Big Lots 2013 Annual Report Download - page 38

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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)
of the IRC would be reduced by the amount of the excess parachute payment.
The 2012 LTIP addresses excess parachute payment penalties. Generally, if a participant in the 2012 LTIP receives
an excess parachute payment, the value of the payment is reduced to avoid the excess parachute penalties. However,
the 2012 LTIP 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). We are a party to an employment agreement with several of
our named executive officers. Those employment agreements provide that if the payments received by the named
executive officer in connection with a change in control constitute an excess parachute payment under Section
280G of the IRC, the executive’s benefits under his or her employment agreement will be reduced to the extent
necessary to become one dollar less than the amount that would generate such excise tax, if this reduction results in
a larger after-tax amount to the executive as compared to the excise tax reimbursement method. The compensation
payable on account of a change in control may be subject to the deductibility limitations of Sections 162(m) and
280G of the IRC.
Section 83(b)
A participant may elect pursuant to Section 83(b) of the IRC to have compensation 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 generally be entitled to
a corresponding tax deduction equal to the value of the Award affected by this election. If the participant who has
made an election subsequently forfeits the Award, then the participant will not be entitled to deduct the amount
previously recognized as income.
Section 409A
Section 409A of the IRC 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. If the requirements of Section 409A are not complied with, holders of such Awards may be taxed
earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be
subject to an additional 20% penalty tax and, potentially, interest and penalties. 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 2012 LTIP 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 February 1, 2014, the closing price of the Company’s common shares traded on the NYSE was $26.79 per share.