Big Lots 2007 Annual Report Download - page 61

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Performance-Based Awards
Generally, Section 162(m) provides that we may not deduct more than $1,000,000 of compensation paid during
any fiscal year to our covered employees (i.e., our CEO or our three other highest compensated executives
(excluding the principal financial officer) employed at the end of the fiscal year). However, this limit does not
apply to “performance based compensation.” Any Awards granted under the 2005 Incentive Plan may be granted
in a form that qualifies for the “performance based compensation” exception under Section 162(m). Under Section
162(m), the terms of the Award must state, in terms of an objective formula or standard, the method of computing
the amount of compensation payable under the Award, and must preclude discretion to increase the amount of
compensation payable under the terms of the Award (but may give the Committee discretion to decrease the
amount of compensation payable). The 2005 Incentive Plan specifies performance goals that the Committee must
use when granting a performance-based Award. As described above, the 2005 Incentive Plan imposes certain
limitations on the number and value of performance-based Awards to covered employees.
Effect of Change in Control
Awards granted under the 2005 Incentive Plan are generally subject to special provisions upon the occurrence of
a change in control (as defined in the 2005 Incentive Plan and discussed in the “Executive Compensation” section
of this Proxy Statement). For Awards granted under the 2005 Incentive Plan, if a change in control occurs, then:
(i) all outstanding stock options and SARs shall become fully exercisable; (ii) all remaining restrictions applicable
to restricted stock and restricted stock units shall lapse and such restricted stock and restricted stock units shall
become free of restrictions, fully vested and transferable; and (iii) any performance goals or other condition
applicable to performance units shall be deemed to be satisfied in full with the common shares or cash subject to
such Award being fully distributable. Payments under Awards that become subject to the excess parachute payment
rules of Section 280G of the IRC may be reduced under certain circumstances. See the “Tax Treatment of Awards
— Sections 280G and 4999” section below for more details.
Limited Transferability
All Awards or common shares subject to an Award under the 2005 Incentive Plan are nontransferable except upon
death, either by the participant’s will or the laws of descent and distribution or through a beneficiary designation,
and Awards are exercisable during the participant’s lifetime only by the participant (or by the participant’s legal
representative in the event of the participant’s incapacity).
Equitable Adjustments
With the approval of the proposed amendments, in the event of a reorganization, recapitalization, merger, spin-
off, stock split or other specified changes affecting us or our capital structure, the Committee is required to make
equitable adjustments that reflect equitably the effects of such changes to the participants. Such adjustments may
relate to the number of our common shares available for grant, as well as to other maximum limitations under the
2005 Incentive Plan (e.g., exercise prices and number of Awards), and the number of our common shares or other
rights and prices under outstanding Awards.
Plan Benefits
The Committee has discretionary authority to grant Awards pursuant to the 2005 Incentive Plan. The 2005
Incentive Plan does not contain any provision for automatic grants. As a result, the future Awards, benefits or
amounts that may be received by any individual participant or group of participants are not determinable.