Big Lots 2007 Annual Report Download - page 33

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Unless the executive and we mutually agree to amend or terminate his or her employment agreement, its terms
will remain unchanged and it will remain effective as long as we employ the executive. The consequences of
termination of the employment agreement depend on the circumstances of termination.
Post-Termination and Change in Control Arrangements
The employment agreements with the named executive officers provide for potential severance and change
in control payments and other consideration. The terms of these employment agreements were set through
negotiation, during which we considered the various factors discussed in the prior section. Our equity
compensation plans also provide for the accelerated vesting of outstanding stock options and restricted stock in
connection with a change in control.
The severance provisions of the employment agreements are intended to address competitive concerns by
providing the executives with compensation that may alleviate the uncertainty of leaving another employer or
foregoing other opportunities. The change in control provisions of the employment agreements dictate that the
executive receives certain cash payments and other benefits only if there is a change in control and the executive
is terminated in connection with the change in control. This “double trigger” is intended to allow us to rely upon
the named executive officers’ continued employment and objective advice, without concern that a named executive
officer might be distracted by the personal uncertainties and risks created by an actual or proposed change in
control. These potential benefits provide our named executive officers with important protections that we believe
are necessary to attract and retain executive talent.
While the Committee considers the potential payments upon termination or change in control annually when
it establishes compensation for the applicable year, this information is not a primary consideration in setting
salary or bonus level or awarding equity compensation. We believe that the objectives of attracting and retaining
qualified executives and providing incentives for executives to continue their employment with us would not be
adequately served if potential payments to a named executive officer upon termination or change in control were a
determinative factor in awarding current compensation.
See the “Potential Payments Upon Termination or Change in Control” narrative disclosure and tables following
this CD&A for a discussion of compensation that may be paid to the named executive officers in connection with a
change in control or the termination of their employment with us.
Retirement Plans
We maintain four retirement plans: (i) a tax-qualified, funded noncontributory defined benefit pension plan
(“Pension Plan”); (ii) a non-qualified, unfunded supplemental defined benefit pension plan (“Supplemental Pension
Plan”); (iii) a tax-qualified defined contribution plan (“Savings Plan”); and (iv) a non-qualified supplemental
defined contribution plan (“Supplemental Savings Plan”). We believe that the Savings Plan and Supplemental
Savings Plan are generally commensurate with the retirement plans provided by our competitors and others in our
compensation peer group, and that providing these plans allows us to better attract and retain quality executive
talent. Participation in the Pension Plan and Supplemental Pension Plan, which we do not believe are material
elements of our executive compensation program, is limited to certain employees whose hire date precedes April
1, 1994. See the narrative disclosure accompanying the Pension Benefits and Nonqualified Deferred Compensation
tables following this CD&A for a discussion of our retirement plans.
Review of Effectiveness
Annually, the Committee reviews whether our executive compensation program remains effective at satisfying our
philosophy and objectives. The Committee reviews the total compensation earned by each EMC member. Total
compensation is evaluated in light of numerous objective and subjective factors, including our past and projected
future performance, the past and projected future performance of areas of the business for which the executive
is responsible, comparative compensation data, and the relationship between total compensation and shareholder
return. The Committee also reviews the types of equity awards that we have made historically (i.e., stock options
and restricted stock), the trends in equity compensation among our peer group, and the impact that any changes in
laws and/or accounting standards may have on our equity awards in determining whether to make adjustments in
our executive compensation program.