Big Lots 2007 Annual Report Download - page 45

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outside directors retain the right to adjust the payout percentages and, in the past, have generally done so as deemed
necessary to realign an executive’s bonus opportunity with our compensation philosophy. See the “Overview of our
Executive Compensation Program – Elements of In-Service Compensation – Bonus,” “Overview of our Executive
Compensation Program – Employment Agreements” and “Our Executive Compensation Program for Fiscal 2007 –
Bonus for Fiscal 2007” sections of the CD&A for more information regarding the 2006 Bonus Plan and the awards
made under that plan for fiscal 2007.
Big Lots 2005 Long-Term Incentive Plan
Since January 1, 2006, all employee equity awards, including those made to the named executive officers, have
been granted under the 2005 Incentive Plan. The 2005 Incentive Plan authorizes the grant of nonqualified stock
options (“NQSOs”), incentive stock options, as defined in Section 422 of the IRC (“ISOs”), stock appreciation
rights (“SARs”), restricted stock, restricted stock units and performance unit awards, any of which may be granted
on a stand-alone, combination or tandem basis. To date, we have granted only stock options and restricted stock
under the 2005 Incentive Plan.
Awards under the 2005 Incentive Plan may be made to any salaried employee, consultant or advisor of Big Lots
or its affiliates. The number of common shares available for issuance under the 2005 Incentive Plan consists of:
(i) an initial allocation of 1,250,000 common shares; (ii) 2,001,142 common shares, the common shares that were
available under the 1996 Incentive Plan upon its expiration; and (iii) an annual increase equal to 0.75% of the total
number of issued common shares (including treasury shares) as of the start of each fiscal year during which the
2005 Incentive Plan is in effect. Of this number, during the term of the 2005 Incentive Plan, no more than 33⅓%
of all common shares may be issued in the form of restricted stock, restricted stock units and performance units
and no more than 5,000,000 common shares may be issued pursuant to grants of ISOs. A participant may receive
multiple awards under the 2005 Incentive Plan. Awards intended to qualify as “performance based compensation”
under Section 162(m) are limited to: (i) 2,000,000 shares of restricted stock per participant annually; (ii) 3,000,000
common shares underlying stock options and SARs per participant during any three consecutive calendar years;
and (iii) $6,000,000 cash through performance units per participant during any three consecutive calendar years.
Also, the 2005 Incentive Plan provides that the total number of common shares underlying outstanding awards
granted under the 2005 Incentive Plan, the 1996 Incentive Plan, the Big Lots, Inc. Executive Stock Option and
Stock Appreciation Rights Plan (“ESO Plan”), and the Director Stock Option Plan may not exceed 15% of the
Company’s issued and outstanding common shares (including treasury shares) as of any date. The 1996 Incentive
Plan and the ESO Plan have expired, and there are no awards outstanding under the ESO Plan.
Each stock option granted under the 2005 Incentive Plan allows the recipient to acquire our common shares, subject
to the completion of a vesting period and continued employment with us through the applicable vesting date. Once
vested, these common shares may be acquired at a fixed exercise price per share and they remain exercisable for
the term set forth in the award agreement. Pursuant to the terms of the 2005 Incentive Plan, the exercise price of a
stock option may not be less than 100% of the volume-weighted average trading price of our common shares on the
grant date or, if the grant date occurs on a day other than a trading day, on the next trading day.
Under the restricted stock grants made pursuant to the 2005 Incentive Plan, if we meet the first trigger and the
recipient remains employed by us, the restricted stock will vest at the opening of our first trading window that
is five years after the grant date. If we meet the second trigger and the recipient remains employed by us, the
restricted stock will vest after we file with the SEC our Annual Report on Form 10-K for the year in which the
second trigger is met. The restricted stock will also vest on a prorated basis in the event that the recipient dies
or becomes disabled after we meet the first trigger but before the lapse of five years. The restricted stock will
be forfeited, in whole or in part, as applicable, if the recipient’s employment with us terminates. See the “Our
Executive Compensation Program for Fiscal 2007 – Equity for Fiscal 2007” section of the CD&A for more
information regarding the equity awards made under the 2005 Incentive Plan in fiscal 2007.
Upon a change in control (as defined in the 2005 Incentive Plan), all awards outstanding under the 2005 Incentive
Plan automatically become fully vested. For a discussion of the change in control provisions in the named executive
officers’ employment agreements and the 2005 Incentive Plan, see the narrative disclosure accompanying the
Potential Payments Upon Termination or Change in Control tables below.
For a discussion of the amendments to the 2005 Incentive Plan for which we are seeking shareholder approval at the
Annual Meeting, see Proposal Two below.