Pier 1 2011 Annual Report Download - page 106

served as a director of Papa John’s International, Inc., including service as chairman of its compensation committee
and as a member of its audit committee. Mr. Smith’s employment agreement provides that, at all times during the
employment period, Pier 1 Imports will use its reasonable efforts to cause the board of directors, or an authorized
committee thereof, to nominate Mr. Smith for election to the board of directors at each annual meeting of
shareholders of Pier 1 Imports held during the employment period, and, if nominated, to cause the board of directors
to recommend his election to the shareholders of Pier 1 Imports.
CECE SMITH
Ms. Smith, age 66, is being nominated for her fifth consecutive term on the board of directors. During fiscal
2011, Ms. Smith served as a member of the nominating and corporate governance, audit and compensation
committees. A certified public accountant, Ms. Smith brings a wealth of retail, finance, and corporate governance
knowledge and experience to the board. Prior to her retirement in September of 2007, Ms. Smith co-founded
Phillips-Smith-Machens Venture Partners, a venture capital firm which invested in retail and consumer businesses.
Prior to that, Ms. Smith served as the executive vice president of finance and administration for Pearl Health
Services, the world’s largest retail optical chain. Ms. Smith currently serves as lead director of Brinker International,
Inc. Previously, Ms. Smith has served as a director of numerous public retailers, including Michaels Stores, Inc.,
Cheap Tickets, Inc., Hot Topic, Inc., and BizMart, Inc. and as a director and chairman of the Federal Reserve Bank
of Dallas. In her role as director on other boards, Ms. Smith has served on audit, compensation and nominating and
governance committees and has chaired audit and compensation committees.
The board of directors unanimously recommends a vote “FOR” the election of each of the above-named
nominees as a director.
PROPOSAL NO. 2 – Proposal to Approve the Material Terms of the Performance Goals Under the Pier 1
Imports, Inc. 2006 Stock Incentive Plan for the Purposes of Compensation Deductibility Under
Section 162(m) of the Internal Revenue Code
The board of directors recommends that shareholders approve the material terms of the performance goals
under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan, Restated as Amended through March 25, 2011. The
purpose of asking shareholders to approve the performance goals under the plan is so that certain incentive awards
granted under the plan may continue to qualify as tax-deductible performance-based compensation under
Section 162(m) of the Internal Revenue Code (“Section 162(m)”).
Section 162(m) generally denies public companies like Pier 1 Imports a federal income deduction for
compensation paid to the chief executive officer or any of the three other most highly compensated officers (not
including the principal financial officer) that exceeds $1,000,000 for each such officer during the tax year. There is,
however, an exception to this limit on deductibility for compensation that satisfies certain conditions for “qualified
performance-based compensation” as set forth under Section 162(m). One of the conditions requires shareholder
approval every five years of the material terms of the performance goals of the plan under which the compensation
will be paid. Pier 1 Imports’ shareholders previously approved the plan, including the material terms of the
performance goals under the plan, at the annual meeting of shareholders on June 22, 2006.
For purposes of Section 162(m), the material terms of the performance goals include:
• the employees eligible to receive compensation under the plan;
• a description of the business criteria on which the performance goals are based; and
• the maximum award that can be paid to an employee under the performance goals.
Each of these aspects of the performance goals is discussed below.
22