Big Lots 2007 Annual Report Download - page 64

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years ending before the change in control (or over the participant’s entire period of service if that period is less than five
calendar years). This average is called the “Base Amount.” An excess parachute payment is the amount by which any
parachute payment exceeds the portion of the Base Amount allocated to such payment.
Some participants in the 2005 Incentive Plan may receive parachute payments in connection with a change in
control. If this happens, the value of each participant’s parachute payment from the 2005 Incentive Plan must be
combined with other parachute payments the same participant is entitled to receive under other agreements or
arrangements with us or our subsidiaries, such as an employment agreement or a change in control agreement. If
the participant is a disqualified individual and the combined value of all parachute payments is an excess parachute
payment, the participant must pay an excise tax equal to 20% of the value of all parachute payments above
100% of the participant’s Base Amount. This tax is due in addition to other federal, state and local income, wage
and employment taxes. Also, neither we nor any of our subsidiaries would be able to deduct the amount of any
participant’s excess parachute payment and the $1,000,000 limit on deductible compensation under Section 162(m)
would be reduced by the amount of the excess parachute payment.
The 2005 Incentive Plan addresses excess parachute payment penalties. Generally, if a participant in the 2005 Incentive
Plan receives an excess parachute payment, the value of the payment is reduced to avoid the excess parachute penalties.
However, the 2005 Incentive Plan also states that other means of dealing with these penalties will be applied if required
by the terms of another written agreement (whether currently in effect or adopted in future) with us or any of our
subsidiaries (such as an employment or a change in control agreement). Each named executive officer has an employment
agreement with the Company that provides that the executive would also receive a payment in the amount necessary to
hold them harmless from the effects of Sections 280G and 4999 of the IRC.
Section 83(b)
A participant may elect pursuant to Section 83(b) of the IRC to have income recognized at the grant date of an
Award of restricted stock, restricted stock units or performance units and to have the applicable capital gain
holding period commence as of that date. If a participant makes this election, we will be entitled to a corresponding
tax deduction equal to the value of the Awards affected by this election.
Section 409A
Section 409A of the IRC, which became effective January 1, 2005, imposes certain restrictions on amounts
deferred under nonqualified deferred compensation plans and a 20% excise tax on amounts that are subject to, but
do not comply with, Section 409A of the IRC. Section 409A of the IRC includes a broad definition of nonqualified
deferred compensation plans, which includes certain types of equity incentive compensation. It is intended that the
Awards granted under the 2005 Incentive Plan will comply with or be exempt from the requirements of Section
409A of the IRC and the treasury regulations promulgated thereunder (and any subsequent notices or guidance
issued by the Internal Revenue Service).
Market Value
On March 31, 2008, the closing price of our common shares traded on the NYSE was $22.30 per share.