Pier 1 2016 Annual Report Download - page 114

COMPENSATION
Chief Executive Officer Employment Agreement
Mr. Smith’s employment with Pier 1 Imports as its president and
chief executive officer has been governed by an employment
agreement since he joined Pier 1 Imports in 2007. The initial three-
year term of Mr. Smith’s current employment agreement ended on
February 27, 2016. The agreement automatically renewed on
February 28, 2016 for a one-year term ending on February 25,
2017. The agreement is renewable for successive one-year terms
unless Pier 1 Imports or Mr. Smith gives notice of non-renewal at
least 60 days prior to the end of the current term. Mr. Smith’s base
salary for fiscal 2016, as provided in his employment agreement,
remained at $1,250,000 and will remain the same for fiscal 2017.
He is eligible to participate in Pier 1 Imports’ short-term cash
incentives during the term of the agreement. As noted above,
Mr. Smith did not accept a fiscal 2017 equity award.
Mr. Smith received 375,000 shares of restricted stock pursuant to
his employment agreement on each of March 3, 2013, March 2,
2014, and March 1, 2015, the first day of each of fiscal 2014, 2015
and 2016. The restricted stock vests as follows:
‰120,000 of the 375,000 shares of restricted stock are Profit Goal
performance-based and vest 40,000 shares upon Pier 1 Imports
satisfying the Profit Goal established by the compensation
committee for the fiscal year in which the shares were received
and 40,000 shares in each of the following two fiscal years upon
Pier 1 Imports satisfying the Profit Goals established by the
compensation committee for the respective fiscal year, provided
that Mr. Smith is employed on the last day of each such fiscal
year. If the Profit Goal for a particular fiscal year is partially met,
then the number of shares that could vest is adjusted as follows
(with interpolation between the target levels):
100% of the Profit Goal – 40,000 shares (100%);
96% of the Profit Goal – 36,000 shares (90%);
92% of the Profit Goal – 32,000 shares (80%);
88% of the Profit Goal – 28,000 shares (70%);
84% of the Profit Goal – 24,000 shares (60%); and
80% of the Profit Goal – 20,000 shares (50%).
‰If the Profit Goal is not satisfied for any two consecutive fiscal
years during each three-year performance period, those
performance-based shares that do not vest in the first of such two
fiscal years may still vest if the sum of consecutive years’ Realized
Profits equals or exceeds the sum of the individual consecutive
fiscal years’ Profit Goals at the 100% level. Further, over each
three-year performance period, if the Profit Goal is not satisfied in
any fiscal year, those performance-based shares that do not vest
may still vest if the sum of the three years’ Realized Profit equals
or exceeds the sum of the three individual years’ Profit Goal at the
100% level. The Realized Profit for fiscal 2016 was below the
threshold Profit Goal and, as a result, none of the shares for fiscal
2016 vested. The balance of the shares that did not vest in fiscal
2016 may vest in fiscal 2017 or 2018 as described above.
‰75,000 (30,000 at target) of the 375,000 shares of restricted
stock are TSR performance-based and may cliff vest within a
range of 50% to 250% following the last day of Pier 1 Imports’
third fiscal year beginning on the date on which the award was
received (a) based upon the rank of the annual equivalent return
of Pier 1 Imports’ TSR within the percentile ranking of the annual
equivalent return of the TSR of each constituent company within
a peer group of companies over the same three-year period
(15,000 share vest at the threshold percentile rank of 41%;
30,000 shares vest at the target percentile rank of 50-55%; and
75,000 shares vest at percentile rank of 91% or above), and
(b) conditioned upon Mr. Smith’s being employed by Pier 1
Imports on the last day of such third fiscal year.
‰180,000 of the 375,000 shares of restricted stock are time-based
and vest 60,000 shares per year on the last day of the fiscal year
in which the shares were received and on the last day of the
following two fiscal years, provided Mr. Smith is employed on
the last day of each such fiscal year.
The termination benefits of Mr. Smith’s employment agreement
are described in the footnotes to the table captioned “Potential
Payments Upon a Change in Control” below.
32 PIER 1 IMPORTS, INC. | 2016 Proxy Statement