Big Lots 2009 Annual Report Download - page 71

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The 1996 Incentive Plan terminated on December 31, 2005. The DSO Plan terminated on May 30, 2008. The
number of common shares available for issuance under the 2005 Incentive Plan is adjusted annually by adding
0.75% of the total number of issued common shares (including treasury shares) as of the start of each of our fiscal
years that the 2005 Incentive Plan is in effect. See the “Stock Ownership - Ownership of Our Common Shares
by Certain Beneficial Owners and Management” section of this Proxy Statement for additional information with
respect to security ownership of certain beneficial owners and management.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDED AND RESTATED 2005 INCENTIVE PLAN.
PROPOSAL THREE: APPROVAL OF THE AMENDED AND RESTATED BIG LOTS 2006 BONUS PLAN
Background
On March 3, 2010, the Board adopted, based on the recommendation of the Compensation Committee (which we
refer to as the “Committee” throughout this discussion of Proposal Three), and proposed that our shareholders
approve, the amended and restated 2006 Bonus Plan. The 2006 Bonus Plan provides for cash compensation to be
paid annually when we meet or exceed minimum corporate performance amounts under one or more financial
measures approved by the Committee and other outside directors at the start of the fiscal year. The 2006 Bonus
Plan is intended to meet the requirements for qualified performance-based compensation under Section 162(m) of
the IRC so that bonus opportunities awarded under the 2006 Bonus Plan qualify for a federal income tax deduction.
Our shareholders first approved the 2006 Bonus Plan on May 25, 2006, and subsequently amended and restated
the 2006 Bonus Plan effective December 4, 2008 for the purpose of complying with Section 409A of the IRC. The
purpose of the 2006 Bonus Plan is to advance our interests by (i) attracting, retaining and motivating employees,
(ii) aligning participants’ interests with those of our shareholders, and (iii) qualifying compensation paid to our
executive officers as qualified performance-based compensation under Section 162(m).
The amended and restated 2006 Bonus Plan includes certain amendments for which we desire to obtain shareholder
approval. In addition, we are required to periodically resubmit the 2006 Bonus Plan for shareholder approval so that
bonus opportunities awarded under the 2006 Bonus Plan can continue to qualify as qualified performance-based
compensation under Section 162(m) of the IRC. Therefore, we are seeking shareholder approval with respect to the
amended and restated 2006 Bonus Plan in its entirety. The amended and restated 2006 Bonus Plan will become
effective if and when approved by our shareholders at the Annual Meeting. If our shareholders do not approve the
amended and restated 2006 Bonus Plan, some or all of the compensation earned under the 2006 Bonus Plan may not
be deductible by us, bonus opportunities previously awarded under the 2006 Bonus Plan will remain valid and the
2006 Bonus Plan will remain in effect. Although we strive to preserve the deductibility of bonus compensation, to
maintain flexibility in compensating executive officers in a manner consistent with our compensation philosophy,
the Committee has not adopted a policy that all bonus compensation must be deductible under Section 162(m).
Section 162(m) Approval Requirement
Section 162(m) generally provides that we may not deduct more than $1,000,000 of compensation paid during any
fiscal year to our covered employees (i.e., our CEO and our three other highest compensated executives (excluding
the principal financial officer) employed at the end of the fiscal year). However, this limit does not apply to
“qualified performance-based compensation” as defined by Section 162(m). Bonus awards under the 2006 Bonus
Plan will only constitute qualified performance-based compensation under Section 162(m) if certain requirements
are satisfied, including shareholder approval of the material terms of the performance goals of the 2006 Bonus
Plan at least once every five years. By approving the amended and restated 2006 Bonus Plan, our shareholders will
approve, among other things, the material terms of the performance goals and criteria (as described below) used to
determine whether bonus awards are earned, the 2006 Bonus Plan’s eligibility requirements, and the limits on the
bonus awards that may be made under the 2006 Bonus Plan.