Big Lots 2011 Annual Report Download - page 30

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As of March 15, 2012, there were 2,320,661 common shares available for grant under the 2005 LTIP and 4,702,362
common shares underlying awards outstanding under the 2005 LTIP (3,440,873 of which are underlying stock
options and 1,261,489 of which are underlying restricted stock). As of March 15, 2012: (1) the weighted average
exercise price of the 3,664,123 outstanding stock options under our equity compensation plans (including under
those plans that previously terminated) was $32.89 and the weighted average remaining term was 4.95 years; and
(2) there were 1,261,489 restricted stock awards outstanding under our equity compensation plans (all of which
were issued under the 2005 LTIP). Between March 15, 2012 and May 23, 2012, we do not expect to grant awards
under the 2005 LTIP covering more than 50,000 common shares.
We have made a concerted effort to manage to reasonable levels the annual run rate – that is, the total number of
common shares underlying equity-related awards granted in any given fiscal year divided by the weighted-average
number of common shares outstanding during that fiscal year. The annual run rate for fiscal 2009, 2010 and 2011
was 1.76%, 1.94% and 2.17%, respectively, resulting in a three-year average run rate of 1.96%. It is our intention
to continue to manage our run rate over time to reasonable levels while ensuring that our executive compensation
program is competitive and motivational.
The 2012 LTIP is designed to meet the requirements for deductibility of executive compensation under Section
162(m) of the IRC (“Section 162(m)”) with respect Awards under the 2012 LTIP that are intended to qualify as
“qualified performance-based compensation” under Section 162(m). In order to meet one of the Section 162(m)
deductibility requirements, the 2012 LTIP imposes limits on the number of common shares underlying Awards that
any one participant may receive, as described below in the “Limits on Awards” section of this Proposal Two.
The 2012 LTIP does not permit the repricing of Awards without the approval of shareholders or the granting of
Awards with a reload feature.
The following is a summary of the 2012 LTIP. The summary is qualified in its entirety by reference to the complete
text of the 2012 LTIP, a copy of which is attached to this Proxy Statement as Appendix A.
Administration
Subject to the terms of the 2012 Plan, the selection of participants in the 2012 LTIP, the level of participation of
each participant and the terms and conditions of all Awards will be determined by the Committee. Each member
of the Committee will be an “independent director” for purposes of our Corporate Governance Guidelines, the
Committee’s charter and the NYSE listing requirements; a “non-employee director” within the meaning of Rule
16b-3 under the Exchange Act; and an “outside director” within the meaning of Section 162(m). Currently, the
Committee is comprised of three directors, each meeting all of these criteria. Consistent with the purpose of
the 2012 LTIP, the Committee will have the discretionary authority to (1) interpret the 2012 LTIP, (2) prescribe,
amend and rescind rules and regulations relating to the 2012 LTIP, and (3) make all other determinations necessary
or advisable for the administration or operation of the 2012 LTIP. The Committee may delegate authority to
administer the 2012 LTIP as it deems appropriate, subject to the express limitations set forth in the 2012 LTIP.
Limits on Awards
The Board has reserved a number of common shares for issuance under the 2012 LTIP equal to the sum of
(1) 7,750,000 newly issued common shares plus (2) any common shares subject to the 4,702,362 outstanding awards
as of March 15, 2012 under the 2005 LTIP that, on or after March 15, 2012, cease for any reason to be subject to
such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or
settled in vested and nonforfeitable common shares).
The 2012 Plan is designed with a flexible share pool. With a flexible share pool, the share authorization is based on
the least costly award vehicle (generally stock options). The value of an option is compared to a full value award (a
full value award is an award other than a stock option or SAR that is settled by the issuance of a common share) to
determine a valuation ratio. We have used a binominal model to determine our valuation ratio of 1:2.15. This means
that every time an option is granted, the authorized pool is reduced by one common share and every time a full
value share is granted, the authorized pool is reduced by 2.15 common shares.