Pier 1 2007 Annual Report Download - page 128

options under the 1989 Plan are fully vested. Optionees would have until the earlier of (a) the expiration
of the option term, or (b) three years from the date of retirement to exercise the vested shares. Only
Messrs. Schneider and Walker are eligible for early retirement given their age and years of service with
Pier 1 and each have stock options with an intrinsic value. The dollar value shown is market price less
exercise price times the number of options.
(10) Upon termination of employment with the consent of Pier 1, optionees have until the earlier of (a) the
expiration of the option term, or (b) the 91st day after the date of termination (three months in the 1989
Plan) to exercise the shares vested as of termination. Only Messrs. Schneider and Walker have stock
options with an intrinsic value. The dollar value shown is market price less exercise price times the num-
ber of options.
(11) Upon termination for cause, all options terminate at the termination of employment.
(12) Upon a change in control event (as defined in the 1999 Plan), options granted under the 1999 Plan would
automatically vest unless Pier 1’s board determines otherwise prior to the change in control event. Under
the 2006 Plan, upon a corporate change (as defined in the plan) the vesting of options may be acceler-
ated, the options may be surrendered for a cash payment or adjusted at the discretion of the Committee
or the Committee may determine to make no changes to the options. The 1989 Plan does not address
change in control. Assuming that upon a change in control or corporate change an acceleration of the
vesting of the options granted under the 1999 Plan and 2006 Plan occurs, only Messrs. Schneider and
Walker have stock options with an intrinsic value. Those options have already fully vested. The dollar
value shown is market price less exercise price times the number of options. The exercise term would be
determined by the Committee.
(13) Upon the death or disability of an optionee, the options granted under the 1999 Plan and the 2006 Plan
become fully exercisable to the extent of all unexercised shares, and may be exercised by the optionee,
or in the case of death by the optionee’s estate, until the earlier of (a) the expiration of the option term,
or (b) the first anniversary date of such death or disability. Options granted under the 1989 Plan allow in
the event of disability or death of an optionee that the optionee, or the executor or administrator of the
optionee’s estate, may exercise the options to the extent they are vested until the earlier of (a) expiration
of the option term, or (b) the first anniversary of the date of death or disability. Only Messrs. Schneider
and Walker have stock options with an intrinsic value. These options have already fully vested. The dol-
lar value shown is market price less exercise price times the number of options.
(14) If Mr. Smith’s employment ended as of the end of fiscal 2007 due to a voluntary good reason termination
or an involuntary without cause termination, then pursuant to his employment agreement with Pier 1
Mr. Smith would be entitled to receive through the term of the agreement his compensation and benefits
plus Option 1 would vest. The value shown for these events is determined as of the fiscal 2007 year end.
In the event of Mr. Smith’s disability which results in termination of employment, then pursuant to the
agreement Mr. Smith receives 13 weeks of compensation and benefits, plus any vesting of Option 1 or
Option 2 which occurs in the 13 week period. After the 13 week period Mr. Smith participates in any
Pier 1 short-term or long-term disability plans to which he is eligible and has enrolled. Change in control
does not constitute a termination event under the agreement and death of Mr. Smith ends the employment
agreement.
AUDIT COMMITTEE REPORT
Each member of the audit committee is an independent director, pursuant to the independence
requirements of the NYSE. In accordance with the committee’s written charter, the committee assists the board
in overseeing the quality and integrity of Pier 1’s accounting, auditing and financial reporting practices. In
performing its oversight function, the committee reviewed and discussed Pier 1’s audited consolidated financial
statements as of and for the fiscal year ended March 3, 2007 with management and Pier 1’s independent
auditors, including a discussion of the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The
committee also discussed with Pier 1’s independent auditors all matters required by generally accepted
auditing standards, including those described in Statement on Auditing Standards No. 61, “Communication
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