SHARE-BASED PLANS

Our shareholders initially approved our existing equity compensation plan, the Big Lots 2005 Long-Term Incentive Plan (“2005 LTIP”) in May 2005, approved an amendment in May 2008, and approved the amended and restated 2005 LTIP effective May 27, 2010. The 2005 LTIP authorizes the issuance of incentive and nonqualified stock options, restricted stock, restricted stock units, performance units, and stock appreciation rights. We have not issued incentive stock options, restricted stock units, performance units, or stock appreciation rights under the 2005 LTIP. The number of common shares available for issuance under the 2005 LTIP consists of: 1) an initial allocation of 1,250,000 common shares; 2) 2,001,142 common shares, the number of common shares that were available under the predecessor Big Lots, Inc. 1996 Performance Incentive Plan (“1996 LTIP”) upon its expiration; 3) 2,100,000 common shares approved by our shareholders in May 2008; and 4) an annual increase equal to 0.75% of the total number of issued common shares (including treasury shares) as of the start of each of our fiscal years during which the 2005 LTIP is in effect. The Compensation Committee of our Board of Directors (“Committee”), which is charged with administering the 2005 LTIP, has the authority to determine the terms of each award. Nonqualified stock options granted to employees under the 2005 LTIP, the exercise price of which may not be less than the fair market value of the underlying common shares on the grant date, generally expire on the earlier of: 1) the seven year term set by the Committee; or 2) one year following termination of employment, death, or disability. The nonqualified stock options generally vest ratably over a four-year period; however, upon a change in control, all awards outstanding automatically vest.

In addition to the 2005 LTIP, we previously maintained the Big Lots Director Stock Option Plan ("Director Stock Option Plan") for non-employee directors. The Director Stock Option Plan was administered by the Committee pursuant to an established formula. Neither the Board of Directors nor the Committee exercised any discretion in administration of the Director Stock Option Plan. Grants were made annually at an exercise price equal to the fair market value of the underlying common shares on the date of grant. The annual grants to each non-employee director of an option to acquire 10,000 of our common shares became fully exercisable over a three‑year period: 20% of the shares on the first anniversary, 60% on the second anniversary, and 100% on the third anniversary. Stock options granted to non-employee directors expire on the earlier of: 1) 10 years plus one month; 2) one year following death or disability; or 3) at the end of our next trading window one year following termination. In connection with the amendment to the 2005 LTIP in May 2008, our Board of Directors amended the Director Stock Option Plan so that no additional awards may be made under that plan. Our non-employee directors did not receive any stock options in 2011, 2010, and 2009, but did, as discussed below, receive restricted stock awards under the 2005 LTIP.

Share-based compensation expense was $25.0 million, $24.6 million and $20.3 million in 2011, 2010, and 2009, respectively. We use a binomial model to estimate the fair value of stock options on the grant date. The binomial model takes into account variables such as volatility, dividend yield rate, risk-free rate, contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of retirement of the option holder in computing the value of the option. Expected volatility is based on historical and current implied volatilities from traded options on our common shares. The dividend yield on our common shares is assumed to be zero since we have not paid dividends and have no current plans to do so in the future. The risk-free rate is based on U.S. Treasury security yields at the time of the grant. The expected life is determined from the binomial model, which incorporates exercise and post-vesting forfeiture assumptions based on analysis of historical data.

The weighted-average fair value of stock options granted and assumptions used in the stock option pricing model for each of the respective periods were as follows:



	2011			2010			2009
Weighted-average fair value of stock options granted	$	14.43		$	13.64		$	7.89
Risk-free interest rates	1.8		%	2.2		%	1.7		%
Expected life (years)	4.2			4.2			4.3
Expected volatility	41.7		%	45.6		%	56.0		%
Expected annual forfeiture rate	1.5		%	1.5		%	1.5		%

The following table summarizes information about our stock options outstanding and exercisable at January 28, 2012:



Range of Prices				Options Outstanding				Options Exercisable
Greater Than		Less Than or Equal to		Options Outstanding	Weighted-Average Remaining Life (Years)	Weighted-Average Exercise Price		Options Exercisable	Weighted-Average Exercise Price
$	10.01	$	20.00	1,071,948	3.4	$	16.45	668,198	$	15.83
20.01		30.00		991,850	2.8	24.95		784,349	25.92
30.01		40.00		837,125	5.2	35.76		211,625	35.82
$	40.01	$	50.00	775,500	6.1	41.20		2,500	41.14
				3,676,423	4.2	$	28.36	1,666,672	$	23.16

A summary of the annual stock option activity for fiscal years 2009, 2010, and 2011 is as follows:



	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (000's)
Outstanding stock options at January 31, 2009	3,960,568		$	19.42
Granted	967,500		17.62
Exercised	(361,560	)	13.64
Forfeited	(69,875	)	21.80
Outstanding stock options at January 30, 2010	4,496,633		$	19.46
Granted	997,500		35.92
Exercised	(1,807,850	)	17.98
Forfeited	(107,600	)	26.10
Outstanding stock options at January 29, 2011	3,578,683		$	24.59
Granted	918,500		40.85
Exercised	(500,085	)	20.81
Forfeited	(320,675	)	33.84
Outstanding stock options at January 28, 2012	3,676,423		$	28.36	4.2	$	43,724
Vested or expected to vest at January 28, 2012	3,617,383		$	28.39	4.2	$	42,924
Exercisable at January 28, 2012	1,666,672		$	23.16	3.1	$	28,076

The number of stock options expected to vest was based on our annual forfeiture rate assumption.

A summary of the nonvested restricted stock activity for fiscal years 2009, 2010, and 2011 is as follows:



	Number of Shares		Weighted Average Grant-Date Fair Value Per Share
Outstanding nonvested restricted stock at January 31, 2009	716,275		$	24.81
Granted	471,688		17.91
Vested	(327,675	)	28.85
Forfeited	(10,800	)	20.50
Outstanding nonvested restricted stock at January 30, 2010	849,488		$	19.48
Granted	507,684		35.88
Vested	(847,688	)	19.46
Forfeited	(5,700	)	33.44
Outstanding nonvested restricted stock at January 29, 2011	503,784		$	35.88
Granted	564,589		40.76
Vested	(271,784	)	35.84
Forfeited	(55,300	)	38.72
Outstanding nonvested restricted stock at January 28, 2012	741,289		$	39.40

The nonvested restricted stock awards granted to employees in 2011, 2010, and 2009 (other than the awards granted to our Chairman, CEO and President, Steven S. Fishman in 2011 and 2010) vest if certain financial performance objectives are achieved. If we meet a threshold financial performance objective and the grantee remains employed by us, the restricted stock will vest on the opening of our first trading window five years after the grant date of the award. If we meet a higher financial performance objective and the grantee remains employed by us, the restricted stock will vest on the first trading day after we file our Annual Report on Form 10-K with the SEC for the fiscal year in which the higher objective is met.

On the grant date of the 2010 restricted stock awards (other than the award granted to Mr. Fishman), we estimated a two-year period for vesting based on the assumed achievement of the higher financial performance objective.

On the grant date of the 2011 restricted stock awards (other than the award granted to Mr. Fishman), we estimated a three-year period for vesting based on the assumed achievement of the higher financial performance objective.

The nonvested restricted stock awards granted to Mr. Fishman in 2011 and 2010 vest if we achieve a corporate financial goal for 2011 and 2010, respectively, and he is employed by us on the anniversary of the grant date of the award. If either of the conditions is not achieved, the restricted stock awards are forfeited. Mr. Fishman's 2010 nonvested restricted stock award vested. Mr. Fishman's 2011 restricted stock is expected to vest after we file this Form 10-K with the SEC.

In 2011 and 2010, we granted to each of the non-employee members of our Board of Directors restricted stock awards having a fair value on the grant date of approximately $95,000. In 2009, we granted to each of the non-employee members of our Board of Directors restricted stock awards having a fair value on the grant date of approximately $75,000. These awards vest on the earlier of 1) the trading day immediately preceding the next annual meeting of our shareholders; or 2) the death or disability of the grantee. However, the restricted stock award will not vest if the non-employee director ceases to serve on our Board of Directors before either vesting event occurs.

During 2011, 2010, and 2009, the following activity occurred under our share-based compensation plans:



(in thousands)	2011		2010		2009
Total intrinsic value of stock options exercised	$	8,747	$	32,537	$	5,079
Total fair value of restricted stock vested	$	11,618	$	31,150	$	6,954

The total unearned compensation cost related to all share-based awards outstanding at January 28, 2012 was approximately $26.3 million. This compensation cost is expected to be recognized through January 2016 based on existing vesting terms with the weighted-average remaining expense recognition period being approximately 1.7 years from January 28, 2012