Big Lots 2011 Annual Report Download - page 48

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performance-based compensation. The Committee and the other outside directors determined that Mr. Fishman’s
continued leadership is important to our future performance due to our record growth and shareholder return
during his tenure with Big Lots and his vision for our future. The Committee and the other outside directors
desired to address their retention objective by delivering additional compensation to Mr. Fishman in an efficient
manner (see the “Equity for Fiscal 2011” section of this CD&A below for more detail on our efficient use of
common shares). In order to accomplish this goal, the Committee considered increasing Mr. Fishman’s cash
compensation, but instead elected to provide in the retention agreement that his equity awards for fiscal 2010,
fiscal 2011 and fiscal 2012 will be made solely in the form of restricted stock, which also will allow us to benefit
from the favorable tax treatment applicable to qualified performance-based compensation (see the “Tax and
Accounting Considerations” section of this CD&A for a further discussion of the deductibility of qualified
performance based compensation). The number of common shares underlying each restricted stock award is
dependent on our performance relative to the prior fiscal year’s operating profit, subject to collars established in the
retention agreement.
Structuring Mr. Fishman’s fiscal 2010, fiscal 2011 and fiscal 2012 equity awards solely in the form of restricted
stock substantially reduced the total number of common shares underlying those awards compared to the total
number of common shares underlying the equity awards made to him in prior years. For example, there were
530,000 common shares underlying Mr. Fishman’s fiscal 2009 equity award, which consisted of 200,000 common
shares underlying his restricted stock award and 330,000 common shares underlying his stock option award. In
each of fiscal 2010 and fiscal 2011, however, there were only 250,000 common shares underlying Mr. Fishman’s
equity award which consisted solely of restricted stock. Accordingly, the revised equity award structure established
by the retention agreement provided an annual reduction of 280,000 common shares, or 52.8% for fiscal 2010 and
fiscal 2011 compared to Mr. Fishman’s fiscal 2009 equity award. As a result of our fiscal 2011 operating profit
performance, Mr. Fishman was awarded 240,000 common shares underlying his fiscal 2012 restricted stock award,
a reduction of 10,000 common shares from the restricted stock award granted to him in fiscal 2011.
Mr. Fishman’s fiscal 2010 and fiscal 2011 restricted stock awards have vested, as we achieved the corporate
financial goals established at the beginning of each of those fiscal years and he remained employed by us through
the first anniversary of the grant dates of those awards. Mr. Fishman’s fiscal 2012 restricted stock award under
the retention agreement will vest if (1) we achieve a corporate financial goal established at the beginning of fiscal
2012 and (2) Mr. Fishman is employed by us on March 31, 2013. In the event that Mr. Fishman’s employment with
us is terminated involuntarily without cause or he resigns pursuant to a constructive termination while his fiscal
2012 restricted stock award is outstanding, that award shall remain outstanding and, subject to our achievement
of the applicable corporate financial goal, shall vest as if he had remained employed by us until the scheduled
vesting date.
Post-Termination and Change in Control Arrangements
The employment agreements with our named executive officers provide for potential severance and change
in control payments and other consideration, and the retention agreement with Mr. Fishman provides for the
accelerated vesting of outstanding restricted stock and other consideration upon a change in control, as described
below. The terms of these agreements were established through negotiation, during which we considered the
various factors discussed above in the “Employment Agreements” and “Retention Agreement” sections of this
CD&A. 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 agreements are intended to address competitive concerns by providing the
executives with compensation that may alleviate the uncertainty associated with foregoing other opportunities
and, if applicable, leaving another employer. The change in control provisions of the employment agreements
dictate that the executive would receive certain cash payments and other benefits upon a change in control only
if the executive is terminated in connection with the change in control. This “double trigger” is intended to allow
us to rely upon each named executive officer’s continued employment and objective advice, without concern that
the named executive officer might be distracted by the personal uncertainties and risks created by an actual or
proposed change in control. These potential payments and benefits provide our named executive officers with