Pier 1 2009 Annual Report Download - page 74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8—MATTERS CONCERNING SHAREHOLDERS’ EQUITY (Continued)
options were granted as an employment inducement award, and not under any stock option or other
equity incentive plan adopted by the Company. The first option for 1,000,000 shares vested on
February 19, 2008. The second option for 2,000,000 shares could have vested up to 1,000,000 shares
based on the Company’s performance as measured by an adjusted consolidated EBITDA target as
defined in the agreement for the Company’s 2009 fiscal year. However, the target was not met and the
shares did not vest. The remaining 1,000,000 shares from the second option may vest based on the
Company’s performance as measured by an adjusted consolidated EBITDA target for the Company’s
2010 fiscal year. Subject to the terms of the employment agreement, the CEO must be employed at the
end of each fiscal year for the respective options to vest. All options have a term of ten years from the
date of grant. The Company did not expense 1,000,000 shares of the second option during fiscal 2009
since the adjusted consolidated EBITDA target was not met. The remaining 1,000,000 shares of the
second grant did not have a SFAS 123R grant date at the end of fiscal 2009 and will be expensed in
fiscal 2010 if the Company determines it is probable the adjusted consolidated EBITDA target that was
set will be met.
During fiscal 2009, the Board of Directors approved stock option grants under the 2006 Plan of
617,300 shares. As of February 28, 2009 and March 1, 2008, outstanding options covering 1,259,250 and
802,625 shares were exercisable under the 2006 Plan, respectively. Options were granted at exercise
prices equal to the fair market value of the Company’s common stock at the date of grant. Employee
options issued under the 2006 Plan vest over a period of four years and have a term of ten years from
the grant date. The employee options are fully vested upon death, disability or retirement of the
employee. The 2006 Plan’s administrative committee also has the discretion to take certain actions with
respect to stock options, such as accelerating the vesting, upon certain corporate changes (as defined in
the 2006 Plan). Non-employee director options are fully vested on the date of grant, and are
exercisable for a period of ten years.
The 1999 Stock Plan provided for the granting of options to directors and employees with an
exercise price not less than the fair market value of the common stock on the date of the grant. The
1999 Stock Plan provided that a maximum of 14,500,000 shares of common stock could be issued under
the 1999 Stock Plan, of which not more than 250,000 shares could be issued under the Director
Deferred Stock Program. The options issued to employees vest equally over a period of four years,
while non-employee directors’ options were fully vested at the date of issuance. Both options have a
term of ten years from the grant date. The employee options are fully vested upon death, disability, or
retirement of an employee, or under certain conditions, such as a change in control of the Company,
unless the Board of Directors determines otherwise prior to a change of control event. As of
February 28, 2009, there were no shares available for grant under the 1999 Stock Plan. All future stock
option grants will be made from shares available under the 2006 Plan. Additionally, outstanding options
covering 7,757,400 and 8,465,775 shares were exercisable under the 1999 Stock Plan at fiscal years
ended 2009 and 2008, respectively.
Under the 1989 Employee Stock Option Plan, options vest over a period of four to five years and
all have a term of ten years from the grant date. As of February 28, 2009 and March 1, 2008,
outstanding options covering 368,975 and 714,825 shares were exercisable, respectively. As a result of
the expiration of the plan during fiscal 2005, no shares are available for future grant. The plan was
subject to adjustments for stock dividends and certain other changes to the Company’s capitalization.
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