Big Lots 2008 Annual Report Download - page 33

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We entered into the employment agreements because the agreements provide us with several protections (including
non-competition, confidentiality, non-solicitation and continuing cooperation provisions) in exchange for minimum
salary levels and target and stretch bonus payout percentages, potential severance and change in control payments
and other benefits. Further, we believe it is in our best interests and the best interests of our shareholders to
enter into these employment agreements to assure the undivided loyalty and dedication of the named executive
officers. We entered into amended and restated employment agreements with each named executive officer in
fiscal 2008 for the principal purpose of conforming the employment agreements to the substantive and procedural
requirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (“IRC”), and the
regulations promulgated thereunder.
We negotiated the terms of each employment agreement, including the minimum salary levels and minimum target
and stretch bonus payout percentages set forth therein, with the executive. In those negotiations, we considered
many factors, including:
• our need for the executive;
• the executive’s level of responsibility and the potential impact that the executive could have on our
operations and financial condition;
• the skills and past and anticipated future performance of the executive;
• the degree to which we believe the executive will be able to help improve our business;
• the compensation being paid to similarly-situated executives at peer group companies;
• to the extent applicable, the other elements of compensation being offered to the executive and the
amount of compensation being paid to the executive by another employer;
• the relationship between the compensation being offered to the executive and that being paid to the
other EMC members; and
• our perception of our bargaining power and the executive’s bargaining power.
Under the terms of their employment agreements, the named executive officers are each entitled to receive at
least the following salaries, which amounts are not subject to automatic increases: Mr. Fishman: $1,200,000;
Mr. Cooper: $440,000; Mr. Waite: $550,000; Mr. Martin: $520,000; and Mrs. Bachmann: $440,000. The terms
of each named executive officer’s employment agreement also establish the minimum payout percentages that
may be set annually for his or her target and stretch bonus levels. The payout percentages set by the employment
agreements for target bonus and stretch bonus, respectively, are as follows (expressed as a percentage of the
executive’s salary): Mr. Fishman: 100% and 200%; Mr. Cooper: 60% and 120%; Mr. Waite: 75% and 150%;
Mr. Martin: 60% and 120%; and Mrs. Bachmann: 60% and 120%. The employment agreements also provide each
named executive officer with an automobile or automobile allowance.
Upon entry into the employment agreements, we believed the named executive officers’ salaries and payout
percentages were commensurate with each executive’s job responsibilities, overall individual performance,
experience, qualifications and salaries and the payout percentages provided to similarly-situated executives at
peer companies. When the employment agreements were amended and restated in fiscal 2008, the Committee and
each named executive officer agreed to update the salary and payout percentages to reflect the awards made by
the Committee and other outside directors in March 2008. The Committee believed this was appropriate because
it completed its annual executive compensation review earlier in the fiscal year (as discussed in this CD&A),
which included a review of the factors considered when we initially entered into an employment agreement
with each executive. Updating the salary and payout percentages in each employment agreement was also
offered by the Committee in consideration of the named executive officers’ entry into the amended and restated
employment agreements. The Committee prefers the amended and restated employment agreements over the
former agreements, because the amended and restated employment agreements follow the same form of agreement
(making them easier to administer) and impose a broader definition of termination for cause in our agreements
with Mr. Waite, Mr. Martin and Mrs. Bachmann (such definition already applied to Mr. Fishman and Mr. Cooper
under their former employment agreements with us). Because the various factors considered when evaluating each
named executive officer’s salary and payout percentages change, the Committee reviews the salaries and payout
percentages annually and adjustments are made if warranted. See the “Salary for Fiscal 2008” and “Bonus for
Fiscal 2008” sections of this CD&A for a further discussion of the salaries and payout percentages for the named
executive officers for fiscal 2008.