Pier 1 2008 Annual Report Download - page 113

Pier 1 Imports entered into post-employment consulting agreements with Jay R. Jacobs, Executive Vice
President, Merchandising on September 13, 1995, Phil E. Schneider, former Executive Vice President,
Marketing on July 6, 1993, Charles H. Turner, Executive Vice President and Chief Financial Officer on
September 19, 1994 and David A. Walker, Executive Vice President, Planning and Allocations on Novem-
ber 17, 1999.
Mr. Schneider’s employment with Pier 1 Imports ended on August 6, 2007 and subsequent to that date
Pier 1 Imports settled its obligations under his post-employment consulting agreement in exchange for a
release from Mr. Schneider. The settlement amount is reflected in the Summary Compensation Table below.
Effective April 20, 2008, Pier 1 Imports and each of Messrs. Jacobs, Turner and Walker mutually
terminated their respective post-employment consulting agreement. There are no further post-employment
consulting agreements to which Pier 1 Imports is a party.
Gregory S. Humenesky, Executive Vice President, Human Resources entered into an employment
agreement with Pier 1 Imports on February 25, 2005. That agreement expired by its terms on February 29,
2008.
As reflected in last fiscal year’s Compensation Discussion and Analysis, Mr. Smith and Pier 1 Imports
entered into an employment agreement for Mr. Smith’s employment as Pier 1 Imports’ president and chief
executive officer. The initial term of the employment agreement is for three years, which began on February 19,
2007 and ends on February 27, 2010. The term of the employment agreement renews for one-year periods
unless Pier 1 Imports or Mr. Smith gives notice of non-renewal at least 60 days prior to the term expiration.
Pursuant to the employment agreement, Mr. Smith receives a base salary of $1,000,000 per year. That
amount has been increased to $1,050,000 per year beginning in fiscal 2009, for the elimination of perquisites
discussed above. Pursuant to the employment agreement, Mr. Smith’s bonus for fiscal 2008 would be between
$500,000 and $750,000. Based on Pier 1 Imports’ performance for fiscal 2008, the board of directors approved
$750,000 as the fiscal 2008 bonus for Mr. Smith. He will participate in Pier 1 Imports’ annual cash incentive
award plan for Pier 1 Imports’ 2009 and 2010 fiscal years as determined by Pier 1 Imports’ compensation
committee and board of directors at those times.
Pursuant to Mr. Smith’s employment agreement, Mr. Smith was granted two stock options (“Option 1”
and “Option 2,” and, collectively, the “Options”), to purchase an aggregate of 3,000,000 shares of Pier 1
Imports’ common stock. The Options were granted as an employment inducement award, and not under any
stock option or other equity incentive plan adopted by Pier 1 Imports.
Option 1 for 1,000,000 shares vested in full on February 19, 2008. If Mr. Smith fails to be employed with
Pier 1 Imports between February 19, 2008 and February 28, 2009, and Mr. Smith ends such employment
without good reason (as defined in Mr. Smith’s employment agreement), then he forfeits 50% of Option 1.
Option 2 for 2,000,000 shares is performance-based and will vest upon meeting consolidated EBITDA
targets to be established by the board of directors for fiscal years 2009 and 2010. In conjunction with
establishing the short-term incentive plan and performance measures for fiscal 2009 for all other executive
officers, the board of directors authorized an amendment to Mr. Smith’s employment and option agreements
whereby Option 2 will vest up to 1,000,000 shares based upon achieving a percentage of the fiscal 2009
EBITDA target as follows:
100% of the 2009 EBITDA Target — 1,000,000 shares;
96% of the 2009 EBITDA Target — 900,000 shares;
92% of the 2009 EBITDA Target — 800,000 shares;
88% of the 2009 EBITDA Target — 700,000 shares;
84% of the 2009 EBITDA Target — 600,000 shares; and
80% of the 2009 EBITDA Target — 500,000 shares.
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