Big Lots 2013 Annual Report Download - page 40

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We are required to periodically resubmit the 2006 Bonus Plan for shareholder approval so that bonus opportunities
awarded under the 2006 Bonus Plan can 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. If our shareholders do not approve the amended and restated 2006 Bonus Plan, bonus
opportunities previously awarded under the 2006 Bonus Plan will remain valid and the 2006 Bonus Plan will
remain in effect.
The Proposed Amended and Restated 2006 Bonus Plan
The primary amendments to the 2006 Bonus Plan reflected in the amended and restated 2006 Bonus Plan include:
• Expanding the performance criteria, and the equitable adjustments that may be made thereto, for
awards under the 2006 Bonus Plan. The amended and restated 2006 Bonus Plan includes several
additional performance criteria, and additional equitable adjustments that may be made to the
performance criteria, upon which the Committee may base the performance goals it establishes for
bonus opportunities awarded under the Plan. The Board believes that the 2006 Bonus Plan needs to
include these additional performance criteria and equitable adjustments to address all of the financial
measures that management now focuses on in its corporate operating plan. See “Description of Bonus
Awards” for a complete list of the performance criteria and equitable adjustments available under the
amended and restated 2006 Bonus Plan.
• Updating and clarifying certain other provisions of the 2006 Bonus Plan. The other proposed
amendments to the 2006 Bonus Plan principally consist of (1) updates and clarifications to better ensure
compliance with the requirements of Section 409A and Section 162(m) of the IRC, (2) clarifications to
the performance criteria and adjustment categories set forth in the appendix of the 2006 Bonus Plan,
and (3) additional revisions that we believe would improve the clarity of the 2006 Bonus Plan. We
believe these amendments would facilitate a better understanding of the 2006 Bonus Plan’s terms by
participants, shareholders, administrators and us.
Section 162(m) Approval Requirement
Section 162(m) of the IRC 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) of the IRC. Annual incentive awards
under the 2006 Bonus Plan will only constitute qualified performance-based compensation under Section 162(m)
of the IRC if certain requirements are satisfied, including shareholder approval of the material terms of the
performance criteria 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 criteria
(as described below in “Description of Bonus Awards”) used to determine whether bonus awards are earned.
Summary of 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 performance criteria 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 annual incentive award
opportunities awarded under the 2006 Bonus Plan qualify for a federal income tax deduction.
The purpose of the 2006 Bonus Plan is to advance our interests by (1) attracting, retaining and motivating
employees, (2) aligning participants’ interests with those of our shareholders, and (3) qualifying compensation paid
to our executives as qualified performance-based compensation under Section 162(m) of the IRC.
The following summary describes the material features of the amended and restated 2006 Bonus Plan and is
qualified in its entirety by reference to the complete text of the amended and restated 2006 Bonus Plan attached to
this Proxy Statement as Appendix B.