	available	under	the	senior	secured	asset-based	revolving	credit	facility	(including	in	respect	of	letters	of	credit)	may	not	exceed	the borrowing	base	(consisting	of	specified	percentages	of	eligible	inventory	and	credit	card	receivables	less	any	applicable	availability	reserves).		The	senior	secured	asset-based revolving	credit	facility	includes	a	$1.0	billion	tranche	and	a	$125.0	million	("last	out")	tranche.		Repayments	of	the	senior	secured	asset-based	revolving	credit	facility	will	be applied	to	the	$125.0	million	tranche	only	after	all	other	tranches	have	been	fully	paid	down.		As	of	February	1,	2008,	the	Company	had	borrowed	$102.5	million	under	the	"last out"	tranche.

Borrowings	under	the	New	Credit	Facilities	bear	interest	at	a	rate	equal	to	an	applicable	margin	plus,	at	the	Company's	option,	either	(a)	LIBOR	or	(b)	a	base	rate	(which	is usually	equal	to	the	prime	rate).		The	applicable	margin	for	borrowings	is	(i)	under	the	term	loan	facility,	2.75%	with	respect	to	LIBOR	borrowings	and	1.75%	with	respect	to	base- rate	borrowings	and	(ii)	as	of	February	1,	2008,	under	the	asset-based	revolving	credit	facility	(except	in	the	last	out	tranche	described	above),	1.50%	with	respect	to	LIBOR borrowings	and	0.50%	with	respect	to	base-rate	borrowings	and	for	any	last	out	borrowings,	2.25%	with	respect	to	LIBOR	borrowings	and	1.25%	with	respect	to	base-rate borrowings.		The	applicable	margins	for	borrowings	under	the	asset-based	revolving	credit	facility	(except	in	the	case	of	last	out	borrowings)	are	subject	to	adjustment	each	quarter based	on	average	daily	excess	availability	under	the	asset-based	revolving	credit	facility.		As	of	February	1,	2008,	the	average	interest	rate	for	borrowings	under	the	revolving	credit facility	was	6.35%.		The	interest	rate	for	borrowings	under	the	term	loan	facility	was	6.22%	(without	giving	effect	to	the	interest	rate	swap	discussed	in	Note	1)	as	of	February	1, 2008.

In	addition	to	paying	interest	on	outstanding	principal	under	the	New	Credit	Facilities,	the	Company	is	required	to	pay	a	commitment	fee	to	the	lenders	under	the	asset- based	revolving	credit	facility	in	respect	of	the	unutilized	commitments	thereunder.		The	commitment	fee	rate	was	0.375%	per	annum.		The	commitment	fee	rate	will	be	reduced (except	with	regard	to	the	last	out	tranche)	to	0.25%	per	annum	at	any	time	that	the	unutilized	commitments	under	the	asset-based	credit	facility	are	equal	to	or	less	than	50%	of	the aggregate	commitments	under	the	asset-based	revolving	credit	facility.		The	Company	also	must	pay	customary	letter	of	credit	fees.

The	senior	secured	credit	agreement	for	the	term	loan	facility	requires	the	Company	to	prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with	percentages	of excess	cash	flow,	proceeds	of	non-ordinary	course	asset	sales	or	dispositions	of	property,	and	proceeds	of	incurrences	of	certain	debt.		In	addition,	the	senior	secured	credit agreement	for	the	asset-based	revolving	credit	facility	requires	the	Company	to	prepay	the	asset-based	revolving	credit	facility,	subject	to	certain	exceptions,	with	proceeds	of	non- ordinary	course	asset	sales	or	dispositions	of	property	and	any	borrowings	in	excess	of	the	then	current	borrowing	base.		Beginning	September	30,	2009,	the	Company	is	required	to repay	installments	on	the	loans	under	the	term	loan	credit

facility	in	equal	quarterly	principal	amounts	in	an	aggregate	amount	per	annum	equal	to	1%	of	the	total	funded	principal	amount	at	July	6,	2007,	with	the	balance	payable	on	July	6, 2014.

All	obligations	under	the	New	Credit	Facilities	are	unconditionally	guaranteed	by	substantially	all	of	the	Company's	existing	and	future	domestic	subsidiaries	(excluding certain	immaterial	subsidiaries	and	certain	subsidiaries	designated	by	the	Company	under	the	New	Credit	Facilities	as	"unrestricted	subsidiaries").

All	obligations	and	guarantees	of	those	obligations	under	the	term	loan	credit	facility	are	secured	by,	subject	to	certain	exceptions,	a	second-priority	security	interest	in	all existing	and	after-acquired	inventory	and	accounts	receivable;	a	first	priority	security	interest	in	substantially	all	of	the	Company's	and	the	guarantors'	tangible	and	intangible	assets (other	than	the	inventory	and	accounts	receivable	collateral	just	described);	and	first-priority	pledge	of	the	capital	stock	held	by	the	Company.		All	obligations	under	the	asset-based revolving	credit	facility	are	secured	by	all	existing	and	after-acquire	inventory	and	accounts	receivable,	subject	to	certain	exceptions.

The	New	Credit	Facilities	contain	certain	covenants,	including,	among	other	things,	covenants	that	limit	the	Company's	ability	to	incur	additional	indebtedness,	sell	assets, incur	additional	liens,	pay	dividends,	make	investments	or	acquisitions,	or	repay	certain	indebtedness.

As	of	February	1,	2008,	the	Company	had	$102.5	million	in	borrowings,	$28.8	million	of	commercial	letters	of	credit,	and	$69.2	million	of	standby	letters	of	credit outstanding	under	the	asset-based	revolving	credit	facility,	with	excess	availability	under	that	facility	of	$769.2	million.		As	of	February	1,	2008,	the	Company	had	$2,300.0	million outstanding	under	the	term	loan	facility.

In	addition,	on	July	6,	2007,	in	conjunction	with	the	Merger,	the	Company	issued	$1,175.0	million	aggregate	principal	amount	of	10.625%	senior	notes	due	2015	(the "senior	notes")	which	were	issued	net	of	a	discount	of	$23.2	million	and	which	mature	on	July	15,	2015	pursuant	to	an	indenture,	dated	as	of	July	6,	2007	(the	"senior	indenture"), and	$725	million	aggregate	principal	amount	of	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the	"senior	subordinated	notes"),	which	mature	on	July	15,	2017, pursuant	to	an	indenture,	dated	as	of	July	6,	2007	(the	"senior	subordinated	indenture").		The	senior	notes	and	the	senior	subordinated	notes	are	collectively	referred	to	herein	as	the "notes".		The	senior	indenture	and	the	senior	subordinated	indenture	are	collectively	referred	to	herein	as	the	"indentures".

Interest	on	the	notes	is	payable	on	January	15	and	July	15	of	each	year,	commencing	on	January	15,	2008.		Interest	on	the	senior	notes	will	be	payable	in	cash.		Cash interested	on	the	senior	subordinated	notes	will	accrue	at	a	rate	of	11.875%	per	annum	and	PIK	interest	(as	that	term	is	defined	below)	will	accrue	at	a	rate	of	12.625%	per annum.		The	initial	interest	payment	on	the	senior	subordinated	notes	was	paid	in	cash.		For	certain	subsequent	interest	periods,	the	Company	may	elect	to	pay	interest	on	the	senior subordinated	notes	by	increasing	the	principal	amount	of	the	senior	subordinated	notes	or	issuing	new	senior	subordinated	notes	("PIK	interest").

The	notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future	direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the	obligations under	the	Company's	New	Credit	Facilities.

The	Company	may	redeem	some	or	all	of	the	notes	at	any	time	at	redemption	prices	described	or	set	forth	in	the	indentures.	During	the	fourth	quarter	of	fiscal	2007,	we repurchased	$25.0	million	of	the	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017,	resulting	in	a	pretax	gain	of	$4.9	million.

The	indentures	contain	certain	covenants,	including,	among	other	things,	covenants	that	limit	the	Company's	ability	to	incur	additional	indebtedness,	create	liens,	sell assets,	enter	into	transactions	with	affiliates,	or	consolidate	or	dispose	of	all	of	its	assets.

On	July	6,	2007,	immediately	after	the	completion	of	the	Merger,	the	Company	completed	a	cash	tender	offer	to	purchase	any	and	all	of	its	$200	million	principal	amount of	8	5/8%	Notes	due	June	2010	(the	"2010	Notes").		Approximately	99%	of	the	2010	Notes	were	validly	tendered	and	accepted	for	payment.		The	tender	offer	included	a	consent payment	equal	to	3%	of	the	par	value	of	the	2010	Notes,	and	such	payments	along	with	associated	settlement	costs	totaling	$6.2	million	were	paid	and	reflected	as	a	loss	on	debt retirement	in	the	2007	Successor	period	presented.		Additionally,	because	the	Company	received	the	requisite	consents	to	the	proposed	amendments	to	the	indenture	pursuant	to which	the	2010	Notes	were	issued,	a	supplemental	indenture	to	effect	such	amendments	was	executed	and	delivered.		The	amendments,	which	eliminated	substantially	all	of	the restrictive	covenants	contained	in	the	indenture,	became	operative	upon	the	purchase	of	the	tendered	2010	Notes.

# 7. Commitments	and	contingencies

# Leases

As	of	February	1,	2008,	the	Company	was	committed	under	capital	and	operating	lease	agreements	and	financing	obligations	for	most	of	its	retail	stores,	three	of	its	DCs, and	certain	of	its	furniture,	fixtures	and	equipment.		The	majority	of	the	Company's	stores	are	subject	to	short-term	leases	(an	average	of	three	to	five	years)	with	multiple	renewal options	when	available.		The	Company	also	has	stores	subject	to	build-to-suit	arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	10	years	with	multiple renewal	options.	Approximately	44%	of	the	stores	have	provisions	for	contingent	rentals	based	upon	a	percentage	of	defined	sales	volume.		Certain	leases	contain	restrictive covenants.		As	of	February	1,	2008,	the	Company	is	not	aware	of	any	material	violations	of	such	covenants,	however,	there	is	a	degree	of	uncertainty	with	regard	to	the	Company's DC	leases	as	discussed	below.

The	Merger	and	certain	of	the	related	financing	transactions	may	be	interpreted	as	giving	rise	to	certain	trigger	events	(which	may	include	events	of	default)	under	the Company's	three	DC	leases.	In	such	event,	the	Company's	net	cost	of	acquiring	the	underlying	assets	could	approximate	$112	million.	At	this	time,	the	Company	does	not	believe the	resolution	of	such	issues	would	result	in	the	purchase	of	these	DCs;	however,	the	payments	associated	with	such	an	outcome	would	have	a	negative	impact	on	the	Company's liquidity.	To	minimize	the	uncertainty	associated	with	such	possible	interpretations,	the	Company	is	negotiating	the	restructuring	of	these	leases	and	the	related	underlying	debt.	The Company	has	concluded	that	a	probable	loss	exists	in	connection	with	the	restructurings	and	has	recorded	expenses	totaling	$12.0	million	in	SG&A	expenses	in	the Successor	statement	of	operations	for	the	period	ended	February	1,	2008.	The	ultimate	resolution	of	these	negotiations	may	result	in	changes	in	the	amounts	of	such	losses,	and	such changes	may	be	material.

In	January	1999	and	April	1997,	the	Company	sold	its	DCs	located	in	Ardmore,	Oklahoma	and	South	Boston,	Virginia,	respectively,	for	100%	cash consideration.		Concurrent	with	the	sale	transactions,	the	Company	leased	the	properties	back	for	periods	of	23	and	25	years,	respectively.		The	transactions	were	recorded	as financing	obligations	rather	than	sales	as	a	result	of,	among	other	things,	the	lessor's	ability	to	put	the	properties	back	to	the	Company	under	certain	circumstances.		The	property and	equipment,	along	with	the	related	lease	obligations,	associated	with	these	transactions	were	recorded	in	the	consolidated	balance	sheets.

In	August	2007,	the	Company	purchased	a	secured	promissory	note	(the	"Ardmore	Note")	from	Principal	Life	Insurance	Company,	which	had	a	face	value	of	$34.3 million	at	the	date	of	purchase	and	approximated	the	remaining	financing	obligation.	The	Ardmore	Note	represents	debt	issued	by	the	third	party	entity	from	which	the	Company leases	the	Ardmore	DC.	The	Ardmore	Note	is	being	accounted	for	as	a	"held	to	maturity"	debt	security	in	accordance	with	the	provisions	of	SFAS	115,	"Accounting	for	Certain Investments	in	Debt	and	Equity	Securities"	(see	Note	1).		However,	by	acquiring	the	Ardmore	Note,	the	Company	holds	the	debt	instrument	pertaining	to	its	lease	financing obligation	and,	because	a	legal	right	of	offset	exists,	is	accounting	for	the	acquired	Ardmore	Note	as	a	reduction	of	its	outstanding	financing	obligations	in	its	consolidated	balance sheet	as	of	February	1,	2008	in	accordance	with	the	provisions	of	FASB	Interpretation	39,	"Offsetting	of	Amounts	Related	to	Certain	Contracts	–	An	Interpretation	of	APB	Opinion 10	and	FASB	Statement	105."

In	May	2003,	the	Company	purchased	two	secured	promissory	notes	(the	"South	Boston	Notes")	from	Principal	Life	Insurance	Company	totaling	$49.6	million.	The	South Boston	Notes	represented	debt	issued	by	the	third	party	entity	from	which	the	Company	leased	the	South	Boston	DC.	In	June	2006,	the	Company	acquired	the	third	party	entity, which	owned	legal	title	to	the	South	Boston	DC	assets	and	had	issued	the	related	debt	in	connection	with	the	original	financing	transaction.	There	was	no	material	gain	or	loss recognized	as	a	result	of	this	transaction.	Based	on	the	Company's	ownership	of	the	third	party	entity	at	February	1,	2008,	the	financing	obligation	and	South	Boston	Notes	are eliminated	in	the	Company's	consolidated	financial	statements.

Future	minimum	payments	as	of	February	1,	2008	for	capital	and	operating	leases	are	as	follows:

|  | Capital | Operating |
| :--- | :--- | :--- |
| (In\tthousands) | Leases | Leases |
| 2008 | \t$3,740 | \t$335,457 |
| 2009 | 1,909 | 286,490 |
| 2010 | 810 | 237,873 |
| 2011 | 599 | 198,954 |
| 2012 | 599 | 158,464 |
| Thereafter | 6,476 | 396,977 |
| Total\tminimum\tpayments | 14,133 | \t$1,614,215 |
| Less:\timputed\tinterest | (3,865) |  |
| Present\tvalue\tof\tnet\tminimum\tlease\tpayments | 10,268 |  |
| Less:\tcurrent\tportion,\tnet | (3,246) |  |

Capital	leases	were	discounted	at	an	effective	interest	rate	of	approximately	5.43%	at	February	1,	2008.		The	gross	amount	of	property	and	equipment	recorded	under capital	leases	and	financing	obligations	at	February	1,	2008	and	February	2,	2007,	was	$33.5	million	and	$85.1	million,	respectively.		Accumulated	depreciation	on	property	and equipment	under	capital	leases	and	financing	obligations	at	February	1,	2008	and	February	2,	2007,	was	$2.7	million	and	$41.0	million,	respectively.

Rent	expense	under	all	operating	leases	is	as	follows:

|  | Successor | Predecessor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | July\t7,\t2007 | February\t3,\t2007 |  |  |
| (In\tthousands) | through\nFebruary\t1,\t2008 | through\nJuly\t6,\t2007 | 2006 | 2005 |
| Minimum\trentals\t(a) | \t$205,672 | \t$143,188 | \t$327,911 | \t$295,061 |
| Contingent\trentals | 8,780 | 6,964 | 16,029 | 17,245 |
|  | \t$214,452 | \t$150,152 | \t$343,940 | \t$312,306 |

(a) Excludes	net	contract	termination	costs	of	$2.4	million,	$19.1	million,	and	$5.7	million	for	the	Successor	period	ended	February	1,	2008	and the	Predecessor	periods	ended	July	6,	2007	and	February	2,	2007,	respectively.		These	expenses	were	recorded	in	association	with	the	closing of	stores	associated	with	strategic	initiatives	as	further	discussed	in	Note	3.	Also	excludes	amortization	of	leasehold	interests	of	$26.1	million included	in	rent	expense	for	the	Successor	period	ended	February	1,	2008.

# Legal	proceedings

On	August	7,	2006,	a	lawsuit	entitled	Cynthia	Richter,	et	al.	v.	Dolgencorp,	Inc.,	et	al.	was	filed	in	the	United	States	District	Court	for	the	Northern	District	of	Alabama (Case	No.	7:06-cv-01537-LSC)	("Richter")	in	which	the	plaintiff	alleges	that	she	and	other	current	and	former	Dollar	General	store	managers	were	improperly	classified	as	exempt executive	employees	under	the	FLSA	and	seeks	to	recover	overtime	pay,	liquidated	damages,	and	attorneys'	fees	and	costs.	On	August	15,	2006,	the	Richter	plaintiff	filed	a	motion in	which	she	asked	the	court	to	certify	a	nationwide

class	of	current	and	former	store	managers.	The	Company	opposed	the	plaintiff's	motion.	On	March	23,	2007,	the	court	conditionally	certified	a	nationwide	class	of	individuals	who worked	for	Dollar	General	as	store	managers	since	August	7,	2003.	The	number	of	persons	who	will	be	included	in	the	class	has	not	been	determined,	and	the	court	has	not approved	the	Notice	that	will	be	sent	to	the	class.

On	May	30,	2007,	the	court	stayed	all	proceedings	in	the	case,	including	the	sending	of	the	Notice,	to	evaluate,	among	other	things,	certain	appeals	currently	pending	in	the Eleventh	Circuit	involving	claims	similar	to	those	raised	in	this	action.	That	stay	has	been	extended	through	June	30,	2008.	During	the	stay,	the	statute	of	limitations	will	be	tolled for	potential	class	members.	At	its	conclusion,	the	court	will	determine	whether	to	extend	the	stay	or	to	permit	this	action	to	proceed.	If	the	court	ultimately	permits	Notice	to	issue, the	Company	will	have	an	opportunity	at	the	close	of	the	discovery	period	to	seek	decertification	of	the	class,	and	the	Company	expects	to	file	such	a	motion.

The	Company	believes	that	its	store	managers	are	and	have	been	properly	classified	as	exempt	employees	under	the	FLSA	and	that	this	action	is	not	appropriate	for collective	action	treatment.	The	Company	intends	to	vigorously	defend	this	action.	However,	at	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	this action	to	proceed	collectively,	and	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise.	If	the	Company	is	not	successful	in	its efforts	to	defend	this	action,	the	resolution	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

On	May	18,	2006,	the	Company	was	served	with	a	lawsuit	entitled	Tammy	Brickey,	Becky	Norman,	Rose	Rochow,	Sandra	Cogswell	and	Melinda	Sappington	v.

Dolgencorp,	Inc.	and	Dollar	General	Corporation	(Western	District	of	New	York,	Case	No.	6:06-cv-06084-DGL,	originally	filed	on	February	9,	2006	and	amended	on	May	12, 2006	("Brickey")).	The	Brickey	plaintiffs	seek	to	proceed	collectively	under	the	FLSA	and	as	a	class	under	New	York,	Ohio,	Maryland	and	North	Carolina	wage	and	hour	statutes on	behalf	of,	among	others,	assistant	store	managers	who	claim	to	be	owed	wages	(including	overtime	wages)	under	those	statutes.	At	this	time,	it	is	not	possible	to	predict	whether the	court	will	permit	this	action	to	proceed	collectively	or	as	a	class.	However,	the	Company	believes	that	this	action	is	not	appropriate	for	either	collective	or	class	treatment	and that	the	Company's	wage	and	hour	policies	and	practices	comply	with	both	federal	and	state	law.	The	Company	plans	to	vigorously	defend	this	action;	however,	no	assurances	can be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise,	and,	if	it	is	not	successful,	the	resolution	of	this	action	could	have	a	material	adverse	effect	on the	Company's	financial	statements	as	a	whole.

On	March	7,	2006,	a	complaint	was	filed	in	the	United	States	District	Court	for	the	Northern	District	of	Alabama	(Janet	Calvert	v.	Dolgencorp,	Inc.,	Case	No.	2:06-cv- 00465-VEH	("Calvert")),	in	which	the	plaintiff,	a	former	store	manager,	alleged	that	she	was	paid	less	than	male	store	managers	because	of	her	sex,	in	violation	of	the	Equal	Pay Act	and	Title	VII	of	the	Civil	Rights	Act	of	1964,	as	amended	("Title	VII").	The	complaint	subsequently	was	amended	to	include	additional	plaintiffs,	who	also	allege	to	have	been paid	less	than	males	because	of	their	sex,	and	to	add	allegations	that	the	Company's	compensation	practices	disparately	impacted	females.	Under	the	amended	complaint,	Plaintiffs seek	to	proceed	collectively	under	the	Equal	Pay	Act	and	as	a	class	under	Title	VII,	and	request	back	wages,	injunctive	and	declaratory	relief,	liquidated	damages,	punitive	damages and	attorney's	fees	and	costs.

On	July	9,	2007,	the	plaintiffs	filed	a	motion	in	which	they	asked	the	court	to	approve	the	issuance	of	notice	to	a	class	of	current	and	former	female	store	managers	under the	Equal	Pay	Act.	The	Company	opposed	plaintiffs'	motion.	On	November	30,	2007,	the	court	conditionally	certified	a	nationwide	class	of	females	under	the	Equal	Pay	Act	who worked	for	Dollar	General	as	store	managers	between	November	30,	2004	and	November	30,	2007.	The	notice	was	issued	on	January	11,	2008,	and	persons	to	whom	the	notice	was sent	were	required	to	opt	into	the	suit	by	March	11,	2008.	The	Company	will	have	an	opportunity	at	the	close	of	the	discovery	period	to	seek	decertification	of	the	Equal	Pay	Act class,	and	the	Company	expects	to	file	such	motion.

At	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	the	Calvert	action	to	proceed	collectively	under	the	Equal	Pay	Act	or	as	a	class	under	the Title	VII.	However,	the	Company	believes	that	the	case	is	not	appropriate	for	class	or	collective	treatment	and	that	its	policies	and	practices	comply	with	the	Equal	Pay	Act	and	Title VII.		The	Company	intends	to	vigorously	defend	the	action;	however,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise.	If the	Company	is	not	successful	in	defending	the	Calvert	action,	its	resolution	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

On	November	9,	2007,	the	Company	was	served	with	an	action	entitled	Sheneica	Nunn,	et	al.	v.	Dollar	General	Corporation,	et	al.	(Circuit	Court	for	Dane	County, Wisconsin,	Case	No.	07CV4178)	in	which	the	plaintiff,	on	behalf	of	herself	and	a	putative	class	of	African-American	applicants,	alleges	that	the	Company's	criminal	background check	process	disparately	impacts	African-Americans	in	violation	of	Title	VII	of	the	Civil	Rights	Act	of	1964,	as	amended,	and	the	Wisconsin	Fair	Employment	Act.	The	Company has	removed	the	case	to	federal	court,	and	it	currently	is	pending	in	the	United	States	District	Court	for	the	Western	District	of	Wisconsin.	At	this	time,	it	is	not	possible	to	predict whether	the	court	will	permit	this	action	to	proceed	as	a	class	under	either	Title	VII	or	the	Wisconsin	statute.	However,	the	Company	believes	that	this	action	is	not	appropriate	for class	treatment	and	that	the	Company's	background	check	policies	and	practices	comply	with	both	federal	and	state	law.		The	Company	plans	to	vigorously	defend	this	action; however,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise,	and,	if	it	is	not	successful,	the	resolution	of	this	action	could have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

On	September	8,	2005,	the	Company	received	a	request	for	information	from	the	Environmental	Protection	Agency	(EPA)	with	respect	to	Krazy	String,	a	product	that	was offered	for	sale	in	the	Company's	stores.	The	EPA	asserted	that	Krazy	String	contained	an	aerosol	that	included	an	ozone	depleting	substance	in	violation	of	the	Clean	Air	Act.	On July	12,	2006,	the	Company	agreed	to	an	Administrative	Compliance	Order	requiring	the	destruction	of	the	Krazy	String	remaining	in	inventory.	After	advising	the	Company	that	it was	considering	imposing	a	penalty	in	connection	with	Krazy	String,	on	February	5,	2007	the	EPA	proposed	a	penalty	of	approximately	$800,000.	The	Company	believed	that amount	to	be	excessive	under	applicable	EPA	policies.	After	additional	discussions	with	the	EPA,	the	Company	and	the	EPA	agreed	on	January	17,	2008	to	resolve	this	matter through	the	Company's	payment	of	a	$155,826	penalty.

The	Company	paid	this	penalty	in	the	fourth	quarter	of	fiscal	2007	and	has	received	full	reimbursement	from	the	product	vendor.

Subsequent	to	the	announcement	of	the	agreement	relating	to	the	Merger,	the	Company	and	its	directors	were	named	in	seven	putative	class	actions	alleging	claims	for breach	of	fiduciary	duty	arising	out	of	the	Company's	proposed	sale	to	KKR.	Each	of	the	complaints	alleged,	among	other	things,	that	the	Company's	directors	engaged	in	"self- dealing"	by	agreeing	to	recommend	the	transaction	to	the	Company's	shareholders	and	that	the	consideration	available	to	such	shareholders	in	the	transaction	is	unfairly	low.	On motion	of	the	plaintiffs,	each	of	these	cases	was	transferred	to	the	Sixth	Circuit	Court	for	Davidson	County,	Twentieth	Judicial	District,	at	Nashville.	By	order	dated	April	26,	2007, the	seven	lawsuits	were	consolidated	in	the	court	under	the	caption,	"In	re:	Dollar	General,"	Case	No.	07MD-1.	On	June	13,	2007,	the	court	denied	the	Plaintiffs'	motion	for	a temporary	injunction	to	block	the	shareholder	vote	that	was	then	held	on	June	21,	2007.	On	June	22,	2007,	the	Plaintiffs	filed	their	amended	complaint	making	claims	substantially similar	to	those	outlined	above.	The	matter	is	currently	in	discovery.	The	Company	believes	that	the	foregoing	lawsuit	is	without	merit	and	continues	to	defend	the	action vigorously;	however,	if	the	Company	is	not	successful	in	that	defense,	its	resolution	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

From	time	to	time,	the	Company	is	a	party	to	various	other	legal	actions	involving	claims	incidental	to	the	conduct	of	its	business,	including	actions	by	employees, consumers,	suppliers,	government	agencies,	or	others	through	private	actions,	class	actions,	administrative	proceedings,	regulatory	actions	or	other	litigation,	including	under	federal and	state	employment	laws	and	wage	and	hour	laws.		The	Company	believes,	based	upon	information	currently	available,	that	such	other	litigation	and	claims,	both	individually	and in	the	aggregate,	will	be	resolved	without	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.	However,	litigation	involves	an	element	of	uncertainty.	Future developments	could	cause	these	actions	or	claims	to	have	a	material	adverse	effect	on	the	Company's	results	of	operations	or	financial	position.	In	addition,	certain	of	these	lawsuits, if	decided	adversely	to	the	Company	or	settled	by	the	Company,	may	result	in	liability	material	to	the	Company's	financial	position	or	may	negatively	affect	our	operating	results	if changes	to	the	Company's	business	operation	are	required.

# 8. Benefit	plans

The	Dollar	General	Corporation	401(k)	Savings	and	Retirement	Plan,	which	became	effective	on	January	1,	1998,	is	a	safe	harbor	defined	contribution	plan	and	is	subject to	the	Employee	Retirement	and	Income	Security	Act	("ERISA").

Participants	are	permitted	to	contribute	between	1%	and	25%	of	their	pre-tax	annual	eligible	compensation	as	defined	in	the	401(k)	plan	document,	subject	to	certain limitations	under	the	Internal	Revenue	Code.		Employees	who	are	over	age	50	are	permitted	to	contribute	additional	amounts	on	a	pre-tax	basis	under	the	catch-up	provision	of	the 401(k)	plan	subject	to	Internal	Revenue	Code	limitations.	The	Company	currently	matches	employee	contributions,	including	catch-up	contributions,	at	a	rate	of	100%	of	employee contributions,	up	to	5%	of

annual	eligible	salary,	after	an	employee	has	been	employed	for	one	year	and	has	completed	a	minimum	of	1,000	hours	of	service.

A	participant's	right	to	claim	a	distribution	of	his	or	her	account	balance	is	dependent	on	ERISA	guidelines	and	Internal	Revenue	Service	regulations.	All	active	employees are	fully	vested	in	all	contributions	to	the	401(k)	plan.	During	the	2007	Successor	and	Predecessor	periods,	2006	and	2005,	the	Company	expensed	approximately	$3.0	million,	$4.3 million,	$6.4	million,	and	$5.8	million,	respectively,	for	matching	contributions.	The	Merger	did	not	significantly	impact	the	comparability	of	such	expense	amounts	between periods.

The	Company	also	has	a	nonqualified	supplemental	retirement	plan	and	compensation	deferral	plan	(called	the	Dollar	General	Corporation	CDP/SERP	Plan)	for	a	select group	of	management	and	highly	compensated	employees.		The	supplemental	retirement	plan	is	a	noncontributory	defined	contribution	plan	with	annual	Company	contributions ranging	from	2%	to	12%	of	base	pay	plus	bonus	depending	upon	age	plus	years	of	service	and	job	grade.		Under	the	compensation	deferral	plan,	participants	may	defer	up	to	65%	of base	pay	and	up	to	100%	of	bonus	pay.	An	employee	may	be	designated	for	participation	in	one	or	both	of	the	plans,	according	to	the	eligibility	requirements	of	the	plans.	The Company	matches	base	pay	deferrals	at	a	rate	of	100%	of	base	pay	deferral,	up	to	5%	of	annual	salary,	with	annual	salary	offset	by	the	amount	of	match-eligible	salary	in	the	401(k) plan.	All	participants	are	100%	vested	in	their	compensation	deferral	plan	accounts.

As	a	result	of	the	Merger	which	constituted	a	"change	in	control"	under	the	CDP/SERP	Plan,	all	previously	unvested	amounts	under	the	supplemental	retirement	plan vested	on	July	6,	2007.		For	newly	eligible	SERP	participants	after	July	6,	2007,	the	supplemental	retirement	plan	accounts	vest	at	the	earlier	of	the	participant's	attainment	of	age	50 or	the	participant's	being	credited	with	10	or	more	"years	of	service",	upon	termination	of	employment	due	to	death	or	"total	and	permanent	disability"	or	upon	a	"change	in	control", all	as	defined	in	the	CDP/SERP	Plan.		The	Company	incurred	compensation	expense	for	these	plans	of	approximately	$0.3	million	in	the	2007	Successor	period,	$0.5	million	in	the 2007	Predecessor	period,	$0.8	million	in	2006	and	$0.6	million	in	2005.

The	supplemental	retirement	plan	and	compensation	deferral	plan	assets	are	invested	at	the	option	of	the	participant	in	an	account	that	mirrors	the	performance	of	a	fund	or funds	selected	by	the	Company's	Compensation	Committee	or	its	delegate	(the	"Mutual	Fund	Options")	or,	prior	to	the	Merger,	in	an	account	that	mirrored	the	performance	of	the Company's	common	stock	(the	"Common	Stock	Option").		A	participant's	compensation	deferral	plan	and	supplemental	retirement	plan	account	balances	will	be	paid	in accordance	with	the	participant's	election	by	(a)	lump	sum,	(b)	monthly	installments	over	a	5,	10	or	15	year	period	or	(c)	a	combination	of	lump	sum	and	installments.		The	vested amount	will	be	payable	at	the	time	designated	by	the	plan	upon	the	participant's	termination	of	employment	or	retirement,	except	that	participants	may	elect	to	receive	an	in-service distribution	or	an	"unforeseeable	emergency	hardship"	distribution	of	vested	amounts	credited	to	the	compensation	deferral	account.	Account	balances	deemed	to	be	invested	in	the Mutual	Fund	Options	are	payable	in	cash	and,	prior	to	the	Merger,	account	balances	deemed	to	be	invested	in	the	Common	Stock	Option	were	payable	in	shares	of	Dollar	General common	stock	and	cash	in	lieu	of	fractional	shares.

As	a	result	of	the	Merger,	the	CDP/SERP	Plan	liabilities	were	fully	funded	into	an	irrevocable	rabbi	trust.		All	account	balances	deemed	to	be	invested	in	the	Common Stock	Option	were	liquidated	at	a	value	of	$22.00	per	share	and	the	proceeds	were	transferred	to	an	existing	Mutual	Fund	Option	within	the	Plan.

Asset	balances	in	the	Mutual	Funds	Option	are	stated	at	fair	market	value,	which	is	based	on	quoted	market	prices.	The	current	portion	of	these	balances	is	included	in Prepaid	expenses	and	other	current	assets	and	the	long	term	portion	is	included	in	Other	assets,	net	in	the	consolidated	balance	sheets.		In	accordance	with	EITF	97-14	"Accounting for	Deferred	Compensation	Arrangements	Where	Amounts	Earned	Are	Held	in	a	Rabbi	Trust	and	Invested,"	the	Company's	stock	was	recorded	at	historical	cost	and	included	in Other	shareholders'	equity,	prior	to	the	Merger.		Also,	prior	to	the	Merger,	the	deferred	compensation	liability	related	to	the	Company	stock	for	active	plan	participants	was	included in	shareholders'	equity	and	subsequent	changes	to	the	fair	value	of	the	obligation	were	not	recognized,	in	accordance	with	the	provisions	of	EITF	97-14.	However,	as	a	result	of	the Merger,	Plan	participants	no	longer	have	the	option	of	investing	in	the	Company's	stock.		The	deferred	compensation	liability	related	to	the	Mutual	Funds	Option	is	recorded	at	the fair	value	of	the	investments	held	in	the	trust.	The	current	portion	of	these	balances	is	included	in	Accrued	expenses	and	other	and	the	long	term	portion	is	included	in	Other liabilities	in	the	consolidated	balance	sheets.

The	Company	sponsored	through	2007	a	supplemental	executive	retirement	plan	for	the	Chief	Executive	Officer	(called	the	Supplemental	Executive	Retirement	Plan	for David	A.	Perdue)	and	accounted	for	the	plan	in	accordance	with	SFAS	158.		As	a	result	of	the	Merger,	which	constituted	a	change	in	control	under	the	terms	of	this	plan	and	the grantor	trust	agreement,	and	Mr.	Perdue's	subsequent	resignation,	Mr.	Perdue	became	100%	vested.		A	deposit	of	$6,208,966	was	made	to	the	trust	representing	Mr.	Perdue's	lump sum	vested	benefit	and	accumulated	interest,	which	amount	was	paid	to	Mr.	Perdue	on	January	7,	2008	effectively	terminating	the	plan.

Prior	to	the	Merger,	non-employee	directors	could	defer	all	or	a	part	of	any	fees	normally	paid	by	the	Company	to	a	voluntary	nonqualified	compensation	deferral plan.		The	compensation	eligible	for	deferral	includes	the	annual	retainer,	meeting	and	other	fees,	as	well	as	any	per	diem	compensation	for	special	assignments,	earned	by	a	director for	his	or	her	service	to	the	Company's	Board	of	Directors	or	one	of	its	committees.		The	deferred	compensation	was	credited	to	a	liability	account,	which	was	then	invested	at	the option	of	the	director,	in	deemed	investments	which	mirrored	either	the	Mutual	Fund	Options	or	the	Common	Stock	Option	and	the	deferred	compensation	was	to	be	paid	in accordance	with	the	director's	election.	All	deferred	compensation	was	immediately	due	and	payable	upon	a	"change	in	control"	of	the	Company,	as	defined	by	the	Plan.	As	a	result of	the	Merger,	which	constituted	a	change	in	control	under	the	Plan,	all	accounts	held	in	the	Deferred	Compensation	Plan	for	Non-Employee	Directors	were	distributed.

The	Company	accounts	for	share-based	payments	in	accordance	with	SFAS	123(R).		Under	SFAS	123(R),	the	fair	value	of	each	award	is	separately	estimated	and amortized	into	compensation	expense	over	the	service	period.		The	fair	value	of	the	Company's	stock	option	grants	are	estimated	on	the	grant	date	using	the	Black-Scholes-Merton valuation	model.		The	application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	determination	of	compensation	expense.

The	Successor	statement	of	operations	for	the	period	from	July	7,	2007	to	February	1,	2008	reflect	share-based	compensation	expense	(a	component	of	SG&A	expenses) under	the	fair	value	method	of	SFAS	123(R)	for	outstanding	share-based	awards	and	a	corresponding	reduction	of	pre-tax	income	in	the	amount	of	$3.8	million	($2.4	million	net	of tax).

The	Company	recognized	$45.4	million	of	share-based	compensation	expense	in	the	Predecessor	statements	of	operations	in	2007	($28.5	million	net	of	tax),	including	$6.0 million	of		compensation	expense	prior	to	the	Merger	included	in	SG&A	expenses	comprised	of	$2.3	million	and	$3.7	million,	respectively,	for	stock	options	and	restricted	stock and	restricted	stock	units.	The	remaining	$39.4	million	of	such	expense	related	directly	to	the	Merger	is	reflected	in	Transaction	and	related	costs	in	the	consolidated	statement	of operations	for	the	Predecessor	period	ended	July	6,	2007,	consisting	of	$18.7	million	and	$20.7	million,	respectively,	for	the	accelerated	vesting	of	stock	options	and	restricted	stock and	restricted	stock	units.

For	the	year	ended	February	2,	2007,	the	fair	value	method	of	SFAS	123(R)	resulted	in	additional	share-based	compensation	expense	and	a	corresponding	reduction	in	net income	before	income	taxes	in	the	amount	of	$3.6	million	($2.2	million	net	of	tax).

Prior	to	the	Merger,	the	Company	maintained	various	share-based	compensation	programs	which	included	options,	restricted	stock	and	restricted	stock	units.		In connection	with	the	Merger,	the	Company's	outstanding	stock	options,	restricted	stock	and	restricted	stock	units	became	fully	vested	immediately	prior	to	the	closing	of	the	Merger and	were	settled	in	cash,	canceled	or,	in	limited	circumstances,	exchanged	for	new	options	of	the	Company,	as	described	below.		Unless	exchanged	for	new	options,	each	option holder	received	an	amount	in	cash,	without	interest	and	less	applicable	withholding	taxes,	equal	to	$22.00	less	the	exercise	price	of	each	in-the-money	option.		Additionally,	each restricted	stock	and	restricted	stock	unit	holder	received	$22.00	in	cash,	without	interest	and	less	applicable	withholding	taxes.		Certain	stock	options	held	by	Company	management were	exchanged	for	new	options	to	purchase	common	stock	in	the	Company	(the	"Rollover	Options").		The	exercise	price	of	the	Rollover	Options	and	the	number	of	shares	of Company	common	stock	underlying	the	Rollover	Options	were	adjusted	as	a	result	of	the	Merger.		The	Rollover	Options	otherwise	continue	under	the	terms	of	the	equity	plan under	which	the	original	options	were	issued.

On	February	3,	2006,	the	vesting	of	all	outstanding	options	granted	prior	to	August	2,	2005,	other	than	options	previously	granted	to	the	Company's	then	CEO	and	options granted	in	2005	to	the	officers	of	the	Company	at	the	level	of	Executive	Vice	President	or	above,	accelerated

pursuant	to	a	January	24,	2006	action	of	the	Compensation	Committee	of	the	Company's	Board	of	Directors.	In	addition,	pursuant	to	that	Compensation	Committee	action,	the vesting	of	all	outstanding	options	granted	on	or	after	August	2,	2005	but	prior	to	January	24,	2006,	other	than	options	granted	during	that	time	period	to	the	officers	of	the	Company at	the	level	of	Executive	Vice	President	or	above,	accelerated	effective	as	of	the	date	that	is	six	months	after	the	applicable	grant	date.	Certain	options	granted	on	January	24,	2006 to	certain	newly	hired	officers	below	the	level	of	Executive	Vice	President	were	granted	with	a	six-month	vesting	period.	The	decision	to	accelerate	the	vesting	of	these	stock options	resulted	in	compensation	expense	of	$0.9	million,	before	income	taxes,	recognized	during	the	fourth	quarter	of	2005,	and	was	made	primarily	to	reduce	non-cash compensation	expense	to	be	recorded	in	future	periods	under	the	provisions	of	SFAS	123(R).	The	future	expense	eliminated	as	a	result	of	the	decision	to	accelerate	the	vesting	of these	options	was	approximately	$28	million,	or	$17	million	net	of	income	taxes,	over	the	four-year	period	during	which	the	stock	options	would	have	vested,	subject	to	the	impact of	additional	adjustments	related	to	certain	stock	option	forfeitures.	The	Company	also	believed	this	decision	benefited	employees.

On	July	6,	2007,	the	Company's	Board	of	Directors	adopted	the	2007	Stock	Incentive	Plan	for	Key	Employees	(the	"Plan").		The	Plan	provides	for	the	granting	of	stock options,	stock	appreciation	rights,	and	other	stock-based	awards	or	dividend	equivalent	rights	to	key	employees,	directors,	consultants	or	other	persons	having	a	service	relationship with	the	Company,	its	subsidiaries	and	certain	of	its	affiliates.		The	number	of	shares	of	Company	common	stock	authorized	for	grant	under	the	Plan	is	24,000,000.		As	of	February 1,	2008,	3,470,200	of	such	shares	are	available	for	future	grants.

During	the	Successor	period	ended	February	1,	2008,	the	Company	granted	options	that	vest	solely	upon	the	continued	employment	of	the	recipient	("Time	Options")	as well	as	options	that	vest	upon	the	achievement	of	predetermined	annual	or	cumulative	financial-based	targets	that	coincide	with	the	Company's	fiscal	year	("Performance Options").		According	to	the	award	terms,	20%	of	the	Time	Options	vest	on	each	of	the	five	successive	anniversary	dates	of	the	merger	transaction,	and	20%	of	the	Performance Options	vests	at	the	end	of	each	of	the	successive	five	fiscal	years	in	which	the	performance	target	is	achieved.		In	the	event	the	performance	target	is	not	achieved	in	any	given	year, such	options	for	that	year	will	subsequently	vest	upon	the	achievement	of	a	cumulative	performance	target.		Vesting	of	the	Time	Options	and	Performance	Options	is	also	subject	to acceleration	in	the	event	of	an	earlier	change	in	control	or	public	offering.		Each	of	these	options,	whether	Time	Options	or	Performance	Options	have	a	contractual	term	of	10	years and	an	exercise	price	equal	to	the	fair	value	of	the	stock	on	the	date	of	grant.

Both	the	Time	Options	and	the	Performance	Options	are	subject	to	various	provisions	by	which	the	Company	may	require	the	employee,	upon	termination,	to	sell	to	the Company	any	vested	options	or	shares	received	upon	exercise	of	the	Time	Options	or	Performance	Options	at	amounts	that	differ	based	upon	the	reason	for	the	termination.	In particular,	in	the	event	that	the	employee	resigns	"without	good	reason"	(as	defined	in	the	management	stockholders	agreement),	then	any	options	whether	or	not	then	exercisable are	forfeited	and	any	shares	received	upon	prior	exercise	of	such	options	are	callable	at	the	Company's	option	at	an	amount	equal	to	the	lesser	of	fair	value	or	the	amount	paid	for	the shares	(i.e.	the	exercise	price).		In	such

cases,	because	the	employee	would	not	benefit	in	any	share	appreciation	over	the	exercise	price,	for	accounting	purposes,	under	SFAS	123(R)	such	options	are	not	considered	vested until	the	expiration	of	the	Company's	call	option	(July	6,	2012).		Accordingly,	all	references	to	the	vesting	provisions	or	vested	status	of	the	options	discussed	in	this	note	give	effect to	the	vesting	pursuant	to	the	provisions	of	SFAS	123(R)	and	may	differ	from	descriptions	of	the	vesting	status	of	the	Time	Options	and	Performance	Options	located	elsewhere	in the	Company's	Annual	Report	on	Form	10-K.

Each	of	the	Company's	management-owned	shares,	Rollover	Options,	and	vested	new	options	include	certain	provisions	by	which	the	holder	of	such	shares,	Rollover Options,	or	vested	new	options	may	require	the	Company	to	repurchase	such	instruments	in	limited	circumstances.		Specifically,	each	such	instrument	is	subject	to	a	repurchase right	for	a	period	of	365	days	after	termination	due	to	the	death	or	disability	of	the	holder	of	the	instrument	that	occurs	within	five	years	from	the	closing	date	of	the	Merger.		In	such circumstances,	the	holder	of	such	instruments	may	require	the	Company	to	repurchase	any	shares	at	the	fair	market	value	of	such	shares	and	any	Rollover	Options	or	vested	new options	at	a	price	equal	to	the	intrinsic	value	of	such	rollover	or	vested	new	options.		Because	the	Company	does	not	have	control	over	the	circumstances	in	which	it	may	be	required to	repurchase	the	outstanding	shares	or	Rollover	Options,	such	shares	and	Rollover	Options,	valued	at	a	fair	value	and	intrinsic	value	of	$6.0	million	and	$3.2	million,	respectively, have	been	classified	as	Redeemable	common	stock	in	the	accompanying	consolidated	balance	sheet	at	February	1,	2008.		Because	redemption	of	such	shares	is	uncertain,	such shares	are	not	subject	to	re-measurement	until	their	redemption	becomes	probable.

In	addition	to	the	repurchase	rights	upon	death	or	disability	that	are	common	to	all	management	held	shares,	Rollover	Options,	and	vested	new	options,	the	management stockholder's	agreement	which	the	Company	entered	into	with	certain	executive	officers	provides	such	officers	with	an	additional	repurchase	right	in	the	event	their	employment terminates	for	any	reason	prior	to	July	21,	2008.		Such	executive	officers	may	require	the	Company	to	repurchase	their	outstanding	shares	and	Rollover	Options	at	a	price	of	$5	per share	in	the	case	of	shares	and	the	difference	in	$5	per	share	and	the	exercise	price	of	any	Rollover	Options	that	they	hold.		This	repurchase	right	exists	for	a	period	of	365	days following	their	termination	within	the	required	timeframe.		As	noted	above,	each	of	the	shares,	whether	held	by	general	members	of	management	or	executive	officers,	has	been classified	within	Redeemable	common	stock	on	the	accompanying	consolidated	balance	sheet	as	of	February	1,	2008.		In	the	case	of	the	Rollover	Options	held	by	the	executive officers,	however,	the	additional	repurchase	rights	in	the	event	of	their	termination	prior	to	July	21,	2008	are	considered	within	the	control	of	the	employee,	and	as	such,	$3.6	million (representing	the	fixed	repurchase	price)	related	to	such	Rollover	Options	have	been	classified	in	Other	(noncurrent)	liabilities	in	the	accompanying	consolidated	balance	sheet	at February	1,	2008	pursuant	to	SFAS	123(R).

The	Company	adopted	SFAS	123(R)	effective	February	4,	2006	and	began	recognizing	compensation	expense	for	stock	options	based	on	the	fair	value	of	the	awards	on	the grant	date.	The	Company	adopted	SFAS	123(R)	under	the	modified-prospective-transition	method	and,	therefore,	results	from	prior	periods	have	not	been	restated.	The	following table	illustrates	the	effect	on	net	income	and	earnings	per	share	as	if	the	Company	had	applied	the	fair	value

recognition	provisions	of	SFAS	123	to	options	granted	under	the	Company's	stock	plans	for	the	year	ended	February	3,	2006.	For	purposes	of	this	pro	forma	disclosure,	the	value	of the	options	is	estimated	using	the	Black-Scholes-Merton	option	pricing	model	for	all	option	grants.

| (In	thousands) | Year	Ended<br>February	3,<br>2006 |
| :--- | :--- |
| Net\tincome\t–\tas\treported | \t$350,155 |
| Deduct:\tTotal\tpro\tforma\tstock-based\temployee\tcompensation\texpense\tdetermined |  |
| under\tfair\tvalue\tbased\tmethod\tfor\tall\tawards,\tnet\tof\trelated\ttax\teffects\tper\tSFAS\t123 | 32,621 |
| Net\tincome\t–\tpro\tforma | \t$317,534 |

Under	SFAS	123(R),	forfeitures	are	estimated	at	the	time	of	valuation	and	reduce	expense	ratably	over	the	vesting	period.	Under	SFAS	123,	the	Company	elected	to account	for	forfeitures	when	awards	were	actually	forfeited,	at	which	time	all	previous	pro	forma	expense	(which,	after-tax,	approximated	$5.5	million	in	the	year	ended	February	3, 2006)	was	reversed	to	reduce	pro	forma	expense	for	that	year.

SFAS	123(R)	also	requires	the	benefits	of	tax	deductions	in	excess	of	recognized	compensation	cost	to	be	reported	as	a	financing	cash	flow,	rather	than	as	an	operating	cash flow	as	required	prior	to	the	adoption	of	SFAS	123(R).	For	the	Predecessor	period	ended	July	6,	2007	and	year	ended	February	2,	2007,	the	$3.9	million	and	$2.5	million	excess	tax benefits,	respectively,	classified	as	financing	cash	inflows	would	have	been	classified	as	an	operating	cash	inflow	if	the	Company	had	not	adopted	SFAS	123(R).	The	impact	of	the adoption	of	SFAS	123(R)	on	future	results	will	depend	on,	among	other	things,	levels	of	share-based	payments	granted	in	the	future,	actual	forfeiture	rates	and	the	timing	of	option exercises.

The	fair	value	of	each	option	grant	is	separately	estimated	by	applying	the	Black-Scholes-Merton	option	pricing	valuation	model.	The	weighted	average	for	key assumptions	used	in	determining	the	fair	value	of	options	granted	in	the	Successor	period	ended	February	1,	2008	and	Predecessor	period	ended	July	6,	2007	and	years	ended February	2,	2007	and	February	3,	2006,	and	a	summary	of	the	methodology	applied	to	develop	each	assumption,	are	as	follows:

|  | February	1, | July	6, | February	2, | February	3, |
| :--- | :--- | :--- | :--- | :--- |
|  | 2008 | 2007 | 2007 | 2006 |
| Expected\tdividend\tyield | 0% | 0.91% | 0.82\t% | 0.85\t% |
| Expected\tstock\tprice\tvolatility | 41.9% | 18.5% | 28.8\t% | 27.1\t% |
| Weighted\taverage\trisk-free\tinterest\trate | 4.6% | 4.5% | 4.7\t% | 4.2\t% |
| Expected\tterm\tof\toptions\t(years) | 7.5 | 5.7 | 5.7 | 5.0 |

Expected	dividend	yield	-	This	is	an	estimate	of	the	expected	dividend	yield	on	the	Company's	stock.		Prior	to	the	Merger	this	estimate	was	based	on	historical	dividend payment	trends.	Subsequent	to	the	Merger,	the	Company	is	subject	to	limitations	on	the	payment	of	dividends	under	its	credit	facilities	as	further	discussed	in	Note	6.		An	increase	in the	dividend	yield	will	decrease	compensation	expense.

Expected	stock	price	volatility	-	This	is	a	measure	of	the	amount	by	which	the	price	of	the	Company's	common	stock	has	fluctuated	or	is	expected	to	fluctuate.	Prior	to	the Merger,	the	Company	used	actual	historical	changes	in	the	market	price	of	the	Company's	common	stock

and	implied	volatility	based	upon	traded	options,	weighted	equally,	to	calculate	the	volatility	assumption,	as	it	was	the	Company's	belief	that	this	methodology	provided	the	best indicator	of	future	volatility.	For	historical	volatility,	the	Company	calculated	daily	market	price	changes	from	the	date	of	grant	over	a	past	period	representative	of	the	expected	life of	the	options	to	determine	volatility.	Subsequent	to	the	Merger	the	expected	volatilities	have	been	based	upon	the	historical	volatilities	of	a	peer	group	of	four	companies,	as	the Company's	common	stock	is	not	publicly	traded.	An	increase	in	the	expected	volatility	will	increase	compensation	expense.

Weighted	average	risk-free	interest	rate	-	This	is	the	U.S.	Treasury	rate	for	the	week	of	the	grant	having	a	term	approximating	the	expected	life	of	the	option.	An	increase	in the	risk-free	interest	rate	will	increase	compensation	expense.

Expected	term	of	options	-	This	is	the	period	of	time	over	which	the	options	granted	are	expected	to	remain	outstanding.	For	options	issued	prior	to	the	Merger,	the Company	took	into	consideration	that	its	stock	option	grants	prior	to	August	2002	were	significantly	different	than	grants	issued	on	and	after	that	date,	and	therefore	that	the historical	and	post-vesting	employee	behavior	patterns	for	grants	prior	to	that	date	were	of	little	or	no	value	in	determining	future	expectations.	As	a	result,	the	Company	excluded these	pre-August	2002	grants	from	its	analysis	of	expected	term.	For	pre-Merger	options,	the	Company	estimated	expected	term	using	a	computation	based	on	an	assumption	that outstanding	options	would	be	exercised	approximately	halfway	through	their	contractual	term,	taking	into	consideration	such	factors	as	grant	date,	expiration	date,	weighted-average time-to-vest,	actual	exercises	and	post-vesting	cancellations.	Options	granted	have	a	maximum	term	of	10	years.	Due	to	the	absence	of	historical	data	for	grants	issued	subsequent	to the	Merger,	the	Company	has	estimated	the	expected	term	as	the	mid-point	between	the	vesting	date	and	the	contractual	term	of	the	option.	An	increase	in	the	expected	term	will increase	compensation	expense.

All	nonvested	restricted	stock	and	restricted	stock	unit	awards	granted	for	the	Predecessor	and	Successor	periods	in	the	year	ended	February	1,	2008	had	a	purchase	price	of zero.	The	Company	records	compensation	expense	on	a	straight-line	basis	over	the	restriction	period	based	on	the	market	price	of	the	underlying	stock	on	the	date	of	grant.	The nonvested	restricted	stock	and	restricted	stock	unit	awards	granted	under	the	plan	to	employees	during	the	Predecessor	period	ended	July	6,	2007	were	originally	scheduled	to	vest and	become	payable	ratably	over	a	three-year	period	from	the	respective	grant	dates.	The	nonvested	restricted	stock	unit	awards	granted	under	the	plan	to	non-employee	directors during	the	Predecessor	period	ended	July	6,	2007	were	originally	scheduled	to	vest	over	a	one-year	period	from	the	respective	grant	dates,	but	became	payable	as	a	result	of	the Merger	as	discussed	above.

In	accordance	with	the	provisions	of	SFAS	123(R),	unearned	compensation	is	not	recorded	within	shareholders'	equity	for	nonvested	restricted	stock	and	restricted	stock unit	awards.	Accordingly,	during	the	year	ended	February	2,	2007,	the	Company	reversed	its	unearned	compensation	balance	as	of	February	3,	2006	of	approximately	$5.2	million, with	an	offset	to	common	stock	and	additional	paid-in	capital.

The	Company	issues	new	shares	when	options	are	exercised.	A	summary	of	stock	option	activity	during	the	Predecessor	period	ended	July	6,	2007	is	as	follows:

|  | Options<br>Issued | Weighted	Average<br>Exercise	Price |
| :--- | :--- | :--- |
| Balance,\tFebruary\t2,\t2007 | 19,398,881 | $18.38 |
| Granted | 1,997,198 | 21.15 |
| Exercised | (2,496,006) | 16.64 |
| Exchanged\tfor\tcash\tin\tMerger | (14,829,364) | 18.53 |
| Exchanged\tfor\tRollover\tOptions | (2,225,175) | 18.76 |
| Canceled | (1,845,534) | 22.17 |
| Balance,\tJuly\t6,\t2007 | - | $- |

During	the	Predecessor	period	from	February	3,	2007	to	July	6,	2007	and	years	ended	February	2,	2007	and	February	3,	2006,	the	weighted	average	grant	date	fair	value	of options	granted	was	$5.37,	$5.86	and	$6.33,	respectively;	4,213,373,	617,234	and	8,281,184	options	vested,	net	of	forfeitures,	respectively;	with	a	total	fair	value	of	approximately $23.6	million,	$2.5	million	and	$56.5	million,	respectively;	and	the	total	intrinsic	value	of	stock	options	exercised	was	$10.8	million,	$6.8	million	and	$16.7	million,	respectively. The	total	intrinsic	value	of	stock	options	exercised	during	the	Successor	period	from	July	7,	2007	to	February	1,	2008	(all	of	which	were	Rollover	Options)	was	$0.5	million.

At	February	1,	2008,	1,799,102	Rollover	Options	were	outstanding,	all	of	which	were	exercisable.	The	aggregate	intrinsic	value	of	outstanding	Rollover	Options	was	$6.7 million	with	a	weighted	average	remaining	contractual	term	of	7.36	years,	and	a	weighted	average	exercise	price	of	$1.25.

All	stock	options	granted	prior	to	the	Merger	in	the	period	ended	July	6,	2007	and	the	year	ended	February	2,	2007	under	the	terms	of	the	Company's	pre-merger	stock incentive	plan	were	non-qualified	stock	options	issued	at	a	price	equal	to	the	fair	market	value	of	the	Company's	common	stock	on	the	date	of	grant,	were	originally	scheduled	to vest	ratably	over	a	four-year	period,	and	were	to	expire	10	years	following	the	date	of	grant.

A	summary	of	activity	related	to	nonvested	restricted	stock	and	restricted	stock	unit	awards	during	the	Predecessor	period	ended	July	6,	2007	is	as	follows:

|  | Nonvested | Grant	Date |
| :--- | :--- | :--- |
|  | Shares | Fair\tValue |
| Balance,\tFebruary\t2,\t2007 | 748,631 | $16.63 |
| Granted | 749,508 | 21.17 |
| Vested | (1,476,044) | 18.83 |
| Canceled | (22,095) | 20.72 |
| Balance,\tJuly\t6,\t2007 | - | $- |

A	summary	of	Time	Options	activity	during	the	Successor	period	ended	February	1,	2008	is	as	follows:

|  | Options<br>Issued | Weighted	Average<br>Exercise	Price |
| :--- | :--- | :--- |
| Granted | 9,945,000 | $5.00 |
| Exercised | - | - |
| Canceled | (410,000) | 5.00 |
| Balance,\tFebruary\t1,\t2008 | 9,535,000 | $5.00 |

During	the	Successor	period	from	July	7,	2007	to	February	1,	2008,	the	weighted	average	grant	date	fair	value	of	Time	Options	granted	was	$2.65;	no	options	vested	or were	exercised.	At	February	1,	2008,	the	aggregate	intrinsic	value	of	outstanding	2007	Time	Options	was	$0	with	a	weighted	average	remaining	contractual	term	of	9.6	years.	None of	the	outstanding	Time	Options	are	currently	exercisable.

A	summary	of	Performance	Options	activity	during	the	Successor	period	ended	February	1,	2008	is	as	follows:

|  | Options | Weighted	Average |
| :--- | :--- | :--- |
|  | Issued | Exercise\tPrice |
| Granted | 9,945,000 | $5.00 |
| Exercised | - | - |
| Canceled | (410,000) | 5.00 |
| Balance,\tFebruary\t1,\t2008 | 9,535,000 | $5.00 |

During	the	Successor	period	from	July	7,	2007	to	February	1,	2008,	the	weighted	average	grant	date	fair	value	of	Performance	Options	granted	was	$2.65;	1,907,000 Performance	Options	vested	and	are	exercisable,	net	of	forfeitures,	with	a	total	fair	value	of	approximately	$5.1	million,	and	none	of	those	options	were	exercised.	At	February	1, 2008,	the	aggregate	intrinsic	value	of	outstanding	2007	Performance	Options	was	$0	with	a	weighted	average	remaining	contractual	term	of	9.6	years.

At	February	1,	2008,	the	total	unrecognized	compensation	cost	related	to	non-vested	stock	options	was	$46.8	million	with	an	expected	weighted	average	expense recognition	period	of	4.4	years.

The	Company	currently	believes	that	the	performance	targets	related	to	the	Performance	Options	will	be	achieved.		If	such	goals	are	not	met,	and	there	is	no	change	in control,	no	compensation	cost	relating	to	these	Performance	Options	will	be	recognized	and	any	compensation	cost	recognized	to	date	will	be	reversed.

In	January	2008,	the	Company	granted	890,000	nonvested	restricted	shares	to	its	CEO.	These	shares	vest	on	the	first	to	occur	of	(i)	a	change	in	control,	(ii)	an	initial	public offering,	(iii)	termination	without	cause	or	due	to	death	or	disability,	or	(iv)	the	last	day	of	the	Company's	2011	fiscal	year.	These	shares	represent	the	only	outstanding	restricted shares	as	of	February	1,	2008.	At	February	1,	2008,	the	total	compensation	cost	related	to	nonvested	restricted	stock	awards	not	yet	recognized	was	approximately	$4.4	million.

# 10. Related	party	transactions

Affiliates	of	certain	of	the	Investors	participated	as	(i)	lenders	in	the	Company's	New	Credit	Facilities	discussed	in	Note	6;	(ii)	initial	purchasers	of	the	Company's	notes discussed	in	Note	6;	(iii)	counterparties	to	certain	interest	rate	swaps	discussed	in	Note	1	and	(iv)	as	advisors	in	the	Merger.	Certain	fees	were	paid	upon	closing	of	the	Merger	to affiliates	of	certain	of	the	Investors.		These	fees	primarily	included	underwriting	fees,	advisory	fees,	equity	commitment	fees,	syndication	fees,	merger	and	acquisition	fees,	sponsor fees,	costs	of	raising	equity,	and	out	of	pocket	expenses.		The	aggregate	fees	paid	to	these	related	parties	during	the	Successor	period	ended	February	1,	2008	totaled	$134.9	million, portions	of	which	have	been	capitalized	as	debt	financing	costs	or	as	direct	acquisition	costs.

The	Company	entered	into	a	monitoring	agreement,	dated	July	6,	2007,	with	affiliates	of	certain	of	the	Investors	pursuant	to	which	those	entities	will	provide	management and	advisory	services	to	the	Company.	Under	the	terms	of	the	monitoring	agreement,	among	other	things,	the	Company	is	obliged	to	pay	to	those	entities	an	aggregate	annual management	fee	of	$5.0	million	payable	in	arrears	at	the	end	of	each	calendar	quarter	plus	all	reasonable	out	of	pocket	expenses	incurred	in	connection	with	the	provision	of	services under	the	agreement	upon	request.		The	fees	incurred	for	the	Successor	period	ended	February	1,	2008	totaled	$2.9	million.		After	the	completion	of	the	Company's	first	fiscal	year, the	management	fee	will	increase	at	a	rate	of	5%	per	year.	Those	entities	also	are	entitled	to	receive	a	fee	equal	to	1%	of	the	gross	transaction	value	in	connection	with	certain subsequent	financing,	acquisition,	disposition,	and	change	in	control	transactions,	as	well	as	a	termination	fee	in	the	event	of	an	initial	public	offering	or	under	certain	other circumstances.	In	addition,	on	July	6,	2007,	the	Company	also	entered	into	a	separate	indemnification	agreement	with	the	parties	to	the	monitoring	agreement,	pursuant	to	which	the Company	agreed	to	provide	customary	indemnification	to	such	parties	and	their	affiliates.

The	Company	uses	Capstone	Consulting,	LLC,	a	team	of	executives	who	work	exclusively	with	KKR	portfolio	companies	providing	certain	consulting	services.		The Chief	Executive	Officer	of	Capstone	serves	on	our	Board.		Although	neither	KKR	nor	any	entity	affiliated	with	KKR	owns	any	of	the	equity	of	Capstone,	prior	to	January	1,	2007 KKR	had	provided	financing	to	Capstone.		The	aggregate	fees	incurred	for	Capstone	services	for	the	Successor	period	ended	February	1,	2008	totaled	$1.9	million.

The	Company	purchased	a	total	of	$25	million	of	the	11.857%/12.625%	senior	subordinated	notes	held	by	Goldman	Sachs	&	Co.	as	further	discussed	in	Note	6	and	paid	a commission	of	less	than	$0.1	million	in	connection	therewith.

# 11. Capital	stock

Prior	to	the	Merger,	the	Company	had	a	Shareholder	Rights	Plan	(the	"Rights	Plan")	under	which	Series	B	Junior	Participating	Preferred	Stock	Purchase	Rights	(the "Rights")	were	issued	for	each	outstanding	share	of	common	stock.		The	Rights	were	attached	to	all	common	stock	outstanding	as	of	March	10,	2000.	On	May	8,	2000,	the Company	effected	a	five	for	four	stock	split	at	which	time,	pursuant	to	the	adjustment	provisions	contained	in	the	Rights

Agreement,	each	outstanding	share	of	the	Company's	common	stock	evidenced	the	right	to	receive	eight-tenths	of	a	Right.		Such	Rights	attached	to	all	additional	shares	of	common stock	issued	prior	to	the	Plan's	termination	immediately	prior	to	the	effective	date	of	the	Merger.		The	Rights	entitled	the	holders	to	purchase	from	the	Company	one	one-hundredth of	a	share	(a	"Unit")	of	Series	B	Junior	Participating	Preferred	Stock,	no	par	value,	at	a	purchase	price	of	$100	per	Unit,	subject	to	adjustment,	upon	certain	triggering	events	defined in	the	Plan.		The	Rights	Plan	terminated	by	its	terms	immediately	prior	to	the	effective	date	of	the	Merger.	No	Rights	were	exercised	prior	to	that	date.

On	November	29,	2006,	the	Board	of	Directors	authorized	the	Company	to	repurchase	up	to	$500	million	of	its	outstanding	common	stock.		On	September	30,	2005,	the Board	of	Directors	authorized	the	Company	to	repurchase	up	to	10	million	shares	of	its	outstanding	common	stock.	These	authorizations	allowed	for	purchases	in	the	open	market	or in	privately	negotiated	transactions	from	time	to	time,	subject	to	market	conditions.	The	objective	of	the	Company's	share	repurchase	initiative	was	to	enhance	shareholder	value	by purchasing	shares	at	a	price	that	produced	a	return	on	investment	that	was	greater	than	the	Company's	cost	of	capital.	Additionally,	share	repurchases	generally	were	undertaken only	if	such	purchases	resulted	in	an	accretive	impact	on	the	Company's	fully	diluted	earnings	per	share	calculation.		As	a	result	of	the	Merger,	the	2006	authorization	is	no	longer outstanding.	No	purchases	were	made	pursuant	to	this	authorization.	The	2005	authorization	was	completed	prior	to	its	expiration	date.	During	2006,	the	Company	purchased approximately	4.5	million	shares	pursuant	to	the	2005	authorization	at	a	total	cost	of	$79.9	million.	During	2005,	the	Company	purchased	approximately	5.5	million	shares	pursuant to	the	2005	authorization	at	a	total	cost	of	$104.7	million	and	approximately	9.5	million	shares	pursuant	to	an	earlier	authorization	at	a	total	cost	of	$192.9	million.

# 12. Insurance	settlement

During	2006	and	2005,	the	Company	received	proceeds	of	$13.0	million	and	$8.0	million,	respectively,	representing	insurance	recoveries	for	destroyed	and	damaged assets,	costs	incurred	and	business	interruption	coverage	related	to	Hurricane	Katrina,	which	are	reflected	in	results	of	operations	for	these	years	as	a	reduction	of	SG&A	expenses. The	claim	was	settled	in	2006.	The	business	interruption	portion	of	the	proceeds	was	approximately	$5.8	million	and	was	received	in	2006.	Insurance	recoveries	related	to	fixed assets	losses	are	included	in	cash	flows	from	investing	activities	and	recoveries	related	to	inventory	losses	and	business	interruption	are	included	in	cash	flows	from	operating activities.

# 13. Segment	reporting

The	Company	manages	its	business	on	the	basis	of	one	reportable	segment.		See	Note	1	for	a	brief	description	of	the	Company's	business.		As	of	February	1,	2008,	all	of the	Company's	operations	were	located	within	the	United	States	with	the	exception	of	an	immaterial	Hong	Kong	subsidiary	formed	to	assist	in	the	process	of	importing	certain merchandise	that	began	operations	in	2004.		The	following	net	sales	data	is	presented	in	accordance	with	SFAS	131,	"Disclosures	about	Segments	of	an	Enterprise	and	Related Information."

|  | Successor | Predecessor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | July\t7,\t2007\nthrough\nFebruary\t1,\t2008 | February\t1,\t2007\nthrough\nJuly\t6,\t2007 | 2006 | 2005 |
| Classes\tof\tsimilar\tproducts: |  |  |  |  |
| Highly\tconsumable | $3,701,724 | $2,615,110 | \t$6,022,014 | \t$5,606,466 |
| Seasonal | 908,301 | 604,935 | 1,509,999 | 1,348,769 |
| Home\tproducts | 507,027 | 362,725 | 914,357 | 907,826 |
| Basic\tclothing | 454,441 | 340,983 | 723,452 | 719,176 |
| Net\tsales | $5,571,493 | $3,923,753 | \t$9,169,822 | \t$8,582,237 |

# 14. Subsequent	event

Subsequent	to	the	2007	fiscal	year	end,	the	Company	entered	into	a	$350.0	million	step-down	interest	rate	swap	which	became	effective	February	28,	2008	in	order	to	mitigate	an additional	portion	of	the	variable	rate	interest	exposure	under	the	New	Credit	Facilities	discussed	in	Note	6.		The	Company	entered	into	the	swap	with	Wachovia	Capital	Markets and	the	terms	result	in	the	Company	paying	a	fixed	rate	of	5.58%	on	a	notional	amount	of	$350.0	million	for	the	first	year	and	$150.0	million	for	the	second	year.

# 15. Quarterly	financial	data	(unaudited)

The	following	is	selected	unaudited	quarterly	financial	data	for	the	fiscal	years	ended	February	1,	2008	and	February	2,	2007.	Each	quarter	listed	below	was	a	13-week accounting	period.	The	sum	of	the	four	quarters	for	any	given	year	may	not	equal	annual	totals	due	to	rounding.

|  | First | May	5,	2007- | August	3,	2007 | Third | Fourth |
| :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Quarter | July\t6,\t2007 | (a) | Quarter | Quarter |
| 2007: |  |  |  |  |  |
| Net\tsales | \t$2,275,267 | \t$1,648,486 | \t$699,078 | \t$2,312,842 | \t$2,559,573 |
| Gross\tprofit | 633,060 | 438,515 | 184,723 | 646,800 | 740,371 |
| Operating\tprofit\t(loss) | 55,368 | (46,120) | (6,025) | 65,703 | 186,466 |
| Net\tincome\t(loss) | 34,875 | (42,873) | (27,175) | (33,032) | 55,389 |

|  | First | Second | Third | Fourth |
| :--- | :--- | :--- | :--- | :--- |
| Predecessor | Quarter | Quarter | Quarter | Quarter |
| 2006: |  |  |  |  |
| Net\tsales | \t$2,151,387 | \t$2,251,053 | \t$2,213,396 | \t$2,553,986 |
| Gross\tprofit | 584,274 | 611,534 | 526,447 | 645,950 |
| Operating\tprofit | 81,285 | 80,577 | 3,339 | 83,075 |
| Net\tincome\t(loss) | 47,670 | 45,468 | (5,285) | 50,090 |

As	discussed	in	Note	2,	in	the	Predecessor	period	ended	July	6,	2007,	the	Company	recorded	transaction	and	other	costs	related	to	the	Merger	of	$56.7	million	and	share- based	compensation	expense	related	directly	to	the	Merger	of	$39.4	million	as	discussed	in	Note	9.	As	discussed	in	Note	2,	in	the	Successor	period	ended	August	3,	2007,	the Company	recorded	transaction	and	other	costs	related	to	the	Merger	of	$5.6	million,	a	loss	on	debt	retirement	related	to	the	Merger	of	$6.2	million;	a	contingent	loss	related	to certain	DC	leases	of	$8.6	million	as	discussed	in	Note	7;	and	a	gain	on	certain	interest	rate	swaps	discussed	in	Note	1	of	$6.8	million.

In	the	third	quarter	of	2007,	the	Company	recorded	an	additional	contingent	loss	related	to	certain	DC	leases	of	$3.4	million	as	discussed	in	Note	7.	As	discussed	in	Note	6, in	the	fourth	quarter	of	2007,	the	Company	recorded	a	gain	on	debt	retirement	of	$4.9	million.

As	discussed	in	Note	12,	during	the	first	and	third	quarters	of	2006,	the	Company	received	proceeds,	net	of	taxes,	of	$3.2	million	and	$5.0	million,	respectively, representing	insurance	recoveries	for	destroyed	and	damaged	assets,	costs	incurred	and	business	interruption	coverage	related	to	Hurricane	Katrina,	which	is	reflected	in	results	of operations	for	these	periods	as	a	reduction	of	SG&A	expenses.

As	discussed	in	Note	3,	in	the	third	quarter	of	2006,	the	Company	completed	a	strategic	review	of	its	real	estate	portfolio	and	traditional	inventory	packaway	strategy.	The review	resulted	in	plans	to	close	approximately	400	underperforming	stores	and	to	eliminate	nearly	all	packaway	merchandise	by	the	close	of	fiscal	2007.	As	a	result,	in	the	third quarter	of	2006,	the	Company	recorded	SG&A	charges	and	a	lower	of	cost	or	market	inventory	impairment,	which	reduced	the	Company's	net	income.	Also,	the	change	in merchandising	strategy	resulted	in	substantially	higher	markdowns	on	inventory	in	the	fourth	quarter	of	2006	($179.9	million	at	cost)	negatively	impacting	gross	profit	and	net income.

# 16. Guarantor	subsidiaries

Certain	of	the	Company's	subsidiaries	(the	"Guarantors")	have	fully	and	unconditionally	guaranteed	on	a	joint	and	several	basis	the	Company's	obligations	under	certain outstanding	debt	obligations.	Each	of	the	Guarantors	is	a	direct	or	indirect	wholly-owned	subsidiary	of	the	Company.	The	following	consolidating	schedules	present	condensed financial	information	on	a	combined	basis,	in	thousands.

| SUCCESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | \t$8,320 | \t$59,379 | \t$32,510 | \t$- | \t$100,209 |
| Short-term\tinvestments | - | - | 19,611 | - | 19,611 |
| Merchandise\tinventories | - | 1,288,661 | - | - | 1,288,661 |
| Income\ttax\treceivable | 102,273 | - | - | (69,772) | 32,501 |
| Deferred\tincome\ttaxes | 6,090 | - | 18,501 | (7,294) | 17,297 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 221,408 | 337,741 | 9,341 | (509,025) | 59,465 |
| Total\tcurrent\tassets | 338,091 | 1,685,781 | 79,963 | (586,091) | 1,517,744 |
| Net\tproperty\tand\tequipment | 83,658 | 1,190,131 | 456 | - | 1,274,245 |
| Goodwill | 4,344,930 | - | - | - | 4,344,930 |
| Intangible\tassets | 10,911 | 1,359,646 | - | - | 1,370,557 |
| Deferred\tincome\ttaxes | 47,299 | - | 43,658 | (90,957) | - |
| Other\tassets,\tnet | 2,629,967 | 1,652 | 175,238 | (2,657,902) | 148,955 |
| Total\tassets | \t$7,454,856 | \t$4,237,210 | \t$299,315 | \t$(3,334,950) | \t$8,656,431 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term\tobligations | \t$- | \t$3,246 | \t$- | \t$- | \t$3,246 |
| Accounts\tpayable | 317,116 | 736,844 | 40 | (502,960) | 551,040 |
| Accrued\texpenses\tand\tother | 48,431 | 188,877 | 69,712 | (6,064) | 300,956 |
| Income\ttaxes\tpayable | - | 59,264 | 13,507 | (69,772) | 2,999 |
| Total\tcurrent\tliabilities | 365,547 | 988,231 | 83,259 | (578,796) | 858,241 |
| Long-term\tobligations | 4,257,250 | 1,837,715 | - | (1,816,209) | 4,278,756 |
| Deferred\tincome\ttaxes | - | 584,976 | - | (98,251) | 486,725 |
| Other\tliabilities | 119,064 | 21,191 | 179,459 | - | 319,714 |
| Redeemable\tcommon\tstock | 9,122 | - | - | - | 9,122 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | - | - | - | - | - |
| Common\tstock | 277,741 | 23,753 | 100 | (23,853) | 277,741 |
| Additional\tpaid-in\tcapital | 2,480,062 | 653,711 | 19,900 | (673,611) | 2,480,062 |
| Retained\tearnings | (4,818) | 127,633 | 16,597 | (144,230) | (4,818) |
| Accumulated\tother\tcomprehensive\tloss | (49,112) | - | - | - | (49,112) |
| Other\tshareholders'\tequity | - | - | - | - | - |
| Total\tshareholders'\tequity | 2,703,873 | 805,097 | 36,597 | (841,694) | 2,703,873 |
| Total\tliabilities\tand\tshareholders'\tequity | \t$7,454,856 | \t$4,237,210 | \t$299,315 | \t$(3,334,950) | \t$8,656,431 |

|  | DOLLAR	GENERAL | GUARANTOR | OTHER |  | CONSOLIDATED |
| :--- | :--- | :--- | :--- | :--- | :--- |
| PREDECESSOR | CORPORATION | SUBSIDIARIES | SUBSIDIARIES | \t ELIMINATIONS | TOTAL |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | \t$114,310 | \t$58,107 | \t$16,871 | \t$- | \t$189,288 |
| Short-term\tinvestments | - | - | 29,950 | - | 29,950 |
| Merchandise\tinventories | - | 1,432,336 | - | - | 1,432,336 |
| Income\ttax\treceivable | 4,884 | 4,949 | - | - | 9,833 |
| Deferred\tincome\ttaxes | 7,422 | 13,482 | 3,417 | - | 24,321 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 139,913 | 928,854 | 166,468 | (1,178,215) | 57,020 |
| Total\tcurrent\tassets | 266,529 | 2,437,728 | 216,706 | (1,178,215) | 1,742,748 |
| Net\tproperty\tand\tequipment | 98,580 | 1,137,710 | 584 | - | 1,236,874 |
| Deferred\tincome\ttaxes | 581 | - | 5,536 | (6,117) | - |
| Other\tassets,\tnet | 2,693,030 | 23,489 | 20,133 | (2,675,760) | 60,892 |
| Total\tassets | \t$\t\t3,058,720 | \t$3,598,927 | \t$242,959 | \t$(3,860,092) | \t$3,040,514 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term\tobligations | \t$- | \t$8,080 | \t$- | \t$- | \t$8,080 |
| Accounts\tpayable | 1,084,460 | 577,443 | 69,710 | (1,176,339) | 555,274 |
| Accrued\texpenses\tand\tother | 13,327 | 241,849 | 258 | (1,876) | 253,558 |
| Income\ttaxes\tpayable | - | 6,453 | 9,506 | - | 15,959 |
| Total\tcurrent\tliabilities | 1,097,787 | 833,825 | 79,474 | (1,178,215) | 832,871 |
| Long-term\tobligations | 199,842 | 1,584,526 | - | (1,522,410) | 261,958 |
| Deferred\tincome\ttaxes | - | 47,714 | - | (6,117) | 41,597 |
| Other\tnon-current\tliabilities | 15,344 | 35,521 | 107,476 | - | 158,341 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | - | - | - | - | - |
| Common\tstock | 156,218 | 23,753 | 100 | (23,853) | 156,218 |
| Additional\tpaid-in\tcapital | 486,145 | 653,711 | 19,900 | (673,611) | 486,145 |
| Retained\tearnings | 1,103,951 | 419,877 | 36,009 | (455,886) | 1,103,951 |
| Accumulated\tother\tcomprehensive\tloss | (987) | - | - | - | (987) |
| Other\tshareholders'\tequity | 420 | - | - | - | 420 |
| Total\tshareholders'\tequity | 1,745,747 | 1,097,341 | 56,009 | (1,153,350) | 1,745,747 |
| Total\tliabilities\tand\tshareholders'\tequity | \t$3,058,720 | \t$3,598,927 | \t$242,959 | \t$(3,860,092) | \t$3,040,514 |

| SUCCESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF |  |  |  |  |  |
| OPERATIONS: |  |  |  |  |  |
| Net\tsales | \t$96,300 | \t$5,571,493 | \t$65,057 | \t$(161,357) | \t$5,571,493 |
| Cost\tof\tgoods\tsold | - | 3,999,599 | - | - | 3,999,599 |
| Gross\tprofit | 96,300 | 1,571,894 | 65,057 | (161,357) | 1,571,894 |
| Selling,\tgeneral\tand\tadministrative | 103,272 | 1,337,311 | 46,524 | (161,357) | 1,325,750 |
| Operating\tprofit\t(loss) | (6,972) | 234,583 | 18,533 | - | 246,144 |
| Interest\tincome | (58,786) | (23,206) | (8,013) | 86,206 | (3,799) |
| Interest\texpense | 274,104 | 64,991 | 8 | (86,206) | 252,897 |
| Loss\ton\tinterest\trate\tswaps | 2,390 | - | - | - | 2,390 |
| Loss\ton\tdebt\tretirement,\tnet | 1,249 | - | - | - | 1,249 |
| Income\t(loss)\tbefore\tincome\ttaxes | (225,929) | 192,798 | 26,538 | - | (6,593) |
| Income\ttaxes | (76,881) | 65,166 | 9,940 | - | (1,775) |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof\ttaxes | 144,230 | - | - | (144,230) | - |
| Net\tincome\t(loss) | \t$(4,818) | \t$127,632 | \t$16,598 | \t$(144,230) | \t$(4,818) |

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF |  |  |  |  |  |
| OPERATIONS: |  |  |  |  |  |
| Net\tsales | \t$76,945 | \t$3,923,753 | \t$44,206 | \t$(121,151) | \t$3,923,753 |
| Cost\tof\tgoods\tsold | - | 2,852,178 | - | - | 2,852,178 |
| Gross\tprofit | 76,945 | 1,071,575 | 44,206 | (121,151) | 1,071,575 |
| Selling,\tgeneral\tand\tadministrative | 166,224 | 982,321 | 34,933 | (121,151) | 1,062,327 |
| Operating\tprofit\t(loss) | (89,279) | 89,254 | 9,273 | - | 9,248 |
| Interest\tincome | (53,278) | (11,472) | (5,626) | 65,330 | (5,046) |
| Interest\texpense | 19,796 | 55,828 | 5 | (65,330) | 10,299 |
| Income\t(loss)\tbefore\tincome\ttaxes | (55,797) | 44,898 | 14,894 | - | 3,995 |
| Income\ttaxes | (4,814) | 11,924 | 4,883 | - | 11,993 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof\ttaxes | 42,985 | - | - | (42,985) | - |
| Net\tincome\t(loss) | \t$(7,998) | \t$32,974 | \t$10,011 | \t$(42,985) | \t$(7,998) |

# For	the	year	ended	February	2,	2007

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF |  |  |  |  |  |
| OPERATIONS: |  |  |  |  |  |
| Net\tsales | \t$165,463 | \t$9,169,822 | \t$107,383 | \t$(272,846) | \t$9,169,822 |
| Cost\tof\tgoods\tsold | - | 6,801,617 | - | - | 6,801,617 |
| Gross\tprofit | 165,463 | 2,368,205 | 107,383 | (272,846) | 2,368,205 |
| Selling,\tgeneral\tand\tadministrative | 149,272 | 2,154,371 | 89,132 | (272,846) | 2,119,929 |
| Operating\tprofit | 16,191 | 213,834 | 18,251 | - | 248,276 |
| Interest\tincome | (126,628) | (33,521) | (11,543) | 164,690 | (7,002) |
| Interest\texpense | 60,856 | 138,749 | - | (164,690) | 34,915 |
| Income\tbefore\tincome\ttaxes | 81,963 | 108,606 | 29,794 | - | 220,363 |
| Income\ttaxes | 36,513 | 36,568 | 9,339 | - | 82,420 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof\ttaxes | 92,493 | - | - | (92,493) | - |
| Net\tincome | \t$137,943 | \t$72,038 | \t$20,455 | \t$(92,493) | \t$137,943 |

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF |  |  |  |  |  |
| OPERATIONS: |  |  |  |  |  |
| Net\tsales | \t$162,805 | \t$8,582,237 | \t$184,889 | \t$(347,694) | \t$8,582,237 |
| Cost\tof\tgoods\tsold | - | 6,117,413 | - | - | 6,117,413 |
| Gross\tprofit | 162,805 | 2,464,824 | 184,889 | (347,694) | 2,464,824 |
| Selling,\tgeneral\tand\tadministrative | 139,879 | 1,936,514 | 174,258 | (347,694) | 1,902,957 |
| Operating\tprofit | 22,926 | 528,310 | 10,631 | - | 561,867 |
| Interest\tincome | (97,005) | (65,428) | (3,504) | 156,936 | (9,001) |
| Interest\texpense | 85,536 | 97,626 | - | (156,936) | 26,226 |
| Income\tbefore\tincome\ttaxes | 34,395 | 496,112 | 14,135 | - | 544,642 |
| Income\ttaxes | 17,824 | 172,892 | 3,771 | - | 194,487 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof\ttaxes | 333,584 | - | - | (333,584) | - |
| Net\tincome | \t$350,155 | \t$323,220 | \t$10,364 | \t$(333,584) | \t$350,155 |

| SUCCESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome\t(loss) | \t$(4,818) | \t$127,632 | \t$16,598 | \t$(144,230) | \t$(4,818) |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\t(used |  |  |  |  |  |
| in)\toperating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 21,634 | 128,431 | 148 | - | 150,213 |
| Deferred\tincome\ttaxes | (2,120) | 20,208 | 1,463 | - | 19,551 |
| Loss\ton\tdebt\tretirement,\tnet | 1,249 | - | - | - | 1,249 |
| Noncash\tshare-based\tcompensation | 3,827 | - | - | - | 3,827 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (144,230) | - | - | 144,230 | - |
| Noncash\tunrealized\tloss\ton\tinterest\trate\tswap | 3,705 | - | - | - | 3,705 |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | 79,469 | - | - | 79,469 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (1,120) | 4,783 | 76 | - | 3,739 |
| Accounts\tpayable | (40,745) | 12,428 | (13,078) | - | (41,395) |
| Accrued\texpenses\tand\tother | (7,456) | 6,418 | 17,099 | - | 16,061 |
| Income\ttaxes | (45,416) | 44,829 | 7,935 | - | 7,348 |
| Other | (3,169) | 4,246 | (422) | - | 655 |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | (218,659) | 428,444 | 29,819 | - | 239,604 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Acquisition,\tnet\tof\tcash\tacquired | (5,649,182) | (1,129,953) | 40,744 | - | (6,738,391) |
| Purchases\tof\tproperty\tand\tequipment | (1,617) | (82,003) | (21) | - | (83,641) |
| Purchases\tof\tshort-term\tinvestments | - | - | (3,800) | - | (3,800) |
| Sales\tof\tshort-term\tinvestments | - | - | 21,445 | - | 21,445 |
| Purchases\tof\tlong-term\tinvestments | - | - | (7,473) | - | (7,473) |
| Purchase\tof\tpromissory\tnote | - | (37,047) | - | - | (37,047) |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | - | 533 | - | - | 533 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | (5,650,799) | (1,248,470) | 50,895 | - | (6,848,374) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 2,759,540 | - | - | - | 2,759,540 |
| Borrowings\tunder\trevolving\tcredit\tfacility | 1,522,100 | - | - | - | 1,522,100 |
| Repayments\tof\tborrowings\tunder\trevolving\tcredit\tfacility | (1,419,600) | - | - | - | (1,419,600) |
| Issuance\tof\tlong-term\tobligations | 4,176,817 | - | - | - | 4,176,817 |
| Repayments\tof\tlong-term\tobligations | (236,084) | (5,861) | - | - | (241,945) |
| Repurchase\tof\tcommon\tstock | (541) | - | - | - | (541) |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | (837,062) | 885,266 | (48,204) | - | - |
| Debt\tissuance\tcosts | (87,392) | - | - | - | (87,392) |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 5,877,778 | 879,405 | (48,204) | - | 6,708,979 |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 8,320 | 59,379 | 32,510 | - | 100,209 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tperiod | - | - | - | - | - |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | \t$8,320 | \t$59,379 | \t$32,510 | \t$- | \t$100,209 |

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome\t(loss) | \t$(7,998) | \t$32,974 | \t$10,011 | \t$(42,985) | \t$(7,998) |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash\tprovided\tby |  |  |  |  |  |
| operating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 9,051 | 74,770 | 96 | - | 83,917 |
| Deferred\tincome\ttaxes | (7,982) | (9,194) | (3,698) | - | (20,874) |
| Noncash\tshare-based\tcompensation | 45,433 | - | - | - | 45,433 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | (3,927) | - | - | - | (3,927) |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (42,985) | - | - | 42,985 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | 16,424 | - | - | 16,424 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 5,758 | (11,762) | (180) | - | (6,184) |
| Accounts\tpayable | 44,909 | (23,103) | 12,988 | - | 34,794 |
| Accrued\texpenses\tand\tother | 7,897 | 36,021 | 9,077 | - | 52,995 |
| Income\ttaxes | (24,998) | 31,741 | (3,934) | - | 2,809 |
| Other | 21 | 4,726 | (190) | - | 4,557 |
| Net\tcash\tprovided\tby\toperating\tactivities | 25,179 | 152,597 | 24,170 | - | 201,946 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (5,321) | (50,737) | (95) | - | (56,153) |
| Purchases\tof\tshort-term\tinvestments | - | - | (5,100) | - | (5,100) |
| Sales\tof\tshort-term\tinvestments | - | - | 9,505 | - | 9,505 |
| Purchases\tof\tlong-term\tinvestments | - | - | (15,754) | - | (15,754) |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | - | 620 | - | - | 620 |
| Net\tcash\tused\tin\tinvesting\tactivities | (5,321) | (50,117) | (11,444) | - | (66,882) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Repayments\tof\tlong-term\tobligations | (148) | (4,352) | - | - | (4,500) |
| Payment\tof\tcash\tdividends | (15,710) | - | - | - | (15,710) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | 41,546 | - | - | - | 41,546 |
| Tax\tbenefit\tof\tstock\toptions | 3,927 | - | - | - | 3,927 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 75,840 | (86,988) | 11,148 | - | - |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 105,455 | (91,340) | 11,148 | - | 25,263 |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 125,313 | 11,140 | 23,874 | - | 160,327 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 114,310 | 58,107 | 16,871 | - | 189,288 |
| Cash\tand\tcash\tequivalents,\tend\tof\tperiod | \t$239,623 | \t$69,247 | \t$40,745 | \t$- | \t$349,615 |

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | \t$137,943 | \t$72,038 | \t$20,455 | \t$(92,493) | \t$137,943 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby |  |  |  |  |  |
| operating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 21,436 | 178,920 | 252 | - | 200,608 |
| Deferred\tincome\ttaxes | (1,845) | (35,118) | (1,255) | - | (38,218) |
| Noncash\tshare-based\tcompensation | 7,578 | - | - | - | 7,578 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | (2,513) | - | - | - | (2,513) |
| Noncash\tinventory\tadjustments\tand\tasset\timpairments | - | 78,115 | - | - | 78,115 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (92,493) | - | - | 92,493 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | (28,057) | - | - | (28,057) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (1,042) | (13,655) | 9,286 | - | (5,411) |
| Accounts\tpayable | (4,246) | 39,189 | 18,601 | - | 53,544 |
| Accrued\texpenses\tand\tother | (225) | 38,564 | 14 | - | 38,353 |
| Income\ttaxes | (2,558) | (29,524) | (3,083) | - | (35,165) |
| Other | 430 | (1,850) | - | - | (1,420) |
| Net\tcash\tprovided\tby\toperating\tactivities | 62,465 | 298,622 | 44,270 | - | 405,357 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (13,270) | (247,788) | (457) | - | (261,515) |
| Purchases\tof\tshort-term\tinvestments | (38,700) | - | (10,975) | - | (49,675) |
| Sales\tof\tshort-term\tinvestments | 38,700 | - | 12,825 | - | 51,525 |
| Purchases\tof\tlong-term\tinvestments | - | - | (25,756) | - | (25,756) |
| Insurance\tproceeds\trelated\tto\tproperty\tand\tequipment | - | 1,807 | - | - | 1,807 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | 143 | 1,496 | 11 | - | 1,650 |
| Net\tcash\tused\tin\tinvesting\tactivities | (13,127) | (244,485) | (24,352) | - | (281,964) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Borrowings\tunder\trevolving\tcredit\tfacility | 2,012,700 | - | - | - | 2,012,700 |
| Repayments\tof\tborrowings\tunder\trevolving\tcredit\tfacility | (2,012,700) | - | - | - | (2,012,700) |
| Repayments\tof\tlong-term\tobligations | 97 | (14,215) | - | - | (14,118) |
| Payment\tof\tcash\tdividends | (62,472) | - | - | - | (62,472) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | 19,894 | - | - | - | 19,894 |
| Repurchases\tof\tcommon\tstock | (79,947) | - | - | - | (79,947) |
| Tax\tbenefit\tof\tstock\toptions | 2,513 | - | - | - | 2,513 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 74,438 | (39,676) | (34,762) | - | - |
| Other\tfinancing\tactivities | 39 | (623) | - | - | (584) |
| Net\tcash\tused\tin\tfinancing\tactivities | (45,438) | (54,514) | (34,762) | - | (134,714) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 3,900 | (377) | (14,844) | - | (11,321) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 110,410 | 58,484 | 31,715 | - | 200,609 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | \t$114,310 | \t$58,107 | \t$16,871 | \t$- | \t$189,288 |

| PREDECESSOR | GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | \t$350,155 | \t$323,220 | \t$10,364 | \t$(333,584) | \t$350,155 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby |  |  |  |  |  |
| operating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 20,046 | 166,600 | 178 | - | 186,824 |
| Deferred\tincome\ttaxes | (750) | 16,692 | (7,698) | - | 8,244 |
| Noncash\tshare-based\tcompensation | 3,332 | - | - | - | 3,332 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | 6,457 | - | - | - | 6,457 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (333,584) | - | - | 333,584 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | (97,877) | - | - | (97,877) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (4,546) | 23,200 | (29,284) | - | (10,630) |
| Accounts\tpayable | (26,052) | (54,502) | 167,784 | - | 87,230 |
| Accrued\texpenses\tand\tother | (12,210) | 52,719 | (133) | - | 40,376 |
| Income\ttaxes | 13 | (38,619) | 12,589 | - | (26,017) |
| Other | 2,919 | 4,472 | - | - | 7,391 |
| Net\tcash\tprovided\tby\toperating\tactivities | 5,780 | 395,905 | 153,800 | - | 555,485 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (18,089) | (265,954) | (69) | - | (284,112) |
| Purchases\tof\tshort-term\tinvestments | (123,925) | - | (8,850) | - | (132,775) |
| Sales\tof\tshort-term\tinvestments | 166,350 | 500 | - | - | 166,850 |
| Purchases\tof\tlong-term\tinvestments | - | - | (16,995) | - | (16,995) |
| Insurance\tproceeds\trelated\tto\tproperty\tand\tequipment | - | 1,210 | - | - | 1,210 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | 100 | 1,319 | - | - | 1,419 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 24,436 | (262,925) | (25,914) | - | (264,403) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Borrowings\tunder\trevolving\tcredit\tfacility | 232,200 | - | - | - | 232,200 |
| Repayments\tof\tborrowings\tunder\trevolving\tcredit\tfacility | (232,200) | - | - | - | (232,200) |
| Issuance\tof\tlong-term\tborrowing | - | 14,495 | - | - | 14,495 |
| Repayments\tof\tlong-term\tobligations | (4,969) | (9,341) | - | - | (14,310) |
| Payment\tof\tcash\tdividends | (56,183) | - | - | - | (56,183) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | 29,405 | - | - | - | 29,405 |
| Repurchases\tof\tcommon\tstock | (297,602) | - | - | - | (297,602) |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 281,481 | (165,005) | (116,476) | - | - |
| Other\tfinancing\tactivities | 892 | - | - | - | 892 |
| Net\tcash\tused\tin\tfinancing\tactivities | (46,976) | (159,851) | (116,476) | - | (323,303) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | (16,760) | (26,871) | 11,410 | - | (32,221) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 127,170 | 85,355 | 20,305 | - | 232,830 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | \t$110,410 | \t$58,484 | \t$31,715 | \t$- | \t$200,609 |

# ITEM	9. CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

Not	Applicable.

# CONTROLS	AND	PROCEDURES

(a)											Disclosure	Controls	and	Procedures.		Under	the	supervision	and	with	the	participation	of	our	management,	including	our	principal	executive	officer	and	principal financial	officer,	we	conducted	an	evaluation	of	our	disclosure	controls	and	procedures,	as	such	term	is	defined	under	Rule	13a-15(e)	or	15d-15(e)	promulgated	under	the	Securities Exchange	Act	of	1934,	as	amended	(the	"Exchange	Act").	Based	on	this	evaluation,	our	principal	executive	officer	and	our	principal	financial	officer	concluded	that	our	disclosure controls	and	procedures	were	effective	as	of	the	end	of	the	period	covered	by	this	report.

(b)											Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting.	Our	management	prepared	and	is	responsible	for	the	consolidated	financial statements	and	all	related	financial	information	contained	in	this	report.	This	responsibility	includes	establishing	and	maintaining	effective	internal	control	over	financial	reporting as	defined	in	Rule	13a-15(f)	or	15d-15(f)	under	the	Securities	Exchange	Act	of	1934.	Our	internal	control	over	financial	reporting	is	designed	to	provide	reasonable	assurance regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	United	States	generally	accepted	accounting principles.

To	comply	with	the	requirements	of	Section	404	of	the	Sarbanes–Oxley	Act	of	2002,	management	designed	and	implemented	a	structured	and	comprehensive	assessment process	to	evaluate	its	internal	control	over	financial	reporting.	The	assessment	of	the	effectiveness	of	our	internal	control	over	financial	reporting	was	based	on	criteria	established in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	Because	of	its	inherent	limitations,	a	system	of internal	control	over	financial	reporting	can	provide	only	reasonable	assurance	and	may	not	prevent	or	detect	misstatements.	Management	regularly	monitors	our	internal	control over	financial	reporting,	and	actions	are	taken	to	correct	any	deficiencies	as	they	are	identified.	Based	on	its	assessment,	management	has	concluded	that	Dollar	General's	internal control	over	financial	reporting	is	effective	as	of	February	1,	2008.

This	annual	report	does	not	include	an	attestation	report	of	Ernst	&	Young	LLP	regarding	internal	control	over	financial	reporting.	Management's	report	was	not	subject	to attestation	by	Ernst	&	Young	LLP	pursuant	to	temporary	rules	of	the	Securities	and	Exchange	Commission	that	permit	us	to	provide	only	management's	report	in	this	annual	report.

(c)											Changes	in	Internal	Control	Over	Financial	Reporting.		There	have	been	no	changes	during	the	quarter	ended	February	1,	2008	in	our	internal	control	over financial	reporting	(as	defined	in	Exchange	Act	Rule	13a-15(f))	that	have	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial reporting.

# PART	III

# ITEM	10. DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

(a)											Information	Regarding	Directors	and	Executive	Officers.		Information	regarding	our	current	directors	and	executive	officers	as	of	March	17,	2008	is	set	forth below.	Each	of	our	directors	holds	office	for	a	term	of	1	year	or	until	his	or	her	successor	is	elected	and	qualified.	Our	executive	officers	serve	at	the	pleasure	of	the	Board	of Directors	and	are	elected	annually	by	the	Board	to	serve	until	their	successors	are	duly	elected.	There	are	no	familial	relationships	between	any	of	our	directors	or	executive	officers.

Mr.	Calbert	has	been	with	KKR	for	eight	years	and	during	that	time	has	been	directly	involved	with	several	portfolio	companies	and	participated	in	another	four investments.	He	heads	the	Retail	industry	team.	Mr.	Calbert	is	currently	on	the	board	of	directors	of	Toys	"R"	Us,	Inc.	and	U.S.	Foodservice.	Mr.	Calbert	joined	Randall's	Food Markets	as	the	Chief	Financial	Officer	in	1994,	ultimately	taking	the	company	through	a	transaction	with	KKR	in	June	1997.	He	left	Randall's	Food	Markets	after	the	company	was sold	in	September	1999	and	joined	KKR.	Mr.	Calbert	started	his	professional	career	as	a	consultant	with	Arthur	Andersen	Worldwide,	where	his	primary	focus	was	on	the retail/consumer	industry.	He	has	been	a	member	of	our	Board	of	Directors	since	July	2007.	KKR	is	an	affiliate	of	Dollar	General.

Mr.	Agrawal	joined	KKR	in	2006	and	is	a	member	of	the	Retail	and	Energy	industry	teams.	Prior	to	joining	KKR,	he	was	a	Vice	President	with	Warburg	Pincus,	where	he was	involved	in	the	execution	and	oversight	of	a	number	of	investments	in	the	energy	sector.	Mr.	Agrawal's	prior	experience	also	includes	Thayer	Capital	Partners,	where	he	played a	role	in	the	firm's	business	services	investments,	and	McKinsey	&	Co.,	where	he	provided	strategic	and	M&A	advice	to	clients	in	a	variety	of	industries.	He	has	been	a	member	of our	Board	of	Directors	since	July	2007.	KKR	is	an	affiliate	of	Dollar	General.

Mr.	Jones	has	been	with	Goldman,	Sachs	&	Co.	since	1994.	He	is	a	managing	director	in	Principal	Investment	Area	(PIA)	in	New	York	where	he	focuses	on	healthcare and	consumer-related	opportunities	and	sits	on	the	Global	Investment	Committee.	Mr.	Jones	joined	Goldman,	Sachs	&	Co.	as	an	associate	in	the	Investment	Banking	Division	and, after	two	years	in	the	Communications	and	Media	Department	and	mobility	assignments	in	Equity	Capital	Markets	and	in	the	Executive	Office	of	Goldman	Sachs	International,	he joined	PIA	in	London	in	1998.	He	returned	to	New	York	with	PIA	in	2002	and	became	a	managing	director	later	that	year.	He	became	a	partner	in	2004.	Goldman,	Sachs	&	Co.	is an	affiliate	of	Dollar	General.	Mr.	Jones	is	currently	on	the	board	of	directors	of	Biomet,	Inc.,	Burger	King	Holdings,	Inc.,	Education	Management	Corporation,	HealthMarkets,	Inc. and	Signature	Hospital,	LLC.	He	has	been	a	member	of	our	Board	of	Directors	since	July	2007.

Mr.	Nelson	has	been	the	Chairman	of	the	Board	(since	April	2003)	and	was	previously	President	and	Chief	Executive	Officer	(since	October	2005	–	September	2007)	of PRIMEDIA	Inc.,	a	targeted	media	company.	He	has	served	as	the	Chief	Executive	Officer	of	Capstone	Consulting	LLC,	a	strategic	consulting	firm,	since	2000.	From	August	1985 to	February	2000,	Mr.	Nelson	was	employed	by	Boston	Consulting	Group,	Inc.,	a	strategic	consulting	firm,	where	he	served	as	a	Senior	Vice	President	from	December	1998	to February	2000	and	held	various	other	positions	from	August	1985	to	November	1998.	Mr.	Nelson	is	a	member	of	the	Board	of	Directors	of	Sealy	Corporation	and	Toys	"R"	Us,	Inc. He	has	been	a	member	of	our	Board	of	Directors	since	July	2007.

Mr.	Dreiling	joined	Dollar	General	in	January	2008	as	Chief	Executive	Officer	and	a	member	of	our	Board	of	Directors.	Prior	to	joining	Dollar	General,	Mr.	Dreiling served	as	Chief	Executive	Officer,	President	and	a	director	of	Duane	Reade	Holdings,	Inc.	and	Duane	Reade	Inc.,	the	largest	drugstore	chain	in	New	York	City,	from November	2005	until	January	2008	and	as	Chairman	of	the	Board	of	Duane	Reade	from	March	2007	until	January	2008.	Mr.	Dreiling	previously	served	as	Executive	Vice	President —Chief	Operating	Officer	of	Longs	Drug	Store	Corporation,	an	operator	of	a	chain	of	retail	drug	stores	on	the	West	Coast	and	Hawaii,	since	March	2005,	after	having	joined	Longs in	July	2003	as	Executive	Vice	President	and	Chief	Operations	Officer.	From	2000	to	2003,	Mr.	Dreiling	served	as	Executive	Vice	President—Marketing,	Manufacturing	and Distribution	at	Safeway,	Inc.,	a	food	and	drug	retailer.	Prior	to	that,	Mr.	Dreiling	served	from	1998	to	2000	as	President	of	Vons,	a	Southern	California	food	and	drug	division	of Safeway.

Mr.	Beré	has	served	as	our	President	and	Chief	Operating	Officer	since	December	2006.	He	also	served	as	our	Interim	Chief	Executive	Officer	from	July	6,	2007	to January	21,	2008.	He	served	as	a	member	of	our	Board	of	Directors	from	2002	until	March	2008.	He	served	from	December	2003	until	June	2005	as	Corporate	Vice	President	of Ralcorp	Holdings,	Inc.	and	as	the	President	and	Chief	Executive	Officer	of	Bakery	Chef,	Inc.,	a	leading	manufacturer	of	frozen	bakery	products	that	was	acquired	by	Ralcorp Holdings	in	December	2003.	From	1998	until	the	acquisition,	Mr.	Beré	was	the	President	and	Chief	Executive	Officer	of	Bakery	Chef,	Inc.,	and	also	served	on	its	Board	of Directors.	From	1996	to	1998,	he	served	as	President	and	Chief	Executive	Officer	of	McCain	Foods	USA,	a	manufacturer	and	marketer	of	frozen	foods	and	a	subsidiary	of	McCain Foods	Limited.	From	1978	to	1995,	Mr.	Beré	worked	for	The	Quaker	Oats

Company	and	served	as	President	of	the	Breakfast	Division	from	1992	to	1995	and	President	of	the	Golden	Grain	Division	from	1990	to	1992.

Mr.	Tehle	joined	Dollar	General	in	June	2004	as	Executive	Vice	President	and	Chief	Financial	Officer.	He	served	from	1997	to	June	2004	as	Executive	Vice	President	and Chief	Financial	Officer	of	Haggar	Corporation,	a	manufacturing,	marketing	and	retail	corporation.	From	1996	to	1997,	he	was	Vice	President	of	Finance	for	a	division	of	The Stanley	Works,	one	of	the	world's	largest	manufacturers	of	tools,	and	from	1993	to	1996,	he	was	Vice	President	and	Chief	Financial	Officer	of	Hat	Brands,	Inc.,	a	hat	manufacturer. Earlier	in	his	career,	Mr.	Tehle	served	in	a	variety	of	financial-related	roles	at	Ryder	System,	Inc.	and	Texas	Instruments.	Mr.	Tehle	serves	as	a	director	of	Jack	in	the	Box,	Inc.

Mr.	Buley	joined	Dollar	General	in	December	2005	as	Division	President,	Merchandising,	Marketing	and	Supply	Chain.	Prior	to	joining	Dollar	General,	he	served	from April	2005	through	November	2005	as	Executive	Vice	President,	Retail	Operations	of	Mervyn's	Department	Store,	a	privately	held	company	operating	265	department	stores, where	he	was	responsible	for	store	operations,	supply	chain	(including	4	distribution	centers),	real	estate,	construction,	visual	merchandising	and	interior	planning,	and	loss prevention.	From	September	2003	to	March	2005,	Mr.	Buley	worked	for	Sears,	Roebuck	and	Company,	a	multi-line	retailer	offering	a	wide	array	of	merchandise	and	related services.	As	Sears'	Executive	Vice	President	and	General	Manager	of	Retail	Store	Operations,	he	was	responsible	for	all	store-based	activities.	Prior	to	that,	he	had	responsibility	for 8	distinct	businesses	operating	in	over	2,200	locations	as	Sears'	Senior	Vice	President	and	General	Merchandise	Manager	of	the	Specialty	Retail	Group.	Prior	to	joining	Sears, Mr.	Buley	spent	15	years	in	various	positions	with	Kohl's	Corporation,	which	operates	a	chain	of	specialty	department	stores,	including	Executive	Vice	President	of	Stores, responsible	for	store	operations,	and	Senior	Vice	President	of	Stores.

Ms.	Guion	joined	Dollar	General	in	October	2003	as	Executive	Vice	President,	Store	Operations.	She	was	named	Executive	Vice	President,	Store	Operations	and	Store Development	in	February	2005,	and	was	promoted	to	Division	President,	Store	Operations	and	Store	Development	in	November	2005.	From	2000	until	joining	Dollar	General, Ms.	Guion	served	as	President	and	Chief	Executive	Officer	of	Duke	and	Long	Distributing	Company,	a	convenience	store	chain	operator	and	wholesale	distributor	of	petroleum products.	Prior	to	that	time,	she	served	as	an	operating	partner	for	Devon	Partners	(1999-2000),	where	she	developed	operating	plans	and	assisted	in	the	identification	of	acquisition targets	in	the	convenience	store	industry,	and	as	President	and	Chief	Operating	Officer	of	E-Z	Serve	Corporation	(1997-1998),	an	owner/operator	of	convenience	stores,	mini-marts and	gas	marts.	From	1987	to	1997,	Ms.	Guion	served	as	the	Vice	President	and	General	Manager	of	the	largest	division	(Chesapeake	Division)	of	company-owned	stores	at	7- Eleven,	Inc.,	a	convenience	store	chain.	Other	positions	held	by	Ms.	Guion	during	her	tenure	at	7-Eleven	include	District	Manager,	Zone	Manager,	Operations	Manager,	and Division	Manager	(Midwest	Division).

Ms.	Lanigan	joined	Dollar	General	in	July	2002	as	Vice	President,	General	Counsel	and	Corporate	Secretary.	She	was	promoted	to	Senior	Vice	President	in	October	2003 and	to	Executive	Vice	President	in	March	2005.	Prior	to	joining	Dollar	General,	Ms.	Lanigan	served	as	Senior	Vice	President,	General	Counsel	and	Secretary	at	Zale	Corporation,	a specialty	retailer	of

fine	jewelry.	During	her	six	years	with	Zale,	Ms.	Lanigan	held	various	positions,	including	Associate	General	Counsel.	Prior	to	that,	she	held	legal	positions	with	both	Turner Broadcasting	System,	Inc.	and	the	law	firm	of	Troutman	Sanders	LLP.

Ms.	Lowe	joined	Dollar	General	as	Executive	Vice	President	of	Human	Resources	in	September	2005.	From	2000	to	2004,	Ms.	Lowe	was	Executive	Vice	President	of Human	Resources,	Corporate	Communications,	and	Public	Affairs	for	Ryder	System,	Inc.,	a	logistics	and	transportation	services	company.	She	was	Executive	Vice	President	of Human	Resources	and	Administration	Services	for	Beneficial	Management	Corporation,	an	international	consumer	finance	company,	from	1997	to	1999,	and	Executive	Vice President	of	Human	Resources	and	Communications	for	Heller	International,	a	commercial	finance	company,	from	1993	to	1997.	She	also	served	as	Senior	Vice	President, Administrative	Services,	for	Sanwa	Business	Credit	Corporation	from	1985	to	1993.	Prior	to	joining	Sanwa,	she	spent	13	years	with	Continental	Illinois	Leasing	Corporation	and Continental	Bank,	where	her	last	position	was	Vice	President	and	Division	Head.	Ms.	Lowe	serves	as	a	director	of	The	South	Financial	Group,	Inc.

Ms.	Elliott	joined	Dollar	General	as	Senior	Vice	President	and	Controller	in	August	2005.	Prior	to	joining	Dollar	General,	she	served	as	Vice	President	and	Controller	of Big	Lots,	Inc.,	a	closeout	retailer,	from	May	2001	to	August	2005.	Overseeing	a	staff	of	140	employees	at	Big	Lots,	she	was	responsible	for	accounting	operations,	financial reporting	and	internal	audit.	Prior	to	serving	at	Big	Lots,	she	served	as	Vice	President	and	Controller	for	Jitney-Jungle	Stores	of	America,	Inc.,	a	grocery	retailer,	from	April	1998	to March	2001.	At	Jitney-Jungle,	Ms.	Elliott	was	responsible	for	the	accounting	operations	and	the	internal	and	external	financial	reporting	functions.	Prior	to	serving	at	Jitney-Jungle, she	practiced	public	accounting	for	12	years,	6	of	which	were	with	Ernst	&	Young	LLP.

Mr.	Gibson	joined	Dollar	General	as	Senior	Vice	President	of	Dollar	General	Market	in	November	2005.	He	was	named	Senior	Vice	President	of	Dollar	General	Markets and	Shrink	in	January	2008.	Prior	to	joining	Dollar	General,	he	assembled	and	led	teams	of	investment	bankers	and	private	equity	fund	managers	in	several	mid-sized	business acquisition	efforts	from	2004	to	November	2005.	He	also	served	as	Senior	Vice	President	of	Global	Logistics	(2000-2003)	and	Vice	President	of	Imports	and	Logistics	(1998-2000) for	The	Home	Depot,	Inc.,	a	home	improvement	retailer.	He	founded	Gibson	Associates,	a	management	consulting	firm,	in	1997	and	served	there	until	1998.	Prior	to	that,	he	served in	various	positions	at	Rite	Aid	Corporation	from	1994	to	1997,	including	Senior	Vice	President	of	Logistics.	He	also	served	retailers	as	a	management	consulting	principal	(1993- 1994)	and	management	consultant	(1984-1993)	at	Deloitte	&	Touche.

(b)											Procedures	for	Shareholders	to	Nominate	Directors;	Arrangements	to	Serve	as	Directors.		The	procedures	by	which	security	holders	may	recommend	nominees to	our	Board	of	Directors	that	were	contained	in	our	Bylaws	prior	to	the	Merger	were	eliminated	as	a	result,	and	at	the	effective	time,	of	the	Merger.

All	of	our	directors	are	managers	of	Buck	Holdings,	LLC.	The	Second	Amended	and	Restated	Limited	Liability	Company	Agreement	of	Buck	Holdings,	LLC	generally requires	that	the	members	of	Buck	Holdings,	LLC	take	all	necessary	action	to	ensure	that	the	persons	who

serve	as	managers	of	Buck	Holdings,	LLC	also	serve	on	our	Board.	In	addition,	Mr.	Dreiling's	employment	agreement	provides	that	he	will	continue	to	serve	as	a	member	of	our Board	as	long	as	he	remains	our	Chief	Executive	Officer.

Because	of	these	requirements,	together	with	Buck	Holdings'	controlling	ownership	of	our	outstanding	common	stock,	we	do	not	currently	have	a	policy	or	procedures	with respect	to	shareholder	recommendations	for	nominees	to	our	Board.

(c)											Audit	Committee	Financial	Expert.			Our	Audit	Committee	is	composed	of	Messrs.	Calbert	and	Agrawal.	In	light	of	our	status	as	a	closely	held	company	and	the absence	of	a	public	trading	market	for	our	common	stock,	our	Board	has	not	designated	any	member	of	the	Audit	Committee	as	an	"audit	committee	financial	expert."	Though	not formally	considered	by	our	Board	given	that	our	securities	are	not	registered	or	traded	on	any	national	securities	exchange,	based	upon	the	listing	standards	of	the	New	York	Stock Exchange	(the	"NYSE")	upon	which	our	common	stock	was	listed	prior	to	the	Merger,	we	do	not	believe	that	Messrs.	Calbert	or	Agrawal	would	be	considered	independent	because of	their	relationships	with	KKR	which	indirectly	owns,	through	its	interests	in	Parent,	over	50%	of	our	outstanding	common	stock,	and	certain	other	relationships	with	us	as	more fully	described	under	Item	13	below.

(d)												Code	of	Business	Conduct	and	Ethics.		We	have	adopted	a	Code	of	Business	Conduct	and	Ethics	that	applies	to	our	principal	executive	officer,	principal financial	officer,	principal	accounting	officer	or	controller,	or	persons	performing	similar	functions.	We	will	either	post	this	Code	on	our	Internet	website	at	www.dollargeneral.com or,	if	not	so	posted,	provide	a	copy	of	the	Code	to	any	person	without	charge	upon	written	request	to	Dollar	General	Corporation,	c/o	Investor	Relations	Department,	100	Mission Ridge,	Goodlettsville,	TN	37072.		We	intend	to	provide	any	required	disclosure	of	any	amendment	to	or	waiver	from	the	Code	that	applies	to	our	principal	executive	officer, principal	financial	officer,	principal	accounting	officer	or	controller,	or	persons	performing	similar	functions,	on	www.dollargeneral.com	promptly	following	the	amendment	or waiver.		We	may	elect	to	disclose	any	such	amendment	or	waiver	in	a	report	on	Form	8-K	filed	with	the	SEC	either	in	addition	to	or	in	lieu	of	the	website	disclosure.	The information	contained	on	or	connected	to	our	Internet	website	is	not	incorporated	by	reference	into	this	report	and	should	not	be	considered	part	of	this	or	any	other	report	that	we file	with	or	furnish	to	the	SEC.

# ITEM	11. EXECUTIVE	COMPENSATION

(a)											Executive	Compensation.		We	refer	to	the	persons	included	in	the	Summary	Compensation	Table	below	as	our	"named	executive	officers"	(or	"NEOs").	In addition,	references	to	"2007"	mean	our	fiscal	year	ended	February	1,	2008,	references	to	the	"Merger"	mean	our	merger	that	occurred	on	July	6,	2007	discussed	more	fully elsewhere	in	this	document,	references	to	the	"Merger	Agreement"	mean	the	agreement	governing	the	Merger	and	references	to	"Project	Alpha"	refer	to	certain	strategic	initiatives discussed	in	the	"Executive	Overview"	section	of	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations"	in	this	document.

# Compensation	Discussion	and	Analysis

# Executive	Compensation	Philosophy	and	Objectives

We	strive	to	attract,	retain	and	motivate	persons	with	superior	ability,	to	reward	outstanding	performance,	and	to	align	our	NEOs'	and	shareholders'	long-term	interests. Our	material	compensation	principles	applicable	to	2007	NEO	compensation	included	the	following,	all	of	which	are	discussed	in	more	detail	in	"Elements	of	2007	NEO Compensation"	below:

·		We	generally	target	total	compensation	at	the	benchmarked	median	of	our	market	comparator	group,	but	we	make	adjustments	based	on	circumstances,	such	as	unique	job descriptions	and	our	particular	niche	in	the	retail	sector,	that	are	not	reflected	in	the	market	data.	For	competitive	reasons,	our	levels	of	total	compensation	or	for	any component	of	compensation	may	exceed	median.

·		We	set	base	salaries	to	reflect	the	responsibilities,	experience	and	contributions	of	the	NEOs	and	the	salaries	for	comparable	benchmarked	positions,	subject	to	minimums set	forth	in	employment	agreements.

·		We	emphasize	pay	for	performance	and	reward	NEOs	who	enhance	our	performance.	We	accomplish	this	by	linking	cash	incentives	to	the	achievement	of	our	financial goals	and	through	subjective	evaluations	of	the	NEOs'	contributions	to	the	achievement	of	our	business	goals.

·		We	promote	ownership	of	our	common	stock	to	align	the	interests	of	our	NEOs	with	those	of	our	shareholders.

Beginning	in	2004	(2003	with	respect	to	Mr.	David	Perdue),	the	Compensation	Committee	authorized	employment	agreements	with	NEOs	which,	among	other	things,	set forth	minimum	levels	of	certain	compensation	components	because	the	Committee	believed,	based	on	benchmarking	data,	that	such	arrangements	were	a	common	protection	offered to	NEOs	at	comparable	companies	and	because	contracts	were	needed	to	ensure	continuity	and	to	retain	NEOs	to	execute	changes	necessary	to	meet	our	strategic	objectives.	The Committee	also	wanted	to	give	standard	protections	to	both	the	NEOs	and	to	us	upon	the	termination	of	any	NEO's	employment.

# Compensation	Process

Oversight	of	2007	NEO	Compensation.		Prior	to	the	Merger,	the	Compensation	Committee	was	responsible	for	recommending	CEO	compensation	to	the	independent directors	of	our	Board	and	for	approving	compensation	of	other	NEOs.	The	independent	directors	of	the	Board	retained	sole	authority	to	determine	CEO	compensation.	Prior	to	the Merger,	the	Committee	members	were	Messrs.	Dennis	Bottorff,	Reginald	Dickson	and	E.	Gordon	Gee.	Subsequent	to	the	Merger,	our	Board	made	all	executive	compensation decisions	until	a	new	Compensation	Committee	was	established	in	March	2008.

Use	of	Outside	Advisors	in	Determining	NEO	Compensation.		Prior	to	the	Merger,	the	Compensation	Committee	selected	Hewitt	Associates	as	its	compensation	consultant. Hewitt	also	provides	consulting	services	to	our	human	resources	group,	both	with	respect	to	management's	work	in	connection	with	NEO	compensation	(as	described	below	under "Management's	Role	in	Determining	or	Recommending	2007	NEO	Compensation")	and	in	connection	with	general	employee	compensation	and	benefits	matters.

Prior	to	the	Merger,	the	Committee	approved	a	written	agreement	with	Hewitt	describing	the	general	terms	of	the	working	relationship.	In	particular,	Hewitt	may	perform compensation	consulting	services	upon	management	or	Committee	request,	which	services	may	include	competitive	market	pay	analyses,	support	regarding	legal,	regulatory	or accounting	considerations	impacting	compensation	programs,	redesign	of	those	programs,	assistance	with	market	data,	trends	and	competitive	practices,	meeting	preparation	and attendance	and	other	miscellaneous	work.

Management's	Role	in	Determining	or	Recommending	2007	NEO	Compensation.	Prior	to	the	Merger,	management	assisted	Hewitt	in	gathering	and	analyzing	relevant competitive	data	and	identifying	and	evaluating	various	alternatives	for	2007	compensation.	Mr.	Perdue	(while	he	served	as	CEO)	and	Ms.	Challis	Lowe	regularly	provided	their recommendations	in	Compensation	Committee	meetings	regarding	NEO	compensation	and	assisted	Hewitt	in	making	presentations	to	the	Committee.	Mr.	Perdue	participated	fully with	the	Committee	in	assessing	NEO	performance	and	made	recommendations	on	the	compensation	level	for	each	NEO	pay	component	prior	to	the	Merger.	No	member	of management	attended	the	Committee's	own	private	session.

In	connection	with	the	Merger,	NEOs	were	represented	by	legal	counsel	who	negotiated	on	their	behalf	with	KKR	and	its	legal	counsel	with	respect	to	the	terms	of	the	new long-term	incentive	plan.		Such	negotiations	did	not	address	the	amounts	or	value	of	the	grants	to	be	given	under	that	plan	upon	the	closing	of	the	Merger.		Messrs.	Richard	Dreiling and	David	Beré	also	were	represented	by	legal	counsel	in	negotiations	with	respect	to	the	terms	of	their	employment	agreements	and	compensation.

While	the	Board	and	the	Committee	valued	and	welcomed	the	input	of	management,	Board	and	Committee	members	ultimately	made	all	2007	NEO	compensation decisions.

Use	of	Market	Benchmarking	Data	in	Determining	2007	NEO	Compensation.		To	attract	and	retain	NEOs	who	we	believe	will	enhance	our	long-term	business	results,	we must	pay	compensation	that	is	competitive	with	the	external	market	for	executive	talent.	We	believe	that	the	primary	NEO	talent	market	consists	of	retail	companies	with	revenues and	business	models	similar	to	ours	because	those	companies	have	executive	positions	similar	in	breadth,	complexity	and	scope	of	responsibility	to	our	NEO	positions.	For	2007,	the Compensation	Committee	directed	Hewitt	to	provide	data	on	total	and	individual	compensation	elements	from	its	proprietary	salary	survey	database	and	from	the	proxy	statements of	selected	retail	companies	that	met	these	criteria.	We	refer	to	this	combined	group	as	the	market	comparator	group.	In	2007,	this	group	consisted	of	Advance	Auto	Parts, AutoZone,	Family	Dollar,	Kohl's,	Limited	Brands,	Long	Drug	Stores,	Nordstrom,	OfficeMax,	Office	Depot,	RadioShack,	Staples,	J.C.	Penney,	The

Gap,	Federated	Department	Stores,	Blockbuster,	The	Pantry,	Ross	Stores,	and	SuperValue	Inc.	Hewitt	was	also	asked	to	provide	proxy	statement	information	for	certain	other significantly	larger	retail	companies	(Wal-Mart,	Target,	Walgreen's	and	CVS)	to	be	used	as	additional	reference	points	in	assessing	the	appropriateness	of	our	NEOs'	compensation levels.

The	Committee	believed	that	the	median	of	the	competitive	market	generally	was	the	appropriate	target	for	an	NEO's	total	compensation,	although	the	target	for	each compensation	component	relative	to	the	competitive	market	varied.

# Elements	of	2007	NEO	Compensation

We	provide	compensation	in	the	form	of	base	salary,	short-term	incentives,	long-term	incentives,	benefits	and	perquisites.	As	discussed	in	more	detail	below,	the Compensation	Committee	believed	that	each	of	these	elements	was	a	necessary	component	of	an	NEO's	compensation	package	and	was	consistent	with	compensation	programs	at competing	companies.	Prior	to	the	Merger,	the	Committee	reviewed	base	salary,	short-term	incentives,	and	long-term	incentives	at	least	annually	and	other	elements	periodically when	material	changes	were	considered.

Base	Salary.				Base	salary	generally	promotes	the	recruiting	and	retention	functions	of	our	compensation	principles	by	reflecting	the	salaries	for	comparable	positions	in	the competitive	marketplace.	The	Committee	believed	that	we	would	be	unable	to	attract	or	retain	quality	NEOs	in	the	absence	of	competitive	base	salary	levels.	For	this	reason,	base salary	constitutes	a	significant	portion	of	an	NEO's	total	compensation.	Base	salary	also	furthers	our	pay	for	performance	role	of	our	philosophy	because,	as	a	threshold	matter,	an NEO	is	not	eligible	for	a	salary	increase	unless	he	or	she	achieves	a	satisfactory	overall	performance	evaluation.

In	determining	each	NEO's	2007	base	salary,	the	Committee	reviewed	with	Mr.	Perdue	his	evaluation	of	each	NEO's	individual	performance.	The	evaluations	included	a review	of	performance	versus	goals	established	earlier	in	2006,	except	for	Mr.	Beré	who	did	not	have	established	goals	because	he	was	hired	near	the	end	of	fiscal	2006.		Because the	Committee	agreed	with	Mr.	Perdue's	conclusion	that	each	NEO	performed	satisfactorily	overall	in	2006,	each	NEO	was	eligible	as	a	threshold	matter	for	a	salary	increase.

The	Committee	also	reviewed	the	benchmarking	data	provided	by	Hewitt,	as	described	above,	and	considered	certain	provisions	in	the	Merger	Agreement	limiting	the aggregate	employee	base	salary	increase	pool	to	no	more	than	3%.	Because	Hewitt's	data	showed	that	existing	base	salaries	with	a	3%	increase	would	continue	to	approximate	the market	median,	the	Committee	approved	a	3%	base	salary	increase	for	each	NEO	in	2007.

Subsequent	to	the	fiscal	2007	year	end	but	prior	to	the	filing	of	this	document,	the	new	Compensation	Committee	considered	the	2008	base	salary	increases	for	each NEO.		Mr.	Dreiling,	with	Mr.	Beré's	input,	reviewed	the	2007	individual	performance	of	each	NEO,	including	a	review	of	performance	versus	goals	established	earlier	in	2007. Because	Mr.	Dreiling	determined	that	each	NEO	performed	satisfactorily	overall	in	2007,	as	a	threshold	matter	each	NEO	was	eligible	for	a	salary	increase.

The	Committee	reviewed	benchmarking	data	provided	by	Hewitt	of	a	market	comparator	group	substantially	similar	to	the	group	used	for	purposes	of	2007	compensation decisions	(with	the	addition	of	Payless	Shoe	Source,	Retail	Ventures	and	Big	Lots	and	the	removal	of	Office	Depot	and	RadioShack).	This	benchmarking	data	showed	that	there	was a	significant	movement	in	the	market	median	for	Ms.	Guion's	position	and,	as	a	result,	the	Committee	adjusted	her	pay	accordingly.	The	Committee	approved	3%	base	salary increases	for	all	NEOs	(other	than	Mr.	Dreiling,	who	did	not	receive	a	base	salary	increase	since	he	was	hired	shortly	before	the	end	of	the	2007	fiscal	year,	and	Ms.	Guion,	who received	an	approximate	15.5%	base	salary	increase	for	the	reason	discussed	above)	in	order	to	maintain	base	salaries	at	the	median	of	the	market	comparator	group.

Short-Term	Incentive	Plan.				Our	short-term	incentive	plan,	called	Teamshare,	serves	to	motivate	NEOs	to	achieve	certain	objective	financial	goals	that	are	established early	in	the	fiscal	year.	As	is	the	case	with	base	salary,	as	a	threshold	matter	an	NEO	may	not	receive	a	Teamshare	payout	unless	he	or	she	receives	a	satisfactory	overall performance	evaluation,	even	if	the	Teamshare	financial	goal	is	attained.	Accordingly,	Teamshare	fulfills	a	part	of	our	pay	for	performance	philosophy	while	aligning	our	NEOs' and	shareholders'	interests.		Teamshare	also	helps	us	meet	our	recruiting	and	retention	objectives	by	providing	compensation	opportunities	that	are	consistent	with	those	prevalent	in our	market	comparator	group.

(a)		2007	Teamshare	Structure.		Teamshare	authorizes	the	payment	of	cash	bonuses,	calculated	as	a	percentage	of	base	salary,	based	on	our	performance	measured	against	a financial	performance	measure	established	early	in	the	fiscal	year.	"Threshold,"	"target"	and	"maximum"	performance	goals	are	set,	along	with	corresponding	potential	payout percentages.		Payouts	are	prorated	between	threshold	and	maximum	levels	in	relation	to	actual	performance	results.

In	2007,	the	Compensation	Committee	had	decided	to	re-evaluate	its	historical	use	of	net	income	as	the	Teamshare	performance	measure	given	changes	in	our	business strategy,	but	before	that	evaluation	could	occur	we	announced	the	proposed	Merger	and	agreed	to	consult	with	KKR	on	significant	changes	to	certain	of	our	normal	business practices.	KKR	requested,	and	the	Committee	agreed,	to	adopt	a	metric	based	principally	upon	earnings	before	interest,	taxes,	depreciation	and	amortization	(EBITDA)	as	the	sole 2007	Teamshare	performance	measure.	After	discussions	with	KKR,	the	Committee	set	this	performance	target	for	2007	at	$570	million,	which	was	equal	to	our	annual	financial objective.	Consistent	with	prior	practice	and	after	consultation	with	KKR,	the	Committee	also	set	the	threshold	and	maximum	levels	at	90%	and	110%,	respectively,	of	the	target level.	The	Committee	considered	the	Teamshare	performance	target	to	be	challenging	and	generally	consistent	with	the	level	of	difficulty	of	achievement	associated	with	our performance-based	awards	for	prior	years.		We	did	not	achieve	the	threshold	Teamshare	performance	level	in	fiscal	years	2006	or	2005.	We	achieved	Teamshare	performance	levels between	threshold	and	target	in	fiscal	years	2004	and	2002	and	at	maximum	in	fiscal	year	2003.

The	Committee	directed	that	our	Teamshare	2007	EBITDA	performance	measure	be	computed	using	numbers	from	our	issued	financial	statements,	adjusted	to	exclude:

·		consulting,	accounting,	legal,	valuation,	banking,	filing,	disclosure	and	similar	costs,	fees	and	expenses	directly	related	to	the	consideration,	negotiation,	approval	and consummation	of	the	Merger	and	related	financing	and	any	related	litigation	or	settlement	of	any	related	litigation;

·		costs	and	expenses	constituting	severance	payments	and	benefits	incurred	during	the	12	month	period	following	the	date	of	shareholder	approval	of	the	Merger;	and

·		the	impact	of	any	unplanned	items	of	a	non-recurring	or	extraordinary	nature.

The	Committee	then	set	the	potential	Teamshare	payout	range	for	the	NEOs,	other	than	Mr.	Perdue	and	Mr.	Dreiling	(see	"Compensation	of	Mr.	Perdue"	and "Compensation	of	Mr.	Dreiling"	below)	and	Mr.	Beré	(see	below),	at	the	following	base	salary	percentages:	32.5%	(threshold),	65%	(target),	and	130%	(maximum).	In	determining this	range,	the	Committee	reviewed	Hewitt's	benchmarking	information	regarding	competitive	target	incentives	for	comparable	positions	in	our	market	comparator	group.	This analysis	showed	that	our	existing	target	salary	payout	percentages	generally	exceeded	the	market	median,	but	that	our	total	direct	compensation	would	remain	at	or	slightly	above the	market	median	because	our	long-term	incentive	compensation	remains	significantly	below	the	market	median.	The	Committee	also	continued	to	rely	on	Hewitt's	prior	year benchmarking	data	which	indicated	that	the	typical	practice	was	to	set	the	threshold	payout	percentage	at	half	of	the	target	and	the	maximum	payout	percentage	at	twice	the	target. Accordingly,	the	Committee	made	no	changes	to	the	potential	payout	range	for	those	NEOs	from	the	prior	year.

Mr.	Beré	assumed	the	position	of	Interim	CEO	upon	Mr.	Perdue's	resignation	on	July	6,	2007.		At	that	time,	the	Board	set	Mr.	Beré's	potential	Teamshare	payout percentages	at	35%	(threshold),	140%	(target)	and	280%	(maximum)	of	base	salary	upon	achievement	of	EBITDA-based	performance	levels	of	$630	million	(threshold),	$700 million	(target),	and	$770	million	(maximum).		Mr.	Beré's	performance	target	level,	as	well	as	the	calculation	of	the	related	EBITDA-based	performance	metric,	were	chosen	to match	the	level	used	for	vesting	purposes	for	the	performance-based	options	(discussed	below	under	"Long-Term	Incentive	Program")	granted	to	the	NEOs	on	July	6,	2007. Threshold	and	maximum	performance	levels	were	set	at	90%	and	110%	of	the	target	level.	Mr.	Beré's	fiscal	2007	bonus	opportunity	was	not	based	on	a	prorated	graduated	scale	for performance	between	the	threshold	and	target	and	the	target	and	maximum	levels.

(b)		2007	Teamshare	Results.		Mr.	Dreiling,	with	Mr.	Beré's	input,	reviewed	the	2007	individual	performance	of	each	NEO,	including	a	review	of	performance	versus	goals established	earlier	in	2007.	Because	Mr.	Dreiling	determined	that	each	NEO	performed	satisfactorily	overall	in	2007,	as	a	threshold	matter	each	NEO	was	eligible	to	receive	a	2007 Teamshare	payout	to	the	extent	we	achieved	the	relevant	EBITDA	performance	target.	In	March	2008,	our	new	Compensation	Committee	approved	an	EBITDA	calculation	for	this purpose	between	the	"target"	and	"maximum"	performance	levels.	Accordingly,	each	NEO	received	a	Teamshare	payout	in	the	amount	reflected	in	the	"Non-Equity	Incentive	Plan Compensation"	column	of	the	Summary	Compensation	Table	at	the	following	percentages	of	base	salary:		Mr.	Dreiling,	127%	(based	on	an	annualization	of	his	partial	fiscal	2007 salary);	Mr.	Beré,	140%;		and	Mr.	Tehle,		Mr.	Buley,		Ms.	Guion	and	Ms.	Lowe,	82.6%.

Long-Term	Incentive	Program.				Long-term	equity	incentives	motivate	NEOs	to	focus	on	long-term	success	for	shareholders.	These	incentives	also	provide	a	balance between	short-term	and	long-term	goals.	Prior	to	the	Merger,	we	delivered	these	incentives	as	equity	grants	structured	to	recognize	stock	price	changes.	The	Compensation Committee	targeted	a	certain	economic	value	to	be	delivered	through	these	incentives	which	an	NEO	would	realize	only	if	our	stock	price	increased.	Long-term	incentives	are	also important	to	our	compensation	program's	recruiting	and	retention	objectives	because	most	of	the	companies	in	our	market	comparator	group	offer	them.		Following	the	Merger,	our long-term	incentives	are	designed	to	compensate	NEOs	for	a	long-term	commitment	to	us,	while	motivating	sustained	increases	in	our	financial	performance.

Prior	to	the	Merger,	the	Committee	typically	made	equity	grant	decisions	when	it	reviewed	other	compensation	decisions	and	evaluated	NEO	performance,	and	it	was	our practice	to	establish	option	exercise	prices	as	the	closing	market	price	on	the	grant	date.	We	typically	released	our	annual	earnings	and	other	financial	results	shortly	thereafter,	but the	grants	were	made	regardless	of	whether	earnings	were	favorable	or	unfavorable.	In	accordance	with	our	usual	practice,	the	Committee	made	pre-Merger	2007	annual	equity	grant decisions	prior	to	the	annual	earnings	release	but	after	the	announcement	of	the	proposed	Merger.

Because	Hewitt's	benchmarking	data	indicated	that	our	target	long-term	incentive	values	for	NEOs	(other	than	Mr.	Perdue)	were	significantly	below	the	median	of	our market	comparator	group,	the	Committee	decided	in	fiscal	2006	to	increase	that	value	by	approximately	20-25%	for	fiscal	2006	compensation.	At	the	same	time,	the	Committee	also decided	to	change	the	options/restricted	stock	units	("RSUs")	allocation	from	the	previous	80%/20%	to	70%/30%	for	fiscal	2006	compensation,	which,	according	to	Hewitt,	more closely	aligned	with	market	practice.	In	2007,	the	Committee	decided	to	further	adjust	the	relationship	of	options	and	RSUs	to	reflect	a	50%/50%	allocation	of	the	economic	value for	2007	long-term	incentive	grants	which	Hewitt	advised	continued	to	further	align	with	market	practice.

The	Committee's	decision	regarding	the	2007	equity	grant	mix	also	took	into	account	the	limited	availability	of	shares	for	use	under	the	shareholder-approved	option program	existing	at	that	time.		If	the	options/RSUs	mix	continued	unchanged	from	2006,	there	likely	would	not	have	been	enough	shares	for	equity	grants	through	fiscal	2008,	the year	the	plan	was	scheduled	to	terminate	by	its	terms.		The	Committee	believed	the	best	way	to	address	that	issue,	while	also	assisting	with	retention	and	motivation	of	NEOs	and maintaining	alignment	with	shareholder	interests,	was	to	adjust	the	options/RSUs	grant	mix.

In	connection	with	the	Merger,	all	outstanding	equity	awards	became	fully	vested	and	were	settled	in	cash,	canceled	or	rolled	over,	as	described	below.	Unless	they	elected to	roll	over	their	existing	options,	each	NEO	received	in	exchange	for	each	option	an	amount	in	cash,	without	interest	and	less	applicable	withholding	taxes,	equal	to	$22.00	less	the exercise	price	of	each	option.	Additionally,	each	NEO	received	in	exchange	for	each	RSU	or	share	of	restricted	stock	an	amount	in	cash,	without	interest	and	less	applicable withholding	taxes,	equal	to	$22.00.

Certain	NEOs	elected	to	roll	over	their	existing	options	in	connection	with	the	Merger	(the	"Rollover	Options").	The	exercise	price	of	the	Rollover	Options	and	the	number	of	shares underlying	the	Rollover	Options	were	adjusted	as	a	result	of	the	Merger	to	provide	their	pre-Merger	value	equivalents.	The	Rollover	Options	otherwise	continue	under	the	terms	of the	equity	plan	under	which	they	were	issued.

On	July	6,	2007,	our	Board	adopted	the	2007	Stock	Incentive	Plan	for	Key	Employees	(the	"2007	Plan").		For	certain	designated	employees,	including	NEOs,	the	Board required	a	personal	financial	investment	in	Dollar	General	in	order	for	the	employee	to	be	eligible	to	receive	an	option	grant	under	the	2007	Plan.	That	investment	could	be	made	in the	form	of	cash,	rollover	of	stock	and/or	rollover	of	in-the-money	options	issued	prior	to	the	Merger.	Each	NEO	(other	than	Mr.	Perdue	who	resigned	and	Mr.	Dreiling	who	is discussed	separately	below)	met	the	personal	investment	requirement	and,	accordingly,	received	option	grants	under	the	2007	Plan.

The	options	granted	under	the	2007	Plan	are	divided	so	that	half	are	time-vested	and	half	are	performance-vested	based	on	a	comparison	of	an	EBITDA-based	performance metric,	as	described	below,	against	pre-set	goals	for	that	performance	metric.	The	combination	of	time	and	performance	based	vesting	of	these	awards	is	designed	to	compensate executives	for	long-term	commitment	to	us,	while	motivating	sustained	increases	in	our	financial	performance.	The	options	have	an	exercise	price	of	$5	per	share,	which	was	the fair	market	value	on	the	grant	date.

The	time-vested	options	vest	and	become	exercisable	ratably	on	each	of	the	five	anniversary	dates	of	July	6,	2007	solely	based	upon	continued	employment	with	us	over that	time	period.	The	performance-vested	options	are	eligible	to	vest	and	become	exercisable	ratably	if	the	Board	determines	in	good	faith	that	we	achieve	specified	annual performance	targets	based	on	EBITDA	and	adjusted	as	described	below.	For	fiscal	2007	that	target	was	$700	million,	which	was	based	on	our	annual	financial	plan	and	anticipated permitted	adjustments,	primarily	to	account	for	unique	expenses	related	to	the	Merger	and	costs	associated	with	Project	Alpha.		If	a	performance	target	for	a	given	fiscal	year	is	not met,	the	performance-based	options	may	still	vest	and	become	exercisable	on	a	"catch	up"	basis	if,	at	the	end	of	a	subsequent	fiscal	year	through	fiscal	2012,	a	specified	cumulative EBITDA-based	performance	target	is	achieved.	Because	the	performance	targets	are	based	on	our	long-term	financial	plan,	we	believe	these	levels,	while	attainable,	require	strong performance	and	execution.	We	consider	these	performance	targets	to	be	slightly	more	difficult	to	achieve	than	financial	performance	targets	associated	with	Teamshare compensation	in	prior	years.

For	purposes	of	calculating	performance	targets	for	our	long-term	incentive	program,	"EBITDA"	means	earnings	before	interest,	taxes,	depreciation	and	amortization	plus transaction,	management	and/or	similar	fees	paid	to	KKR	and/or	its	affiliates.	In	addition,	the	Board	is	required	to	fairly	and	appropriately	adjust	the	calculation	of	EBITDA	to reflect,	to	the	extent	not	contemplated	in	our	financial	plan,	the	following:	acquisitions,	divestitures,	any	change	required	by	generally	accepted	accounting	principles	("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	to	the	EBITDA	performance	metric	we	use	for	our	long-term	incentive	program.	For	2007	performance	targets,	the	Board	also	is	required	to

make	a	good	faith	determination	of	adjustments	to	EBITDA	for	Project	Alpha	costs	and	other	non-recurring	expenses	after	consulting	with	the	CEO	and	CFO.	Adjustments	to EBITDA	for	purposes	of	calculating	performance	targets	or	our	long-term	incentive	program	may	not	in	all	circumstances	be	identical	to	adjustments	to	EBITDA	for	other	purposes, including	our	Teamshare	targets	and	the	covenants	contained	in	our	principal	financial	agreements.	Accordingly,	comparability	of	such	measures	is	limited.

In	March	2008,	the	Compensation	Committee	determined	that	the	specified	adjusted	EBITDA	performance	target	had	been	achieved	for	fiscal	2007	and,	as	a	result, acknowledged	the	vesting	of	20%	of	the	performance-based	options.

Benefits	and	Perquisites.				We	provide	benefits	and	limited	perquisites	to	NEOs	for	retention	and	recruiting	purposes,	to	promote	tax	efficiency	for	the	NEOs,	and	to replace	benefit	opportunities	lost	due	to	regulatory	limits.	We	also	provide	NEOs	with	benefits	and	perquisites	as	additional	forms	of	compensation	that	are	believed	to	be	consistent and	competitive	with	benefits	and	perquisites	provided	to	similar	positions	in	our	market	comparator	group	and	our	industry.	The	Compensation	Committee	believed	these	benefits and	perquisites	help	to	attract	and	retain	NEOs.	Along	with	certain	benefits	offered	to	NEOs	on	the	same	terms	that	are	offered	to	all	of	our	salaried	employees	(such	as	health	and welfare	benefits	and	matching	contributions	under	our	401(k)	plan),	we	provide	NEOs	with	certain	additional	benefits	and	perquisites.

We	allow	NEOs	to	participate	in	the	Compensation	Deferral	Plan	(the	"CDP")	and	the	defined	contribution	Supplemental	Executive	Retirement	Plan	(the	"SERP",	and together	with	the	CDP,	the	"CDP/SERP	Plan").	During	his	tenure	with	us,	Mr.	Perdue	was	eligible	to	participate	in	the	CDP	but	not	the	SERP	due	to	his	participation	in	an individual	defined	benefit	supplemental	executive	retirement	plan.	Mr.	Perdue's	defined	benefit	supplemental	executive	retirement	plan	was	provided	as	part	of	Mr.	Perdue's inducement	package	to	join	Dollar	General	in	2003	and	was	one	of	the	compensation	components	necessary	at	that	time	to	attract	him	to	serve	as	our	CEO.	In	addition,	in January	2006	our	Board	approved	the	establishment	of	a	grantor	trust	to	hold	certain	assets	in	connection	with	Mr.	Perdue's	supplemental	executive	retirement	plan	in	the	event	of	a change	in	control.

We	provide	each	NEO	a	life	insurance	benefit	equal	to	2.5	times	his	or	her	base	salary	to	a	maximum	of	$3	million.	We	pay	the	premiums	and	gross	up	the	NEO's	income to	pay	the	tax	cost	of	this	benefit.	We	also	provide	each	NEO	a	disability	insurance	benefit	that	provides	income	replacement	of	60%	of	base	salary	up	to	a	maximum	monthly benefit	of	$20,000	($25,000	for	Mr.	Perdue).	We	pay	the	cost	of	this	benefit	and	gross	up	the	NEO's	income	to	pay	the	tax	cost	of	this	benefit	to	the	extent	necessary	to	replace benefit	level	caps	in	the	group	plan	applicable	to	all	salaried	employees.

Each	NEO	may	choose	either	a	leased	automobile	or	a	fixed	monthly	automobile	allowance.	All	NEOs	except	Mr.	Beré	and	Ms.	Lowe	chose	the	automobile	allowance option	in	2007.	Mr.	Beré	and	Ms.	Lowe	chose	the	lease	option	under	which	we	provide	a	company-leased	automobile,	pay	for	gasoline,	repairs,	service,	and	insurance	and	provide	a gross-up	payment	to	pay	the	tax	cost	of	the	imputed	income.

We	also	provide	a	relocation	assistance	program	to	NEOs	similar	to	that	offered	to	certain	other	employees.	In	2007,	we	incurred	relocation	expenses	in	accordance	with this	policy	for	Mr.	Buley	and	Mr.	Dreiling	(as	discussed	below	in	"Compensation	of	Mr.	Dreiling").		The	significant	differences	of	the	relocation	assistance	available	to	NEOs	from the	relocation	assistance	available	to	other	employees	are	as	follows:

·		We	provide	a	pre-move	allowance	of	5%	of	the	NEO's	annual	base	salary	(we	cap	this	allowance	at	$5,000	for	other	employees);

·		We	provide	home	sale	assistance	by	offering	to	purchase	the	NEO's	prior	home	at	an	independently	determined	appraised	value	in	the	event	the	prior	home	is	not	sold	to an	outside	buyer	(we	do	not	offer	this	service	to	other	employees);

·		We	reimburse	NEOs	for	all	reasonable	and	customary	home	purchase	closing	costs	(we	limit	our	reimbursement	to	other	employees	to	2%	of	the	purchase	price	to	a maximum	of	$2,500)	except	for	loan	origination	fees	which	are	limited	to	1%;	and

·		We	provide	60	days	of	temporary	living	expenses	(we	limit	temporary	living	expenses	to	30	days	for	all	other	employees).

As	an	exception	to	the	NEO	relocation	policy,	the	Committee	extended	the	temporary	housing	benefit	in	2007	to	Mr.	Beré	beyond	the	60	day	limit	due	to	uncertainties arising	from	the	Merger.

# Compensation	of	Mr.	Perdue

While	Mr.	Perdue's	compensation	reflected	an	emphasis	on	achieving	both	short	and	long-term	performance	results,	more	emphasis	was	placed	on	long-term	performance goals.		This	is	generally	typical	for	CEO	compensation	structures	as	it	aligns	their	compensation	more	directly	with	that	of	shareholders,	i.e.,	the	creation	of	long-term	economic value	in	the	company.		As	a	result	of	the	risk	associated	with	the	long-term	component	being	such	a	large	portion	of	his	total	compensation	and	as	a	part	of	the	decision	to	extend	Mr. Perdue's	employment	contract	with	us,	his	compensation	was	benchmarked	closer	to	the	75 th 	percentile	of	the	market	comparator	group.

In	2007,	the	Committee	reviewed	Mr.	Perdue's	assessment	of	his	overall	performance	to	determine	as	a	threshold	matter	his	eligibility	for	a	base	salary	increase.	This review	included	Mr.	Perdue's	performance	versus	his	previously	established	2006	goals,	which	included	measures	relating	to	the	sell	off	of	inventory	and	the	closing	of	stores	as	a part	of	Project	Alpha;	increasing	the	discipline	in	the	planning	and	buying	process	including	private	label	development	and	SKU	rationalization;	enhanced	domestic	sourcing	and continued	reduction	of	costs	through	the	supply	chain;	enhancing	the	customer	experience	in	the	store	through	shrink	reduction,	reduced	store	manager	turnover	and	the development	of	measurements	of	store	standards;	and	the	development	of	a	store	strategic	growth	plan.		Because	the	Committee	was	satisfied	with	Mr.	Perdue's	overall performance,	he	was	eligible	for	a	2007	salary	increase.

The	Committee	also	reviewed	Hewitt's	benchmarking	data,	as	described	above,	and	considered	certain	provisions	contained	in	the	Merger	Agreement	limiting	the aggregate	employee	base	salary	increase	pool	to	no	more	than	3%.	Hewitt's	data	showed	that	Mr.	Perdue's	existing	base	salary	with	a	3%	increase	would	continue	to	approximate market	median,	and	the	Committee	determined	that	Mr.	Perdue	would	receive	a	3%	base	salary	increase	for	2007.

The	process	followed	in	determining	Mr.	Perdue's	2007	Teamshare	structure	and	2007	long-term	incentives	was	substantially	similar	to	that	described	above	regarding other	NEOs,	except	that	the	ultimate	decisions	were	made	by	the	independent	directors	of	the	Board	upon	Committee	recommendation.	In	addition,	the	Board	and	the	Committee were	contractually	bound	by	the	target	(100%)	and	maximum	(200%)	Teamshare	payout	percentages	contained	in	Mr.	Perdue's	employment	agreement	approved	prior	to	2007.

With	respect	to	Mr.	Perdue's	long-term	incentive	compensation,	the	Committee	chose	to	use	the	same	50%/50%	options/RSUs	allocation	of	economic	value	as	it	used	for other	NEOs	in	2007.		Hewitt's	benchmarking	data	indicated	that	the	amounts	to	be	granted	to	Mr.	Perdue	would	approximate	the	75 th 	percentile	of	our	market	comparator	group, keeping	his	total	direct	compensation	near	the	same	percentile.	In	connection	with	the	Merger,	Mr.	Perdue's	outstanding	equity	awards	became	fully	vested	and	were	settled	in	cash in	the	same	manner	described	for	the	other	NEOs.

Mr.	Perdue	resigned	from	Dollar	General	effective	July	6,	2007.	We	treated	the	resignation	as	one	for	"good	reason"	after	a	change-in-control	under	his	employment agreement.	He	executed	a	release	and	became	entitled	to	certain	severance	payments	and	benefits	which	are	triggered	by	such	a	resignation	under	his	employment	agreement,	subject to	his	continued	compliance	with	certain	terms	(including	restrictive	covenants)	of	the	employment	agreement.	He	was	also	entitled	to	payments	under	his	defined	benefit supplemental	executive	retirement	plan	and	the	CDP.

# Compensation	of	Mr.	Dreiling

Mr.	Dreiling	entered	into	a	five-year	employment	agreement	to	become	CEO	and	a	member	of	our	Board	effective	January	21,	2008.		Key	compensatory	provisions	of	the agreement	include:

·		Annual	bonus	payout	range	of	50%	(threshold),	100%	(target)	and	200%	(maximum)	of	base	salary	based	upon	EBITDA	performance.		Mr.	Dreiling	is	eligible	to	earn	a prorated	2007	bonus	for	the	number	of	days	worked	in	fiscal	2007.		For	2008,	Mr.	Dreiling	is	guaranteed	to	earn	at	least	a	threshold	level	bonus. ·		A	signing	bonus	of	$2,000,000.

·		Equity	grants	consisting	of	890,000	shares	of	restricted	stock	and	options	to	purchase	2.5	million	shares	of	Dollar	General	at	$5	per	share	(the	fair	market	value	on	the grant	date).	The	restricted	stock	is	scheduled	to	vest	upon	the	earlier	to	occur	of	the	last	day	of	fiscal	2011,	a	change	in	control,	an	initial	public	offering,	termination without	cause	or	due	to	death	or	disability,	or	resignation	with	good	reason.	Half	of	the

	options	are	time-vested	and	the	other	half	are	performance-vested.	These	options	vest	upon	the	same	terms	as	the	other	options	that	have	been	granted	under	the	2007 Plan.

·		Payment	of	the	premiums	on	his	personal	long-term	disability	insurance	policy.

·		Use	of	our	plane	for	Mr.	Dreiling	and	his	spouse	up	to	nine	trips	per	year	between	our	headquarters	and	his	permanent	residence	in	California.

·		Reimbursement	and	gross-up	for	taxes	of	all	closing	costs	and	expenses,	including	broker's	fees,	loan	origination	and/or	loan	discount	fees	(not	to	exceed	2	points	in total),	and	attorney	fees	incurred	to	purchase	a	residence	in	the	Nashville,	Tennessee	area	and	for	up	to	2	months'	lease	cancellation	on	his	apartment	in	the	New	York metropolitan	area.		Reimbursement	and/or	payment	of	and	gross-up	for	taxes	of	temporary	living	expenses	for	120	days	as	well	as	2	house	hunting	trips	not	to	exceed	7 nights/8	days.	Relocation	also	includes	the	payment	of	packing,	loading,	transporting,	storing	and	delivering	his	household	goods	including	the	movement	of	1	car	and	a miscellaneous	expense	allowance	equal	to	$50,000	less	applicable	taxes.

·		Reimbursement	of	legal	fees	up	to	$35,000,	grossed-up	for	taxes,	incurred	in	negotiating	and	preparing	the	employment	agreement	and	documents	associated	with	Mr. Dreiling's	equity	grants.

·		Payment	of	monthly	membership	fees	and	costs	related	to	his	membership	in	professional	clubs	selected	by	him,	grossed-up	for	any	taxes.

Mr.	Dreiling	was	chosen	for	the	CEO	position	after	a	lengthy	and	careful	search.	The	Board	firmly	believes	he	is	the	right	leader	for	the	Company	as	we	move forward.		The	terms	of	his	employment	agreement	summarized	above	were	settled	after	negotiation	with	Mr.	Dreiling,	and	the	Board	believes	that	they	are	fair	and	appropriate	given CEO	compensation	and	benefits	at	comparable	companies	and	given	Mr.	Dreiling's	experience	and	leadership	ability.		These	arrangements	were	also	necessary	to	entice	Mr. Dreiling	to	resign	from	his	previous	employer	and	to	give	him	the	opportunity	to	offset	the	potential	financial	gain	he	would	be	foregoing	by	leaving	that	employer.

# Severance	and	Change-in-Control	Agreements

As	noted	above,	we	have	employment	agreements	with	our	NEOs	that	among	other	things	provide	for	each	NEO's	rights	upon	a	termination	of	employment.	We	believe that	reasonable	severance	and	change-in-control	benefits	are	appropriate	to	protect	the	NEO	against	circumstances	over	which	he	or	she	does	not	have	control	and	as	consideration for	the	promises	of	non-competition,	non-solicitation	and	non-interference	that	we	require	in	our	employment	agreements.	Furthermore,	we	believe	change-in-control	severance payments	align	NEO	and	shareholder	interests	by	enabling	NEOs	to	evaluate	a	transaction	in	the	best	interests	of	our	shareholders	and	our	other	constituents	without	undue	concern over	whether	the	transaction	may	jeopardize	the	NEO's	own	employment.

All	of	our	change-in-control	provisions	operate	under	a	double	trigger,	requiring	both	a	change-in-control	and	a	termination	event,	except	for	the	provisions	related	to	long- term	equity	incentives	under	our	2007	Plan.		Under	the	2007	Plan,	(1)	all	time-vested	options	will	vest	and	become	immediately	exercisable	as	to	100%	of	the	shares	of	common stock	subject	to	such	options	immediately	prior	to	a	change-in-control	and	(2)	all	performance–vested	options	will

vest	and	become	immediately	exercisable	as	to	100%	of	the	shares	of	common	stock	subject	to	such	options	immediately	prior	to	a	change-in-control	if,	as	a	result	of	the	change–in- control,	(x)	investment	funds	affiliated	with	KKR	realize	a	specified	internal	rate	of	return	on	100%	of	their	aggregate	investment,	directly	or	indirectly,	in	our	equity	securities	(the "Sponsor	Shares")	and	(y)	the	investment	funds	affiliated	with	KKR	earn	a	specified	cash	return	on	100%	of	the	Sponsor	Shares;	provided,	however,	that	in	the	event	that	a	change- in-control	occurs	in	which	more	than	50%	but	less	than	100%	of	our	common	stock	or	other	voting	securities	or	the	common	stock	or	other	voting	securities	of	Buck	Holdings,	L.P. is	sold	or	otherwise	disposed	of,	then	the	performance-vested	options	will	become	vested	up	to	the	same	percentage	of	Sponsor	Shares	on	which	investment	funds	affiliated	with KKR	achieve	a	specified	internal	rate	of	return	on	their	aggregate	investment	and	earn	a	specified	return	on	their	Sponsor	Shares.	The	Merger	constituted	a	change-in-control	for purposes	of	our	pre-Merger	plans	and	arrangements.

# Deductibility	of	NEO	Compensation

Section	162(m)	of	the	Internal	Revenue	Code	generally	disallows	a	tax	deduction	to	public	companies	for	compensation	over	$1	million	paid	in	any	fiscal	year	to	an	NEO that	is	not	performance-based	compensation.	We	believe	that	compensation	paid	in	2007	associated	with	stock	options	under	our	1998	Stock	Incentive	Plan	would	generally	be	fully deductible	for	federal	income	tax	purposes.	However,	in	certain	situations	(such	as	time-vested	RSUs)	the	Compensation	Committee	approved	compensation	that	did	not	meet	these requirements	in	order	to	ensure	competitive	levels	of	total	compensation	for	our	NEOs.	Because	our	common	stock	is	no	longer	publicly	traded,	the	Board	did	not	consider Section	162(m)	with	respect	to	2007	compensation	paid	after	the	Merger.

# Compensation	Committee	Report

Our	Compensation	Committee	has	reviewed	and	discussed	with	management	the	Compensation	Discussion	and	Analysis	required	by	Item	402(b)	of	Regulation	S-K	and, based	on	such	review	and	discussions,	the	Compensation	Committee	recommended	to	the	Board	that	the	Compensation	Discussion	and	Analysis	be	included	in	this	document.

This	report	has	been	furnished	by:

·		Michael	M.	Calbert,	Chairman

·		Raj	Agrawal

·		Adrian	Jones

The	Compensation	Committee	Report	is	deemed	furnished,	not	filed,	in	this	document	and	will	not	be	deemed	to	be	incorporated	by	reference	into	any	filing	under	the Securities	Act	or	the	Exchange	Act	as	a	result	of	furnishing	the	Compensation	Committee	Report	in	this	manner.

# Summary	Compensation	Table

The	following	table	summarizes	compensation	paid	to	or	earned	by	our	NEOs	in	each	of	fiscal	2007	and	2006.

| Position | Position |  | Year |  |  |  |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Richard\tW.\tDreiling, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | 2007 | 34,615 | 2,000,000 | 36,777 | 42,174 | 41,760 | -- |  | 62,141(7) | 2,217,467 |
| Chief\tExecutive\tOfficer | Chief\tExecutive\tOfficer | (1) |  |  |  |  |  |  |  |  |  |  |
| David\tA.\tPerdue, |  |  | 2007 | 488,390 | -- | 8,259,225 | 1,690,873 | -- | 4,179,884 | (8) | 11,238,529(9) | \t\t25,856,901 |
| Former\tChairman\t&amp; |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | (8) |  |  |
| Chief\tExecutive\tOfficer | Chief\tExecutive\tOfficer | (1) | 2006 | 1,037,540 | -- | 1,472,904 | 87,582 | -- | 677,541 |  | 151,448 | 3,427,015 |
| David\tL.\tBeré, |  |  |  |  |  |  |  |  |  |  |  |  |
| President\tand\tChief | President\tand\tChief |  | 2007 | 717,528 | -- | 974,231 | 1,381,712 | 1,009,400 | -- |  | 187,046(10) | 4,269,917 |
| Operating\tOfficer | (1) |  |  |  |  |  |  |  |  |  |  |  |
| David\tM.\tTehle, |  |  | 2007 | 594,523 | -- | 632,162 | 1,149,922 | 493,213 | -- |  | 130,464(11) | 3,000,284 |
| Executive\tVice\tPresident\t&amp; |  |  |  |  |  |  |  |  |  |  |  |  |
| Chief\tFinancial\tOfficer | Chief\tFinancial\tOfficer |  | 2006 | 580,022 | 188,500 | 235,247 | 194,127 | -- | -- |  | 121,126 | 1,319,022 |
| Beryl\tJ.\tBuley, |  |  | 2007 | 589,398 | -- | 690,116 | 1,065,045 | 488,962 | -- |  | 111,234(12) | 2,944,755 |
| Division\tPresident, | Division\tPresident, |  | 2006 | 575,022 | 186,875 | 183,223 | 180,669 | -- | -- |  | 273,801 | 1,399,590 |
| Merchandising,\tMarketing\t\t&amp; |  |  |  |  |  |  |  |  |  |  |  |  |
| Supply\tChain |  |  |  |  |  |  |  |  |  |  |  |  |
| Kathleen\tR.\tGuion, | Kathleen\tR.\tGuion, |  | 2007 | 512,520 | -- | 521,453 | 917,214 | 425,184 | -- |  | 115,011(13) | 2,491,382 |
| Division\tPresident, | Division\tPresident, |  | 2006 | 500,019 | 162,500 | 206,455 | 154,982 | -- | -- |  | 151,971 | 1,175,927 |
| Store\tOperations\t&amp; |  |  |  |  |  |  |  |  |  |  |  |  |
| Store\tDevelopment |  |  |  |  |  |  |  |  |  |  |  |  |
| Challis\tM.\tLowe, |  |  | 2007 | 420,266 | -- | 512,771 | 768,251 | 348,651 | -- |  | 118,133(14) | 2,168,072 |
| Executive\tVice\tPresident, |  |  |  |  |  |  |  |  |  |  |  |  |
| Human\tResources |  |  | 2006 | 404,182 | 133,250 | 130,813 | 117,933 | -- | -- |  | 174,322 | 960,500 |

(1)		Mr.	Dreiling	was	hired	on	January	21,	2008.	Mr.	Perdue	resigned	effective	July	6,	2007.		Mr.	Beré	was	hired	as	our	President	and	Chief	Operating	Officer	in	December 2006,	was	appointed	interim	Chief	Executive	Officer	upon	Mr.	Perdue's	resignation	on	July	6,	2007,	and	resumed	his	position	as	President	and	Chief	Operating	Officer when	Mr.	Dreiling	was	hired	as	our	Chief	Executive	Officer.

(2)		All	NEOs	(excluding	Mr.	Dreiling)	deferred	a	portion	of	their	fiscal	2007	salaries	under	the	CDP.	The	amounts	of	such	deferrals	are	included	in	the	Nonqualified	Deferred Compensation	Table.	Each	NEO	(excluding	Mr.	Dreiling)	also	contributed	a	portion	of	his	or	her	fiscal	2007	salary	to	our	401(k)	Plan.	All	NEOs	for	which	fiscal	2006 salaries	are	reported	in	this	column	deferred	a	portion	of	their	fiscal	2006	salaries	under	the	CDP	and	contributed	a	portion	of	their	salaries	to	our	401(k)	Plan.

(3)		The	amount	for	Mr.	Dreiling	represents	the	signing	bonus	paid	pursuant	to	his	employment	agreement.		The	2006	amounts	represent	a	one-time	discretionary	bonus	awarded to	these	NEOs	for	fiscal	2006.

(4)		Represents	the	dollar	amount	recognized	during	the	fiscal	year	for	financial	statement	reporting	purposes	in	accordance	with	Statement	of	Financial	Accounting	Standards 123R	("SFAS	123R"),	but	disregarding	the	estimate	of	forfeitures	related	to	service-based	vesting	conditions,	for	outstanding	awards	of	restricted	stock	and	restricted	stock units	("RSUs").		Prior	to	the	Merger,	the	expense	was	recorded	on	a	straight-line	basis	over	the	restriction	period	based	on	the	market	price	of	the	underlying	stock	on	the grant	date.	There	were	no	forfeitures	of	restricted	stock	or	RSUs	held	by	the	NEOs	during	fiscal	2007	or	fiscal	2006.	For	more	information	regarding	the	assumptions	used	in the	valuation	of	these	awards,	see	Note	9	of	the	annual	consolidated	financial	statements	included	in	this	document.	As	a	result	of	the	Merger,	all	restricted	stock	and	RSU awards	outstanding	immediately	before	the	Merger	vested	and,	therefore,	all	remaining	compensation	expense	associated	with	those	awards	was	recognized	in	fiscal	2007	in accordance	with	SFAS	123R.

(5)		Represents	the	dollar	amount	recognized	during	the	fiscal	year	for	financial	statement	reporting	purposes	in	accordance	with	SFAS	123R,	but	disregarding	the	estimate	of forfeitures	related	to	service-based	vesting	conditions,	for	stock	options.	Option	awards	granted	before	February	4,	2006	were	valued	on	the	applicable	grant	date	under	the fair	value	method	of	SFAS	123	and	those	granted	on	or	after	that	date	were	valued	under	the	fair	value	method	of	SFAS	123R	using	the	Black-Scholes	option	pricing	model with	the	following	assumptions:

|  | March	15, | September	1, | January	24, | March	16, | March	23, | July	7, |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2005 | 2005 | 2006 | 2006 | 2007 | 2007 |
| Expected\tdividend\tyield | .85% | .85% | 1.0% | .82% | .91% | 0% |
| Expected\tstock\tprice\tvolatility | 27.4% | 25.9% | 24.7% | 28.7% | 18.5% | 42.3% |
| Risk-free\tinterest\trate | 4.25% | 3.71% | 4.31% | 4.7% | 4.5% | 4.9% |
| Expected\tlife\tof\toptions\t(years) | 5.0 | 5.0 | 4.5 | 5.7 | 5.7 | 7.5 |
| Exercise\tprice | $22.35 | $18.51 | $16.94 | $17.54 | $21.25 | $5.00 |
| Stock\tprice\ton\tdate\tof\tgrant | $22.35 | $18.51 | $16.94 | $17.54 | $21.25 | $5.00 |

	For	more	information	regarding	the	assumptions	used	in	the	valuation	of	these	awards,	see	Note	9	of	the	annual	consolidated	financial	statements	included	in	this document.		As	a	result	of	the	Merger,	all	options	outstanding	immediately	before	the	Merger	vested	and,	therefore,	all	compensation	expense	associated	with	those	awards was	recognized	in	fiscal	2007	in	accordance	with	SFAS	123R.		Mr.	Tehle	and	Ms.	Guion	had	63,000	and	50,300	options,	respectively,	that	were	forfeited	as	a	result	of	the Merger.		There	were	no	forfeitures	of	options	held	by	NEOs	in	fiscal	2006.

(6)		Represents	amounts	earned	pursuant	to	our	Teamshare	bonus	program	for	fiscal	2007.		See	the	discussion	of	the	"Short-Term	Incentive	Plan",	"Compensation	of	Mr. Dreiling"	and	"Compensation	of	Mr.	Perdue"	in	"Compensation	Discussion	and	Analysis"	above.		Messrs.	Beré	and	Buley	and	Ms.	Guion	deferred	5%,	20%	and	5%, respectively	of	their	fiscal	2007	bonus	payments	under	the	CDP	in	fiscal	2008.	No	amounts	were	earned	under	our	Teamshare	bonus	program	for	fiscal	2006	because	we	did not	meet	the	financial	performance	level	required	for	a	payout.

(7)		Represents	the	incremental	cost	of	providing	certain	perquisites,	including	$61,414	for	amounts	associated	with	relocation	and	$727	for	an	automobile	allowance.		The aggregate	incremental	cost	related	to	Mr.	Dreiling's	relocation	amount	was	calculated	as	follows:	$50,000	as	a	miscellaneous	cash	allowance,	$4,000	for	the	cost	to	transport a	personal	vehicle	from	New	Jersey	to	his	home	in	California,	$4,803	for	temporary	living	expenses,	$1,129	for	transportation	costs	incurred	in	connection	with	house	hunting trips	and	$1,482	for	meal	expenses	incurred	in	connection	with	temporary	living.

(8)		The	2007	amount	represents	the	aggregate	change	in	the	actuarial	present	value	of	the	accumulated	benefit	under	Mr.	Perdue's	SERP	from	February	2,	2007	to	February	1, 2008.		Because	Mr.	Perdue	resigned	effective	July	6,	2007,	the	fiscal	2007	year-end	actuarial	present	value	of	the	accumulated	benefit	is	equal	to	the	benefit	paid	to	him	in fiscal	2007.	The	2006	amount	represents	the	aggregate	change	in	the	actuarial	present	value	of	the	accumulated	benefit	under	Mr.	Perdue's	SERP	from	February	4,	2006	to February	2,	2007.

(9)		Includes	$6,798,000	for	severance	paid	in	connection	with	Mr.	Perdue's	resignation	pursuant	to	his	employment	agreement,	$2,681,201	for	the	reimbursement	of	excise	taxes related	to	the	severance	payment,	$78,438	for	unused	vacation	at	the	time	of	Mr.	Perdue's	resignation,	$1,489,398	for	the	reimbursement	of	excise	taxes	related	to	the payment	made	to	Mr.	Perdue	for	his	defined	benefit	SERP,	$71,327	for	the	tax	reimbursement	of	excise	taxes	related	to	the	payment	of	interest	on	Mr.	Perdue's	defined benefit	SERP,	$24,892	for	a	lump	sum	payment	in	lieu	of	COBRA	payments	on	behalf	of	Mr.	Perdue,	$9,818	for	reimbursement	of	taxes	related	to	the	lump	sum	payment	in lieu	of	COBRA	payments,	$19,908	for	the	reimbursement	of	taxes	related	to	the	COBRA	gross	up	payment,	$11,249	for	premiums	paid	under	our	life	and	disability insurance	programs,	$17,753	for	our	match	contributions	to	the	CDP,	$6,667	for	our	match	contributions	to	the	401(k)	Plan,	$6,452	for	tax	reimbursements	related	to	life	and disability	insurance	premiums,	and	$23,426	which	represents	the	incremental	cost	of	providing	certain	perquisites,	including	$11,280	for	personal	use	of	the	company	plane and	other	amounts,	which	individually	did	not	equal	the	greater	of	$25,000	or	10%	of	total	perquisites,	including	an	annual	automobile	allowance,	a	medical	physical examination	and	a	Merger	closing	gift.	We	incurred	no	incremental	cost	in	connection	with	the	occasional	travel	of	Mr.	Perdue's	spouse	on	our	plane	while	accompanying him	on	travel.

(10)		Includes	$7,806	for	premiums	paid	under	our	life	and	disability	insurance	programs,	$53,683	for	our	contributions	to	the	SERP,	$32,872	for	our	match	contributions	to	the CDP,	$2,854	for	our	match	contributions	to	the	401(k)	Plan,	$4,477	for	the	reimbursement	of	taxes	related	to	life	and	disability	insurance	premiums,	$21,336	for	the reimbursement	of	taxes	related	to	relocation,	$4,906	for	reimbursement	of	taxes	related	to	the	personal	use	of	a	company-leased	automobile,	and	$59,112	which	represents	the incremental	cost	of	providing	certain	perquisites,	including	$37,200	for	temporary	living	expenses	(calculated	as	rent	and	utility	payments)	associated	with	relocation,	$18,601 for	personal	use	of	a	company-leased	vehicle,	and	other	amounts	which	individually	did	not	equal	the	greater	of	$25,000	or	10%	of	total	perquisites,	including	a	medical physical	examination,	expenses	related	to	Mr.	Beré's	and	his	spouse's	attendance	at	sporting	events,	and	a	Merger	closing	gift.	We	incurred	no	incremental	cost	in	connection with	the	occasional	travel	of	Mr.	Beré's	family	members	on	our	plane	while	accompanying	him	on	business	travel.

(11)		Includes	$6,412	for	premiums	paid	under	our	life	and	disability	insurance	programs,	$58,618	for	our	contributions	to	the	SERP,	$18,403	for	our	match	contributions	to	the CDP,	$11,198	for	our	match	contributions	to	the	401(k)	Plan,	$3,678	for	tax	reimbursements	related	to	life	and	disability	insurance	premiums,	and	$32,155	which	represents the	incremental	cost	of	providing	certain	perquisites,	including	$21,000	for	an	annual	automobile	allowance	and	other	amounts	which	individually	did	not	equal	the	greater	of $25,000	or	10%	of	total	perquisites,	including	a	directed	donation	to	a	charity,	expenses	incurred	in	connection	with	his	personal	use	of	our	plane,	and	expenses	related	to	Mr. Tehle's	and	his	guests'	attendance	at	sporting	events.

(12)		Includes	$3,294	for	premiums	paid	under	our	life	and	disability	insurance	programs,	$34,868	for	our	contributions	to	the	SERP,	$18,148	for	our	match	contributions	to	the CDP,	$11,174	for	our	match	contributions	to	the	401(k)	Plan,	$1,890	for	the	reimbursement	of	taxes	related	to	life	and	disability	insurance	premiums,	$2,182	for	the reimbursement	of	taxes	related	to	relocation,	and	$39,678	which	represents	the	incremental	cost	of	providing	certain	perquisites,	including		$21,000	for	an	annual	automobile allowance,	$6,069	for	an	expense	related	to	selling	his	prior	home,	$5,000	for	a	directed	charitable	donation	and	other	amounts	which	individually	did	not	equal	the	greater	of $25,000	or	10%	of	total	perquisites,	including	expenses	relating	to	Mr.	Buley's	and	his	guests'	attendance	at	sporting	events,	a	fee	to	attend	a	Young	Presidents'	Organization meeting	and	a	medical	physical	examination.	We	incurred	no	incremental	cost	in	connection	with	the	occasional	travel	of	Mr.	Buley's	spouse	on	our	plane	while accompanying	him	on	business	travel.

(13)		Includes	$9,447	for	premiums	paid	under	our	life	and	disability	insurance	programs,	$50,533	for	our	contributions	to	the	SERP,	$14,314	for	our	match	contributions	to	the CDP,	$10,789	for	our	match	contributions	to	the	401(k)	Plan,	$3,397	for	tax	reimbursements	related	to	life	and	disability	insurance	premiums,	and	$26,531	which	represents the	incremental	cost	of	providing	certain	perquisites,	including	$21,000	for	an	annual	automobile	allowance,	a	$5,000	directed	charitable	donation	and	other	amounts	which individually	did	not	equal	the	greater	of	$25,000	or	10%	of	total	perquisites,	including	expenses	relating	to	Ms.	Guion's	attendance	at	a	sporting	event.

(14)		Includes	$11,754	for	premiums	paid	under	our	life	and	disability	insurance	programs,	$41,437	for	our	contributions	to	the	SERP,	$9,712	for	our	match	contributions	to	the CDP,	$11,213	for	our	match	contributions	to	the	401(k)	Plan,	$4,227	for	the	reimbursement	of	taxes	related	to	life	and	disability	insurance	premiums,	$8,429	for reimbursement	of	taxes	related	to	the	personal	use	of	a	company-leased	automobile,	and	$31,361	which	represents	the	incremental	cost	of	providing	certain	perquisites, including	$22,887	for	personal	use	of	a	company-leased	vehicle,	a	$5,000	directed	charitable	donation,	and	other	amounts	which	individually	did	not	equal	the	greater	of $25,000	or	10%	of	total	perquisites,	including	expenses	relating	to	Ms.	Lowe's	and	her	guests'	attendance	at	sporting	or	other	entertainment	events	and	minimal	hotel incidental	charges	incurred	by	her	spouse	while	accompanying	her	on	business	travel.		We	incurred	no	incremental	cost	in	connection	with	the	occasional	travel	of	Ms. Lowe's	spouse	on	our	plane	while	accompanying	her	on	business	travel.

# Grants	of	Plan-Based	Awards	During	Fiscal	2007

The	table	below	sets	forth	information	regarding	grants	of	plan-based	awards	to	our	NEOs	in	fiscal	2007.		The	grants	include	RSUs	and	options	granted	pursuant	to	our 1998	Stock	Incentive	Plan	in	fiscal	2007	prior	to	the	Merger,	all	of	which	became	fully	vested	and	were:

·		settled	in	cash,	without	interest	and	less	applicable	withholding	taxes,	equal	to	$22	per	share	less,	for	options,	the	exercise	price	(the	"Merger	Consideration");

·		forfeited,	with	respect	to	any	options	having	an	exercise	price	at	or	above	$22/share;	or

·		exchanged	for	Rollover	Options	as	further	described	and	defined	in	the	"Long-Term	Incentives"	portion	of	"Compensation	Discussion	and	Analysis"	above.

The	Rollover	Options	are	set	forth	in	the	table	as	separate	grants.	The	amounts	paid	as	consideration	for	the	Rollover	Options	as	noted	in	the	footnotes	to	the	table	represent the	value	the	NEO	would	have	received	in	the	Merger	had	the	NEO	instead	chosen	to	accept	the	Merger	Consideration.	While	the	exercise	price	and	the	number	of	shares	underlying the	Rollover	Options	have	been	adjusted	as	a	result	of	the	Merger	and	are	fully	vested,	they	are	deemed	to	have	been	granted,	and	otherwise	continue,	under	the	terms	of	our	1998 Stock	Incentive	Plan,	which	is	the	plan	under	which	the	original	options	were	issued.

The	table	also	includes	options	granted	in	2007	on	or	after	the	Merger	under	our	2007	Stock	Incentive	Plan.		We	have	omitted	the	columns	for	threshold	and	maximum estimated	future	payouts	under	equity	incentive	plan	awards	because	they	are	inapplicable.

Each	NEO's	annual	Teamshare	bonus	opportunity	established	for	fiscal	2007	also	is	set	forth	in	the	table	below.		Actual	bonus	amounts	earned	by	each	NEO	for	fiscal	2007 as	a	result	of	our	EBITDA	performance	are	set	forth	in	the	Summary	Compensation	Table	above	and	represent	prorated	payment	on	a	graduated	scale	between	the	target	and maximum	EBITDA	performance	levels	for	each	of	the	NEOs	other	than	Mr.	Beré	whose	payment	was	not	made	on	a	graduated	scale,	but	rather	represented	payment	at	the	target level.		Mr.	Perdue	did	not	receive	a

Teamshare	payout	for	fiscal	2007	due	to	his	resignation	on	July	6,	2007.		See	"Short-Term	Incentives",	"Compensation	of	Mr.	Dreiling"	and	"Compensation	of	Mr.	Perdue"	in "Compensation	Discussion	and	Analysis"	above	for	further	discussion	of	the	fiscal	2007	Teamshare	program.

| Mr.	Dreiling |  |  | 16,438 | 32,877 | 65,753 | -- | -- | -- | -- | -- |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 1/21/08 | 1/11/08 | -- | -- | -- | -- | -- | 1,250,000(5) | 5.00(5) | 3,120,875 |
|  | 1/21/08 | 1/11/08 | -- | -- | -- | 1,250,000 | -- | -- | 5.00(3) | 3,120,875 |
|  | 1/21/08 | 1/11/08 | -- | -- | -- | -- | 890,000 | -- | -- | 4,450,000 |
| Mr.\tPerdue |  |  | 566,500 | 1,133,000 | 2,266,000 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/20/07 | -- | -- | -- | -- | -- | 313,630(6) | 21.25(6) | 1,690,873 |
|  | 3/23/07 | 3/20/07 | -- | -- | -- | -- | 110,693 | -- | -- | 2,325,226 |
| Mr.\tBeré |  |  | 252,350 | 1,009,400 | 2,018,800 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | -- | 126,565(6) | 21.25(6) | 682,350 |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | 44,670 | -- | -- | 949,238 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 1,125,000(5) | 5.00(5) | 3,042,225 |
|  | 7/6/07 |  | -- | -- | -- | 1,125,000 | -- | -- | 5.00(3) | 3,042,225 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 5,809(7) | 1.25(7) | 21,784(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 17,590(7) | 1.25(7) | 65,963(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 25,313(7) | 1.25(7) | 94,924(7) |
| Mr.\tTehle |  |  | 194,155 | 388,310 | 776,620 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | -- | 49,917(6) | 21.25 | 269,118 |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | 17,618 | -- | -- | 374,383 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 550,000(5) | 5.00(5) | 1,487,310 |
|  | 7/6/07 |  | -- | -- | -- | 550,000 | -- | -- | 5.00(3) | 1,487,310 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 54,426(7) | 1.25(7) | 204,098^(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 44,464(7) | 1.25(7) | 166,740(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 83,134(7) | 1.25(7) | 311,753(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 9,983(7) | 1.25(7) | 37,436(7) |
| Mr.\tBuley |  |  | 192,481 | 384,963 | 769,925 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | -- | 39,883(6) | 21.25(6) | 215,021 |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | 14,076 | -- | -- | 299,115 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 437,500(5) | 5.00(5) | 1,183,088 |
|  | 7/6/07 |  | -- | -- | -- | 437,500 | -- | -- | 5.00(3) | 1,183,088 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 134,933(7) | 1.25(7) | 505,999(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 66,364(7) | 1.25(7) | 248,865(7) |
| Ms.\tGuion |  |  | 167,375 | 334,750 | 669,500 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | -- | 39,883(6) | 21.25(6) | 215,021 |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | 14,076 | -- | -- | 299,115 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 437,500(5) | 5.00(5) | 1,183,088 |
|  | 7/6/07 |  | -- | -- | -- | 437,500 | -- | -- | 5.00(3) | 1,183,088 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 22,942(7) | 1.25(7) | 86,033(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 35,504(7) | 1.25(7) | 133,140(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 66,364(7) | 1.25(7) | 248,865(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 7,976(7) | 1.25(7) | 29,910(7) |
| Ms.\tLowe |  |  | 137,248 | 274,495 | 548,990 | -- | -- | -- | -- | -- |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | -- | 35,733(6) | 21.25(6) | 192,647 |
|  | 3/23/07 | 3/19/07 | -- | -- | -- | -- | 12,612 | -- | -- | 268,005 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 337,500(5) | 5.00(5) | 912,668 |
|  | 7/6/07 |  | -- | -- | -- | 337,500 | -- | -- | 5.00(3) | 912,668 |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 39,088(7) | 1.25(7) | 146,580(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 59,466(7) | 1.25(7) | 222,998(7) |
|  | 7/6/07 |  | -- | -- | -- | -- | -- | 7,146(7) | 1.25(7) | 26,798(7) |

(1)		Our	Board	of	Directors	authorized	Mr.	Dreiling's	equity	grants	on	the	same	day	that	it	approved	his	employment	and	related	agreements.		Because	the	2007	Stock	Incentive Plan	does	not	allow	us	to	make	grants	to	non-employees,	the	Board	set	the	grant	date	effective	as	of	Mr.	Dreiling's	hire	date.		Our	Board	of	Directors	authorized	Mr.	Perdue's equity	grants,	and	our	Compensation	Committee	authorized	the	equity	grants	to	Messrs.	Beré,	Tehle	and	Buley	and	Mss.	Guion	and	Lowe,	at	the	meetings	where	other annual	executive	compensation	matters	were	considered,	consistent	with	historical	practice.		Such	grants,	however,	were	conditioned	upon	receipt	of	KKR's	approval	per certain	provisions	in	the	Merger	Agreement.		The	date	of	KKR's	approval	was	considered	the	grant	date	for	those	awards.

(2)		Represents	each	NEO's	fiscal	2007	Teamshare	bonus	opportunity.		Mr.	Dreiling's	payout	levels	are	prorated	for	12	days	of	service	in	fiscal	2007.

(3)		Represents	post-Merger	grants	of	performance-based	options	under	the	2007	Stock	Incentive	Plan.		Because	there	is	no	market	for	our	common	stock,	the	per	share	exercise price	is	the	fair	market	value	of	one	share	of	our	common	stock	on	the	grant	date	as	determined	in	good	faith	by	our	Board	of	Directors.		If	we	achieve	specific	EBITDA targets,	these	options	are	eligible	to	become	exercisable	in	installments	of	20%	on	February	1,	2008,	January	30,	2009,	January	29,	2010,	January	28,	2011,	and	February	3, 2012.		If	an	EBITDA	target	for	a	given	fiscal	year	is	not	met,	these	options	may	still	vest	on	a	"catch	up"	basis	if,	at	the	end	of	fiscal	years	2008,	2009,	2010,	2011,	or	2012, the	applicable	cumulative	EBITDA	target	is	achieved.		In	addition,	these	options	are	subject	to	certain	accelerated	vesting	provisions	as	described	in	"Potential	Payments Upon	Termination	or	Change-in-Control"	below.

(4)		Represents	post-Merger	grants	of	time-vested	restricted	stock	to	Mr.	Dreiling	under	the	2007	Stock	Incentive	Plan	and	pre-Merger	grants	of	time-vested	RSUs	to	all	other NEOs	under	the	1998	Stock	Incentive	Plan.		The	restricted	shares	granted	to	Mr.	Dreiling	are	scheduled	to	vest	upon	the	earliest	to	occur	of:		a	change	in	control	of	the company,	an	initial	public	offering	of	the	company,	Mr.	Dreiling's	termination	without	cause	or	due	to	death	or	disability,	Mr.	Dreiling's	resignation	for	good	reason,	or February	3,	2012.	The	pre-Merger	RSU	grants	vested	in	connection	with	the	Merger.

(5)		Represents	post-Merger	grants	of	time-vested,	non-qualified	stock	options	under	the	2007	Stock	Incentive	Plan.		Because	there	is	no	market	for	our	common	stock,	the	per share	exercise	price	is	the	fair	market	value	of	one	share	of	our	common	stock	on	the	grant	date	as	determined	in	good	faith	by	our	Board	of	Directors.		These	options	are scheduled	to	become	exercisable	ratably	in	installments	of	20%	on	July	6,	2008,	July	6,	2009,	July	6,	2010,	July	6,	2011	and	July	6,	2012.	In	addition,	these	options	are subject	to	certain	accelerated	vesting	provisions	as	described	in	"Potential	Payments	upon	Termination	or	Change-in-Control"	below.

(6)		Represents	pre-Merger	grants	of	time-vested,	non-qualified	stock	options	under	the	1998	Stock	Incentive	Plan	which	became	fully	vested	in	connection	with	the	Merger.		The per	share	exercise	price	equals	the	closing	market	price	of	our	common	stock	on	the	grant	date.

(7)		Represents	Rollover	Options	which	are	governed	by	the	terms	of	the	1998	Stock	Incentive	Plan.		The	per	share	exercise	price	equals	the	exercise	price	of	the	original surrendered	option	(which	was	the	closing	market	price	of	our	common	stock	on	the	grant	date)	as	adjusted	to	reflect	our	capitalization	immediately	following	the	Merger.		As described	in	the	narrative	before	this	Grants	of	Plan-Based	Awards	Table,	the	NEOs	paid	the	following	consideration	for	the	Rollover	Options:	Mr.	Beré,	$182,675;	Mr. Tehle,	$720,034;	Mr.	Buley,	$754,868;	Ms.	Guion,	$497,956;	and	Ms.	Lowe,	$396,380.		Because	we	will	not	recognize	any	compensation	expense	in	connection	with	the Rollover	Options	on	a	going	forward	basis,	we	have	not	determined	the	grant	date	fair	values	of	those	options	in	accordance	with	SFAS	123R,	but	rather	have	disclosed	their intrinsic	values	(equal	to	the	difference	between	the	fair	market	value	of	the	common	stock	and	the	per	share	exercise	price	of	the	Rollover	Options	multiplied	by	the	number of	shares	underlying	such	Rollover	Options)	which	we	believe	would	not	be	materially	different	from	the	SFAS	123R	grant	date	fair	value.

# Outstanding	Equity	Awards	at	2007	Fiscal	Year-End

The	table	below	sets	forth	information	regarding	outstanding	equity	awards	held	by	our	NEOs	as	of	the	end	of	fiscal	2007.

|  | Option	Awards | Option	Awards | Option	Awards | Option	Awards | Option	Awards | Option	Awards | Option	Awards | Option	Awards | Stock	Awards | Stock	Awards | Stock	Awards | Stock	Awards |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | Equity |  |  |  |  |  |  |  |
|  |  |  |  |  | Incentive |  |  |  |  |  |  |  |
|  |  |  |  |  | Plan\tAwards: |  |  |  | Number | Market\tValue | Market\tValue |  |
|  | Number\tof |  | Number\tof |  | Number\tof |  |  |  | of\tShares | of |  |  |
|  | Securities |  | Securities |  | Securities |  |  |  | or\tUnits | Shares\tor | Shares\tor |  |
|  | Underlying |  | Underlying |  | Underlying |  |  |  | of\tStock | Units\tof | Units\tof |  |
|  | Unexercised |  | Unexercised |  | Unexercised |  | Option |  | That | Stock\tThat | Stock\tThat |  |
|  | Options |  | Options |  | Unearned |  | Exercise | Option | \tHave\tNot | Have | Have |  |
|  | (#) |  | (#) |  | Options |  | Price | Expiration | Vested | Not\tVested | Not\tVested |  |
| Name | Exercisable |  | Unexercisable |  | (#) |  | ($) | Date | (#) | ($) | (1) |  |
| Mr.\tDreiling | -- |  | 1,250,000(2) |  | -- |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 250,000(3) | 250,000(3) | -- |  | 1,000,000(4) |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | -- |  | -- |  | -- |  | -- | -- | 890,000(5) | 4,450,000 | 4,450,000 | 4,450,000 |
| Mr.\tPerdue | -- |  | -- |  | -- |  | -- | -- | -- |  |  | -- |
| Mr.\tBeré | 5,809(6) | 5,809(6) | -- |  | -- |  | 1.25 | 8/12/2012 | -- |  |  | -- |
|  | 17,590(7) | 17,590(7) | -- |  | -- |  | 1.25 | 3/13/2013 | -- |  |  | -- |
|  | 25,313(8) | 25,313(8) | -- |  | -- |  | 1.25 | 3/23/2017 | -- |  |  | -- |
|  | -- |  | 1,125,000(2) | 1,125,000(2) |  |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 225,000(3) | 225,000(3) | -- |  | 900,000(4) | 900,000(4) | 5.00 | 7/6/2017 | -- |  |  | -- |
| Mr.\tTehle^(9) | 54,426 | (10) | -- |  | -- |  | 1.25 | 8/9/2014 | -- |  |  | -- |
|  | 44,464 | (11) | -- |  | -- |  | 1.25 | 8/24/2014 | -- |  |  | -- |
|  | 83,134 | (12) | -- |  | -- |  | 1.25 | 3/16/2016 | -- |  |  | -- |
|  | 9,983 | (8) | -- |  | -- |  | 1.25 | 3/23/2017 | -- |  |  | -- |
|  | -- |  | 550,000 | (2) | -- |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 110,000 | (3) | -- | -- | 440,000 | (4) | 5.00 | 7/6/2017 | -- |  |  | -- |
| Mr.\tBuley | 134,933 | (13) | -- |  | -- |  | 1.25 | 1/24/2016 | -- |  |  | -- |
|  | 66,364 | (12) | -- |  | -- |  | 1.25 | 3/16/2016 | -- |  |  | -- |
|  | -- |  | 437,500 | (2) | -- |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 87,500 | (3) | -- |  | 350,000 | (4) | 5.00 | 7/6/2017 | -- |  |  | -- |
| (14)\nMs.\tGuion | 22,942 | (15) | -- |  | -- |  | 1.25 | 12/2/2013 | -- |  |  | -- |
|  | 35,504 | (11) | -- |  | -- |  | 1.25 | 8/24/2014 | -- |  |  | -- |
|  | 66,364 | (12) | -- |  | -- |  | 1.25 | 3/16/2016 | -- |  |  | -- |
|  | 7,976 | (8) | -- |  | -- |  | 1.25 | 3/23/2017 | -- |  |  | -- |
|  | -- |  | 437,500 | (2) | -- |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 87,500 | (3) | -- |  | 350,000 | (4) | 5.00 | 7/6/2017 | -- |  |  | -- |
| Ms.\tLowe | 39,088 | (16) | -- |  | -- |  | 1.25 | 9/1/2015 | -- |  |  | -- |
|  | 59,466 | (11) | -- |  | -- |  | 1.25 | 3/16/2016 | -- |  |  | -- |
|  | 7,146 | (8) | -- |  | -- |  | 1.25 | 3/23/2017 | -- |  |  | -- |
|  | -- |  | 337,500 | (2) | -- |  | 5.00 | 7/6/2017 | -- |  |  | -- |
|  | 67,500 | (3) | -- |  | 270,000 | (4) | 5.00 | 7/6/2017 | -- |  |  | -- |

(1)		Based	on	a	per	share	fair	market	value	of		$5.00.		Our	Board	of	Directors	determined	in	good	faith	that	the	per	share	market	value	of	our	common	stock	on	January	21,	2008 was	$5.00.

(2)		These	options	are	scheduled	to	become	exercisable	ratably	in	installments	of	20%	on	July	6,	2008,	July	6,	2009,	July	6,	2010,	July	6,	2011	and	July	6,	2012.	In	addition, these	options	are	subject	to	certain	accelerated	vesting	provisions	as	described	in	"Potential	Payments	upon	Termination	or	Change-in-Control"	below.

(4)		If	we	achieve	specific	EBITDA	targets,	these	options	are	eligible	to	become	exercisable	in	installments	of	25%	on	January	30,	2009,	January	29,	2010,	January	28,	2011, and	February	3,	2012.		If	an	EBITDA	target	for	a	given	fiscal	year	is	not	met,	these	options	may	still	vest	on	a	"catch	up"	basis	if,	at	the	end	of	fiscal	years	2008,	2009,	2010, 2011,	or	2012,	the	applicable	cumulative	EBITDA	target	is	achieved.		In	addition,	these	options	are	subject	to	certain	accelerated	vesting	provisions	as	described	in "Potential	Payments	upon	Termination	or	Change-in-Control"	below.

(5)		These	restricted	shares	are	scheduled	to	vest	upon	the	earliest	to	occur	of:		a	change	in	control	of	the	company,	an	initial	public	offering	of	the	company,	Mr.	Dreiling's termination	without	cause	or	due	to	death	or	disability,	Mr.	Dreiling's	resignation	for	good	reason,	or	February	3,	2012.

(6)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	on	August	12,	2003.

(7)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	on	March	13,	2004.

(8)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	on	July	6,	2007.

(9)		As	a	result	of	the	Merger	on	July	6,	2007,	Mr.	Tehle	forfeited	63,000	options	having	an	exercise	price	higher	than	the	Merger	Consideration.

(10)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	August	9,	2005	and	75%	on	February	3,	2006.

(11)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	August	24,	2005	and	75%	on	February	3,	2006.

(12)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	March	16,	2007	and	75%	on	July	6,	2007.

(13)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	January	24,	2007	and	75%	on	July	6,	2007.

(14)		As	a	result	of	the	Merger	on	July	6,	2007,	Ms.	Guion	forfeited	50,300	options	having	an	exercise	price	higher	than	the	Merger	Consideration.

(15)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	December	2,	2004	and	December	2,	2005	and	50%	on	February 3,	2006.

(16)		The	options	for	which	these	Rollover	Options	were	exchanged	became	exercisable	in	installments	of	25%	on	September	1,	2006	and	75%	on	July	6,	2007.

# Option	Exercises	and	Stock	Vested	During	Fiscal	2007

The	table	below	provides	information	regarding	the	value	realized	by	our	NEOs	upon	the	transfer	for	value	of	stock	options	and	the	vesting	of	stock	awards	during	fiscal

	(1) Represents	the	transfer	for	value	of	options	held	by	the	NEOs	in	connection	with	the	Merger.		All	of	the	value	realized	by	Messrs.	Beré	and	Tehle	and by	Mss.	Guion	and	Lowe	and	$754,868	of	the	value	realized	by	Mr.	Buley	was	rolled	over	into	Rollover	Options.

# Pension	Benefits

We	provided	retirement	benefits	to	Mr.	Perdue	under	an	unfunded,	non-qualified	defined	benefit	pension	plan,	or	SERP.	As	a	result	of	the	Merger,	which	constituted	a change-in-control	under	the	terms	of	the	SERP	and	the	related	grantor	trust	agreement,	and	Mr.	Perdue's	resignation	effective	July	6,	2007,	Mr.	Perdue	became	100%	vested	in	his SERP	account	and	the	actuarial	equivalent	of	the	lump	sum	value	of	Mr.	Perdue's	accrued	benefit	was	funded	to	the	grantor	trust.		The	material	terms	of	Mr.	Perdue's	SERP	are discussed	following	the	table.

|  |  |  | Present |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Number\tof\tYears | Value\tof | Payments\tDuring | Payments\tDuring |
|  |  | Credited\tService | Accumulated\tBenefit | Last\tFiscal\tYear | Last\tFiscal\tYear |
| Name | Plan\tName | (#) | ($) | ($) | (1) |
| Mr.\tPerdue | Supplemental\tExecutive | N/A | 0 | 6,208,966 | 6,208,966 |

(1) On	January	7,	2008,	distribution	was	made	to	Mr.	Perdue	of	the	entire	benefit	obligation	under	the	terms	of	his	SERP	consisting	of	$6,028,122	of	vested	benefit	and $180,844	in	interest.		The	distribution	to	Mr.	Perdue	was	made	six	months	following	his	termination	date	to	comply	with	Section	409A	of	the	Internal	Revenue	Code	(the "Code").

Mr.	Perdue's	SERP	provided	for	an	annual	normal	retirement	benefit	equal	to	25%	of	"final	average	compensation"	upon	retirement	on	or	after	his	"normal	retirement date",	payable	as	a	joint	and	50%	spouse	annuity	assuming	his	spouse	to	be	the	same	age	as	Mr.	Perdue.	Mr.	Perdue	could	elect	to	receive	his	benefit	as	a	lump	sum	or	any	annuity form	actuarially	equivalent	to	the	normal	retirement	benefit.		The	SERP	also	provided	for	an	early	retirement	benefit	which	would	reduce	his	benefit	by	5%	for	each	year	or	portion thereof	that	Mr.	Perdue	retired	prior	to	age	60.

	For	the	purpose	of	calculating	Mr.	Perdue's	accumulated	benefit,	"normal	retirement	date"	is	the	first	of	the	month	coincident	with	or	next	following	the	later	of	the	date Mr.	Perdue	attains	age	60	or	is	credited	with	15	years	of	credited	service.		Since	Mr.	Perdue	was	not	age	60	on	the	date	of	his	resignation,	his	benefit	under	the	SERP	was	treated	as an	early	retirement	and	his	benefit	was	reduced	accordingly.

Mr.	Perdue's	benefit	was	based	on	a	total	of	14	out	of	a	possible	15	years	of	credited	service	under	the	SERP	plan.		This	included	8	years	of	credited	service	based	on	his actual	service	under	the	plan	in	which	he	received	2	years	of	credited	service	upon	each	anniversary	of	his	date	of	hire	and	an	additional	6	years	of	credited	service	since	his resignation	was	for	good	reason	within	2	years	of	a	change-in-control.

"Final	average	compensation"	is	calculated	as	Mr.	Perdue's	base	salary	plus	his	"applicable	annual	bonus"	for	the	highest	3	consecutive	fiscal	years	of	credited service.		"Applicable	annual	bonus"	is	the	greater	of	the	actual	bonus	paid	for	the	immediately	preceding	fiscal	year	or	the	target	annual	bonus	for	the	current	fiscal year.		Mr.	Perdue's	base	salary	and	"applicable	annual	bonus"	were	assumed	to	have	been	paid	during	the	additional	years	of	credited	service	for	the	purpose	of	calculating	his	"final average	compensation".		For	the	purpose	of	his	benefit	calculation,	Mr.	Perdue's	final	average	compensation	was	$2,266,000.

We	had	established	a	grantor	trust	that	provided	for	assets	to	fund	Mr.	Perdue's	SERP	to	be	placed	in	the	trust	upon	a	change-in-control	(as	defined	in	the	grantor	trust)	of Dollar	General.	The	trust's	assets	were	subject	to	the	claims	of	our	creditors.	The	trust	also	provided	for	a	distribution	to	Mr.	Perdue	to	pay	certain	taxes	in	the	event	he	was	taxed	in connection	with	the	funding	of	the	trust	and	to	apply	interest	at	the	rate	of	6%	per	annum	in	the	event	payment	was	delayed	due	to	Section	409A	of	the	Code.	As	a	result	of	the Merger,	and	since	the	payment	was	determined	to	be	subject	to	Section	409A	delay,	a	deposit	of	$6,208,966	was	made	to	the	trust	representing	the	lump	sum	and	interest	value	of Mr.	Perdue's	benefit.	This	amount	was	paid	to	Mr.	Perdue	on	January	7,	2008.

# Nonqualified	Deferred	Compensation

We	offer	a	CDP/SERP	Plan	to	certain	key	employees,	including	the	NEOs.	Mr.	Perdue	was	not	eligible	to	participate	in	the	SERP	portion	of	the	CDP/SERP	Plan	due	to	his participation	in	his	individualized	SERP	discussed	under	"Pension	Benefits"	above.	Information	regarding	the	NEOs'	participation	in	the	CDP/SERP	Plan	is	included	in	the following	table.	The	material	terms	of	the	CDP/SERP	Plan	are	described	after	the	table.		Please	also	see	"Benefits	and	Perquisites"	in	"Compensation	Discussion	and	Analysis" above.

|  | Executive | Registrant | Aggregate | Aggregate | Aggregate |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Contributions\tin | Contributions | Earnings\tin | Withdrawals/ | Balance\tat |
|  | Last\tFY | in\tLast\tFY | Last\tFY | Distributions | Last\tFYE |
|  | (1) | (2) | (3) |  |  |
| Name | ($) | ($) | ($) | ($) | ($) |
| Mr.\tDreiling | -- | -- | -- | -- | -- |
| Mr.\tPerdue | 24,420 | 17,753 | 13,568 | -- | (4)\n397,753 |
| Mr.\tBeré | 35,876 | 86,555 | \t\t\t\t\t\t\t\t\t(185) | -- | 128,081 |
| Mr.\tTehle | 40,621 | 77,021 | 6,932 | -- | (5)\n332,588 |
| Mr.\tBuley | 39,307 | 53,016 | \t\t\t(646) | -- | (6)\n193,336 |
| Ms.\tGuion | 33,751 | 64,846 | 8,550 | -- | (7)\n296,607 |
| Ms.\tLowe | 21,013 | 51,149 | 3,310 | -- | (8)\n176,064 |

(1) Reported	as	"Salary"	in	the	Summary	Compensation	Table.

(2) Reported	as	"All	Other	Compensation"	in	the	Summary	Compensation	Table.

(3) The	amounts	shown	in	this	column	are	not	reported	in	the	Summary	Compensation	Table	because	they	do	not	represent	above-market	or	preferential	earnings.

(6) Includes	the	following	amounts	reported	in	the	Summary	Compensation	Table	in	the	proxy	statements	for	the	fiscal	years	indicated:	$89,392	in	2006;	and	$4,792 in	2005.

(8) Includes	$91,496	reported	in	the	Summary	Compensation	Table	in	the	proxy	statement	for	fiscal	2006.

Pursuant	to	the	CDP,	NEOs	may	annually	elect	to	defer	up	to	65%	of	base	salary	and	up	to	100%	of	bonus	pay.	We	currently	match	base	pay	deferrals	at	a	rate	of	100%,	up to	5%	of	annual	salary,	with	annual	salary	offset	by	the	amount	of	match-eligible	salary	under	the	401(k)	plan.	All	NEOs	are	100%	vested	in	all	compensation	and	matching deferrals	and	earnings	on	those	deferrals.

Pursuant	to	the	SERP,	we	make	an	annual	contribution	equal	to	a	certain	percentage	of	a	participant's	annual	salary	and	bonus	to	all	participants	who	are	actively	employed in	an	eligible	job	grade	on	January	1	and	continue	to	be	employed	as	of	December	31	of	a	given	year.	The	contribution	percentage	is	based	on	age,	years	of	service	and	job	grade. The	2007	contribution	percentage	for	each	eligible	NEO	was	7.5%	for	Mr.	Beré,	Mr.	Tehle,	Ms.	Guion	and	Ms.	Lowe	and	4.5%	for	Mr.	Buley.

As	a	result	of	the	Merger,	which	constituted	a	change-in-control	under	the	CDP/SERP	Plan,	all	previously	unvested	SERP	amounts	vested	on	July	6,	2007.	For	newly eligible	SERP	participants	after	July	6,	2007,	SERP	amounts	vest	at	the	earlier	of	the	participant's	attainment	of	age	50	or	the	participant's	being	credited	with	10	or	more	"years	of service",	or	upon	termination	of	employment	due	to	death	or	"total	and	permanent	disability"	or	upon	a	"change-in-control",	all	as	defined	in	the	CDP/SERP	Plan.

The	amounts	deferred	or	contributed	to	the	CDP/SERP	Plan	are	credited	to	a	liability	account,	which	is	then	invested	at	the	participant's	option	in	either	an	account	that mirrors	the	performance	of	a	fund	or	funds	selected	by	the	Compensation	Committee	or	its	delegate	(the	"Mutual	Fund	Options")	or,	prior	to	the	Merger,	in	an	account	that	mirrors the	performance	of	our	common	stock	(the	"Common	Stock	Option").

A	participant	who	ceases	employment	with	at	least	10	years	of	service	or	after	reaching	age	50	and	whose	CDP	account	balance	or	SERP	account	balance	exceeds	$25,000 may	elect	for	that	account	balance	to	be	paid	in	cash	by	(a)	lump	sum,	(b)	monthly	installments	over	a	5,	10	or	15-year	period	or	(c)	a	combination	of	lump	sum	and installments.		Otherwise,	payment	is	made	in	a	lump	sum.		The	vested	amount	will	be	payable	at	the	time	designated	by	the	Plan	upon	the	participant's	termination	of	employment.	A participant's	CDP/SERP	benefit	normally	is	payable	in	the	following	February	if	employment	ceases	during	the	first	6	months	of	a	calendar	year	or	is	payable	in	the	following August	if	employment	ceases	during	the	last	6	months	of	a	calendar	year.	However,	participants	may	elect	to	receive	an	in-service	lump	sum	distribution	of	vested	amounts	credited to	the	CDP	account,	provided	that	the	date	of	distribution	is	no	sooner	than	5	years	after	the	end	of	the	year	in	which	the	amounts	were	deferred.	In	addition,	a	participant	who	is actively	employed	may	request	an	"unforeseeable	emergency	hardship"	in-service	lump	sum	distribution	of	vested	amounts	credited	to	the	participant's	CDP	account.		Account balances	deemed	to	be	invested	in	the	Mutual	Fund	Options	are	payable	in	cash	and,	prior	to	the	Merger,	account	balances	deemed	to	be	invested	in	the	Common	Stock	Option	were payable	in	shares	of	Dollar	General	common	stock	and	cash	in	lieu	of	fractional	shares.

As	a	result	of	the	Merger,	the	CDP/SERP	Plan	liabilities	were	fully	funded	into	an	irrevocable	rabbi	trust.	All	account	balances	deemed	to	be	invested	in	the	Common Stock	Option	were	liquidated	at	a	value	of	$22.00	per	share	and	the	proceeds	were	transferred	to	an	existing	investment	option	within	the	Plan.

# Potential	Payments	upon	Termination	or	Change-in-Control

The	tables	below	reflect	potential	payments	to	each	of	our	NEOs	in	various	termination	and	change-in-control	scenarios	based	on	compensation,	benefit,	and	equity	levels in	effect	on	February	1,	2008.	The	amounts	shown	assume	that	the	termination	or	change-in-control	event	was	effective	as	of	February	1,	2008.	For	stock	valuations,	we	have assumed	that	the	price	per	share	is	the	fair	market	value	of	our	stock	on	February	1,	2008	($5.00).	The	amounts	shown	are	merely	estimates.	We	cannot	determine	the	actual	amounts to	be	paid	until	the	time	of	a	change-in-control	or	the	NEO's	termination	of	employment.

Since	Mr.	Perdue	resigned	effective	July	6,	2007,	he	did	not	have	a	right	to	any	payments	as	of	February	1,	2008.		We	agreed	to	treat	this	resignation	as	one	for	"good reason"	after	a	change-in	control	as	defined	in	his	employment	agreement.	Therefore,	the	table	below	presents	Mr.	Perdue's	actual	payments	in	connection	with	his	resignation.		The other	forms	of	termination	do	not	apply	and	are	marked	as	"N/A",	or	not	applicable.

# Payments	Regardless	of	Manner	of	Termination

Regardless	of	the	termination	scenario,	the	NEOs	(other	than	Mr.	Perdue)	will	receive	earned	but	unpaid	base	salary	through	the	employment	termination	date,	along	with any	other	benefits	owed	under	any	of	our	plans	or	agreements	covering	the	NEO	as	governed	by	the	terms	of	those	plans	or	agreements.	These	benefits	include	vested	amounts	in	the CDP/SERP	Plan	discussed	above	after	the	Nonqualified	Deferred	Compensation	Table.

Upon	Mr.	Perdue's	resignation	on	July	6,	2007,	he	received	payment	equal	to	his	earned	but	unpaid	base	salary	through	his	employment	termination	date,	any	accrued expenses	and	vacation	pay.	This	payment	was	made	in	accordance	with	our	normal	payroll	cycle	and	procedures.	He	also	received	timely	payment	or	provision	for	any	other	accrued amounts	or	benefits	required	to	be	paid	for	which	he	was	eligible	under	any	of	our	plans,	practices	or	agreements.	These	benefits	include	amounts	payable	pursuant	to	his	SERP described	above	after	the	Pension	Benefits	Table	and	his	CDP	benefit	discussed	above	in	detail	after	the	Nonqualified	Deferred	Compensation	Table.

The	tables	below	exclude	any	amounts	payable	to	the	NEO	to	the	extent	that	they	are	available	generally	to	all	salaried	employees	and	do	not	discriminate	in	favor	of	our executive	officers.

# Payments	Upon	Termination	Due	to	Retirement

Mr.	Perdue's	resignation	on	July	6,	2007	was	treated	under	the	terms	of	his	SERP	as	a	change-in-control	termination	and	an	early	retirement.		Mr.	Perdue's	SERP	benefit and	the	enhancement	of	that	benefit	as	a	result	of	his	retirement	are	discussed	above	after	the	Pension	Benefits	Table.

Except	for	Mr.	Perdue,	retirement	is	not	treated	differently	from	any	other	voluntary	termination	under	any	of	our	plans	or	agreements	for	NEOs,	except	that	all	Rollover Options	will	remain	exercisable	for	a	period	of	3	years	following	the	NEO's	retirement	unless	the	options	expire	earlier.		To	be	entitled	to	the	extended	exercise	period	for	the Rollover	Options,	the	retirement	must	occur	on	or	after	the	NEO	reaches	the	age	of	65	or,	with	our	express	consent,	prior	to	age	65	in	accordance	with	any	applicable	early retirement	policy	then	in	effect	or	as	may	be	approved	by	our	Compensation	Committee.

# Payments	Upon	Termination	Due	to	Death	or	Disability

In	the	event	of	death	or	disability,	with	respect	to	each	NEO:

·		The	20%	portion	of	the	time-based	options	that	would	have	become	exercisable	on	the	next	anniversary	date	of	the	Merger	if	the	NEO	had	remained	employed	with	us through	that	date	will	become	vested	and	exercisable.

·		The	20%	portion	of	the	performance-based	options	that	would	have	become	exercisable	in	respect	of	the	fiscal	year	in	which	the	NEO's	employment	terminates	if	the NEO	had	remained	employed	with	us	through	that	date,	will	remain	outstanding	through	the	date	we	determine	whether	the	applicable	performance	targets	are	met	for	that fiscal	year.		If	the	performance	targets	are	met	for	that	fiscal	year,	that	20%	portion	of	the	performance-based	options	will	become	exercisable	on	such	performance- vesting	determination	date.	Otherwise,	that	20%	portion	will	be	forfeited.

·		All	unvested	options	will	be	forfeited,	and	vested	options	generally	may	be	exercised	(by	the	employee's	survivor	in	the	case	of	death)	for	a	period	of	1	year	(3	years	in the	case	of	Rollover	Options)	from	the	service	termination	date	unless	we	purchase	such	vested	options	in	total	at	the	fair	market	value	less	the	exercise	price.

In	the	event	of	Mr.	Dreiling's	death	or	disability,	his	restricted	stock	will	vest	and,	in	the	event	of	disability,	he	will	receive	a	prorated	bonus	payment	based	on	our performance	for	the	fiscal	year,	paid	at	the	time	bonuses	are	normally	paid	for	that	fiscal	year.

In	the	event	of	death,	the	NEO's	beneficiary	will	receive	payments	under	our	group	life	insurance	program	in	an	amount,	up	to	a	maximum	of	$3	million,	equal	to	2.5	times the	NEO's	annual	base	salary.	We	have	excluded	from	the	tables	below	amounts	that	the	NEO	would	receive	under	our	disability	insurance	program	since	the	same	benefit	level	is provided	to	all	of	our	salaried	employees.	The	NEO's	CDP/SERP	Plan	benefit	also	becomes	fully	vested	and	is	payable	in	a	lump	sum	within	60	days	after	the	end	of	the	calendar quarter	in	which	the	NEO's	death	occurs.

In	the	event	of	disability,	the	NEO's	CDP/SERP	Plan	benefit	becomes	fully	vested	and	is	payable	in	a	lump	sum	within	60	days	after	the	end	of	the	calendar	quarter	in which	we	receive	notification	of	the	determination	of	the	NEO's	disability	by	the	Social	Security	Administration.

For	purposes	of	the	NEOs'	employment	agreements,	"disability"	means	the	that	employee	must	be	disabled	for	purposes	of	our	long-term	disability	insurance	plan.	For purposes	of	the	CDP/SERP	Plan,	"disability"	means	total	and	permanent	disability	for	purposes	of	entitlement	to	Social	Security	disability	benefits.

# Payments	Upon	Voluntary	Termination

The	payments	to	be	made	to	an	NEO	upon	voluntary	termination	vary	depending	upon	whether	the	NEO	resigns	with	or	without	"good	reason"	or	after	our	failure	to	offer to	renew,	extend	or	replace	the	NEO's	employment	agreement	under	certain	circumstances.	For	purposes	of	each	NEO,	"good	reason"	generally	means	(as	more	fully	described	in the	applicable	employment	agreement):

·		a	reduction	in	base	salary	or	target	bonus	level;

·		our	material	breach	of	the	employment	agreement;

·		the	failure	of	any	successor	to	all	or	substantially	all	of	our	business	and/or	assets	to	assume	and	agree	to	perform	the	employment	agreement;

·		our	failure	to	continue	any	significant	compensation	plan	or	benefit	without	replacing	it	with	a	similar	plan	or	a	compensation	equivalent	(except	for	across-the-board changes	or	terminations	similarly	affecting	at	least	95%	of	all	of	our	executives);

·		relocation	of	our	principal	executive	offices	outside	of	the	middle-Tennessee	area	or	basing	the	officer	anywhere	other	than	our	principal	executive	offices;	or

·		assignment	of	duties	inconsistent,	or	the	significant	reduction	of	the	title,	powers	and	functions	associated,	with	the	NEO's	position	unless	it	results	from	our	restructuring or	realignment	of	duties	and	responsibilities	for	business	reasons	that	leaves	the	NEO	at	the	same	compensation	and	officer	level	and	with	similar	responsibility	levels	or results	from	the	NEO's	failure	to	meet	performance	criteria,	all	without	the	NEO's	written	consent.

No	event	will	constitute	"good	reason"	if	we	cure	the	claimed	event	within	30	days	after	receiving	notice	from	the	NEO.

Voluntary	Termination	with	Good	Reason	or	After	Failure	to	Renew	the	Employment	Agreement.				If	the	NEO	(1)	resigns	with	good	reason,	or	(2)	in	the	case	of	NEOs other	than	Mr.	Dreiling,	within	60	days	of	our	failure	to	offer	to	renew,	extend	or	replace	the	NEO's	employment	agreement	before,	at	or	within	60	days	after	the	end	of	the agreement's	term	(unless	we	enter	into	a	mutually	acceptable	severance	arrangement	or	the	resignation	is	a	result	of	the	NEO's	voluntary	retirement	or	termination),	or	(3)	in	the	case of	Mr.	Dreiling,	in	the	event	we	elect	not	to	extend	the	term	of	his	employment	by	providing	60	days	prior	written	notice	before	the	applicable	extension	date:

·		With	respect	to	each	NEO,	all	unvested	option	grants	will	be	forfeited.		Unless	we	purchase	the	vested	options	in	total	at	a	per	share	price	equal	to	the	fair	market	value	less the	exercise	price	or	they	expire	earlier,	the	NEO	generally	may	exercise	vested	options	for	a	period	of	180	days	(90	days	in	the	case	of	Rollover	Options)	from	the termination	date.	This	extended	exercisability	period	and	purchase	provision	for	options	that	are	not	Rollover	Options	applies	only	if	the	NEO	resigns	with	good	reason	or is	terminated	without	cause	(as	discussed	below);	otherwise,	the	NEO	will	forfeit	those	options.

·		Mr.	Dreiling's	restricted	stock	will	vest	if	he	resigns	with	good	reason	or	is	terminated	without	cause	(as	discussed	below)	or	upon	a	change-in-control	(as	discussed below);	otherwise,	he	will	forfeit	the	restricted	stock.

·		The	NEO	will	receive,	subject	to	any	6-month	delay	in	payment	required	for	tax	law	compliance,	the	following	upon	the	execution	of	a	release	of	certain	claims	against	us and	our	affiliates	in	the	form	attached	to	the	NEO's	employment	agreement:

√		Continuation	of	base	salary	for	24	months	payable	in	accordance	with	our	normal	payroll	cycle	and	procedures.

√		A	lump	sum	payment	equal	to	2	times	the	NEO's	target	incentive	bonus	(in	the	case	of	Mr.	Dreiling,	target	incentive	bonus	payable	over	24	months)	and	2	times our	annual	contribution	for	the	NEO's	participation	in	our	medical,	dental	and	vision	benefits	program	(in	the	case	of	Mr.	Dreiling,	the	medical,	dental	and	vision benefit	instead	will	be	in	the	form	of	a	continuation	of	these	benefits).

√		Mr.	Dreiling	will	receive	a	prorated	bonus	payment	based	on	our	performance	for	the	fiscal	year,	paid	at	the	time	bonuses	are	normally	paid	for	that	fiscal	year. √		If	Mr.	Beré's	termination	occurred	prior	to	the	payment	of	our	fiscal	2007	bonus,	he	would	receive	a	lump	sum	payment	of	his	fiscal	2007	bonus,	determined	as if	he	had	remained	employed	through	the	date	necessary	to	receive	the	payment	of	the	fiscal	2007	bonus.

√		Outplacement	services,	at	our	expense,	for	1	year	or,	if	earlier,	until	other	employment	is	secured.

Subject	to	any	applicable	prohibition	on	acceleration	of	payment	under	Section	409A	of	the	Internal	Revenue	Code,	we	may,	at	any	time	and	in	our	sole	discretion,	elect	to make	a	lump-sum	payment	of	all	these	amounts	(other	than	Mr.	Dreiling's	medical,	dental	and	vision	benefit	continuation),	or	all	remaining	amounts,	due	as	a	result	of	this	type	of termination.

The	NEO	will	forfeit	any	unpaid	severance	amounts	upon	a	material	breach	of	any	continuing	obligation	under	the	employment	agreement	or	the	release,	which	include:

·		The	NEO	must	maintain	the	confidentiality	of,	and	refrain	from	disclosing	or	using,	our	(a)	trade	secrets	for	any	period	of	time	as	the	information	remains	a	trade	secret under	applicable	law	and	(b)	confidential	information	for	a	period	of	2	years	following	the	employment	termination	date.

·		For	2	years	after	the	employment	termination	date,	the	NEO	may	not	accept	or	work	in	a	"competitive	position"	within	any	state	in	which	we	maintain	stores	at	the	time	of his	termination	date	or	any	state	in	which	we	have	specific	plans	to	open	stores	within	6	months	of	that	date.		For	this	purpose,	"competitive	position"	means	any employment,	consulting,	advisory,	directorship,	agency,	promotional	or	independent	contractor	arrangement	between	the	NEO	and	any	person	engaged	wholly	or	in material	part	in	the	business	in	which	we	are	engaged,	including	but	not	limited	to	Wal-Mart,	K-Mart,	Walgreen's,	Family	Dollar	Stores,	Fred's,	the	99	Cents	Stores	and Dollar	Tree	Stores	(and,	with	respect	to	Mr.	Dreiling,	Costco,	BJ's	Wholesale	Club,	Casey's	General	Stores,	and	The	Pantry,	Inc.),	or	any	person	then	planning	to	enter 143

	the	deep	discount	consumable	basics	retail	business,	if	the	NEO	is	required	to	perform	services	for	that	person	which	are	substantially	similar	to	those	he	or	she	provided or	directed	at	any	time	while	employed	by	us.

·		For	2	years	after	the	employment	termination	date,	the	NEO	may	not	actively	recruit	or	induce	any	of	our	exempt	employees	to	cease	employment	with	us.

·		For	2	years	after	the	employment	termination	date,	the	NEO	may	not	solicit	or	communicate	with	any	person	who	has	a	business	relationship	with	us	and	with	whom	the NEO	had	contact	while	employed	by	us,	if	that	contact	would	likely	interfere	with	our	business	relationships	or	result	in	an	unfair	competitive	advantage	over	us.

·		The	NEO	may	not	engage	in	any	communications	to	persons	outside	Dollar	General	which	disparages	Dollar	General	or	interferes	with	our	existing	or	prospective	business relationships.

Voluntary	Termination	without	Good	Reason.				If	the	NEO	resigns	without	good	reason,	he	or	she	will	forfeit	all	unvested	equity	grants	and	all	vested	options	granted	in connection	with	the	Merger.		Rollover	Options	generally	may	be	exercised	for	3	months	from	the	termination	date	unless	they	expire	earlier	or	unless	we	repurchase	them	at	a	per share	price	equal	to	the	lesser	of	(x)	fair	market	value	minus	the	exercise	price	and	(y)	the	sum	of	base	price	and	applicable	percentage	minus	the	exercise	price.

# Payments	Upon	Involuntary	Termination

The	payments	to	be	made	to	an	NEO	upon	involuntary	termination	vary	depending	upon	whether	termination	is	for	or	without	"cause".	For	purposes	of	each	NEO,	"cause" generally	means	(as	more	fully	described	in	the	applicable	employment	agreement):

·		Attendance	at	work	in	a	state	of	intoxication	or	in	possession	of	any	prohibited	drug	or	substance	which	would	amount	to	a	criminal	offense;

·		Assault	or	other	act	of	violence;

·		Any	act	involving	fraud	or	dishonesty;

·		Any	material	breach	of	any	SEC	or	other	law	or	regulation	or	any	Dollar	General	policy	governing	securities	trading	or	inappropriate	disclosure	or	"tipping";

·		Any	activity	or	public	statement,	other	than	as	required	by	law,	that	prejudices	Dollar	General	or	reduces	our	good	name	and	standing	or	would	bring	Dollar	General	into public	contempt	or	ridicule;	or

·		Conviction	of,	or	plea	of	guilty	or	nolo	contendre	to,	any	felony	whatsoever	or	any	misdemeanor	that	would	preclude	employment	under	our	hiring	policy

For	purposes	of	determining	treatment	of	an	NEO's	Rollover	Options,	"cause"	means,	to	the	extent	that	our	Compensation	Committee	determines	that	it	is	directly	and materially	harmful	to	our	business	or	reputation:

·		A	felony	conviction	or	the	failure	to	contest	prosecution	of	a	felony;	or

·		Willful	misconduct	or	dishonesty.

Involuntary	Termination	for	Cause.				If	the	NEO	is	involuntarily	terminated	for	cause,	he	or	she	will	forfeit	all	unvested	equity	grants,	as	well	as	all	vested	but	unexercised options.	However,	we	may	repurchase	all	Rollover	Options	at	a	per	share	price	equal	to	the	lesser	of	(x)	base	price	over	the	exercise	price	and	(y)	fair	market	value	over	the	exercise price.

Involuntary	Termination	without	Cause.				If	the	NEO	is	involuntarily	terminated	without	cause,	the	NEO's	equity	grants	will	be	treated	as	described	under	"Voluntary Termination	with	Good	Reason	or	After	Failure	to	Renew	the	Employment	Agreement"	above.	In	addition,	each	NEO	will	receive	the	applicable	payments	and	benefits	listed	under "Voluntary	Termination	with	Good	Reason	or	After	Failure	to	Renew	the	Employment	Agreement"	above.

# Payments	After	a	Change-in-Control

Upon	a	change-in-control,	regardless	of	whether	the	NEO's	employment	terminates:

·		All	unvested	time-based	options	will	become	fully	vested	and	exercisable,	and	all	unvested	performance-based	options	will	become	fully	vested	and	exercisable	subject	to KKR's	achievement	of	certain	return-based	performance	targets.

·		All	CDP/SERP	Plan	benefits	will	become	fully	vested.

If	the	NEO,	other	than	Messrs.	Perdue,	Dreiling	or	Beré,	is	involuntarily	terminated	without	cause	or	resigns	for	good	reason	within	2	years	of	a	change-in-control,	he	or she	will	receive,	upon	execution	of	a	release	of	certain	claims	against	us	and	our	affiliates	in	the	form	attached	to	the	NEO's	employment	agreement,	a	lump	sum	payment	equal	to	2 times	the	NEO's	annual	base	salary	plus	2	times	the	NEO's	target	incentive	bonus,	each	as	in	effect	immediately	prior	to	the	change-in-control,	plus	2	times	our	annual	contribution for	the	NEO's	participation	in	our	medical,	dental	and	vision	benefits	program.	The	NEO	also	will	receive	outplacement	services,	at	our	expense,	for	1	year	or,	if	earlier,	until	other employment	is	secured.

For	Messrs.	Dreiling	and	Beré,	an	involuntary	termination	following	a	change-in-control	event	will	be	treated	in	the	same	manner	as	a	"Voluntary	Termination	with	Good Reason	or	After	Failure	to	Renew	the	Employment	Agreement"	as	described	above.

If	any	payments	or	benefits	in	connection	with	a	change-in-control	would	be	subject	to	the	excise	tax	under	federal	income	tax	rules,	we	will	pay	an	additional	amount	to the	NEO	to	cover	the	excise	tax	and	any	resulting	taxes.	However,	if	after	receiving	this	payment	the	NEO's

after-tax	benefit	is	not	at	least	$25,000	more	than	it	would	be	without	this	payment,	then	it	will	not	be	made	and	the	severance	and	other	benefits	due	will	be	reduced	so	that	an excise	tax	is	not	incurred.

For	purposes	of	the	CDP/SERP	Plan	and	the	employment	agreements	of	Mr.	Tehle,	Mr.	Buley,	Ms.	Guion	and	Ms.	Lowe,	a	change-in-control	generally	is	deemed	to	occur (as	more	fully	described	in	those	documents):

·		if	any	person	(other	than	Dollar	General	or	any	of	our	employee	benefit	plans)	acquires	35%	or	more	of	our	voting	securities	(other	than	as	a	result	of	our	issuance	of securities	in	the	ordinary	course	of	business);

·		for	purposes	of	our	CDP/SERP	Plan,	if	a	majority	of	our	Board	members	at	the	beginning	of	any	consecutive	2-year	period	are	replaced	within	that	period	without	the approval	of	at	least	2/3	of	our	Board	members	who	served	as	directors	at	the	beginning	of	the	period;

·		for	purposes	of	the	specified	employment	agreements,	if	a	majority	of	our	Board	members	as	of	the	effective	date	of	the	applicable	NEO's	employment	agreement	are replaced	without	the	approval	of	at	least	75%	of	our	Board	members	who	served	as	directors	on	that	effective	date	or	are	replaced,	even	with	this	75%	approval,	by persons	who	initially	assumed	office	as	a	result	of	an	actual	or	threatened	election	contest	or	other	actual	or	threatened	proxy	solicitation	other	than	by	our	Board;	or

·		upon	the	consummation	of	a	merger,	other	business	combination	or	sale	of	assets	of,	or	cash	tender	or	exchange	offer	or	contested	election	with	respect	to,	Dollar	General if	less	than	65%	(less	than	a	majority,	for	purposes	of	our	CDP/SERP	Plan)	of	our	voting	securities	are	held	after	the	transaction	in	the	aggregate	by	holders	of	our securities	immediately	prior	to	the	transaction.

For	purposes	of	the	treatment	of	equity	discussed	above,	a	change-in-control	generally	means	(as	more	fully	described	in	the	Management	Stockholder's	Agreement between	us	and	the	NEOs),	in	one	or	a	series	of	related	transactions:

·		the	sale	of	all	or	substantially	all	of	the	assets	of	Buck	Holdings,	L.P.	or	us		and	our	subsidiaries	to	any	person	(or	group	of	persons	acting	in	concert),	other	than	to	(x) investment	funds	affiliated	with	KKR	or	its	affiliates	or	(y)	any	employee	benefit	plan	(or	trust	forming	a	part	thereof)	maintained	by	us,	KKR	or	our	respective	affiliates or	other	person	of	which	a	majority	of	its	voting	power	or	other	equity	securities	is	owned,	directly	or	indirectly,	by	us,	KKR	or	our	respective	affiliates;	or

·		a	merger,	recapitalization	or	other	sale	by	us,	KKR	(indirectly)	or	any	of	our	respective	affiliates,	to	a	person	(or	group	of	persons	acting	in	concert)	of	our	common	stock or	our	other	voting	securities	that	results	in	more	than	50%	of	our	common	stock	or	our	other	voting	securities	(or	any	resulting	company	after	a	merger)	being	held, directly	or	indirectly,	by	a	person	(or	group	of	persons	acting	in

	concert)	that	is	not	controlled	by	(x)	KKR	or	its	affiliates	or	(y)	an	employee	benefit	plan	(or	trust	forming	a	part	thereof)	maintained	us,	KKR	or	our	respective	affiliates or	other	person	of	which	a	majority	of	its	voting	power	or	other	equity	securities	is	owned,	directly	or	indirectly,	by	us,	KKR	or	our	respective	affiliates;	in	any	event, which	results	in	us,	KKR	and	its	affiliates	or	such	employee	benefit	plan	ceasing	to	hold	the	ability	to	elect	(or	cause	to	be	elected)	a	majority	of	the	members	of	our	board of	directors.

Because	Mr.	Perdue's	resignation	occurred	within	2	years	of	the	Merger	(which	constituted	a	change-in-control	under	his	employment	agreement	and	the	plan	under	which his	equity	awards	were	granted),	he	received	the	following	benefits	under	his	employment	agreement	and	other	plans	in	which	he	participated:

·		A	lump	sum	payment	equal	to	3	times	the	sum	of	his	annual	base	salary	in	effect	on	his	employment	termination	date	and	his	target	annual	incentive	bonus	for	fiscal	2007 and	reimbursement	of	excise	taxes	related	to	this	payment.

·		A	lump	sum	payment	equal	to	36	months	of	the	cost	of	COBRA	benefits	which	was	grossed-up	to	the	extent	taxable	to	him.

·		A	lump	sum	payment	for	unused	vacation	in	fiscal	2007.

·		We	credited	Mr.	Perdue	with	6	additional	years	of	credited	service	under	his	SERP.		In	determining	his	base	salary	and	bonus	for	these	additional	years	for	purposes	of calculating	his	final	average	compensation,	we	used	his	base	salary	on	his	termination	date	and	his	target	annual	bonus	for	fiscal	2007.		We	also	credited	interest	to	his SERP	benefit	for	the	period	of	time	payment	was	delayed	to	him	due	to	Section	409A	of	the	Code.		We	reimbursed	Mr.	Perdue	for	excise	taxes	related	to	the	SERP payments.

·		All	unvested	equity	grants	automatically	vested	without	regard	to	Mr.	Perdue's	employment	termination,	and	all	CDP/SERP	Plan	benefits	became	fully	vested.

Mr.	Perdue	is	subject	to	the	following	business	protection	provisions:

·		He	must	maintain	the	confidentiality	of	our	(a)	trade	secrets	as	long	as	the	information	remains	a	trade	secret	and	(b)	confidential	information	for	2	years	after	his	service termination	date.

·		For	2	years	after	his	service	termination	date,	Mr.	Perdue	may	not	actively	recruit	or	induce	certain	of	our	employees	to	cease	employment	with	us	or	engage	that	person's services	in	any	business	substantially	similar	to	or	competitive	with	that	in	which	we	were	engaged	during	Mr.	Perdue's	employment.

·		For	2	years	after	his	service	termination	date,	Mr.	Perdue	may	not	accept	or	work	in	a	"competitive	position"	within	any	state	in	which	we	maintain	stores	at	the	time	of	his

	termination	date	or	any	state	in	which	we	have	specific	plans	to	open	stores	within	6	months	of	that	date.	For	this	purpose,	"competitive	position"	means	any	employment, consulting,	advisory,	directorship,	agency,	promotional	or	independent	contractor	arrangement	between	Mr.	Perdue	and	any	person	engaged	wholly	or	in	material	part	in the	business	in	which	we	are	engaged,	including	but	not	limited	to	Wal-Mart,	Target,	K-Mart,	Walgreen's,	Rite-Aid,	CVS,	Family	Dollar	Stores,	Fred's,	the	99	Cents Stores	and	Dollar	Tree	Stores,	or	any	person	then	planning	to	enter	the	deep	discount	consumable	basics	retail	business,	if	Mr.	Perdue	is	required	to	perform	services	for that	person	which	are	substantially	similar	to	those	he	provided	or	directed	at	any	time	while	employed	by	us.

·		Mr.	Perdue	may	not	engage	in	any	communications	which	disparage	Dollar	General	or	interfere	with	our	existing	or	prospective	business	relationships.

# Potential	Payments	to	Named	Executive	Officers	Upon	Occurrence	of	Various	Termination	Events

|  |  | Involuntary |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Voluntary | Without\tCause |  |  |  |  |  |
|  | Without | or\tVoluntary |  |  |  |  |  |
|  | Good | With\tGood | Involuntary |  |  |  | Change-in- |
|  |  |  |  |  |  |  | (1) |
| Name | Reason | Reason | With\tCause | Death | Disability | Retirement | Control |
| Richard\tW.\tDreiling |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | $0 | $4,450,000 | $0 | $4,450,000 | $4,450,000 | $0 | $4,450,000 |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Cash\tSeverance | $0 | $4,041,760 | $0 | $0 | $41,760 | $0 | $4,041,760 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $10,305 | $0 | $0 | $0 | $0 | $10,305 |
| Health\t&amp;\tWelfare\tContinuation\tGross-Up |  |  |  |  |  |  |  |
| Payment\tTo\tIRS | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Payment\tto\tIRS | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $2,500,000 | N/A | N/A | N/A |
| Total | $0 | $8,517,065 | $0 | $6,950,000 | $4,541,760 | $0 | $8,567,065 |
|  |  |  |  |  |  |  | As\tof\tJuly\t6, |
| David\tA.\tPerdue |  |  |  |  |  |  | 2007 |
| Vested\tOptions\tPrior\tTo\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $9,320,000 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | N/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $235,223 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $11,669,109 |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $0 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $6,208,966 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $415,519 |
| Cash\tSeverance | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $6,798,000 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $24,892 |
| Health\t&amp;\tWelfare\tContinuation\tGross-Up |  |  |  |  |  |  |  |
| Payment\tTo\tIRS | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $14,277 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Payment\tto\tIRS | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $5,279,760 |
| Life\tInsurance\tProceeds | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | N/A |
| Total | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | \tN/A | $39,965,747 |

|  |  | Involuntary |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Voluntary | Without\tCause |  |  |  |  |  |
|  | Without | or\tVoluntary |  |  |  |  |  |
|  | Good | With\tGood | Involuntary |  |  |  | Change-in- |
|  |  |  |  |  |  |  | (1) |
| Name | Reason | Reason | With\tCause | Death | Disability | Retirement | Control |
| David\tL.\tBeré |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $182,671 | $182,671 | $182,671 | $182,671 | $182,671 | $182,671 | $182,671 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $54,280 | $54,280 | $54,280 | $54,280 | $54,280 | $54,280 | $54,280 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $73,801 | $73,801 | $73,801 | $73,801 | $73,801 | $73,801 | $73,801 |
| Cash\tSeverance | $0 | $2,451,400 | $0 | $0 | $0 | $0 | $2,451,400 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $16,518 | $0 | $0 | $0 | $0 | $16,518 |
| Outplacement | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Due\tto\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $1,802,500 | N/A | N/A | N/A |
| Total | $310,752 | $2,793,670 | $310,752 | $2,113,252 | $310,752 | $310,752 | $2,793,670 |
| David\tM.\tTehle |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $720,027 | $720,027 | $720,027 | $720,027 | $720,027 | $720,027 | $720,027 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $159,579 | $159,579 | $159,579 | $159,579 | $159,579 | $159,579 | $159,579 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $173,009 | $173,009 | $173,009 | $173,009 | $173,009 | $173,009 | $173,009 |
| Cash\tSeverance | $0 | $1,971,420 | $0 | $0 | $0 | $0 | $1,971,420 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $16,518 | $0 | $0 | $0 | $0 | $16,518 |
| Outplacement | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Due\tto\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $1,492,500 | N/A | N/A | N/A |
| Total | $1,052,615 | $3,055,553 | $1,052,615 | $2,545,115 | $1,052,615 | $1,052,615 | $3,055,533 |

|  |  | Involuntary |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Voluntary | Without\tCause |  |  |  |  |  |
|  | Without | or\tVoluntary |  |  |  |  |  |
|  | Good | With\tGood | Involuntary |  |  |  | Change-in- |
|  |  |  |  |  |  |  | (1) |
| Name | Reason | Reason | With\tCause | Death | Disability | Retirement | Control |
| Beryl\tJ.\tBuley |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $754,864 | $754,864 | $754,864 | $754,864 | $754,864 | $754,864 | $754,864 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $71,024 | $71,024 | $71,024 | $71,024 | $71,024 | $71,024 | $71,024 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $34,285 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $122,312 | $122,312 | $122,312 | $122,312 | $122,312 | $122,312 | $122,312 |
| Cash\tSeverance | $0 | $1,954,425 | $0 | $0 | $0 | $0 | $1,954,425 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $16,518 | $0 | $0 | $0 | $0 | $16,518 |
| Outplacement | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Due\tto\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $1,480,625 | N/A | N/A | N/A |
| Total | $948,200 | $2,934,143 | $948,200 | $2,428,825 | $948,200 | $948,200 | $2,968,428 |
| Kathleen\tR.\tGuion |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $497,948 | $497,948 | $497,948 | $497,948 | $497,948 | $497,948 | $497,948 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $132,742 | $132,742 | $132,742 | $132,742 | $132,742 | $132,742 | $132,742 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $163,865 | $163,865 | $163,865 | $163,865 | $163,865 | $163,865 | $163,865 |
| Cash\tSeverance | $0 | $1,699,500 | $0 | $0 | $0 | $0 | $1,699,500 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $10,305 | $0 | $0 | $0 | $0 | $10,305 |
| Outplacement | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Due\tto\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $1,287,500 | N/A | N/A | N/A |
| Total | $794,555 | $2,776,276 | $794,555 | $2,338,971 | $794,555 | $794,555 | $2,776,276 |

|  |  | Involuntary |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Voluntary | Without\tCause |  |  |  |  |  |
|  | Without | or\tVoluntary |  |  |  |  |  |
|  | Good | With\tGood | Involuntary |  |  |  | Change-in- |
|  |  |  |  |  |  |  | (1) |
| Name | Reason | Reason | With\tCause | Death | Disability | Retirement | Control |
| Challis\tM.\tLowe |  |  |  |  |  |  |  |
| Vested\tOptions\tPrior\tTo\tEvent | $396,376 | $396,376 | $396,376 | $396,376 | $396,376 | $396,376 | $396,376 |
| Vesting\tof\tOptions\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Vesting\tof\tRestricted\tStock\t&amp;\tRSUs\tDue |  |  |  |  |  |  |  |
| to\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SERP\tBenefits\tPrior\tto\tthe\tEvent | $82,663 | $82,663 | $82,663 | $82,663 | $82,663 | $82,663 | $82,663 |
| SERP\tBenefits\tDue\tto\tthe\tEvent | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Deferred\tComp\tPlan\tBalance\tPrior\tto\tand |  |  |  |  |  |  |  |
| After\tthe\tEvent | $93,401 | $93,401 | $93,401 | $93,401 | $93,401 | $93,401 | $93,401 |
| Cash\tSeverance | $0 | $1,393,590 | $0 | $0 | $0 | $0 | $1,393,590 |
| Health\t&amp;\tWelfare\tContinuation\tPayment | $0 | $10,305 | $0 | $0 | $0 | $0 | $10,305 |
| Outplacement | $0 | $15,000 | $0 | $0 | $0 | $0 | $15,000 |
| Section\t280(G)\tExcise\tTax\t&amp;\tGross-Up |  |  |  |  |  |  |  |
| Due\tto\tthe\tEvent | N/A | N/A | N/A | N/A | N/A | N/A | $0 |
| Life\tInsurance\tProceeds | N/A | N/A | N/A | $1,055,750 | N/A | N/A | N/A |
| Total | $572,440 | $1,991,335 | $572,440 | $1,628,190 | $572,440 | $572,440 | $1,991,335 |

(1) All	payments	in	this	column	require	termination	to	be	paid	except	options	(prior	to	and	due	to	the	event)	and	restricted	stock	and	RSUs.

# Compensation	Committee	Interlocks	and	Insider	Participation

Each	of	Dennis	Bottorff,	Reginald	Dickson	and	Gordon	Gee	was	a	member	of	our	Compensation	Committee	during	fiscal	2007	prior	to	the	Merger.	We	did	not	have	a Compensation	Committee	or	another	Board	committee	that	performed	equivalent	functions	for	the	remaining	portion	of	fiscal	2007.	None	of	these	persons	was	at	any	time	during fiscal	2007	an	officer	or	employee	of	Dollar	General	or	any	of	our	subsidiaries,	or	an	officer	of	Dollar	General	or	any	of	our	subsidiaries	at	any	time	prior	to	fiscal	2007.		None	of these	persons	had	any	relationship	with	Dollar	General	or	any	of	our	subsidiaries	requiring	disclosure	under	any	paragraph	of	Item	404	of	Regulation	S-K	during	the	period	that these	persons	served	on	the	Committee.	As	a	Board	member,	David	L.	Beré	was	entitled	to	participate	in	Board	deliberations	regarding	executive	compensation	(other	than	his	own) that	occurred	during	the	portion	of	fiscal	2007	after	the	Merger.		None	of	our	executive	officers	served	as	a	member	of	a	compensation	committee	or	as	a	director	of	any	entity	of which	any	of	our	directors	served	as	an	executive	officer	during	fiscal	2007.

(b)											Director	Compensation.	The	following	tables	and	text	discuss	the	compensation	of	persons	who	served	as	a	member	of	our	Board	of	Directors	during	all	or	part of	fiscal	2007	other	than	Richard	W.	Dreiling,	David	L.	Beré,	and	David	A.	Perdue,	each	of	whose	compensation	is	discussed	under	"Executive	Compensation"	above	and	who	was not	separately	compensated	for	Board	service. 152

# Fiscal	2007	Director	Compensation

|  | Fees |  |  |  | Pension	Value |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Earned |  |  |  | and\tNonqualified |  |  |
|  | or |  |  | Non-Equity | Deferred |  |  |
|  | Paid\tin |  | Option | Incentive\tPlan | Compensation | All\tOther |  |
|  | Cash | Stock\tAwards | Awards | Compensation | Earnings | Compensation | Total |
| (1) | (2) | (3)(4)(5) | (5)(6) |  |  | (7) |  |
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
| Raj\tAgrawal | 23,333 | - | - | - | - | \t\t\t\t\t- | 23,333 |
| Michael\tM.\tCalbert | 23,333 | - | - | - | - | \t\t\t\t\t- | 23,333 |
| Adrian\tJones | 23,333 | - | - | - | - | \t\t\t\t\t- | 23,333 |
| Dean\tB.\tNelson | 23,333 | - | - | - | - | \t\t\t\t\t- | 23,333 |
| Sumit\tRajpal | - | - | - | - | - | \t\t\t\t\t- | - |
| Dennis\tC.\tBottorff | 38,625 | 124,353 | - | - | - | \t\t\t\t\t- | 162,978 |
| Barbara\tL.\tBowles | 33,625 | 124,353 | - | - | - | \t\t\t\t\t- | 157,978 |
| Reginald\tD.\tDickson | 22,500 | 124,353 | - | - | - | \t\t\t\t\t- | 146,853 |
| E.\tGordon\tGee | 23,750 | 124,353 | - | - | - | \t\t\t\t\t- | 148,103 |
| Barbara\tM.\tKnuckles | 22,500 | 124,353 | - | - | - | \t\t\t\t\t- | 146,853 |
| J.\tNeal\tPurcell | 26,750 | 124,353 | - | - | - | \t\t\t\t\t- | 151,103 |
| James\tD.\tRobbins | 35,500 | 124,353 | - | - | - | \t\t\t\t\t- | 159,853 |
| Richard\tE.\tThornburgh | 23,125 | 129,628 | - | - | - | \t\t\t\t\t- | 152,753 |
| David\tM.\tWilds | 36,250 | 124,353 | - | - | - | \t\t\t\t\t- | 160,603 |

(1)		Pursuant	to	the	terms	of	the	Merger	Agreement,	on	July	6,	2007	each	of	Messrs.	Agrawal,	Calbert,	Jones	and	Rajpal	joined	our	Board	and	each	of	Messrs.	Bottorff,	Dickson,

Gee,	Purcell,	Robbins,	Thornburgh	and	Wilds	and	Mss.	Bowles	and	Knuckles	ceased	to	serve	on	our	Board.		Mr.	Rajpal	resigned	from	our	Board	effective	September	19,	2007 and	received	no	compensation	for	his	Board	service.	Mr.	Nelson	was	appointed	to	our	Board	on	July	20,	2007.

(2)		Each	of	Messrs.	Purcell	and	Thornburgh	deferred	payments	of	all	his	fiscal	2007	director	fees	pursuant	to	the	terms	of	our	Deferred	Compensation	Plan	for	Non-Employee Directors.

(3)		These	amounts	represent	restricted	stock	units	("RSUs")	granted	during	fiscal	2007	and	prior	fiscal	years	under	the	1998	Stock	Incentive	Plan.	The	amounts	equal	the compensation	cost	recognized	during	fiscal	2007	for	financial	statement	purposes	in	accordance	with	Statement	of	Financial	Accounting	Standards	123R	("SFAS	123R"),	except forfeitures	related	to	service-based	vesting	conditions	were	disregarded.	Additional	information	related	to	the	calculation	of	the	compensation	cost	is	set	forth	in	Note	9	of	the annual	consolidated	financial	statements	included	in	this	report.	As	a	result	of	the	Merger,	all	outstanding	RSU	awards	vested	and,	therefore,	all	compensation	expense associated	with	such	awards	was	recognized	in	fiscal	2007	in	accordance	with	SFAS	123(R).

(4)		Each	person	who	served	as	a	non-employee	director	on	June	5,	2007	received	4,600	RSUs	during	fiscal	2007	under	the	automatic	grant	provisions	of	the	1998	Stock	Incentive Plan.	The	grant	date	fair	value	computed	in	accordance	with	SFAS	123R	for	those	RSUs	was	$99,360.

(5)		No	director	listed	in	this	table	had	stock	awards	or	option	awards	outstanding	at	February	1,	2008.		As	a	result	of	the	Merger,	each	director	who	held	RSUs	received	$22.00	in cash,	without	interest	and	less	applicable	withholding	taxes,	and	each	director	listed	in	this	table	who	held	options	received	an	amount	in	cash,	without	interest	and	less applicable	withholding	taxes,	equal	to	$22.00	less	the	exercise	price	of	each	in-the-money	option.		No	director	forfeited	any	RSUs	or	options	during	fiscal	2007.

(6)		No	compensation	expense	was	recorded	in	fiscal	2007	for	options	held	by	directors	because	no	options	were	granted	to	these	directors	during	fiscal	2007	and	all	options	awarded in	prior	years	had	previously	vested.

(7)		Perquisites	and	personal	benefits,	if	any,	totaled	less	than	$10,000	per	director.

# Narrative	to	Fiscal	2007	Director	Compensation	Table

The	following	discussion	of	fiscal	2007	director	compensation	encompasses	compensation	of	the	director	group	who	served	before	the	Merger,	as	well	as	the	director	group who	served	after	the	Merger.		Each	group	can	be	identified	by	reference	to	the	1 st 	footnote	to	the	Director	Compensation	Table	above.

Prior	to	the	Merger,	we	used	a	combination	of	cash	and	stock-based	incentive	compensation	to	attract	and	retain	qualified	Board	candidates.	Subsequent	to	the	Merger,	our compensation	structure	includes	only	cash.	For	both	periods,	we	did	not	compensate	for	Board	service	any	director	who	was	also	a	Dollar	General	employee.

Cash	Compensation.				Prior	to	the	Merger,	we	paid	non-employee	directors	two	quarterly	installments	of	the	annual	cash	retainer	and	the	per	meeting	attendance	fees	set forth	below.	We	also	paid	two	quarterly	installments	of	the	following	additional	annual	retainers	to	each	committee	chairman	and	to	the	Presiding	Director.

|  | Other	Annual	Retainers | Other	Annual	Retainers | Other	Annual	Retainers | In-Person	Meeting	Attendance	Fees | In-Person	Meeting	Attendance	Fees | In-Person	Meeting	Attendance	Fees | Telephonic |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Annual\nCash\nRetainer | Audit\nCommittee\nChairman | Other\nCommittee\nChairman | Presiding\nDirector | Board\nMeeting | Audit\nCommittee\nMeeting | Other\nCommittee\nMeeting | Meeting\nAttendance\nFee |
| $35,000 | $20,000 | $10,000 | $15,000 | $1,250 | $1,500 | $1,250 | $625 |

To	assist	in	understanding	the	fees	actually	earned	by	each	non-employee	director	prior	to	the	Merger,	the	following	chart	shows	information	regarding	committee	service and	meeting	attendance	of	each	pre-Merger	director.

|  | #		of |  |  |  | Other | Telephonic	Meetings |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Name | Committees\nChaired | Presiding\nDirector | Board | Audit\nCommittee | Committee\nMeeting | Attended\n(Board/Committee) |
| Mr.\tBottorff | 2 |  | 3 | 2 | 2 | 3 |
| Ms.\tBowles | 1 |  | 3 | 2 | 1 | 5 |
| Mr.\tDickson | - |  | 2 | - | 1 | 2 |
| Mr.\tGee | - |  | 2 | - | 2 | 2 |
| Ms.\tKnuckles | - |  | 3 | - | 1 | - |
| Mr.\tPurcell | - |  | 3 | 2 | - | 4 |
| Mr.\tRobbins | 1\t(Audit) |  | 3 | 2 | - | 2 |
| Mr.\tThornburgh | - |  | 3 | - | - | 3 |
| Mr.\tWilds | 1 | X | 3 | - | 1 | 2 |

We	reimbursed	directors	for	certain	fees	and	expenses	incurred	in	connection	with	continuing	education	seminars	and	travel	expenses	related	to	Dollar	General	meeting attendance	or	requested	appearances.	We	allowed	directors	(and	spouses	for	no	additional	incremental	cost)	to	travel	on	the	Dollar	General	airplane	for	those	purposes.

Subsequent	to	the	Merger,	cash	fees	payable	to	our	non-employee	directors	consist	solely	of	a	$40,000	annual	retainer	fee,	payable	in	quarterly	installments.		Directors	also are	entitled	to	receive	the	expense	reimbursements	discussed	above.	Because	the	post-Merger	directors	served	on	our	Board	for	only	a	portion	of	fiscal	2007,	those	directors	received one-third	of	the	second	quarter	retainer	fee	along	with	two	full	quarterly	installments	of	the	retainer	fee.

Equity	Compensation.				Each	non-employee	director	who	served	on	our	Board	prior	to	the	Merger	received	4,600	RSUs	in	fiscal	2007	pursuant	to	the	automatic	grant provisions	of	our	1998	Stock	Incentive	Plan.	Each	RSU	represented	the	right	to	receive	one	share	of	Dollar	General	common	stock.

In	accordance	with	the	terms	of	our	1998	Stock	Incentive	Plan,	we	credited	dividend	equivalents	to	the	director's	RSU	account	as	additional	RSUs	whenever	we	declared	a cash	dividend	on	our	common	stock.	Directors	did	not	have	voting	rights	with	respect	to	RSUs	until	the	underlying	shares	of	common	stock	were	issued.	RSUs	generally	vested	one year	after	the	grant	date	if	the	director	was	still	serving	on	our	Board.	We	did	not,	however,	make	payment	on	vested	RSUs	until	the	director	ceased	to	be	a	member	of	our	Board. Under	the	terms	of	the	1998	Stock	Incentive	Plan,	vesting	of	the	RSUs	accelerated	upon	termination	of	a	director's	Board	service	due	to	a	variety	of	reasons,	including	upon	a change-in-control	of	Dollar	General.	Because	the	Merger	constituted	a	change-in-control	under	our	1998	Stock	Incentive	Plan,	all	outstanding	RSUs	vested	and	were	settled	in	cash in	the	Merger.

Prior	to	June	2,	2003,	we	also	annually	granted	non-qualified	stock	options	to	our	non-employee	directors	under	certain	stock	incentive	plans.	All	of	those	options	have since	fully	vested	and,	pursuant	to	the	Merger,	were	settled	in	cash	(if	in-the-money)	or	cancelled.

Immediately	following	the	Merger,	we	ceased	making	equity	grants	to	our	non-employee	directors	as	part	of	director	compensation.

Stock	Ownership	Guidelines.				In	fiscal	2007,	as	a	publicly	held	company,	we	required	each	non-employee	director	to	own	at	least	13,000	shares	of	our	common	stock within	three	years	of	joining	our	Board.	RSUs	and	stock	options	counted	towards	that	requirement.	Because	we	are	now	a	privately	held	company,	we	no	longer	maintain	those stock	ownership	guidelines.

Deferred	Compensation	Plan	for	Non-Employee	Directors.				Prior	to	the	Merger,	non-employee	directors	could	defer	up	to	100%	of	eligible	compensation	paid	by	us	to them	pursuant	to	a	voluntary	nonqualified	Deferred	Compensation	Plan	for	Non-Employee	Directors.	Eligible	compensation	included	the	annual	retainer(s),	meeting	fees,	and	any per	diem	compensation	for	special	assignments	earned	by	a	director	for	service	to	the	Board.	We	credited	the	deferred	compensation	to	a	liability	account,	which	was	then	invested at	the	director's	option	in	one	or	more	accounts	that	mirrored	the	performance	of	(a)	funds	selected	by	our	Compensation	Committee	or	its	delegate	or	(b)	our	common	stock.

All	deferred	compensation	pursuant	to	the	Deferred	Compensation	Plan	for	Non-Employee	Directors	was	immediately	due	and	payable	as	a	result	of	the	Merger,	which constituted	a	change-in-control	of	Dollar	General	under	the	terms	of	that	Plan.

Our	Board	elected	to	terminate	the	Deferred	Compensation	Plan	for	Non-Employee	Directors	effective	as	of	December	31,	2007.

# ITEM	12. SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

(a)											Equity	Compensation	Plan	Information.		The	following	table	sets	forth	information	about	securities	authorized	for	issuance	under	our	equity	compensation	plans (including	individual	compensation	arrangements)	as	of	February	1,	2008:

| Plan	category | Number	of<br>securities	to	be<br>issued	upon	exercise<br>of	outstanding<br>options,	warrants<br>and	rights<br>(a) | Weighted-average<br>exercise	price	of<br>outstanding	options,<br>warrants	and	rights<br>(b) | available	for	future<br>issuance	under<br>equity	compensation<br>plans	(excluding<br>securities	reflected<br>in	column	(a))<br>(c) |
| :--- | :--- | :--- | :--- |
| (1) |  |  |  |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders | 20,869,102 | $4.68 | 3,470,200 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders | -- | -- | -- |
| (1) |  |  |  |
| Total | 20,869,102 | $4.68 | 3,470,200 |

(1) Column	(a)	consists	of	shares	issuable	upon	exercise	of	outstanding	options	under	the	2007	Stock	Incentive	Plan	and	the	1998	Stock	Incentive	Plan.	Column	(c)	consists	of shares	reserved	for	issuance	pursuant	to	the	2007	Stock	Incentive	Plan,	whether	in	the	form	of	stock	or	restricted	stock	or	upon	the	exercise	of	an	option	or	right.

(b)	Security	Ownership	of	Certain	Beneficial	Owners	and	Management.		The	following	table	shows	the	amount	of	our	common	stock	beneficially	owned,	as	of	March	17, 2008,	by	those	who	were	known	by	us	to	beneficially	own	more	than	5%	of	our	common	stock,	by	our	directors	and	named	executive	officers	individually	and	by	our	directors	and all	of	our	executive	officers	as	a	group,	all	calculated	in	accordance	with	Rule	13d-3	of	the	Exchange	Act	under	which	a	person	generally	is	deemed	to	beneficially	own	a	security	if he	has	or	shares	voting	or	investment	power	over	the	security	or	if	he	has	the	right	to	acquire	beneficial	ownership	within	60	days.	Unless	otherwise	noted,	these	persons	may	be contacted	at	our	executive	offices	and,	to	our	knowledge,	have	sole	voting	and	investment	power	over	the	shares	listed.	Percentage	computations	are	based	on	555,481,897	shares	of our	stock	outstanding	as	of	March	17,	2008.

* Denotes	less	than	1%	of	class.

(1) Includes	the	following	number	of	shares	held	by	the	following	entities:	KKR	2006	Fund	L.P.	(203,464,902.69);	KKR	PEI	Investments,	L.P.	(49,999,976.09);	KKR	Partners III,	L.P.	(4,724,997.74)	and	Buck	Holdings	Co-Invest,	LP	(30,210,020).	Buck	Holdings	Co-Invest	GP,	LLC,	which	is	controlled	by	KKR	2006	GP	LLC,	is	the	general	partner of	Buck	Holdings	Co-Invest,	LP,	and	has	the	right	to	manage	the	affairs	of	such	entity,	and	thus	is	deemed	to	be	the	beneficial	owner	of	the	securities	owned	by	such	entity. However,	it	does	not	have	any	economic	or	other	dispositive	rights	with	respect	to	such	securities	and	thus	disclaims	beneficial	ownership	with	respect	thereto.	The	address	of KKR	is	c/o	Kohlberg	Kravis	Roberts	&	Co.	L.P.,	2800	Sand	Hill	Road,	Suite	200,	Menlo	Park,	CA	94025.

(2) Indirectly	held	through	Buck	Holdings,	L.P.

investment	manager	of	each	of	the	GS	Funds,	and	each	of	the	GS	Funds	shares	voting	and	investment	power	with	certain	of	its	respective	affiliates.	Each	of	the	GS	Funds	is affiliated	with	or	managed	by	Goldman,	Sachs	&	Co.,	a	wholly	owned	subsidiary	of	The	Goldman	Sachs	Group,	Inc.	Each	of	The	Goldman	Sachs	Group,	Inc.	and	Goldman, Sachs	&	Co.	disclaims	beneficial	ownership	of	the	shares	owned	by	each	of	the	GS	Funds,	except	to	the	extent	of	their	pecuniary	interest	therein,	if	any.	The	address	of	each	of the	GS	Funds	and	GSUIG,	L.L.C.	is	c/o	Goldman,	Sachs	&	Co.,	85	Broad	Street	10th	floor,	New	York,	New	York	10004.

(5) The	Address	of	CPP	Investment	Board	(USRE	II)	Inc.	is	c/o	Canada	Pension	Plan	Investment	Board,	One	Queen	Street	East,	Suite	2600,	Toronto,	ON	M5C	2W5,	Canada.

(7) Messrs.	Calbert	and	Agrawal	are	our	directors	and	are	executives	of	KKR,	and	as	such	may	be	deemed	to	share	beneficial	ownership	of	any	shares	beneficially	owned	by KKR,	but	disclaim	such	beneficial	ownership	except	to	the	extent	of	their	pecuniary	interest	in	those	shares.

(8) Mr.	Jones	is	our	director	and	an	executive	of	GS	Capital	Partners,	but	disclaims	any	beneficial	ownership	except	to	the	extent	of	his	pecuniary	interest	in	those	shares.

(9) Represents	shares	of	restricted	common	stock	that	were	unvested	as	of	March	17,	2008	over	which	the	named	holder	does	not	have	investment	power	until	the	vesting	of	those shares.

(10) Includes	the	following	number	of	shares	subject	to	options	either	currently	exercisable	or	exercisable	within	60	days	of	March	17,	2008	over	which	the	person	will	not	have voting	or	investment	power	until	the	options	are	exercised:	Mr.	Dreiling	(250,000);	Mr.	Beré	(273,712);	Mr.	Tehle	(302,007);	Mr.	Buley	(288,797);	Ms.	Guion	(220,286);	Ms. Lowe	(173,200);	and	all	current	directors	and	executive	officers	as	a	group	(1,930,628).	The	shares	described	in	this	note	are	considered	outstanding	for	the	purpose	of computing	the	percentage	of	outstanding	stock	owned	by	each	named	person	and	by	the	group,	but	not	for	the	purpose	of	computing	the	percentage	ownership	of	any	other person.

# ITEM	13. CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

(a)											Director	Independence	(post-Merger).		The	members	of	our	Board	of	Directors	are	Michael	M.	Calbert,	Raj	Agrawal,	Adrian	Jones,	Dean	B.	Nelson	and	Richard W.	Dreiling.	Messrs.	Calbert	and	Agrawal	serve	on	our	Audit	Committee	and	Messrs.	Calbert,	Agrawal	and	Jones	serve	on	our	Compensation	Committee.		Sumit	Rajpal	served	as	a member	of	our	Board	for	a	brief	period	following	the	Merger	and	David	Beré	served	on	our	Board	until	March	2008.	Though	not	formally	considered	by	our	Board	given	that	our securities	are	not	registered	or	traded	on	any	national	securities	exchange,	based	upon	the	listing	standards	of	the	NYSE	on	which	our	common	stock	was	listed	prior	to	the	Merger, we	do	not	believe	that	any	of	our	current	Board	members	or	Messrs.	Rajpal	or	Beré	would	be	considered	independent	either	because	they	serve	as	members	of	our	management team	or	because	of	their	relationships	with	certain	affiliates	of	the	funds	and	other	entities	that	hold	significant	interests	in	Parent,	and	other	relationships	with	us	as	more	fully described	under	"Related	Party	Transactions"	below.

Accordingly,	we	do	not	believe	that	any	of	our	Audit	Committee	members	would	meet	the	independence	requirements	of	Rule	10A-1	of	the	Exchange	Act	or	the	NYSE's	audit committee	independence	requirements,	or	that	any	of	our	Compensation	Committee	members	would	meet	the	NYSE's	independence	requirements.	We	do	not	have	a nominating/corporate	governance	committee,	or	a	committee	that	serves	a	similar	purpose.

(b)											Director	Independence	(pre-Merger).	Until	the	Merger	on	July	6,	2007,	our	Board	of	Directors	at	least	annually	considered	each	director's	independence	in accordance	with	guidelines	it	had	adopted,	which	included	all	elements	of	independence	set	forth	in	the	NYSE	listing	standards	as	well	as	certain	Board-adopted	categorical independence	standards.	These	guidelines	were	contained	in	our	Corporate	Governance	Principles	or,	with	respect	to	interests	of	less	than	1%	of	a	publicly	held	vendor,	in	our	Code of	Business	Conduct	and	Ethics,	and	were	last	described	in	our	Form	10-K	for	the	fiscal	year	ended	February	2,	2007.

During	fiscal	2007	but	prior	to	the	Merger,	our	Board	of	Directors	consisted	of	David	Perdue,	David	Beré,	Dennis	Bottorff,	Barbara	Bowles,	Reginald	Dickson,	Gordon Gee,	Barbara	Knuckles,	Neal	Purcell,	James	Robbins,	Richard	Thornburgh	and	David	Wilds.		Also	during	that	time	period,	our	Audit	Committee	consisted	of	Mr.	Robbins,	Mr. Bottorff,	Ms.	Bowles	and	Mr.	Purcell;	our	Compensation	Committee	consisted	of	Mr.	Bottorff,	Mr.	Dickson	and	Mr.	Gee;	and	our	Nominating	and	Corporate	Governance Committee	consisted	of	Mr.	Wilds,	Mr.	Gee	and	Ms.	Knuckles.	Our	Board	of	Directors	had	affirmatively	determined	on	March	20,	2007	that	Directors	Bottorff,	Bowles,	Dickson, Gee,	Knuckles,	Purcell,	Robbins,	Thornburgh	and	Wilds,	but	not	Directors	Perdue	or	Beré	(each	of	whom	was	a	member	of	management),	were	independent	from	our	management under	both	the	NYSE's	listing	standards	and	our	additional	categorical	independence	standards	based	on	information	known	at	that	time.	Any	relationship	between	an	independent director	and	Dollar	General	or	our	management	were	either	encompassed	by	the	Board-adopted	categorical	standards	mentioned	above	or,	in	the	case	of	Mr.	Wilds'	relationship	with a	vendor,	deemed	to	be	immaterial.	A	table	setting	forth	the	transactions	or	relationships	with	our	former	directors	that	fell	within	a	Board-adopted	categorical	standard,	as	well	as	a description	of	Mr.	Wilds'	relationships	with	a	vendor,	was	set	forth	in	our	Form	10-K	for	the	fiscal	year	ended	February	2,	2007.	Because	of	the	Merger,	our	Board	has	not	made any	additional	independence	determinations	with	respect	to	those	former	Board	members.

(c)											Related	Party	Transactions.		We	describe	below	the	transactions	that	have	occurred	since	the	beginning	of	fiscal	2007,	and	any	currently	proposed	transactions, that	involve	Dollar	General	and	exceed	$120,000,	and	in	which	a	related	party	had	or	has	a	direct	or	indirect	material	interest.

Management	Stockholder's	Agreement.	Simultaneously	with	the	closing	of	the	Merger	and,	thereafter,	in	connection	with	our	offering	equity	awards	to	certain	members of	our	management	and	other	employees	(the	"Management	Participants")	under	our	stock	incentive	plan	(including	the	equity	grants	to	Mr.	Dreiling	in	connection	with	his	offer	of employment),	we,	Parent	and	each	of	the	Management	Participants	who	held	shares	of	our	capital	stock	(including	through	option	exercises),	or	who	were	granted	new	options	to acquire	our	stock	(or,

in	the	case	of	Mr.	Dreiling,	who	was	granted	shares	of	restricted	common	stock),	entered	into	a	stockholder's	agreement.	The	Management	Stockholder's	Agreement	imposes significant	transfer	restrictions	on	shares	of	our	common	stock.	Generally,	shares	will	be	nontransferable	by	any	means	at	any	time	prior	to	July	6,	2012,	except	(i)	sales	pursuant	to an	effective	registration	statement	filed	by	us	under	the	Securities	Act	in	accordance	with	the	Management	Stockholder's	Agreement,	(ii)	a	sale	pursuant	to	the	Sale	Participation Agreement	(described	below),	(iii)	a	sale	to	certain	permitted	transferees,	or	(iv)	as	otherwise	permitted	by	our	Board	of	Directors	or	pursuant	to	a	waiver	given	by	the	Sponsor; provided,	that,	in	the	event	the	Sponsor	or	its	affiliates	transfer	limited	partnership	units	owned	by	them	to	a	third	party,	such	transfer	restrictions	shall	lapse	with	respect	to	the	same proportion	of	shares	of	common	stock	owned	by	a	management	stockholder	as	the	proportion	of	limited	partnership	units	transferred	by	the	Sponsor	and	such	affiliates	relative	to the	aggregate	number	of	limited	partnership	units	owned	by	them	prior	to	that	transfer.

In	the	event	that	a	management	stockholder	wishes	to	sell	his	or	her	stock	at	any	time	after	July	6,	2012	but	before	the	earlier	of	a	"Change	in	Control"	(as	defined	in	the Management	Stockholder's	Agreement)	or	the	consummation	of	a	"Qualified	Public	Offering"	(as	defined	in	the	Management	Stockholder's	Agreement),	the	Management Stockholder's	Agreement	provides	us	with	a	right	of	first	refusal	on	those	shares	on	the	same	terms	and	conditions	that	the	management	stockholder	proposes	to	sell	them	to	a	third party.	In	the	event	that	a	registration	statement	is	filed	with	respect	to	our	common	stock	in	the	future,	the	Management	Stockholder's	Agreement	prohibits	management stockholders	from	selling	shares	not	included	in	the	registration	statement	from	the	time	of	receipt	of	notice	that	we	have	filed	or	intend	to	file	such	registration	statement	until 180	days	(in	the	case	of	an	initial	public	offering)	or	90	days	(in	the	case	of	any	other	public	offering)	of	the	effective	date	of	the	registration	statement.	The	Management Stockholder's	Agreement	also	provides	for	the	management	stockholder's	ability	to	cause	us	to	repurchase	his	outstanding	stock	and	vested	options	(and	vested	restricted	stock,	with respect	to	Mr.	Dreiling)	in	the	event	of	the	management	stockholder's	death	or	disability,	and	for	our	ability	to	cause	the	management	stockholder	to	sell	his	stock	or	options	back	to us	upon	certain	termination	events.	Mr.	Dreiling	also	has	the	ability	to	cause	us	to	repurchase	his	vested	restricted	stock,	if	any,	if	he	resigns	for	any	reason	within	six	months	after January	21,	2008.	In	addition,	under	the	terms	of	the	Management	Stockholder's	Agreement,	each	Senior	Management	Stockholder	(as	defined	below)	has	the	ability	to	cause	us	to repurchase,	prior	to	the	later	of	(x)	July	6,	2008	and	(y)	the	last	day	of	the	six-month	period	after	Mr.	Dreiling	was	hired,	all	of	the	shares	of	common	stock	and	all	of	the	options they	rolled	over	in	connection	with	the	Merger	that	such	Management	Stockholder	then	holds	if	such	Management	Stockholder	resigns	or	is	terminated	within	such	time	frame.

Following	the	initial	public	offering	of	our	common	stock,	certain	members	of	senior	management,	including	the	executive	officers	(the	"Senior	Management Stockholders"),	will	have	limited	"piggyback"	registration	rights	with	respect	to	their	shares	in	the	event	that	certain	of	the	Investors	are	selling,	or	causing	to	be	sold,	shares	of common	stock	in	such	offering.

Sale	Participation	Agreement.		Each	Management	Participant,	including	Mr.	Dreiling,	also	has	entered	into	a	Sale	Participation	Agreement	with	Parent.	The	Sale Participation	Agreement	grants	the	Senior	Management	Stockholders	the	right	to	participate	in	any	private	sale	of	shares	of	common	stock	by	Parent	or	its	affiliates	(the	"Tag-Along Right")	and	requires	all	management	stockholders	to	participate	in	the	private

sale,	if	Parent	elects,	in	the	event	that	Parent	or	its	affiliates	are	proposing	to	sell	at	least	50%	of	the	outstanding	shares	of	common	stock	held	by	it	(the	"Drag-Along	Right").	The number	of	shares	a	management	stockholder	would	be	permitted	or	required,	as	applicable,	to	sell	pursuant	to	the	exercise	of	the	Tag-Along	Right	or	the	Drag-Along	Right	is	equal to	the	number	of	shares	then	owned	by	the	management	stockholder	and	his	or	her	affiliates	plus	all	shares	that	person	is	entitled	to	acquire	under	unexercised	options	(to	the	extent exercisable	at	that	time	or	as	a	result	of	the	consummation	of	the	proposed	sale	and	also,	with	respect	to	Drag-Along	Rights	pertaining	to	Mr.	Dreiling,	unvested	shares	of	restricted stock	that	would	vest	upon	consummation	of	the	transaction),	multiplied	by	a	fraction	(x)	the	numerator	of	which	is	the	aggregate	number	of	shares	Parent	proposes	to	transfer	in	the proposed	sale	and	(y)	the	denominator	of	which	is	the	total	number	of	shares	Parent	directly	or	indirectly	owns.	Management	stockholders	will	bear	the	pro	rata	share	of	any	fees, commissions,	adjustments	to	purchase	price,	expenses	or	indemnities	in	connection	with	any	sale	under	the	Sale	Participation	Agreement.

Equity	Investment	by	Senior	Management	Participants.		In	connection	with	the	Merger,	certain	members	of	our	management	(the	"Senior	Management	Participants") were	offered	the	opportunity	to	roll	over	portions	of	their	equity	and/or	options	and	to	purchase	additional	equity	of	Dollar	General.	In	connection	with	such	investment	and	the Merger,	we	adopted	a	new	stock	incentive	plan	pursuant	to	which	these	individuals	were	granted	new	options	with	respect	to	additional	shares	of	our	common	stock.	Messrs.	Beré, Tehle,	Buley	and	Gibson	and	Mss.	Guion,	Lanigan,	Lowe	and	Elliott	each	invested	a	total	of	$2,249,995.00,	$799,996.25,	$754,863.75,	$348,703.75,	$650,007.50,	$516,026.25, $526,650.00	and	$249,997.50,	respectively.	Any	shares	purchased	or	otherwise	acquired	by	these	Senior	Management	Participants	as	described	above	(including	any	shares	subject to	roll	over	options	or	acquired	upon	exercise	thereof)	are	subject	to	certain	transfer	limitations	and	repurchase	rights	by	Dollar	General.	We	also	offered	other	employees	a	similar investment	opportunity	to	participate	in	our	common	equity.

Pre-Merger	Equity.			Prior	to	the	Merger,	we	maintained	various	share-based	compensation	programs	which	included	options,	restricted	stock	and	restricted	stock	units ("RSUs").	In	connection	with	the	Merger,	the	outstanding	stock	options,	restricted	stock	and	RSUs	became	fully	vested	and	were	settled	in	cash,	canceled	or,	in	limited circumstances,	exchanged	for	new	options	to	purchase	our	common	stock,	as	described	below.	Unless	exchanged	for	new	options,	each	option	holder	received	an	amount	in	cash, without	interest	and	less	applicable	withholding	taxes,	equal	to	$22	per	share	(the	"Merger	Consideration"),	less	the	exercise	price	of	each	option.	Additionally,	each	restricted	stock and	RSU	holder	received	the	Merger	Consideration	in	cash,	without	interest	and	less	applicable	withholding	taxes.	Certain	members	of	our	management	exchanged	existing	stock options	for	new	options	to	purchase	our	common	stock.	The	exercise	price	of,	and	the	number	of	shares	underlying,	the	roll	over	options	were	adjusted	as	a	result	of	the	Merger.	The roll	over	options	otherwise	continue	under	the	terms	of	the	equity	plans	under	which	they	were	issued.

# Compensation	Deferral	Plan	("CDP")	and	Supplemental	Executive	Retirement	Plan	("SERP").		The	CDP,	in	which	the	executive	officers	are	eligible	to	participate,	and

the	associated	grantor	trust	agreement	require	that	the	full	amount	of	the	benefits	due	under	the	CDP

The	SERP,	in	which	the	executive	officers	participate,	provides	that	benefits	will	become	immediately	vested	upon	a	change	in	control	of	Dollar	General.	The	associated grantor	trust	agreement	requires	the	full	amount	of	the	benefits	due	under	the	SERP	to	be	funded	in	the	grantor	trust	within	30	days	of	a	change	in	control,	payable	in	accordance	with the	terms	of	the	SERP	and	the	trust.	The	Merger	was	a	change	in	control	for	this	purpose.	Mr.	Tehle	and	Mss.	Guion	and	Lowe	were	already	vested	in	benefits	under	the	SERP having	approximate	values	as	determined	on	July	6,	2007	of	$105,332.01,	$83,706.80	and	$41,776.60,	respectively.	As	of	the	Merger,	Messrs.	Buley	and	Gibson	and	Mss.	Lanigan and	Elliott	became	vested	in	benefits	under	the	SERP	having	an	approximate	value	of	$39,125.13,	$20,035.14,	$109,199.14	and	$17,471.36,	respectively,	as	determined	on	July	6, 2007.	Messrs.	Dreiling	and	Beré	had	no	balances	in	the	SERP	as	of	that	time.

New	Stock	Incentive	Plan.		On	July	6,	2007,	our	Board	of	Directors	adopted	the	2007	Stock	Incentive	Plan	for	Key	Employees	(the	"Plan").	The	Plan	provides	for	the granting	of	stock	options,	stock	appreciation	rights,	and	other	stock-based	awards	or	dividend	equivalent	rights	to	key	employees,	directors,	consultants	or	other	persons	having	a service	relationship	with	us,	our	subsidiaries	and	certain	of	our	affiliates.	The	number	of	shares	of	our	common	stock	authorized	for	grant	under	the	Plan	is	24,000,000.

On	July	6,	2007,	we	granted	to	the	Senior	Management	Participants	non-qualified	stock	options	to	purchase	13,110,000	shares	of	our	common	stock	pursuant	to	the	terms of	the	Plan.	We	later	granted	non-qualified	stock	options	to	certain	other	employees	pursuant	to	the	terms	of	the	Plan.	Effective	January	21,	2008,	our	Board	also	granted	to Mr.	Dreiling	non-qualified	stock	options	to	purchase	2.5	million	shares	of	our	common	stock	and	890,000	shares	of	restricted	common	stock	pursuant	to	the	terms	of	the	Plan. SFAS	123R	grant	date	fair	values	of	the	post-merger	option	grants	to	Messrs.	Dreiling,	Beré,	Tehle,	Buley	and	Gibson	and	Mss.	Guion,	Lanigan,	Lowe	and	Elliott	are	$6,241,750, $6,084,450,	$2,974,620,	$2,366,175,	$1,081,680,	$2,366,175,	$1,825,335,	$1,825,335	and	$1,081,680,	respectively.	Half	of	these	options	will	vest	ratably	on	each	of	the	five anniversary	dates	of	July	6,	2007	solely	based	upon	continued	employment	over	that	time	period,	while	the	other	half	of	these	options	will	vest	based	both	upon	continued employment	and	upon	the	achievement	of	predetermined	annual	or	cumulative	financial-based	targets	over	time	which	coincide	with	our	fiscal	year.	The	options	also	have	certain accelerated	vesting	provisions	upon	a	change	in	control	or	initial	public	offering,	as	defined	in	the	Plan.	The	options	have	a	10-year	maximum	expiration	date	and	an	exercise	price of	$5.00	per	share,	which	represented	the	fair	market	value	on	the	grant	date.	The	SFAS	123R	grant	date	fair	value	of	the	post-merger	restricted	stock	grant	to	Mr.	Dreiling	is $4,450,000.	The	restricted	stock	will	vest	on	the	last	day	of	our	2011	fiscal	year	if	Mr.	Dreiling	remains	employed	by	us	through	that	date.	The	restricted	stock	also	has	certain accelerated	vesting	provisions	upon	a	change	in	control,	initial	public	offering,	termination	without	cause	or	due	to	death	or

disability,	or	resignation	for	good	reason,	all	as	defined	in	Mr.	Dreiling's	employment	agreement.	We	believe	that	the	Plan	has	been	designed	to	effectively	align	the	interests	of	our employees	and	shareholders.

Operating	Agreements.		In	connection	with	the	Merger,	the	Investors	(or	funds	affiliated	with	the	Investors)	directly	or	indirectly	acquired	limited	partnership	interests	in Parent	and	certain	of	such	Investors	also	acquired	membership	interests	in	Parent's	general	partner,	Buck	Holdings,	LLC.	These	entities	entered	into	a	limited	partnership	agreement with	respect	to	their	investment	in	Parent	and	an	operating	agreement	with	respect	to	their	investment	in	Parent's	general	partner	and	a	registration	rights	agreement	relating	to	such investment.	These	agreements	contain	agreements	among	the	parties	with	respect	to,	among	other	things,	restrictions	on	the	issuance	or	transfer	of	interests,	other	special	corporate governance	provisions	(including	the	right	to	approve	various	corporate	actions),	the	election	of	managers	of	Parent's	general	partner,	the	election	of	our	Board	members,	and registration	rights	(including	customary	indemnification	provisions).

Monitoring	Agreement	and	Indemnity	Agreement.		In	connection	with	the	Merger,	we	and	Parent	entered	into	a	monitoring	agreement,	dated	July	6,	2007,	with	an affiliate	of	KKR	and	Goldman,	Sachs	&	Co.	pursuant	to	which	such	parties	have	provided	and	will	continue	to	provide	management	and	advisory	services	to	us	and	our	affiliates. Under	the	terms	of	the	monitoring	agreement,	among	other	things,	we	are	obligated	to	pay	an	aggregate	annual	management	fee	of	$5.0	million,	which	amount	will	increase	by	5.0% annually,	payable	quarterly	in	arrears	at	the	end	of	each	calendar	quarter.	The	initial	annual	fee	was	prorated	for	our	fiscal	2007.	Those	entities	also	are	entitled	to	receive	a	fee	equal to	1%	of	the	gross	transaction	value	in	connection	with	certain	subsequent	financing,	acquisition	or	disposition	of	assets	or	equity	interests,	recapitalization	and	other	similar transactions,	as	well	as	a	termination	fee	in	the	event	of	an	initial	public	offering	or	under	certain	other	circumstances.	All	such	fees	are	to	be	split	based	upon	an	agreed	upon formula,	which	results	in	an	initial	split	of	78.38%	of	this	fee	payable	to	the	KKR	affiliate	and	21.62%	payable	to	Goldman,	Sachs	&	Co.	Under	this	agreement,	we	also	are obligated	to	reimburse	all	reasonable	out-of-pocket	expenses	incurred	by	such	entities	and	their	respective	affiliates	in	connection	with	rendering	covered	services.	Pursuant	to	this agreement,	we	also	paid	aggregate	fees	of	approximately	$75	million	in	connection	with	services	provided	in	connection	with	the	Merger	and	related	transactions,	$58.8	million	of which	was	paid	to	the	KKR	affiliate	and	$16.2	million	of	which	was	paid	to	Goldman,	Sachs	&	Co.

In	connection	with	entering	into	the	monitoring	agreement,	on	July	6,	2007	we	and	Parent	also	entered	into	a	separate	indemnification	agreement	with	the	parties	to	the monitoring	agreement,	pursuant	to	which	we	agreed	to	provide	customary	indemnification	to	such	parties	and	their	affiliates.

Messrs.	Calbert	and	Agrawal,	two	of	our	Board	members,	serve	as	a	Member	and	a	Director	of	KKR,	respectively.	Mr.	Jones,	one	of	our	Board	members,	serves	as	a Managing	Director	of	Goldman,	Sachs	&	Co.

Other	Relationships.				In	connection	with	the	Merger,	Goldman,	Sachs	&	Co.	and	Citigroup	Global	Markets	Inc.	and	their	affiliates	participated	in	several	related transactions	with	us.	Specifically,	Goldman	Sachs	Credit	Partners	L.P.	and	Citigroup	Global	Markets	Inc.,	along	with	other	institutions,	served	as	joint	lead	arranger	and	joint bookrunner	with	respect	to	the	credit	agreements	and	related	security	and	other	agreements	consisting	of	(i)	a	$2.3	billion	senior	secured	term	loan	facility	(affiliates	of	KKR	and Wellington	Management	Company,	LLP	are	also	lenders	under	this	facility)	and	(ii)	a	senior	secured	asset-based	revolving	credit	facility	of	up	to	$1.125	billion.	Goldman	Sachs Credit	Partners	L.P.	also	served	as	syndication	agent	for	each	of	the	new	facilities.	Citicorp	North	America,	Inc.	served	as	administrative	agent,	collateral	agent	for	the	senior	secured term	loan	facility.	Goldman,	Sachs	&	Co.	also	is	a	counterparty	to	certain	interest	rate	swaps	entered	into	in	connection	with	these	facilities.	Pursuant	to	the	swaps,	which	became effective	on	July	31,	2007,	we	swapped	three	month	LIBOR	rates	for	fixed	interest	rates	receiving	an	all-in	fixed	rate	of	7.683%	which	includes	a	2.75%	spread	on	a	notional amount	of	$2,000.0	million	which	will	amortize	on	a	quarterly	basis	until	maturity	at	July	31,	2012.	Also	in	connection	with	the	Merger,	Goldman,	Sachs	&	Co.	and	Citigroup Global	Markets	Inc.,	along	with	other	institutions,	(i)	acted	as	initial	purchasers	for	our	issuance	of	$1,175.0	million	aggregate	principal	amount	of	10.625%	senior	notes	due	2015 and	$725	million	aggregate	principal	amount	of	11.875%/12.625%	senior	subordinated	notes	due	2017	and	(ii)	provided	financial	advisory	services	to,	and	received	financial advisory	fees	from	us,	the	Investors	and	their	affiliates.	Finally,	in	connection	with	the	Merger,	we	completed	a	cash	tender	offer	to	purchase	any	and	all	of	our	$200	million principal	amount	of	8- 5/8%	Notes	due	June	2010.	Goldman,	Sachs	&	Co.	acted	as	dealer	manager	and	consent	solicitation	agent	for	that	tender	offer.	In	the	aggregate, approximately	$32.0	million	in	fees	were	paid	to	Goldman,	Sachs	&	Co.	and	its	affiliates	and	approximately	$26.2	million	in	fees	were	paid	to	Citigroup	Global	Markets	Inc.	and	its affiliates	in	connection	with	the	foregoing	transactions	relating	to	the	Merger,	portions	of	which	have	been	capitalized	as	debt	financing	costs	or	as	direct	acquisition	costs.	In addition,	under	the	registration	rights	agreement,	we	agreed	to	file	a	"market-making"	prospectus	in	order	to	enable	Goldman,	Sachs	&	Co.	to	engage	in	market-making	activities	for the	notes.

In	addition,	in	the	fourth	quarter	of	fiscal	2007,	we	purchased	a	total	of	$25	million	of	the	11.857%/12.625%	senior	subordinated	notes	held	by	Goldman	Sachs	&	Co.	or	its affiliates	for	a	purchase	price	of	$20	million,	and	paid	a	commission	of	$62,500	in	connection	therewith.

Goldman	Sachs	Credit	Partners	L.P.	and	Goldman,	Sachs	&	Co.	are	affiliates	of	GS	Capital	Partners	VI	Fund,	L.P.	and	affiliated	funds.	In	addition,	Mr.	Jones,	who	serves on	our	Board,	and	Sumit	Rajpal,	who	served	on	our	Board	for	a	brief	period	following	the	Merger,	each	serve	as	Managing	Directors	of	Goldman,	Sachs	&	Co.		GS	Capital	Partners VI	Fund,	L.P.	and	affiliated	funds	indirectly	own	approximately	22%	of	our	common	stock	on	a	fully	diluted	basis.	Citigroup	Global	Markets	Inc.	and	Citicorp	North	America	Inc. are	affiliates	of	Citigroup	Private	Equity	LP.		Funds	managed	by	Citigroup	Private	Equity	LP	indirectly	own	approximately	7.2%	of	our	common	stock	on	a	fully	diluted	basis.

We	use	Capstone	Consulting,	LLC,	a	team	of	executives	who	work	exclusively	with	KKR	portfolio	companies	as	an	integral	part	of	the	value-creation	process,	for	certain consulting

services.	We	pay	Capstone	a	monthly	fee,	currently	$210,000,	plus	expense	reimbursements.		During	fiscal	2007,	we	incurred	aggregate	fees	and	expense	reimbursements	paid	or owing	to	Capstone	for	such	services	of	approximately	$1.9	million.	We	also	paid	approximately	$78,750	of	fees	to	Capstone	for	services	provided	in	connection	with	the	Merger	and related	transactions.	Dean	Nelson,	who	serves	on	our	Board,	is	the	Chief	Executive	Officer	of	Capstone.	Although	neither	KKR	nor	any	entity	affiliated	with	KKR	owns	any	of	the equity	of	Capstone,	prior	to	January	1,	2007	KKR	had	provided	financing	to	Capstone.

(d)											Related	Party	Transaction	Approval	Policy.		Prior	to	the	Merger,	as	a	public	company,	we	had	policies	and	procedures	in	place	regarding	the	review,	approval and	ratification	of	"related	party"	transactions.	Those	policies	and	procedures	are	described	below.	None	of	the	Merger-related	transactions	or	the	transactions	with	the	Investors discussed	above	were	considered	under	the	pre-existing	policies	and	procedures.

On	an	annual	basis,	both	before	and	after	the	Merger,	each	director	and	executive	officer	is	asked	to	disclose,	among	other	things,	any	relationship	or	transaction	with	us	in which	the	director	or	executive	officer,	or	any	member	of	his	or	her	immediate	family	("related	parties"),	have	a	direct	or	indirect	material	interest.	Our	Legal	Department determines	which	of	those	disclosed	transactions	or	relationships	fall	below	the	related-party	transaction	disclosure	threshold	in,	or	are	otherwise	exempt	from	disclosure	under, Item	404	of	Regulation	S-K	of	the	Exchange	Act	or,	prior	to	the	Merger,	which	fell	within	a	Board-adopted	categorical	director	independence	standard.	Prior	to	the	Merger,	our Legal	Department	ensured	that	any	identified	relationship	or	transaction	that	was	not	exempt	from	disclosure	under	Item	404	or	that	did	not	fall	within	a	categorical	director independence	standard	was	submitted	to	the	Board	of	Directors	or	an	appropriate	Board	committee	for	consideration	under	our	conflict	of	interest	or	other	policy	as	further	described below.

Pursuant	to	our	Code	of	Business	Conduct	and	Ethics	and	prior	to	the	Merger,	the	Nominating	and	Corporate	Governance	Committee	of	our	Board	reviewed	and	resolved any	conflict	of	interest	involving	directors	or	executive	officers.	In	addition,	if	a	director's	relationship	or	transaction	fell	within	any	of	the	Board-adopted	categorical	standards	for director	independence,	then	the	director's	interest	in	the	relationship	or	transaction	was	deemed	immaterial	in	the	absence	of	other	factors	for	purposes	of	both	independence	and related-party	transaction	disclosure.	Finally,	prior	to	the	Merger	our	Compensation	Committee	reviewed	and	approved	and/or	ratified	all	material	components	of	executive	officer compensation	as	further	discussed	in	"Compensation	Discussion	and	Analysis"	above.

# ITEM	14. 	PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

The	table	below	shows	the	aggregate	fees	Ernst	&	Young	LLP	billed	to	us	in	connection	with	various	audit	and	other	services	provided	throughout	fiscal	2007	and	fiscal

| Service | 2007	Aggregate	Fees	Billed	($) | 2006	Aggregate	Fees	Billed	($) |
| :--- | :--- | :--- |
| (1) | 2,586,426 | 2,521,920 |
| Audit\tFees\n(2)\nAudit-Related\tFees | 119,514 | 45,225 |
| (3)\nTax\tFees | 163,645 | 182,937 |
| (4)\nAll\tOther\tFees | 6,000 | 6,000 |

(1) 2007	fees	include	audit	services,	as	well	as	services	relating	to	the	debt	offering	memorandum	associated	with	the	Merger	and	the	subsequent	exchange	offer	Registration Statement	on	Form	S-4	filed	with	the	SEC.	2006	fees	include	audit	services.		Such	amounts	include	fees	and	expenses	related	to	the	fiscal	year	and	interim	reviews, notwithstanding	when	the	fees	and	expenses	were	billed	or	when	the	services	were	rendered.

(2) 2007	fees	include	services	relating	to	the	employee	benefit	plan	audit,	as	well	as	accounting	consultation	services	relating	to	the	Merger.		2006	fees	include	services	relating to	accounting	consultations	regarding	Financial	Accounting	Standards	Board	Interpretation	48,	"Accounting	for	Uncertainty	in	Income	Taxes,"	and	a	sale-leaseback transaction	for	one	of	our	distribution	centers.		Such	amounts	include	fees	and	services	rendered	during	the	respective	fiscal	year,	notwithstanding	when	the	fees	and	expenses were	billed.

(3) Both	2007	and	2006	fees	include	services	relating	to	a	LIFO	tax	calculation	and	tax	advisory	services	related	to	inventory,	as	well	as	international,	federal,	state	and	local	tax advice.		Such	amounts	include	fees	and	services	rendered	during	the	respective	fiscal	year,	notwithstanding	when	the	fees	and	expenses	were	billed.

(4) Both	2007	and	2006	fees	include	a	subscription	fee	to	an	on-line	accounting	research	tool.		Such	amounts	include	fees	and	services	rendered	during	the	respective	fiscal		year, notwithstanding	when	the	fees	and	expenses	were	billed.

The	Audit	Committee	Charter	requires	committee	pre-approval	for	all	audit	and	permissible	non-audit	services	provided	by	our	independent	auditors.	Where	feasible,	the committee	considers	and,	when	appropriate,	pre-approves	services	at	regularly	scheduled	meetings	after	disclosure	by	management	and	the	auditors	of	the	nature	of	the	proposed services,	the	estimated	fees	(when	available),	and	their	opinions	that	the	services	will	not	impair	the	auditors'	independence.	The	committee	also	may	consider	and	pre-approve	any such	services	in	between	meetings.

# PART	IV

# ITEM	15. EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

# (a) Report	of	Independent	Registered	Public	Accounting	Firm

(b) All	schedules	for	which	provision	is	made	in	the	applicable	accounting	regulations	of	the	SEC	are	not	required	under	the	related	instructions,	are	inapplicable	or	the information	is	included	in	the	Consolidated	Financial	Statements	and,	therefore,	have	been	omitted.

(c) Exhibits:		See	Exhibit	Index	immediately	following	the	signature	pages	hereto,	which	Exhibit	Index	is	incorporated	by	reference	as	if	fully	set	forth	herein.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the undersigned,	thereunto	duly	authorized.

We,	the	undersigned	directors	and	officers	of	the	Registrant,	hereby	severally	constitute	Richard	W.	Dreiling	and	David	M.	Tehle,	and	each	of	them	singly,	our	true	and lawful	attorneys	with	full	power	to	them	and	each	of	them	to	sign	for	us,	and	in	our	names	in	the	capacities	indicated	below,	any	and	all	amendments	to	this	Annual	Report	on	Form 10-K	filed	with	the	Securities	and	Exchange	Commission.

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in	the capacities	and	on	the	dates	indicated.

# Supplemental	Information	to	be	Furnished	With	Reports	Filed	Pursuant	to	Section	15(d)

# of	the	Act	by	Registrants	Which	Have	Not	Registered	Securities	Pursuant	to	Section	12	of	the	Act

The	Registrant	has	not	sent	to	its	security	holders	an	annual	report	covering	its	last	fiscal	year.	In	addition,	the	Registrant	has	not	sent	to	security	holders	any	proxy statement,	form	of	proxy	or	other	proxy	soliciting	material	since	such	time	as	the	registration	of	Registrant's	securities	under	Section	12	of	the	Act	was	terminated.

# EXHIBIT	INDEX

2.1 Agreement	and	Plan	of	Merger,	dated	as	of	March	11,	2007,	by	and	among	Buck	Holdings,	L.P.,	Buck	Acquisition	Corp.,	and	Dollar	General	Corporation	(incorporated	by reference	to	Exhibit	2.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	March	11,	2007,	filed	with	the	SEC	on	March	12,	2007	(file	number	001- 11421))

3.1 Amended	and	Restated	Charter	of	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	3.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	number	001-11421))

3.2 Amended	and	Restated	Bylaws	of	Dollar	General	Corporation	(adopted	on	September	20,	2007)	(incorporated	by	reference	to	Exhibit	3.2	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))

4.1 Sections	7	and	8	of	Dollar	General	Corporation's	Amended	and	Restated	Charter	(included	in	Exhibit	3.1)

4.2 Indenture,	dated	as	of	June	21,	2000,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank,	National	Association (formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4 filed	with	the	SEC	on	August	1,	2000	(file	number	333-42704))

4.3 First	Supplemental	Indenture,	dated	as	of	July	28,	2000,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.4	to	Dollar	General	Corporation's	Annual	Report on	Form	10-K	for	the	fiscal	year	ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	number	001-11421))

4.4 Second	Supplemental	Indenture,	dated	as	of	June	18,	2001,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.5	to	Dollar	General	Corporation's	Annual	Report on	Form	10-K	for	the	fiscal	year	ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	number	001-11421))

4.5 Third	Supplemental	Indenture,	dated	as	of	June	20,	2002,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.6	to	Dollar	General	Corporation's	Annual	Report on	Form	10-K	for	the	fiscal	year	ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	number	001-11421))

4.6 Fourth	Supplemental	Indenture,	dated	as	of	December	11,	2002,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.7	to	Dollar	General	Corporation's	Annual Report	on	Form	10-K	for	the	fiscal	year	ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	number	001-11421))

4.7 Fifth	Supplemental	Indenture,	dated	as	of	May	23,	2003,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	August	1,	2003,	filed	with	the	SEC	on	August	29,	2003	(file	number	001-11421))

4.8 Sixth	Supplemental	Indenture,	dated	as	of	July	15,	2003,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	August	1,	2003,	filed	with	the	SEC	on	August	29,	2003	(file	number	001-11421))

4.9 Seventh	Supplemental	Indenture,	dated	as	of	May	23,	2005,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005	(file	number	001-11421))

4.10 Eighth	Supplemental	Indenture,	dated	as	of	July	27,	2005,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	Wachovia	Bank, National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005	(file	number	001-11421))

4.11 Ninth	Supplemental	Indenture,	dated	as	of	August	30,	2006,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	U.S.	Bank National	Association	(successor	to	Wachovia	Bank,	National	Association),	as	trustee	(incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly Report	on	Form	10-Q	for	the	quarter	ended	November	3,	2006,	filed	with	the	SEC	on	December	12,	2006	(file	number	001-11421))

4.12 Tenth	Supplemental	Indenture,	dated	as	of	July	6,	2007,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors,	and	U.S.	Bank	National Association	(successor	to	Wachovia	Bank,	National	Association),	as	trustee	(incorporated

4.13 Senior	Indenture,	dated	July	6,	2007,	among	Buck	Acquisition	Corp.,	Dollar	General	Corporation,	the	guarantors	named	therein	and	Wells	Fargo	Bank,	National Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.8	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on July	12,	2007	(file	number	001-11421))

4.16 Second	Supplemental	Indenture	to	the	Senior	Indenture,	dated	as	of	December	31,	2007,	between	Retail	Risk	Solutions,	LLC,	the	Guaranteeing	Subsidiary,	and	Wells Fargo	Bank,	National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))

4.17 Senior	Subordinated	Indenture,	dated	July	6,	2007,	among	Buck	Acquisition	Corp.,	Dollar	General	Corporation,	the	guarantors	named	therein	and	Wells	Fargo	Bank, National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.9	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the SEC	on	July	12,	2007	(file	number	001-11421))

4.19 First	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	September	25,	2007,	between	DC	Financial,	LLC,	the	Guaranteeing	Subsidiary,	and	Wells Fargo	Bank,	National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.16	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the SEC	on	December	21,	2007	(file	number	333-148320))

4.20 Second	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	December	31,	2007,	between	Retail	Risk	Solutions,	LLC,	the	Guaranteeing	Subsidiary, and	Wells	Fargo	Bank,	National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.33	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))

4.21 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Acquisition	Corp.,	Dollar	General	Corporation,	the	guarantors	named	therein	and	the	initial	purchasers named	therein	(incorporated	by	reference	to	Exhibit	4.10	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12, 2007	(file	number	001-11421))

4.22 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Buck	Holdings,	LLC,	Dollar	General	Corporation	and	Shareholders	named	therein (incorporated	by	reference	to	Exhibit	4.18	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number 333-148320))

4.23 Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Borrower,	Citicorp	North	America,	Inc.,	as	Administrative	Agent,	and	the	other	lending institutions	from	time	to	time	party	thereto	(incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed with	the	SEC	on	July	12,	2007	(file	number	001-11421))

4.24 Guarantee	to	the	Credit	Agreement,	dated	as	of	July	6,	2007,	among	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as	Guarantors	and	Citicorp	North America,

Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.3	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on July	12,	2007	(file	number	001-11421))

4.25 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Guarantee	to	the	Credit	Agreement,	between	DC	Financial,	LLC,	as	New	Guarantor,	and	Citicorp	North	America, Inc.,

as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.23	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21, 2007	(file	number	333-148320))

4.26 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Guarantee	to	the	Credit	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New	Guarantor,	and	Citicorp	North America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4, filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))

4.27 Security	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as	Grantors,	and	Citicorp North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.4	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed with	the	SEC	on	July	12,	2007	(file	number	001-11421))

4.28 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Security	Agreement,	between	DC	Financial,	LLC,	as	New	Grantor,	and	Citicorp	North	America,	Inc.,	as Collateral

Agent	(incorporated	by	reference	to	Exhibit	4.25	to	Dollar	General	Corporation's

4.29 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Security	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New	Grantor,	and	Citicorp	North	America,	Inc.,	as Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC on	January	25,	2008	(file	number	333-148320))

4.30 Pledge	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as	Pledgors,	and	Citicorp North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.5	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed with	the	SEC	on	July	12,	2007	(file	number	001-11421))

4.31 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Pledge	Agreement,	between	DC	Financial,	LLC,	as	Additional	Pledgor,	and	Citicorp	North	America,	Inc.,	as Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.27	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007 (file	number	333-148320))

4.32 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Pledge	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	Additional	Pledgor,	and	Citicorp	North	America,	Inc., as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC on	January	25,	2008	(file	number	333-148320))

4.33 ABL	Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Parent	Borrower,	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as Subsidiary	Borrowers,	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Administrative	Agent,	and	the	other	lending	institutions	from	time	to	time	party	thereto	(incorporated by	reference	to	Exhibit	4.6	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	number	001-11421))

4.34 Guarantee,	dated	as	of	September	11,	2007,	to	the	ABL	Credit	Agreement,	between	DC	Financial,	LLC	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.29	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number 333-148320))

4.35 Supplement	No.	1,	dated	as	of	December	31,	2007,	to	the	Guarantee	to	the	ABL	Credit	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New	Guarantor,	and	The	CIT Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))

4.36 ABL	Security	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Parent	Borrower,	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as Subsidiary	Borrowers,	collectively	the	Grantors,	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.7	to	Dollar General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	number	001-11421))

4.37 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	ABL	Security	Agreement,	between	DC	Financial,	LLC,	as	New	Grantor,	and	The	CIT	Group/Business	Credit	Inc., as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.31	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December 21,	2007	(file	number	333-148320))

4.38 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	ABL	Security	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New	Grantor,	and	The	CIT	Group/Business Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4, filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))

10.1 2007	Stock	Incentive	Plan	for	Key	Employees	of	Dollar	General	Corporation	and	its	Affiliates	(incorporated	by	reference	to	Exhibit	10.1	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.2 Form	of	Stock	Option	Agreement	between	Dollar	General	Corporation	and	officers	of	Dollar	General	Corporation	granting	stock	options	pursuant	to	the	2007	Stock Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.2	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007 (file	number	333-148320))*

10.3 Form	of	Option	Rollover	Agreement	between	Dollar	General	Corporation	and	officers	of	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	10.3	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.4 Form	of	Management	Stockholder's	Agreement	among	Dollar	General	Corporation,	Buck	Holdings,	L.P.	and	officers	of	Dollar	General	Corporation	(incorporated	by reference	to	Exhibit	10.4	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.5 Form	of	Sale	Participation	Agreement	between	Buck	Holdings,	L.P.	and	certain	officer-level	employees,	dated	July	6,	2007	(incorporated	by	reference	to	Exhibit	10.5	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.6 Agreement	among	Challis	Lowe,	Buck	Holdings,	L.P.	and	Dollar	General	Corporation,	dated	July	5,	2007,	regarding	call	right	and	termination	without	good	reason provision	in	Management	Stockholder's	Agreement	(incorporated	by	reference	to	Exhibit	10.6	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.9 Form	of	Stock	Option	Grant	Notice	in	connection	with	option	grants	made	pursuant	to	the	1998	Stock	Incentive	Plan	(incorporated	by	reference to	Dollar	 General Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005	(file	number	001-11421))*

10.10 Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and	restated	effective	December	31,	2007)	(incorporated	by	reference to	Exhibit	10.10 to	Dollar	 General Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.11 First	Amendment	to	the	Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and	restated	effective	December	31,	2007)	(incorporated	by	reference	to	Exhibit	10.11	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))*

10.12 Dollar	General	Corporation	Annual	Incentive	Plan	(effective	March	16,	2005,	as	approved	by	shareholders	on	May	24,	2005)	(incorporated	by	reference	to	Exhibit	10.6	to Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005)	(file	number	001-11421))*

10.13 Dollar	General	Corporation	2007	Teamshare	Bonus	Program	for	Named	Executive	Officers	(incorporated	by	reference to	Exhibit	10.3	Dollar	General	Corporation's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	May	4,	2007,	filed	with	the	SEC	on	June	7,	2007)	(file	number	001-11421))*

10.14 Summary	of	Dollar	General	Corporation	Life	Insurance	Program	as	Applicable	 to	Executive	Officers	(incorporated	by	reference	 to	Exhibit	10.19 to	Dollar	 General Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	February	2,	2007,	filed	with	the	SEC	on	March	29,	2007)	(file	number	001-11421))*

10.15 Dollar	General	Corporation	Domestic	Relocation	Policy	for	Officers	(incorporated	by	reference	 to	Exhibit	10.20 to	Dollar	General	Corporation's	Annual	Report	 on Form	10-K	for	the	fiscal	year	ended	February	2,	2007,	filed	with	the	SEC	on	March	29,	2007)	(file	number	001-11421))*

10.16 Summary	of	Director	Compensation	(incorporated	by	reference	to	Exhibit	10.19	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC on	December	21,	2007	(file	number	333-148320))

10.17 Employment	Agreement,	effective	as	of	January	11,	2008,	between	Dollar	General	Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.28	to	Dollar General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

10.18 Stock	Option	Agreement,	dated	as	of	January	21,	2008,	between	Dollar	General	Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.29	to	Dollar General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

10.19 Restricted	Stock	Award	Agreement,	effective	as	of	January	21,	2008,	between	 Dollar	General	Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit 10.32	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

10.20 Management	Stockholder's	Agreement,	dated	as	of	January	21,	2008,	among	Dollar	General	Corporation,	Buck	Holdings,	L.P.	and	Richard	Dreiling	(incorporated	by reference	to	Exhibit	10.30	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number 333-148320))*

10.21 Sale	Participation	Agreement,	dated	January	21,	2008,	between	Buck	Holdings,	L.P.	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.31	to	Dollar	General Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

10.22 Employment	Agreement,	dated	July	6,	2007,	by	and	between	Dollar	General	Corporation	and	David	L.	Beré	(incorporated	by	reference	to	Exhibit	10.1	to	Dollar	General Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	number	001-11421))*

10.23 Extension	of	Initial	Term	of	Employment	Agreement,	dated	December	27,	2007,	between	Dollar	General	Corporation	and	David	Beré	(incorporated	by	reference	to	Exhibit 10.33	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

10.24 Notice	of	Initiation	of	Transition	Period	under	Employment	Agreement,	dated	January	8,	2008,	by	Dollar	General	Corporation	to	David	Beré	(incorporated	by	reference	to Exhibit	10.34	to	Dollar	General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333- 148320))*

10.25 Employment	Agreement	with	David	M.	Tehle	effective	April	1,	2006	(incorporated	by	reference	to	Exhibit	99.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8- K	dated	March	30,	2006,	filed	with	the	SEC	on	April	5,	2006)	(file	number	001-11421))*

10.26 Employment	Agreement	with	Beryl	J.	Buley	effective	April	1,	2006	(incorporated	by	reference	to	Exhibit	99	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K dated	April	6,	2006,	filed	with	the	SEC	on	April	12,	2006)	(file	number	001-11421))*

10.27 Employment	Agreement	with	Kathleen	R.	Guion	effective	April	1,	2006	(incorporated	by	reference	to	Exhibit	99.2	to	Dollar	General	Corporation's	Current	Report	on Form	8-K	dated	March	30,	2006,	filed	with	the	SEC	on	April	5,	2006)	(file	number	001-11421))*

10.28 Employment	Agreement	with	Challis	M.	Lowe	effective	April	1,	2006	(incorporated	by	reference	to	Exhibit	10.31	to	Dollar	General	Corporation's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	February	2,	2007,	filed	with	the	SEC	on	March	29,	2007	(file	number	001-11421))*

10.29 Monitoring	Fee	Letter	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Dollar	General	Corporation,	Kohlberg	Kravis	Roberts	&	Co	L.P.,	and	Goldman,	Sachs &	Co.	(incorporated	by	reference	to	Exhibit	10.25	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file number	333-148320))

10.30 Indemnification	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Dollar	General	Corporation,	Kohlberg	Kravis	Roberts	&	Co	L.P.,	and	Goldman,	Sachs	&	Co. (incorporated	by	reference	to	Exhibit	10.26	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number 333-148320))

10.31 Purchase	Letter	Agreement,	dated	August	15,	2007,	between	Principal	Life	Insurance	Company	and	DC	Financial,	LLC	(incorporated	by	reference	to	Exhibit	10.27	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	December	21,	2007	(file	number	333-148320))

10.32 Supplemental	Release	Agreement	between	Dollar	General	Corporation	and	David	Perdue	dated	December	28,	2007	(incorporated	by	reference	to	Exhibit	10.35	to	Dollar General	Corporation's	Amendment	No.	1	to	Registration	Statement	on	Form	S-4,	filed	with	the	SEC	on	January	25,	2008	(file	number	333-148320))*

21 List	of	Subsidiaries	of	Dollar	General	Corporation

24 Powers	of	Attorney	(included	as	part	of	the	signature	pages	hereto)

31 Certifications	of	CEO	and	CFO	under	Exchange	Act	Rule	13a-14(a).

* Management	Contract	or	Compensatory	Plan


what was the change in millions of impairment charges included in sg&a expense from 2006 to 2007
  impairment_charges = 0.2 - 9.4
 answer = impairment_charges