Big Lots 2007 Annual Report Download - page 146

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 6 — Shareholders’ Equity (Continued)
In June 2006, we paid $14.7 million to enter into a structured share repurchase transaction which settled in
cash on its maturity date in September 2006. The initial cash disbursement and subsequent receipt of cash were
recorded in additional paid-in capital on our consolidated balance sheet. We entered into the structured share
repurchase transaction as part of our share repurchase program announced in February 2006. Because the
market price of our common shares was above $15.34 on the maturity date, we received $15.3 million on the
maturity date, representing our original investment of $14.7 million and a $0.6 million return on our investment.
The shares acquired under the repurchase programs, including shares acquired under the GSR, were recorded as
treasury shares, at cost.
Note 7 — Share-Based Plans
In May 2005, our shareholders approved the Big Lots 2005 Long-Term Incentive Plan (“2005 Incentive
Plan”). The 2005 Incentive Plan replaced the Big Lots, Inc. 1996 Performance Incentive Plan, as amended
(“1996 Incentive Plan”). Beginning January 1, 2006, employee equity awards have been issued under the 2005
Incentive Plan.
The 1996 Incentive Plan and 2005 Incentive Plan authorize the issuance of incentive and nonqualified stock
options, restricted stock, restricted stock units, performance units, and stock appreciation rights. We have
not issued restricted stock units, performance units, or stock appreciation rights. As a result of its expiration,
no common shares are available for issuance under the 1996 Incentive Plan. The number of common shares
available for issuance under the 2005 Incentive Plan consists of: 1) an initial allocation of 1,250,000 common
shares; 2) 2,001,142 common shares, the number of common shares that were available under the 1996 Incentive
Plan upon its expiration; and 3) an annual increase equal to 0.75% of the total number of issued common shares
(including treasury shares) as of the start of each of our fiscal years during which the 2005 Incentive Plan
is in effect. The Compensation Committee of our Board of Directors (“Committee”), which is charged with
administering the 2005 Incentive Plan, has the authority to determine the terms of each award. Stock options
granted to employees generally expire on the lesser of: 1) the term set by the Committee, which has historically
been 7 to 10 years from the grant date; 2) one year following death or disability; or 3) three months following
termination. Stock options granted under the 1996 Incentive Plan and 2005 Incentive Plan may be either
nonqualified or incentive stock options, and the exercise price may not be less than the fair market value of the
underlying common shares (i.e. 100% of the volume-weighted average trading price) on the grant date. The
stock options generally vest ratably over a four-year or five-year period; however, upon a change in control, all
awards outstanding automatically vest.
In addition to the 2005 Incentive Plan, we maintain the Big Lots Director Stock Option Plan (“Director Stock
Option Plan”) for non-employee directors. The number of common shares initially available for issuance under
the Director Stock Option Plan was 781,250 shares. The Director Stock Option Plan is administered by the
Committee pursuant to an established formula. Neither the Board of Directors nor the Committee exercises
any discretion in administration of the Director Stock Option Plan. Grants are made annually, approximately
90 days following the Annual Meeting of Shareholders, at an exercise price equal to the fair market value of
the underlying common shares (i.e. 100% of the final trading price) on the date of grant. The present formula
provides to each non-employee director an annual grant of an option to acquire 10,000 of our common shares
which becomes fully exercisable over a three-year period: 20% of the shares on the first anniversary, 60% on the
second anniversary, and 100% on the third anniversary. Stock options granted to non-employee directors expire
on the lesser of: 1) 10 years plus one month; 2) one year following death or disability; or 3) at the end of our
trading window immediately following termination.
On November 21, 2005, we announced that the Committee, after discussion with our Board of Directors,
approved accelerating the vesting of stock options representing approximately 3.8 million of our common shares
awarded on or before February 21, 2005, under the 1996 Incentive Plan and the Director Stock Option Plan. The