SHARE-BASED PLANS

Our shareholders approved the Big Lots 2012 Long-Term Incentive Plan (“2012 LTIP”) in May 2012. The 2012 LTIP authorizes the issuance of incentive and nonqualified stock options, restricted stock, restricted stock units, deferred stock awards, PSUs, stock appreciation rights, cash-based awards, and other share-based awards. We have issued nonqualified stock options, restricted stock, restricted stock units, and PSUs under the 2012 LTIP. The number of common shares available for issuance under the 2012 LTIP consists of an initial allocation of 7,750,000 common shares plus any common shares subject to the 4,702,362 outstanding awards as of March 15, 2012 under the Big Lots 2005 Long-Term Incentive Plan (“2005 LTIP”) that, on or after March 15, 2012, cease for any reason to be subject to such awards (other than by reason of exercise or settlement). The Compensation Committee of our Board of Directors (“Committee”), which is charged with administering the 2012 LTIP, has the authority to determine the terms of each award. Nonqualified stock options granted to employees under the 2012 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.

Our former equity compensation plan, the 2005 LTIP, approved by our shareholders in May 2005, expired on May 16, 2012. The 2005 LTIP authorized the issuance of nonqualified stock options, restricted stock, and other award types. We issued only nonqualified stock options and restricted stock under the 2005 LTIP. The Committee, which was charged with administering the 2005 LTIP, had the authority to determine the terms of each award. Nonqualified stock options granted to employees under the 2005 LTIP, the exercise price of which was not 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.

We previously maintained the Big Lots Director Stock Option Plan (“Director Stock Option Plan”) for non-employee directors. The Director Stock Option Plan was terminated on May 30, 2008. 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 2015, 2014, and 2013, but did, as discussed below, receive restricted stock awards under the 2012 and 2005 LTIPs.

Share-based compensation expense was $13.5 million, $10.5 million and $13.2 million in 2015, 2014, and 2013, respectively. We historically used 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 was assumed to be zero since we had not paid dividends, nor did we have any plans to do so at the time of those grants. The risk-free rate was based on U.S. Treasury security yields at the time of the grant. The expected life was determined from the binomial model, which incorporates exercise and post-vesting forfeiture assumptions based on analysis of historical data.

Non-vested Restricted Stock

The following table summarizes the non-vested restricted stock awards and restricted stock units activity for fiscal years 2013, 2014, and 2015:



	Number of Shares		Weighted Average Grant-Date Fair Value Per Share
Outstanding non-vested restricted stock at February 2, 2013	783,609		$	42.25
Granted	458,576		35.53
Vested	(64,784	)	37.79
Forfeited	(513,300	)	41.86
Outstanding non-vested restricted stock at February 1, 2014	664,101		$	38.34
Granted	317,641		37.81
Vested	(70,155	)	34.54
Forfeited	(166,782	)	39.87
Outstanding non-vested restricted stock at January 31, 2015	744,805		$	38.13
Granted	217,767		49.00
Vested	(128,140	)	38.42
Forfeited	(49,283	)	40.28
Outstanding non-vested restricted stock at January 30, 2016	785,149		$	40.96

The non-vested restricted stock units granted in 2014 and 2015 generally vest, and are expensed, on a ratable basis over three years from the grant date of the award, if certain threshold financial performance objectives are achieved and the grantee remains employed by us through the vesting dates.

The non-vested restricted stock awards granted to employees in prior years 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.

As of January 30, 2016, we estimated a five-year period for vesting, and therefore expensing, of all non-vested restricted stock awards granted in prior years, as we do not anticipate achieving the higher financial performance objective for any outstanding restricted stock awards.

Performance Share Units

In 2013, in connection with his appointment as CEO and President, Mr. Campisi was awarded 37,800 PSUs, which vest based on the achievement of share price performance goals, that had a weighted average grant-date fair value per share of $34.68. The PSUs have a contractual term of seven years. In 2014, Mr. Campisi’s first two tranches for a total of 25,200 PSUs vested. If the performance goals applicable to the PSUs are not achieved prior to expiration, the awards will be forfeited. A total of 12,600 PSUs remain unvested and outstanding at January 30, 2016.

In 2014 and 2015, we issued, net of forfeitures, 433,350 and 219,784 PSUs, respectively, to certain members of management, which vest if certain financial performance objectives are achieved over a three-year performance period and the grantee remains employed by us during that period. At January 30, 2016, 653,134 nonvested PSUs, excluding the awards granted to Mr. Campisi at his appointment as CEO and President, were outstanding in the aggregate. The financial performance objectives for each fiscal year within the three-year performance period are approved by the Compensation Committee of our Board of Directors during the first quarter of the respective fiscal year.

As a result of the process used to establish the financial performance objectives, we will only meet the requirements of establishing a grant date for the PSUs when we communicate the financial performance objectives for the third fiscal year of the award to the award recipients, which will then trigger the service inception date, the fair value of the awards, and the associated expense recognition period. Therefore, we have recognized no expense for these issued PSUs in 2014 and 2015. If we meet the applicable threshold financial performance objectives over the three-year performance period and the grantee remains employed by us through the end of the performance period, the PSUs will vest on the first trading day after we file our Annual Report on Form 10-K for the last fiscal year in the performance period.

We expect to begin recognizing expense related to PSUs as follows:



Issue Year	Outstanding PSUs at January 30, 2016	Expected Valuation Date	Expected Expense Period
2014	379,794	March 2016	Fiscal 2016
2015	273,340	March 2017	Fiscal 2017
Total	653,134

Board of Directors' Awards

In 2015, 2014, and 2013, we granted to each non-employee member of our Board of Directors a restricted stock award. In 2015, each had a fair value on the grant date of approximately $110,000. 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.

Stock Options

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:



	2013
Weighted-average fair value of stock options granted	$	12.08
Risk-free interest rates	0.8		%
Expected life (years)	4.2
Expected volatility	41.9		%
Expected annual forfeiture rate	3.0		%

During 2014 and 2015, we granted no stock options.

The following table summarizes information about our stock options outstanding and exercisable at January 30, 2016:



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	12,500	0.3	$	18.18	12,500	$	18.18
20.01		30.00		10,625	1.8	28.19		10,312	28.20
30.01		40.00		707,277	3.6	35.87		338,402	35.84
$	40.01	$	50.00	444,500	2.7	42.89		345,250	42.60
				1,174,902	3.2	$	38.26	706,464	$	38.72

A summary of the annual stock option activity for fiscal years 2013, 2014, and 2015 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 February 2, 2013	3,029,086		$	34.49
Granted	1,159,500		35.80
Exercised	(213,520	)	22.87
Forfeited	(597,763	)	38.97
Outstanding stock options at February 1, 2014	3,377,303		$	34.88
Granted	—		—
Exercised	(1,389,040	)	30.67
Forfeited	(285,050	)	39.19
Outstanding stock options at January 31, 2015	1,703,213		$	37.59
Granted	—		—
Exercised	(450,136	)	36.17
Forfeited	(78,175	)	35.84
Outstanding stock options at January 30, 2016	1,174,902		$	38.26	3.2	$	2,431
Vested or expected to vest at January 30, 2016	1,167,905		$	38.28	3.2	$	2,411
Exercisable at January 30, 2016	706,464		$	38.72	2.7	$	1,361

The stock options granted in prior years vest in equal amounts on the first four anniversaries of the grant date and have a contractual term of seven years. The number of stock options expected to vest was based on our annual forfeiture rate assumption.

During 2015, 2014, and 2013, the following activity occurred under our share-based compensation plans:



(In thousands)	2015		2014		2013
Total intrinsic value of stock options exercised	$	5,980	$	18,614	$	2,646
Total fair value of restricted stock vested	$	6,259	$	2,825	$	2,237
Total fair value of performance shares vested	$	—	$	1,143	$	—

The total unearned compensation cost related to all share-based awards outstanding, excluding PSUs, at January 30, 2016 was approximately $17.8 million. This compensation cost is expected to be recognized through January 2019 based on existing vesting terms with the weighted-average remaining expense recognition period being approximately 1.8 years from January 30, 2016.