Big Lots 2011 Annual Report Download - page 36

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Deferred Stock Units
Generally, a participant who defers compensation into deferred stock units will not recognize income at the time
the compensation would otherwise have been paid to the participant. Upon the settlement of the deferred stock unit,
the participant will be taxed on the then-current fair market value of the shares or cash paid and we will be entitled
to a deduction equal to the amount of ordinary compensation income the participant is required to recognize as a
result of the settlement.
Other Awards
The current United States federal income tax consequences of other Awards authorized under the 2012 LTIP are
generally in accordance with the following: (1) the fair market value of other stock-based awards is generally
subject to ordinary compensation income tax at the time the restrictions lapse, unless the participant elects to
accelerate recognition as of the date of grant; and (2) the amount of cash paid (or the fair market value of the
common shares issued) to settle restricted stock units, performance shares, performance share units, performance
units and cash-based awards is generally subject to ordinary compensation income tax. In each of the foregoing
cases, we will generally be entitled to a corresponding federal income tax deduction at the same time the
participant recognizes ordinary compensation income.
Dividend-Equivalent Rights
Participants may be granted dividend-equivalent rights in connection with any Award other than a stock option
or SAR. A participant who receives dividend-equivalent rights with respect to an Award between the grant date
and the date the Award is exercised, payable or vests or when the restrictions lapse or expires (as the terms of
the Awards dictate) will recognize ordinary compensation income equal to the value of cash or common shares
delivered and we will generally be entitled to a corresponding deduction for such dividends.
Section 162(m)
As described above, Section 162(m) generally provides that a company is prohibited from deducting compensation
paid to certain “covered employees” (i.e., the principal executive officer and three other most highly compensated
officers (other than the principal financial officer)) in excess of $1 million per person in any year. Compensation
that qualifies as “qualified performance-based compensation” is excluded for purposes of calculating the amount
of compensation subject to the $1 million limit. To qualify as qualified performance-based compensation, Awards
must be granted under the 2012 LTIP by the Committee and satisfy the 2012 LTIP’s limit on the total number
of common shares that may be awarded to any one participant during a year. In addition, for Awards other than
stock options to qualify as qualified performance-based compensation, the issuance or vesting of the Award, as
applicable, must be contingent upon satisfying one or more of the performance criteria listed in the 2012 LTIP, as
established and certified by the Committee.
Sections 280G and 4999
Section 280G of the IRC disallows deductions for excess parachute payments and Section 4999 of the IRC
imposes penalties on persons who receive excess parachute payments. A parachute payment is the present value
of any compensation amount that is paid to “disqualified individuals” (such as our and our subsidiaries’ officers
and highly paid employees) that are contingent upon or paid on account of a change in control – but only if such
payments, in the aggregate, are equal to or greater than 300% of the participant’s taxable compensation averaged
over the five calendar 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 2012 LTIP may receive parachute payments in connection with a change in control.
If this happens, the value of each participant’s parachute payment from the 2012 LTIP 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