Pier 1 2010 Annual Report Download - page 125

The EBITDA Target for fiscal 2010 was established by the board of directors and was the same measure as the
Profit Goal for the annual short-term incentive plan for fiscal 2010 of negative $49,000,000, which goal represented
significant progress in returning Pier 1 Imports to profitability given the comparable annual Profit Goal measure
achieved in fiscal 2009 of negative $60,000,000. Option 2 could vest up to 1,000,000 shares based upon achieving a
percentage of the EBITDA Target for fiscal 2010 as follows:
100% of the 2010 EBITDA Target – 1,000,000 shares;
98% of the 2010 EBITDA Target – 900,000 shares;
96% of the 2010 EBITDA Target – 800,000 shares;
94% of the 2010 EBITDA Target – 700,000 shares;
92% of the 2010 EBITDA Target – 600,000 shares; and
90% of the 2010 EBITDA Target – 500,000 shares.
The actual EBITDA for fiscal 2010 was calculated at $31,900,000 and the remaining 1,000,000 shares vested upon
the filing of the 2010 Form 10-K. The 1,000,000 vested options have an exercise price of $6.69 per share and expire
on February 19, 2017, if not exercised.
Mr. Smith’s initial employment agreement states that if Pier 1 Imports’ aggregate EBITDA for fiscal years
2009 and 2010 equal or exceed the sum of the fiscal 2009 EBITDA Target plus the fiscal 2010 EBITDA Target,
then the Option 2 shares that did not vest at the end of fiscal 2009 could be earned and vest at the end of fiscal 2010.
The aggregate fiscal 2009 and fiscal 2010 EBITDA amounts were not greater than the sum of the EBITDA Targets
for fiscal years 2009 and 2010; therefore, the 1,000,000 Option 2 shares that did not vest at the end of fiscal 2009
were forfeited.
Pursuant to the renewal and extension of Mr. Smith’s employment agreement, Mr. Smith received a grant of
375,000 shares of restricted stock on December 18, 2009, under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan,
which will vest one-third per year on the first three anniversaries of the grant date, provided Mr. Smith is employed
on such dates. Additional grants of 375,000 shares of restricted stock are to be made to Mr. Smith on February 28,
2010, February 27, 2011 and February 26, 2012, provided Mr. Smith is employed on such dates. The additional
restricted stock grants will vest as follows: (i) one-half of the 375,000 shares of restricted stock will vest one-third
per year on the last day of the fiscal year in which the grant occurred 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; and (ii) the other one-half of the
375,000 shares of restricted stock will vest one-third upon Pier 1 Imports satisfying the adjusted consolidated
EBITDA target established by the compensation committee for the fiscal year in which the grant occurred and will
vest one-third for each of the following two fiscal years upon Pier 1 Imports satisfying the adjusted consolidated
EBITDA target established by the compensation committee for the respective fiscal year, provided that vesting for
each fiscal year is conditioned upon Mr. Smith being employed on the last day of each such fiscal year. If an
adjusted consolidated EBITDA target 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 EBITDA Target – 62,500 shares;
96% of the EBITDA Target – 56,250 shares;
92% of the EBITDA Target – 50,000 shares;
88% of the EBITDA Target – 43,750 shares;
84% of the EBITDA Target – 37,500 shares; and
80% of the EBITDA Target – 31,250 shares.
Over each three-year performance (vesting) period, if the adjusted consolidated EBITDA targets are not
satisfied in any fiscal year, those shares that do not vest may still vest if the sum of consecutive years’ adjusted
consolidated EBITDA equals or exceeds the sum of the individual consecutive fiscal year adjusted consolidated
EBITDA targets.
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